Since a long run consists of many short runs, the classical model is
a. incorrect every time we look at output data
b. accurate during the short run
c. paradoxically quite accurate in the long run; however, it is not very accurate in the
short run
d. our best guide to fluctuations in the economy
e. paradoxically quite accurate in the short run; however, it is not very accurate in the
long run
An individual’s quantity of money demanded
a. refers to how much money the individual would like to have
b. refers to the amount of money an individual needs to maintain her desired standard of
living
c. refers to her wealth constraint
d. refers to the amount of her wealth that an individual chooses to hold in the form of
money
e. is virtually unlimited.
If disposable income decreased, which of the following changes in the
consumption-function line would occur?
a. A rightward movement along the line
b. A leftward movement along the line
c. The entire line would shift upward
d. The entire line would shift downward
e. The entire line would shift downward and there would be a rightward movement
along the new line
Supply curves usually slope upward because producers face increasing opportunity
costs when increasing output.
Lorrie will receive a nominal wage increase of 10 percent this year. The inflation rate
was 5 percent last year and is predicted to be 8 percent this year. If the economic
forecast is correct, her real wage this year
a. will increase by approximately 2 percent
b. will increase by approximately 8 percent
c. will increase by approximately 5 percent
d. will remain the same
e. cannot be calculated without knowing the number of dollars by which her wage
increases
For an individual, opportunity costs
a. decrease as consumption increases.
b. include only the monetary costs of goods and services.
c. reflect resource scarcity.
d. reflect the fact that wants are unlimited.
e. reflect the fundamental assumption that “more is better.”
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.
What is assumed constant as the economy moves from point F to point G?
Figure 2-2
a. both d and e
b. the money supply
c. consumer tastes and preferences
d. the level of currently available technology
e. the amount of available resources
Increases in investment spending cause interest rates to increase. As a result,
a. households will demand more loanable funds
b. households will save a smaller fraction of their incomes
c. households will voluntarily decrease their consumption spending
d. the investment curve will shift leftward
e. firm will receive greater profits from households who are consuming goods
The production possibilities frontier illustrates
a. the combinations of goods that could be produced with resources and technology
constant
b. how technology influences opportunity costs
c. the law of diminishing returns
d. how price changes affect decision making of individuals
e. the law of demand
In the long run, if an economy’s consumption spending is $5 trillion, its planned
investment is $2 trillion, government spending is $1 trillion, net tax revenue is $1
trillion, and household savings are $2 trillion, total output should be
a. $3 trillion
b. $5 trillion
c. $7 trillion
d. $8 trillion
e. $11 trillion
Revisions in the interest rate target
a. occur on a daily basis
b. have widespread impacts on the financial markets
c. require Congressional approval
d. are based solely on data gathered in previous quarters
e. are a no-lose opportunity for the Fed
Microeconomic topics include the overall unemployment rate in the United States and
the rate of inflation.
The factor payments measure of GDP
a. can be expressed as GDP = C + I + G + NX
b. is found by summing all expenditures on intermediate and final goods and services
during the year
c. calculates how much value was added at each stage of production
d. is found by summing all interest, rent, profit, and wages and salaries generated
during the year
e. calculates how much workers paid for goods and services during the year
The Federal Reserve System was created in
a. 1776
b. 1894
c. 1913
d. 1930
e. 1936
A positive supply shock causes stagflation in the short run.
In deciding where to operate along its production possibilities frontier, a society is
answering the question of
a. which goods and services should be produced with its scarce resources
b. what production methods should be used to produce goods and services
c. how will output be allocated among the individuals in the society
d. what prices will be charged for goods and services
e. how much will it trade with other societies in the world
The supply of loanable funds curve
a. is upward sloping
b. is downward sloping
c. is horizontal
d. begins sloping upward, then levels off
e. may slope either upward or downward, depending upon the interest rate
Which of the following would unambiguously increase consumption spending?
a. an increase in real disposable income coupled with a decrease in real wealth
b. an increase in real wealth coupled with more pessimistic expectations regarding
future income
c. a decrease in real disposable income coupled with a decrease in the interest rate
d. a decrease in the interest rate coupled with an increase in real wealth
e. increased pessimism regarding future income coupled with an increase in the interest
rate
Tax collections in the United States are an example of
a. tradition in a mainly market system
b. command in a mainly tradition system
c. market in a mainly tradition system
d. tradition in a mainly command system
e. command in a mainly market system
When the minimum wage is set above the equilibrium market wage,
a. there will be a shortage of labor at the minimum wage
b. it will have no effect on the quantity of labor employed
c. the unemployment rate will rise
d. the quality of the labor force will increase
e. the unemployment rate will fall