Which of the following would be counted in U.S. GDP?
a. the purchase of an old house
b. the purchase of a new textbook
c. the purchase of a $1,000 government savings bond
d. washing your car in the driveway
e. the purchase of 50 shares of IBM stock
Assume that U.S. agricultural land is used either to raise cattle for beef or to grow
wheat. Figure 2-2 represents the production possibility frontier for beef and wheat. The
opportunity cost of moving from point G to point F equals
Figure 2-2
Which of the following is an assumption made about a competitive labor market?
The long-run Phillips curve is vertical.
If the demand for British pounds decreases,
a. the equilibrium price of the pound will increase
b. the equilibrium price of the pound will decrease
c. the equilibrium price of the pound will not change
d. the equilibrium price of the pound will change, but we need additional information to
predict the direction of the change
e. no one can predict what will happen
A family on a trip budgets $800 for sit-down restaurant meals and fast food. The family
can buy 16 restaurant meals if they don’t buy any fast food. What is the price of a
restaurant meal for the family?
In the classical model, which of the following is treated as independent of the interest
rate?
a. the quantity of loanable funds demanded by government
b. the quantity of loanable funds demanded by businesses
c. the total quantity of loanable funds demanded
d. household saving
e. the total quantity of loanable funds supplied
In the long run, large and continuing budget surpluses
a. mean higher taxes and a lower standard of living
b. mean a larger money supply and higher interest rates
c. are a problem because they crowd out private spending
d. permit the government to lower taxes, thereby encouraging work, investment, and
saving
e. mean a larger money supply and lower interest rates
If the price floor of a market is raised, which of the following would happen?
How would an increase in the required reserve ratio affect banks’ ability to create
money?
a. Banks will be able to create more money because of the decrease in excess reserves.
b. Banks will be able to create more money because of the increase in the demand
deposit multiplier.
c. It will have no effect on banks’ ability to create money.
d. It will reduce banks’ ability to create money by forcing them to hold more reserves.
e. It will reduce the banks’ ability to create money by increasing excess reserves.
We would expect the cross-price elasticity of demand between two different brands of
flour to be
According to the efficient markets theory of stock prices, who are the primary
beneficiaries of a sudden rise in demand for a firm’s stock?
Long-run average total cost must always be
For the Fed, price stability means a low and stable rate of inflation.
Budget deficits cause interest rates to be high.
In the classical model,
a. markets do not automatically clear.
b. business demand for loanable fund exceeds business planned investment spending.
c. there is no government sector, only private consumption and planned investment.
d. businesses engage in interest-free borrowing.
e. the government’s demand for funds is vertical.
Which of the following describes the relationship between GDP and government
spending?
a. Government spending = GDP + consumption + private investment – exports – imports
b. Government spending = GDP – consumption – private investment – exports – imports
c. Government spending = GDP – consumption – private investment + exports + imports
d. Government spending = GDP – consumption – private investment – exports + imports
e. Government spending = GDP + consumption – private investment + exports – imports
Which of the following is not an accurate description of the point at which the labor
supply and labor demand curves meet?
a. The point at which the market for labor has cleared
b. The real wage at which the quantity of labor demanded is equal to the quantity of
labor supplied
c. The point at which there is no frictional unemployment
d. The point at which there is no unemployment
e. The wage at which the number of workers firms want to hire is equal to the number
of people who want jobs
Economic growth caused by increased employment creates a trade-off between income
and
a. present-day living standards
b. research and development expenditures
c. investment in physical capital
d. future living standards
e. leisure time
Assume that India has a comparative advantage in producing a computer game. The
United States has an absolute advantage in producing the same game. Mutually
advantageous trade will have India producing and exporting the game while the United
States will specialize in producing something else.