Workers are more productive than in the past because they:
A) have more natural resources to use.
B) work a four-day week.
C) are better educated and so have more human capital.
D) are physically larger than their parents.
According to the rule of 70, if a country doubles its real GDP per capita every 20 years,
that country must be growing at an annual rate of:
A) 2%.
B) 3.5%.
C) 35%.
D) 70%.
A 20% increase in the aggregate price level will increase the quantity of money
demanded by:
A) 20%.
B) the money multiplier.
C) 10%.
D) half of the money multiplier.
If the opportunity cost of producing either of two goods in question is constant, the
production possibility frontier is:
A) linear.
B) concave to the origin.
C) convex to the origin.
D) upward-sloping.
In a simple economy with no taxes, government spending, exports, or imports, any
disposable income that is not consumed is saved.
A) True
B) False
The total value of all final goods and services produced in a given year, calculated with
the prices current in the year in which the output is produced is:
A) real GDP.
B) nominal GDP.
C) net exports.
D) consumption spending.
The savings”investment spending identity says that savings and investment spending
are:
A) always equal because private savings match government savings.
B) equal as long as there is no trade surplus or deficit.
C) always equal for the economy as a whole.
D) equal as long as there is no government budget deficit or surplus.
Spending for Medicare and Medicaid accounts for approximately _____ of federal
spending.
A) 10%
B) 20%
C) 30%
D) 40%
According to the rule of 70, if real GDP per capita is growing at 2% a year, in 100 years
it will have increased by:
A) about 4 times.
B) about 7 times.
C) almost 30 times.
D) almost 60 times.
According to the interest rate effect, an increase in the price level causes people to
_____ their money holdings, which _____ interest rates and _____ investment
spending.:
A) increase; increases; decreases
B) decrease; increases; decreases
C) increase; decreases; decreases
D) decrease; decreases; increases
Which of the following is NOT one of the four main types of financial assets?
A) real estate
B) bonds
C) bank deposits
D) loans
A binding minimum wage results in:
A) higher wages for those who were working prior to the minimum wage
implementation.
B) an increase in structural unemployment.
C) a decrease in the amount of cyclical unemployment.
D) lower actual unemployment rates, since higher wages encourage more people to
enter the labor force.
Fiat money is:
A) money backed by gold.
B) money that only the government will accept to pay taxes.
C) paper money with no intrinsic value.
D) used only in the United States as a medium of exchange.
In 2007, the Fed raised its target federal funds rate to prevent unemployment and a
recession.
A) True
B) False
Inflation does NOT reduce purchasing power if:
A) prices of essential products, such as food and gasoline, don’t increase too much.
B) nominal wages rise at the same rate as prices.
C) it remains under 10% per year.
D) the Federal Reserve increases the money supply enough to offset it.
Keynesian economics stressed:
A) the importance of total spending.
B) the self-correcting power of free markets.
C) the long run.
D) that the Depression should run its course to bring down the high cost of living.
The Great Moderation consensus is that discretionary fiscal policy can be destabilizing
because of the political business cycle.
A) True
B) False
Which of the following is FALSE? GDP can be calculated by summing:
A) total market value of all final goods and services produced in a country in a given
year.
B) all factor payments within a country’s borders in a given year.
C) the value added for all goods and services.
D) government spending and tax revenues.
Facebook’s primary type of investment spending is the purchase of:
A) server farms, or arrays of linked computers.
B) health care for its employees.
C) stock in Yahoo and Google.
D) U.S. Treasury securities.
A situation in which borrowers cannot find credit or must pay very high interest rates
for loans is called a:
A) liquidity trap.
B) zero-bound limit.
C) credit crunch.
D) stagflation.
The positive relationship between the aggregate price level and aggregate output
supplied gives the short-run aggregate supply curve a(n) _____ slope.
A) upward
B) vertical
C) horizontal
D) downward
Severe banking crises usually lead to:
A) low levels of unemployment.
B) high levels of unemployment.
C) high levels of saving and investment spending.
D) rapid growth of real GDP per capita.
Investment in human capital shifts the aggregate production function:
A) downward.
B) leftward.
C) upward.
D) rightward.
Figure: Expanded Circular-Flow Model
Look at the figure Expanded Circular-Flow Model. The government has a budget:
A) surplus of $150.
B) surplus of $220.
C) deficit of $70.
D) deficit of $200.
Economies with high growth rates tend to be those that have:
A) large amounts of natural resources.
B) a stable government that protects property rights.
C) high levels of government regulation.
D) a large defense budget.
One person’s spending is another person’s:
A) loss.
B) income.
C) physical capital.
D) opportunity cost.
Nominal GDP may be used to compare:
A) the dollar amount of final goods produced in different years.
B) the price of final goods times the number of goods produced in one year.
C) output if prices are increasing.
D) living standards among different countries.
In 1820, Mexico had a somewhat higher real GDP per capita than Japan, but today
Japan’s is higher than Mexico’s.
A) True
B) False
In a recession, the Fed usually purchases short-term government securities to decrease
interest rates and increase spending.
A) True
B) False
Look at the table Production Possibilities for the United States and Canada. Both
nations can produce cars and lumber. If these nations trade, Canada has the comparative
advantage in _____ and should trade _____ to the United States in exchange for _____.
A) cars; cars; lumber
B) lumber; lumber; cars
C) lumber; cars; lumber
D) cars; lumber; cars
The short-run aggregate supply curve will shift to the right if:
A) commodity prices rise.
B) nominal wages rise.
C) productivity decreases.
D) nominal wages fall.
Figure: The Market for Melons in Russia II
Look at the figure The Market for Melons in Russia II. Suppose Russia opens to trade
and finds the world price to be $10. Russia will:
A) import 30 units of melons.
B) export 30 units of melons.
C) not find it beneficial to trade.
D) import 40 units of melons.
When corporations need to borrow large amounts of money, they can minimize their
transaction costs by getting many small loans directly from many people.
A) True
B) False
The Federal Reserve:
A) was established by Franklin Delano Roosevelt to disburse funds for the Works
Progress Administration.
B) was established in 1913 in response to the Panic of 1907.
C) conducts fiscal policy for state governments.
D) was established by Ronald Reagan during the recession of 1982.
Figure: AD”AS
Look at the figure AD”AS. Suppose the economy is initially at E1, where AD1 intersects
SRAS1 and LRAS. Now, suppose that the AD1 shifts to AD2. That shift could be due to:
A) an increase in the aggregate price level.
B) a decrease in government expenditure.
C) an increase in tax rates.
D) an increase in money supply.