QN=1 (17754) Refer to Table 3-9.

Barb has an absolute advantage in

(2234
)

a. both setting up and testing computers and a comparative advantage in setting up computers.
b. both setting up and testing computers and a comparative advantage in testing computers.
c. neither setting up nor testing computers and a comparative advantage in setting up computers.
d. neither setting up nor testing computers and a comparative advantage in testing computers.

QN=2 (2231) (17733) Suppose that a worker in Boatland can produce either 5 units of wheat or 25
units of fish per year, and a worker in Farmland can produce either 25 units of wheat
or 5 units of fish per year. There are 30 workers in each country. No trade occurs
between the two countries. Boatland produces and consumes 75 units of wheat and
375 units of fish per year while Farmland produces and consumes 375 units of wheat
and 75 units of fish per year. If trade were to occur, Boatland would trade 90 units of
fish to Farmland in exchange for 80 units of wheat. If Boatland now completely
specializes in fish production, how many units of fish could it now consume along with
the 80 units of imported wheat?
a. 490 units
b. 500 units
c. 610 units
d. 660 units

QN=3 (2221) (17727) Which of the following is not correct?

a. Economists are generally united in their support of free trade.
b. The conclusions of Adam Smith and David Ricardo on the gains from trade have held
up well over time.
c. David Ricardo argued that Britain should not restrict imports of grain.
d. Economists’ opposition to trade restrictions is still based largely on the principle of
absolute advantage.
QN=4 (2213) (17718) People who provide you with goods and services
a. are acting out of generosity.
b. do so because they get something in return.
c. have chosen not to become interdependent.
d. are required to do so by the government.

QN=5 (2209) (17747) A country that currently does not trade with other countries could benefit by
a. restricting imports and promoting exports.
b. promoting imports and restricting exports.
c. restricting both imports and exports.
d. not restricting trade.

QN=6 (2250) (17774) Household spending on education is counted in which component or

subcomponent of GDP?
a. consumption of durable goods
b. consumption of nondurable goods
c. consumption of services
d. investment

QN=7 (2242) (17730) Assume for Namibia that the opportunity cost of each hut is 200 bowls. Then
which of these pairs of points could be on Namibia's production possibilities frontier?
a. (200 huts, 30,000 bowls) and (150 huts, 35,000 bowls)
b. (200 huts, 40,000 bowls) and (150 huts, 30,000 bowls)
c. (300 huts, 50,000 bowl) and (200 huts, 60,000 bowls)
d. (300 huts, 60,000 bowls) and (200 huts, 80,000 bowls)

QN=8 (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=9 (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=10 (2240) (17728) By definition, imports are
a. people who work in foreign countries.
b. goods in which a country has an absolute advantage.
c. limits placed on the quantity of goods leaving a country.
d. goods produced abroad and sold domestically.

QN=11 (2266) (17765) The consumption component of GDP includes spending on

a. durable goods and nondurable goods, but not spending on services.
b. durable goods and services, but not spending on nondurable goods.
c. nondurable goods and services, but not spending on durable goods.
d. durable goods, nondurable goods, and services.

QN=12 (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=13 (2268) (17772) When economists talk about growth in the economy, they measure that
growth as the
a. absolute change in nominal GDP from one period to another.
b. percentage change in nominal GDP from one period to another.
c. absolute change in real GDP from one period to another.
d. percentage change in real GDP from one period to another.

QN=14 (2294) (17793) In the CPI, goods and services are weighted according to
a. how long a market has existed for each good or service.
b. the extent to which each good or service is regarded by the government as a necessity.
c. how much consumers buy of each good or service.
d. the number of firms that produce and sell each good or service.

QN=15 (2271) (17778) Which of the following topics are more likely to be studied by a
macroeconomist than by a microeconomist?
a. the effect of taxes on the prices of airline tickets, the profitability of automobile-
manufacturing firms, and employment trends in the food-service industry
b. the price of beef, wage differences between genders, and antitrust laws
c. how consumers maximize utility, and how prices are established in markets for
agricultural products
d. the percentage of the labor force that is out of work, and differences in average
income from country to country
QN=16 (2322) (17839) The level of real GDP person
a. differs widely across countries, but the growth rate of real GDP per person is similar
across countries.
b. is very similar across countries, but the growth rate of real GDP per person differs
widely across countries.
c. and the growth rate of real GDP per person are similar across countries.
d. and the growth rate of real GDP per person vary widely across countries.

QN=17 (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=18 (2324) (17841) A barber shop produces 96 haircuts a day. Each barber in the shop works 8
hours per day and produces the same number of haircuts per hour. If the shop’s
productivity is 3 haircuts per hour of labor, then how many barbers does the shop
employ?
a. 2
b. 3
c. 4
d. 6

QN=19 (2320) (17838) Which of the following best states economists' understanding of the facts
concerning the relationship between natural resources and economic growth?
a. A country with no or few domestic natural resources is destined to be poor.
b. Differences in natural resources have virtually no role in explaining differences in
standards of living.
c. Some countries can be rich mostly because of their natural resources and countries
without natural resources need not be poor, but can never have very high standards of
living.
d. Abundant domestic natural resources may help make a country rich, but even
countries with few natural resources can have high standards of living.

QN=20 (2297) (17806) The CPI is more commonly used as a gauge of inflation than the GDP deflator is
because
a. the CPI is easier to measure.
b. the CPI is calculated more often than the GDP deflator is.
c. the CPI better reflects the goods and services bought by consumers.
d. the GDP deflator cannot be used to gauge inflation.

QN=21 (2340) (17872) A change in the tax laws that increases the supply of loanable funds will have a
bigger effect on investment when
a. the demand for loanable funds is more elastic and the supply of loanable funds is more
inelastic.
b. the demand for loanable funds is more inelastic and the supply of loanable funds is
more elastic.
c. both the demand for and supply of loanable funds are more elastic.
d. both the demand for and supply of loanable funds are more inelastic.

QN=22 (2344) (17850) In a closed economy, what does (T - G) represent?

a. national saving
b. investment
c. private saving
d. public saving

QN=23 (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=24 (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=25 (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=26 (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=27 (2366) (17878) Which of the following is not an explanation for the existence of structural
unemployment?
a. efficiency wages
b. job search
c. minimum-wage laws
d. unions

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 (2374) (17890) U.S. Department of Labor data show that minimum-wage workers tend to be
a. young and less educated.
b. young and more educated.
c. old and less educated.
d. old and more educated.

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 (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 (2409) (17909) When an economy uses silver as money, then that economy’s money
a. serves as a store of value but not as a medium of exchange.
b. serves as a medium of exchange but not as a unit of account.
c. is fiat money.
d. has intrinsic value.
QN=33 (2401) (17907) The banking system currently has $200 billion of reserves, none of which are
excess. People hold only deposits and no currency, and the reserve requirement is 4
percent. If the Fed raises the reserve requirement to 10 percent and at the same time
buys $50 billion of bonds, then by how much does the money supply change?
a. (i) It rises by $600 billion.
b. (ii) It rises by $125 billion.
c. (iii) It falls by $2,500 billion.
d. None of (i), (ii), and (iii) is correct.

QN=34 (2393) (17902) Which of the following is not included in M1?

a. (i) a $5 bill in your wallet
b. (ii) $100 in your checking account
c. (iii) $500 in your savings account
d. All of (i), (ii), and (iii) are included in M1.

QN=35 (2416) (17938) If M = 3,000, P = 2, and Y = 12,000, what is velocity?

a. 1/2
b. 2
c. 4
d. 8

QN=3 (17947) Refer to Figure 30-2. At the end of 2007 the relevant money-demand curve was the one
6 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=37 (2438) (17945) The term hyperinflation refers to

a. the spread of inflation from one country to others.
b. a decrease in the inflation rate.
c. a period of very high inflation.
d. inflation accompanied by a recession.

QN=38 (2421) (17952) You bought some shares of stock and, over the next year, the price per share
increased by 5 percent and the price level increased by 8 percent. Before taxes, you
experienced
a. both a nominal gain and a real gain, and you paid taxes on the nominal gain.
b. both a nominal gain and a real gain, and you paid taxes only on the real gain.
c. a nominal gain and a real loss, and you paid taxes on the nominal gain.
d. a nominal gain and a real loss, and you paid no taxes on the transaction.

QN=39 (2437) (17957) The classical dichotomy argues that changes in the money supply
a. affect both nominal and real variables.
b. affect neither nominal nor real variables.
c. affect nominal variables, but not real variables.
d. do not affect nominal variables, but do affect real variables.

QN=40 (2435) (17956) Suppose each good costs $5 per unit and Megan holds $40. What is the real
value of the money she holds?
a. $40. If the price of goods rises, to maintain the real value of her money holdings she
needs to hold more dollars.
b. 8 units of goods. If the price of goods rises, to maintain the real value of her money
holdings she needs to hold more dollars.
c. $40. If the price of goods rises, to maintain the real value of her money holdings she
needs to hold fewer dollars.
d. 8 units of goods. If the price of goods rises, to maintain the real value of her money
holdings she needs to hold fewer dollars.

QN=41 (2471) (17960) Paine Pharmaceuticals produces medicines in the U.S. Its overseas sales
a. are an export of the U.S. and increase U.S. net exports.
b. are an export of the U.S. and decrease U.S. net exports.
c. are an import of the U.S. and increase U.S. net exports.
d. are an import of the U.S. and decrease U.S. net exports.

QN=42 (2469) (17972) If a dollar currently purchases 10 pesos and someone forecasts that in a year it
will be 11 pesos, then the forecast is given in
a. real terms and implies the dollar will appreciate.
b. real terms and implies the dollar will depreciate.
c. nominal terms and implies the dollar will appreciate.
d. nominal terms and implies the dollar will depreciate.

QN=43 (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=44 (2493) (17990) A rise in the budget deficit

a. shifts both the supply of loanable funds in the market for loanable funds and the
supply of dollars in the market for foreign-currency exchange right.
b. shifts both the supply of loanable funds in the market for loanable fund and the supply
of dollars in the market for foreign-currency exchange left.
c. shifts both the demand for loanable funds in the market for loanable funds and the
demand for dollars in the market for foreign-currency exchange right.
d. shifts both the demand for loanable funds in the market for loanable funds and the
demand for dollars in the market for foreign-currency exchange left.

QN=45 (2503) (17988) Other things the same, an increase in the U.S. interest rate causes the quantity
of loanable funds supplied to
a. rise because net capital outflow and domestic investment rise.
b. rise because national saving rises.
c. fall because net capital outflow and domestic investment rise.
d. fall because national saving falls.

QN=46 (2531) (18037) As the price level rises,

a. the real exchange rate falls, so net exports fall.
b. the real exchange rate falls, so net exports rise.
c. the real exchange rate rises, so net exports fall.
d. the real exchange rate rises, so net exports rise.

QN=47 (2510) (18025) In which case can we be sure aggregate demand shifts left overall?
a. people want to save more for retirement and the government raises taxes
b. people want to save more for retirement and the government cuts taxes
c. people want to save less for retirement and the government raises taxes
d. people want to save less for retirement and the government cuts taxes

QN=48 (2534) (18056) The theory of liquidity preference assumes that the nominal supply of money
is determined by the
a. level of real output only.
b. interest rate only.
c. level of real output and by the interest rate.
d. Federal Reserve.

QN=49 (2548) (18045) In the long run, fiscal policy primarily affects
a. aggregate demand. In the short run, it affects primarily aggregate supply.
b. aggregate supply. In the short run, it affects primarily saving, investment, and growth.
c. saving, investment, and growth. In the short run, it affects primarily aggregate
demand.
d. saving, investment, and growth. In the short run, it affects primarily aggregate supply.

QN=50 (2554) (18064) Assume the MPC is 0.75. Assuming only the multiplier effect matters, a
decrease in government purchases of $100 billion will shift the aggregate demand
curve to the
a. (i) left by $200 billion.
b. (ii) left by $400 billion.
c. (iii) right by $800 billion.
d. None of (i), (ii), and (iii) is correct.
[id=2234, Mark=1]1. D

[id=2231, Mark=1]2. D

[id=2221, Mark=1]3. D

[id=2213, Mark=1]4. B

[id=2209, Mark=1]5. D

[id=2250, Mark=1]6. C

[id=2242, Mark=1]7. D

[id=2257, Mark=1]8. C

[id=2258, Mark=1]9. C

[id=2240, Mark=1]10. D

[id=2266, Mark=1]11. D

[id=2277, Mark=1]12. A

[id=2268, Mark=1]13. D

[id=2294, Mark=1]14. C

[id=2271, Mark=1]15. D

[id=2322, Mark=1]16. D

[id=2307, Mark=1]17. B

[id=2324, Mark=1]18. C

[id=2320, Mark=1]19. D

[id=2297, Mark=1]20. C

[id=2340, Mark=1]21. A

[id=2344, Mark=1]22. D

[id=2349, Mark=1]23. D

[id=2330, Mark=1]24. D

[id=2336, Mark=1]25. C

[id=2384, Mark=1]26. A

[id=2366, Mark=1]27. B

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

[id=2374, Mark=1]29. A
[id=2378, Mark=1]30. D

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

[id=2409, Mark=1]32. D

[id=2401, Mark=1]33. C

[id=2393, Mark=1]34. C

[id=2416, Mark=1]35. D

[id=2434, Mark=1]36. D

[id=2438, Mark=1]37. C

[id=2421, Mark=1]38. C

[id=2437, Mark=1]39. C

[id=2435, Mark=1]40. B

[id=2471, Mark=1]41. A

[id=2469, Mark=1]42. C

[id=2463, Mark=1]43. C

[id=2493, Mark=1]44. B

[id=2503, Mark=1]45. B

[id=2531, Mark=1]46. C

[id=2510, Mark=1]47. A

[id=2534, Mark=1]48. D

[id=2548, Mark=1]49. C

[id=2554, Mark=1]50. B