The Bretton Woods agreement called for:
A) each currency’s value to be flexible relative to other currencies.
B) maintaining fixed exchange rates by government intervention.
C) most nations to adopt the euro as their official currency.
D) what amounted to a floating exchange rate.
The purpose of the Bureau of Consumer Financial Protection is to prevent exploitation
of borrowers through complicated financial deals that were made to appear attractive to
them.
A) True
B) False
Disposable income in a particular period is:
A) total earned income.
B) earned income plus government transfer payments.
C) earned income plus government transfer payments less taxes.
D) earned income plus government transfer payments less taxes and savings.
Following the banking crises of the early 1930s real GDP _____ and the price level
_____.
A) increased; increased at a rapid pace
B) increased; decreased
C) decreased; decreased
D) decreased; increased
A government can pay off its debt if:
A) GDP and the debt grow at the same rate.
B) the ratio of debt to GDP is increasing.
C) GDP grows faster than the debt.
D) the debt grows faster than GDP.
An increase in the nation’s overall price level is:
A) long-term economic growth.
B) unemployment.
C) inflation.
D) deflation.
If the government were required to balance the budget during a recession, it would have
to decrease taxes and increase government spending.
A) True
B) False
The fact that tax receipts fall during a recession:
A) makes the multiplier stronger.
B) has no impact on the multiplier.
C) reduces the adverse effect of the initial fall in aggregate demand.
D) acts as an automatic contractionary fiscal policy.
Starting from its potential output, an economy’s government increases spending. In the
long run, this economy will produce at:
A) an output level above its potential output.
B) its potential output.
C) an output level below its potential output.
D) its potential output level at a lower aggregate price level.
The Dodd-Frank bill established the Consumer Financial Protection Bureau to help
consumers understand the financial impact of Social Security.
A) True
B) False
An improvement in the business outlook of firms is a type of positive _____ shock and
therefore shifts the _____ curve to the _____.
A) supply; long-run aggregate supply; right
B) demand; aggregate demand; left
C) supply; short-run aggregate supply; right
D) demand; aggregate demand; right
Suppose the marginal propensity to consume equals 0.9 and investment spending
increases by $50 billion. Assuming no taxes and no trade, real GDP will _____ by
_____.
A) increase; $450 billion
B) increase; $90 billion
C) increase; $500 billion
D) decrease; $500 billion
Which index includes smaller companies, many in the technology sector?
A) the Dow Jones Industrial Average
B) the producer price index
C) the S&P 500
D) the NASDAQ
Some baseball fans leave the game in the seventh or eighth inning to avoid the
postgame traffic. The fans are:
A) not considering that they have already paid for their tickets.
B) making a marginal decision by comparing the cost of leaving early to the benefit of
leaving early.
C) thinking only about the benefits of avoiding traffic.
D) underestimating the value of staying for the rest of the game.
In the United States during the 1970s, oil prices increased dramatically and shifted:
A) AD to the right.
B) AD to the left.
C) SRAS to the right.
D) SRAS to the left.
Increasing the quantity of money in circulation shifts the _____ curve to the _____.
A) aggregate demand; left
B) long-run aggregate supply; right
C) aggregate demand; right
D) short-run aggregate supply; right
Which of the following statements is FALSE?
A) Unemployment always rises during recessions.
B) Unemployment always falls during expansions.
C) There is a strong negative relation between growth in real GDP and changes in
unemployment.
D) In general, there is a trade-off between inflation and unemployment in the short run.
The marginal propensity to consume in the aggregate consumption function is:
A) 0.5.
B) 0.7.
C) 0.8.
D) 0.9.
If real GDP is less than aggregate expenditure, then inventories will _____, and firms
will _____.
A) increase; cut back on future production
B) fall; increase the prices of their products
C) increase; lower their product prices
D) fall; increase their future production
Figure: Aggregate Expenditures Curve I
Look at the figure Aggregate Expenditures Curve I. Suppose that the consumption
function in this economy rises by $100. The result would be a shift in the aggregate
expenditures curve:
A) upward by $100.
B) upward by $200.
C) upward by $100 times the multiplier.
D) downward by $200.
Suppose you transfer $500 from your savings account to your checking account. With
this transaction, M1 _____ and M2 _____.
A) increases; decreases
B) increases; stays the same
C) decreases; decreases
D) stays the same; decreases
A vicious downward spiral among banks in which each institution’s failure increases the
likelihood that another will fail is a(n):
A) asset bubble.
B) maturity transformation.
C) multiplier effect.
D) financial contagion.
To be classified as unemployed, a person must be:
A) not working.
B) not working and actively looking for a job in the past four weeks.
C) not working or working part-time but wishing to be working full-time.
D) not working and actively looking for a job in the past four weeks or discouraged and
not actually looking for a job.
According to classical economists, the aggregate supply curve is _____, but according
to Keynes, it is _____.
A) vertical in the short run; upward sloping in the short run
B) upward sloping in the short run; vertical in the short run
C) upward sloping in the short run; horizontal in the short run
D) downward sloping in the long run; always vertical
Figure: The Labor Market
Look at the figure
The Labor Market. The unemployment rate at the equilibrium wage rate is:
A) 0%.
B) 50%.
C) 80%.
D) 15%.
Figure: AD”AS
Look at the figure AD”AS. Consider an economy that is producing an output level of Y1.
The economy has a(n) _____ gap, which can be closed by _____ fiscal policy.
A) recessionary; expansionary
B) inflationary; contractionary
C) inflationary; expansionary
D) recessionary; contractionary
Which of the following situations is likely to lead to an increase in discouraged
workers?
A) The economy is expanding.
B) The availability of jobs falls.
C) The economy is undergoing inflation.
D) The economy is undergoing deflation.
Inflation reduces nominal interest rates.
A) True
B) False
Short-run aggregate supply increases when producers are willing to supply more at any
given price level.
A) True
B) False
Lehman Brothers was established by Henry Lehman in 1844 as a(n):
A) investment bank.
B) commercial bank.
C) dry goods store.
D) saloon.
If Mary accepts a job as a nurse, she has sold a factor of production in the factor
market.
A) True
B) False
After the 2008 financial crisis, proponents of fiscal austerity argued that the primary
problem for the United States and Europe was:
A) high levels of government deficits and debt that eroded investor confidence.
B) powerful labor unions that kept wages too high.
C) unemployment.
D) inflation.