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In February 2009, Congress passed (and President Obama signed) a $787 billion fiscal
stimulus bill in an attempt to improve the economy.
a. True
b. False
When the Federal Open Market Committee (FOMC) votes on policy, they do so
a. in the following order: the chair, the vice chair, the remaining FOMC members in
alphabetical order.
b. in order based on seniority at the Fed.
c. in the following order: the chair, the vice chair, the remaining FOMC members by
seniority at the Fed.
d. in alphabetical order.
As the dollar appreciates, the foreign price of United States goods ______________,
ultimately shifting the United States AD curve ________________.
a. rises; rightward
b. rises; leftward
c. falls; rightward
d. falls; leftward
A subprime mortgage loan is a loan granted to persons who
a. have unusually good credit ratings and who represent a very low risk of default on
the debt repayment.
b. are borrowing funds to purchase a business, rather than a home.
c. might have low credit ratings or some other factors that lead lenders to believe that
they could default on the debt repayment.
d. work for the government, rather than those who work in the private sector.
On a supply-and-demand diagram, consider a price for which the horizontal distance to
the supply curve exceeds the horizontal distance to the demand curve. There is a
__________ at that price and the current price must be __________ the equilibrium
price.
a. shortage; above
b. shortage; below
c. surplus; above
d. surplus; below
When Milton Friedman said that inflation is always and everywhere a monetary
phenomenon, he was referring to
a. one-shot inflation
b. supply-induced inflation
c. continued inflation
d. hyperinflation (high rates of inflation)
e. all kinds of inflation
A monetarist would argue that
a. small changes in M could be offset by changes in V and not cause changes in P.
b. changes in M in the short run can cause Real GDP to fall.
c. prices and wages are flexible.
d. b and c
e. a, b and c
Suppose that in a certain nation the flat income tax rate of 40 percent is reduced to 35
percent and as a result the tax base rises from $400 billion to $600 billion. As a result,
ax revenues __________, indicating the nation is on the __________ portion of its
Laffer curve.
a. rise; upward-sloping
b. rise; downward-sloping
c. fall; upward-sloping
d. fall; downward-sloping
Economist B believes that the economy can get stuck in a recessionary gap.This
economist most likely believes that
a. wages and prices are flexible.
b. wages and prices are inflexible downward.
c. government may need to enact contractionary fiscal policy to move the economy out
of a recessionary gap.
d. the economy is self-regulating.
e. none of the above
When the current state of the economy is such that Real GDP is equal to Natural Real
GDP, the economy is in____________________ .In this situation, the (actual)
unemployment rate is ___________ the natural unemployment rate, and there is
________________ in the labor market.
a. long-run equilibrium; equal to; equilibrium
b. inflationary; less than; a shortage
c. long-run equilibrium; greater than; equilibrium
d. recessionary; greater than; a surplus
e. recessionary; less than; equilibrium
Exhibit 6-2
How many persons are not in the labor force in year 2?
a. 200 million
b. 50 million
c. 75 million
d. 175 million
e. 100 million
An example of income earned but not received is
a. welfare payments.
b. Social Security payments.
c. undistributed profits.
d. a and b
e. a, b, and c
If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.007 = 1
yen, but currently the exchange rate is $0.009 = 1 yen, then with flexible exchange rates
the dollar price of a yen will __________, and the yen will __________.
a. increase; appreciate
b. decrease; appreciate
c. increase; depreciate
d. decrease; depreciate
During much of the 20th century, agricultural product prices
a. rose relative to other prices.
b. fell relative to other prices.
c. neither rose nor fell relative to other prices.
d. rose as agricultural productivity increased.
Consider a setting in which there is a negative externality, but no positive externality.It
follows that
a. the market outcome is inefficient.
b. the market outcome is efficient.
c. MSC > MPC
d. MPC > MSC
e. a and c
Good Y is an inferior good. If the average income of those who buy good Y rises, the
_____________ curve for good Y will shift ____________ resulting in a(n)
_____________ in the equilibrium price of Y and a(n) ____________ in the
equilibrium quantity of Y.
a. supply; rightward; decrease; increase.
b. demand; leftward; decrease; decrease
c. demand; rightward; increase; increase
d. supply; leftward; increase; decrease
e. supply; leftward; increase; increase
Some economists have found that U.S. imports of Chinese goods and resources
a. lower the price of goods for U.S. consumers.
b. lower the cost of inputs for U.S. firms.
c. increase the variety of products in U.S. markets.
d. may enhance productivity of U.S. firms.
e. all of the above
