QN=1 (17744) If the production possibilities frontier is bowed outward, then “?

” could be
(2230
)

a. 50.
b. 75.
c. 100.
d. 125.

QN=2 (17750) Refer to Table 3-5. The opportunity cost of 1 unit of cheese for Spain is
(2216
)

a. 1/2 unit of bread.

b. 2 hours of labor.
c. 2 units of bread.
d. 4 hours of labor.

QN=3 (17753) Refer to Table 3-7. Korea should specialize in the production of
(2217
)
a. cars and import airplanes.
b. airplanes and import cars.
c. both goods and import neither good.
d. neither good and import both goods.

QN=4 (2222) (17725) Adam Smith

a. and David Ricardo both opposed free trade.
b. opposed free trade, but David Ricardo supported it.
c. supported free trade, but David Ricardo opposed it.
d. and David Ricardo both supported free trade.

QN=5 (17749) Refer to Table 3-4. The opportunity cost of 1 pound of potatoes for the farmer is
(2227
)

a. 1/5 pound of meat.

b. 2 hours of labor.
c. 5 pounds of meat.
d. 5 hours of labor.

QN=6 (17736) Refer to Table 3-2. At which of the following prices would both Aruba and Iceland gain from
(2239 trade with each other?
)
a. 2 radios for 4 coolers
b. 2 radio for 6 coolers
c. 2 radio for 10 coolers
d. Aruba and Iceland could not both gain from trade with each other at any price.

QN=7 (17761) Refer to Figure 3-7. The opportunity cost of 1 bowl for Juba is
(2238
)

a. 1/4 cup.
b. 2/3 cup.
c. 3/2 cups.
d. 4 cups.

QN=8 (2255) (17784) In the economy of Wrexington in 2008, consumption was 60% of GDP,
government purchases were $212, imports were $67 and 67% of the value of exports,
 investment was one-half of the value of consumption. What was Wrexington’s GDP in
2008?
a. $1450
b. $1790
c. $2450
d. $2790

QN=9 (2265) (17762) Macroeconomists study

a. the decisions of households and firms.
b. the interaction between households and firms.
c. economy-wide phenomena.
d. regulations on firms and unions.

QN=10 (2253) (17790) Net exports equal

a. exports plus imports.
b. exports minus imports.
c. imports minus exports.
d. GDP minus imports.

QN=11 (2280) (17808) In an imaginary economy, consumers buy only sandwiches and magazines.
The fixed basket consists of 20 sandwiches and 30 magazines. In 2006, a sandwich
cost $4 and a magazine cost $2. In 2007, a sandwich cost $5. The base year is 2006. If
the inflation rate in 2007 was 16 percent, then how much did a magazine cost in 2007?
a. $1.87
b. $2.08
c. $2.32
d. $3.00

QN=12 (2287) (17798) The consumer price index tries to gauge how much incomes must rise to
maintain
a. an increasing standard of living.
b. a constant standard of living.
c. a decreasing standard of living.
d. the highest standard of living possible.

QN=13 (2269) (17773) Quality Motors is a Japanese-owned company that produces automobiles; all
of its automobiles are produced in American plants. In 2007, Quality Motors produced
$20 million worth of automobiles, with $12 million in sales to Americans, $6 million in
sales to Canadians, and $2 million worth of automobiles added to Quality Motors’
inventory. The transactions just described contribute how much to U.S. GDP for 2007?
a. $12 million
b. $14 million
c. $20 million
d. $34 million

QN=14 (2284) (17804) The consumer price index is used to

a. convert nominal GDP into real GDP.
b. turn dollar figures into meaningful measures of purchasing power.
c. characterize the types of goods and services that consumers purchase.
d. measure the quantity of goods and services that the economy produces.

QN=15 (2283) (17819) Scenario 24-3

Grant Gant was a doctor in 1944 and earned $12,000 that year. His daughter, Gretta
Gant, is a doctor today and she earned $210,000 in 2005. The price index was 17.6 in
1944 and 184 in 2005.

Refer to Scenario 24-3. Grant Gant’s 1944 income in 2005 dollars is

a. $1,147.83.
b. $113,454.55.
c. $125,454.55.
d. $1,996,800.00.

QN=16 (2299) (17813) The price index was 120 in 2006 and 127.2 in 2007. What was the inflation
rate?
a. 5.7 percent
b. 6.0 percent
c. 7.2 percent
d. 27.2 percent

QN=17 (2309) (17828) If an economy with constant returns to scale were to double its physical
capital stock, its available natural resources, and its human capital, but leave the size
of the labor force the same,
a. (i) its output would stay the same and so would its labor productivity.
b. (ii) its output and labor productivity would increase, but less than double.
c. (iii) its output and labor productivity would increase by more than double.
d. None of (i), (ii), and (iii) is correct.

QN=18 (2317) (17842) Last year a country had 800 workers who worked an average of 8 hours and
produced 12,800 units. This year the country had 1000 workers who worked an
average of 8 hours and produced 14,000 units. This country’s productivity was
a. higher this year than last year. A possible source of this change in productivity is a
change in the size of the capital stock.
b. higher this year than last year. A change in the size of the capital stock does not affect
productivity.
c. lower this year than last year. A possible source of this change in productivity is a
change in the size of the capital stock.
d. lower this year than last year. A change in the size of the capital stock does not affect
productivity.

QN=19 (2304) (17794) Scenario 24-1

The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in
2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.

Refer to Scenario 24-1. The price of a 1975 tennis ball in 2005 dollars is
a. $0.03.
b. $0.27.
c. $0.37.
d. $1.00.

QN=20 (2303) (17792) When the consumer price index rises, the typical family
a. has to spend more dollars to maintain the same standard of living.
b. can spend fewer dollars to maintain the same standard of living.
c. finds that its standard of living is not affected.
d. can offset the effects of rising prices by saving more.

QN=21 (2349) (17855) If the government's expenditures exceeded its receipts, it would likely
a. lend money to a bank or other financial intermediary.
b. borrow money from a bank or other financial intermediary.
c. buy bonds directly from the public.
d. sell bonds directly to the public.

QN=22 (2343) (17861) World Wide Delivery Service Corporation develops a way to speed up its
deliveries and reduce its costs. We would expect that this would
a. raise the demand for existing shares of the stock, causing the price to rise.
b. decrease the demand for existing shares of the stock, causing the price to fall.
c. raise the supply of the existing shares of stock, causing the price to rise.
d. raise the supply of the existing shares of stock, causing the price to fall.

QN=23 (2338) (17858) If the nominal interest rate is 6 percent and the real interest rate is 2 percent,
then what is the inflation rate?
a. (i) 8 percent
b. (ii) 4 percent
c. (iii) 3 percent
d. None of (i), (ii), and (iii) is correct.

QN=24 (2348) (17849) Which of the following is not always correct for a closed economy?
a. National saving equals private saving plus public saving.
b. Net exports equal zero.
c. Real GDP measures both income and expenditures.
d. Private saving equals investment.

QN=25 (2352) (17856) In examining the national income accounts of the closed economy of
Nepotocracy you see that this year it had taxes of $100 billion, government transfers
of $40 billion, and government purchases of goods and services of $80 billion. You also
notice that last year it had private saving of $50 billion and investment of $70 billion.
In which year did Nepotocracy have a budget deficit of $20 billion?
a. this year and last year
b. this year but not last year
c. last year but not this year
d. neither this year nor last year

QN=26 (2369) (17879) Suppose some country had an adult population of about 50 million, a labor-
force participation rate of 60 percent, and an unemployment rate of 5 percent. How
many people were employed?
a. 1.5 million
b. 28.5 million
c. 30 million
d. 47.5 million

QN=27 (2373) (17873) Consumers decide to buy more computers and fewer typewriters. As a result,
computer companies expand production while typewriter companies lay-off workers.
This is an example of
a. frictional unemployment created by efficiency wages.
b. frictional unemployment created by sectoral shifts.
c. structural unemployment created by efficiency wages.
d. structural unemployment created by sectoral shifts.

QN=28 (2385) (17896) 1. If all workers and all jobs were the same such that all workers were
equally well suited for all jobs, then there would be no
a. cyclical unemployment.
b. frictional unemployment.
c. natural rate of unemployment.
d. structural unemployment.

QN=29 (2381) (17874) Collective bargaining refers to

a. the process by which the government sets exemptions from the minimum wage law.
b. setting the same wage for all employees to prevent conflict among workers.
c. firms colluding to set the wages of employees in order to keep them below
equilibrium.
d. the process by which unions and firms agree on the terms of employment.
QN=30 (2375) (17897) Suppose that because of the popularity of the low-carb diet, bakeries need
fewer workers and steak houses need more workers. This is an example of
a. frictional unemployment created by efficiency wages.
b. frictional unemployment created by sectoral shifts.
c. structural unemployment created by efficiency wages.
d. structural unemployment created by sectoral shifts.

QN=31 (2371) (17882) Suppose that efficiency wages become more common in the economy.
Economists would predict that this would
a. increase the quantity demanded and decrease the quantity supplied of labor, thereby
decreasing the natural rate of unemployment.
b. decrease the quantity demanded and increase the quantity supplied of labor, thereby
increasing the natural rate of unemployment.
c. increase the quantity demanded and decrease the quantity supplied of labor, thereby
increasing the natural rate of unemployment.
d. decrease the quantity demanded and increase the quantity supplied of labor, thereby
decreasing the natural rate of unemployment.

QN=32 (2415) (17928) During a bank run, depositors decide to hold more currency relative to
deposits and banks decide to hold more excess reserves relative to deposits
a. Both the decision to hold relatively more currency and the decision to hold relatively
more excess reserves would make the money supply increase.
b. Both the decision to hold relatively more currency and the decision to hold relatively
more excess reserves would make the money supply decrease.
c. The decision to hold relatively more currency would make the money supply increase.
The decision to hold relatively more excess reserves would make the money supply
decrease.
d. The decision to hold relatively more currency would make the money supply decrease.
The decision to hold relatively more excess reserves would make the money supply
increase.

QN=33 (2398) (17910) Credit cards

a. defer payments.
b. are a store of value.
c. have led to wider use of currency.
d. are part of the money supply.

QN=34 (2394) (17921) In a 100-percent-reserve banking system, if people decided to decrease the
amount of currency they held by increasing the amount they held in checkable
deposits, then
a. M1 would increase.
b. M1 would decrease.
c. M1 would not change.
d. M1 might rise or fall.
QN=3 (17932) Refer to Figure 30-3. What quantity is measured along the vertical axis?
5
(2443)

a. the price level

b. the velocity of money
c. the value of money
d. the quantity of money

QN=36 (2429) (17934) In order to maintain stable prices, a central bank must
a. maintain low interest rates.
b. keep unemployment low.
c. tightly control the money supply.
d. sell indexed bonds.

QN=3 (17947) Refer to Figure 30-2. At the end of 2007 the relevant money-demand curve was the one
7 labeled MD2. At the end of 2008 the relevant money-demand curve was the one labeled MD1.
(2434) Assuming the economy is always in equilibrium, what was the economy’s approximate inflation rate
for 2008?
a. -43 percent
b. -57 percent
c. 57 percent
d. 75 percent

QN=38 (2432) (17955) Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2,
then
a. the value of money is lower than its equilibrium level.
b. the price level is higher than its equilibrium level.
c. the quantity of money demanded is greater than the quantity of money supplied.
d. the quantity of money supplied is greater than the quantity of money demanded.

QN=39 (2420) (17940) According to the classical dichotomy, which of the following is affected by
monetary factors?
a. (i) nominal wages
b. (ii) the price level
c. (iii) nominal GDP
d. All of (i), (ii), and (iii) are correct.

QN=40 (2425) (17953) High and unexpected inflation has a greater cost
a. for those who save than for those who borrow.
b. for those who hold a little money than for those who hold a lot of money.
c. for those whose wages increase by as much as inflation, than those who are paid a
fixed nominal wage.
d. for savers in low income tax brackets than for savers in high income tax brackets.

QN=41 (2448) (17974) If a country has negative net capital outflows, then its net exports are
a. positive and its saving is larger than its domestic investment.
b. positive and its saving is smaller than its domestic investment.
c. negative and its saving is larger than its domestic investment.
d. negative and its saving is smaller than its domestic investment.

QN=42 (2449) (17970) If the nominal exchange rate e is foreign currency per dollar, the domestic
price is P, and the foreign price is P*, then the real exchange rate is defined as
a. e(P*/P).
b. e(P/P*).
c. e + P/P.
d. e - P/P*.

QN=43 (2472) (17987) Which of the following is an example of U.S. foreign portfolio investment?
a. Disney builds a new amusement park near Barcelona, Spain.
b. A U.S. citizen buys bonds issued by the British government.
c. A Dutch hotel chain opens a new hotel in the United States.
d. A citizen of Singapore buys a bond issued by a U.S. corporation.

QN=44 (2502) (18009) If at a given real interest rate desired national saving would be $50 billion,
domestic investment would be $40 billion, and net capital outflow would be $20
billion, then at that real interest rate in the loanable funds market there would be a
a. surplus. The real interest rate would rise.
b. surplus. The real interest rate would fall.
c. shortage. The real interest rate would rise.
d. shortage. The real interest rate would fall.

QN=45 (2505) (18022) The aggregate demand and aggregate supply graph has
a. the price level on the horizontal axis. The price level can be measured by the GDP
deflator.
b. the price level on the horizontal axis. The price level can be measured by real GDP.
c. the price level on the vertical axis. The price level can be measured by the GDP
deflator.
d. the price level on the vertical axis. The price level can be measured by GDP.

QN=46 (2514) (18040) Refer to Figure 33-1. If the economy is in long-run equilibrium, then an adverse
shift in aggregate supply would move the economy from

a. A to B.
b. C to D.
c. B to A.
d. D to C.

QN=47 (2525) (18034) The long-run aggregate supply curve would shift right if immigration from
abroad
a. increased or Congress made a substantial increase in the minimum wage.
b. decreased or Congress abolished the minimum wage.
c. increased or Congress abolished the minimum wage.
d. decreased or Congress made a substantial increase in the minimum wage.

QN=48 (2528) (18042) The sticky-wage theory of the short-run aggregate supply curve says that the
quantity of output firms supply will increase if
a. the price level is higher than expected making production more profitable.
b. the price level is higher than expected making production less profitable.
c. the price level is lower than expected making production more profitable.
d. the price level is lower than expected making production less profitable.

QN=49 (2538) (18051) According to liquidity preference theory, the opportunity cost of holding
money is
a. the interest rate on bonds.
b. the inflation rate.
c. the cost of converting bonds to a medium of exchange.
d. the difference between the inflation rate and the interest rate on bonds.

QN=50 (2552) (18068) According to liquidity preference theory, equilibrium in the money market is
achieved by adjustments in
a. the price level.
b. the interest rate.
c. the exchange rate.
d. real wealth.
[id=2230, Mark=1]1. D

[id=2216, Mark=1]2. A

[id=2217, Mark=1]3. B

[id=2222, Mark=1]4. D

[id=2227, Mark=1]5. A

[id=2239, Mark=1]6. B

[id=2238, Mark=1]7. C

[id=2255, Mark=1]8. C

[id=2265, Mark=1]9. C

[id=2253, Mark=1]10. B

[id=2280, Mark=1]11. B

[id=2287, Mark=1]12. B

[id=2269, Mark=1]13. C

[id=2284, Mark=1]14. B

[id=2283, Mark=1]15. C

[id=2299, Mark=1]16. B

[id=2309, Mark=1]17. B

[id=2317, Mark=1]18. C

[id=2304, Mark=1]19. C

[id=2303, Mark=1]20. A

[id=2349, Mark=1]21. D

[id=2343, Mark=1]22. A

[id=2338, Mark=1]23. B

[id=2348, Mark=1]24. D

[id=2352, Mark=1]25. B

[id=2369, Mark=1]26. B

[id=2373, Mark=1]27. B

[id=2385, Mark=1]28. B

[id=2381, Mark=1]29. D
[id=2375, Mark=1]30. B

[id=2371, Mark=1]31. B

[id=2415, Mark=1]32. B

[id=2398, Mark=1]33. A

[id=2394, Mark=1]34. C

[id=2443, Mark=1]35. C

[id=2429, Mark=1]36. C

[id=2434, Mark=1]37. D

[id=2432, Mark=1]38. D

[id=2420, Mark=1]39. D

[id=2425, Mark=1]40. A

[id=2448, Mark=1]41. D

[id=2449, Mark=1]42. B

[id=2472, Mark=1]43. B

[id=2502, Mark=1]44. C

[id=2505, Mark=1]45. C

[id=2514, Mark=1]46. B

[id=2525, Mark=1]47. C

[id=2528, Mark=1]48. A

[id=2538, Mark=1]49. A

[id=2552, Mark=1]50. B