Owen had a typewriter shop, but he went out of business because no one buys
typewriters anymore. This statement best represents this economic concept:
A) Resources are scarce.
B) People usually exploit opportunities to make themselves better off.
C) Markets move toward equilibrium.
D) One person’s spending is another person’s income.
A bank run occurs when shares of bank stocks become irrationally popular and their
price is bid up too high.
A) True
B) False
You and a coworker have been trying to develop a linear equation that describes the
local household consumption function. Your coworker has sent you a very short email
that simply says he has finished the project and the consumption function is C= 100 +
0.75(YD). Your job is to explain this result to your supervisor. According to this
consumption function, how much consumption spending would occur if a household
had disposable income of $1,000?
A) $750
B) $4,000
C) $850
D) $350
According to the concept of monetary neutrality, _____ in the money supply _____
GDP and _____ the price level.
A) increases; do not change; raise
B) increases; raise; do not change
C) decreases; lower; lower
D) increases; raise; raise
Which of the following accurately describes what is happening along a typical
aggregate production function?
A) At some point, increasing the amount of physical capital per worker will reduce
productivity.
B) Increases in physical capital per worker will always bring about an increase in
productivity that is worth the cost of the additional physical capital.
C) Because of diminishing returns, increasing the amount of physical capital per worker
will eventually bring smaller and smaller increases in productivity.
D) Adding workers results in real GDP per worker rising at an increasing rate
throughout the function.
Which of the following is NOT an example of government purchases of goods and
services?
A) a federal prosecutor’s salary
B) new pavement for interstate highway I-95
C) a surgeon’s bill reimbursed under the Medicare program
D) equipping U.S. air marshals with electroshock weapons
A change in government transfers shifts the aggregate demand curve by _____ than a
change in government spending for goods and services and has a _____ effect on real
GDP.
A) more; smaller
B) more; larger
C) less; smaller
D) less; larger
The belief that individuals and firms make their decisions optimally using all available
information:
A) is an assumption made by Keynesian economists.
B) is referred to as rational expectations.
C) leads to the conclusion by some new classical economists that discretionary policies
work best.
D) is known as the real business cycle.
Figure: Monetary Policy and the AD“SRASModel
Look at the figure Monetary Policy and the AD”SRASModel. The economy may move
from point i to point has a result of:
A) an increase in the money supply.
B) a rise in the discount rate.
C) a decrease in the money supply.
D) sales of government securities in the open market.
A debit card is money because it gives access to a bank account.
A) True
B) False
One type of macroeconomic policy is antitrust enforcement.
A) True
B) False
Which of the following would demand euros in the foreign exchange market?
I. Americans who want to buy U.S. goods, services, and assets
II. Americans who want to buy European goods, services, and assets
III. Europeans who want to buy U.S. goods, services, and assets
A) I only
B) II only
C) III only
D) I, II, and III
The three consequences of the decline in demand during the Great Depression were
_____ prices, _____ output, and a surge in unemployment.
A) falling; declining
B) falling; increasing
C) rising; increasing
D) rising; declining
The Great Moderation consensus is that the policy makers of the central bank should be
elected so that they are responsible to the voters.
A) True
B) False
In 1958, _____ came up with a theory regarding the trade-off between unemployment
and inflation.
A) A. W. H. Phillips
B) John Maynard Keynes
C) Joseph Schumpeter
D) Milton Friedman
In general, the growth in real GDP per capita:
A) was smaller than the growth of per capita oil consumption before 1973.
B) fluctuated above and below the growth of per capita oil consumption before 1973.
C) was greater than the growth of per capita oil consumption after 1973.
D) was smaller than the growth of per capita oil consumption after oil prices began to
increase in 2004.
Besides consumption, the component(s) of aggregate demand is (are):
A) investment expenditures.
B) investment expenditures and government expenditures.
C) investment expenditures and net exports.
D) investment expenditures, government expenditures, and net exports.
The money multiplier and the required reserve ratio are:
A) independent of one another.
B) directly related to one another.
C) inversely related.
D) both greater than 1.
Diminishing returns to physical capital means that when the amount of human capital
per worker and the state of technology are held fixed, each increase in the amount of
physical capital per worker leads to:
A) a smaller increase in the marginal product of labor.
B) a decrease in the total amount of output.
C) negative marginal product.
D) a constant amount of total output.
The rate of unemployment when the economy is at full employment is:
A) zero.
B) the natural rate.
C) the structural rate.
D) less than the full employment rate of unemployment.
Which of the following is an example of marginal analysis?
A) ordering a pizza rather than eating leftover meatloaf
B) deciding whether to eat one more slice of pizza
C) using a coupon to save $2 on a pizza
D) writing a check to pay for the pizza rather than using a credit card
A decrease in supply with no change in demand will lead to _____ in equilibrium
quantity and _____ in equilibrium price.
A) an increase; an increase
B) an increase; a decrease
C) a decrease; an increase
D) a decrease; a decrease
Because the United States is a rich nation, free health care can be provided for all
citizens without considering the issue of scarcity.
A) True
B) False
If the Federal Reserve wants to discourage banks from borrowing directly from the
Federal Reserve and thus decrease the monetary base, it will likely:
A) increase the discount rate.
B) increase the federal funds rate.
C) increase the reserve requirement.
D) sell U.S. Treasury bills in an open market operation.
The consumer price index is intended to measure the cost of all goods purchased in the
economy over time.
A) True
B) False
We now typically refer to the Keynesian term “animal spirits” as:
A) rational expectation.
B) business confidence.
C) adaptive expectation.
D) irrational exuberance.
Suppose the required reserve ratio is 10% and a depositor withdraws $500 from her
checkable deposit. The money supply will _____ if the banking system does NOT hold
any excess reserves.
A) be unchanged
B) decrease by $500
C) decrease by $4,500
D) decrease by $5,000
Policies that reduce inflation are popular with voters because they lead to higher output
and lower unemployment.
A) True
B) False
An economy that lacks a medium of exchange must use a(n) _____ system.
A) anarchist
B) barter
C) communist
D) expanding
The demand for loanable funds is _____ sloping because _____ respond to lower
interest rates by _____ their quantity demanded of loanable funds.
A) downward; investors; increasing
B) downward; savers; increasing
C) upward; investors; decreasing
D) upward; savers; decreasing
You notice that when a new yoga class is offered at the student recreation center at a
highly desirable time, some students from the other yoga classes go to the new class
instead. This statement best represents this economic concept:
A) Resources are scarce.
B) The real cost of something is what you must give up to get it.
C) People usually exploit opportunities to make themselves better off.
D) Marginal analysis.
If the U.S. dollar were replaced with a “new dollar” at an exchange rate of 1 new dollar
for 4 old dollars, then an hourly wage of $10 would become an hourly wage of _____
new dollars.
A) 2.50
B) 6
C) 10
D) 60
The chair of the Board of Governors during the 2008 financial crisis was:
A) Barack Obama.
B) Ben Bernanke.
C) J. P. Morgan.
D) John McCain.
Assume the money supply doubles, followed by a doubling of the wage rate and the
price level. Under these circumstances, we can safely conclude that:
A) real aggregate output will double.
B) real aggregate output will fall in half.
C) nominal output will double, but real output will fall.
D) nominal output will double, but real output will remain unchanged.