A positive short-run aggregate supply shock increases aggregate output and the
aggregate price level.
A) True
B) False
If deflation occurs and your income is fixed, your real income:
A) will fall.
B) will go up.
C) will still be equal to your nominal income.
D) is constant.
If technology improves, then it takes more inputs to produce the same output as the last
period.
A) True
B) False
The federal funds rate is:
A) determined by the supply of and demand for money.
B) set by Congress.
C) determined in the real market by the aggregate supply and aggregate demand curves.
D) the interest rate that banks pay when they borrow directly from the Fed.
Structural unemployment means there are:
A) more people seeking work than there are jobs.
B) more jobs than workers.
C) wages that are too low.
D) people just entering the labor force.
Contractionary fiscal policy includes:
A) decreasing taxes.
B) increasing taxes.
C) increasing the money supply.
D) increasing government expenditures.
A trade-off between equity and efficiency may exist because of all of the following
EXCEPTthat:
A) allocating resources fairly may cause efficiency.
B) an efficient allocation of resources may lead to an outcome that most people
consider unfair.
C) policies that promote equity often come at a cost of decreased efficiency.
D) allocating resources fairly may cause inefficiency.
All else equal, if the Federal Reserve decreases the money supply, interest rates will
_____ and the dollar will _____ against other currencies.
A) increase; depreciate
B) decrease; depreciate
C) decrease; appreciate
D) increase; appreciate
Which of these is one of the four principles of individual choice?
A) Resources are usually renewable.
B) The real cost of something is impossible to measure.
C) People take advantage of opportunities to make themselves better off only if there is
no risk involved.
D) Resources are scarce.
If the economy is at potential output and the Fed increases the money supply, in the
LONG run the price level will likely:
A) fluctuate randomly.
B) remain the same.
C) decrease.
D) increase.
In the circular-flow diagram, the factor market is where:
A) households buy factors of production.
B) households buy goods and services.
C) businesses buy goods and services.
D) businesses buy factors of production.
Suppose that Ann bought a share of General Motors stock. The stock is a(n) _____ for
Ann and a(n) _____ for General Motors.
A) asset; asset
B) asset; liability
C) liability; asset
D) liability; liability
If they produce only hamburgers, in a single day Sarah can produce 10 hamburgers, and
Abe can produce 5 hamburgers. If they make milkshakes only, in a single day Sarah can
produce 10 milkshakes, and Abe can produce 4 milkshakes. Therefore, _____ has an
absolute advantage and a comparative advantage in making _____.
A) Sarah; hamburgers
B) Sarah; milkshakes
C) Abe; hamburgers
D) Abe; milkshakes
_____ is the MOST likely to advocate the use of fiscal policy in fighting recessions?
A) Classical macroeconomics
B) Keynesian economics
C) Rational expectations theory
D) Monetarism
Look at the table Kenya’s Economy in 2010. The population at the end of 2010 was
about:
A) 400 million.
B) 41 million.
C) 14 million.
D) 401 million.
Money that has value apart from its use as money is:
A) fiat money.
B) currency.
C) convertible paper money.
D) commodity money.
Which of the following is considered investment spending in macroeconomics?
A) GM builds a new plant.
B) Ryan Jones buys GM stock.
C) Ryan Jones buys GM bonds.
D) Ryan Jones buys GM stock and bonds.
Suppose that the value of the euro fell from $1.32 on April 30, 2012, to $1.24 on July 5,
2012. This implies that during this period the euro _____ and the dollar _____.
A) depreciated; appreciated
B) appreciated; depreciated
C) depreciated; fluctuated
D) appreciated; did not change
Suppose that the market basket for the university student price index (USPI) consists of
5 textbooks and 100 gallons of gasoline. In 2010, the base year for this index, textbooks
cost $50 each and gas cost $1 per gallon. In 2011, textbooks cost $80 each and gasoline
cost $3 per gallon. The USPI for 2011 is:
A) 100.
B) 150.
C) 200.
D) 250.
The present value of a future payment:
A) decreases when the interest rate rises.
B) decreases when the interest rate falls.
C) decreases when the interest rate stays the same.
D) never changes regardless of the interest rate.
The price in the loanable funds market is:
A) the rate of return of a project.
B) the price level.
C) the interest rate.
D) the consumer price index.
The Ricardian equivalence argument says that households and businesses view any
increase in government spending as a sign that tax burdens will increase in the future,
which will cause a decrease in private spending in anticipation of higher future taxes.
A) True
B) False
In the 1960s, Japan was the fastest-growing major economy and it also:
A) spent a smaller share of its GDP on investment goods than did other major
economies.
B) spent a larger share of its GDP on investment goods than did other major economies.
C) spent more of its GDP on national defense than any other country except for China.
D) was the first Asian country to join the European Union.
If banks were suddenly prohibited from paying interest on checking accounts, the
demand for money would likely decrease.
A) True
B) False
Some Keynesian economists believed that at the cost of some inflation, the government
could reduce the unemployment rate to a permanently low rate.
A) True
B) False
Throughout the twentieth century, nations in Latin America had disappointing growth
rates primarily due to:
A) low rates of national savings, political instability, and little emphasis on education.
B) low rates of investment in physical capital that offset a strong emphasis on
education.
C) abundant natural resources, rapid technological progress, and political instability.
D) low rates of national savings, a scarcity of natural resources, and political instability.
A bond is a financial asset that pays a fixed amount of interest each year and then
repays the principal on a given date.
A) True
B) False
Firms supply resources in the factor markets.
A) True
B) False
Fiscal policy attempts to affect the level of overall spending by making changes in:
A) the interest rate.
B) the money supply.
C) banking regulations.
D) taxes and spending.
In 2008 the Federal Reserve was facing:
A) hyperinflation, which can be reversed only with disinflationary policies.
B) stagflation, a combination of high inflation and high unemployment, which cannot
be reversed easily.
C) the deepest recession since the Great Depression combined with rapidly falling
prices.
D) a very severe deflation, rare in history, which was experienced only by Japan.