An example of a good whose production is counted in this year’s GDP is
a. a share of corporate stock
b. a used book
c. an acre of farm land
d. a used car
e. a new shirt
Assume that the publishing industry produces novels and textbooks, as shown in the
production possibilities frontier in Figure 2-9. Moving from point H to G, the
opportunity cost of those five additional textbooks equals
Figure 2-9
a. 0.5 novels
b. 10 million novels
c. 3 novels
d. 8 novels
e. 2 novels
Productivity efficiency in saving lives
a. is not possible to today’s economy
b. is guaranteed in today’s economy
c. occurs when the economy is saving the maximum possible number of lives
d. requires producing on the economy’s production possibilities frontier
e. occurs where the production possibilities frontier intersects the “lives saved” axis
One consequence of an increase in government spending is that
a. autonomous consumption will increase
b. autonomous consumption and investment spending will decrease
c. the increase in GDP will equal the size of the amount of spending
d. autonomous consumption and investment spending will increase
e. investment spending will increase.
Markets clear
a. in the short run
b. when a depression occurs
c. when a recession occurs
d. roughly every ninety days
e. eventually
The economic expansion that began in 1991
a. lasted approximately five years.
b. lasted approximately twelve years.
c. lasted approximately nine years.
d. was the longest expansion in U.S. history.
e. was the second longest expansion in U.S. history.
Suppose the required reserve ratio is 10 percent, but banks choose to hold an additional
15 percent of demand deposits as excess reserves. Under these conditions, the demand
deposit multiplier will be
a. 0
b. 4
c. 5
d. 6.67
e. 10
Simplifying assumptions always affect the conclusions derived from an economic
model.
Individuals who would like a full-time job but are working only part-time are known as
a. partially unemployed.
b. involuntary part-time workers.
c. freelancers.
d. flexible workers.
e. temporary labor force.
Given the following information, what would be the value of M2?
a. $400 billion
b. $100 billion
c. $425 billion
d. $425 billion
e. $1,825 billion
According to classical economists,
a. full employment means zero unemployment
b. as long as markets clear, no government action is needed to ensure full employment
c. even if all markets clear, government action is needed to correct labor market
imperfections if the economy is to reach full employment
d. as long as markets clear and government provides jobs to those who need them, the
economy will be at full employment
e. even if markets clear, cyclical unemployment will still persist in the long run
An increase in the demand for loanable funds will, everything else equal,
a. increase the supply of funds
b. lower the interest rate and reduce investment spending
c. lower the interest rate and increase investment spending
d. raise the interest rate and reduce investment spending
e. raise the interest rate and increase investment spending
If an improvement in production technology causes a decrease in production costs, the
result is a(n)
a. decrease in quantity supplied
b. increase in demand
c. increase in supply
d. improvement is working conditions
e. increase in quantity supplied
Policies that increase research and development spending will increase the rate of
technological change and thus shift the production function up vertically.
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
An increase in labor force participation will increase output and living standards at the
cost of
a. higher taxes
b. higher interest rates
c. longer work weeks
d. foregone leisure time
e. higher exports.
The least liquid of the following assets is
a. cash in the hands of the public
b. time deposits
c. savings accounts
d. travelers’ checks
e. demand deposits