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According to the Application, moving from a country with relatively weak civil liberties
to one with relatively strong civil liberties, the economic rate of return on World Bank
development projects
A) increases by about 15 percentage points.
B) more than triples.
C) decreases by more than 20 percent.
D) is not noticeably changed.
Recall the Application about the number of homeowners in the year 2012 who owed
more on their homes than their homes were worth to answer the following question(s).
To assist homeowners who are behind on their payments and may eventually lose their
homes to foreclosure, many in Congress have advocated for reduction on the amount of
money they actually owe€or principal reduction. The hope is that with a reduction in
the amount they owed they would start making timely payments on their mortgages and
avoid a messy default.Recall the Application. Assume that immediately before the
housing bubble burst, you purchased a $250,000 home and took out a $225,000
mortgage to make the purchase. When the bubble burst, the value of your home fell by
20 percent. The value of the home is now ________ and you owe the mortgage
company ________.
A) $200,000; $225,000
B) $180,000; $225,000
C) $200,000; $180,000
D) $180,000; $200,000
Recall Application 6, "Culture, Evolution, and Economic Growth," to answer the
following questions:
According to the application, the research of Galor and Moav concluded that the
sources of evolution was genetic because:
A) they found that families with fewer children invested more in their human capital.
B) they found that richer families had a longer life expectancy.
C) poorer families were more determined to succeed than those in richer families.
D) the family tree of most successful individuals in England could be traced back to the
royal family.
Figure 15.3
Refer to Figure 15.3. At full employment equilibrium, investment would decrease from
$15 billion to $10 billion if:
A) the government increases government expenditures.
B) the Fed increases the money supply.
C) the government reduces government expenditures.
D) the government increases net taxes.
Suppose the economy is at full employment. An increase in the money supply will
________ in the short run and ________ in the long run.
A) increase investment, leave investment unchanged
B) decrease investment, decrease investment
C) increase investment, increase investment
D) leave investment unchanged, leave investment unchanged
The required reserve ratio is 10%. The money multiplier is:
A) 0.1.
B) 1.
C) 9.
D) 10.
Recall the Application about the impact of the federal Disability Insurance
program on the unemployment rate to answer the following question. Recall the
Application. Assume 5,000 unemployed workers left the workforce to participate in the
federal Disability Insurance program, leaving the size of the labor force at 195,000. If
13,000 workers remain unemployed and in the labor force, what was the unemployment
rate before and after the 5,000 unemployed workers left the workforce?
A) 9.0 percent; 6.7 percent
B) 6.5 percent; 2.3 percent
C) 12.8 percent; 4.3 percent
D) 38.5 percent; 27.8 percent
The accelerator theory refers to the effects of:
A) interest rates on investment.
B) expected output growth on investment.
C) the money supply on inflation.
D) wages on inflation.
When gross domestic product (GDP) is adjusted by adding any income earned abroad
by U.S. firms or residents which is sent back to the United States and by subtracting
any income earned in the United States by non-U.S. corporations or foreign nationals
which is sent back to their home countries, it is called
A) depreciation.
B) subsidized income.
C) international GDP.
D) gross national product (GNP).
Expenditures on which of the following would not be counted in private investment
expenditure?
A) new housing
B) new factories
C) stocks and bonds
D) inventory changes
Recall Application 1, "Don't Forget the Costs of Time and Invested Funds," to
answer the following questions.
According to the Application, the opportunity cost of your time should be ________ the
opportunity cost of your invested funds.
A) added to
B) subtracted from
C) multiplied with
D) divided by
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 that:
A) demand will increase until quantity demanded equals quantity supplied.
B) supply will decrease until quantity demanded equals quantity supplied.
C) price will decrease until quantity demanded equals quantity supplied.
D) no change will occur since the market is in equilibrium.
Figure 4.6
Figure 4.6 illustrates a set of supply and demand curves for a product. When the
economy moves from point B to point C, there has been:
A) a decrease in supply and a decrease in demand.
B) a decrease in supply and a decrease in quantity demanded.
C) a decrease in quantity supplied and a decrease in demand.
D) a decrease in quantity supplied and a decrease in quantity demanded.
Which of the following types of workers might have wages that change quickly?
A) unskilled, low-wage workers
B) union workers
C) employees of state and local governments
D) movie stars and rock stars
