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Which of the following is considered a cost of unemployment?
A) higher crime, suicide and divorce rates
B) severe psychological costs to the job loser
C) wasted resources because a worker is not being utilized
D) All of the above are considered costs of unemployment.
When the interest rate rises, bond prices:
A) rise.
B) fall.
C) are unchanged because the interest rate paid on a bond is fixed.
D) will either increase or decrease depending on the type of bond.
Table 6.10
Refer to Table 6.10. Suppose 1999 is the base year. The price index in 1999 is:
A) 1,000.
B) 100.
C) 1.
D) 10.
Suppose that in 2011, 3 million plasma TVs were purchased at $950 each, while in
2012, 4 million plasma TVs were purchased at $800 each. What might have caused this
change?
A) The price of LCD TVs (a substitute for plasma TVs) fell.
B) The price of LCD TVs (a substitute for plasma TVs) rose.
C) There was an advance in plasma TV manufacturing technology.
D) There were fewer workers in plasma TV manufacturing.
Table 5.4
Refer to Table 5.4. Suppose this economy produces only the two goods X and Y. If year
2 is the base year, Real GDP in year 2 is:
A) $250.
B) $360.
C) $404.
D) $520.
If you negotiated a salary based on an anticipated inflation rate of 4 percent, and the
actual inflation rate turned out to be 6 percent
A) the purchasing power of your real wages would be more than you anticipated.
B) your employer would have gained at your expense.
C) your real wage will increase, but your nominal wage will decrease.
D) the purchasing power of your wages will not change, since purchasing power is
based on your nominal wage.
Figure 19.5 From Figure 19.5 above, if the U.S. fixes the exchange rate at $1.25 per
euro, then the U.S experiences:
A) a balance of payments surplus.
B) capital account surplus.
C) a balance of payments deficit.
D) capital account deficit.
Recall Application 3, "Civil Liberties and the Efficiency of Government," to answer the
following questions:
According to the application, why is a government's efficiency improved with stronger
civil liberties?
A) Stronger civil liberties encourage corruption.
B) Stronger civil liberties force the government to hand out more subsidies.
C) Stronger civil liberties encourage citizen participation and government
accountability.
D) All of the above are correct.
Suppose the government has a $900 billion budget deficit. If the government borrows
$560 billion to finance this deficit and finances the rest by printing money, the amount
of new money created will be
A) $340 billion.
B) $560 billion.
C) $900 billion.
D) $1,460 billion.
Most economists believe that ________ is a purely ________ phenomenon.
A) unemployment; monetary
B) inflation; fiscal
C) hyperinflation; monetary
D) deflation; fiscal
If the equilibrium price of a good increases and the equilibrium quantity of the good
decreases, we can conclude that:
A) demand increased.
B) demand decreased.
C) supply increased.
D) supply decreased.
A bank may make loans until its
A) required reserves are exhausted.
B) excess reserves are exhausted.
C) total assets are exhausted.
D) total liabilities are exhausted.
If prices increase by 8 percent and wages increase by 6 percent, the:
A) real wage has fallen.
B) real wage has not changed.
C) nominal wage has fallen.
D) real wage has increased.
The system of accounts that measures transactions of goods, services, income, and
financial
assets between domestic households, businesses, and governments and residents of the
rest of the world during a specific time period is called the:
A) balance of payments.
B) financial account.
C) exchange rate.
D) current account.
Suppose that potential output is $5 trillion and real GDP is currently $5.5 trillion. In the
long run, we would expect that:
A) the price level will rise.
B) real GDP will rise.
C) wages and input prices will fall.
D) all of the above
Suppose iPhones cost 180 euros and 240 dollars in Belgium and the United States,
respectively, while binoculars cost 60 euros and 75 dollars in Belgium and the United
States, respectively. If the exchange rate is 0.75 euros/dollar, the law of one price
________ for iPhones and ________ for binoculars.
A) holds; holds
B) does not hold; holds
C) holds; does not hold
D) does not hold; does not hold
Prices that adjust nearly on a daily basis are
A) custom prices.
B) auction prices.
C) sticky prices.
D) heavy prices.
Assume that consumption is represented by the following: C = 200 + 0.75Y. Also
assume that investment (I) equals 300.
(a) Given the information, calculate the equilibrium level of income.
(b) Given the information, calculate the level of consumption and saving that occurs at
the equilibrium level of income.
(c) Now suppose that individuals decide to increase their saving so that autonomous
consumption falls by 100. The consumption function is now C = 100 + 0.75Y. Calculate
the new equilibrium level of income, the new level of consumption, and the new level
of saving.
(d) Based on your analysis in Part (c), did the level of saving change as a result of this
increased desire to save? Explain.
Based on our understanding of the aggregate demand curve, we know that a(n)
________ in the price level causes the quantity of real GDP demanded to ________.
A) increase; increase
B) decrease; increase
C) decrease; remain unchanged
D) decrease; decrease
Which of the following benefits from a quota or VER?
A) consumers
B) domestic producers
C) the government
D) all of the above
