Suppose the real exchange rate of 10 Mexican pesos to the dollar changes to 9 pesos to the dollar.

In this
situation, the dollar has ________________, making Mexican goods __________ expensive for
Americans.
a. appreciated; less
b. appreciated; more
c. depreciated; less
d. depreciated; more

Which of the following statements represents a correct and sequentially accurate economic explanation?
a. Wage rates rise, SRAS rises, and the SRAS curve shifts to the left.
b. The prices of nonlabor inputs rise, SRAS decreases, and the SRAS curve shifts to the right.
c. Labor productivity rises, SRAS increases, and the SRAS curve shifts to the right.
d. An adverse supply shock hits, SRAS decreases, and the SRAS curve shifts to the right.
e. a and c

The nominal wage is $40 an hour and the price level as measured by a price index is 2.00. If the nominal
wage falls to $30 and the price index declines to 1.50, according to the worker misperception explanation
of the upward-sloping SRAS curve, workers will initially perceive the
a. real wage as something greater than $20.
b. real wage as something less than $20.
c. real wage as $20.
d. nominal wage as something more than $30.
e. nominal wage as something less than $30.

Exhibit 8-3

Refer to Exhibit 8-3. A movement from point A to point B on AD1 would have been the result of
a. a decrease in the price level.
b. an increase in the price level.
 c. an increase in income taxes.
d. a decrease in income taxes.

Refer to Exhibit 8-3. A shift in aggregate demand from AD1 to AD2 could have been the result of
a. a decrease in the price level.
b. an increase in the price level.
c. an increase in foreign real national income.
d. a decrease in foreign real national income.

If Real GDP is less than Natural Real GDP, the economy is in

a. an inflationary gap.
b. a recessionary gap.
c. an unemployment gap.
d. a real gap.

The long-run aggregate supply (LRAS) curve is

a. horizontal.
b. vertical.
c. positively sloped.
d. negatively sloped.

In a self-regulating economy, inflationary and recessionary gaps

a. never occur.
b. are eliminated by forces internal to the economy, without government intervention.
c. are eliminated by timely actions of government policymakers.
d. are the desirable results of microeconomic price adjustments.

Classical economics refers to an era in the history of economic thought that stretched from about
a. 1750 to the early 1900s.
b. 1935 to the 1970s.

If the natural unemployment rate is 5.5 percent, then the economy is at long-run equilibrium when the
actual unemployment rate is
a. more than 5.5 percent.
b. between 0 and 5.5 percent.
c. 0 percent.
d. 5.5 percent.
e. none of the above
If the economy is self-regulating and in an inflationary gap,
a. wages and prices will fall.
b. wages will rise, but prices will fall.
c. wages and prices will rise.
d. wages will fall, but prices will rise.

Which of the following is not consistent with a self-regulating economy?

a. flexible prices
b. flexible wages
c. a labor market in which wages fall if there is a surplus
d. a labor market in which wages rise if there is a shortage
e. none of the above (all are consistent with a self-regulating economy)

In a barter economy, Say's law implies there

a. can be a general overproduction of goods.
b. can be a general underproduction of goods.
c. cannot be a general overproduction or underproduction of goods.
d. can be a general overproduction of goods but never a general underproduction of goods.

Exhibit 9-6

Refer to Exhibit 9-6. If the economy is self-regulating and currently at point 1, it follows that
a. there is a surplus of labor in the labor market.
b. the economy is currently on its institutional PPF.
c. the economy is currently in an inflationary gap.
d. the labor market is in equilibrium.
e. the actual unemployment rate is below the natural unemployment rate.
Efficiency wage models imply that workers are more productive when they are paid a higher wage, as
compared to when they are paid a lower wage.
a. True
b. False

Two economists, Smith and Jones, are discussing the currently high unemployment rate. Smith says that
something ought to be done quickly because the economy may not be able to restore itself to full
employment. Jones says that it is better to take a "hands-off" approach. Which of the following is most
likely to be true?
a. Smith and Jones are most likely both Keynesian economists with a few minor differences of
opinion.
b. Smith and Jones are most likely both classical economists with a few minor differences of
opinion.
c. Jones is likely to be a Keynesian economist and Smith is likely to be a classical economist.
d. Smith is likely to be a Keynesian economist and Jones is likely to be a classical economist.

Keynes’s major work, The General Theory of Employment, Interest and Money, was published during the
a. late 1800s.
b. mid-1700s.
c. 1930s.
d. Panic of 1907.

Keynes believed that saving is

a. more responsive to changes in income than to changes in interest rates.
b. less responsive to changes in income than to changes in interest rates.
c. equally responsive to changes in income and to changes in interest rates.
d. dependent only on changes in interest rates.

Keynes believed that investment is

a. dependent on a number of factors, including business expectations.
b. mainly determined by changes in interest rates.
c. unrelated to business expectations.
d. related to business expectations only during recessionary periods.

Which of the following statements is false?

a. Keynes believed that monopolistic elements in the economy will prevent immediate price
declines.
b. Keynes believed that during periods of high unemployment, labor unions will prevent wages
from falling fast enough to restore full employment.
c. Keynes believed that interest rate flexibility will ensure that saving is equal to investment.
d. Keynes did not believe in Say's law.
Here is a consumption function: C = C0 + MPC(Yd). If MPC is 0.80, then we know that
a. as Yd rises by $1, Co rises by $0.80.
b. as Yd rises by $1, C rises by $0.80.
c. Yd rises by $0.80.
d. as C0 rises by $0.80, Yd rises by $1.

John Maynard Keynes believed that wages may be inflexible in the downward direction. Consequently,
an economy
a. could get stuck in long-run equilibrium.
b. could get stuck in a recessionary gap.
c. could get stuck in an inflationary gap.
d. would always produce more than Natural Real GDP.

Which of the following illustrates the data lag?

a. The economy turns down on January 8, 2019, but policymakers do not figure this out until
April 19, 2019.
b. Policymakers wait and see what is really going on with the economy.
c. Policymakers implement policy X on September 12, 2019, but the effects are not felt until six
months later.