According to Okun’s law, unemployment must decrease by 1% for output to increase by
1%.
A) True
B) False
Scenario: Open Economy S= I
In an open economy GDP is $12 trillion this year. Consumption is $8 trillion, and
government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and
imports are $3 trillion.
Look at the scenario Open Economy S = I. How much is the net capital inflow?
A) $1 trillion
B) $2 trillion
C) $3 trillion
D) $4 trillion
An amount that would equal a particular future value if deposited today at the
prevailing interest rate is the:
A) present value.
B) inflation rate.
C) discount premium.
D) market index.
In the circular-flow diagram firms buy _____ in the _____ market.
A) goods and services; product
B) goods and services; factor
C) resources; product
D) resources; factor
If people demand more of product A when the price of B falls, then A and B are:
A) not related.
B) substitutes.
C) complements.
D) inferior goods.
Households demand goods and services in the product markets.
A) True
B) False
The recommendation that a decrease in taxes will alleviate a recessionary gap is
consistent with _____ macroeconomics.
A) classical
B) Keynesian
C) monetarist
D) Great Moderation consensus
Which sector is responsible for most of the growth in the United States during the
1990s?
A) service
B) manufacturing
C) mining
D) retail
If the price level increases by 20%, the purchasing power of $1,000 will increase to
$1,200.
A) True
B) False
If nominal GDP increases from one year to the next, _____ must have risen.
A) prices
B) real GDP
C) prices and real GDP
D) output or prices or both
Macroeconomics entails the study of the:
A) overall behavior of the economy.
B) individual decision makers.
C) market structures.
D) cost and production decisions by firms.
If the price level decreases, real income will:
A) increase.
B) decrease.
C) remain constant.
D) fluctuate randomly.
To put an end to the bank failures during the 1930s President Franklin Roosevelt
declared a bank holiday and temporarily closed all banks.
A) True
B) False
In an economy with no taxes and no imports, disposable income decreases from $6,000
to $4,000. If consumption decreases from $4,500 to $3,000, the marginal propensity to
save is:
A) 0.25.
B) “0.25.
C) 1.125.
D) 0.75.
Analysts believe that generous unemployment benefits in Europe are associated with:
A) low unemployment rates in Europe.
B) high unemployment rates in Europe.
C) weak labor unions in Europe.
D) relatively constant levels of unemployment in Europe.
Figure: Supply of Coconuts
Look at the figure Supply of Coconuts. If the prices of inputs (e.g., labor, fertilizer, and
fuel) used to produce and transport coconuts decreased, it would be represented in the
figure as a movement from:
A) A to B.
B) B to A.
C) C to A.
D) E to B.
If the Federal Reserve increases the discount rate:
A) the money supply is likely to decrease.
B) the money supply is likely to increase.
C) the money supply is not likely to change.
D) the federal funds rate must decrease.
Monetarists argue that:
A) the impact lag for monetary policy is short and predictable.
B) stabilization policies may actually be destabilizing.
C) the Federal Reserve System should use active monetary policy.
D) active monetary policy should be used to reinforce active fiscal policy.
Suppose you manage a corner grocery store. If peanut butter is an inferior good, what
do you suppose would happen to the price and quantity sold of peanut butter as incomes
fell during a recession?
A) The price would increase and the quantity would decrease.
B) The price and quantity would both increase.
C) The price and quantity would both decrease.
D) The price would decrease and the quantity would increase.
When it was established in 1913, the Federal Reserve was NOT granted the authority
to:
A) require banks to hold reserves.
B) inspect banks.
C) prepare the federal budget.
D) issue currency.
The General Theory of Employment, Interest, and Money was written by:
A) Robert Lucas.
B) David Ricardo.
C) John Maynard Keynes.
D) Thomas Malthus.
Which of the following is an expansionary fiscal policy?
A) an increase in the money supply that decreases interest rates
B) an increase in taxes that reduces the budget deficit and decreases consumption
C) a decrease in government spending
D) an increase in unemployment benefits
A change in the U.S. balance of payments on financial account generates an equal and
opposite reaction in the balance of payments on current account.
A) True
B) False
Figure: Circular-Flow Model
Look at the figure Circular-Flow Model. If the circular-flow model is in equilibrium
(the sum of money flowing into each box is equal to the sum of the money flowing out
of it) and there is an increase in imports, which of the following is likely to happen?
A) an increase in the nominal GDP
B) a decrease in the nominal GDP
C) a decrease in the unemployment rate
D) an increase in the nominal GDP and in the unemployment rate
A statement of spending that flows into and out of the country for purchases of assets
during a particular period is the nation’s:
A) current account.
B) financial account.
C) universal exchange position.
D) statistical discrepancy.
Figure: Monetary Policy and the AD“SRASModel
Look at the figure Monetary Policy and the AD”SRASModel. If the economy is in a
recessionary gap at point f, it could move to point gas a result of:
A) a decrease in government spending.
B) an increase in the discount rate.
C) a decrease in the money supply.
D) purchases of government securities in the open market.
When the Mexican government changes the fixed rate of pesos per U.S. dollar from 1.5
to 3.0, the peso is _____. When the equilibrium exchange rate of U.S. dollars per euro
changes from 1.15 to 1.30, the euro is _____.
A) revaluated; appreciated
B) appreciated; devaluated
C) devaluated; appreciated
D) appreciated; revaluated
Figure: Shifts in Demand and Supply II
Look at the figure Shifts in Demand and Supply II. The graph shows how supply and
demand might shift in response to specific events. Suppose a fall frost destroys
one-third of the nation’s grapefruit crop. Which panel BEST describes how this will
affect the market for vitamin B12 tablets, which are a substitute in consumption for
grapefruit?
A) panel A
B) panel B
C) panel C
D) panel D
Near-moneys are:
A) paper money.
B) fiat money.
C) highly liquid financial assets.
D) any financial assets.
A private investment partnership open only to wealthy individuals and institutions is
a(n):
A) hedge fund.
B) investment bank.
C) savings and loan.
D) quasi-government agency.
The Great Moderation consensus includes the idea that the central bank should be
independent of politics.
A) True
B) False