The Full Employment and Balanced Growth Act of 1978 set the target unemployment
rate for the United States economy at 4 percent.
Which of the following most accurately describes the aggregate supply curve?
a. It shows the price level associated with firms’ unit costs and markups for any level of
GDP.
b. It is the sum of all individual firms’ supply curves.
c. It is determined by the federal government.
d. It shows firms’ unit costs for each level of GDP.
e. It shows the equilibrium level of GDP corresponding to each price level.
The average percentage markup in the economy
a. is of special interest in microeconomics
b. fluctuates greatly from year to year
c. depends on competitive conditions in the economy
d. depends on the level of GDP
e. increases as the interest rate increases
Assume that U.S. agricultural land is used either to raise cattle for beef or to grow
wheat. Figure 2-2 represents the production possibility frontier for beef and wheat. The
opportunity cost of moving from point G to point F equals
Figure 2-2
a. 0.25 million bushels of
wheat
b. 1.75 million bushels of wheat
c. 0.125 bushels of wheat
d. 8 bushels of wheat
e. 2 bushels of wheat
In the short run, movements in exchange rates are caused largely by economic
fluctuations.
Money is
a. only assets such as gold and silver
b. only fiat in nature
c. anything that is generally accepted as a means of payment
d. acceptable as a means of payment because the government guarantees that it must be
e. only those things backed by gold
For the Fed, price stability means a low and stable rate of inflation.
The national debt
a. exists because of past government budget deficits
b. is the difference between the government’s spending and revenue in a given year
c. is the amount households owe on credit cards, mortgages and other loans
d. is a flow variable
e. is the same as the government’s budget deficit
Recovery from the 1990-91 recession occurred because wages fell and the aggregate
supply curve shifted downward.
The federal funds rate is determined in a market and targeted by the Fed
Which of the following would not increase autonomous consumption spending?
a. Expectations of greater future income
b. A lower interest rate
c. Reduced consumer debt
d. Increased household wealth
e. Increased disposable income.
In a floating exchange rate system, the equilibrium exchange rate is determined
a. by the price of the foreign currency
b. by the government of the country issuing the foreign currency
c. by the interest rate in the country issuing the foreign currency
d. by the Federal Reserve
e. at the intersection of the demand curve and supply curve for the foreign currency
Assume that society is operating on its concave production possibilities frontier. As
more and more units of the good on the horizontal axis are produced,
a. more and more total resources are employed in the two industries combined
b. larger and larger amounts of the good on the vertical axis must be sacrificed
c. fewer and fewer total resources are employed in the two industries combined
d. more and more units of the good on the vertical axis will be produced
e. smaller and smaller amounts of the good on the vertical axis must be sacrificed
In only one of the following situations is a nation’s standard of living certain to
increase. Which one?
a. Real GDP rises faster than population.
b. Real GDP rises faster than the price level.
c. Real GDP rises.
d. Real GDP rises faster than the number of people employed.
e. Real GDP rises faster than the number of people unemployed.
Under a capitalist economic system,
a. the state owns all or most of the resources
b. people are forced to work for a living
c. resources are privately owned
d. the government determines the allocation of resources
e. prices eventually become unnecessary
Which of the following best describes the history of bank failures in the U.S. from 1863
to the present?
a. Bank failures were eliminated after 1913.
b. Bank failures were common until 1940 but were almost nonexistent until the late
1980s and early 2000s.
c. Bank failures have always been rare events.
d. Bank failures were common until 1940 and were eliminated thereafter.
e. Bank failures have always been common.
Which of the following would lead to an upward movement along the aggregate
demand curve?
a. An increase in government purchases
b. An increase in the money supply
c. An increase in the price level
d. A decrease in the money supply
e. An increase in taxes.
The specialization of labor
a. leads to a reduction in unemployment
b. means that less equipment will be employed when labor and capital are substitutes in
production
c. expands the output a society can produce
d. decreases the costs to the firm of coordinating activities
e. effectively separates labor from management
Which of the following is a definition of economic fluctuations?
a. Movements in prices around their long-run trend
b. Shifts in the long-run trend of output
c. Movements of the real wage over the long run
d. Shifts in the long-run trend of prices
e. Movements in output around its long-run trend
One reason for the differences between the Federal Reserve System and its European
counterparts is
a. that the Fed was established earlier
b. the tendency for Americans to embrace the idea of a central authority
c. the fear that a powerful central bank might be dominated by one group’s interests to
another group’s detriment
d. the homogeneity of the United States compared with other nations
e. because our definition of money is much different from other countries.