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A movement along the aggregate demand curve is caused by a(n):
A) change in the aggregate price level.
B) increase in consumer spending.
C) fall in commodity prices.
D) reduction in government spending.
It is certain that the equilibrium quantity will fall when:
A) the supply curve and the demand curve both shift to the right.
B) the supply curve shifts to the right and the demand curve shifts to the left.
C) the supply curve shifts to the left and demand shifts to the right.
D) supply shifts to the left and demand stays the same.
When the demand for labor is falling and employers have committed to high wages,
_____ unemployment will result.
A) frictional
B) cyclical
C) permanent
D) structural
People pay a cost for holding money instead of nonmonetary assets such as Treasury
bills.
A) True
B) False
Florida schools offered cash bonuses to students who scored high on the state's
standardized exams. The cash bonuses are an example of this economic principle:
A) Resources are scarce.
B) The real cost of something is what you must give up to get it.
C) There are gains from trade.
D) People usually take advantage of opportunities to make themselves better off.
The government's budget deficit increases, and at the same time the trade deficit grows.
This will lead to a(n) _____ in the demand and a(n) _____ in the supply of loanable
funds in domestic markets.
A) increase; decrease
B) decrease; decrease
C) increase; increase
D) decrease; increase
If a contraction in aggregate demand causes a recession, the Great Moderation
consensus on macroeconomics suggests that:
A) fiscal discipline with a balanced budget eventually stimulates aggregate demand.
B) fiscal policy should take the leading role in economic stabilization.
C) the use of discretionary fiscal policy is counterproductive except in special
circumstances.
D) monetary discipline with a reduction in the money supply eventually stimulates
aggregate demand.
Figure: Tom's Production Possibilities
Look at the figure Tom's Production Possibilities. The opportunity cost for Tom to move
from point C on the curve to point A is:
A) 10 coconuts.
B) 30 fish.
C) 5 coconuts.
D) There is no opportunity cost.
Look at the table Combinations of Unemployment and Inflation. Which of the
following combinations could lie on the same long-run Phillips curve?
A) W and Z
B) W and Y
C) X and Z
D) X and Y
In a credit crunch:
A) interest rates are so low that savers decrease the quantity of available loanable funds.
B) borrowers are forced to pay very high interest rates or may not be able to borrow at
all.
C) unemployment is usually very low and the growth rate of output is very high.
D) the spread becomes negative.
Opportunity cost is:
A) about half of the monetary cost of a product.
B) the dollar payment for a product.
C) the benefit derived from a product.
D) the value of the best alternative forgone in making any choice.
Suppose that Jim just got a $20,000 loan from his credit union to buy a new car. The
loan is a _____ for Jim and a _____ for the credit union.
A) financial asset; physical asset
B) financial asset; financial asset
C) financial asset; liability
D) liability; financial asset
The present value of $1 realized one year from now equals:
A) $1 / (1 + r).
B) $1 (1 + r).
C) 1 + r.
D) 1 / r.
According to the savings"investment spending identity, savings and investment
spending are the most important components of GDP.
A) True
B) False
The unemployment rate in Western Europe has been higher than the unemployment rate
in the United States in recent years.
A) True
B) False
People can avoid the inflation tax by reducing their real money balances.
A) True
B) False
Figure: Shift of the Aggregate Demand Curve
Look at the figure Shift of the Aggregate Demand Curve. A movement from AD1 to
AD2 may have been the result of:
A) an increase in government spending.
B) a decrease in government spending.
C) increases in personal income taxes.
D) a decrease in consumer wealth.
A person who is not working and is not looking for work is:
A) included in the unemployment rate.
B) underemployed.
C) a member of the labor force who is not working.
D) not counted in the unemployment statistics.
An increase in government transfer payments of $250 billion and a tax cut of $250
billion will have _____ effects on the budget balance and _____ effects on real GDP.
A) equal; equal
B) equal; unequal
C) unequal; equal
D) unequal; unequal
In the United States 49 of the 50 states are required to have an annually balanced
budget, which worsens the severity of the business cycle.
A) True
B) False
The present value of a future payment increases if the:
A) period between the present and the future increases.
B) future payment decreases.
C) interest rate decreases.
D) stock market falls.
The demand for a good will increase if:
A) there is a decrease in the price of the good.
B) the price of inputs needed in the production of the good decrease.
C) there is an increase in the number of consumers in this market.
D) the price of a complementary good increases.
The recession began to wind down in late 2001 mainly because of an increase in:
A) tax rates on capital gains.
B) consumer spending on durable goods, especially automobiles.
C) consumer spending on nondurables, especially gasoline and clothing.
D) consumer savings.
If the wage rate is $9 per hour and the price level is 2, then the real wage is:
A) $18.
B) $11.
C) $7.
D) $4.50.
According to the natural rate hypothesis, attempts to keep unemployment below the
natural rate will lead to increasing inflation.
A) True
B) False
Inventory investment can be:
A) negative only.
B) zero only.
C) positive only.
D) negative, zero, or positive.
Actual investment equals planned investment:
A) plus unplanned investment.
B) minus unplanned investment.
C) plus unplanned investment plus inventory investment.
D) times unplanned investment minus inventory investment.
The long run in macroeconomic analysis is a period:
A) in which wages and some other prices are sticky.
B) in which prices and nominal wages are flexible.
C) longer than one year.
D) in which the capital stock is held constant.
Which of the following is TRUE?
A) Borrowing money will always be more expensive than using retained earnings.
B) The cost of retained earnings is unrelated to the cost of borrowing money.
C) The tradeoff a firm faces whether using retained earnings or borrowed funds is the
same.
D) Using retained earnings has a higher opportunity cost than does using borrowed
money because retained earnings come from past profits.
Discouraged workers are not working, want to work, but are not actively looking for a
job.
A) True
B) False
