The three methods for computing GDP include
a. the expenditure approach, the value-added approach, and the factor payments
approach
b. the expenditure approach, the value-added approach, and the productivity approach
c. the productivity approach, the value-added approach, and the factor payments
approach
d. the expenditure approach, the productivity approach, and the factor payments
approach
e. the output approach, the productivity approach, and the factor payments approach
Which of the following policies would most likely increase the money supply?
a. Selling government bonds
b. Raising the discount rate
c. Lowering tax rates
d. Lowering the required reserve ratio
e. Decreasing the prime lending rate.
In the short run, an increase in real GDP will
a. increase unit costs and increase the price level
b. increase unit costs and decrease the price level
c. decrease unit costs and decrease the price level
d. decrease unit costs and increase the price level
e. have no effect on unit costs or the price level
The concave shape of the production possibilities frontier reflects
a. the law of comparative advantage
b. the law of absolute advantage
c. the law of increasing opportunity cost
d. the simplifying assumption of scarce resources
e. productive inefficiency
According to the classical model, if there are too many elementary school teachers in
the labor market,
a. the government should institute a retraining program to give the unemployed teachers
new job skills
b. the wages for elementary teachers will fall, eventually causing the number of excess
teachers to shrink
c. the wage for elementary teachers will increase for those who are employed, but
unemployment of teachers will remain high
d. this situation provides an example of cyclical unemployment, which often occurs in
the long run
e. people will quit training to become elementary school teachers and soon there will be
a shortage in this labor market
Figure 2-4
Which production possibilities frontier(s) in Figure 2-4 depict(s) a situation in which
all resources are perfect substitutes in production?
a. both C and E
b. both D and E
c. C
d. D
e. E
When measuring the opportunity cost of taking a vacation to Europe, the money spent
on the flight, hotels, and meals is
a. generally less than the opportunity cost of the vacation
b. generally greater than the opportunity cost of the vacation
c. generally equal to the total opportunity cost of the vacation
d. equal to the total opportunity cost of the vacation only if the vacation was planned
well in advance
e. equal to the total opportunity cost of the vacation only if there was little advanced
planning
The Fed issues bonds to raise money and uses it to finance the U.S. government’s
budget deficit.
According to the classical model, if the government lowers its budget deficit, which of
the following will occur?
a. The interest rate will rise, and consumption, investment and output will all decrease.
b. The interest rate will fall, consumption and investment will increase, but output will
not change.
c. The interest rate will rise, and consumption, investment and output will all increase.
d. The interest rate will fall, and consumption, investment and output will all increase.
e. The interest rate will fall, consumption will not change, but investment and output
will both increase.
In the classical model, taxes and spending are treated as two separate variables.
Which of the following statements is true?
a. The U.S. Treasury deals in newly issued bonds and the Fed deals in previously issued
(second-hand) bonds.
b. The U.S. Treasury deals in previously issued bonds and the Fed deals in newly issued
bonds.
c. The U.S. Treasury deals in only newly issued bonds and the Fed deals in both new
and second-hand bonds.
d. The U.S. Treasury deals in both new and second-hand bonds and the Fed only deals
in second-hand bonds.
e. Both the U.S. Treasury and the Fed deal in both new and second-hand bonds.
Which of the following Federal Reserve policy tools is used most often?
a. Open market operations
b. Changing the required reserve ratio
c. Changing the discount rate
d. Changing the prime lending rate
e. Moral suasion
Which of the following helps explain low growth rates of many less developed
countries?
a. Good law enforcement
b. Political stability
c. Low population growth rates
d. Excellent legal systems
e. Near-subsistence levels of per capita output
Periodic fluctuations in GDP are called business cycles.
How are the prices of various goods and services determined for the Consumer Price
Index (CPI)?
a. By an extensive annual household survey
b. By an extensive monthly survey of stores, apartments, and owner-occupied homes
c. By an extensive annual survey of stores, apartments, and owner-occupied homes
d. By an extensive monthly household survey
e. Through the same survey used to determine the typical market basket
Which of the following will cause a movement along the aggregate demand curve?
a. A decrease in the price level
b. An increase in government purchases
c. A decrease in taxes
d. An increase in investment spending
e. An increase in the interest rate.
Which of the following describes the relationship among income, disposable income,
taxes, and transfer payments?
a. Taxes plus transfers equal income plus disposable income
b. Disposable income equals income divided by the sum of taxes and transfers
c. Disposable income equals income minus taxes plus transfers
d. Disposable income equals income plus taxes plus transfers
e. Taxes plus transfers equal disposable income minus income.
If a change in real GDP causes the price level to change, there will be a movement
along the aggregate supply curve.
Which of the following would lead to a leftward movement along the supply curve of
euros?
a. An increase in the U.S. interest rate relative to the European interest rate
b. An increase in the dollars per euro exchange rate
c. A decrease in Europe’s GDP
d. A decrease in the dollar price of the euros
e. A decrease in the U.S. price level relative to the European price level.