QN=1 (17738) Refer to Table 3-6. Assume that Hilda and Carlos each has 90 hours available.

Originally,
(2219 each person divided their time equally between the production of quilts and dresses. Now, each
) person spends all their time producing the good in which they have a comparative advantage. As a
result, the total output of dresses increased by

a. 3.5.
b. 4.5.
c. 5.5.
d. 9.0.

QN=2 (17758) Refer to Figure 3-3. Enid has an absolute advantage in the production of
(2206
)
a. burritos and a comparative advantage in the production of tacos.
b. burritos and a comparative advantage in the production of burritos.
c. neither good and a comparative advantage in the production of tacos.
d. neither good and a comparative advantage in the production of burritos.

QN=3 (2226) (17732) Suppose that a worker in Cornland can grow either 40 bushels of corn or 10
bushels of oats per year, and a worker in Oatland can grow either 5 bushels of corn or
50 bushels of oats per year. There are 20 workers in Cornland and 20 workers in
Oatland. If the two countries do not trade, Cornland will produce and consume 400
bushels of corn and 100 bushels of oats, while Oatland will produce and consume 60
bushels of corn and 400 bushels of oats. If each country made the decision to
specialize in producing the good in which it has a comparative advantage, then the
combined yearly output of the two countries would increase by
a. 280 bushels of corn and 450 bushels of oats.
b. 340 bushels of corn and 500 bushels of oats.
c. 360 bushels of corn and 520 bushels of oats.
d. 360 bushels of corn and 640 bushels of oats.

QN=4 (2210) (17726) Which famous economist developed the principle of comparative advantage as
we know it today?
a. Adam Smith
b. David Ricardo
c. John Maynard Keynes
d. Milton Friedman

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

a. 1/5 pound of meat.

b. 2 hours of labor.
c. 5 pounds of meat.
d. 5 hours of labor.
QN=6 (17769) Refer to Table 23-5. In 2008, Batterland’s real GDP was
(2254
)

a. $100.
b. $390.
c. $400.
d. $540.

QN=7 (17751) Refer to Table 3-5. England has a comparative advantage in the production of
(2244
)

a. cheese and Spain has a comparative advantage in the production of bread.

b. bread and Spain has a comparative advantage in the production of cheese.
c. both goods and Spain has a comparative advantage in the production of neither good.
d. neither good and Spain has a comparative advantage in the production of both goods.
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 (17761) Refer to Figure 3-7. The opportunity cost of 1 bowl for Juba is
(2238
)

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

QN=10 (2251) (17764) Gross domestic product is defined as

a. (i) the quantity of all final goods and services demanded within a country in a given
period of time.
b. (ii) the quantity of all final goods and services supplied within a country in a given
period of time.
c. (iii) the market value of all final goods and services produced within a country in a
given period of time.
d. Both (i) and (ii) are correct.

QN=11 (2286) (17800) In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the
 county restored the courthouse for about $1.7 million. A price index for
nonresidential construction was 24 in 1949, 108 in 1987, and 126.5 in 2000. According
to these numbers, the hospital cost about
a. $2.1 million in 2000 dollars, which is less than the cost of the courthouse restoration in
2000 dollars.
b. $2.1 million in 2000 dollars, which is more than the cost of the courthouse restoration
in 2000 dollars.
c. $2.6 million in 2000 dollars, which is less than the cost of the courthouse restoration in
2000 dollars.
d. $2.6 million in 2000 dollars, which is more than the cost of the courthouse restoration
in 2000 dollars.

QN=12 (2276) (17786) If you buy a burger and fries at your favorite fast food restaurant,
a. then neither GDP nor consumption will be affected because you would have eaten at
home had you not bought the meal at the restaurant.
b. then GDP will be higher, but consumption spending will be unchanged.
c. then GDP will be unchanged, but consumption spending will be higher.
d. then both GDP and consumption spending will be higher.

QN=13 (2274) (17791) A German citizen buys an automobile produced in the United States by a
Japanese company. As a result,
a. U.S. net exports increase, U.S. GDP is unaffected, Japanese GNP increases, German net
exports decrease, and German GNP and GDP are unaffected.
b. U.S. net exports and GDP increase, Japanese GNP increases, German net exports
decrease, and German GNP is unaffected, and German GDP decreases.
c. U.S. net exports and GDP increase, Japanese GNP increases, German net exports
decrease, and German GNP and GDP are unaffected.
d. U.S. net exports and GDP are unaffected, Japanese GNP increases, and German net
exports, GNP, and GDP decrease.

QN=14 (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=15 (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=16 (2299) (17813) The price index was 120 in 2006 and 127.2 in 2007. What was the inflation
rate?
a. 5.7 percent
b. 6.0 percent
c. 7.2 percent
d. 27.2 percent

QN=17 (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 (2303) (17792) When the consumer price index rises, the typical family
a. has to spend more dollars to maintain the same standard of living.
b. can spend fewer dollars to maintain the same standard of living.
c. finds that its standard of living is not affected.
d. can offset the effects of rising prices by saving more.

QN=19 (2302) (17818) Scenario 24-2

The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005
read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.

Refer to Scenario 24-2. The price of a 1975 golf ball in 2005 dollars is
a. $0.05.
b. $0.53.
c. $0.73.
d. $2.00.

QN=20 (2308) (17796) Table 24-1

The table below pertains to Pieway, an economy in which the typical consumer’s
basket consists of 10 bushels of peaches and 15 bushels of pecans.

Refer to Table 24-1. If 2005 is the base year, then the CPI for 2005 was
a. 83.3.
b. 100.0.
c. 120.0.
d. 200.0.

QN=21 (2344) (17850) In a closed economy, what does (T - G) represent?

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

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 (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=24 (2343) (17861) World Wide Delivery Service Corporation develops a way to speed up its
deliveries and reduce its costs. We would expect that this would
a. raise the demand for existing shares of the stock, causing the price to rise.
b. decrease the demand for existing shares of the stock, causing the price to fall.
c. raise the supply of the existing shares of stock, causing the price to rise.
d. raise the supply of the existing shares of stock, causing the price to fall.
QN=25 (2355) (17853) The source of the supply of loanable funds is
a. saving, and the source of the demand for loanable funds is investment.
b. consumption, and the source of the demand for loanable funds is investment.
c. investment, and the source of the demand for loanable funds is saving.
d. the interest rate, and the source of the demand for loanable funds is saving.

QN=26 (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=27 (2375) (17897) Suppose that because of the popularity of the low-carb diet, bakeries need
fewer workers and steak houses need more workers. This is an example of
a. frictional unemployment created by efficiency wages.
b. frictional unemployment created by sectoral shifts.
c. structural unemployment created by efficiency wages.
d. structural unemployment created by sectoral shifts.

QN=28 (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=29 (2357) (17871) Which of the following lists correctly identifies the four expenditure categories
of GDP?
a. consumption, government purchases, investment, net-exports
b. consumption, investment, depreciation, net-exports
c. consumption, saving, investment, depreciation,
d. consumption, government purchases, investment, savings

QN=30 (2365) (17887) Suppose some country had an adult population of about 25 million, a labor-
force participation rate of 60 percent, and an unemployment rate of 6 percent. How
many people were unemployed?
a. 0.846 million
b. 0.9 million
c. 1.5 million
d. 6 million

QN=31 (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=32 (2387) (17898) Public policy

a. can reduce both frictional unemployment and the natural rate of unemployment.
b. can reduce frictional unemployment, but it cannot reduce the natural rate of
unemployment.
c. cannot reduce frictional unemployment, but it can reduce the natural rate of
unemployment.
d. cannot reduce either frictional unemployment or the natural rate of unemployment.

QN=33 (2388) (17908) An increase in the money supply might indicate that the Fed had
a. purchased bonds in an attempt to increase the federal funds rate.
b. purchased bonds in an attempt to reduce the federal funds rate.
c. sold bonds in an attempt to increase the federal funds rate.
d. sold bonds in an attempt to reduce the federal funds rate.

QN=34 (2407) (17918) If people decide to hold more currency relative to deposits, the money supply
a. falls. The larger the reserve ratio is, the more the money supply falls.
b. falls. The larger the reserve ratio is, the less the money supply falls.
c. rises. The larger the reserve ratio is, the more the money supply rises.
d. rises. The larger the reserve ratio is, the less the money supply rises.

QN=35 (2436) (17951) 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=36 (2428) (17943) Suppose that velocity rises while the money supply stays the same. It follows
that
a. P*Y must rise.
b. P*Y must fall.
c. P*Y must be unchanged.
d. the effects on P*Y are uncertain.
QN=3 (17931) Refer to Figure 30-3. Suppose the relevant money-supply curve is the one labeled MS2; also
7 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=38 (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=39 (2417) (17941) According to monetary neutrality and the Fisher effect, an increase in the
money supply growth rate eventually increases
a. inflation, nominal interest rates, and real interest rates.
b. inflation and nominal interest rates, but does not change real interest rates.
c. inflation and real interest rates, but does not change nominal interest rates.
d. neither inflation, nominal interest rates, nor real interest rates.
QN=40 (2418) (17937) If P denotes the price of goods and services measured in terms of money,
then
a. (i) 1/P represents the value of money measured in terms of goods and services.
b. (ii) P can be interpreted as the inflation rate.
c. (iii) the supply of money influences the value of P, but the demand for money does
not.
d. All of (i), (ii), and (iii) are correct.

QN=41 (2473) (17968) Suppose that the nominal exchange rate is 120 yen per dollar, that the price of
a basket of goods in the U.S. is $500 and the price of a basket of goods in Japan is
50,000 yen. Suppose that these values change to 100 yen per dollar, $600, and 70,000
yen. Then the real exchange rate would
a. appreciate which by itself would make U.S. net exports fall.
b. appreciate which by itself would make U.S. net exports rise.
c. depreciate which by itself would make U.S. net exports fall.
d. depreciate which by itself would make U.S. net exports rise.

QN=42 (2458) (17984) Refer to Table 31-1. What are Argentina’s net exports?

a. $30 billion
b. $5 billion
c. -$5 billion
d. -$25 billion

QN=43 (2455) (17978) When Claudia, a U.S. citizen, purchases a handbag made in France, the
purchase is
a. both a U.S. and French import.
b. a U.S. export and a French import.
c. a U.S. import and a French export.
d. neither an export nor an import for either country.

QN=44 (2494) (17997) Refer to Figure 32-3. Which curve shows the relation between the exchange
rate and net exports?
a. the demand curve in panel a.
b. the demand curve in panel c.
c. the supply curve in panel a.
d. the supply curve in panel c.

QN=45 (2482) (18002) In the open-economy macroeconomic model, the purchase of a capital asset
adds to the demand for loanable funds
a. (i) only if the asset is located at home.
b. (ii) only if the asset is located abroad.
c. (iii) whether the asset is located at home or abroad.
d. None of (i), (ii), and (iii) is correct.

QN=46 (2533) (18052) Fiscal policy affects the economy

a. only in the short run.
b. only in the long run.
c. in both the short and long run.
d. in neither the short nor the long run.

QN=47 (2528) (18042) The sticky-wage theory of the short-run aggregate supply curve says that the
quantity of output firms supply will increase if
a. the price level is higher than expected making production more profitable.
b. the price level is higher than expected making production less profitable.
c. the price level is lower than expected making production more profitable.
d. the price level is lower than expected making production less profitable.

QN=48 (2535) (18046) In the long run, changes in the money supply affect
a. (i) prices.
b. (ii) output.
c. (iii) unemployment rates.
d. All of (i), (ii), and (iii).

QN=49 (2556) (18057) To reduce the effects of crowding out caused by an increase in government
expenditures, the Federal Reserve could
a. increase the money supply by buying bonds.
b. increase the money supply by selling bonds.
c. decrease the money supply by buying bonds.
d. decrease the money supply by selling bonds.

QN=50 (2540) (18069) According to liquidity preference theory, the money-supply curve would shift if
the Fed
a. (i) engaged in open-market transactions.
b. (ii) changed the discount rate.
c. (iii) changed the reserve requirement.
d. did any of (i), (ii), or (iii).
[id=2219, Mark=1]1. A

[id=2206, Mark=1]2. C

[id=2226, Mark=1]3. B

[id=2210, Mark=1]4. B

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

[id=2254, Mark=1]6. D

[id=2244, Mark=1]7. A

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

[id=2238, Mark=1]9. C

[id=2251, Mark=1]10. C

[id=2286, Mark=1]11. D

[id=2276, Mark=1]12. D

[id=2274, Mark=1]13. C

[id=2283, Mark=1]14. C

[id=2267, Mark=1]15. C

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

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

[id=2303, Mark=1]18. A

[id=2302, Mark=1]19. C

[id=2308, Mark=1]20. B

[id=2344, Mark=1]21. D

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

[id=2345, Mark=1]23. B

[id=2343, Mark=1]24. A

[id=2355, Mark=1]25. A

[id=2366, Mark=1]26. B

[id=2375, Mark=1]27. B

[id=2367, Mark=1]28. B

[id=2357, Mark=1]29. A
[id=2365, Mark=1]30. B

[id=2378, Mark=1]31. D

[id=2387, Mark=1]32. A

[id=2388, Mark=1]33. B

[id=2407, Mark=1]34. B

[id=2436, Mark=1]35. D

[id=2428, Mark=1]36. A

[id=2422, Mark=1]37. C

[id=2437, Mark=1]38. C

[id=2417, Mark=1]39. B

[id=2418, Mark=1]40. A

[id=2473, Mark=1]41. D

[id=2458, Mark=1]42. D

[id=2455, Mark=1]43. C

[id=2494, Mark=1]44. B

[id=2482, Mark=1]45. C

[id=2533, Mark=1]46. C

[id=2528, Mark=1]47. A

[id=2535, Mark=1]48. A

[id=2556, Mark=1]49. A

[id=2540, Mark=1]50. D