Price level is held constant when moving along the planned expenditures curve.
Recall Application 3, “Oil Supply Disruptions, Speculation and Supply Shocks,” to
answer the following questions:
Oil price speculators cause an increase in the price of oil both now and in the future.
The marginal principle dictates that marginal cost should equal marginal benefit.
Outsourcing occurs when a firm produces components of their good or service in
another country.
Most economists believe that the CPI overstates the actual changes in prices while the
chain index for GDP understates them.
If the Fed lowers the discount rate, banks borrow more reserves from the Fed, which
leads to an increase in the money supply.
When Lonnie produces 1 pair of cowboy boots his costs total $300. When he produces
2 pairs of cowboy boots his total costs are $500. This means that Lonnie’s marginal cost
of producing the second pair of cowboy boots is $200.
A decrease in the discount rate will increase the money supply.
Unrealistic simplifying assumptions should be avoided because they cause the analysis
that is based on the assumption to be incorrect.
A large increase in oil prices will cause the short-run aggregate supply curve to shift
left.
The tax multiplier is calculated as 1 / (1 – ).
If the reserve ratio is 0.9, the money multiplier will be 10.
Alan Greenspan was not credible in his determination to fight inflation during the
1990s.
Money is the standard of exchange by which any type of goods can be purchased.
Which of the following did not directly cause the worldwide recession in 2007-2008?
A) the decision by the government to bailout banks in 2008
B) easy access to credit in the U.S.
C) a large number of home purchasers who were unable to afford the homes
D) booming housing prices that ultimately dropped
Which of the following assets is the largest component of M2?
A) savings deposits
B) checking deposits
C) currency
D) small time deposits
From the end of 1997 through 2000, the U.S. budget:
A) was in deficit.
B) was in surplus.
C) was balanced.
D) deficit was decreasing as a percentage of GDP.
In the supply and demand for U.S. dollars in Europe, who is a demander in that market?
A) Americans who want to invest in Europe
B) Europeans who want to invest in the U.S.
C) Americans who want to bring their investments back to the U.S.
D) B and C only
Which of the following is a microeconomic question?
A) Should we have a constitutional amendment to balance the federal budget?
B) Why do some countries grow faster than others?
C) Should the government prevent the merger of two large firms?
D) All of the above are microeconomic questions.
Figure 4.3 illustrates the demand for tacos. Assume that tacos and burritos are
substitutes. A decrease in the price of burritos would bring about a movement from
A) point a to point c.
B) point c to point .
C) D2 to D0.
D) D1 to D2.
Any action that gives rise to a supply of foreign currency is a
A) deficit item on the current, financial, or capital account.
B) deficit item on the current account and a surplus item on the financial and capital
accounts.
C) surplus item on the current, financial, or capital account.
D) surplus item on the current account and a deficit item on the financial and capital
accounts.
The physical and mental effort people use to produce goods and services is a
description of which factor of production?
A) physical capital
B) human capital
C) labor
D) entrepreneurship
Recall the Application about cultural factors in England and their relevance to the
Industrial Revolution to answer the following question(s). In studying the economic
history of England before the Industrial Revolution, Professor Gregory Clark found that
children of the more affluent members of English society were more likely to survive
than those of the less affluent. Coupled with the slow growth of population over several
centuries, this differential survival of the wealthy had the effect of creating downward
mobility for the rich, as their sons and daughter increasingly populated the society.
According to the Application, the differential survival of the wealthy created an
environment
A) which allowed for economic growth.
B) which caused increased class warfare.
C) where lower-class people could no longer afford to live in the country.
D) that directly led to the demise of the British monarchy.
The argument that calls for the trade protection of only newly developing industries is
known as the ________ argument.
A) learning by doing
B) predatory dumping
C) infant industry
D) developing nation
Which of the following is NOT an example of a consumption expenditure?
A) a digital camera you purchase to take on vacation
B) a new county jail
C) a motorcycle you purchase to ride on the weekends
D) a restaurant meal
Recall the Application about the decline in honeybee colonies and its effect on the
price of ice cream to answer the following question(s). In the last few years
thousands of honeybee colonies have vanished, a result of bee colony collapse
disorder (CCD). Roughly one third of the U.S. food supply–including a wide
variety of fruits, vegetables, and nuts–depends on pollination from bees. The
decline of honeybees threatens $15 billion worth of crops in the United States.
According to this Application, the decline in honeybee colonies has caused ________ of
fruits and nuts used in ice cream production.
A) a decrease in the supply
B) an increase in the supply
C) an increase in the demand
D) a decrease in the demand
In which system are decisions made by thousands of people who have information
about resources, production technology and consumer desires?
A) market system
B) centrally planned system
C) command system
D) socialist system
When the consumption function is expressed as C = 200 + .75(1-t)y where t =0.2, then
an increase in income y by 100 will result in an increase in tax collection by:
A) 15.
B) 80.
C) 20.
D) 75.
Which of the following is NOT a component of value added of a firm?
A) expenditures on intermediate goods
B) profits
C) wages
D) interest
In what ways is the government debt a burden on future generations?
When the government collects taxes as a lump sum, or as a fixed nominal amount (e.g.,
$500 per individual), will this tax collection system operate as an automatic stabilizer?
How would the Fed’s reduction of the reserve ratio requirement affect the money
supply?
Explain why the marginal propensity to consume and the marginal propensity to save
must sum to one.
Suppose an economy is currently producing at a level below full employment. Explain
what will likely happen to wages and prices.
Is seasonal unemployment one of the basic types of unemployment? Explain why or
why not.
Can an individual with no absolute advantage find himself with a comparative in
producing a good or a service?