The Federal Reserve is under the supervision of Congress.
The investment rule states that you should invest in a project if the present value of the
future payments from the project is less than or equal to the cost you incur today.
A decrease in demand will cause the equilibrium price and quantity of a good to fall,
ceteris paribus.
A depreciation of a country’s currency is likely to decrease its GDP.
The breaking of laws protecting intellectual property rights is an example of “creative
destruction.”
An increase in the saving rate will generally cause an increase in productivity growth in
the long run.
The risk of investing in the stock market can be eliminated by diversification.
The response of the federal government to the devastation brought about by Hurricane
Katrina resulted n a larger budget deficit.
In the last few decades there has been considerable progress in lowering the barriers to
international trade.
If the economy is operating above full employment, falling wages and prices will
stimulate investment and increase output.
One example of a microeconomic question is, “How will prices in the satellite TV
industry change if a new firm enters the market?”
In 2001, the federal budget turned ________ and, as a result of this, it is expected that
the ratio of government debt to GDP is expected to ________.
A) from a deficit into a surplus; increase
B) from a surplus into a deficit; increase
C) from a deficit into a surplus; decrease
D) from a surplus into a deficit; decrease
Suppose prices increase by 3% per year. What nominal percentage return on your
savings account would you require to get a 3% real return?
A) 3%
B) 6%
C) 8%
D) 9%
In an open economy, the government can accelerate growth by:
A) taxing consumption and using the tax revenues for capital formation.
B) taxing investment and using the tax revenues for capital formation.
C) increasing government spending to finance additional consumption.
D) increasing the trade deficit and importing consumption goods.
Workers whose wages tend to adjust slowly include all of the following EXCEPT
A) union workers.
B) unskilled, low wage workers.
C) those with long-term contracts.
D) movie stars, professional athletes, and rock stars.
An increase in the price level results in a decline in aggregate demand because people’s
“net worth” decreases and will spend less. This effect is called the:
A) wealth effect.
B) income effect.
C) interest rate effect.
D) trade effect.
Let C = 80 + 0.6y and I = 40. The value of the MPS is
A) 0.24.
B) 0.4.
C) 0.48.
D) 0.6.
Business cycles are
A) movements in stock prices.
B) the transfer of executives between firms.
C) used to describe fluctuations in GDP.
D) a description of the time required to bring a new product to market.
The largest cost associated with anticipated inflation is:
A) the distortion of our tax system.
B) the menu cost.
C) the shoe-leather cost.
D) the distortion of our financial system.
If the number of unemployed increases by the same number as the number of people in
the labor force, then:
A) the unemployment rate will increase.
B) the labor force participation rate will decrease.
C) the unemployment rate will decrease.
D) the population growth rate will increase.
Refer to Figure 11.4. Which diagram illustrates the effect of a decrease in government
spending?
A) A
B) B
C) C
D) D
The following table lists the basket of goods in the
Consumer Price Index for the nation of Astro (Assume 2010 is the base year.)
Table 6.2
Using the information in Table 6.2, the inflation rate from 2011 to 2012 is about
A) 4 percent.
B) 5 percent.
C) 17 percent.
D) 31 percent.
Comment on the following statement: “A bank’s owners’ equity will be equal to the sum
of its assets and liabilities.”
Why might economic policies aimed at stabilization actually increase the magnitudes of
economic fluctuations?
What is a commodity money system?
According to the Solow model, technological progress will cause output to increase for
two reasons. What are these two reasons?
What are the trade-offs involved in shortening the length of a patent for
pharmaceuticals?
Suppose that the economy is above the full employment level of output. Describe the
adjustment process of returning this economy to full employment.
Define the “consumption function.”
Briefly discuss the classical view of the labor market. Specifically, to what extent can
unemployment occur based on the classical view? Explain.
Explain how the lack of clear property rights can impede economic growth.