The federal income tax on wages is the largest source of revenue for the federal
government.
A principle is a self-evident truth that most people readily understand and accept.
An import quota is the same as an import ban.
A large government debt increases the amount of capital in the economy and thereby
increases future incomes and real wages.
When the level of output is below potential output, the unemployment rate is higher
than the natural rate.
The members of NAFTA are the United States, Canada, and:
A) France.
B) Japan.
C) Chile.
D) Mexico.
Bob meets with a banker to discuss the terms of a 1-year loan. Bob and the banker both
expect that inflation will be 4 percent over the next year and agree on a nominal interest
rate of 9 percent. In actuality, the inflation rate is 5 percent over the next year.
(a) What was the expected real interest rate on the loan?
(b) What was the actual real interest rate on the loan?
The present value of a given payment in the future ________ when the interest rates
fall.
A) increases
B) decreases
C) remains the same
D) reverts to the original value
Recall the Application about the possible link between the value of the U.S. dollar and
the worldwide increase in commodity prices to answer the following question(s).
Starting in the summer of 2010, there was a rise in prices of commodities such as oil
and food worldwide. Some economists suggested that monetary policy in the United
States was the cause of the worldwide commodity boom.According to this Application,
some economists noticed that the change in the value of the U.S. dollar was largely due
to the change in interest rates, and the change in interest rates occurred because of the
Fed’s use of ________ to further stimulate the economy.
A) open market sales
B) quantitative easing
C) discount operations
D) open market purchases
If net investment is negative, then:
A) gross investment is less than depreciation.
B) gross investment is less than zero.
C) gross investment is greater than depreciation.
D) depreciation is less than zero.
Loans are examples of a bank’s
A) assets.
B) liabilities.
C) net worth.
D) balance sheet.
When constructing a production function between labor and output, which of the
following is held constant?
A) the stock of labor
B) the stock of capital
C) the level of technology
D) B and C are both correct.
When the consumption function is expressed as C = Ca + b (y-T), taxes are collected
by the government as:
A) a constant proportion of income y.
B) an increasing proportion of income y.
C) a lump sum, and independent of y.
D) a decreasing proportion of income y.
The smallest single component of M1 is
A) demand deposits.
B) savings account balances.
C) other checkable deposits.
D) traveler’s checks.
In the United States during the 1930s, politicians
A) relied on government spending and taxation to pull the economy out of the
depression.
B) did not believe in using government spending and taxation because they feared the
consequences of budget deficits.
C) knew that the depression would eventually subside because of automatic stabilizers.
D) deliberately relied on government spending and taxation even though they knew the
depression would continue.
If an economy produced 60 pounds of sushi at $12 per pound and 15 gallons of sake at
$30 per gallon, the total value of these goods and services would be
A) $450.
B) $720.
C) $1,170.
D) $2,700.
Which of the following would lower the burden of increased government spending on
future generations?
A) increased spending to subsidize the losses of government owned enterprises
B) increased spending to subsidize consumption
C) increased spending to subsidize education
D) increased spending to subsidize imported consumption goods
Transfer payments include
A) Social Security.
B) dividends.
C) consumption taxes.
D) open market sales.