When the Fed conducts an open market sale, it leads to a higher level of investment and
output in the economy.
People will buy more of a normal good when their income decreases.
Capital deepening will occur as long as total saving is greater than depreciation.
A person who is not working and who has looked for work in the past, but is not
looking for work now is not considered “unemployed.”
If output is below full employment, we expect wages and prices to fall, money demand
to decrease, and interest rates to fall.
Real wages are wages expressed in U.S. dollars.
All presidents of the 12 district banks of the Federal Reserve can vote during FOMC
meetings.
If a country experiences a trade deficit (net exports are negative), we know that GDP
will be less than GNP.
As the economy expands, unemployment rises, and the result is an increase in
unemployment benefits.
A higher marginal propensity to consume results in a larger multiplier.
If the production possibilities curve is drawn as a straight line it means that:
A) the tradeoff between the two goods is increasing.
B) the tradeoff between the two goods is decreasing.
C) the tradeoff between the two goods is constant.
D) no tradeoff is possible between the two goods.
U.S. imports and exports both fell during the first quarter of 2009. The value of these
imports and exports would be reflected in the United States
A) current account.
B) financial account.
C) capital account.
D) exchange rate account.
Recall the Application about the impact of the federal Disability Insurance
program on the unemployment rate to answer the following question. Recall the
Application. If the federal Disability Insurance program leads to a decrease in the labor
force participation rate, the ________ will be ________.
A) frictional unemployment rate; higher
B) structural unemployment rate; higher
C) measured unemployment rate; lower
D) measured unemployment rate; higher
Figure 14.3
Refer to Figure 14.3. At an interest rate of 4%, there is:
A) an excess supply of money of $200.
B) an excess supply of money of $600.
C) an excess demand for money of $600.
D) an excess demand for money of $200.
When people who were previously looking for jobs stop looking for jobs, they are
classified as:
A) unemployed.
B) in the labor force.
C) not in the labor force.
D) employed.
If the tax multiplier is -6 and taxes are reduced by $100 billion, output:
A) falls by $100 billion.
B) falls by $600 billion.
C) increases by $600 billion.
D) increases by $100 billion.
Lower U.S. interest rates cause the value of the dollar to
A) rise, making U.S. goods relatively cheaper on world markets.
B) rise, making U.S. goods relatively more expensive on world markets.
C) fall, making U.S. goods relatively cheaper on world markets.
D) fall, making U.S. goods relatively more expensive on world markets.
Which of the following causes the consumption function to rotate downwards?
A) a decrease in consumer tax rates
B) a decrease in autonomous consumption
C) a decrease in the marginal propensity to save (MPS)
D) a decrease in the marginal propensity to consume (MPC)
From the Application, we can infer that the wine lakes will disappear if:
A) the government set the minimum price below the equilibrium.
B) the government set minimum prices above the equilibrium.
C) the government takes over the production of wine.
D) All of the above are correct.
Recall Application 3, “Increasing Health-Care Expenditures and Crowding Out,” to
answer the following questions:
According to the application, as individuals become richer, sooner or later they will
substitute spending away from ________ and into ________.
A) consumer durables; increasing their lifespan
B) consumer durables; stocks of HMOs
C) less expensive health care; more expensive health care
D) nursing homes; retirement communities
For economic growth to increase living standards:
A) society must discover ways of using available resources more efficiently.
B) the choices available to consumers must increase.
C) the rate of growth of real GDP must exceed the rate of population increase.
D) society must acquire more resources.
Figure 8.1
Refer to Figure 8.1. If the saving rate is s1, the economy reaches the long run
equilibrium at:
A) pt. A.
B) pt. C.
C) pt. D.
D) pt. E.
Mr. Garrison has recently obtained a bank card from South Park National Bank. Excited
about the concept of using a little plastic card to get money from a machine, he quickly
runs down to the nearest Automatic Teller Machine and withdraws $500. This action
has
A) increased the money supply by $500.
B) reduced the money supply by $500.
C) reduced the bank’s required reserves by $25 assuming the reserve ratio is 5 percent.
D) not changed the money supply.
Which of the following is an example of technological progress?
A) an increase in corn output resulting from genetic engineering
B) the invention of the air conditioner
C) the invention of LCD televisions
D) all of the above
In an open economy, a country can accelerate growth by:
A) increasing the trade deficit and importing investment goods.
B) increasing the trade deficit and exporting investment goods.
C) decreasing the trade deficit and importing investment goods.
D) increasing the trade deficit and importing consumption goods.
Table 6.4
Refer to Table 6.4. The labor-force equals:
A) 150.6.
B) 120.3.
C) 125.
D) 83.5.
The security provided by the federal government on money in banks is called
A) social security.
B) deposit insurance.
C) investment equity.
D) a hedge fund.
A government policy that leads to a decrease in aggregate demand is called:
A) a contractual policy.
B) a contractionary policy.
C) a recessionary policy.
D) an economic growth policy.
If firms receive an economic forecast predicting future increases in the growth of real
GDP, they are likely to respond by
A) decreasing their level of investment spending to decrease future production capacity.
B) increasing their level of investment spending to increase current production capacity.
C) increasing their level of investment spending to increase future production capacity.
D) decreasing their level of investment spending to decrease current production
capacity.
Why do the demand curves for inferior goods slope downward, even though the law of
demand is driven in part by the income effect?
What are the similarities and differences between an import tariff and a voluntary
export restraint? What are the differences?
Suppose that the economy is experiencing a 3 percent unemployment rate when the
natural rate of unemployment is 5 percent. Is this unemployment rate sustainable in the
long run? Explain.
What is the difference between the discount rate and the fed funds rate?
Explain how real GDP could be increased without using additional inputs.