If a country is experiencing inflation, nominal GDP is always greater than real GDP.
Capital deepening is the only mechanism by which economies can grow.
Accurate predictions for exchange rates can be determined by considering purchasing
power parity.
Because GDP ignores most transactions that do not take place in organized markets it
probably led us to underestimate the true growth in real output in recent years.
On the ‘supply side” of a market, producers indicate to consumers what they are willing
to sell, in what quantity, and at what price.
The outside lag associated with economic policy represents:
A) the time that it takes for a newly implemented policy to take effect.
B) the time needed for the Federal Reserve Board to meet.
C) the time that is necessary to recognize and implement policy.
D) the time it takes for the policy makers to admit that a policy is not working.
A decrease in the price level will cause a:
A) movement along the aggregate demand curve upwards.
B) movement along the aggregate demand curve downwards.
C) shift in the aggregate demand curve upwards.
D) shift in the aggregate demand curve downwards.
Suppose an individual works 12 hours per week in a family business and is not looking
for other work. Also assume that the individual is not paid for the 12 hours of work.
According to the Bureau of Labor Statistics, this individual would be classified as:
A) employed.
B) not in the labor force.
C) a discouraged worker.
D) none of the above
Recall Application 4, “Fertilizer and Crop Yields” to answer the following
questions:
According to the application, the corn production exhibited the principle of diminishing
returns because:
A) the size of the land and the amount of machinery were held constant.
B) the type of soil was held constant.
C) the type of fertilizer was held constant.
D) the amount of nitrogen in each bag is decreasing.
If, on average, the velocity of money is low
A) interest rates fall.
B) people hold onto money for a long period of time.
C) people hold onto money for a short period of time.
D) interest rates rise.
The slope of a nonlinear curve
A) is constant.
B) is negative.
C) is zero.
D) changes along the curve.
Figure 18.1 Refer to Figure 18.1. Duckland has a comparative advantage in the
production of:
A) sunglasses.
B) umbrellas.
C) both umbrellas and sunglasses.
D) neither umbrellas nor sunglasses.
Market failure occurs when
A) markets have perfect information.
B) markets do not produce the most efficient outcome.
C) companies merge to increase efficiency.
D) companies are too efficient.
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 real gain from
the investment is approximately
A) $3.
B) $4.
C) $7.
D) $11.
Refer to Figure 18.4. With an import ban, what is the equilibrium price of gloves in
Duckland?
A) $0
B) $8
C) $9
D) $12
We can use microeconomic analysis to:
A) learn how to balance a checkbook.
B) evaluate the merits of public policies.
C) understand marginal changes in the macroeconomy.
D) All of the above are correct.
A decrease in government spending and an increase in taxes will cause the:
A) budget deficit to decrease.
B) budget deficit to increase.
C) budget deficit to remain unchanged.
D) government debt to increase.
The aggregate supply curve in the short run is different from the aggregate supply curve
in the long run because of:
A) the recurring nature of supply shocks.
B) the crowding out effect.
C) the wealth effect.
D) the existence of sticky prices in the short run.
The share of corporate tax in total federal revenues
A) is larger than the other components of federal revenue.
B) is the smallest of all the components of federal tax revenue.
C) has declined over the past few decades to a relatively low level.
D) has grown significantly in each of the past 10 years.
During a press conference, the Secretary of Employment notes that the unemployment
rate is 7.0%. As a political opponent, how might you criticize this figure as an
underestimate? In rebuttal, how might the Secretary argue that the reported rate is an
overestimate of unemployment?
Suppose that demand for a product falls, but prices are sticky. What is likely to happen
to prices and output in that market, in the short run?
Describe the changes in the variables that will cause demand for a product to increase,
shifting the demand curve to the right.
Explain how an open market purchase can increase net exports and real GDP.