The Fed:
a. has little control over the money supply.
b. serves as the central bank for the United States.
c. often uses a mix of lower taxes in its fiscal policy.
d. ensures commercial bank profitability.
The presence of discouraged workers may cause:
a. the employment rate to be overstated.
b. the employment rate to be understated.
c. the unemployment rate to be overstated.
d. the unemployment rate to be understated.
e. GDP to be too large.
The opportunity cost of a purchase is:
a. the selling price of the good or service.
b. zero if the good or service satisfies a need.
c. greater for persons who are rich.
d. the good or service given up for the good or service purchased.
Unemployment that is caused by a mismatch of the demand for workers with certain
skills and the skills of unemployed workers is:
a. frictional unemployment.
b. structural unemployment.
c. cyclical unemployment.
d. mismatch unemployment.
When measured as a percentage of GDP, the U.S. national debt reached its highest
levels as a result of:
a. World War II.
b. The Vietnam War.
c. The Reagan defense buildup and tax cut.
d. The Bush economic recovery program.
Exhibit 4-10 Supply and demand data for apricotsBushels demanded
per monthPrice per
bushelBushels supplied
per month
50 $5 80
55 4 75
60 3 70
65 2 65
70 1 55In Exhibit 4-10, assume that the government initially sets a price floor of $4 for
apricots, and then removes the $4 price floor. What effect will this price change have?
a. The price of apricots will rise.
b. The quantity of apricots demanded will fall.
c. The quantity of apricots supplied will decline.
d. Quantity supplied will continue to exceed quantity demanded.
A source of economic growth is:
a. unemployment.
b. inefficiency.
c. less resources.
d. greater entrepreneurship.
Unemployment that is of a short duration to allow time to find a new job is:
a. structural unemployment.
b. cyclical unemployment.
c. frictional unemployment.
d. durational unemployment.
According to the quantity theory of money:
a. the velocity of money is highly variable.
b. the money supply directly affects real GDP.
c. the money supply inversely affects velocity.
d. real GDP increases as the price level increases.
e. P = MV/Q.
Suppose an increase in government spending stimulates real GDP without affecting the
price level. What is the relevant range of the aggregate supply curve in this case?
a. The classical range.
b. The intermediate range.
c. The Keynesian range.
d. The monetarist range.
Exhibit 2-8 Production possibilities curve data A BCDEF
Capital goods 15 14 12 9 5 0
Consumer goods 0 2 4 6 8 10 As shown in Exhibit 2-8, a total output of 0 units of
capital goods and 10 units of consumer goods is:
a. the maximum rate of output for this economy.
b. an inefficient way of using the economy’s scarce resources.
c. the result of maximum use of the economy’s labor force.
d. unobtainable in this economy.
Those who favor government policies to stimulate the economy by creating incentives
for individuals and businesses to increase their productive efforts are supporting:
a. supply-side economics.
b. Keynesian economics.
c. monetarist economics.
d. Marxian economics.
Which of the following is an example of a pure public good?
a. A bus.
b. A mall.
c. A teddy bear.
d. An army.
e. An automobile.
Which of the following is included in the study of macroeconomics?
a. Wage rate of college students.
b. Prices of automobiles.
c. Unemployment in the nation.
d. Price of silver and gold.
The national debt as a percentage of GDP has remained roughly constant since the end
of World War II.
A shortage means that the quantity demanded is greater than the quantity supplied at the
prevailing price.
People with fixed incomes fare best in an inflationary period.
The consumption function has a positive slope.
What is the difference between socialism and communism? What are some examples of
countries that are largely socialistic and some that are communistic?
On the production possibilities curve, a movement between points that yields a loss of
one good in order to raise the output of another good will maintain efficient production.
Negative externalities result in unfair, excessively high prices.
All banks are required to join the Fed.
An open-market purchase by the Federal Reserve injects excess reserves into the
banking system and allows the money supply to expand.
The largest revenue source in the U.S. federal tax system is the corporate income tax.