Full employment occurs when
a. everyone has a job
b. everyone who wants a job has one
c. there is no frictional unemployment
d. there is no cyclical unemployment
e. there is no structural, frictional, and seasonal unemployment
Assuming the economy was in equilibrium, use the following information to determine
the amount of funds demanded by the government in the loanable funds market.
Consumption Spending $3.5 trillion
Net Taxes $2.7 trillion
Household Saving $2.5 trillion
Investment Spending $2.2 trillion
Government Purchases $3.0 trillion
a. $0.3 trillion
b. $2.2 trillion
c. $2.5 trillion
d. $3.0 trillion
e. $5.2 trillion
What do supply and demand curves have in common?
a. They both usually slope upward.
b. They both show a relationship between quantity and price.
c. They both usually slope downward.
d. They can both shift in response to changes in income or wealth.
e. Neither of them is influenced by the size of the population.
The opportunity cost of any action is
a. irrelevant to economic theory
b. limited to the out-of-pocket cost incurred
c. the sunk cost plus the markup on materials and labor
d. what we gain in the process of consumption
e. what is sacrificed to pursue that action
Refer to Figure 7-1. Based on the figure,
a. since 1990, the price level has fallen
b. the price level was the highest in 1980
c. since 1965, the price level has risen sometimes and fallen other times
d. since 1965, the price level has risen every year
e. cannot tell what has happened to the price level since 1965
A shock to the economy is a change in
a. production that only affects a few sectors
b. production that initially affects the whole economy and then one or more sectors
c. spending or production that initially affects one or more sectors and then spreads
throughout the whole economy
d. spending that only affects a few sectors
e. spending that initially affects the whole economy and then one or more sectors
The economy’s long run aggregate supply curve
a. is horizontal, indicating that the economy always reaches full employment in the long
run.
b. is vertical at the full-employment level of output, indicating that the price level is
constant in the long run.
c. is horizontal, indicating that prices are constant in the long run.
d. is vertical at the full-employment level of output, indicating that the economy always
reaches full employment in the long run.
e. is vertical at the zero budget deficit level of output.
Refer to Figure 8-4. Based on these graphs, what is the total quantity of loanable funds
demanded at an interest rate of 5 percent?
a. $0.8 trillion
b. $1.0 trillion
c. $1.4 trillion
d. $1.8 trillion
e. $2.2 trillion
GDP is a flow variable because it measures the process of production and is
independent of time.
Refer to Figure 15-16 above. Short run macro equilibrium occurs at a real GDP of
a. $8.4 trillion and a price level of 110.
b. $8.4 trillion and a price level of 130.
c. $8.7 trillion and a price level of 150.
d. $8.1 trillion and a price level of 110.
e. $8.1 trillion and a price level of 150.
Understanding the distinction between positive and normative economic statements is
important because it
a. enables us to derive better forecasts of macroeconomic aggregates such as GDP
b. explains why economics is not a physical science
c. is the primary distinction between macroeconomics and microeconomics
d. provides a framework for understanding differences among economists
e. enables us to see the rationale behind economic models
Under a managed float, if U.S. demand for British goods drops, which of the following
actions would the Bank of England need to take in order to stop any movement in the
dollar-pound exchange rate?
a. Buy British pounds for dollars in order to shift the demand curve for pounds leftward
b. Sell British pounds for dollars in order to shift the supply curve for pounds leftward
c. Sell British pounds for dollars in order to shift the supply curve for pounds rightward
d. Buy British pounds for dollars in order to shift the demand curve for pounds
rightward
e. Do nothing, since purchasing power parity will correct the situation in the short run.
The four main categories of resources are
a. labor, money, capital, and inputs
b. capital, land, raw materials, and entrepreneurship
c. raw materials, money, labor, and capital
d. land, capital, labor, natural resources, and entrepreneurship
e. human capital, physical capital, labor, and natural resources
When negative spending shocks occur, transfer payments automatically fall.
Which of the following statements about interest rate determination is most accurate?
a. In both the long run and the short run, the interest rate is determined in the market for
loanable funds.
b. In both the long run and the short run, the interest rate is determined in the money
market.
c. In the short run the interest rate is determined in the market for loanable funds, and in
the long run it is are determined in the money market.
d. In the short run the interest rate is determined in the money market, and in the long
run it is determined in the market for loanable funds.
e. The interest rate is determined through an interaction between the money market and
the loanable funds market.
If the equilibrium interest rate is 4% but the current interest rate is 6%,
a. bond prices will rise.
b. money demand will decrease.
c. money demand will increase.
d. bond prices will fall.
e. the money supply will decrease.