China has much higher rate of growth than the United States, but the average Chinese
household is _____ a typical U.S. household. China’s real GDP per capita is _____ that
of the United States.
A) as well off as; catching up with
B) richer than; much higher than
C) still a bit poorer than; catching up with
D) still far poorer than; much lower than
In a time-series graph, large changes can be made to appear trivial by:
A) changing the scale of the axes.
B) labeling more intervals.
C) defining the dependent variable.
D) defining the independent variable.
Unanticipated inflation:
A) reduces the value of money.
B) increases the value of future obligations.
C) increases certainty about the future.
D) helps lenders.
If labor is abundant in South Africa but capital is scarce, when South Africa opens to
trade, the price of labor will _____ and the price of capital will _____.
A) rise; rise
B) fall; fall
C) rise; fall
D) fall; rise
Analysis of the Phillips curve reveals that a _____ in unemployment, like that of the
early 1980s, is needed to break the cycle of inflationary expectations.
A) permanent increase
B) permanent decrease
C) temporary increase
D) temporary decrease
When wages rise,AS shifts _____ and aggregate price levels _____.
A) left; fall.
B) right; fall
C) right; rise
D) left; rise
The main problem with the national banking system in the United States between 1864
and 1913 was that the money supply was difficult to shift from urban to rural areas.
A) True
B) False
When the economy is in a liquidity trap, consumers and businesses aren’t willing to
borrow and spend even though interest rates may be zero.
A) True
B) False
If the Federal Reserve conducts an open market purchase, holding everything else
constant, in the long run there will be:
A) an increase in the aggregate price level.
B) an increase in the aggregate output level.
C) a decrease in unemployment.
D) no effects on output, unemployment, or the price level.
The short-run aggregate supply curve would shift to the left for all the following
reasons EXCEPT:
A) a decrease in productivity.
B) an increase in nominal wages.
C) an increase in interest rates.
D) an increase in the price of commodities used for production.
Look at the table Competitive Market for Good Z. If the price of good Z is $15, there
will be:
A) excess demand of 25 units.
B) excess supply of 25 units.
C) a shortage of 20 units.
D) a surplus of 45 units.
Value added in national income accounts refers to the:
A) value added by labor to the production process.
B) difference between the final price and the value of inputs purchased.
C) difference in profits at various stages of production.
D) value of all inputs used by the final producer.
A current account deficit is generally a result of:
A) imports exceeding exports.
B) U.S. purchases of bonds issued by foreign corporations.
C) a large amount of U.S. purchases of foreign real estate.
D) exports exceeding imports.
Suppose the government increases spending to fund tuition assistance for qualified
college students. Automatic stabilizers will _____ the _____ effect of the _____ in
aggregate demand.
A) increase; contractionary; decrease
B) decrease; contractionary; increase
C) increase; expansionary; increase
D) decrease; expansionary; increase
Import tariffs always benefit domestic producers more than they hurt domestic
consumers.
A) True
B) False
Most economists believe that discretionary fiscal policy should be used sparingly
because of the risk of:
A) budget deficits.
B) lags in adjusting policy, so that policies designed to fight a recession may end up
intensifying an inflationary gap.
C) budget surpluses.
D) sacrificing equity for efficiency.
Assembling a pool of loans and selling shares of the pool to investors is called:
A) securitization.
B) deleveraging.
C) derivation.
D) investment banking.
Using marginal analysis to decide whether to consume an additional slice of pizza
requires making a comparison of the benefits and costs associated with the consumption
of an additional slice of pizza.
A) True
B) False
Figure: Crowding Out
If the supply of loanable funds curve shifts to the right, the result will be a(n) _____ in
the total amount of borrowing and a(n) _____ in the interest rate.
A) increase; increase
B) decrease; decrease
C) increase; decrease
D) decrease; increase
The aggregate price level is a measure of the overall level of prices in the economy.
A) True
B) False
People use wealth to smooth consumption over their life cycle.
A) True
B) False
An increase in aggregate demand is seen as a(n) _____ the aggregate demand curve.
A) shift to the right in
B) downward movement along
C) upward movement along
D) shift to the left in
A bond is:
A) a share of ownership of a company.
B) an IOU that pays interest.
C) a portion of a firm’s profits paid to shareholders.
D) part of private savings.
Consumer spending in the United States normally accounts for approximately _____ of
the economy.
A) one-third
B) one-half
C) two-thirds
D) three-fourths
A Peruvian financial investor purchases a sporting goods store in Colorado Springs. In
the accounting for U.S. international transactions, this transaction would appear in the
_____, and it would be entered as a payment _____ foreigners.
A) current account; from
B) current account; to
C) financial account; from
D) financial account; to
Figure: Strawberries and Submarines II
Look at the figure Strawberries and Submarines II. The downward slope of the
production possibility frontier implies that resources:
A) must be used efficiently.
B) are scarce.
C) should not be wasted.
D) should be allocated so that approximately equal amounts of both goods are
produced.
One normally expects that unemployment increases while aggregate output and
aggregate incomes decrease during:
A) an expansion.
B) government intervention.
C) a recession.
D) the peak of the business cycle.
Because the gap in real GDP per capita between Western Europe, North America, and
parts of Asia is widening, the convergence hypothesis is wrong.
A) True
B) False
If real business cycle theory uses an upward-sloping aggregate _____ curve, aggregate
_____ is _____.
A) demand; supply; relevant
B) demand; supply; irrelevant
C) supply; demand; irrelevant
D) supply; demand; relevant
Which of the following assets is money?
A) a $20 bill
B) a work of art
C) a baseball signed by a famous player
D) shares of stock in a profitable company
Real GDP tends to understate our economic well-being because it:
A) includes the value of services produced in the home.
B) excludes the value of leisure.
C) includes expenditures on crime prevention equipment.
D) includes health care costs related to the consumption of cigarettes.
The study of economics arises because of the necessity of choice, and the necessity of
choice arises because of the fundamental problem of scarcity of resources.
A) True
B) False
If the U.S. dollar appreciates, we expect all of the following EXCEPT that:
A) Americans will buy more foreign currency.
B) Americans will buy more goods from abroad.
C) U.S. exports to other countries will decline.
D) Americans will buy fewer goods from abroad.
Market equilibrium will always be efficient even if it is not equitable.
A) True
B) False
Figure: The DVD Rental Market
Look at the figure The DVD Rental Market. At a rental price of $6, there will be:
A) equilibrium in the rental market for DVDs.
B) a decrease in demand.
C) an excess supply of 20 DVD rentals.
D) an excess demand of 20 DVD rentals.