The unemployment that occurs as a result of the normal functioning of the labor market
is called cyclical unemployment.
Nominal wage increases will cause real wage increases.
The price system always works instantaneously.
The larger the marginal propensity to save, the smaller the multiplier.
“Nominal GDP” is a measure of GDP that adjusts for price changes.
Table 2.3
Refer to Table 2.3. What can be observed about the given resources?
A) Capital and labor are both fixed.
B) Capital is variable.
C) Capital is fixed.
D) Labor is fixed.
Which of the following is an example of an expansionary fiscal policy?
A) decreasing government spending
B) less subsidies to encourage investment
C) increasing taxes
D) decreasing taxes
Table 2.4
Refer to Table 2.4. The principle of diminishing returns sets in with the addition of the
________ tank of fertilizer.
A) second
B) third
C) fourth
D) fifth
An increase in the capital stock will
A) shift the production function downward.
B) shift the production function upward.
C) flatten the production function.
D) steepen the production function.
Money is
A) anything that is regularly used and generally accepted in economic transactions or
exchanges.
B) necessary to conduct economic transactions.
C) facilitates specialization in production.
D) anything the government declares to have value.
Recall Application 2, “Increased Political Independence for the Bank of England
Lowered Inflation Expectations,” to answer the following questions:
According to the application, the study by Mark Spiegel concluded that inflation
expectations decreased after the Bank of England announced political independence
because:
A) the difference in the interest rates of inflation adjusted bonds and non-inflation
adjusted bonds decreased.
B) the difference in the interest rates of inflation adjusted bonds and non-inflation
adjusted bonds increased.
C) the difference between nominal and real GDP decreased.
D) the difference between the nominal GDP growth rate and real GDP growth rate
decreased.
In Figure 11.1, an increase in the marginal propensity to consume is represented by a
change in the consumption function from
A) to .
B) to .
C) to .
D) to .
Suppose that your tuition to attend college is $5,000 per year and you spend $5,000 per
year on room and board. If you were working full time, you could earn $22,000 per
year. What is your opportunity cost of attending college?
A) $13,000
B) $27,000
C) $30,000
D) $35,000
Which of the following is a microeconomic question?
A) Should the government decrease unemployment benefits to reduce the
unemployment rate ?
B) Why do some countries have higher inflation rates than other countries?
C) Should the government subsidize corn farmers to encourage the production of
ethanol?
D) Should congress decrease taxes to help stimulate the economy?
Who is associated with the following summary of the economic way of thinking: “The
theory of economics does not furnish a body of settled conclusions immediately
acceptable to policy. It is a method rather than a doctrine, an apparatus of the mind, a
technique of thinking which helps its processor draw correct conclusions.”
A) John Maynard Keynes
B) Alfred Marshall
C) Adam Smith
D) President Harry Truman
Recall Application 3, “Sources of Growth in China and India,” to answer the following
questions:
According to the application, which country is expected to see their GDP per capita gap
with the U.S. decrease in the future?
A) China
B) India
C) both China and India
D) neither China nor India
Table 5.1
Refer to Table 5.1. Assume that this economy produces only two goods: Good X and
Good Y. The value for this economy’s nominal GDP in year 3:
A) is $120.
B) is $200.
C) is $282.
D) cannot be determined from this information.
Recall Application 4, “Chinese Demand and Pecan Pies,” to answer the following
questions:
According to the Application, which determinant of demand is responsible for the
increase in the demand for pecans?
A) preferences
B) income
C) price of substitutes
D) price of complements
For country A, an import is a good produced in
A) country B and purchased by residents of country B.
B) country B and purchased by residents of country A.
C) country A and purchased by residents of country B.
D) country A and purchased by residents of country A.
Figure 4.2 Figure 4.2 depicts three market situations. Which of the panels depicts a
market in which the price is likely to fall?
A) Panel A
B) Panel B
C) Panel C
D) None of the panels depicts a market in which the price is likely to fall.
Figure 18.4
In Figure 18.5, compared to free trade, the tariff causes domestic production of the good
to:
A) increase by Q2-Q1.
B) decrease by Q2-Q1.
C) increase by Q5-Q4.
D) decrease by Q5-Q4.
How do expectations impact upon inflation?
What will happen to the exchange rate between the euro and the U.S. dollar if U.S.
interest rates increase?
If a government creates an excess demand for a product by setting a maximum price, it
is sometimes called a ________.
Describe the changes in the variables that will cause supply for a product to increase,
shifting the supply curve down and to the right.
Explain the law of one price.
Explain how an excess supply would lead to a decrease in prices in an unregulated
market.
Explain how changes in government purchases and taxes can affect the level of
aggregate demand both directly and indirectly.
Briefly explain how the aggregate demand curve is different from the demand curve for
a particular good.
How do financial intermediaries reduce risk?