If unemployment is above the natural rate, GDP is below potential output.
The demand curve facing the firm has been estimated as follows:
Which of the following statements about the firm’s total revenue is correct?
If the marginal propensity to consume is 0.6, what is the long-run expenditure
multiplier?
a. 0.0
b. 2.0
c. 2.5
d. 10.0
e. 1.0
If a firm experiences economies of scale, then, as output increases,
The difference in unemployment rates between Europe and the U.S. has been narrowing
partly because
a. tax rates in European countries are generally lower.
b. economic conditions in Europe and the U.S have been converging.
c. European and American labor unions have been coordinating their activities.
d. of a change in labor market policies.
e. Europe has been making it easier for workers to gain unemployment benefits
An increase in tuition rates for astronomy students would
A firm can maximize profits in the short run by producing output where
The natural rate of unemployment in the United States
a. has consistently equaled 6 percent
b. has increased as the federal budget deficit has fallen
c. is similar to the natural rate in European countries
d. has increased in recent years
e. is now unusually high because so many women have entered the labor force
In an expansion, tax payments tend to increase and transfer payments tend to decrease.
If the price of a good increases from $20 to $25 and the quantity demanded declines
from 15 to 10 units of the good, the price elasticity of demand is 5.
Equilibrium in the money market means that the quantity of money people are holding
equals
a. their entire wealth
b. their entire income
c. the quantity of money that they want to hold
d. the money supply
e. the value of bonds in their financial portfolios
The equilibrium price level
a. determines by how much the AD curve shifts
b. is inversely related to the nominal wage rate
c. is influenced by the pricing behavior of all the firms in the economy
d. is unaffected by changes in resource costs
e. is the same thing as the interest rate
The firm depicted in Figure 7-10 currently is producing 200 units of output per day. If
it decides to increase its output level to 375 units, then it will
The infant industry argument
a. is that governments should protect all industries for the first five years of existence
b. is that governments should protect a new industry until it can ‘stand on its own feet”
c. defends quotas on products produced by infant industries abroad
d. has been used to justify protection of strategically important industries
e. explains why some less developed countries export raw materials
If income increased by $20,000, investment spending is fixed at $5,000, government
purchases are fixed at $10,000, net exports are fixed at $500, and aggregate expenditure
increases by $15,000, what is the marginal propensity to consume (MPC)?
a. 0.25
b. 0.75
c. 0.33
d. 0.50
e. 0.70
In the short-run macro model, which of the following increases when government
spending increases?
a. The interest rate
b. Investment spending
c. Taxes
d. Spending on consumer durables
e. The money supply
The demand deposit multiplier is the number by which we must multiply the
a. injection of reserves to get the total change in demand deposits
b. total amount of demand deposits to get the total change in the money supply
c. level of required reserves to get the total change in the money supply
d. total amount of currency in circulation to find total demand deposits
e. change in demand deposits to find the total change in the money supply
Refer to Figure 15-2. If the economy is initially at equilibrium at $7 trillion, what is the
least likely cause of the shift of the aggregate expenditure line from AE1to AE2, and the
shift of the aggregate demand curve from AD1to AD2?
a. An increase in government purchases
b. A decrease in taxes
c. An increase in autonomous consumption
d. An increase in the money supply
e. A decrease in the price level