The FOMC no longer sets targets for M1 and M2 to meet its goals of price stability and
high employment.
Answer:
Increases in population shift the market supply curve for labor to the right.
Answer:
A law requiring the government to balance its budget in each year would serve as an
automatic destabilizer.
Answer:
On a diagram of a production possibility frontier, opportunity cost is represented by the
production possibility frontier shifting outward.
Answer:
Under current U.S. tax laws individuals do not pay taxes on health insurance benefits
they receive from their employers.
Answer:
Inflation redistributes income to a greater extent when the inflation is unanticipated
compared to when the inflation is anticipated.
Answer:
If firms are protected by substantial barriers to entry, short-run profits can turn into
long-run profits.
Answer:
The application of economic analysis to human resources issues is called personnel
economics.
Answer:
In a two-good, two country world, if one country has an absolute advantage in the
production of both goods, it can still benefit by trading with the other country.
Answer:
Firms in perfect competition produce the productively efficient output level in the short
run and in the long run.
Answer:
If Gladys sells her 1998 Jeep Cherokee for $3,500 in 2013, the sale of her car
contributes $3,500 to 2013 GDP.
Answer:
The unemployment rate tends to be higher in the European Union as compared to the
United States.
Answer:
The lower-income industrial countries are catching up to the higher-income industrial
countries in terms of economic growth.
Answer:
For all points above the 45-degree line, planned aggregate expenditure will be less than
GDP.
Answer:
Which of the following is considered a negative supply shock?
A) increasing investment in the economy causes the capital stock to rise
B) an unexpected increase in the price of natural gas
C) a decline in wages
D) an improvement in technology
Answer:
Which of the following summarizes the information provided by a Lorenz curve?
A) the Lorenz coefficient
B) the income distribution ratio
C) the Gini coefficient
D) the slope (the rise divided by the run) of the Lorenz curve at a particular point on the
curve
Answer:
The leader of the monetarist school and major proponent of a monetary growth rule was
A) Ben Bernanke.
B) Milton Friedman.
C) Alan Greenspan.
D) Paul Volcker.
Answer:
In the United States, out-of-pocket spending on health care was ________ percent of all
health care spending in 2011.
A) 2
B) 11
C) 33
D) 51
Answer:
The “Buy American” provision in the 2009 stimulus package required that stimulus
money be spent only on U.S.-made goods, effectively acting as a quota of zero imports
when stimulus money was being spent. In the market for steel, the “Buy American”
provision would ________ the price of steel in the United States and ________ the
quantity of steel demanded in the United States.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
Answer:
Most of the unemployment that occurred during the Great Depression was
A) frictional unemployment.
B) structural unemployment.
C) cyclical unemployment.
D) core unemployment.
Answer:
Using the money demand and money supply model, an open market sale of Treasury
securities by the Federal Reserve would cause the equilibrium interest rate to
A) increase.
B) decrease.
C) not change.
D) increase, then decrease.
Answer:
Which of the following is a fixed cost?
A) payment to hire a security worker to guard the gate to the factory around the clock
B) wages to hire assembly line workers
C) payments to an electric utility
D) costs of raw materials
Answer:
Which of the following individuals would be most negatively affected by anticipated
inflation?
A) a retired railroad engineer who receives a fixed income payment every month
B) a union contractor whose pay is adjusted based on changes in the CPI
C) a full-time employee at a pizza parlor who makes more than the minimum wage
D) a student who borrows $10,000 at a nominal interest rate of 5% to finance
educational expenses
Answer:
If the ________ cost of production for two goods is different between two countries
then mutually beneficial trade is possible.
A) marginal
B) explicit
C) opportunity
D) implicit
Answer:
Table 9-17
Looking at the table above, real average hourly earnings in 2010 were
A) $3.67.
B) $5.63.
C) $10.24.
D) $11.37.
Answer:
If Brazil has a comparative advantage relative to Cuba in the production of sugar cane,
then
A) the average cost of production for sugar cane is lower in Brazil than in Cuba.
B) the implicit costs of production for sugar cane are lower in Brazil than in Cuba.
C) the opportunity cost of production for sugar cane is lower in Brazil than in Cuba.
D) the explicit cost of production for sugar cane is lower in Brazil than in Cuba.
Answer:
Which of the following is a normative economic statement?
A) Rising corn prices have increased the price of corn-based ethanol.
B) With rising home prices and falling mortgage interest rates, the amount of home
foreclosures has decreased.
C) The federal government is considering increasing regulations on the use of fossil
fuels to promote the use of wind power.
D) Farmers should not be allowed to grow and sell genetically-modified crops.
Answer:
Autonomous expenditure times the multiplier equals
A) autonomous saving.
B) autonomous consumption.
C) equilibrium GDP.
D) planned autonomous investment.
Answer:
An increase in the wage rate causes
A) a rightward shift of the firm’s labor demand curve.
B) a leftward shift of the firm’s labor demand curve.
C) a decrease in the quantity of labor demanded.
D) an increase in labor’s marginal productivity.
Answer:
The recession of 2007-2009 decreased the demand for imports in Japan, which caused
the ________ curve for the yen to ________, increasing the exchange rate and the value
of the yen.
A) supply; right
B) supply; left
C) demand; right
D) demand; left
Answer:
If Congress and the president pursue an expansionary fiscal policy at the same time as
the Federal Reserve pursues an expansionary monetary policy, how might the
expansionary monetary policy affect the extent of crowding out in the short run?
Answer:
What type of business has the potential for double taxation of profits and why?
Answer:
What is an externality?
Answer:
What is a compensating differential?
Answer:
Suppose you withdraw $1,000 in cash from your checking account. Draw a T-account
to show the effect of this transaction on your bank’s balance sheet.
Answer:
What is the underground economy and how could it hurt an economy? How does it hurt
developing economies?
Answer:
Carefully define the two categories of saving in the economy.
Answer:
Show the impact of tax reduction and simplification using the dynamic aggregate
demand and aggregate supply model. Clearly show and identify the impact of the tax
change. Assume that aggregate demand and short-run aggregate supply shift as they
typically do in the dynamic model. Show what happens to the price level and real GDP
because of the tax change.
Answer:
What action should the Fed take if it wants to move from a point on the short-run
Phillips curve representing low unemployment and high inflation to a point representing
higher unemployment and lower inflation?
Answer:
Does the fact that monopolistically competitive firms do not achieve productive
efficiency or allocative efficiency mean that there is a significant loss in consumer
welfare?
Answer: