Firms in a small economy planned that inventories would grow over the past year by
$300,000. Over that year, inventories actually grew by $400,000. This implies that
A) aggregate expenditure that year was less than GDP that year.
B) there was an unplanned decrease in inventories that year.
C) there was a planned decrease in inventories that year.
D) aggregate expenditure that year was equal to GDP that year.
If China decides to enact laws to clean up the environment, what would be the effect on
GDP?
A) GDP would increase reflecting the fact that the environment would be cleaner.
B) GDP would decrease if the pollution controls reduce productivity by more than the
cost of the controls.
C) GDP would increase as the citizens of China were made happier as the environment
was cleaned up.
D) GDP would increase as the environmental costs of pollution were not included in the
calculation of GDP.
The Business Cycle Dating Committee, a part of the ________, officially decides when
a recession begins and ends.
A) federal government
B) Bureau of Labor Statistics
C) National Bureau of Economic Research
D) Federal Reserve
Firms that participate in regular open market transactions with ________ are called
primary dealers.
A) commercial banks
B) Treasury banks
C) the Federal Reserve
D) mortgage lenders
The money demand curve, against possible levels of interest rates, has a
A) positive slope.
B) negative slope.
C) zero slope.
D) positive slope for low levels of money demand, a negative slope for high levels of
money demand.
Figure 2-9
Figure 2-9 shows the production possibilities frontiers for Greenland and Iceland. Each
country produces two goods, snow cones and popsicles.
Refer to Figure 2-9. Which country has a comparative advantage in the production of
popsicles?
A) Greenland
B) They have equal productive abilities.
C) Iceland
D) neither country
According to new growth theory,
A) technological change is influenced by economic incentives.
B) centrally-planned economies are the most efficient.
C) growth in real GDP per capita occurs only if there are increasing returns.
D) economic growth is determined by forces outside the control of the market system.
Shares of stock and long-term debt, including corporate and government bonds and
bank loans, are bought and sold on
A) the stock market.
B) capital markets.
C) foreign exchange markets.
D) commodity markets.
If the GDP deflator is 142, by how much have prices changed since the base year?
A) Prices have increased by 42%.
B) Prices have increased by 142%.
C) Prices have decreased by 4.2%.
D) Prices have increased by 58%.
Examples of comparative advantage show how trade between two countries can make
each better off. Compared to their pre-trade positions, trade makes both countries better
off because in each country
A) total employment is greater.
B) total consumption of goods is greater.
C) wages are higher.
D) total welfare is greater.
Which of the following does not take place in the direct finance market?
A) Ownership in corporations is sold in the form of common stock.
B) Deposits from savers are accumulated and loans made to borrowers.
C) Ownership in corporations is sold in the form of preferred stock.
D) Corporate bonds are sold to savers.
When groups of mortgages are bundled together by financial institutions and sold to
investors, these institutions are said to be ________ mortgage loans.
A) securitizing
B) underwriting
C) liquidating
D) harvesting
A decrease in the price level will
A) shift the short-run aggregate supply curve to the left.
B) shift the short-run aggregate supply curve to the right.
C) move the economy up along a stationary short-run aggregate supply curve.
D) move the economy down along a stationary short-run aggregate supply curve.
Figure 4-5
Figure 4-5 shows the market for apartments in Bay City. Recently, the government
imposed a rent ceiling at R0.
Refer to Figure 4-5. Suppose that instead of a price ceiling, the government imposed a
price floor of R1. What area represents the deadweight loss after the imposition of the
price floor?
A) G + H
B) J + H
C) C + E + J + H
D) C + E
The health care system in ________ is referred to as socialized medicine, under which
the government owns most of the hospitals and employs most of the doctors.
A) Canada
B) Japan
C) the United Kingdom
D) the United States
Which of the following statements is true about the U.S. economy?
A) Each year, many new jobs are created, but few existing jobs are destroyed, and the
unemployed find jobs quickly.
B) Each year, few new jobs are created, but few existing jobs are destroyed, keeping
unemployment low.
C) Each year, many new jobs are created and many existing jobs are destroyed.
D) Each year few jobs are created, and therefore it takes the unemployed a long time to
find a new job.