The real wage can increase only if the nominal wage increases.
Over the past several decades, federal transfer payments as a fraction of GDP have
trended upward.
If the price level is increasing and output is falling, which of the following could be the
reason?
a. A negative demand shock
b. A positive supply shock
c. A positive supply shock combined with a positive demand shock
d. A negative supply shock
e. A positive demand shock.
The 2001-2007 economic expansion began when a change in Federal Reserve policy
and other global conditions caused interest rates to drop and stay low.
A decrease in the price of a commodity results in a(n)
a. decrease in supply
b. decrease in quantity demanded
c. increase in demand
d. decrease in quantity supplied
e. increase in supply
Which of the following might result in an underestimation of GDP?
a. Significant underground activity such as trade in illegal drugs
b. Sales of used cars
c. Many intermediate goods
d. Imported goods
e. Exported goods
According to classical economics,
a. the economy moves to full employment in the long run
b. the economy is always at full employment in the short run
c. the economy is rarely at full employment
d. business cycles explain long-run fluctuations in the economy
e. the economy is at full employment in the short run, but in the long run, business
cycle movements lead the economy away from full employment
The relationship between household saving and business investment spending in
equilibrium is:
Planned investment = household saving – government spending + taxes
From where do most of a bank’s profit come?
a. Issuing currency.
b. Subsidies from the Federal Reserve.
c. Lending out funds and charging interest.
d. Buying and selling bonds.
e. Selling mutual fund shares.
Countercyclical fiscal policy can
a. only be employed in reaction to an existing recession
b. only be employed in reaction to an existing boom
c. be employed to prevent a potential recession or boom or in reaction to an existing
recession or boom
d. only be employed to prevent a potential boom
e. only be employed to prevent a potential recession.
The Federal Reserve Open Market Committee allows representatives of the President
and Congress to sit on its meetings.
If a piece of currency must be accepted for payment because the government says so,
the currency is called
a. commodity money
b. money backed by gold
c. high-powered money
d. greenbacks
e. fiat money
When a new good enters the market, the CPI
a. accounts for the change in its price immediately.
b. fails to account for the impact on living standards from the good’s existence.
c. never accounts for how the good changes in price.
d. accounts for the decline in the price but not for any increases.
e. accounts for the good only if sold in populous eastern states.
Right or wrong, using the expenditure approach to GDP will show a net increase in
GDP because of the 2005 Hurricanes.
The inflation rate for the economy as a whole is a
a. normative value judgment
b. positive value judgment
c. macroeconomic statistic
d. microeconomic statistic
e. critical assumption
Which of the following is the formula for the government’s budget deficit?
a. S – G
b. G -T
c. C + I + G
d. S + I
e. I + G
An increase in supply results in a(n)
a. increase in demand
b. decrease in equilibrium quantity and an increase in equilibrium price
c. decrease in equilibrium quantity and a decrease in equilibrium price
d. decrease in equilibrium price and an increase in equilibrium quantity
e. unfavorable shift in tastes and preferences
Savings and loan associations are not a financial intermediary.