ISBN 13: 978-1305280595

The net export component of aggregate demand is defined as U.S. a. imports minus U.S. exports. b. imports plus U.S. exports. c. exports minus U.S. imports. d. exports minus taxes and customs duties. At higher interest rates, banks will want […]

The concept of “lender of last resort” is that when a. lending decreases, the Fed will be the last to resort to higher interest rates. b. borrowing increases, the Fed will be the last to increase lending. c. commercial banks […]

Bond prices and interest rates: a. are interrelated b. have no relationship to one another c. rise or fall in tandem d. none of these choices The national debt is defined as the total a. amount that U.S. citizens owe […]

A correct formula (dropping all minus signs) for the calculation of the elasticity of demand between point Q1, P1 and point Q2, P2 is a. [(P2 − P1)/(P2 + P1)]/[(Q2 − Q1)/(Q2 + Q1)]. b. [(P2 − P1)/P1]/[(Q2 − Q1)/Q1]. […]

All large firms have monopoly power. a. True b. False The growth rate of productivity is the most important determinant of material well-being in the short run. a. True b. False Answer: False Land on both sides of the border […]

Japanese employers tend to hire employees right out of college and train them for a lifetime job with the company. Over time they found that women often, but not always, married after a few years and left the company so […]

Figure 20-7 In Figure 20-7, there are three aggregate expenditure functions (C + I + G + X − IM) for an open economy. Which of the following would cause a movement from C to B? a. a European economic […]

Economists define “efficiency” as the absence of waste. a. True b. False With regard to the characteristics of production indifference curves, which of the following statements is/are NOT true? a. Higher curves correspond to larger outputs. b. An indifference curve […]

If workers and firms forecast inflation accurately, a. the aggregate supply curve will be vertical. b. the real wage will not decline as the price level rises. c. workers will not lose from inflation, and firms will not gain. d. […]

Appreciation of the Japanese Yen would lead to a. outward shift in the aggregate supply curve for Japan. b. upward shift in the aggregate demand curve for Japan. c. downward shift in the aggregate supply curve for Japan. d. downward […]

Reductions in the personal income tax, often advocated by supply-siders to increase labor supply and effort, can be expected to also a. decrease consumption spending. b. increase consumption spending. c. decrease investment spending. d. increase export sales. If the fluctuations […]

A shift in the demand curve occurs when a. suppliers place more goods on the market. b. the price of a good rises. c. consumers want to buy more or less than before at a given price. d. the price […]

Economics can decide a. the appropriate trade-off between fairness and efficiency. b. which pricing arrangements are fair and which are unfair. c. whether a pricing decision will impose heavy inefficiency costs on society. d. All of the above are correct. […]

The banking industry is heavily regulated because a. banking is a monopoly industry. b. most banks are owned by government agencies. c. bankers do what is best for their stockholders, not necessarily what is best for the economy. d. All […]

At equilibrium, the market will clear, with no surpluses or shortages occurring. a. True b. False The supply curve of a depletable natural resource is usually a. downward sloping because the resource runs out over time. b. upward sloping because […]

If demand is elastic, an increase in price will decrease total revenue. a. True b. False A typical American family sends about _____% of its budget on services. a. 20% b. 32% c. 66% d. 70% Answer: c It might […]

Critics of affirmative action programs argue that they a. promote statistical discrimination. b. impair economic efficiency by preventing firms from freely choosing the most productive employee for a particular job. c. are not as efficient as quota systems at hiring […]

A demand schedule shows a. the “market potential” for a product. b. how much consumers are willing and able to buy at different prices. c. possible combinations of output under different conditions. d. how much producers would like to sell […]

The “Taylor rule” for monetary policy provides the Fed with a a. mechanical prescription for monetary policy. b. benchmark to guide policy decisions. c. time frame for discount rate changes. d. rule for changing the M1 money supply. A budget […]

The immediate impetus for the establishment of the Federal Reserve System came from a. severe outbreaks of inflation in the early 1900s. b. four severe banking panics between 1873 and 1907. c. the discovery of gold in Alaska. d. the […]

Compared to workers in poor countries, workers in richer countries have a. lower productivity but higher wages. b. higher productivity and higher wages. c. higher productivity but lower wages. d. the same productivity but higher wages. Given the economy’s existing […]

If demand is inelastic, a drop in price will raise total expenditure. a. True b. False The concentration ratio of industry is a measure relating to the proportion of the industry’s total output that is produced by a small number […]

Given the labor force, either more capital or better technology will shift the production function downward. a. True b. False Assuming free trade between countries, exchange rates will change so that goods cost the same in all countries. This concept […]

Members of the Board of Governors of the Federal Reserve System are a. elected by member banks to serve four-year terms. b. appointed by Congress for 14-year terms. c. appointed by the president for 14-year terms. d. appointed by the […]

The concept that increases in spending cause larger increases in equilibrium GDP is known as the a. profiler. b. mystifier. c. multiplier. d. depreciator. In the circular flow model, which of the following is considered a leakage? a. investment spending […]

The Fed’s purchase and sale of government securities is known as a. margin operations. b. open market operations. c. bank reserve operations. d. cash management operations. A bond and stock differ in that a stock is an IOU for a […]

The windfall profits tax on oil will curtail oil production if a. oil executives decide to be spiteful. b. the demand for oil is inelastic. c. the supply curve for oil is upward sloping. d. the supply curve for oil […]

If the firm’s marginal physical product is 8, and its handicrafts sell for $70, at a labor cost of $150, the firm is operating a. short of an optimal input point. b. at the optimum input point. c. beyond the […]

The school of engineering at a modern university would be a supporter of the new a. consumption theory. b. growth theory. c. monetary theory. d. construction theory. Which of the following would be the most likely candidate for direct application […]

Gross domestic product is the money value of manufacturing production in a year. a. True b. False Figure 9-1 Which of the graphs in Figure 9-1 best illustrates the path of a composite of common stock prices over the long […]

On the job training: a. is an important component for building human capital b. may be just as important as formal education in raising productivity c. is less amenable to influence by the government d. All of the above are […]

In August 1988, the Los Angeles Kings hired Wayne Gretzky for $15 million in cash. The hockey team’s decision must have been based on the expectation that a. Gretzky’s opportunity cost will exceed $15 million. b. Gretzky’s marginal revenue product […]

Prices are useful in coordinating society’s economic planning because a. they convey information about which goods are scarce and which are plentiful. b. economies based on price systems are more flexible than centrally planned economies. c. economies based on price […]

What does the Herfindahl-Hirschman Index value near 10,000 imply about the market? a. Pure monopoly b. Perfect competition c. Monopolistic competition d. Oligopoly The statement “Resources employed in producing X are better suited to making Y” is another way of […]

What is the most probable reason why garbage men have higher wages than nurses? a. marketplace discrimination b. active unionization in the garbage collection field c. higher demand for garbage men than nurses d. the nonmonetary attractiveness of garbage collection […]

Policy makers who believe that the costs of unemployment are very high will tend to favor which of the following during a recessionary gap? a. moderate fiscal stimulus, no monetary stimulus b. fiscal and monetary tightness c. moderate monetary stimulus, […]

Figure 16-3 If budget deficits shift the money demand curve as is illustrated in Figure 16-3, which component of total expenditures will be affected the most? a. consumption spending b. government spending c. private investment spending d. net exports The […]

Deregulation has led to higher prices. a. True b. False The most volatile component of aggregate demand is a. consumption spending. b. government spending. c. investment spending. d. net exports. Answer: c Under the gold standard, a. no nation had […]

Figure 4-20 If there are empty seats at the university basketball game when the price per ticket is P*, then this situation can best be represented by which graph in Figure 4-20? a. 1 b. 2 c. 3 d. 4 […]

Inefficient resource allocation is a major problem with monopolies. a. True b. False The cost of a hospital stay has been going down slowly. a. True b. False Answer: False A fall in the price of a competing product will […]

Explain how and why economic events in the U.S. affected the economies of Thailand, South Korea, and Indonesia and vice-versa. Part of the normal aftermath of a period of excessive aggregate demand is a. improvement in the quality of life. […]

Inflation refers to an increase in the a. price level. b. rate of inflation. c. total income. d. real GDP. A society must make three sorts of decision: what goods to produce, how to produce them, and how to distribute […]

When the growth rates of actual and potential GDP diverge, they usually diverge because a. actual GDP growth equals potential GDP growth. b. actual GDP growth falls below potential GDP growth. c. potential GDP growth rates fall below actual GDP […]

Under an emissions tax program, the government sets ____; under an emissions permits program, the government sets ____. a. the price of the right to pollute; the price of the right to pollute b. the price of the right to […]

Previously a creditor nation, in the 1980s the U.S. became a debtor nation. a. True b. False The reason that higher interest rates reduce aggregate demand in an open economy with capital flows is that investment a. increases generated by […]

Inflation reduces the multiplier effect by reducing consumers’ wealth and purchasing power. a. True b. False When a shortage occurs in the market for a good, quantity a. demanded exceeds quantity supplied and the market mechanism pushes the price up, […]

In which of the following monetary aggregates are Treasury Bills included? a. M1 only b. M2 only c. both M1 and M2 d. neither M1 nor M2 Game theory is based on the idea that each participant makes decisions based […]

The “investment” component of aggregate demand will include all of the following except a. expenditures of business firms on new plants. b. expenditures of business firms on new equipment. c. resales of existing physical assets. d. household spending on new […]

In a simple economy (no government), the vertical distance between the consumption function and the expenditure schedule measures a. undesired inventory depletion. b. planned investment c. undesired investment. d. unintended investment. To “cure” their balance of payments deficits without altering […]

Lower inflation rates are usually correlated with lower unemployment rates. a. True b. False GDP can be calculated by the value-added approach, which a. is useful in avoiding double counting. b. includes only the value-added portion from the sale of […]