The real business cycle theory holds that the business cycle
a. originates as a result of factors affecting aggregate supply.
b. originates as a result of factors affecting aggregate demand.
c. is the result of correctly anticipated policies.
d. is the result of incorrectly anticipated policies.
Country X has a high unemployment rate. It follows that country X is operating
a. beyond its production possibilities frontier (PPF).
b. on its PPF.
c. inside (below) its PPF.
d. at a productive efficient point.
e. b and d
In the prisoner’s dilemma setting for stealing and producing, both participants end up
__________, which turns out to be ________________________ stolen.The
government _________ make both participants better off by changing the payoff
matrix.
a. stealing; better for them than if they had both not; can
b. stealing; worse for them than if they had both not; can
c. not stealing; better for them than if they had both; cannot
d. not stealing; worse for them than if they had both; cannot
Exhibit 34-2
The U.S. demand and supply for a good are shown. Under a policy of free trade, the
world price is PW. If there is a policy change such that imports are prohibited, the price
becomes PN. U.S. producers are better off if imports are __________; specifically, their
producers’ surplus changes by area __________.
a. permitted; PWDE
b. permitted; PN BDPW
c. prohibited; BDC
d. prohibited; PNBDPW
If the law of increasing opportunity costs is operable, and currently the opportunity cost
of producing the 101st unit of good X is 5Y, then the opportunity cost of producing the
201st unit of good is X is most likely to be
a. less than 5Y.
b. more than 1/5Y but less than 5Y.
c. more than 5Y
d. less than 1/5Y but more than zero.
Exhibit 8-1
Assume that the economy is originally in equilibrium at point A.If businesses become
more optimistic about future sales, at which point is the economy most likely to end up
in the short run?
a. A
b. B
c. C
d. D
A change in the quantity demanded of Real GDP is graphically represented as a
a. shift in the AD curve.
b. movement from one point on the AD curve to another point on the same curve.
c. movement from a point on the AD curve to a point on the SRAS curve.
d. shift in the real balance effect curve.
e. shift in the interest rate effect curve.
The _______________________ (TARP) is an example of a government program
created to help stabilize the financial sector during the financial crisis of 2007-2009.
a. Times Are Really Problematic
b. Tarnished Assets Recovery Program
c. Troubled Assessments Recovery Program
d. Troubled Assets Relief Program
In the simple Keynesian model, a rightward shift in the aggregate demand curve
__________ result in a change in the price level when the economy is in the horizontal
segment of the AS curve and ___________ result in a change in the price level if the
economy is in the vertical segment of the AS curve.
a. will not; will
b. will not; will not
c. will; will not
d. will; will
The Board of Governors of the Federal Reserve serves on a larger policy-making group
called the House Banking Committee.
a. True
b. False
Which of the following statements is false?
a. Currency is money, but money is more than just currency.
b. M1 is a component of M2.
c. Retail money market mutual funds are part of M2, but institutional money market
mutual funds are not.
d. Credit cards are money since they are widely accepted for purposes of exchange.
e. Money reduces the transaction costs of making exchanges.