When it comes to pollution, economists believe that the government must:
A) allow firms to pollute as long as they bear the full cost of their pollution.
B) never allow pollution to exist.
C) allow firms to pollute as long as the benefits of pollution is positive.
D) allow pollution to exist unabated.
A decrease in the required reserve ratio:
A) will increase the money supply.
B) will decrease the money supply.
C) will not change the money supply.
D) will decrease the discount rate.
Table 3.1
Table 3.1 illustrates Willy and Blythe’s hourly production for apples and carrots. Based
on the table, Blythe’s opportunity cost of 1 carrot is:
A) 3 apples.
B) 4 apples.
C) 6 apples.
D) 1.5 apples.
Imposing an employment tax leads to
A) more employment.
B) decreased potential output in the economy.
C) greater demand for labor.
D) a decreased supply of labor.
When employees demand higher wages as a result of price increases which were caused
by higher wages being paid by companies, it is called
A) economic inflation.
B) the wage-price spiral.
C) out of kilter fiscal policies.
D) a recession.
Recall the Application about Fed Chairman Ben Bernanke’s views on how to fight a
liquidity trap to answer the following question(s).
According to the Application, future Fed Chairman Ben Bernanke criticized the Bank of
Japan for not taking strong enough action when their interest rates fell close to zero.
Bernanke argued that the Bank of Japan should have made substantial purchases of
________ and also publicly commit to ________ inflation.
A) long-term bonds; increasing
B) long-term bonds; decreasing
C) short-term bonds; increasing
D) short-term bonds; decreasing
In making accurate comparisons of GDP across countries, it is important to take
differences in ________ into account.
A) population size
B) the average age of the population
C) family size
D) all of the above
Recall Application 4, “The Locomotive Effect: Why Do Foreign Demand Affects a
Country’s Output,” to answer the following questions:
According to the application, what took over the U.S.’s role as the locomotive for global
growth in 2007 when the U.S. economy was slowing down?
A) growth in other parts of the world such as China and India
B) growth in other parts of the world such as Japan
C) growth in other parts of the world such as Zimbabwe and Somalia
D) a higher price of oil worldwide
Suppose the government runs a budget surplus in a given year. It can reduce its overall
federal debt by
A) not buying anything on credit.
B) buying back bonds it sold to the public.
C) forcing a change in net exports.
D) increasing taxes on luxury items.
If Julie expects that her salary will increase by 10 percent per year, how many years will
it take for her salary to double?
A) 5
B) 10
C) 7
D) 20
The consumption function describes the relationship between consumption
expenditures and:
A) the level of income.
B) the level of prices.
C) the level of the interest rates.
D) the rate of growth of GDP.
Recall Application 1, “Shifts in the Natural Rate of Unemployment,” to answer the
following questions:
According to the application, William Dickens estimated that the natural rate of
unemployment since the 1990s has been:
A) 7 percent.
B) 6 percent.
C) 5 percent.
D) 4 percent.
During an economic boom
A) the level of unemployment tends to be high.
B) it is difficult for firms to recruit and retain workers.
C) firms have an easier time purchasing raw materials.
D) prices tend to decrease over time.
Recall Application 7, “Lack of Property Rights Hinders Growth in Peru,” to answer the
following questions:
According to the application, the inability of households to switch production to highly
profitable goods such as palm oil is made difficult by the:
A) lack of available credit.
B) how price of palm oil.
C) high export taxes on palm oil.
D) lack of land to grow the palms.
When a supply curve is drawn, which of the following is held constant?
A) the amount of taxes or subsidies that a firm pays or receives
B) the number of sellers in a market
C) prices of inputs
D) All of the above are held constant when constructing a supply curve.