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The slope of the planned aggregate spending line is determined by:
A) the marginal propensity to consume.
B) the level of unplanned investment spending.
C) the level of planned investment spending.
D) the level of autonomous consumption.
If an economy is producing at a point on its production possibilities frontier, it is:
A) efficient in production and allocation.
B) efficient in production but not necessarily in allocation.
C) efficient in allocation but not necessarily in production.
D) not necessarily efficient in production or allocation.
Figure: Seasonally Adjusted Unemployment Rate
Look at the figure Seasonally Adjusted Unemployment Rate. The distance between
each labeled point on the horizontal axis is one year. Unemployment was ______
between 1/2001 and 1/2003 and ______ between 1/2007 and 1/2008.
A) increasing; decreasing
B) increasing; increasing
C) decreasing; increasing
D) decreasing; decreasing
The short-run aggregate supply curve may shift to the right if:
A) productivity increases.
B) nominal wages increase.
C) personal income taxes decrease.
D) commodity prices rise.
Classical economists believed all of the following EXCEPT that:
A) there could be temporary periods of unemployment.
B) emphasis should be on the long run, and in the long run all would be set right
because of the smooth functioning of the price system.
C) the Great Depression would be a short-run aberration.
D) monetary policy could tame the business cycle.
A contractionary monetary policy is appropriate during an expansion.
A) True
B) False
Figure: Production Possibility Frontier
Look at the figure Production Possibilities Frontier. A movement from point C
producing 12 cars and 16 computers per period to point B means a _____of _____ cars
and a _____ of _____ computers per period.
A) gain; 4; loss; 4
B) gain; 2; loss; 4
C) gain; 4; loss; 6
D) loss; 2; gain; 4
An increase in government spending on health care is likely to shift the _____ curve to
the _____.
A) short-run aggregate supply; right
B) short-run aggregate supply; left
C) aggregate demand; right
D) aggregate demand; left
In the long run, any given percentage increase in the money supply:
A) decreases real GDP.
B) leads to an equal percentage increase in the overall price level.
C) increases real GDP.
D) leads to an equal percentage decrease in the unemployment rate.
In the long run, an increase in the money supply:
A) will increase real GDP and the price level.
B) causes people to hold onto large sums of money.
C) results in no change in real GDP.
D) encourages people to save more money.
U.S. real GDP per capita in 2010 was _____ as much per person as in 1900.
A) 16%
B) 129%
C) 46%
D) 758%
If the opportunity cost of manufacturing machinery is higher in the United States than
in Britain and the opportunity cost of manufacturing sweaters is lower in the United
States than in Britain, then the United States will:
A) export both sweaters and machinery to Britain.
B) import both sweaters and machinery from Britain.
C) export sweaters to Britain and import machinery from Britain.
D) import sweaters from Britain and export machinery to Britain.
Figure: The Market for Loanable Funds with Government Borrowing
Look at the figure The Market for Loanable Funds with Government Borrowing. After
an increase in government borrowing, the new equilibrium interest rate will rise from
6% to _____ and the amount of private savings will _____.
A) 10%; stay the same
B) 8%; rise
C) 8%; fall
D) 10%; be indeterminate
In the local market for coffee, a normal good, the price will _____ and the quantity will
_____ if new coffee shops open and consumers' incomes decrease because of a
recession.
A) increase; be indeterminate
B) decrease; be indeterminate
C) be indeterminate; increase
D) be indeterminate; decrease
Unit-of-account costs may be especially important in the tax system when inflation
distorts the measures of income on which taxes are collected.
A) True
B) False
Suppose an economy is producing real GDP of $300 billion. The potential output is
equal to $400 billion, and the marginal propensity to consume is equal to 0.80. The
government should _____ taxes by _____ to bring the economy to potential output.
A) raise; $25 billion
B) cut; $33.33 billion
C) raise; $33.33 billion
D) cut; $25 billion
If a country has a working-age population of 200 million, 135 million people with jobs,
and 15 million people unemployed and seeking employment, then its unemployment
rate is:
A) 4%.
B) 7.5%.
C) 10%.
D) 67.5%.
In general, the discount rate is set above the federal funds rate to discourage banks from
borrowing from the Fed.
A) True
B) False
The _____ analyzes trade under the assumption that opportunity costs are constant and
therefore production possibility frontiers are straight lines.
A) pauper labor fallacy model
B) Ricardian model
C) Heckscher"Ohlin model
D) oligopoly model
Figure: Demand for Coconuts
Look at the figure Demand for Coconuts. If fish is a substitute good for coconuts and
the price of fish increases, it will be represented in the figure as a movement from:
A) A to C.
B) B to A.
C) C to A.
D) B to E.
Nate and Dylan are brothers. They have to mow the lawn and clean their rooms before
they can go to the high school football game. Nate mows the lawn and Dylan picks up
the rooms, and they make it to the football game on time. This statement best represents
this economic concept:
A) People usually exploit opportunities to make themselves better off.
B) There are gains from trade.
C) Markets usually lead to efficiency.
D) One person's spending is another person's income.
If the economy is at potential output and the Fed increases the money supply, in the
SHORT run the aggregate demand will likely:
A) shift to the left.
B) remain the same.
C) increase.
D) decrease.
Figure: Shifts in Demand and Supply IV
Look at the figure Shifts in Demand and Supply IV. The figure shows how supply and
demand might shift in response to specific events. Suppose the price of lumber falls
dramatically. Which panel BEST describes how this will affect the market for new
houses?
A) panel A
B) panel B
C) panel C
D) panel D
The consumer price index is calculated by the Congressional Budget Office.
A) True
B) False
Menu costs refer to the increased cost of:
A) food in a time of inflation.
B) eating out when inflation increases.
C) changing listed prices.
D) the minimum wage.
Table: Price and Output Data
Look at the table Price and Output Data.
Real GDP in year 5 is:
A) $1.29.
B) $16.
C) $35.
D) $63.
Cyclical unemployment:
A) occurs when people are between jobs.
B) is a lack of good matches between available jobs and skills.
C) is the normal unemployment around which the actual unemployment rate fluctuates.
D) is the deviation from the natural rate in the actual rate of unemployment.
People who are counted as unemployed by the Bureau of Labor Statistics are:
A) people without a job who are actively seeking a job.
B) discouraged workers.
C) workers who are underemployed.
D) people without a job who are actively seeking a job, discouraged workers, and
workers who are underemployed.
Figure: The Labor Market
Look at the figure
The Labor Market. The level of employment at the equilibrium wage rate is:
A) 80,000.
B) 110,000
C) 100,000.
D) 90,000.
A country has a financial account surplus if the balance on the:
A) financial account is negative.
B) financial account is positive.
C) current account is zero.
D) current account is positive.
Figure: The Production Possibility Frontiers for Jackson and Tahoe
Look at the figure The Production Possibility Frontiers for Jackson and Tahoe. In
autarky, Jackson produces and consumes 30 head of cattle and 80 bushels of wheat,
while Tahoe produces and consumes 80 head of cattle and 60 bushels of wheat. If the
two countries engage in international trade and specialize completely and if the price of
1 head of cattle equals the price of 2 bushels of wheat, world production of cattle will:
A) remain constant.
B) increase by 90 head.
C) increase by 120 head.
D) decrease by 30 head.
Under the Dodd-Frank Act of 2010, derivatives:
A) have to be bought and sold in open, transparent markets so that there is a limit to the
invisible risk that financial traders can assume.
B) are prohibited.
C) may be purchased and sold in foreign markets only.
D) may be purchased and sold only by state and local governments.
