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The real-nominal principle can be stated as
A) production generates income.
B) only final goods and services should be counted in GDP.
C) what matters to people is the purchasing power of money or income.
D) only the manufacture of real goods is production.
In 1929-1933, the U.S. experienced unemployment rates exceeding ________.
A) 25 percent
B) 33 percent
C) 50 percent
D) 90 percent
Historical economic research shows that the accumulated investment in human capital
during the last 300 years has produced:
A) taller workers.
B) heavier workers.
C) more productive workers.
D) all of the above
If the actual unemployment rate is above the natural rate, we would expect that:
A) the inflation rate is zero.
B) the inflation rate is constant.
C) the inflation rate is increasing.
D) the inflation rate is decreasing.
The classical aggregate supply curve is:
A) horizontal.
B) downward sloping.
C) vertical.
D) upward sloping.
Refer to Figure 19.3. At the exchange rate of 120 yen per dollar, the United States is
experiencing a
A) current account surplus.
B) balance of payments deficit.
C) capital account deficit.
D) balance of payments surplus.
The Kennedy administration was not concerned about the possible negative effect of
large tax cuts because:
A) the tax cuts were initially designed to be temporary.
B) the assassination of President Kennedy became a much more serious issue.
C) the ensuing federal deficit would disappear as government programs would be cut
too.
D) the ensuing federal deficit was projected to disappear as higher tax revenues would
follow from faster GDP growth.
Monetizing the budget deficit
A) leads to increases in the money supply.
B) creates a full-employment deficit that exceeds the actual deficit.
C) occurs when the Treasury sells bonds to businesses.
D) helps stabilize the economy.
When the Fed lowers the required reserve ratio, the money supply ________ and banks'
reserves ________.
A) remains constant; decrease
B) decreases; decrease
C) increases; remain constant
D) increases; increase
A "menu cost" is the cost associated with:
A) changing price lists when there is inflation.
B) trying to reduce holdings of cash.
C) designing a new menu for a restaurant.
D) buying new shoes.
Recall the Application about the government of Mexico City repainting highway lane
lines to transform a 4-lane highway into a 6-lane highway to answer the following
question(s).
If the government converted the highway from 4 lanes into 6 lanes, then using the
midpoint method, the percentage increase would have been ________ percent. If the
government converted the highway from 6 lanes into 4 lanes, then using the midpoint
method, the percentage increase would have been ________ percent.
A) 40; 40
B) 33; 50
C) 100; 50
D) 33;33
Which of the following is a function of the Federal Reserve?
A) to act as a lender of last resort
B) conduct monetary policy
C) supply currency to the economy
D) All of the above are correct.
