The price of a stock is equal to the present value of expected future dividend payments.
A restriction on imports is likely to reduce further restrictions on trade.
Higher tax rates lower the value of the spending multiplier and make the economy more
susceptible to shocks.
When interest rates fall, the present value of a given payment in the future increases.
Talking about alternatives is the first step in a process that helps us make better choices
about how we use our resources.
The costs of unemployment are limited to only financial costs.
An individual using rational expectations can make unsystematic errors in predicting
inflation in the future if some information available is incorrect.
An increase in U.S. interest rates, holding Canadian interest rates unchanged, will cause
the U.S. dollar to appreciate against the Canadian dollar.
Innovation and incentives to come up with new products and production methods are
stifled in larger markets.
Classical economists believe that prices are generally sticky.
The Obama stimulus package was implemented to assist the economy in its recovery
from recession. This package was designed to shift
A) aggregate demand to the right.
B) aggregate demand to the left.
C) aggregate supply to the left.
D) aggregate demand and aggregate supply to the left.
Suppose that GDP is 65 billion in 2012 and consumption expenditures is 30 billion. If
the government purchases are 20 billion and the net exports are neither in surplus or
deficit, then how much is investment expenditures?
A) 15 billion
B) zero
C) 80 billion
D) 35 billion
Suppose that growth in output that can be attributed to growth in labor and capital is
3%. If output grows at a rate of 5%, it must be the case that:
A) growth in labor exceeds growth in capital.
B) growth in capital exceeds growth in labor.
C) both labor and capital are becoming more productive.
D) the economy is not spending enough on acquiring human capital.
Recall the Application about the decrease in price of illegal drugs in the United
States to answer the following question(s). Recall the Application. If the decrease in
price of illegal drugs is due to equal changes in demand and supply, the equilibrium
quantity of drugs
A) will increase.
B) will decrease.
C) will not change.
D) may or may not change.
An increase in the income tax rate ________ the value of the tax multiplier.
A) has no effect on
B) may increase or decrease
C) increases
D) decreases
People who are currently not working but are actively looking for work are officially
classified as
A) unemployed and in the labor force.
B) unemployed and out of the labor force.
C) employed and in the labor force.
D) employed and out of the labor force.
Which of the following is considered as the largest fiscal policy in U.S. history?
A) the $787 billion economic stimulus package in 2009
B) the New Deal in 1933
C) the 2001 economic stimulus package in 2001
D) the 1992 expansionary stimulus package proposed by President Clinton in 1993
Sally works 10 hours a week, but would not prefer to work more hours. According to
the BLS, Sally is classified as:
A) employed and “an individual working part time for economic reasons.”
B) unemployed and “an individual working part time for economic reasons.”
C) employed but not “an individual working part time for economic reasons.”
D) a discouraged worker.
An individual or country that has a comparative advantage in the production of one
good:
A) must have an absolute advantage in the good’s production.
B) must not have an absolute advantage in the good’s production.
C) may or may not have an absolute advantage in the good’s production.
D) must not have an absolute advantage in the production of the other good.
Scenario 12.1: Jennifer has decided to give up her pack-a-day smoking habit and invest
the money she would have spent on cigarettes in a retirement account. At $6.00 a pack,
Jennifer is currently spending $2,190 per year on cigarettes. Jennifer is 25 years old and
plans to retire in 35 years, at age 60. She has chosen a retirement account that will earn
a long-term average return of 5 percent per year. Jennifer is currently earning $40,000
annually. Assume that the average annual inflation rate will be 5 percent per year, that
the cost of cigarettes will increase with inflation, and that Jennifer’s income will also
rise with the inflation rate.Refer to Scenario 12.1 At the assumed annual inflation rate
of 5 percent, approximately how much will the $6.00 pack of cigarettes cost in 30
years, when Jennifer reaches the retirement age of 60?
A) $16
B) $21
C) $33
D) $47
Which of the following is an example of a final good or service?
A) wheat a bakery purchases to make bread
B) coffee beans Starbucks purchases to make coffee
C) lumber purchased by a construction company to be used in building houses
D) a tractor purchased by a farmer to cultivate his farm
If the nominal minimum wage is unchanged while prices rise, then the real minimum
wage:
A) rises.
B) declines.
C) stays the same.
D) is unaffected.
Daily Output of Scotland and Poland
Table 18.1 Refer to Table 18.1. Poland has a
comparative advantage in:
A) accordions.
B) bagpipes.
C) both accordions and bagpipes.
D) neither accordions nor bagpipes.
The Keynesian aggregate supply curve is:
A) horizontal.
B) vertical.
C) downward sloping.
D) upward sloping.
Recall Application 4, “Fertilizer and Crop Yields” to answer the following
questions:
As bags of nitrogen applied went from 0 to 1 to 2 to 3 to 4, crop yield went from 85 to
120 to 135 to 144 to 147 bushels per acre or production exhibited:
A) increasing returns to fertilizer.
B) constant returns to land.
C) diminishing returns to fertilizer.
D) decreasing returns to land.
Recall the Application about the factors involved in causing recessions, and the causes
of recessions in the United States from 1893 to 1990 to answer the following
question(s).
According to this Application, the recessions in 1973 and 1979 were caused by
A) supply shocks.
B) deflation.
C) foreign monetary developments.
D) arbitrage losses in the foreign exchange market.
From the application, if the industrial revolution occurred right around the time of the
bubonic plague, then we would expect to see the real wage rate of laborers in England
to be:
A) lower than what was observed during that period.
B) higher than what was observed during that period.
C) the same with what was observed during that period.
D) continuously falling during that period.
Assume that the consumption function is C = 200 + 0.8Y. The value of the point at
which the consumption function intersects the C axis is:
A) 200.
B) 300.
C) 400.
D) 500.
From 1970-2011, investment as a share of GDP was highest in ________ when it was at
________ percent.
A) 2000; 18
B) 2001; 7
C) 1975; 10
D) 2011; 14
When the quantity of a product demanded by buyers equals the quantity supplied, it is
called ________.
Using aggregate supply and aggregate demand curves, indicate the impact of an
increase in the money supply on the price level and on the equilibrium level of real
GDP in the short run.
Explain what would happen to the labor supply and the potential output if workers in
Germany decide to take fewer vacation days.
Once a problem has been diagnosed, it takes time for the government to take action.
This is because any changes in taxes or government spending require approval from
both houses of Congress and the president.
List four things considered to be shortcomings in the determination of GDP in relation
to the use of GDP as a measure of welfare..
Explain how an open market sale will affect bond prices.