QN=1 (2228) (17743) When can two countries gain from trading two goods?

a. (i) when the first country can only produce the first good and the second country can
only produce the second good
b. (ii) when the first country can produce both goods, but can only produce the second
good at great cost, and the second country can produce both goods, but can only
produce the first good at great cost
c. (iii) when the first country is better at producing both goods and the second country is
worse at producing both goods
d. Two countries could gain from trading two goods under all of the conditions in (i), (ii),
and (iii).

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 (17741) Refer to Figure 3-4. The opportunity cost of 1 novel for Jordan is
(2235
)
a. 1/3 poem.
b. 3 poems.
c. 4 poems.
d. 12 poems.

QN=4 (17740) Refer to Figure 3-4. If Perry and Jordan each spends all their time producing the good in
(2211 which they have a comparative advantage and trade takes place at a price of 1 novel for 7 poems,
) then
a. Perry and Jordan will both gain from this trade.
b. Perry will gain from this trade, but Jordan will not.
c. Jordan will gain from this trade, but Perry will not.
d. neither Perry nor Jordan will gain from this trade.

QN=5 (2212) (17719) When an economist points out that you and millions of other people are
interdependent, he or she is referring to the fact that we all
a. rely upon the government to provide us with the basic necessities of life.
b. rely upon one another for the goods and services we consume.
c. have similar tastes and abilities.
d. are concerned about one another’s well-being.

QN=6 (2248) (17745) Absolute advantage is found by comparing different producers’

a. opportunity costs.
b. payments to land, labor, and capital.
c. input requirements per unit of output.
d. locational and logistical circumstances.

QN=7 (2261) (17780) In 2007, Corny Company grows and sells $2 million worth of corn to Tasty
Cereal Company, which makes corn flakes. Tasty Cereal Company produces $6 million
worth of corn flakes in 2007, with sales to households during the year of $4.5 million.
The unsold $1.5 million worth of corn flakes remains in Tasty Cereal Company’s
inventory at the end of 2007. The transactions just described contribute how much to
GDP for 2007?
a. $4.5 million
b. $6 million
c. $6.5 million
d. $8 million

QN=8 (2258) (17789) What word do economists use to refer to the purchase of goods that will be
used in the future to produce more goods and services?
a. capital
b. consumption
c. investment
d. costs

QN=9 (2257) (17782) GDP is defined as

a. the market value of all goods and services produced within a country in a given period
of time.
b. the market value of all goods and services produced by the citizens of a country,
regardless of where they are living, in a given period of time.
c. the market value of all final goods and services produced within a country in a given
period of time.
d. the market value of all final goods and services produced by the citizens of a country,
regardless of where they are living, in a given period of time.

QN=10 (2263) (17767) Suppose there are only two firms in an economy: Cowhide, Inc. produces
leather and sells it to Couches, Inc., which produces and sells leather furniture. With
each $1,000 of leather that it buys from Cowhide, Inc., Couches, Inc. produces a couch
and sells it for $3,000. Neither firm had any inventory at the beginning of 2009.
During that year, Cowhide produced enough leather for 20 couches. Couches, Inc.
bought 80% of that leather for $16,000 and promised to buy the remaining 20% for
$4,000 in 2010. What was the economy's GDP for the 2009?
a. $48,000
b. $52,000
c. $64,000
d. $68,000

QN=11 (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=12 (2275) (17787) The value of the housing services provided by the economy's owner-occupied
 houses is
a. included in GDP, and the estimated rental values of the houses are used to place a
value on these housing services.
b. included in GDP, and the actual mortgage payments made on the houses are used to
estimate the value of these rental services.
c. excluded from GDP since these services are not sold in any market.
d. excluded from GDP since the value of these housing services cannot be estimated with
any degree of precision.

QN=13 (2277) (17777) Def01 stands for GDP deflator in year 1. Def02 stands for GDP deflator in year
2. The inflation rate in year 2 equals
a. 100*(Def02-Def01)/Def01.
b. 100*(Def02-Def01)/Def02.
c. 100*(Def01-Def02)/Def01.
d. 100*(Def01-Def02)/Def02.

QN=14 (2267) (17771) A transfer payment is

a. a payment for moving expenses a worker receives when he or she is transferred by an
employer to a new location.
b. a payment that is automatically transferred from your bank account to pay a bill or
some other obligation.
c. a form of government spending that is not made in exchange for a currently produced
good or service.
d. the benefit that a person receives from an expenditure by government minus the taxes
that were collected by government to fund that expenditure.

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 (2314) (17837) All else equal, if there are diminishing returns, then which of the following is
true if a country increases its capital by one unit?
a. Output will rise by more than it did when the previous unit was added.
b. Output will rise but by less than it did when the previous unit was added.
c. Output will fall by more than it did when the previous unit was added.
d. Output will fall but by less than it did when the previous unit was added.
QN=17 (2311) (17834) Human capital is the
a. knowledge and skills that workers acquire through education, training, and experience.
b. stock of equipment and structures that is used to produce goods and services.
c. total number of hours worked in an economy.
d. same thing as technological knowledge.

QN=18 (2298) (17805) Economists use the term inflation to describe a situation in which
a. some prices are rising faster than others.
b. the economy's overall price level is rising.
c. the economy's overall price level is high, but not necessarily rising.
d. the economy's overall output of goods and services is rising faster than the economy's
overall price level.

QN=19 (2313) (17824) An understanding of the best ways to produce goods and services is called
a. human capital.
b. physical capital.
c. technology.
d. productivity.

QN=20 (2307) (17811) The consumer price index is used to

a. monitor changes in the level of wholesale prices in the economy.
b. monitor changes in the cost of living over time.
c. monitor changes in the level of real GDP over time.
d. monitor changes in the stock market.

QN=21 (2341) (17859) People who buy newly issued stock in a corporation such as Crate and Barrel
provide
a. debt finance and so become part owners of Crate and Barrel.
b. debt finance and so become creditors of Crate and Barrel.
c. equity finance and so become part owners of Crate and Barrel.
d. equity finance and so become creditors of Crate and Barrel.

QN=22 (2346) (17870) 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=23 (2336) (17826) In a market economy, we know that a resource has become scarcer when
a. both the demand for the good and the supply of the good have increased.
b. both the demand for the good and the supply of the good have decreased.
c. the demand for the good has increased and the supply has decreased.
d. the demand for the good has decreased and the supply has remained constant.

QN=24 (2345) (17862) Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to
2,500 consumption equals 7,500 and government purchases equal 2,000. What are
private saving, public saving, and national saving?
a. (i) 1,500, 1,000, and 500, respectively
b. (ii) 1,000, 500, and 1,500, respectively
c. (iii) 500, 1,500, and 1,000, respectively
d. None of (i), (ii), and (iii) is correct.

QN=25 (2330) (17848) Given that a country’s real output has increased, in which of the following
cases can we be sure that its productivity also has increased?
a. (i) The total number of hours worked rose.
b. (ii) The total number of hours worked stayed the same.
c. (iii) The total number of hours worked fell.
d. Both (ii) and (iii) are correct.

QN=26 (2380) (17899) Which of the following does not help reduce frictional unemployment?
a. (i) government-run employment agencies
b. (ii) public training programs
c. (iii) unemployment insurance
d. All of (i), (ii), and (iii) help reduce frictional unemployment.

QN=27 (2384) (17880) The labor-force participation rate measures the percentage of the
a. total adult population that is in the labor force.
b. total adult population that is employed.
c. labor force that is employed.
d. labor force that is either employed or unemployed.

QN=28 (2363) (17881) The labor force equals the

a. number of people employed.
b. number of people unemployed.
c. number of people employed plus the number of people unemployed.
d. adult population.

QN=29 (2362) (17892) A person who is counted as unemployed by the Bureau of Labor Statistics
a. (i) is also in the labor force.
b. (ii) must have recently looked for work or be on temporary layoff.
c. (iii) be at least 16 years old.
d. All of (i), (ii), and (iii) are correct.
QN=30 (2378) (17875) In one year, you meet 52 people who are each unemployed for one week and
eight people who are each unemployed for the whole year. Normally there are 52
weeks in a year. What percentage of the unemployment spells you encountered was
short-term, and what percentage of the unemployment you encountered in a given
week was long-term?
a. 52 percent and 13.3 percent
b. 52 percent and 88.9 percent
c. 86.7 percent and 13.3 percent
d. 86.7 percent and 88.9 percent

QN=31 (2367) (17884) Workers searching for jobs that best suit them is most closely associated with
a. cyclical unemployment.
b. frictional unemployment.
c. seasonal unemployment.
d. structural unemployment.

QN=32 (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=33 (2397) (17925) If the reserve ratio for all banks is 5 percent, then $2,500 of additional reserves
can create up to
a. $62,500 of new money.
b. $50,000 of new money.
c. $45,600 of new money.
d. $37,500 of new money.

QN=34 (2386) (17894) Unions contribute to

a. structural unemployment but not the natural rate of unemployment.
b. the natural rate of unemployment but not structural unemployment.
c. both structural unemployment and the natural rate of unemployment.
d. neither structural unemployment nor the natural rate of unemployment.

QN=35 (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=36 (2427) (17936) According to the quantity theory of money, a 2 percent increase in the money
supply
a. causes the price level to fall by 2 percent.
b. leaves the price level unchanged.
c. causes the price level to rise by less than 2 percent.
d. causes the price level to rise by 2 percent.

QN=3 (17946) Refer to Figure 30-2. Which of the following events could explain a shift of the money-
7 demand curve from MD1 to MD2?
(2433)

a. (i) an increase in the value of money

b. (ii) a decrease in the price level
c. (iii) an open-market purchase of bonds by the Federal Reserve
d. None of (i), (ii), and (iii) is correct.

QN=38 (2431) (17950) Tara deposits money into an account with a nominal interest rate of 6 percent.
She expects inflation to be 2 percent. Her tax rate is 20 percent. Tara’s after-tax real
rate of interest
a. will be 2.8 percent if inflation turns out to be 2 percent; it will be higher if inflation
turns out to be higher than 2 percent.
b. will be 2.8 percent if inflation turns out to be 2 percent; it will be lower if inflation
turns out to be higher than 2 percent.
c. will be 3.2 percent if inflation turns out to be 2 percent; it will be higher if inflation
 turns out to be higher than 2 percent.
d. will be 3.2 percent if inflation turns out to be 2 percent; it will be lower if inflation
turns out to be higher than 2 percent.

QN=3 (17931) Refer to Figure 30-3. Suppose the relevant money-supply curve is the one labeled MS2; also
9 suppose the economy’s real GDP is 45,000 for the year. If the money market is in equilibrium, then
(2422) the velocity of money is approximately

a. 4.5
b. 6.0
c. 9.0
d. 12.0

QN=40 (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=41 (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=42 (2463) (17965) Stacey, a U.S. citizen, buys a bond issued by an Italian pasta manufacturer.
a. This purchase is foreign direct investment. By itself it increases U.S. net capital
outflow.
b. This purchase is foreign direct investment. By itself it decreases U.S. net capital
outflow.
c. This purchase is foreign portfolio investment. By itself it increases U.S. net capital
outflow.
d. This purchase is foreign portfolio investment. By itself it decreases U.S. net capital
outflow.

QN=43 (2446) (17982) If it took as many dollars to buy goods in the United States as it did to buy
enough currency to buy the same goods in India, the real exchange rate would be
computed as how many Indian goods per U.S. goods?
a. (i) one
b. (ii) the number of dollars needed to buy U.S. goods divided by the number of rupees
needed to buy Indian goods
c. (iii) the number of rupees needed to buy Indian goods divided by the number of
dollars needed to buy U.S. goods
d. None of (i), (ii), and (iii) is correct.

QN=44 (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=45 (2489) (18000) The real exchange rate measures the

a. (i) price of domestic currency relative to foreign currency.
b. (ii) price of domestic goods relative to the price of foreign goods.
c. (iii) rate of domestic and foreign interest.
d. None of (i), (ii), and (iii) is correct.

QN=46 (2519) (18033) Which of the following shifts both the short-run and long-run aggregate supply
right?
a. (i) an increase in the actual price level
b. (ii) an increase in the expected price level
c. (iii) an increase in the capital stock
d. None of (i), (ii), and (iii) is correct.

QN=47 (2508) (18035) Changes in the price of oil

a. can only lead to recessions.
b. have not contributed much to output fluctuations in the United States.
c. change the economy principally by changing aggregate demand.
d. created both inflation and recession in the United States in the 1970s.

QN=48 (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=49 (2550) (18070) People are likely to want to hold more money if the interest rate
a. increases, making the opportunity cost of holding money rise.
b. increases, making the opportunity cost of holding money fall.
c. decreases, making the opportunity cost of holding money rise.
d. decreases, making the opportunity cost of holding money fall.

QN=50 (2553) (18062) According to the liquidity preference theory, which of the following events
 would shift money demand to the left?
a. an increase in the price level
b. a decrease in the price level
c. an increase in the interest rate
d. a decrease in the interest rate
[id=2228, Mark=1]1. D

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

[id=2235, Mark=1]3. B

[id=2211, Mark=1]4. C

[id=2212, Mark=1]5. B

[id=2248, Mark=1]6. C

[id=2261, Mark=1]7. B

[id=2258, Mark=1]8. C

[id=2257, Mark=1]9. C

[id=2263, Mark=1]10. B

[id=2269, Mark=1]11. C

[id=2275, Mark=1]12. A

[id=2277, Mark=1]13. A

[id=2267, Mark=1]14. C

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

[id=2314, Mark=1]16. B

[id=2311, Mark=1]17. A

[id=2298, Mark=1]18. B

[id=2313, Mark=1]19. C

[id=2307, Mark=1]20. B

[id=2341, Mark=1]21. C

[id=2346, Mark=1]22. D

[id=2336, Mark=1]23. C

[id=2345, Mark=1]24. B

[id=2330, Mark=1]25. D

[id=2380, Mark=1]26. C

[id=2384, Mark=1]27. A

[id=2363, Mark=1]28. C

[id=2362, Mark=1]29. D
[id=2378, Mark=1]30. D

[id=2367, Mark=1]31. B

[id=2398, Mark=1]32. A

[id=2397, Mark=1]33. B

[id=2386, Mark=1]34. C

[id=2425, Mark=1]35. A

[id=2427, Mark=1]36. D

[id=2433, Mark=1]37. D

[id=2431, Mark=1]38. B

[id=2422, Mark=1]39. C

[id=2420, Mark=1]40. D

[id=2472, Mark=1]41. B

[id=2463, Mark=1]42. C

[id=2446, Mark=1]43. A

[id=2505, Mark=1]44. C

[id=2489, Mark=1]45. B

[id=2519, Mark=1]46. C

[id=2508, Mark=1]47. D

[id=2514, Mark=1]48. B

[id=2550, Mark=1]49. D

[id=2553, Mark=1]50. B