Special interest group Q receives a 1/10,000th slice of the economic pie.Its net benefit
from either an economic growth policy or a transfer policy is $50,000.In order for
group Q to be indifferent between the two policies, the economic growth policy would
have to make the size of the economic pie (Real GDP) grow
by_________________.This type of analysis is used to show that special interest
groups tend press government for ______________ instead of ________________.
a. $50,000,000; economic growth; transfers
b. $500,000; transfers; economic growth
c. $500,000,000; transfers; economic growth
d. $5,000,000; transfers; economic growth
e. none of the above
Which of the following is an example of a trade restriction?
a. quotas
b. tariffs
c. dumping
d. a and b
e. a, b, and c
If the United States goes into a recession, this tends to shift Japan’s AD curve
_______________ because Japan will ___________________.
a. rightward; import less from the United States
b. rightward; export less to the United States
c. leftward; import less from the United States
d. leftward; export less to the United States
Exhibit 4-5
Suppose the government imposes a price ceiling at P = $0 for transplanted kidneys. The
result will be a
a. shortage of kidneys equal to (Q3 – Q1).
b. surplus of kidneys equal to (Q3 – Q1).
c. shortage of kidneys equal to (Q2 – Q1).
d. surplus of kidneys equal to (Q2 – Q1).
If the dollar appreciates and the U.S. AD curve shifts leftward by an amount greater
than the U.S. SRAS curve shifts rightward, then Real GDP will
_____________________ and the price level will _____________________.
a. decrease; decrease
b. decrease; increase
c. increase; decrease
d. increase; increase
If the nominal wage is $12 per hour and the price level (as measured by a price index)
is 2, it follows that the real wage is _________ per hour.
a. $24.00
b. $6.00
c. $2.50
d. $14.00.
e. none of the above
The Board of Governors of the Federal Reserve
a. is made up of seven members.
b. is a group of advisers reporting to the President.
c. is located in New York City.
d. members are appointed to four-year terms by the President and confirmed by the
Senate.
e. all of the above
Many economists argue that higher real interest rates in the United States (relative to
foreign real interest rates) will lead to a(n) ________________ of the dollar and
subsequent shifts in the U.S. AD curve and SRAS curve such that Real GDP will
___________________.
a. depreciation; increase
b. depreciation; decrease
c. appreciation; increase
d. appreciation; decrease
Historically, which of the following goods have evolved into money?
a. gold
b. salt
c. cattle
d. cocoa beans
e. all of the above
Proponents of the fixed exchange rate system argue that
a. flexible exchange rates may promote international trade, but under a fixed exchange
rate system at least we know what the rates will be from day to day.
b. under a flexible exchange rate system, there is too great a chance that the exchange
rate will diverge from the equilibrium exchange rate.
c. under a flexible exchange rate system, there is no way of knowing what the exchange
rate is at any particular point in time.
d. under a fixed exchange rate system, there would be only one currency.
e. none of the above
An expansionary monetary policy causes interest rates to _____________________,
and eventually United States net exports ____________ causing the AD curve to shift
to the ___________________.
a. fall; rise; right
b. fall; fall; left
c. rise; rise; right
d. rise; fall; left
e. rise; rise; left
With complete crowding out, an increase in government spending
a. is completely offset by a reduction in private spending.
b. is matched by an increase in private spending.
c. results in an increase in aggregate supply.
d. results in an increase in aggregate demand.
Exhibit 9-5
Imagine an AD curve and an SRAS curve intersecting at Point I on graph (1).Which
point(s) would this correspond to on graph (2)?
a. A or B
b. C
c. D or E
d. F
e. G
The number of unpaid internships is more likely to rise in an economy when the
economy is in a recessionary gap and wage rates are constant than when wage rates are
falling.
a. True
b. False
The market demand curve for a given product may be downward sloping even if no
person in that market has a downward sloping demand curve.
a. True
b. False
Suppose the government attempts to stimulate the economy by increasing spending
without increasing taxes. Which of the following statements is most likely to be
accepted by someone who believes in crowding out?
a. The government’s actions will have their intended effect.
b. The government’s actions will cause businesses to become more optimistic about the
economy, and they will increase their output even more than the government had
intended.
c. The government’s actions will raise interest rates, causing decreased investment and
consumption, and the economy will not expand as much as the government had
intended.
d. This is a trick question, because the federal government is required by law to increase
taxes by the same amount as it increases expenditures.
According to Say’s law,
a. if there is demand for a good, someone will supply it.
b. production creates demand sufficient to purchase all goods and services produced.
c. supply and demand work together to determine price.
d. trading takes longer in a barter economy than in a money economy.
e. none of the above
An “increase in the quantity demanded” means that
a. the demand curve has shifted to the right.
b. the supply curve has shifted to the left.
c. price has declined and consumers therefore want to purchase more of the good.
d. given supply, the price of the good can be expected to rise.
If the relative price of one unit of good X is 5 units of good Y, then it follows that the
absolute price of good X can be __________ and the absolute price of good Y can be
__________.
a. $20,000; $10,000
b. $40,000; $8,000
c. $30,000; $5,0000
d. $5,000; $40,000
e. a and c