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The reason why economists do not need details regarding the topography of a region
when determining driving directions is because the topography is irrelevant to complete
your objective of getting to a certain place.
The Bretton Woods exchange rate system was replaced by a gold standard.
Changes in the CPI provide an accurate measure of changes in the cost of living for all
individuals.
If a company's total costs per day increase from $500 to $600 by adding another
worker, but its additional benefits are $150, it is sensible to add that additional worker.
Compared to other countries, the United States has a relatively low share of
consumption spending in GDP.
Hyperinflations in history were never caused by the government printing money to
finance government expenditures.
The larger the marginal propensity to import, the larger the multiplier in an open
economy.
Figure 18.1
Refer to Figure 18.1. The opportunity cost of bicycles in the United States is
A) 1/3 of a hang glider.
B) 1/2 of a hang glider.
C) 3 hang gliders.
D) 4 hang gliders.
Table 11.3 Refer to Table 11.3. At an aggregate output level of $3,000 million, the
unplanned inventory change is:
A) $1,000 million.
B) 0.
C) $10 million.
D) -$10 million.
If the investment curve is steep (i.e., investment is less sensitive to changes in the real
interest rate), then an increase in government spending by $100 billion will cause:
A) a decrease in investments larger than $100 billion.
B) a decrease in investments less than $100 billion.
C) an increase in investments larger than $100 billion.
D) an increase in investments equal to $100 billion.
Recall the Application about cultural factors in England and their relevance to the
Industrial Revolution to answer the following question(s). In studying the economic
history of England before the Industrial Revolution, Professor Gregory Clark found that
children of the more affluent members of English society were more likely to survive
than those of the less affluent. Coupled with the slow growth of population over several
centuries, this differential survival of the wealthy had the effect of creating downward
mobility for the rich, as their sons and daughter increasingly populated the society.
According to the Application, the cultural habits of the rich filtered down through
English society. These habits included all of the following virtues EXCEPT
A) thrift.
B) prudence.
C) hard work.
D) impulsive behavior.
An open market ________ by the Fed increases the money supply, which leads to
________ interest rates and increased GDP.
A) purchase; increased
B) purchase; decreased
C) sale; increased
D) sale; decreased
Figure 18.3 Refer to Figure 18.3. In autarky, the maximum amount of scooters that
Livonia can produce is
A) 120.
B) 100.
C) 80.
D) 40.
All of the following encourage increases in technological progress EXCEPT
A) larger markets through free trade.
B) the possibility of monopoly profits.
C) the ability to patent a new invention.
D) closed economies.
Recall Application 4, "Securitization: the Good, the Bad, and the Ugly," to answer the
following questions:
According to the Application, the reason why the problem caused by subprime loans
came to light was because:
A) the housing boom ended.
B) the Federal Reserve put an end to it.
C) the economy was in a recession and the Fed lowered the interest rates further.
D) investors realized the risks before it was too late.
According to human capital theory, all of the following help make workers more
productive EXCEPT
A) education.
B) health and fitness.
C) skills.
D) increased unemployment benefits.
There are ________ members of the FOMC.
A) 5
B) 7
C) 12
D) 19
Explain what happens to the money supply, interest rates, investment spending and
GDP when the Fed makes open market bond purchases.
What is the difference between the short run and the long run in macroeconomics?
By NOT taxing capital gains separately from ordinary income, what would happen to
the government's stream of revenue?
Explain three ways we can use macroeconomic analysis.
Suppose the labor market is in equilibrium and the economy suddenly experiences a
boom. Assuming flexible wages, explain using the marginal principle how the labor
market reaches its new equilibrium quantity.
What are the four components of M1?
