Look at the table Comparative Advantage I. The opportunity cost of producing 1 box of
cell phones for Finland is _____ box(es) of herring.
A) 10
B) 0.5
C) 5
D) 0.1
Contractionary fiscal policy includes:
A) decreasing taxes.
B) decreasing the money supply.
C) decreasing government expenditures.
D) increasing government expenditures.
A contractionary fiscal policy is one that reduces aggregate demand by decreasing:
A) government purchases.
B) the money supply.
C) interest rates.
D) taxes.
Decreases in investment spending are usually offset by increases in consumption
through the multiplier process.
A) True
B) False
Employment is the total:
A) labor force.
B) population of working age.
C) number of people actively working, either full-time or part-time.
D) number of people not unemployed.
The existence of banks:
A) results in the money supply being larger than the amount of currency in circulation.
B) inhibits the creation of money.
C) makes the money supply equal to the amount of currency in circulation.
D) results in the money supply being less than the amount of currency in circulation.
An individual who decides to hold money instead of other assets:
A) is giving up the interest that other assets could have earned.
B) is likely to be subject to money illusion.
C) is not affected by unanticipated inflation.
D) can maintain a higher standard of living.
Unplanned inventory investment leads to:
A) prices increasing.
B) production increasing.
C) firms hiring more workers.
D) production decreasing.
If the actual inflation rate is less than the expected inflation rate:
A) lenders gain and borrowers lose.
B) borrowers gain and lenders lose.
C) everyone benefits.
D) everyone is worse off.
In a closed economy, investment spending, I, must equal:
A) GDP ” C ” G.
B) GDP ” C.
C) GDP ” C ” G ” X.
D) GDP ” [C G].
In 2002, France replaced its national currency, the franc, with the:
A) euro.
B) U.S. dollar.
C) British pound.
D) Chinese yuan.
A busy professor can’t decide whether to stay in his office to grade papers for another
hour or to go home and go to bed. This is an example of:
A) equity versus efficiency.
B) how one person’s spending is another person’s income.
C) economic incentives.
D) marginal analysis.
The sources of financing of physical capital include:
A) domestic consumption.
B) foreign borrowing from the home country.
C) foreign investment in the home country.
D) domestic consumption, foreign borrowing from the home country, and foreign
investment in the home country.
The Federal Reserve has just purchased $100 million in Treasury bills from commercial
banks.
a. How will this affect the T-accounts for the commercial banks?
b. If the public holds a fixed amount of currency (so that all loans produce an equal
amount of deposits in the banking system), the minimum reserve ratio is 5%, and banks
hold no excess reserves, by how much will deposits in the commercial banks change?
c. By how much will the money supply change? Describe the final changes to the
T-account for commercial banks when the money supply changes by this amount.
Factors that influence productivity and therefore growth are:
A) physical and human capital per worker and technological advances.
B) government independence.
C) more government intervention in the marketplace.
D) increased consumption and less investment spending.
The trade-off between equity and efficiency occurs because:
A) the efficient allocation of resources is bad for business and industry.
B) allocating resources fairly may cause inefficiency.
C) everyone must pay more tax to ensure equity.
D) efficiency is politically unpopular.
Because of the role of automatic stabilizers and discretionary fiscal policy, the historical
record of the United States since 1970 shows that the budget tends to:
A) move into a deficit during expansions.
B) move into a surplus during recessions.
C) move into a deficit during recessions.
D) remain balanced throughout expansions and recessions.
In an economy with no taxes or imports, if the marginal propensity to save decreases,
the marginal propensity to consume will:
A) increase.
B) decrease.
C) remain constant.
D) fluctuate randomly.
Macroeconomics deals with:
A) bits and pieces of the economy.
B) how a business unit should operate profitably.
C) the working of the entire economy or large sectors of it.
D) how individuals make decisions.
The cyclically adjusted budget deficit fluctuates _____ the actual budget deficit.
A) more than
B) less than
C) about the same as
D) inversely with
The purpose of open market purchases is to:
A) decrease the government budget deficit.
B) increase the government budget deficit.
C) increase consumer and investment spending.
D) decrease consumer and investment spending.
Which of the following assets is the MOST liquid?
A) a $50 bill
B) a $50 gift certificate
C) 100 shares of stock
D) an economics textbook
When there is a deficit in the U.S. balance of payments on the current account, we pay
for the difference by:
A) allowing the price of currency to rise.
B) allowing the price of currency to fall.
C) buying assets from other countries.
D) selling assets to other countries.
In 1798 the English economist Thomas Malthus predicted that a growing population
and a fixed supply of land would eventually cause productivity to fall.
A) True
B) False
The U.S. national debt as a percentage of GDP is _____ that of Greece.
A) slightly higher than
B) equivalent to
C) substantially higher than
D) lower than
Expecting the inflation rate to be 3%, Tony decides to put his savings in a 12-month
certificate of deposit yielding a fixed 6% interest rate. If the actual inflation rate is
_____, it can be argued that _____ is (are) worse off.
A) above 3%; the bank issuing the certificate
B) exactly 6%; both the bank and Tony
C) below 3%; Tony
D) below 3%; the bank issuing the certificate
Long-Term Capital Management’s collapse in the late 1990s was caused primarily by:
A) too much government regulation.
B) financial crises in Asia and Russia.
C) the fraud and corruption of its management.
D) competition from investment banks, which were not regulated as strictly as hedge
funds.
If the aggregate price level doubles:
A) the money supply will also double.
B) neither money demand nor the money supply will rise.
C) both money demand and the money supply will rise proportionally.
D) money demand at any given interest rate will also double.
Which of the following theories is consistent with the notion that the short-run
aggregate supply curve may be vertical after all?
A) Keynesian theory
B) new classical economics
C) new Keynesian theory
D) real business cycle theory
The slow recovery from the 2008 financial crisis meant that the unemployment rate:
A) remained low in spite of the crisis.
B) returned quickly to its previous level.
C) increased and remained high.
D) fell to its natural rate.
Monetarists argue that discretionary monetary policy does more harm than good.
A) True
B) False
The consumption function shifts when:
A) disposable income changes.
B) expected disposable income changes.
C) people receive a pay raise.
D) disposable income goes down.
The concept of monetary neutrality means that changes in the money supply have no
real effects on real output in the long run.
A) True
B) False