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Countries that have experienced sustained increases in their standard of living have achieved them because of A) higher rates of saving and investment. B) higher rates of population growth. C) sustained technological change. D) All of the above are correct. […]

A decrease in the unemployment rate which is accompanied by an decrease in the inflation rate is represented by a ________ the Phillips curve. A) movement down B) movement up C) upward shift of D) downward shift of An American […]

A credit-rationed household is more likely to immediately ________ of a one-time tax rebate than is a household that is not credit rationed. A) spend a larger portion B) spend a smaller portion C) save a larger portion D) spend […]

Suppose you purchase a two-year bond that has a $450 coupon and a face value of $5,000, and immediately after you purchase the bond, new bonds are issued that are otherwise identical, except they have coupons of $375. If you […]

Your loss from an increase in interest rates is ________, and your gain from a decrease in interest rates is ________, if you hold a two-year bond compared to holding a one-year bond. A) greater; greater B) greater; less C) […]

According to the quantity theory of money, the inflation rate equals A) money supply minus real GDP. B) the growth rate of the money supply minus the growth rate of real GDP. C) real GDP minus the money supply. D) […]

If a government chooses to finance a budget deficit by borrowing and the expected inflation rate does not change, this will cause the real interest rate to ________ and the nominal interest rate to ________. A) increase; increase B) increase; […]

If the real interest rate is 3% and the expected inflation rate is 6%, then the nominal interest rate is A) 0.5%. B) 2%. C) 3%. D) 9%. Which of the following is a way to measure of real GDP […]

The increase in the federal deficit due to the 2009 stimulus package may have had a smaller impact on the economy due to forward-looking households and firms A) reducing consumption and investment expenditures in anticipation of future tax increases. B) […]

Fiat money has A) little to no intrinsic value but is backed by the quantity of gold held by the central bank. B) great intrinsic value because it can be exchanged for gold at the central bank. C) little to […]

The increased stability of the financial system in the United States since 1950 can help explain A) why the United States has only experienced one recession since 1950. B) the severity of the 2007-2009 recession. C) the increase in the […]

When deciding whether the economy has entered an economic recession, the NBER’s Business Cycle Dating Committee examines and compares the behavior of various measures of broad activity. The measures the committee focuses on include all of the following except A) […]

A decrease in the price level will shift the money demand curve to the ________, causing the nominal interest rate to ________. A) right; increase B) right; decrease C) left; increase D) left; decrease Suppose the economy is initially in […]

A decrease in the real interest rate in the United States will cause net capital outflows to ________ and cause the dollar to ________ relative to other currencies. A) increase; appreciate B) increase; depreciate C) decrease; appreciate D) decrease; depreciate […]

Figure 4.4 Suppose the world consists of two large open economies, the United States and the rest of the world. The figures above represent loanable funds graphs for these two economies. Refer to Figure 4.4. At an interest rate of […]

Real GDP is the value of goods and services A) adjusted only for unanticipated inflation. B) adjusted only for anticipated inflation. C) using base-year prices. D) using current-year prices. Suppose for every dollar change in household wealth, consumption expenditures change […]

Samantha’s wealth is $100,000, she expects to work for another 30 years at a constant salary of $200,000 and live for another 50 years. Assume taxes are zero and that Samantha completely smooths consumption over her lifetime. Calculate the following: […]

Which of the following explains why purchasing power parity may not hold perfectly in the long run? A) Most countries have free markets with limited government regulation. B) Consumer preferences for goods and services across countries are very similar. C) […]

The real interest rate can be thought of as A) the price of current consumption relative to future consumption. B) the price of current consumption completely smoothed over a lifetime. C) the price of future consumption smoothed completely over a […]

If bananas were used as money, which of the following functions of money would be the hardest for bananas to satisfy? A) unit of account B) store of value C) divisibility D) medium of exchange Targeting the federal funds rate […]

In general, if the Fed increases its target for the federal funds rate, A) short-term nominal interest rates will increase and long-term nominal interest rates will not change. B) short-term nominal interest rates will not change and long-term nominal interest […]

The aggregate production function is an equation that shows the relationship between ________ and ________. A) the inputs employed by firms; the maximum output firms can produce with those inputs B) the inputs employed by an individual firm in an […]

Factors of production are usually divided into all of the following categories except A) labor. B) capital. C) interest. D) natural resources. Figure 9.1 Refer to Figure 9.1. Assume the economy is initially at point A. The initial change from […]

In the long run, an increase in the growth rate of the money supply causes the inflation rate to ________, which then causes the nominal interest rate to ________. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; […]

If the currency to deposit ratio decreases and the monetary base is unchanged, the value of the money multiplier will ________ and the value of the money supply will ________ A) decline; decline B) decline; increase C) increase; decline D) […]

As people’s incomes rise, they tend to purchase relatively less ________ and relatively more ________. A) durable goods; nondurable goods B) nondurable goods; services C) services; durable goods D) services; nondurable goods In the United States from 1949 to 2010, […]

Assume that seigniorage and the government’s primary deficit are both zero. If the real interest rate is greater than the growth rate of real GDP, the debt-to-GDP ratio A) will increase. B) will decrease. C) will either decrease or not […]

The government’s profit from issuing fiat money is known as A) seigniorage. B) menu costs. C) commodity profit. D) tax distortions. C = $40 million + 0.6(1 – 0.2)Y I = $35 million G = $31 million NX = -$6 […]

The level of investment necessary to keep the capital-labor ratio constant is called A) capital investment. B) break-even investment. C) depreciated investment. D) diluted investment. If a household is credit rationed, the MPC out of current disposable income is ________ […]

Historically, U.S. federal expenditures have ________ as a percentage of GDP. A) remained fairly stable B) increased dramatically C) slowly declined D) been extremely volatile All of the following are examples of financial securities except A) checking accounts. B) corporate […]

If the real interest rate in the United States increases, foreign investors will ________ their demand for U.S. dollars because they desire to ________ more U.S. financial assets. A) increase; buy B) increase; sell C) decrease; buy D) decrease; sell […]