Recall Application 2, “Economic Equality May Sustain Economic Growth,” to answer
the following questions:
After reading the application, one can conclude that all countries that experience
economic growth also experience improved income equality.
If the unemployment rate is above the natural rate, we would expect that the inflation
rate will decrease.
Recall Application 3, “Is a VAT in our Future?” to answer the following questions.
Based on what you learned from the application, the VAT is a form of a flat tax.
Table 6.1
Refer to Table 6.1. The unemployment rate is:
A) 9.09%.
B) 18.5%.
C) 15.2%.
D) 22.7%.
Figure 14.6
Refer to Figure 14.6. The money supply curve will shift from to , if:
A) the Fed increases the reserve requirement.
B) the price level increases.
C) the equilibrium level of output decreases.
D) the Fed buys U.S. government bonds in the open market.
In a market system, prices:
A) signal the relative scarcity of a product.
B) are unfair.
C) are too high.
D) all of the above.
What is the best measure of the value of output of an economy?
A) GDP
B) GNP
C) NNP
D) the GDP deflator
Nancy and Melissa both have broken light fixtures in their living rooms. Nancy opts to
hire an electrician, while Melissa spends two hours replacing the fixture herself. Which
of the following is a possible explanation of this behavior?
A) Nancy dislikes electrical work more than Melissa.
B) Melissa is better at doing electrical work than Nancy.
C) The opportunity cost of Nancy’s time is higher than her cost to hire an electrician.
D) All of the above are possible explanations of this behavior.
Money is:
A) neutral in the long run only.
B) neutral in both the short run and in the long run.
C) neutral in the short run only.
D) never neutral.
Gross domestic product measured in terms of the prices of a fixed, or base, year is
called:
A) current GDP.
B) base GDP.
C) real GDP.
D) nominal GDP.
Scenario 1: Imagine that an economy produces two goods, flashlights and fishing lures.
In 2011, the economy produced 70 flashlights and 40 fishing lures, and the prices of
flashlights and fishing lures were $5 and $12, respectively. In 2012, the economy
produced 85 flashlights and 50 fishing lures, and the prices of flashlights and fishing
lures were $7 and $15, respectively.Based on the information in Scenario 1, nominal
GDP grew by about ________ percent from 2011 to 2012.
A) 23
B) 31
C) 62
D) 162
Which of the following serves as the central bank for the United States?
A) the Federal Reserve System
B) the Treasury Department
C) the Federal Deposit Insurance Corporation
D) the Congress
In the United States, estimates of the natural rate of unemployment in recent years have
varied between
A) 0 percent and 4 percent.
B) 0 percent and 2 percent.
C) 2 percent and 4 percent.
D) 5 percent and 6.5 percent.
If each additional worker hired contributes less to total output, then:
A) total output will fall if an extra worker is hired.
B) economies of scale are present.
C) diminishing returns are occurring.
D) none of the above
“Crowding in” refers to
A) an increase of investment caused by an increase in government spending.
B) a decrease in investment caused by an increase in government spending.
C) an increase in investment caused by a decrease in government spending.
D) a decrease in investment caused by a decrease in government spending.
When we study the effect of how a beer tax may decrease the number of highway
deaths, we use microeconomics to:
A) better understand how markets work.
B) make personal or managerial decisions.
C) evaluate the merits of public officials.
D) A and C are correct.
Imagine that an upward sloping line is depicted in a graph with income per week on the
y-axis and hours worked per week on the x-axis. From the graph, we can conclude that:
A) income and hours worked are negatively related.
B) income and hours worked per week are positively related.
C) hours worked are not related.
D) income and hours worked are equal.
A U.S. firm builds a factory in South Africa. This will be entered as a:
A) negative in the U.S. financial account.
B) negative in the U.S. current account.
C) positive in the U.S. financial account.
D) positive in the U.S. current account.
Table 5.4
Refer to Table 5.4. Suppose this economy produces only the two goods X and Y.
Nominal GDP in year 2 is:
A) $296.
B) $360.
C) $448.
D) $497.
Which of the following is a federal and state health program that benefits the elderly?
A) Defense
B) Social Security
C) Medicare
D) Medicaid