To be effective, countercyclical fiscal policy must be temporary.
One way to increase labor force participation is to cut income tax rates. Which of the
following is true given such a scenario?
a. Cutting income tax rates increases labor force participation and also allows all other
taxes to be cut
b. Cutting income tax rates may force the government to raise other taxes or cut some
programs
c. Cutting income tax rates raises more tax revenue and allows for even more
government programs
d. Cutting income tax rates puts the burden of the tax cuts on those who now join the
labor force.
e. Cutting income tax rates reduces labor force participation.
Total product begins to decline when diminishing marginal returns are first experienced.
The Fed’s objectives have remained the same since its inception.
Macroeconomics is best suited to answering questions such as
a. what determines the unemployment rate among students on this campus
b. why rent is higher in big cities than in smaller ones
c. how fast the overall price level will rise next year
d. what determines the demand for public transportation in rural areas
e. why sales taxes in this area are increasing
Joe spends all of his money on concert tickets and compact disks. Figure 6-1 shows his
budget constraint when his income is $100. The price of a ticket is $20, while the price
of a compact disk is $10. What is the opportunity cost of a compact disk?
Figure 6-1
Income = $ 100
Price per Ticket = $20
Price per Compact Disk $ 10
If the Federal Reserve sells $1,500 in bonds and the resulting money supply change is
$7,500, what is the required reserve ratio?
a. 5.0
b. 0.2
c. 0.1
d. 0.4
e. 0.8
Oligopoly
The time spent by students in college
Which of the following could not serve as commodity money?
a. diamond
b. gold
c. paper
d. fur
e. silver
If the economy is at potential output, the price level can continue to increase.
Which of the following is not a responsibility of the Federal Reserve?
a. Controlling the money supply
b. Printing paper currency
c. Supervising banks
d. Acting as a bank for banks (e.g., lender of last resort)
e. Clearing checks
Which combination of government policies would be most likely to increase labor
supply?
a. Increasing income tax rates and cutting transfer payments to the needy
b. Decreasing income tax rates and cutting transfer payments to the needy
c. Decreasing income tax rates and increasing subsidies to businesses for hiring certain
kinds of workers
d. Increasing income tax rates and cutting subsidies to business
e. Cutting transfer payments to the needy and increasing subsidies to business
In order to maximize profits, a firm should decrease output whenever total cost exceeds
total revenue.