Social Science Economics Exam Review
Course Introduction
Social Science Economics explores the fundamental principles of economics within the broader context of social science. The course examines how individuals, groups, and societies make choices about resource allocation, production, and consumption in the presence of scarcity. Students will analyze economic systems, market structures, and the impact of government policies on economic behavior, while considering social, cultural, and ethical dimensions. Through case studies, theoretical frameworks, and empirical research, the course fosters a deeper understanding of how economic phenomena are influenced by and interact with social processes and institutions.
Recommended Textbook
Principles of Economics 4th Edition by N. Gregory Mankiw
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36 Chapters
9199 Verified Questions
9199 Flashcards
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Page 2
Chapter 1: Ten Principles of Economics
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237 Verified Questions
237 Flashcards
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Sample Questions
Q1) Germany could have avoided the high inflation that it experienced in the 1920s by
A)not directing so many of its resources toward preparation for World War II.
B)not increasing taxes so much on the German middle class.
C)not allowing the quantity of money to increase so rapidly.
D)using government policies to stimulate the economy more so than what was done.
Answer: C
Q2) The business cycle is the
A)relationship between unemployment and inflation.
B)irregular fluctuations in economic activity.
C)positive relationship between the quantity of money in an economy and inflation.
D)predictable changes in economic activity due to changes in government spending and taxes.
Answer: B
Q3) Equity refers to how the pie is divided,and efficiency refers to the size of the economic pie.
A)True
B)False
Answer: True
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3
Chapter 2: Thinking Like an Economist
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Sample Questions
Q1) Which of the following statements about models is correct?
A)The more details a model includes, the better the model.
B)Models assume away irrelevant details.
C)Models cannot be used to explain how the economy functions.
D)Models cannot be used to make predictions.
Answer: B
Q2) An example of a price that changes only infrequently is the price of
A)stocks on the New York Stock Exchange.
B)crude oil.
C)residential real estate.
D)magazines sold at newsstands.
Answer: D
Q3) In the markets for goods and services,
A)households provide firms with savings for investment.
B)households provide firms with labor, land, and capital.
C)firms provide households with output.
D)the government provides firms with inputs for the production process.
Answer: C
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4
Chapter 3: Interdependence and the Gains From Trade
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Sample Questions
Q1) Refer to Table 3-2.Helen has a comparative advantage in
A)dresses and Carolyn has a comparative advantage in quilts.
B)quilts and Carolyn has a comparative advantage in dresses.
C)neither good and Carolyn has a comparative advantage in both goods.
D)both goods and Carolyn has a comparative advantage in neither good.
Answer: A
Q2) Refer to Table 3-4.Which of the following statements is correct?
A)Brenda has an absolute advantage, and Eric has a comparative advantage, in setting up computers.
B)Eric has an absolute advantage, and Brenda has a comparative advantage, in setting up computers.
C)Brenda has an absolute advantage and a comparative advantage in setting up computers.
D)Eric has an absolute advantage and a comparative advantage in setting up computers.
Answer: C
Q3) Some countries win in international trade,while other countries lose.
A)True
B)False
Answer: False
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Chapter 4: The Market Forces of Supply and Demand
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Sample Questions
Q1) Refer to Table 4-3.Suppose Alfred,Belinda,and Charissa are the only demanders of sandwiches.Also suppose: x = 2; the current price of a sandwich is $5.00; the market quantity supplied of sandwiches is 10; the law of supply applies to the supply of sandwiches. Then
A)there is a shortage of 3 sandwiches and the price would be expected to rise from its current level of $5.00.
B)there is a shortage of 3 sandwiches and the price would be expected to fall from its current level of $5.00.
C)there is a surplus of 5 sandwiches and the price would be expected to rise from its current level of $5.00.
D)there is a surplus of 5 sandwiches and the price would be expected to fall from its current level of $5.00.
Q2) Holding all other things constant,a higher price for ski lift tickets would
A)increase the number of skiers.
B)increase the price of skis.
C)decrease the number of skis sold.
D)decrease the demand for other winter recreational activities.
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Page 6
Chapter 5: Elasticity and Its Applications
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Sample Questions
Q1) Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00.This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to A)fall by 200 percent.
B)fall by 40 percent.
C)rise by 200 percent.
D)rise by 40 percent.
Q2) Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good.The income elasticity of demand for the good is
A)negative and therefore the good is an inferior good.
B)negative and therefore the good is a normal good.
C)positive and therefore the good is an inferior good.
D)positive and therefore the good is a normal good.
Q3) If demand is perfectly inelastic,the demand curve is vertical,and elasticity is equal to 0.
A)True
B)False
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Chapter 6: Supply, demand, and Government Policies
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Sample Questions
Q1) Policymakers sometimes are attracted to price controls because
A)they view the market's outcome as inefficient.
B)they view the market's outcome as unfair.
C)it is politically popular to impose price controls in markets in which the demand for the good or service is inelastic.
D)they are required to do so under the Employment Act of 1946.
Q2) Refer to Figure 6-9.The price received by sellers after the tax is imposed is
A)$18.
B)$14.
C)$12.
D)$8.
Q3) Advocates of the minimum wage
A)deny that the minimum wage produces any adverse effects.
B)emphasize the benefits to teenagers of increases in the minimum wage.
C)emphasize the low annual incomes of those who work for the minimum wage.
D)All of the above are correct.
Q4) A tax on sellers shifts the supply curve upward by exactly the amount of the tax.
A)True
B)False
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Chapter 7: Consumers, producers, and the Efficiency of Markets
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Sample Questions
Q1) Welfare economics is the study of
A)the well-being of less fortunate people.
B)welfare programs in the United States.
C)the effect of income redistribution on work effort.
D)how the allocation of resources affects economic well-being.
Q2) Efficiency in a market is achieved when
A)a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs.
B)the sum of producer surplus and consumer surplus is maximized.
C)all firms are producing the good at the same low cost per unit.
D)no buyer is willing to pay more than the equilibrium price for any unit of the good.
Q3) Answer each of the following questions about supply and producer surplus.
a.What is producer surplus, and how is it measured?
b.What is the relationship between the cost to sellers and the supply curve?
c.Other things equal, what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve.
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Chapter 8: Application: the Costs of Taxation
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Sample Questions
Q1) Refer to Figure 8-3.The amount of tax revenue received by the government is equal to
A)$210.
B)$420.
C)$560.
D)$980.
Q2) Suppose a tax of $3 per unit is imposed on a good.The supply curve and the demand curve are straight lines.The tax decreases consumer surplus by $3,900 and it decreases producer surplus by $3,000.The tax generates tax revenue of $6,000.From this information it follows that the tax decreased the equilibrium quantity of the good
A)from 2,000 to 1,500.
B)from 2,400 to 2,000.
C)from 2,600 to 2,000.
D)from 3,000 to 2,400.
Q3) Deadweight loss is the
A)decline in total surplus that results from a tax.
B)decline in government revenue when taxes are reduced in a market.
C)decline in consumer surplus when a tax is placed on buyers.
D)loss of profits to business firms when a tax is imposed.
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Page 10
Chapter 9: Application: International Trade
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Sample Questions
Q1) Tariffs cause deadweight loss because they move the price of an imported product closer to the equilibrium without trade,thus reducing the gains from trade.
A)True
B)False
Q2) Refer to Figure 9-4.Without trade,total surplus amounts to A)$122.50.
B)$245.
C)$367.50.
D)$612.50.
Q3) Refer to Figure 9-10.Consumer surplus in this market after trade is A)a.
B)C + B.
C)A + B + D.
D)B + C + D.
Q4) When a country takes a multilateral approach to free trade,it A)removes trade restrictions on its own.
B)reduces its trade restrictions while other countries do the same.
C)does not remove trade restrictions no matter what other countries do.
D)is willing to trade with multiple countries at once.
Q5) How does an import quota differ from an equivalent tariff?
Page 11
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Chapter 10: Externalities
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Sample Questions
Q1) The Coase theorem suggests that efficient solutions to externalities can be determined through bargaining.Under what circumstances will private bargaining fail to produce a solution?
Q2) If the social cost of producing robots is less than the private cost of producing robots,the private market produces too few robots. A)True B)False
Q3) Nancy loves to landscape her yard,but her neighbor Lee places a low value on his landscaping.When Lee's grass is neglected and gets long,Nancy will mow it for Lee.This is an example of
A)a situation in which the Coase theorem fails to explain the lawn mowing arrangement. B)an improper allocation of resources.
C)a private solution to a negative externality problem.
D)an exploitation of a common resource.
Q4) Firms that can reduce pollution easily would be willing to sell their pollution permits. A)True B)False
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12
Chapter 11: Public Goods and Common Resources
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Sample Questions
Q1) Each of the following is likely to be a successful way for the government to solve the problem of overuse of a common resource except
A)regulating the use or consumption of the common resource.
B)taxing the use or consumption of the common resource.
C)selling the common resource to a private entity.
D)asking individuals to voluntarily reduce their use of the resource.
Q2) Goods that are not excludable are usually
A)higher priced than excludable goods.
B)higher priced than rival goods.
C)in short supply.
D)free of charge.
Q3) The creation of knowledge is a public good.Because knowledge is a public good,profit-seeking firms tend to free-ride on the knowledge created by others and,as a result,devote too few resources to the creation of knowledge.How does the U.S.government correct for this apparent market failure?
Q4) In some cases the government can make everyone better off by raising taxes to pay for certain goods that the market fails to provide.
A)True
B)False
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Chapter 12: The Design of the Tax System
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328 Flashcards
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Sample Questions
Q1) Incentives to work and save are reduced when A)income taxes are higher.
B)consumption taxes replace income taxes.
C)corrective taxes are implemented.
D)All of the above are correct.
Q2) According to the ability-to-pay principle,it is fair for people to pay taxes based on the amount of government services that they receive.
A)True
B)False
Q3) Refer to Table 12-1.If Danielle has $38,000 in taxable income,her tax liability will be
A)$2,237.50.
B)$3,800.
C)$6,237.50.
D)$9,500.
Q4) Which of the following is a characteristic of a more efficient tax system?
A)The system minimizes deadweight loss.
B)The system raises the same amount of revenue at a lower cost.
C)The system minimizes administrative burdens.
D)All of the above are correct.
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Chapter 13: The Costs of Production
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Sample Questions
Q1) Refer to Table 13-8.What is the average total cost of producing 2 gigaplots at Jimmy's Gigaplot factory?
A)$14.00
B)$18.50
C)$22.50
D)$26.50
Q2) Smith Tire Company has total fixed costs of $300,000 per year.The firm's average variable cost is $80 for 10,000 tires.At that level of output,the firm's average total costs equal
A)$80
B)$90
C)$100
D)$110
Q3) The value of a business owner's time is an example of A)an opportunity cost.
B)a fixed cost.
C)an explicit cost.
D)total revenue.
Q4) What effect,if any,does diminishing marginal product have on the shape of the marginal cost curve?
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Chapter 14: Firms in Competitive Markets
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Sample Questions
Q1) The competitive firm's short-run supply curve
A)is its marginal revenue curve, but only the portion where marginal revenue exceeds marginal cost.
B)is its marginal cost curve.
C)is its marginal cost curve, but only the portion above the minimum of average total cost.
D)is its marginal cost curve, but only the portion above the minimum of average variable cost.
Q2) A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as
A)average revenue is greater than average total cost.
B)average revenue is equal to marginal cost.
C)marginal cost is greater than average total cost.
D)price is above or below marginal cost.
Q3) In the long run,a profit-maximizing firm will choose to exit a market when
A)average fixed cost is falling.
B)variable costs exceed sunk costs.
C)marginal cost exceeds marginal revenue at the current level of production.
D)total revenue is less than total cost.
Q4) List and describe the characteristics of a perfectly competitive market.
Page 16
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Chapter 15: Monopoly
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Sample Questions
Q1) A monopolist produces
A)more than the socially efficient quantity of output, but at a higher price than in a competitive market.
B)less than the socially efficient quantity of output, but at a higher price than in a competitive market.
C)the socially efficient quantity of output, but at a higher price than in a competitive market.
D)possibly more or possibly less than the socially efficient quantity of output, but definitely at a higher price than in a competitive market.
Q2) If a monopolist can sell 7 units when the price is $4 and 8 units when the price is $3,then marginal revenue of selling the eighth unit is equal to
A)$3.
B)$4.
C)$24.
D)-$4.
Q3) It doesn't make sense to talk about a monopolist's supply curve.
A)True
B)False
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Chapter 16: Oligopoly
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Sample Questions
Q1) Refer to Table 16-2.What is the concentration ratio for Industry A?
A)71%
B)81%
C)86%
D)88%
Q2) Oligopolies would like to act like a
A)duopoly, but self-interest often drives them closer to the perfectly competitive outcome.
B)competitive firm, but self-interest often drives them closer to the duopoly outcome.
C)monopoly, but self-interest often drives them closer to the duopoly outcome.
D)monopoly, but self-interest often drives them closer to the perfectly competitive outcome.
Q3) Refer to Table 16-16.What is grocery store 1's dominant strategy?
A)Grocery store 1 does not have a dominant strategy.
B)Grocery store 1 should always set a low price.
C)Grocery store 1 should always set a high price.
D)Grocery store 1 should set a low price when grocery store 2 sets a low price, and grocery store 1 should set a high price when grocery store 2 sets a high price.
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Page 18
Chapter 17: Monopolistic Competition
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Sample Questions
Q1) One way in which monopolistic competition differs from oligopoly is that
A)there are no barriers to entry in oligopolies.
B)in oligopoly markets there are only a few sellers.
C)all firms in an oligopoly eventually earn zero economic profits.
D)strategic interactions between firms are rarely evident in oligopolies.
Q2) List five goods that are likely sold in a monopolistically competitive market.
Q3) A markup of price over marginal cost is inconsistent with free entry and zero profit. A)True
B)False
Q4) A monopolistically competitive firm is currently earning a positive economic profit.If other firms enter the market,we would expect that the added competition will cause this firm to adjust its
A)output so that it will operate closer to its efficient scale.
B)output so that it will operate further from its efficient scale.
C)output so that it will no longer be at its efficient scale.
D)output, but it might move either closer to or further from its efficient scale.
Q5) Discuss how "brand names" may enhance the efficiency of markets in a less developed country.
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Chapter 18: The Markets for the Factors of Production
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Sample Questions
Q1) Describe the difference between the purchase price of capital and the rental price of capital.If you know the value of marginal product from the flow of capital services,how would you determine the market price for the capital stock?
Q2) Refer to Figure 18-3.If the relevant labor supply curve is S and the current wage is W , A)there is a surplus of labor.
B)the quantity of labor demanded exceeds the quantity of labor supplied.
C)an increase in the minimum wage could be employed to restore equilibrium in the market.
D)All of the above are correct.
Q3) Refer to Table 18-5.What is the value for the cell labeled CC?
A)650
B)600
C)100
D)50
Q4) A change in the supply of any one factor alters the earnings of all the other factors. A)True
B)False
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Chapter 19: Earnings and Discrimination
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Sample Questions
Q1) The job of night watchman at the Punxsutawny Phil Groundhog museum is known to have a high wage.This can be partially explained by the fact that the job is likely to A)require specialized skills.
B)be difficult.
C)be incredibly dull.
D)carry a high degree of personal satisfaction.
Q2) Refer to Scenario 19-4.Competition in the market for haircuts is consistent with which of the following statements?
A)Firms hiring nonbald barbers will have a cost advantage, leading to an increase in the demand for nonbald barbers.
B)All firms that hire only bald barbers will go out of business.
C)Firms hiring bald barbers will enter the market, increasing the demand for bald barbers.
D)Firms hiring nonbald barbers will enter the market, increasing the demand for nonbald barbers.
Q3) Explain the theory that education acts as a signaling device.How does this contrast with the theory of education as an investment in human capital?
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Chapter 20: Income Inequality and Poverty
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Sample Questions
Q1) Which of the following is not an example of in-kind transfers?
A)food stamps
B)Medicare
C)the Earned Income Tax Credit
D)housing vouchers
Q2) The poverty line is an absolute standard and is based on the cost of providing an adequate diet.
A)True
B)False
Q3) The top 5 percent of U.S.annual family income in 2003 was $170,082 or more.
A)True
B)False
Q4) The invisible hand of the marketplace acts to allocate resources efficiently,but it does not necessarily ensure that resources are allocated fairly.
A)True
B)False
Q5) Compare and contrast the "life cycle" hypothesis and the "permanent income" hypothesis.What are their respective implications for inequality in the income distribution?
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Chapter 21: The Theory of Consumer Choice
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Sample Questions
Q1) The slope of the budget constraint is determined by the
A)relative price of the goods measured on the axes.
B)relative price of the goods measured on the axes and the consumer's income.
C)endowment of productive resources.
D)preferences of the consumer.
Q2) If the price of hamburgers increases,the substitution effect works to
A)decrease the quantity of hamburgers supplied.
B)increase the number of hamburger buns demanded.
C)decrease the quantity of hamburgers demanded.
D)increase the number of hamburger buns supplied.
Q3) Suppose a consumer has preferences over two goods,x and y,which are perfect substitutes.In particular,two units of x is equivalent to one unit of y.If the price of x is $1,the price of y is $3,and the consumer has $30 of income to allocate to these two goods,how much of each good should the consumer purchase to maximize satisfaction?
A)Thirty units of x and zero units of y.
B)Zero units of x and ten units of y.
C)Fifteen units of x and five units of y.
D)Twelve units of x and six units of y.
Q4) List and briefly explain each of the four properties of indifference curves.
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Chapter 22: Frontiers of Microeconomics
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Sample Questions
Q1) People interpret evidence to confirm beliefs they already hold.This statement is an example of which of the following systematic mistakes that people make found in studies of human decision-making?
A)people are overconfident
B)people give too much weight to a small number of vivid observations
C)people are reluctant to change their minds
D)All of the above
Q2) Adverse selection is
A)the tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behavior.
B)an action taken by an uninformed party to induce an informed party to reveal information.
C)the failure of majority voting to produce transitive preferences for society.
D)the tendency for the mix of unobserved attributes to become undesirable from the standpoint of an uninformed party.
Q3) Valerie prefers A to B and she prefers B to C.If Valerie's preferences are transitive,then she prefers A to C.
A)True
B)False
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Page 24
Chapter 23: Measuring a Nations Income
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Sample Questions
Q1) International data on GDP and socioeconomic variables
A)are inconclusive about the relationship between GDP and the economic well-being of citizens.
B)suggest that poor nations actually might enjoy a higher standard of living than do rich nations.
C)leave no doubt that a nation's GDP is closely associated with its citizens' standard of living.
D)indicate that there are few real differences in living standards around the world, in spite of the large differences in GDP between nations.
Q2) For monitoring fluctuations in the national economy,which measure of income is best?
A)GDP
B)NNP
C)national income
D)It does not matter very much which measure we use.
Q3) For an economy,in a given time period,income exceeds spending.
A)True
B)False
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Chapter 24: Measuring the Cost of Living
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Sample Questions
Q1) Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005.However,the inflation rate was lower between 2004 and 2005 than it was between 2003 and 2004.Which of the following scenarios is consistent with this assumption?
A)The CPI was 100 in 2003, 110 in 2004, and 105 in 2005.
B)The CPI was 100 in 2003, 120 in 2004, and 135 in 2005.
C)The CPI was 110 in 2003, 106 in 2004, and 100 in 2005.
D)All of the above are correct.
Q2) If the price of American-made power tools increases,then
A)the consumer price index and the GDP deflator will both increase.
B)the consumer price index will increase, and the GDP deflator will be unaffected.
C)the consumer price index will be unaffected, and the GDP deflator will increase.
D)the consumer price index and the GDP deflator will both be unaffected.
Q3) Recent changes in methods used to compute the CPI have made the
A)upward bias in the CPI inflation rate more severe than it used to be.
B)upward bias in the CPI inflation rate less severe than it used to be.
C)downward bias in the CPI inflation rate more severe than it used to be.
D)downward bias in the CPI inflation rate less severe than it used to be.
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Chapter 25: Production and Growth
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Sample Questions
Q1) Accumulating capital
A)requires that society sacrifice consumption goods in the present.
B)allows society to consume more in the present.
C)decreases saving rates.
D)has no tradeoffs.
Q2) Investment in human capital has opportunity costs,but investment in physical capital does not.
A)True
B)False
Q3) In the country of Krypton,the price of lead increased from $20 per pound to $21 per pound during a time when the overall price level increased by 5 percent.During this period,the real price of lead
A)increased.
B)decreased.
C)stayed the same.
D)might have increased, decreased or stayed the same; more information is needed to be sure.
Q4) A forest is an example of a nonrenewable resource.
A)True
B)False
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Chapter 26: Saving, investment, and the Financial System
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Sample Questions
Q1) Over-the-Rhine Cheese Corporation had a PE ratio of 20,retained earnings of $1.5 per share and a dividend of $.50.What was its dividend yield?
A)1.25%
B)1.67%
C)3.33%
D)7.50%
Q2) When a corporation experiences financial problems,bondholders are paid before stockholders.
A)True
B)False
Q3) Public saving is T - G,while private saving is Y - T - C.
A)True
B)False
Q4) Which of the following equations will always represent GDP in an open economy?
A)S = I - G
B)I = Y - C + G
C)Y = C + I + G
D)Y = C + I + G + NX
Q5) What are the basic differences between bonds and stocks?
Q6) Draw and label a graph showing equilibrium in the market for loanable funds.
Page 28
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Chapter 27: The Basic Tools of Finance
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Sample Questions
Q1) If you put $125 into an account that paid 1.25 percent interest how much money to the nearest penny,would you have in the account in two years?
A)$129.73
B)$128.14
C)$127.15
D)$125.13
Q2) Fundamental analysis shows that stock in Lodgefire Restaurants has a present value below its price.
A)This stock is overvalued; you should consider adding it to your portfolio.
B)This stock is overvalued; you shouldn't consider adding it to your portfolio.
C)This stock is undervalued; you should consider adding it to your portfolio.
D)This stock is undervalued; you shouldn't consider adding it to your portfolio.
Q3) At an annual interest rate of 10 percent,about how many years will it take $100 to triple in value?
A)8
B)10
C)12
D)14
Q4) Discuss the statistical evidence concerning the efficient markets hypothesis.
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Chapter 28: Unemployment
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Q1) Suppose that some people report themselves as unemployed when,in fact,they are working in the underground economy.If these persons were counted as employed,
A)both the unemployment rate and labor-force participation rate would be higher.
B)both the unemployment rate and labor-force participation rate would be lower.
C)the unemployment rate would be higher and the labor-force participation rate would be higher.
D)the unemployment rate would be lower and the labor-force participation rate would be unaffected.
Q2) Data on unemployment is reported
A)weekly.
B)monthly.
C)quarterly.
D)yearly.
Q3) 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 jealousy 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.
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Page 30
Chapter 29: The Monetary System
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Q1) Which of the following lists two things that both increase the money supply?
A)the Fed buys bonds and lowers the discount rate
B)the Fed buys bonds and raises the discount rate
C)the Fed sells bonds and lowers the discount rate
D)the Fed sells bonds and raises the discount rate
Q2) Each Federal Reserve District Bank president is appointed by
A)the US president with the approval of the Senate.
B)the Board of Governors.
C)the voting members of the FOMC.
D)each bank's board of directors.
Q3) In a fractional reserve banking system,a decrease in reserve requirements
A)increases both the money multiplier and the money supply.
B)decreases both the money multiplier and the money supply.
C)increases the money multiplier, but decreases the money supply.
D)decreases the money multiplier, but increases the money supply.
Q4) If the reserve ratio is 5 percent,the money multiplier is
A)25
B)20
C)2.5.
D)1.25.
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Chapter 30: Money Growth and Inflation
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Q1) The price of a Honda Accord
A)and the price of a Honda Accord divided by the price of a Honda Civic are both real variables.
B)and the price of a Honda Accord divided by the price of Honda Civic are both nominal variables.
C)is a real variable, and the price of a Honda Accord divided by a Honda Civic is a nominal variable.
D)is a nominal variable and the price of a Honda Accord divided by the price of a Honda Civic is a real variable.
Q2) If the Fed were to unexpectedly increase the money supply,creditors would gain at the expense of debtors.
A)True
B)False
Q3) Under the assumptions of the Fisher effect and monetary neutrality,if the money supply growth rate rises,then
A)both the nominal and the real interest rate rise.
B)neither the nominal nor the real interest rate rise.
C)the nominal interest rate rises, but the real interest rate does not.
D)the real interest rate rises, but the nominal interest rate does not.
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Chapter 31: Open-Economy Macroeconomics: Basic Concepts
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Q1) Which of the following does purchasing-power parity imply?
A)The purchasing power of the dollar is the same in the U.S.as in foreign countries.
B)The price of domestic goods relative to foreign goods cannot change.
C)The nominal exchange rate is the ratio of U.S.prices to foreign prices.
D)All of the above are correct.
Q2) Which of the following equations is correct?
A)Y = C + I + G + NCO
B)NX = NCO
C)NCO = S - I
D)All of the above are correct.
Q3) If US goods cost one dollar for each euro German goods costs,the real exchange rate would be computed as how many German goods per U.S.goods?
A)one
B)the price of the U.S.goods
C)the amount of euros that can be bought with one unit of U.S.currency
D)None of the above is correct.
Q4) A country with negative net exports has a trade surplus.
A)True
B)False
Page 33
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Chapter 32: A Macroeconomic Theory of the Open Economy
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Q1) In an open economy the supply of loanable funds comes from
A)national saving.Demand comes from only domestic investment.
B)national saving.Demand comes from domestic investment and net capital outflow.
C)Only net capital outflow.Demand for loanable funds comes from national saving.
D)domestic investment and net capital outflow.Demand for loanable funds comes from national saving.
Q2) The supply of loanable funds comes from
A)national saving.
B)national saving and domestic investment.
C)domestic investment and net capital outflow.
D)national saving, domestic investment, and net capital outflow.
Q3) In the 1980s,both the U.S.budget and U.S.trade deficit increased.
A)True
B)False
Q4) A government budget deficit
A)increases both net capital outflow and net exports.
B)decreases both net capital outflow and net exports.
C)increases net capital outflow and decreases net exports.
D)decreases net capital outflow and increases net exports.
Q5) What do trade policies do to the standard of living?
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Chapter 33: Aggregate Demand and Aggregate Supply
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Q1) Suppose the economy is in long-run equilibrium.If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers,then we would expect that in the short run,
A)real GDP will rise and the price level might rise, fall, or stay the same.In the long-run, real GDP will rise and the price level might rise, fall, or stay the same.
B)the price level will fall, and real GDP might rise, fall, or stay the same.In the long-run, real GDP and the price level will be unaffected.
C)the price level will rise, and real GDP might rise, fall, or stay the same.In the long run, real GDP will rise and the price level will fall.
D)the price level will fall, and real GDP might rise, fall, or stay the same.In the long run, real GDP will rise and the price level will fall.
Q2) When the dollar depreciates,each dollar buys
A)more foreign currency, and so buys more foreign goods.
B)more foreign currency, and so buys fewer foreign goods.
C)less foreign currency, and so buys more foreign goods.
D)less foreign currency, and so buys fewer foreign goods.
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Chapter 34: The Influence of Monetary and Fiscal Policy on Aggregate Demand
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Q1) Tax cuts
A)and increases in government expenditures shift aggregate demand right.
B)and increases in government expenditures shift aggregate demand left.
C)shift aggregate demand right while increases in government expenditures shift aggregate demand left.
D)shift aggregate demand left while increases in government expenditures shift aggregate demand right.
Q2) An increase in the money supply shifts the aggregate supply curve right.
A)True
B)False
Q3) If there is crowding out,which of the following might decrease as government expenditures increased?
A)real GDP
B)the demand for money curve
C)interest rates
D)demand for capital goods
Q4) Stock prices often rise when the Fed raises interest rates.
A)True
B)False
Q5) Explain how unemployment insurance acts as an automatic stabilizer.
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Chapter 35: The Short Run Trade Off Between Inflation and Unemployment
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Q1) The sacrifice ratio of the Volcker disinflation was larger than previous estimates had predicted.
A)True
B)False
Q2) Are the effects of an increase in aggregate demand in the aggregate demand and aggregate supply model consistent with the Phillips curve? Explain.
Q3) Which of the following would not be associated with a favorable supply shock?
A)the short-run Phillips curve shifts left
B)unemployment falls
C)the price level rises
D)output rises.
Q4) Suppose that monetary policymakers announced that they were going to make a serious effort to fight inflation.A few years later the inflation rate has been reduced,but there had also been a serious recession.We could conclude with certainty that
A)the rational expectations hypothesis is false.
B)the rational expectations hypothesis is true.
C)the policymakers lacked credibility.
D)None of the above is certain.
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Chapter 36: Five Debates Over Macroeconomic Policy
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Q1) Which of the following is not correct?
A)Deficits give people the opportunity to consume at the expense of their children, but deficits do not require them to do so.
B)Deficits and surpluses could be used to avoid fluctuations in the tax rate.
C)The only times deficits have increased have been during times of war or economic downturns.
D)Reducing the budget deficit rather than funding more education spending could, all things considered, make future generations worse off.
Q2) A law that requires the money supply to grow by a fixed percentage each year would eliminate
A)the time inconsistency problem, but not political business cycles.
B)the political business cycle, but not the time inconsistency problem.
C)both the time inconsistency problem and political business cycles.
D)neither the time inconsistency problem nor political business cycles.
Q3) Economists predict the business cycle well enough that stabilization policy is likely to work despite lags in the effects of policy.
A)True
B)False
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