A nation’s trade deficit will expand when its:
a. currency appreciates.
b. economy is shrinking.
c. investment environment is less attractive to foreigners.
d. all of these are true.
A worker would be hurt least by inflation when the:
a. worker anticipates inflation and increases savings at the bank.
b. worker is protected by a cost-of-living adjustment clause in an employment contract.
c. price level increases but at a decreasing rate.
d. worker is protected by fixed annual increases in wages and benefits in an
employment contract.
A limit on the quantity of a good that may be imported in a given time period is called:
a. an embargo.
b. a tariff.
c. a quota.
d. dumping.
Which of the following is the best description of the effects of an increase in the supply
of bread?
a. Consumers will pay more for bread.
b. Bread prices will fall, and bread sales will rise.
c. A permanent surplus of bread will remain on the market.
d. Bakers will have higher marginal costs.
In the aggregate demand and supply model, the:
a. vertical axis measures the average price level.
b. horizontal axis measures real GDP.
c. aggregate supply curve is vertical at full-employment real GDP.
d. All of these.
An increase in the required reserve ratio by the Federal Reserve would:
a. cause M1 to contract.
b. cause M1 to expand.
c. have no effect on M1 or M2.
d. affect only M2, not M1.
A strong U.S. dollar is one that has:
a. c and e.
b. d and e.
c. depreciated.
d. appreciated.
e. helped U.S. exporters.
The net exports effect exists because a:
a. higher price level will reduce interest rates and stimulate foreign investment.
b. lower price level will make domestically produced exports less expensive relative to
foreign goods.
c. higher price level will reduce the purchasing power of money.
d. lower price level will encourage Americans to import more foreign goods.
The negative slope of the demand curve reflects the:
a. positive relationship between price and quantity.
b. proportional relationship between price and quantity.
c. inverse relationship between price and quantity.
d. positive relationship between income and quantity.
e. inverse relationship between income and price.
Measured as a share of the economy, government expenditures:
a. have been between 10 and 15 percent of the U.S. economy since 1930.
b. have been between 20 and 25 percent of the U.S. economy since 1930.
c. rose from less than 10 percent in 1929 to nearly 40 percent in 2009.
d. declined from more than 50 percent in 1929 to approximately 25 percent in 2009.
Which of the following would be classified as a personal consumption expenditure?
a. All of the following.
b. Your purchase of a newly constructed house
c. Your purchase of a preowned house.
d. Your purchase of one share of Microsoft stock.
e. Your purchase of this economics course.
When economists say that private investment is “autonomous,” they mean that it:
a. will never change.
b. is not dependent on the current level of disposable income.
c. is determined by the “animal spirits” of business decision makers.
d. is determined by the level of saving.
If the marginal propensity to consume = 0.75, then:
a. the marginal propensity to save = 0.75.
b. the marginal propensity to save = 1.33.
c. the marginal propensity to save = 0.20.
d. the marginal propensity to save = 0.25.
e. since the marginal propensity to save and the marginal propensity to consume are
unrelated, we cannot determine the marginal propensity to save from the information
given.
To close a recessionary gap using fiscal policy, the government can:
a. increase government spending by the size of the gap.
b. decrease government spending by the size of the gap.
c. increase government spending by more than the size of the gap.
d. increase government spending by less than the size of the gap.
e. decrease government spending by more than the size of the gap.
Cost-push inflation occurs when the:
a. aggregate demand curve shifts leftward while the aggregate supply curve is fixed.
b. aggregate supply curve shifts leftward while the aggregate demand curve is fixed.
c. aggregate demand curve shifts rightward while the aggregate supply curve is fixed.
d. aggregate supply curve shifts rightward.
Full employment is the situation in which the economy operates at an unemployment
rate equal to the sum of:
a. structural and frictional unemployment.
b. cyclical and frictional unemployment.
c. structural and cyclical unemployment.
d. structural, frictional, and cyclical unemployment.
The rational expectations hypothesis implies that discretionary macro-policy will:
a. be ineffective, even in the short run.
b. be effective in the short run but ineffective in the long run.
c. be effective both in the short run and long run.
d. make it possible to trade-off a higher rate of inflation for a lower rate of
unemployment.
The opportunity cost of watching television is:
a. all of the alternative programs that appear on other stations.
b. zero because there is no money expenditure involved.
c. the alternative use of the time foregone by watching the program.
d. zero if it benefits you.
Which of the following is a true statement?
a. The LDC classification is of the questionable accuracy.
b. GDP per capita ignores the degree of income distribution.
c. GDP per capita is affected by exchange rate changes.
d. GDP per capita does not account for the difference in the cost of living among
nations.
e. All of these are true.
If the Federal Reserve wishes to increase the money supply it should decrease the
discount rate and/or decrease the required reserve ratio and/or buy government
securities on the open market.
At the equilibrium price, deadweight loss is minimized.
An economic justification for government providing public goods and services is that
many people can benefit regardless of whether they pay or not.
What is full employment? What are the different kinds of unemployment? What
constitutes the natural (normal) rate of unemployment?
The nominal rate of interest is any rate of interest below 3 percent.
Personal income minus personal taxes equals disposable personal income.
The duration of unemployment is not a leading indicator.
Excess quantity demanded for a good creates pressure to push the price of that good
down toward the equilibrium price.
Consumer surplus measures the value between the price consumers are willing to pay
for a product and the preference price.
A simultaneous $10 million increase in both taxes and government spending will have
no net effect on aggregate demand.