If increases in government spending on infrastructure projects “crowd out” private
investment spending, this will lead to
A) higher levels of real income and wages in the future.
B) no effects on real income and wages in the future.
C) lower levels of real income and wages in the future.
D) higher levels of real income and lower levels of wages in the future.
Recall the Application about how society will cope with increased demands for
entitlement programs to answer the following question(s). This Application addresses
the impact of increasing life expectancy and aging populations on the costs of
government entitlement programs such as Social Security, Medicare and Medicaid, and
examines several possible solutions to the potential problem.
According to this Application, how will an increase in government spending on
entitlement programs affect the macroeconomy?
A) It will increase aggregate demand.
B) It will decrease aggregate demand.
C) It will increase aggregate supply.
D) It will decrease aggregate supply.
Recall Application 3, “The Effectiveness of Committees,” to answer the following
questions:
According to the application, later research by Alan Blinder showed that:
A) the wisdom of the whole group contributes to the superiority of committee decisions
than the wisdom of the leader alone.
B) the wisdom of the leader contributes to superiority of committee decisions than the
average wisdom of the group.
C) the wisdom of the leader magnifies the superiority of the decisions of the committee.
D) the wisdom of the leader magnifies the inferiority of the decisions of the committee.
Recall Application 1, “Falling Home Prices, the Wealth Effect, and Decreased
Consumer Spending,” to answer the following questions:
According to the application, one reason why the economy experienced a reduced rate
of growth in 2007 was:
A) the decrease in consumption brought about by the decline in house prices.
B) the decrease in consumption brought about by the decline in the stock market.
C) the increase in investment brought about by the decline in house prices.
D) the decrease in investment brought about by the decline in the stock market.
If the economy was operating below full employment, it could return to full
employment
A) by itself, through falling wages and prices.
B) through increases in government spending or tax cuts.
C) through open market purchases.
D) all of the above
Recall Application 3, “The Financial System Under Stress: September 11, 2001,” to
answer the following questions:
The potentially catastrophic financial impact of the September 11, 2001, terrorist
attacks against the United States was due to:
A) the large volume of direct borrowing from the Fed.
B) the temporary freezing of the “Federal Reserve float.”
C) the risk of massive default, resulting from the forced closing of financial institutions.
D) the forced closing of the New York Stock Exchange.
As a result of the large surpluses following the Clinton Administration, what did
President George W. Bush do in 2001, which reduced the surplus?
A) increased government spending
B) made substantial cuts in taxes
C) raised the interest rate to reduce spending
D) lowered the interest rate to stimulate spending
The real-nominal principle states that:
A) people respond more to explicit, or real, costs than to implicit costs.
B) people respond more to implicit costs than to explicit costs.
C) what matters to people is the face value of money or income.
D) what matters to people is the purchasing power of money or income.
The payoffs resulting from new investment
A) occur in the future and are known with certainty.
B) occur in the present and are known with certainty.
C) occur in the future but are not known with certainty.
D) depend only on current profits.
Table 3.2
Consider two individuals, Jesse and April, who hand paint kites and snowboards. Table
3.2 shows how much of each good Jesse and April can paint in one hour. Which of the
following is true?
A) April has an absolute advantage in painting kites but not snowboards.
B) April has an absolute advantage in painting snowboards but not kites.
C) April has an absolute advantage in painting both goods.
D) April does not have an absolute advantage in painting either good.
Normative economics
A) is the focus of most modern economic reasoning.
B) answers the question “What ought to be?”
C) predicts the consequences of alternative actions.
D) answers the question “What is?”