Recall Application 1, “Absolute Advantage and Comparative Disadvantage in Latvia,”
to answer the following questions:
According to the Application, which good does Latvia have comparative advantage on?
A) timber
B) grain
C) milk
D) livestock
Recall Application 3, “The Financial System Under Stress: September 11, 2001,” to
answer the following questions:
The Federal Reserve Float is:
A) the difference between debits and credits extended by the Federal Reserve.
B) the difference between the assets and the liabilities of the Federal Reserve.
C) the difference between the assets and the liabilities of all banks.
D) the difference between the debits and credits extended by the Fed to the US treasury.
Suppose that the flat tax is 20 percent. A worker who earns $1000 before taxes and puts
all of the income net of taxes into a bond that earns 10 percent per annum will pay an
additional ________ in taxes from interest income next year.
A) $80
B) $8
C) $800
D) $880
If the government stops granting temporary work permits to foreign nationals, the
demand for labor will ________, the supply of labor will ________, and the quantity of
labor hired will ________.
A) remain the same; increase; decrease
B) increase; decrease; remain the same
C) increase; decrease; decrease
D) remain the same; decrease; decrease
Which key principle in economics best explains crowding out?
A) the principle of opportunity cost
B) the principle of voluntary exchange
C) the marginal principle
D) the principle of diminishing returns
Which of the following trade policies will prevent a foreign supplier to sell even one
unit of the good in the domestic market?
A) import ban
B) import quota
C) voluntary export restraint
D) import tariffs
In the United States, the use of fiscal policy tools to stabilize the economy gained
prominence during
A) the depression era.
B) the Kennedy administration.
C) the Reagan administration.
D) the Clinton administration.
In 1986, the U.S. net international investment position was $136 billion. This means
that in 1986:
A) the U.S. was a net lender.
B) the U.S. was a net borrower.
C) the U.S. government made $136 billion in investments abroad.
D) foreign governments made $136 billion in investments in the US.
If the economy is in a recession, the prices and wages will ________ causing the
short-run AS curve to shift ________ until the economy reaches its long run
equilibrium.
A) drop; right
B) drop; left
C) rise; right
D) rise; left
If the labor supply curve were vertical, a tax on labor will cause:
A) a lower equilibrium wage and employment.
B) a lower equilibrium wage only.
C) a higher equilibrium wage and employment.
D) a lower equilibrium employment. only.
Based on growth accounting, which of the following would cause an increase in output?
A) an increase in employment
B) an increase in the capital stock
C) an increase in the number of hours worked
D) all of the above
Because production generates income which, in turn, generates expenditure, it is true
that:
A) corporate profits can not be larger than the income paid to households for the rental
of their capital.
B) the magnitude of government budget deficits is equal to the magnitude of trade
deficits, albeit with the opposite sign.
C) both the income and production approaches to measuring macroeconomic activity
should yield the same results.
D) it is not possible to charge taxes on either expenditure or income without disrupting
macroeconomic equilibrium.
Suppose that 1999 is the base year and the price index for 2008 is 130. A basket of
goods that is valued $200 in 1999 would cost ________ in 2008.
A) $260
B) $230
C) $30
D) $60
A consumption tax system is likely to benefit
A) higher income individuals.
B) lower income individuals.
C) an individual who, regardless of income, is a large consumer.
D) corporations.