An efficient tax is
A) a tax that imposes an equal tax burden on buyers and sellers.
B) a tax that raises a maximum amount of revenue.
C) a tax that imposes a small excess burden relative to the tax revenue that it raises.
D) a tax that is used to fund research and development of new technology.
The profits a corporation keeps to finance future expansion are known as
A) retained earnings.
B) preferred stock.
C) dividends.
D) capital gains.
If the nominal interest rate is 6% and the inflation rate is 2% then the real interest rate is
A) 8%.
B) 4%.
C) 3%.
D) 2%.
E) 1%.
In a production possibilities frontier model, a point inside the frontier is
A) allocatively efficient.
B) productively efficient
C) allocatively inefficient.
D) productively inefficient.
Which of the following do not suffer the costs of inflation?
A) persons on fixed incomes
B) persons whose incomes rise more rapidly than inflation
C) firms that have to devote more time and labor to raising prices
D) an investor that has to pay higher taxes because of the inflation
The nominal GDP of the U.S. in 2012 was approximately $16.2 trillion. This means that
A) the value of output in 2012 was around $16.2 trillion.
B) total income in 2012 was around $16.2 trillion.
C) total spending in 2012 was around $16.2 trillion.
D) all of the above are true.
Figure 13-3
Refer to Figure 13-3. Suppose the economy is at point C. If investment spending
decreases in the economy, where will the eventual long-run equilibrium be?
A) A
B) B
C) C
D) D
The labor force participation rate equals the
A) (number of employed divided by the labor force) x 100.
B) (labor force divided by the number of people not in the labor force) x 100.
C) (labor force divided by working-age population) x 100.
D) (labor force divided by the total population) x 100.
When an economy is at its natural rate of unemployment, which of the following will
be true?
A) The unemployment rate will be 0%.
B) The labor force participation rate will be 100%.
C) The unemployment rate will be greater than 0%.
D) Only structural unemployment as a result of technological change will exist in the
economy.
If labor productivity growth slows down in a country, this means that the growth rate in
________ has declined.
A) labor force participation
B) the quantity of goods or services that can be produced by one hour of work
C) the working-age population
D) nominal GDP
Which of the following would be a consequence of substitution bias in the CPI?
A) Social Security payments would not adequately compensate retired workers for
inflation.
B) Businesses would overcompensate employees for inflation when giving the cost of
living rises.
C) The inflation rate based on the CPI would underestimate the true level of inflation.
D) Judges would award child support payments that would not adequately keep up with
the true cost of inflation.
Investment, as defined by economists, would include the purchase of a
A) corporate bond.
B) government bond.
C) share of stock in ExxonMobil.
D) computer by an accounting firm.
Article Summary
According to the International Energy Agency (IEA), increased oil production resulting
from U.S. shale oil has invigorated the North American oil industry and has created a
global supply shock. The shale oil and gas industry has generated tens of billions of
dollars in revenues and hundreds of thousands of new jobs, and could result in the
United States changing from being the world’s largest oil importer to a net exporter
within a few years. An IEA forecast predicts that because of shale oil, the United States
will become the world’s largest oil producer by 2017, with supply growing by 3.9
million barrels per day from 2012-2018.
Source: Denise Roland, and AFP, “US shale energy creates global oil ‘supply shock’,”
Telegraph, May 14, 2013.
Refer to the Article Summary. The supply shock mentioned in the article summary may
well result in a decrease in the price of oil. After an unexpected decrease in the price of
oil, the long-run adjustment ________ the price level and ________ the unemployment
rate as they return to their original levels.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
If the consumption function is defined as C = 7,250 + 0.8Y, what is the marginal
propensity to save?
A) 0.2
B) 0.8
C) 5.8
D) 7.25