Excess reserves in a bank are the difference between required reserves and the bank’s
total net worth.
When prices rise, increases in real income are greater than increases in nominal income.
The notion of opportunity cost allows the measurement of tradeoffs.
If cash is deposited into a checking account, the supply of money increases.
When the public expects inflation, real and nominal interest rates will differ because
inflation needs to be accounted for in calculating the real return from lending and
borrowing.
The nation’s total federal debt represents the total of all accumulated deficits minus
surpluses over time.
Human capital increases when the economy experiences a higher birth rate.
If the income from investments abroad and net transfer payments are negligible, the
current account becomes equivalent to a country’s net exports.
In the long run, the level of output depends on the price level.
When people in different countries (with different currencies) buy from and sell to each
other, an exchange of currencies almost always also take place.
The interest rate determines the present value of a future payment.
Figure 15.5
Refer to Figure 15.5. If the unemployment rate is below the natural rate, the effect on
the money market is represented by movement from point ________ to point ________.
A) d;
B) a; c
C) a; d
D) ; c
Figure 9.5 Refer to Figure 9.5. Suppose the economy is a point B. A large ________ in
the price level will move the economy to ________.
A) decrease; point C
B) decrease; AS1
C) decrease; point A
D) decrease; AS0
When money is accepted as payment for a good or service, it is being used as a
A) medium of exchange.
B) store of value.
C) unit of account.
D) a mechanism for transforming current purchases into future purchases.
When you need to know how to get from San Francisco to New York, which of the
following details regarding reality are deemed not important and are usually assumed to
not be included in your map?
A) the temperature while you travel
B) the number of lanes on the freeway
C) the number of cars on the freeway
D) All of the above are deemed unimportant and are assumed as not included in your
map.
Suppose that an economy is experiencing continuously rising prices. If 2000 is the base
year, then the real GDP in 2009 is ________ the nominal GDP.
A) less than
B) equal to
C) greater than
D) There is insufficient information to answer this question.
Table 11.1 Refer to Table 11.1. The equation for the aggregate consumption function is:
A) C = 80 + 0.85Y.
B) C = 80 + 0.65Y.
C) C = 80 + 0.75Y.
D) C = -80 + 0.45Y.
Figure 4.3
Figure 4.3 illustrates the supply and demand for blue jeans. If the actual price of blue
jeans is $50, we would expect the price of blue jeans to ________, the quantity
demanded of blue jeans to ________, and the quantity supplied of blue jeans to
________.
A) increase; increase; increase
B) increase; decrease; increase
C) decrease; increase; decrease
D) decrease; decrease; increase
Do most infant industries become as efficient as their international competition?
A) No. This rarely happens.
B) Yes, but only if they get very large protection.
C) Yes, it always happens.
D) Yes, but only after decades of protection.
Suppose the United States is experiencing a balance of payments surplus. To prevent
the exchange rate from appreciating, the U.S. Treasury must
A) sell foreign currency and buy dollars.
B) sell dollars and buy foreign currency.
C) sell both dollars and foreign currency.
D) buy both dollars and foreign currency.
If the flat tax is 27 percent, a person who makes $3000 a month will have an income net
of taxes equal to ________ a month.
A) $2190
B) $2730
C) $270
D) $810
If real salaries increase but nominal salaries do not, this means that:
A) the purchasing power of money has decreased.
B) prices have not changed.
C) prices have risen.
D) prices have fallen.
According to economic studies, the 2001 tax rebates under the presidency of G. W.
Bush did not increase aggregate demand because:
A) the tax rebates were not large enough to have a significant impact on aggregate
demand.
B) consumers saved, instead of spending, the rebates.
C) the Republican-controlled Congress rolled back the tax rebates the following year.
D) the cost of the war in Iraq required an immediate increase in taxes.
When a specialized worker gains insights into a particular task that leads to better
production methods, this is called
A) continuity.
B) innovation.
C) specialization.
D) repetition.
How can governments intervene in trade?
A) by producing cheaper products
B) by helping reduce economic uncertainty
C) by not buying products from competing countries
D) all of the above
Based on growth accounting, which of the following would not cause an increase in
output?
A) an increase in employment
B) an increase in the capital stock
C) an increase in the number of hours worked
D) an increase in interest rates
The permanent income view of consumption spending postulate that households base
their spending on:
A) their average long-run income.
B) their highest level of income.
C) their current income.
D) future income.
What type of fiscal policy will lead to crowding out in the long run?
In an open economy with government spending, derive the formula for equilibrium
output.
Explain the arguments against monetary policy targeting only the inflation rate.
Explain why real GDP is a more reliable estimate of economic growth than nominal
gdp.
What countries are members of the DR-CAFTA?
Rank (from 1 to 4) the following categories of federal revenue from larger (1) to
smaller (4): ( ) Corporate income taxes
( ) Social Security taxes
( ) Individual income taxes
( ) Estate and gift taxes
Can the basic real business cycle model explain unemployment? Explain.
Can the government experience a deficit yet experience a declining debt to GDP ratio?
Explain.