What matters to people is the face value of money or income.
In the circular flow diagram, households and the firms interact in two markets: the
product and the factor markets.
The opportunity cost of a table is 5 chairs in nation A and 4 chairs in nation B. If the
nations specialize and trade, an acceptable terms of trade for both nations would be 3
chairs per table.
Consumers often base their spending on their estimated permanent income.
The United States is still part of the Bretton Woods System.
An improvement in technology that makes workers more productive will cause the
demand for workers to decrease.
In the circular flow model, firms sell the services of factors of production to
households.
Suppose that the price for fully electric vehicle made by Toyota increases. The quantity
of fully electric cars sold in the market will:
A) increase, because Toyota would be willing to sell more fully electric vehicles.
B) decrease, because Toyota believes that to maintain the higher prices, it must sell a
smaller quantity.
C) increase, because other auto manufacturers would want to enter the market and also
sell fully electric vehicles.
D) Both A and C are correct.
A balance of payments surplus occurs if
A) exports exceed imports.
B) the supply of a nation’s currency exceeds the demand for the currency at the current
exchange rate.
C) the demand for a nation’s currency exceeds the supply of the currency at the current
exchange rate.
D) the supply of a nation’s currency is equal to the demand for the currency at the
current exchange rate.
Recall the Application about the decrease in taxes on cigarettes in several
Canadian provinces in 1994 to answer the following question(s). Recall the
Application. The change in demand for cigarettes resulting from the decrease in taxes
would normally create, ceteris paribus,
A) an increase in their supply.
B) a decrease in their supply.
C) an increase in their quantity supplied.
D) a decrease in their quantity supplied.
In the market for labor, the buyers of labor are:
A) the workers.
B) the firms.
C) the resource owners.
D) both B and C are correct.
Explain how the following statements relate to the velocity of money. Assume a
constant money supply.
(a) Businesses around the country decide to pay workers only once a month in order to
reduce paperwork and improve efficiency.
(b) Banks around the country begin using a new check clearing system that allows
checks to clear much faster than they did previously.
(c) Credit card companies and banks announce a huge promotion to increase the use of
credit cards for most, if not all, purchases. This includes food, utility bills, and most
other necessities.
Which of the following is not an assumption in the Solow Model?
A) no depreciation
B) constant population
C) no foreign sector
D) no government
If the real interest rate is 5 percent and the nominal interest rate is 2 percent, this
implies an expected inflation rate of
A) -7 percent.
B) -3 percent.
C) 3.5 percent.
D) 7 percent.
The rate at which nations will exchange goods and service is known as the:
A) exchange rate.
B) transfer rate.
C) terms of trade.
D) terms of exchange.
The percentage rate of change in the price level is called the
A) chain-weighted price index.
B) Consumer Price Index.
C) rate of inflation.
D) rate of absorption.
Recall the Application about the size of Wal-Mart to answer the following
question(s). During 2008, Wal-Mart’s sales were approximately $374 billion, or
roughly 2.6 percent of U.S. GDP, and its cost of sales was $286 billion.
According to this Application, what was the approximate value of Wal-Mart’s value
added in 2008?
A) $88 billion
B) $286 billion
C) $374 billion
D) $661 billion
Table 6.6 Refer to Table 6.6.
The number of people unemployed equals:
A) 6.825 million.
B) 5 million.
C) 10.5 million.
D) 8 million.
The production possibilities curve represents the set of all
A) feasible combinations of goods that the economy can produce given that a nation’s
resources are fully employed.
B) factors of production that can be used to manufacture goods and services.
C) combinations of goods and services that can be used in the production of other goods
and services.
D) nonlinear forms of production in the economy.
Explain the concept of crowding out.
Using the real business cycle theory, explain how a significant technological
improvement can alter the equilibrium employment level and the output level.
Comment on the following statement: “Higher population growth leads to higher living
standards because it leads to an increase in the labor force.”
What is a unit of account? Why is it useful for an economy to have a unit of account?
What do economists mean when they say that there is “no such thing as a free lunch”?
List the four options the federal government faces in regard to its budget surpluses.
What happens to investment and interest rates if the government runs a budget deficit in
a closed economy? Assume that the Ricardian Equivalence does not hold. Explain.
Refer to Application 1, “Using Value Added to Measure the True Size of
Wal-Mart,” to answer the following questions:
Using information from Application 1, explain how you would calculate Wal-Mart’s
“value added” for the year 2008?
Explain why the long-run aggregate supply curve is vertical.
Based on the expenditure approach, discuss and explain each of the components of
GDP.