An increase in the demand for labor means that
A) the demand for labor increases as a result of an increase in the real wage rate.
B) the demand for labor increases as a result of a decrease in the real wage rate.
C) the demand for labor increases at any real wage rate.
D) the supply of labor must also be increasing.
Which of the following represents an action by the Federal Reserve that is designed to
increase the money supply?
A) a decrease in the required reserve ratio
B) an increase in the discount rate
C) a decrease in federal tax rates
D) selling government bonds in the open market
In a graph where the interest rate is on the y-axis and the quantity of money is on the
x-axis, a money supply curve that is drawn as a vertical line implies that:
A) the money supply is independent of the interest rate.
B) the demand for money is independent of the interest rate.
C) the interest rate is independent of the quantity of money.
D) the money market is in equilibrium.
When a government must operate on a balanced budget, it means that there is no
________ or ________.
A) borrowing; printing of money
B) unemployment; special taxes
C) surplus; deficit
D) bonds being issued; purchased
The principle that the cost of something is equal to what is sacrificed to get it is known
as the
A) marginal principle.
B) principle of opportunity cost.
C) principle of diminishing returns.
D) reality principle.
In periods when GDP grows very rapidly for a long period, the actual unemployment
rate will be ________ than the natural rate of unemployment.
A) lower
B) higher
C) the same
D) more variable
Which of the following sources of revenue is used to fund government spending?
A) interest
B) taxation
C) corporate contributions
D) political party contributions
Financial intermediaries
A) increase the risks associated with investment.
B) reduce the costs associated with investment.
C) allow for a smaller volume of investment in the economy.
D) only provide services for the wealthy.
Fiscal policy affects aggregate demand because:
A) government purchases is a category of aggregate demand.
B) taxes affect corporate spending and so investment.
C) taxes affect disposable income and so consumption.
D) all of the above.
The U.S. experienced a recession in 2001 and 2007. During the period 2002-2006, the
U.S. economy was in a:
A) period of expansion.
B) peak.
C) trough.
D) recession.
Among the roles of the government in a market economy is to:
A) enforce property rights.
B) own the means of production.
C) determine what is produced.
D) all of the above
A example of a topic studied in the field of new growth is how incentives for ________
interact with the accumulation of physical capital.
A) research and development
B) new product development
C) international trade
D) all of the above
Suppose that consumption expenditures, investment expenditures, and government
purchases are 75 billion, 25 billion and 20 billion, respectively. If the GDP is 90 billion,
what is the net export?
A) -30 billion
B) zero
C) 20 billion
D) -25 billion
Assume that consumption is represented by the following: C = 200 + 0.9Y. Also assume
that planned investment (I) equals 300.
(a) Now, suppose the level of income is equal to 4,000. What is the level of aggregate
expenditures at this level of income? What is the value of any unplanned changes in
inventories?
(b) Given the information, calculate the equilibrium level of income.
(c) Given the information, calculate the level of consumption and saving that occurs at
the equilibrium level of income.
(d) Suppose planned investment falls by 100. Calculate the new level of equilibrium
income.
Under the Bretton Woods system, which country directly pegged its currency to gold?
A) the U.S.
B) Japan
C) the UK
D) Germany
Suppose the inflation rate is 2 percent this year. If nominal wages increase by 5 percent,
real wages will
A) decrease by 5 percent.
B) increase by 2 percent.
C) increase by 7 percent.
D) decrease by 3 percent.
Suppose after the semester ends, you take a trip to a tropical island. Upon arriving at the
island, you make a stop at one of the markets and notice that everyone is carrying
around jars full of little turtles. You also notice the person in line in front of you just
paid for a bottle of rum with 6 turtles. Someone else just bought a straw hat for two
turtles. Thinking back to your economics class (as painful as that may be), you would
conclude that
A) this is a barter economy.
B) those little turtles are serving as money.
C) turtles are valueless.
D) turtle soup is a delicacy.
The multiplier-accelerator model shows that:
A) a decrease in GDP causes a decrease in investment.
B) a decrease in investment causes a decrease in GDP.
C) a decrease in GDP causes a decrease in investment, which causes further drops in
GDP.
D) a decrease in GDP causes a decrease in investment, which causes an increase in
GDP.
Recall Application 2, “Do European Soccer Stars Change Clubs to Reduce Their
Taxes?” to answer the following questions:
Based on what you can infer from the Application, how does this increase in labor
mobility limit a government’s ability to raise?
A) Higher tax rates will discourage individuals from playing soccer.
B) Higher rates may encourage individuals to move, resulting in a larger tax revenue for
the government.
C) Higher rates may encourage individuals to move, resulting in a lower tax revenue for
the government.
D) Higher tax rates will encourage the outsourcing of jobs to countries with lower
taxes.