Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
A product produced in a foreign country and purchase by residents of the home country
is an import.
The opportunity cost of a table is 5 chairs in nation A and 1 chair in nation B. If the
nations specialize and trade, an acceptable terms of trade for both nations would be 3
chairs per table.
The Argentine financial crisis of 2002 was due to the prevalence of hyperinflation in
Argentina at that time.
In fiscal policy, the outside lag are shorter than the inside lag.
A budget deficit causes the national debt to fall.
Financial intermediaries help savers provide funds to investors.
When people expect inflation, they assume that prices are going to increase at a certain
rate and factor this into their decision making.
An asset that is difficult to convert into money is considered a liquid asset.
An exchange rate system in which governments try to keep currency values from
fluctuating against one another is a fixed exchange rate system.
Microeconomics is the branch of economics that helps explain economic fluctuations,
why the economy shrinks and expands and why some of the economy's resources are
idle.
The multiplier is always larger than one.
The unemployment rate is the ratio of the number of people unemployed to the total
population 16 years of age or older.
During an economic boom, output exceeds potential output.
Figure 9.3 Refer to Figure 9.3. Suppose the economy is at Point A, an increase in the
price level moves the economy in the short run to Point:
A) E.
B) D.
C) B.
D) C.
Generally, when the Federal Reserve lowers interest rates, investment spending
________ and GDP ________.
A) increases; decreases
B) increases; increases
C) decreases; decreases
D) decreases; increases
In developing countries, economists have found ________ correlation between a
person's height and the wages he can earn in the farming sector.
A) a weak
B) a strong
C) an inverse
D) no
Economic growth allows a society to consume:
A) more goods per person.
B) a higher quality of goods.
C) a wider variety of goods.
D) all of the above
Special taxes levied on earnings for Social Security and Medicare are called
A) withholding tax on wages.
B) social insurance tax.
C) unfair tax on low-income families.
D) an exception tax for corporations.
Which of the following cannot be true when it is observed that government spending is
causing crowding out?
A) The government spending is decreasing.
B) The investment spending is decreasing.
C) The consumption spending is decreasing.
D) The net exports spending is decreasing.
The law of demand can be defined as:
A) a lot of people wanting the same thing.
B) the higher the price, the smaller the quantity demanded, ceteris paribus.
C) people are willing to make limited sacrifices to acquire products.
D) none of the above.
A large government debt can reduce the amount of ________ in an economy and reduce
future income and real wages for citizens.
A) employment
B) capital
C) government spending
D) social benefit programs
Table 5.4
Refer to Table 5.4. Suppose this economy produces only the two goods X and Y.
Nominal GDP in year 1 is:
A) $230.
B) $296.
C) $360.
D) $448.
Assume that GDP = $10,000 and the MPC = 0.75. If policy makers want to increase
GDP by 30 percent, by how much should they increase government spending?
A) $300
B) $750
C) $1,000
D) $3,000
Recall Application 2, "Economic Solution to Spam," to answer the following questions:
According to the application, one economic solution to spam is to:
A) subsidize spammers.
B) charge a $0.01 electronic stamp for each commercial email message.
C) outlaw the use of the Internet.
D) require Internet service providers to sue spammers.
Table 6.4
Refer to Table 6.4. The unemployment rate rate equals:
A) 3.1%.
B) 66.6%.
C) 3.7%.
D) 83.5%.
The profit from British Airways production in the U.S. is included in the British
________ and in the U.S. ________.
A) GDP; GDP
B) GNP; GNP
C) GNP; GDP
D) GDP; GNP
The ability of one person or nation to produce a good at a lower resource cost than
another is called a(n):
A) market advantage.
B) comparative advantage.
C) absolute advantage.
D) specialization advantage.
Explain why policymakers would want to increase the saving rate if they are concerned
about economic growth.
What is the difference between a government budget deficit and government debt?
Describe the three broad categories of the U.S. budget.
What is crowding in?
Name two policies that a Keynesian economist would advocate to influence the level of
GDP in the short run.
In what sense is frictional unemployment "good" for the economy?
What is the law of one price?
