Economic growth
a. involves both benefits and costs
b. is beneficial to the economy only if it arises from population growth
c. is beneficial to the economy only if it arises from technological change
d. involves costs that usually outweigh the benefits
e. imposes costs because it requires a movement along the production possibilities
frontier
If the MPC is 0.6 and if government purchases and net taxes both increase by $20
billion, by how much will equilibrium output change?
a. It will increase by $80 billion.
b. It will increase by $20 billion.
c. It will not change because the changes in government purchases and net taxes will
cancel each other out.
d. It will decrease by $20 billion.
e. It will decrease by $80 billion.
When the economy reaches its potential output, the price level cannot rise any further.
If the CPI was 101.7 in 2006 and 101.5 in 2007, it can be concluded that
a. 2001 was the base year
b. all goods were more expensive in 2007 than in 2006
c. all goods were less expensive in 2007 than in 2006
d. all goods were less expensive in 2006 than in 2007
e. the price level fell from 2006 to 2007
The unit of value function of money refers to how we think about and record a
transaction, whereas the means of payment function refers to how we actually pay for
the items.
Say’s Law
a. cannot be satisfied if there is excess supply or demand in individual markets in the
long run
b. ensures that every firm will sell all of its output
c. can be satisfied even if there is a general overproduction or underproduction of goods
in the economy
d. is satisfied only if every market clears in the short run
e. shows that the total value of spending in the economy will equal the total value of the
output produced
Fun Time Toys produced $60 million worth of toys in 2008. Because of a slow
Christmas shopping season, only $50 million worth was sold to consumers, and the
remaining $10 million worth went into inventories. Based on this information, how was
GDP affected in 2008?
a. $60 million was added to GDP; $50 million was classified as consumption spending
and $10 million was classified as private investment
b. $60 million was added to GDP, all classified as consumption spending
c. $50 million was added to GDP, all classified as consumption spending
d. $40 million was added to GDP; $50 million was classified as consumption and -$10
million was classified as private investment
e. $40 million was added to GDP, all classified as consumption
Suppose the economy includes two distinct groups of people: wage earners and goods
sellers. If the price level increases by 50 percent and nominal wages remain unchanged,
a. there will be no redistribution of purchasing power because all private wage earners
in the U.S. economy receive indexed wages
b. real wages will remain the same because nominal wages do not change
c. there will be no redistribution of purchasing power because only changes in real
income can change the distribution of income
d. income will be redistributed from wage earners to goods sellers
e. income will be redistributed from goods sellers to wage earners
Which of the following would be included in the consumption component of GDP?
a. Movie ticket sales
b. Purchase of a new home
c. Purchase of used clothes
d. Purchase of a baseball card collection at a yard sale
e. Purchase of a chain saw at an auction
Which of the following could cause a decrease in labor supply?
a. An increased preference for working in the labor market
b. An increase in the number of two-family households
c. An increased preference for enjoying leisure time
d. A trend toward less schooling and toward earlier entrance into the labor market
e. An increase in the retirement age
If an excise tax is imposed on a good or service,
a. the supply curve shifts upward
b. the supply curve shifts downward
c. the price paid by consumers decreases
d. the net price received by sellers increases
e. the quantity produced and sold increases
Which of the following statements could explain the concave shape of the production
possibilities curve in Figure 2-9?
Figure 2-9
a. The publishing industry
develops improved printing presses.
b. Productive efficiency increases as the publishing industry moves from point F to
point H
c. More editors and writers are employed as the publishing industry moves from point F
to point H.
d. Some writers are better suited to writing novels; some are better suited to writing
textbooks.
e. The prices of paper and ink fall as the publishing industry moves from point H to
point F.
If the Fed reduces the money supply, banks will often initially have
a. more reserves than they are required to hold
b. excess reserves
c. increased demand deposits
d. fewer loans than normal
e. deficient reserves
The economy’s level of output depends upon (1) the
a. amount of land and capital available for labor to use and (2) the state of technology
and types of inputs available
b. cost of land and capital and (2) the cost of labor
c. availability of land and (2) the availability of capital
d. state of technology and (2) the cost of land
e. state of technology and (2) the types of inputs available