Most of a bank’s short-term liabilities are:
A) loans from the Federal Reserve.
B) loans from the U.S. Treasury.
C) loans to its customers.
D) customers’ deposits.
The aggregate production function exhibits diminishing returns to labor but not to
physical capital.
A) True
B) False
A revaluation of a currency, holding everything else constant:
A) makes foreign goods more attractive in the domestic economy.
B) leads to an increase in aggregate demand and can therefore be expansionary.
C) increases the balance of payments account toward a surplus.
D) leads to a merchandise trade surplus.
If the aggregate consumption equals $100 million + 0.75 YD, then autonomous
consumption is:
A) 0.75.
B) 0.25.
C) $75 million.
D) $100 million.
In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of
tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750
boxes of tulips. Trade will take place between these two countries if 1 ton of beef costs
_____ boxes of tulips.
A) 20
B) 5
C) 12
D) 8
Usually the rate of return on stock is lower than the rate of return on bonds.
A) True
B) False
Figure: A Tariff on Oranges in South Africa
Look at the figure A Tariff on Oranges in South Africa. When the government imposes a
tariff on imported oranges, the price of oranges in South Africa rises from PWto PTand
domestic consumer surplus _____ to _____.
A) falls; F+ L
B) falls; F+ G+ I+ J+ K+ L
C) rises; F+ L
D) rises; F+ G+ I+ J+ K+ L
Figure: Production Possibility Frontier
Look at the figure Production Possibilities Frontier. Which of the following is NOT an
efficient rate of production per period?
A) 18 cars and no computers
B) no cars and 20 computers
C) 16 cars and 12 computers
D) no cars and 18 computers
Figure: The Minimum Wage
Look at the figure The Minimum
Wage. What is the quantity of labor supplied at a binding minimum wage of P3?
A) Q1
B) Q2
C) Q3
D) Q4
If the marginal propensity to save is 0.25 and investment spending increases by $50
billion, the change in real GDP will be $200 billion.
A) True
B) False
In Ventura County, California, strawberry production is limited by the number of acres
available for agriculture production. This statement best represents this economic
concept:
A) Resources are scarce.
B) “How much” is a decision at the margin.
C) There are gains from trade.
D) Resources should be used as efficiently as possible to achieve society’s goals.
In the circular-flow diagram, an organization that produces goods or services for sale is
a:
A) market.
B) household.
C) factor.
D) firm.
When the unemployment rate increases, the budget:
A) is unaffected.
B) tends to move into deficit.
C) tends to move into a surplus.
D) remains neutral.
Output per capita in the United States in 2010 was about _____ as high as in 1900.
A) twice
B) 3 times
C) 8 times
D) 10 times
Figure: Equilibrium in the Money Market
Look at the figure Equilibrium in the Money Market. If the rate of interest is below
equilibrium, there will be an excess _____ money and the interest rate will _____.
A) demand for; rise
B) supply of; fall
C) demand for; fall
D) supply of; rise
Privately held companies are owned by an individual or a few partners, who get to keep
all of the company’s profit.
A) True
B) False
All of the following are reasons for the economic stagnation of Latin America during
the last century EXCEPT:
A) irresponsible government policies that fueled high levels of inflation.
B) low rates of savings.
C) lack of public support for education.
D) excessively large flows of foreign investment.
If the marginal propensity to save is small, it will:
A) make the multiplier smaller.
B) make the multiplier larger.
C) not affect the value of the multiplier.
D) increase the interest rate.
Higher government transfers or lower taxes make a budget surplus smaller or a budget
deficit larger.
A) True
B) False
The East Asian countries have exhibited tremendous economic growth during the past
40 years because of all of the following EXCEPT:
A) a significant increase in physical capital per worker made possible by very high rate
of saving.
B) a significant increase in human capital made possible by very good basic education.
C) a substantial achievement in technological progress.
D) intervening governments with lots of regulations.
If workers expect a lower rate of inflation, the short-run Phillips curve will:
A) remain constant, but there will be a movement down the curve.
B) be unaffected.
C) shift up.
D) shift down.
Foreign exchange reserves are stocks of foreign currencies that a government maintains
to buy its currency in foreign exchange markets.
A) True
B) False
In an economy with no taxes or imports, if disposable income decreases by $2,000 and
consumption decreases by $1,400, the multiplier is 7.
A) True
B) False
Figure: The Market for Computers
Look at the figure The Market for Computers. Assume that PAis the autarky price and
PWis the world price. Consumer surplus without international trade would be area:
A) W+ X+ Y.
B) W.
C) Y.
D) W+ X.
The nominal exchange rate is the number of times that a unit of currency changes hands
in a year.
A) True
B) False
The effect of an increase in productive inputs such as labor and capital can be shown
by:
A) a point inside of the production possibility frontier.
B) an outward shift of the production possibility frontier.
C) a movement from one point to another along the production possibility frontier.
D) an inward shift of the production possibility frontier.
The official unemployment rate ignores:
A) people with professional jobs.
B) people who work on commission.
C) discouraged workers.
D) people with professional jobs, people who work on commission, and discouraged
workers.
Scenario: The Velocity Equation
Suppose that real GDP equals $10 trillion, nominal GDP equals $20 trillion, and the
aggregate price level equals 2.
Look at the scenario The Velocity Equation. If the money supply is $5 trillion, then the
velocity of money is:
A) 5.
B) 8.
C) 4.
D) 10.
When the government decreases spending, the:
A) AD curve will shift to the left.
B) SRAS curve will shift to the left.
C) budget balance will move toward a deficit.
D) government debt will increase.
Figure: Actual and Natural Rates of Unemployment
Look at the figure Actual and Natural Rates of Unemployment. In 1982, the actual
unemployment rate was approximately:
A) zero.
B) 4%.
C) 6%.
D) 10%.
Research and development is defined as spending to develop and implement new
technologies.
A) True
B) False
In 1896 presidential candidate William Jennings Bryan wanted the United States to
abandon the gold standard and print more money, which would raise the price level and
benefit farmers who were deeply in debt.
A) True
B) False
As long as individuals know that they can find the goods and services they want in the
market, they are willing to forgo being self-sufficient and are willing to specialize.
A) True
B) False