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Classical economists assumed:
A) involuntary unemployment exists.
B) there is never full employment.
C) the wage rate adjusts to maintain labor market equilibrium.
D) the wage rate cannot adjust to equate the quantity of labor demanded with quantity
of labor supplied.
An open market ________ by the Fed decreases interest rates and ________
investment.
A) purchase; increases
B) purchase; decreases
C) sale; increases
D) sale; decreases
Refer to Application 1, "Using Value Added to Measure the True Size of
Wal-Mart," to answer the following questions:
From Application 1, Wal-Mart's 2008 sales were roughly equal to the GDP of
________, the ________ largest economy in the world.
A) China; 3rd
B) Belgium; 28th
C) Ukraine; 53rd
D) Japan; 2nd
Which one of the following statements is NOT correct?
A) The natural rate of unemployment is estimated to be between 5 percent and 6.5
percent in the U.S.
B) The term "full employment" means that 100 percent of the labor force is employed.
C) The line between frictional and structural unemployment is sometimes hard to draw.
D) Unemployment can occur even when an economy is growing.
Suppose that the government collects $500 in taxes and borrows $1000 from the public.
If the government prints $200 in new money to finance its budget deficit, how large is
the government deficit?
A) $1700
B) $1500
C) $700
D) $1200
Recall the Application about the decrease in price of illegal drugs in the United
States to answer the following question(s). Recall the Application. If it is not known
whether the decrease in price of illegal drugs is primarily due to a change in supply, a
change in demand, or equal changes in both, the equilibrium quantity of drugs
A) will increase.
B) will decrease.
C) will not change.
D) may or may not change.
In the short run, the aggregate supply curve is relatively flat because at any point in
time:
A) the labor costs faced by firms are slower to adjust than final prices.
B) firms are assumed to supply all the output demanded with relatively small changes
in prices.
C) firms can not face increases in the output demanded without experiencing small
reductions in profits.
D) technology advances faster than production costs.
Successful stabilization policies are very difficult to implement because all of the
following reasons, except:
A) decision-makers are slow to recognize changes in the economy.
B) decision-makers are slow to respond to changes in the economy.
C) fiscal policy takes time to operate.
D) the difference in the length between inside and outside lags.
During 2008 and 2009, the debt to GDP ratio in the United States
A) fell to its lowest level since World War I.
B) is the highest it has been since the founding of the country.
C) rose to its highest level since World War II.
D) remained relatively unchanged, as it has since the mid 1970s.
Table 5.3
Refer to Table 5.3. Assume that this economy produces only two goods: Good X and
Good Y. If year 1 is the base year, the value for this economy's GDP Deflator in year 3
is:
A) 100.0.
B) 118.8.
C) 133.3.
D) 152.0.
Hyperinflation is an inflation rate that exceeds:
A) 50 percent inflation per month.
B) 50 percent inflation per year.
C) 50 percent deflation per week.
D) 50 percent inflation per day.
