If K = $200, t = 30 years, i = 5%, the present value (PV) of a payment to be received in
30 years is:
A) $190.48.
B) $46.27.
C) $864.39.
D) none of the above
Economists say that the economy is at “full employment” when the
A) structural unemployment rate is zero.
B) total unemployment rate is zero.
C) frictional unemployment rate is zero.
D) cyclical unemployment rate is zero.
Table 2.2 Julianne runs a business and needs to
decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying
open for each additional hour. Suppose that we observe Julianne staying open 3 hours
per day. If she is following the marginal principle, what must her marginal benefit be?
A) $12
B) $16
C) $18
D) $24
Figure 4.5 Figure 4.5 illustrates the supply of guitars. If the government offered a
subsidy to guitar manufacturers for each guitar they produce, this would most likely
cause a movement from:
A) point B to point C.
B) point B to point A.
C) S1 to S0.
D) S1 to S2.
Which of the following is not an example of the use of activist Keynesian fiscal policy
in recent times?
A) In 2001, George W. Bush led the effort for a tax cut to provide stimulus to a sluggish
economy.
B) In 1994, the Japanese government formulated a plan to increase spending and cut
taxes in order to help their ailing economy.
C) In the late 1990s the Chinese government increased spending to prevent severe
economic activity.
D) In 2001-2003, the Federal Reserve lowered the interest rate several times to help
spur investments and get the economy out of its sluggish growth.
Figure 4.6
David’s Supply Schedule Celeste’s Supply Schedule Refer to Figure 4.6, which
shows David’s and Celeste’s individual supply curves for flower arrangements per
week. Assuming David and Celeste are the only producers in the market, what is the
market quantity supplied at a price of $20?
A) 0
B) 100
C) 150
D) 200
In Figure 11.1, an increase in the marginal propensity to save is represented by a change
in the consumption function from
A) to .
B) to .
C) to .
D) to .
Sticky prices are a result of:
A) labor union influence.
B) government regulation of the economy.
C) economic coordination problems.
D) lack of coordination between auction prices and custom prices.
Using the rule of 70, how many years would it take for David’s income to double if he
was to experience a 4 percent increase in income each year?
A) 35
B) 28
C) 22
D) 17.5
Which of the following provides members of the Board of Governors independence in
conducting monetary policy?
A) their 14-year tenure
B) the fact that they usually are university professors and lawyers
C) the fact that they register as independents and not as Democrats or Republicans
D) the fact that they have lifetime appointments
Import bans, import quotas, voluntary export restraints, and tariffs on goods all
A) increase imports and raise prices for consumers.
B) reduce imports and prices for consumers.
C) reduce imports and raise prices for consumers.
D) increase imports and reduce prices for consumers.
Suppose that union leaders negotiate a significant increase in nominal wages. If the
Federal Reserve holds the growth in the money supply constant, in the short run the
aggregate supply curve will shift
A) up, unemployment will increase, and prices will rise.
B) down, unemployment will increase, and prices will rise.
C) down, unemployment will decrease, and prices will rise.
D) up, unemployment will decrease, and prices will rise.
If nominal wages increase by 6 percent while real wages increase by 4 percent, the
inflation rate must be
A) 2 percent.
B) 4 percent.
C) 6 percent.
D) 10 percent.
Figure 9.2 Refer to Figure 9.2. A movement from point c to point a could be caused by
a(n)
A) decrease in government spending.
B) increase in the price of oil.
C) decrease in taxes.
D) decrease in short-run aggregate supply.
The real exchange rate is the
A) market exchange rate.
B) market exchange rate adjusted for interest rates.
C) exchange rate determined by the government.
D) market exchange rate adjusted for prices.
The Fed’s efforts to stimulate and make the economy grow require that the Fed:
A) sell bonds to raise the interest rates.
B) sell bonds to lower the interest rates.
C) buy bonds to lower the interest rates.
D) buy bonds to raise the interest rates.
Suppose the federal government implemented a flat tax to replace the income tax, and
the flat tax saved taxpayers a total of $5 billion. A tax change such as this could be
viewed as an example of the federal government implementing
A) expansionary monetary policy.
B) contractionary monetary policy.
C) expansionary fiscal policy.
D) contractionary fiscal policy.
Explain why the following items are included in GDP:
(a) depreciation
(b) change in business inventories
(c) indirect taxes
An increase in consumer confidence will:
A) shift the consumption function upwards.
B) shift the consumption function downwards.
C) cause the consumption function to be flatter.
D) cause the consumption function to be steeper.
If the Fed is credible or believable in its desire to fight inflation, it can deter the private
sector:
A) from lowering real wages.
B) from taking aggressive actions that drive up prices.
C) from taking aggressive actions that drive prices down.
D) from developing rational expectations about inflation.