The reason why economists do not need details regarding the topography of a region
when determining driving directions is because economics is because economics
desires unrealistic assumptions.
The deposit insurance is provided by a private corporation.
The definition of a hyperinflation is having an inflation rate of 50 percent a year (or
more).
Proponents of the estate tax argue that the tax is necessary to prevent “unfair”
accumulation of wealth across generations.
The full-employment level of output changes with the supply of labor.
A decrease in the money supply will decrease interest rates in the long run.
As the price of a product rises, the quantity supplied increases.
When considering the aggregate demand curve, the wealth effect, interest rate effect
and effects from international trade reinforce each other.
Due to diminishing returns, the larger the number of scientists and engineers employed
in a country, the slower the pace of technological progress.
If Canadian income grows at a rate of 2 percent per year and French income grows at a
rate of 3 percent each year, it will take about 35 years for Canadian income to double,
but only 23 years for French income to double.
If the government experiences a budget deficit that it finances through borrowing, then
the country’s Debt/GDP ratio will always increase, even if the economy experiences
economic growth.
When an economy is at full employment, the unemployment rate is zero percent.
Isabel receives a check for $7,000 from Kermit and deposits it in her bank. Suppose that
the reserve ratio is 10 percent. As a result of this transaction the money supply will
A) increase by $70,000.
B) decrease by $63,000 and then increase by $70,000.
C) decrease by $70,000 and then increase by $63,000.
D) not change.
The cost of the basket of goods in 2009 is $550 and the cost of the basket of goods in
2010 is $700. If 2009 is used as the base year, the price index for 2010 is:
A) 127.2.
B) 155.
C) 78.5.
D) 100.
If you expect that the inflation rate is 5 percent and the actual inflation rate turned out to
be exactly 8 percent, then:
A) lenders gain.
B) borrowers gain.
C) both the borrowers and lenders gain.
D) neither borrowers nor lenders gain.
If a bond promises a payment of $200 and the interest rate is 3%, then the price of the
bond is:
A) $206.2.
B) $194.2.
C) $197.
D) $206.
When a specialized worker gains insights into a particular task that leads to better
production methods it is called:
A) continuity.
B) innovation.
C) specialization.
D) repetition.
Which of the following does NOT shift the U.S. aggregate demand curve?
A) an increase in the supply of money
B) an increase in GDP in Japan
C) a decrease in taxes
D) a decrease in the price level
Suppose you have $100 to invest for a year and the nominal interest rate is 7 percent. If
the inflation rate during the year is 4 percent, at the end of the year your nominal gain
from the investment is
A) $3.
B) $4.
C) $7.
D) $11.
In considering the relationships between price and quantity demanded, ceteris paribus
directs the economist to assume that
A) price increases affect quantity.
B) quantity increases affect prices.
C) either price nor quantity affect demand.
D) all other variables remain unchanged.
Which of the following is included in “Entitlement and mandatory spending”?
A) Social Security
B) Medicare
C) Medicaid
D) All of the above are correct.
Recall the Application about Austrian economist Henry Hazlitt and the Broken Window
Fallacy to answer the following question(s). Hazlitt questioned whether a hoodlum
breaking a store window was actually good for society.According to this Application,
the argument that the broken window is good for society only works
A) if the economy is operating below full employment where resources are
underemployed.
B) if the economy is operating at full employment where resources are fully employed.
C) if the economy is operating above full employment where too few resources ae
available.
D) in theory, but never in reality.
The Federal Open Market Committee consists of the:
A) 7 members selected by the President and a chairperson selected by the Board of
Governors of the Federal Reserve System.
B) 9 directors each elected by a district Federal Reserve Bank and 3 members selected
by the Treasury secretary.
C) 12 district Federal Reserve Bank presidents, the 7 governors from the Board of
Governors, and the Treasury secretary.
D) none of the above
Which of the following uses of tax revenues collected by the government leads to
increased capital deepening in the United States?
A) providing food to a nation suffering from a famine
B) foreign aid given to Mexico to build new schools
C) higher salaries for members of Congress
D) subsidizing airport construction in Seattle
A person who is currently actively looking for a job, but has a job that pays for 5 hours
a week only is classified by the BLS as:
A) unemployed.
B) employed.
C) not in the labor force.
D) under 16.
In the short run
A) the level of GDP is determined by the demand and supply for labor, the supply of
capital, and technological progress.
B) increases in the money supply increase GDP.
C) prices are flexible.
D) the economy always operates at full employment.
In the long run, decreases in the money supply will
A) decrease real interest rates.
B) increase real interest rates.
C) may increase or decrease real interest rates.
D) have no effect on real interest rates.
The level of potential output in the United States increases as the
A) supply of labor increases.
B) stock of capital decreases.
C) demand for labor decreases.
D) supply of labor decreases.
Labor productivity can be calculated by:
A) dividing GDP by the number of hours worked by all workers in a given year.
B) dividing GDP by the number of workers in a given year.
C) dividing GDP by the price level in a given year.
D) the growth rate of GDP divided by the growth rate of the labor force in a given year.
Consider a two-input production function, one of which is increasing while the other is
fixed. At the point of diminishing returns, output will
A) increase at an increasing rate.
B) increase at a decreasing rate.
C) decrease at an increasing rate.
D) decrease at a decreasing rate.
How would the Fed’s changing the discount rate affect the money supply?
Suppose that you are an Israeli citizen and had invested in a one-year U.S. bond that
yielded 5 percent. The bond cost $5,000 and paid $5,250 at the end of the year. At the
time you bought the bond, the exchange rate was 3.8 shekels/dollar. How many shekels
did the bond cost? If the exchange rate fell to 3.5 shekels/dollar over this time period,
what would the return on your investment be?
Briefly discuss the classical view of the labor market. Specifically, to what extent can
unemployment occur based on the classical view? Explain.
Describe the field of economics known as microeconomics.
Imagine that an economy produces two goods, flashlights and fishing lures. In 2011, the
economy produced 100 flashlights and 50 fishing lures, and the prices of flashlights and
fishing lures were $5 and $11, respectively. In 2012, the economy produced 120
flashlights and 60 fishing lures, and the prices of flashlights and fishing lures were $7
and $14, respectively. respectively. What happened to nominal GDP from 2011 to
2012? What happened to real GDP?
What is meant by the term “outside lags”?
Explain what is meant by the economic principle of voluntary exchange.
Explain why investors would choose to hold on to money for investment purposes when
money gives out a zero rate of return.
In what two ways can education contribute to economic growth?