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2. Interpret points on a graph. 3. Interpret shifts of curves on a graph. A. Constructing a graph from a table B. Interpreting points on a graph C. Shifts of curves APPENDIX TO CHAPTER 1 Working with Graphs OVERVIEW AND […]

3. Understand the concept of ownership as it relates to a nation’s prosperity. 4. Identify titles as legal recognition of ownership. 5. Define economic freedom. 6. Explain how economic freedom and a nation’s standard of living are related. 2. What […]

1. According to the text, as compared to rich countries, most of the poor countries do not fare well because: a. they have no oil. b. the people in these countries have limited property rights. c. access to education in […]

imports, then a decline in government spending by $60 million will result in a total reduction in equilibrium income of: a. $171.43 million. b. $123.47 million. c. $151.63 million. d. $73.47 million. e. $71.43 million. 59. Suppose equilibrium income in […]

4. Why does equilibrium real GDP change by a multiple of a change in autonomous expenditures? 5. What is the spending multiplier? 6. What is the relationship between the GDP gap and the recessionary gap? 7. How does international trade […]

93. If equilibrium in the economy is merely a function of aggregate demand, the aggregate supply curve must be: a. upward-sloping. b. downward-sloping. c. in the Keynesian region. d. vertical. e. at the full-capacity level. 94. When the purchasing power […]

1. In macroeconomics, equilibrium is defined as the point at which: a. the economy attains the highest level of GDP. b. there is no unemployment in the economy. c. people’s plans match the reality. d. there is high inflation and […]

44. Suppose the real interest rate in the economy is 3% and the nominal interest rate is 6%, what is the current inflation rate? a. 18% b. 9% c. 2% d. 3% e. 2.5% ANSWER: d DIFFICULTY: Moderate LEARNING OBJECTIVES: […]

1. The sum of the unemployment rate and the inflation rate is known as: a. the macroeconomic index. b. the mortality rate. c. the market index. d. the misery index. e. a coincident indicator. 2. When the government uses taxes […]

2. How has U.S. fiscal policy changed over time? 3. What are the effects of budget deficits? 4. How does fiscal policy differ across countries? multiplier; the balanced-budget multiplier is also explained. Third, several limitations of multiplier analysis, as it […]

1. An asset that can easily be exchanged for goods and services is referred to as: a. an intangible asset. b. a productive resource. c. a liquid asset. d. a fixed asset. e. a scarce resource. 2. Identify the correct […]

3. How do countries pay for international transactions? 4. Why are banks considered intermediaries? 5. How does international banking differ from domestic banking? 6. How do banks create money? money supply. An examination of international banking includes a look at […]

61. For a depository institution, reserves are: a. assets on the balance sheet. b. loans to individuals and businesses. c. borrowings from the central bank. d. liabilities it owes to customers. e. checkable deposits. 62. In the United States, the […]

3. What are the tools of monetary policy? 4. What role do central banks play in the foreign exchange market? 5. What are the determinants of the demand for money? 6. How does monetary policy affect the equilibrium level of […]

Scenario 13.1 Assume the following conditions hold. a. At all banks, excess reserves are zero. b. The deposit expansion multiplier is 3. c. The investment spending function is as illustrated in the figure below. Now the Federal Reserve engages in […]

1. Which of the following government agencies oversees monetary policy in the U.S.? a. The Federal Reserve System b. Congress c. The Treasury Department d. The Federal Trade Commission e. The Department of Commerce 2. The Federal Reserve System was […]

65. Assume that the yen price of one U.S. dollar rises to 80 yen and that the Bank of Japan has a target exchange rate of 75 yen per dollar. As a result, the Bank of Japan will intervene in […]

1. The Phillips curve is named after the economist A. W. Phillips, who found that there is: a. an inverse relationship between the PPI and the budget deficit in the United States. b. an inverse relationship between wage rates in […]

4. How are macroeconomic expectations formed? 5. What makes government policies credible? 6. Are business cycles related to political elections? 7. How do real shocks to the economy affect business cycles? 8. How is inflationary monetary policy related to government […]

55. Which of the following techniques adopted by the central banks around the world have helped them to achieve credibility? a. Maintaining a low rate of inflation through tight monetary policies b. Publicly announcing a target rate of inflation c. […]

2. Describe the monetarist model of economic theory. 3. Describe the classical and new classical models of economic theory. 4. Describe the policymakers’ role in each of these theories. 2. What role do monetarists believe the government should play in […]

52. The monetarist assumption that monetary policy cannot change long-run equilibrium income is based on the idea that: a. the long-run aggregate supply curve is horizontal. b. the long-run Phillips curve is vertical. c. the price level in the long […]

1. Which of the following macroeconomic schools of thought has dominated the economics profession from the 1940s through the 1960s? a. New classical economics b. Classical economics c. Keynesian economics d. Rational economics e. Positive economics 2. Which of the […]

1. Economic growth is measured as: a. the quarterly percentage change in nominal GDP. b. total output per year divided by the inflation rate. c. total nominal GDP at the end of each year. d. the percentage change in population […]

45. What is the growth in resources when total factor productivity grows by 3.5 percent and the economy grows by 2.7 percent? a. 0.8% b. -2.7% c. 3.5% d. -0.8% e. 0.6% 46. Suppose that an economy grows by 4 […]

2. How are economic growth rates determined? 3. What is productivity? 4. What explains productivity changes? 3. Calculate per capita real GDP. 4. List the determinants of long-run growth of an economy. 5. Calculate growth rates. 6. Define total factor […]

3. What strategies can a nation use to increase its economic growth? 4. How are savings in one nation used to speed development in other nations? 3. List political and social reasons why some countries are poorer than others. 4. […]

52. Assume that initially country A exchanges three barrels of oil for one ton of steel from country B. Later the arrangement changes to four barrels of oil for one ton of steel. This indicates that: a. the terms of […]

1. The Third World consists of _____. a. all communist countries b. the nations in the Southern Hemisphere c. all former British colonies d. all non-English-speaking countries e. all less-developed countries 2. Which of the following is an example of […]

NICs speculative attack 3. What are arguments in support of globalization? 4. How has globalization affected economic growth and poverty? 5. Can recent financial crises be linked to globalization? 3. Describe how globalization is measured. 4. Discuss arguments for and […]

1. Globalization can be defined as: a. the attitude or policy of placing the interests of the entire world above those of individual nations. b. viewing the entire world as a proper sphere for one nation to project political influence. […]

b. The dollar would appreciate against the baht. c. The dollar would remain at the same value against the baht. d. The dollar would appreciate depending on the elasticity of demand for bahts. e. The dollar would depreciate depending on […]

1. Nations trade what they produce in excess of their own consumption to: a. generate jobs for the domestic economy. b. earn “good will” from the World Bank. c. prevent chronic surpluses from driving down domestic prices. d. acquire other […]

a. there will be an excess demand of 10 pounds in Columbia’s domestic market. b. Columbia’s domestic market for coffee will be in equilibrium. c. there will be an excess demand for Columbian coffee in the international market. d. the […]

1. Shirley can choose between peanut butter pretzels and caramel coated popcorn for her evening snack. According to economists, her _____ cost of consuming caramel coated popcorn would be the forgone peanut butter pretzels. a. internal b. opportunity c. average […]

2. What is a production possibilities curve? 3. What are the gains from trade? 4. How do we determine who gets what? 2. Construct and understand a productions possibilities curve (PPC). 3. Discuss points inside and outside the PPC. 4. […]

1. Commercial policy is government policy that influences: a. the operation of commercial banks. b. domestic trade flows. c. domestic private corporations. d. international trade flows. e. the operation of capital markets. 2. If international trade is restricted by the […]

52. Suppose that the world price of kiwi fruit ($10 per box) is below the domestic price ($12 per box). A tariff of $1 per box would: a. cause foreign producers to be better off, because the price they charge […]

1. If $1 was equivalent to 120 Japanese yen in 2008 and 125 Japanese yen in 2010, it implies in 2010, there was: a. a depreciation of the dollar against the yen. b. a depreciation of the yen against the […]

c. countries are free to pursue their own macroeconomic policies without maintaining exchange rates. d. countries cannot act independently and must thus coordinate their macroeconomic policies. e. the global interest rate tends to decline to the lowest possible level. 63. […]

e. an increase in the supply of yen. 97. Assume a one year U.S. bond pays 4.0% interest and a similar U.K. bond pays 5.2% interest. Which of the following changes will establish interest rate parity? a. The British pound […]

1. Given that resources can be allocated by the government, the market, a random process, or on a first-come first-serve basis, which of the following statements is true? a. The market system is not entirely fair but it creates incentives […]

3. What is supply? 4. How is price determined by demand and supply? 5. What causes price to change? 6. What happens when price is not allowed to change with market forces? The unique features of this chapter are the […]

2. What determines the goods that a nation will export? 3. How are the equilibrium price and the quantity of goods traded determined? 4. What are the sources of comparative advantage? 3. Define and determine absolute advantage among countries. 4. […]

tariff quantity quota value quota export subsidies free trade area customs union trade diversion 2. Explain why countries restrict international trade. 3. Discuss tools, such as tariffs, quotas, and subsidies, used to restrict the entry of foreign goods and promote […]

4. How do fixed and floating exchange rates differ in their adjustment to shifts in supply and demand for currencies? 5. What are the advantages and disadvantages of fixed and floating exchange rates? 6. How does a change in the […]

3. What is a business and what is business spending? 4. How does the international sector affect the economy? 5. What is the public sector? What is public sector spending? 6. How do the private and public sectors interact? 3. […]

1. When a household owns shares of stock, _____. a. it has ownership rights in that firm b. it is entitled to the majority of the firm’s profits c. it is liable to bear the entire loss faced by the […]

value added inventory capital consumption allowance depreciation 3. Who purchases the goods and services produced? 4. Who receives the income from the production of goods and services? 5. What is the difference between nominal and real GDP? 6. What is […]

1. The national income accounting system provides a measure of: a. only the total amount of profits made by business firms. b. the total value of all inputs used in production. c. the government budget surplus and deficit. d. the […]

53. Which of the following would not be included as part of personal income? a. Welfare benefits b. Food stamps distributed by the government c. Social security benefits d. Indirect business taxes e. Corporate dividend payments to stockholders ANSWER: d […]

c. The purchase of a Japanese computer by a U.S. corporation d. The purchase of a plane ticket from Australian Airlines by a U.S. resident e. The purchase of a German car by a U.S. resident 51. A U.S. citizen’s […]

balance of payments double-entry bookkeeping current account surplus deficit balance of trade 2. How do changes in exchange rates affect international trade? 3. How do nations record their transactions with the rest of the world? 2. Use current exchange rates […]

1. Markets in which the currencies of different countries across the world are traded are called: a. stock markets. b. foreign exchange markets. c. loanable funds markets. d. commodity markets. e. money markets. 2. _____ is a specific location in […]

d. Hyperinflation e. A prolonged deflation 94. Which of the following countries did not experience hyperinflation in the past 20 years? a. South Korea b. Nicaragua c. Ukraine d. Bolivia e. Argentina ANSWER: a DIFFICULTY: Easy LEARNING OBJECTIVES: MACR.BOYE.16.33 – […]

leading indicator coincident indicator lagging indicator unemployment rate 3. What is the cost of unemployed resources? 4. What is inflation? 5. Why is inflation a problem? 2. Define recession and depression. 3. Provide examples of leading, coincident, and lagging indicators. […]

1. Which of the following refers to business cycles? a. Variations in the economy that are all equal in intensity b. Seasonal variations in the economy that occur every year c. Fluctuations in economic output that show a declining growth […]

61. According to the labor statistics of the United States, the _____ reported the highest unemployment rate between 1960 and 2008. a. Whites b. Asians c. African Americans d. Hispanics e. Latinos ANSWER: c DIFFICULTY: Easy LEARNING OBJECTIVES: MACR.BOYE.16.31 – […]

1. Business cycles are linked to the interaction between: a. the foreign exchange rate and the balance of payments account. b. the aggregate demand and aggregate supply curves. c. the demand and supply curves for a particular good. d. the […]

3. What factors affect aggregate supply? 4. Why does the short-run aggregate supply curve become steeper as real GDP increases? 5. Why is the long-run aggregate supply curve vertical? 6. What causes the aggregate supply curve to shift? 7. What […]

following will be observed in this economy? a. The cost of labor, that is the real wage will decline b. The current profits of the firm will rise c. Aggregate supply in the economy will increase d. Annual production in […]

3. What are the determinants of investment? 4. What are the determinants of government spending? 5. What are the determinants of net exports? 6. What is the aggregate expenditures function? results from a change in income. The (MPC) determines the […]

c. The marginal propensity to consume for the long run consumption function is almost equal to zero. d. The autonomous consumption is negative in long run consumption functions. e. The long run consumption function is represented by a straight line […]

1. Keynesian economics developed in response to: a. the Great Depression of the 1930s. b. the inflation following World War II. c. economic growth during the 1950s. d. the Vietnam War. e. the oil embargo in the 1970s. 2. A […]