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A cut in taxes will have the most effect on aggregate demand if it is given to:
A) people with a low marginal propensity to consume.
B) people with a high marginal propensity to consume.
C) everyone in the economy.
D) those who hold a large amount of wealth.
A survey reveals that on a small island 1,000 people have jobs, 250 people are
unemployed and looking for jobs, and 450 people are neither working nor looking for
work. The unemployment rate on the island is:
A) 20%.
B) 25%.
C) 45%.
D) 15.6%.
In debt deflation, deflation raises the cost of existing debt by increasing the value of
money needed to pay it off, leading to a(n) _____ in aggregate _____.
A) increase; supply
B) reduction; supply
C) increase; demand
D) reduction; demand
Figure: Monetary Policy and the AD"SRASModel
Look at the figure Monetary Policy and the AD"SRASModel. An increase in the money
supply is most likely to cause a shift:
A) from SRAS to SRAS'.
B) from AD to AD'.
C) from SRAS'to SRAS.
D) from AD'to AD.
At the time of the Great Depression, there was:
A) general agreement that monetary policy could help in the short run.
B) no widely accepted theory of the causes of depressions.
C) general agreement that fiscal policy could help in the short run.
D) a consensus about what economic policies to adopt.
Figure: Short-Run Phillips Curve
Look at the figure Short-Run Phillips Curve. SRPC2 is based on an expected inflation
rate of:
A) zero.
B) 1%.
C) 2%.
D) 5%.
Private savings is equal to:
A) disposable income less taxes.
B) disposable income less consumption.
C) wealth.
D) wealth plus government transfer payments.
Table: Wages and Hours Willing to Work
Look at the table Wages and Hours Willing to Work. If it was graphed, the relationship
between wage per hour and hours willing to work would be:
A) linear.
B) coordinated.
C) nonlinear.
D) negatively sloped.
The percentage of the labor force that is unemployed is the:
A) labor force participation rate.
B) employment ratio.
C) unemployment rate.
D) natural employment rate.
When the Fed uses quantitative easing, it is:
A) buying three-month Treasury bills.
B) selling three-month Treasury bills.
C) buying longer-term government debt.
D) selling longer-term government debt.
The Panic of 1907 began when:
A) the Knickerbocker Trust failed.
B) Teddy Roosevelt signed the Sherman Antitrust Act.
C) the Federal Reserve was established.
D) national banks were allowed to issue their own bank notes.
Someone who believes in macroeconomic policy activism is likely to suggest that:
A) changes in the money supply or changes in fiscal policy will most likely destabilize
the economy.
B) balancing the government budget is more important than current economic
problems.
C) keeping the money supply growing at a constant rate would help the economy.
D) changes in monetary or fiscal policy would smooth out the business cycle.
The effect of a natural disaster can be shown by _____ the production possibility
frontier.
A) a point inside of
B) an outward shift of
C) a movement from one point to another along
D) an inward shift of
An increase in the price level that is extremely rapid (say 400% per year) is called:
A) hyperinflation.
B) inflation.
C) deflation.
D) hyperdeflation.
Look at the table Production Possibilities for Machinery and Petroleum. The
opportunity cost of _____ is _____ in the United States as (than) in Mexico.
A) machinery; more
B) machinery; the same
C) machinery; less
D) petroleum; less
Long-term unemployment is usually frictional.
A) True
B) False
If the supply of U.S. dollars in Britain increases, then all of the following occurs
EXCEPT that:
A) the dollar depreciates against the pound.
B) the pound sterling appreciates against the dollar.
C) the dollar price of the pound increases.
D) the dollar appreciates.
If they spend all night writing computer programs, Laurence can write 10 programs,
and Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can
make 6 pairs, and Carrie Anne can make 4. We know that:
A) Laurence's opportunity cost of writing programs is less than Carrie Anne's.
B) Laurence's opportunity costs of writing programs and of making sunglasses are less
than Carrie Anne's.
C) Carrie Anne's opportunity costs of writing programs and of making sunglasses are
less than Laurence's.
D) Carrie Anne's opportunity cost of writing programs is less than Laurence's.
Figure: Classical Model of the Price Level
Look at the figure Classical Model of the Price Level. If the central bank increases the
money supply such that aggregate demand shifts from AD1 to AD2, according to this
classical model, the SRAS will:
A) not change, since in the classical model the SRAS and LRAS are both vertical at
potential output.
B) decrease from SRAS1 to SRAS2.
C) increase from SRAS2 to SRAS1.
D) increase from SRAS1 to SRAS2.
Real GDP is the same as _____ GDP.
A) current-dollar
B) inflation-adjusted
C) nominal
D) value-added
According to the text, productivity is driven by all of the following EXCEPT:
A) physical capital.
B) human capital.
C) technological progress.
D) natural resources.
The tax multiplier for someone living below the poverty line is smaller than the tax
multiplier for someone with an annual income of $1 million.
A) True
B) False
A household is a person or group of people who buy resources and produce goods and
services.
A) True
B) False
Most funds received by depository banks are:
A) borrowed from the U.S. Treasury.
B) deposits of individuals' savings.
C) initially in the form of foreign currency.
D) loans to the bank from businesses.
The present value of a $110 payment in one year, given an annual 10% interest rate, is:
A) $10.
B) $11.
C) $100.
D) $110.
In 1820, Mexico had a higher real GDP per capita than Japan, but today Japan's real
GDP per capita is higher than Mexico's because Japan's real GDP per capita has grown
at _____, and Mexico's real GDP per capita has grown at _____.
A) 1.9%; 1.3%
B) 1.9%; 1.9%
C) 1.3%; 1.9%
D) 1.3%; 1.3%
Trade allows people to get more of what they want.
A) True
B) False
Figure: Demand and Supply
Look at the figure Demand and Supply. The slope of the curve labeled D is:
A) "1.
B) 0.
C) 1.
D) 3.
Scenario: Income"Expenditure Equilibrium
Real GDP is $8,000, autonomous consumption is $500, and planned investment
spending is $200. The marginal propensity to consume is 0.8.
Look at the scenario Income"Expenditure Equilibrium. If real GDP is $3,000, planned
aggregate spending is:
A) $2,400.
B) $2,900.
C) $3,100.
D) $3,000.
When the Fed increases the discount rate, the spread between the discount rate and the
fed funds rate increases and the cost of being short of reserves increases.
A) True
B) False
Because Casey can type reports faster and more accurately than Ahmet, Casey has a(n)
_____ in typing reports.
A) comparative advantage
B) absolute advantage
C) opportunity cost
D) specialization
In the loanable funds market, savers:
A) demand funds.
B) supply funds.
C) represent borrowers of funds.
D) pay the equilibrium interest rate.
Anna recently moved to Boston, as her husband, Joe, has a new job as an economics
professor at Harvard. Anna is an experienced surgeon who is interviewing with several
hospitals in Boston. Anna is:
A) frictionally unemployed.
B) structurally unemployed.
C) cyclically unemployed.
D) counted as employed, since she is likely to receive a job offer soon.
