If nominal GDP double and the GDP deflator doubles, then real GDP
remains constant
doubles
triples
quadruples
A country reported nominal GDP of $115 billion in 2010 and $125 billion in 2009. It also reported a GDP deflator of 85 in 2010 and 100 in 2009. Between 2009 and 2010,
real output and the price level both rose.
real output rose and the price level fell.
real output fell and the price level rose.
real output and the price level both fell.
Which of the following would not be included in the measurement of GDP for the USA?
New Honda Accords produced in the United States
Used Ford Broncos sold in the United States
Health care and legal services
Computers and software products
Labor and capital alone cannot produce sustained growth because of
diminishing returns to labor and increasing returns to capital
increasing returns to labor and diminishing returns to capital
diminishing returns to labor and capital
increasing returns to labor and productivity
Which of the following policies are consistent with the goal of increasing productivity and growth in developing countries?
Increase taxes on income from saving
impose restrictions on foreign ownership of domestic capital
protect property rights and enforce contracts
encourage to increase the fertility
Which of the following is not a way of increasing research and development?
a tax credit for research
eliminating patents, copyrights, and trademarks
increasing funding
improving intellectual property laws
If there is inflation,
nominal GDP grows faster than real GDP
nominal GDP grows faster than the GDP deflator
real GDP grows faster than nominal GDP
real GDP grows faster than the GDP deflator
Which of the following is true?
the decline in consumption resulting from an increase in government purchases is called crowding out
the natural rate of unemployment is the rate of unemployment when the economy is in either a recession or boom
a higher interest rate causes the exchange rate to fall, which results in the share of net exports rising
the CPI is based on a fixed quantity of goods and services in the base-year
The price index was 320 in one year and 360 in the next year. What was the inflation rate?
9%
11.1%
12.5%
40%
Suppose that a country increased its saving rate. In the long run it would have
higher productivity, and another unit of capital would increase output by more than before
higher productivity, but another unit of capital would increase output by less than before
lower productivity, and another unit of capital would increase output by more than before
lower productivity, but another unit of capital would increase output by less than before
1. Which of the following is a requirement for the Bureau of Labor Statistics to place someone in the “unemployed” category?
The person must have worked no more than 10 hours during the past week.
The person must have tried to find employment during the previous four weeks
The person may not have been laid off.
All of the above are correct.
Who is included in the labor force by the Bureau of Labor Statistics?
Dia, an unpaid homemaker not looking for other work
Kevin, a full-time student not looking for work
Sarah, who does not have a job but is looking for work
None of the above is correct.
Suppose there are a large number of men who used to work or seek work who now no longer do either. Other things the same, this makes
the number of people unemployed rise but does not change the labor force.
the number of people unemployed rise but makes the labor force fall.
both the number of people unemployed and the labor force fall.
the number of people unemployed fall but does not change the labor force.
The Bureau of Labor Statistics reported in 2005 that there were 28.19 million people over age 25 who had no high school degree or its equivalent, 11.73 million of whom were employed and 1.04 million of whom were unemployed. What were the labor-force participation rate and the unemployment rate for this group?
45.3% and 3.7%
45.3% and 8.1%
41.6% an 3.7%
41.6% and 8.1%
Suppose that some country had an adult civilian population of about 46 million, a labor-force participation rate of 75 percent, and an unemployment rate of 8 percent. How many people were employed?
2.76 million
31.74 million
34.5 million
42.32 million
Economists would predict that, other things the same, the more generous unemployment compensation a country has, the
shorter the duration of each spell of unemployment and the higher the unemployment rate.
shorter the duration of each spell of unemployment and the lower the unemployment rate.
longer the duration of each spell of unemployment and the higher the unemployment rate.
longer the duration of each spell of unemployment and the lower the unemployment rate.
Suppose that efficiency wages become more common in the economy. Imposing efficiency wages
increases the quantity demanded and decreases the quantity supplied of labor.
decreases the quantity demanded and increases the quantity supplied of labor.
increases the quantity demanded and increases the quantity supplied of labor.
decreases the quantity demanded and decreases the quantity supplied of labor.
Sectoral changes in demand
create frictional unemployment, while firms paying wages above equilibrium to attract a better pool of candidates creates structural unemployment.
create structural unemployment, while firms paying wages above equilibrium to attract a better pool of candidates creates frictional unemployment.
and firms paying wages above equilibrium to attract a better pool of candidates both create structural unemployment.
and firms paying wages above equilibrium to attract a better pool of candidates both create frictional unemployment.
At the Federal Reserve,
the nation’s monetary and fiscal policies are made by the Federal Open Market Committee, which meets about every six weeks.
the nation’s monetary and fiscal policies are made by the Federal Open Market Committee, which meets twice a year.
the nation’s monetary policy is made by the Federal Open Market Committee, which meets about every six weeks.
the nation’s monetary policy is made by the Federal Open Market Committee, which meets twice a year.
A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is
2.5%
33.3%
25%
75%
If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, it could
buy $300,000 worth of bonds.
buy $225,000 worth of bonds.
sell $300,000 worth of bonds.
sell $225,000 worth of bonds.
When the Fed decreases the discount rate, banks will
borrow more from the Fed and lend more to the public. The money supply increases.
borrow more from the Fed and lend less to the public. The money supply decreases.
borrow less from the Fed and lend more to the public. The money supply increases.
borrow less from the Fed and lend less to the public. The money supply decreases.
First National Bank (FNB) has a reserve ratio of 20 percent, a required reserve ratio of 10 percent, and deposits of $1,000. If FNB receives an additional deposit of $100,
then it has required reserves of $210 and holds excess reserves of $10.
then it has required reserves of $10 and holds excess reserves of $20.
then it has required reserves of $110 and holds excess reserves of $190.
then it has required reserves of $110 and holds excess reserves of $0.
When the Consumer Price Index falls from 110 to 100
there is inflation of 9.1% and the value of money decreases.
there is deflation of 9.1% and the value of money increases.
there is deflation of 10% and the value of money increases.
there is inflation of 10% and the value of money decreases.
When the Fed purchases $1000 worth of government bonds from the public, the U.S. money supply eventually increases by
more than $1000
exactly $1000
less than $1000
None of the above are correct
Your nominal wage increases from $12 per hour to $13 per hour. At the same time, the price level increases from 140 to 147. As a result,
The number of dollars you receive increases and the purchasing power of the dollars you receive increases.
The number of dollars you receive increases and the purchasing power of the dollars you receive decreases.
The number of dollars you receive decreases and the purchasing power of the dollars you receive increases.
The number of dollars you receive decreases and the purchasing power of the dollars you receive decreases.
If the Federal Reserve increases the interest rate on bank deposits at the Fed (which are also known as reserves), banks will want to hold
fewer reserves, so the money multiplier will fall.
fewer reserves, so the money multiplier will rise.
more reserves, so the money multiplier will fall.
more reserves, so the money multiplier will rise.
Which of the following combinations of real interest rates and inflation implies a nominal interest rate of 6 percent?
a real interest rate of 3 percent and an inflation rate of 2 percent.
a real interest rate of 7 percent and an inflation rate of 1 percent.
a real interest rate of 5 percent and an inflation rate of 1 percent.
a real interest rate of 6 percent and an inflation rate of 1 percent.
In the 1970s, in response to recessions caused by an increase in the price of oil, the central banks in many countries increased their money supplies. The central banks might have done this by
selling bonds on the open market, which would have not raised the value of money.
purchasing bonds on the open market, which would have raised the value of money.
selling bonds on the open market, which would have raised the value of money.
purchasing bonds on the open market, which would have lowered the value of money.
Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of
two percent and prices fell one percent.
two percent and prices rose one percent.
three percent and prices rose one percent.
three percent and prices fell one percent.
In which case is velocity the highest?
the price level equals 4, the money supply equals 5,000, and output equals 20,000.
the price level equals 4, the money supply equals 20,000 and output equals 5,000.
the price level equals 2, the money supply equals 5,000, and output equals 20,000.
the price level equals 2, the money supply equals 20,000 and output equals 5,000.
If a country experienced deflation, then
the nominal interest rate would be greater than the real interest rate.
the real interest rate would be greater than the nominal interest rate
the real interest rate would equal the nominal interest rate.
nominal GDP would be greater than the money supply.
According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also
either a rise in output or a rise in the rate at which money changes hands.
either a rise in output or a fall in the rate at which money changes hands
either a fall in output or a rise in the rate at which money changes hands.
either a fall in output or a fall in the rate at which money changes hands.
Suppose that in some tax year you earned a nominal interest rate of 6 percent. During the time you held these funds inflation was 1 percent. You compute that you made a real after-tax interest rate of 3 percent. What was your tax rate?
50%
If inflation is higher than what was expected,
creditors receive a lower real interest rate than they had anticipated.
creditors pay a lower real interest rate than they had anticipated.
debtors receive a higher real interest rate than they had anticipated.
debtors pay a higher real interest rate than they had anticipated.
If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets, then France’s net capital outflow is
-.3 trillion euros, so it must have a trade deficit.
-.3 trillion euros, so it must have a trade surplus.
.3 trillion euros, so it must have a trade deficit.
.3 trillion euros, so it must have a trade surplus.
A Japanese bank buys U.S. government bonds, this purchase
increases U.S. net capital outflow and has no affect on Japanese net capital outflow.
increases U.S. net capital outflow and increases Japanese net capital outflow.
increases U.S. net capital outflow, but decreases Japanese net capital outflow.
decreases U.S. net capital outflow, but increases Japanese net capital outflow.
If saving is greater than domestic investment, then
there is a trade deficit and Y > C + I + G.
there is a trade deficit and Y < C + I + G.
there is a trade surplus and Y > C + I + G.
there is a trade surplus and Y < C + I + G.
A country has a trade deficit. Its
net capital outflow must be positive, and saving is larger than investment.
net capital outflow must be positive and saving is smaller than investment.
net capital outflow must be negative and saving is larger than investment.
net capital outflow must be negative and saving is smaller than investment.
Exchange rates are 100 yen per dollar, 0.8 euro per dollar, and 12 pesos per dollar. A bottle of beer in New York costs 6 dollars, 500 yen in Tokyo, 6 euro in Munich, and 84 pesos in Cancun. Where is the most expensive and the cheapest beer, in that order?
Cancun, New York
Munich, Tokyo
Tokyo, Munich
New York, Cancun
If the unit of foreign currency is the peso, in which case is the real exchange rate 1.2?
the U.S. price is $2, the foreign price is 5 pesos, and the exchange rate is 3 pesos per dollar.
the U.S. price is $3, the foreign price is 18 pesos, and the exchange rate is 5 pesos per dollar.
the U.S. price is $5, the foreign price 12 pesos, and the exchange rate is 2 pesos per dollar.
the U.S. price is $10, the foreign price is 3 pesos, and the exchange rate is 4 pesos per dollar.
If the real exchange rate between the U.S. and Japan is 1, the nominal exchange rate is 100 yen per U.S. dollar and the price of chicken in the U.S. is $2.50 per pound, what is the price of chicken in Japan?
400 yen per pound
250 yen per pound
100 yen per pound
40 yen per pound
If purchasing-power parity holds but then U.S. prices rise, which of the following move the exchange rate back towards purchasing-power parity?
foreign prices rise or the U.S. nominal exchange rate rises
foreign prices rise or the U.S. nominal exchange rate falls
foreign prices fall or the U.S. nominal exchange rate rises
foreign prices fall or the U.S. nominal exchange rate falls
If the central bank wants to expand Aggregate Demand (AD), it can _________ the money supply, which would __________ the interest rate
increase, increase
increase, decrease
decrease, increase
decrease, decrease
If the government wants to contract AD, it can ___________ government purchases (G) or ____________ taxes.
Which of the following is an example of an automatic stabilizer? When the economy goes into recession,
more people become eligible for unemployment insurance benefits
stock prices decline, particularly for firms in cyclical industries
Congress begins hearings about a possible stimulus package
the Federal Reserve changes its target for the federal funds rate
An increase in the AD for goods and services has a large impact on output _________ and a larger impact on the price level ____________
in the short run, in the long run
in the long run, in the short run
in the short run, also in the short run
in the long run, also in the long run
the natural rate of unemployment is the rate of unemployment when the economy is in either a recession or a boom
The CPI is based on a fixed quantity of goods and services in the base-year
Suppose there are both multiplier and crowding out effects. An increase in government expenditures would definitely
shift aggregate demand right by a larger amount than the increase in government expenditures
shift aggregate demand right by the same amount as an the increase in government expenditures
shift aggregate demand right by a smaller amount than the increase in government expenditures
Any of the above outcomes are possible
If businesses and consumers become pessimistic, the Federal Reserve can attempt to reduce the impact on the price level and real GDP by
increasing the money supply, which raises interest rates
increasing the money supply, which lowers interest rates
decreasing the money supply, which raises interest rates
decreasing the money supply, which lowers interest rates
Stagflation is caused by
a leftward shift in the AD curve
a rightward shift in the AD curve
a leftward shift in the short-run AS curve
a rightward shift in the short-run AS curve
If policymakers expand aggregate demand, then in the long run
prices will be higher and unemployment will be lower
prices will be higher and unemployment will be unchanged
prices and unemployment will be unchanged
None of the above is correct
In the long run, if the Fed decreases the rate at which it increases the money supply
inflation will be lower
unemployment will be higher
real GDP will be lower
All of the above are correct
Which of the following events would shift money demand to the right?
an increase in the interest rate or an increase in the price level
an increase in the interest, but not an increase in the price level
an increase in the price level, but not an increase in the interest rate
neither an increase in the interest rate nor an increase in the price level
Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve?
As the money supply increase, the interest rate falls, so spending rises
As the money supply increases, the interest rate rises, so spending rises
As the price level increases, the interest rate falls, so spending rises
As the price level increases, the interest rate rises, so spending falls
Suppose the Fed decreases the growth rate of the money supply. Which of the following would be lower in the long run?
both the natural rate of unemployment and the inflation rate
the natural rate of unemployment, but not the inflation rate
the inflation rate, but not the natural rate of unemployment
neither the natural unemployment rate nor the inflation rate
If the government reduced the minimum wage and pursued contractionary monetary policy, then in the long run
both the unemployment rate and the inflation rate would be lower
the unemployment rate would be lower and the inflation rate would be higher
the unemployment rate would be higher and the inflation rate would be lower
the unemployment rate and the inflation rate would be higher
Which of the following policies would be advocated by someone who wants the government to follow an active stabilization policy when the economy is experiencing severe unemployment?
decrease the money supply
increase government expenditures
increase taxes
If countries that imported goods and services from the United States went into recession, we would expect that U.S, net exports would
rise, making aggregate demand shift right
rise, making aggregate demand shift left
fall, making aggregate demand shift right
fall, making aggregate demand shift left
in equilibrium a country has a net capital outflow of $200 billion and domestic investment of $150 billion. What is the quantity of loanable funds demanded?
$50 billion
$150 billion
$200 billion
$350 billion
If U.S. net exports are negative, then net capital outflow is
positive, so foreign assets bought by Americans are greater than American assets bought by foreigners
positive, so American assets bought by foreigners are greater than foreign assets bought by Americans
negative, so foreign assets bought by Americans are greater than American assets bought by foreigners
negative, so American assets bought by foreigners are greater than foreign assets bought by Americans
Which of the following is not an automatic stabilizer?
the minimum wage
the unemployment compensation system
the federal income tax
the welfare system
the imposition of an import quota shifts
the supply of currency right, so the exchange rate falls
the supply of currency left, so the exchange rate rises
the demand for currency right, so the exchange rate rises
the demand for currency left, so the exchange rate falls
In the long run, which of the following depends primarily on the growth rate of the money supply?
the natural rate of unemployment and the inflation rate
the natural rate of unemployment but not the inflation rate
the inflation rate but not the natural rate of unemployment
neither the natural rate of unemployment nor the inflation rate
According to the Phillips curve, policymakers would reduce inflation but raise unemployment if they
decreased the money supply
increased government expenditures
decreased taxes
If policymakers decrease aggregate demand, then in the long run
If the Federal Reserve increases the rate at which it increases the money supply, then unemployment is lower
in the long run and the short run
in the long run but not the short run
in the short run but not the long run
in neither the short run nor the long run
The natural rate of unemployment
is constant over time
varies over time, but can't be changed by the government
is the unemployment rate that the economy tends to move to in the long run
depends on the rate at which the Fed increases the money
