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The economic theory that emphasizes the role of difficulties in coordinating economic
affairs as a cause of economic fluctuations is known as
A) Keynesian economics.
B) investment cycle theory.
C) real business cycle theory.
D) technology shock theory.
The weekly income earned in 1974 at that time could buy ________ standard baskets of
goods and services in 2011.
A) 1.70
B) 1.16
C) 1.54
D) 2.81
Recall Application 2, "Law of Supply and Woolympics," to answer the following
questions:
According to the Application, the policies proposed to help raise the price of wool
focuses on:
A) lowering the demand for wool.
B) raising the supply for synthetic fibers.
C) raising the demand for wool.
D) raising the supply for wool.
Recall the Application about the method used by the Commerce Department to
determine if imported products are being sold at lower prices in the United States than
in their countries of origin to answer the following question(s).
According to this Application, the Commerce Department typically uses ________ to
determine of foreign companies are selling products at lower prices in the United States
than in their own domestic markets.
A) price information supplied by the foreign manufacturing company
B) actual prices charged in home markets compared to foreign markets
C) value-added price estimates supplied by the World Trade Organization (WTO)
D) a constructed value method where it estimates prices charged in an exporter's home
market
An economy in which government bureaucracy decides how much of a good to
produce, how to produce the good, and who gets the good is known as a
A) mixed economy.
B) centrally planned economy.
C) laissez-faire economy.
D) market economy.
The real interest rate is the rate at which borrowers or lenders ________ to make
transactions when issuing or receiving loans.
A) are required
B) expect
C) refuse
D) can only obtain from a financial intermediary
Suppose that a person in the United States earns $5,000 and faces an income tax rate of
25 percent. If that person saves $2,000 and invests it at 12 percent then he or she will
pay
A) more in taxes than if there had been no saving.
B) less in taxes because of the saving.
C) tax only on the income spent.
D) tax only on the amount saved.
An increase in consumption, investment, or net exports caused by a decrease in
government purchases is known as
A) a closed economy.
B) demand-side effects.
C) crowding in.
D) crowding out.
If the consumption function is C = 100 + 0.75Y, then the multiplier is:
A) 5.
B) 4.
C) .75.
D) .25.
Refer to Figure 11.5. An increase in exports is best illustrated by diagram
A) A.
B) B.
C) C.
D) D.
An increase in the labor force, without a corresponding increase in the number of
employed workers will cause the:
A) unemployment rate to increase.
B) the labor force participation rate to decrease.
C) unemployment rate to decrease.
D) the population growth rate to increase.
If the yen to dollar exchange rate is 115, the U.S. price index is 140, and the Japanese
price index is 165, what is the U.S. real exchange rate?
A) 74.52
B) 97.58
C) 135.55
D) 200.87
Figure 18.2
Refer to Figure 18.2. After trade and specialization begin, the maximum amount of
spears that Macadamia can consume is
A) 40.
B) 100.
C) 120.
D) 160.
Recall Application 1, "How to Fight a Liquidity Trap," to answer the following
questions:
According to the Application, what was the biggest drawback to quantitative easing?
A) It would cost so much.
B) It would create expectations of future inflation.
C) It would have very little effect.
D) It would take very long for the effects to be apparent.
The rule in investing is that you should invest in a project as long as the economic cost
you incur today is less than or equal to the present value of the future payments for the
project. This rule utilizes which key principle of economics?
A) marginal principle
B) real-nominal principle
C) principle of diminishing returns
D) principle of voluntary exchange
Bank runs can devastate a financial institution and cause it close its doors to customers
because:
A) not all deposits are liquid.
B) the FDIC insurance is chronically underfunded.
C) they are forced to offer loans at low interest rates.
D) most short-term deposits offer high interest rates.
