Which of the following would you expect to increase both interest rates and exchange
rates?
A) expansionary monetary policy
B) contractionary monetary policy
C) expansionary fiscal policy
D) Both B and C will increase both interest rates and exchange rates.
Suppose real GDP is $13 trillion, potential real GDP is $13.5 trillion, and Congress and
the president plan to use fiscal policy to restore the economy to potential real GDP.
Assuming a constant price level, Congress and the president would need to decrease
taxes by
A) $500 billion.
B) less than $500 billion.
C) more than $500 billion.
D) None of the above are correct. Congress should raise taxes in this case.
What impact might an increase in the budget deficit have on interest rates and exchange
rates?
A) Interest rates and exchange rates increase.
B) Interest rates increase and exchange rates decrease.
C) Interest rates decrease and exchange rates increase.
D) Interest rates and exchange rates decrease.
If people assume that future rates of inflation will ________, they are said to have
adaptive expectations.
A) be higher than inflation rates of the past
B) follow the pattern of inflation rates in the past
C) be lower than inflation rates of the past
D) not be related to inflation rates of the past
Economics is the study of the ________ people make to attain their goals, given their
________ resources.
A) purchases; unlimited
B) choices; scarce
C) income; available
D) decisions; household
When the economy enters a recession, your employer is unlikely to reduce your wages
because ________ during a recession.
A) output and input prices generally fall
B) lower wages reduce productivity and morale
C) output prices always fall
D) output prices generally fall and input prices generally rise
Autonomous expenditure is a type of expenditure that does not depend on
A) wealth.
B) expectations.
C) rates.
D) GDP.
An example of a seasonally unemployed worker would be
A) a software engineer who is laid off because of declining demand for the software he
writes.
B) a day care provider who quits his job to go back to school.
C) a General Motors employee loses her job because the company is downsizing its
work force.
D) a ski lift operator who loses his job when the snow melts in the spring.
E) a mother who quits her job to stay home with her children.
Suppose in Belgium, the opportunity cost of producing a trombone is 8 clarinets. In
Denmark, the opportunity cost of producing a trombone is 6 clarinets.
a. What is the opportunity cost of producing a clarinet for Belgium?
b. What is the opportunity cost of producing a clarinet for Denmark?
c. Which country has a comparative advantage in the production of clarinets?
d. Which country has a comparative advantage in the production of trombones?
How does the increasing use of digital cameras affect the market for traditional camera
film?
A) The demand curve for traditional camera film shifts to the right.
B) The quantity of traditional camera film demanded decreases.
C) The quantity of traditional camera film demanded increases.
D) The demand curve for traditional camera film shifts to the left.
For each of the following pairs of products state which are complements, which are
substitutes, and which are unrelated.
a. Swim fins and scuba tanks
b. Coca Cola and Volkswagens
c. Printers and ink cartridges
d. Ice and ice chests
e. Heineken and Corona
In the United States, currency includes
A) gold, silver, and paper money.
B) checking and savings account deposits.
C) paper money and coins in circulation.
D) traveler’s checks.
M1 includes
A) currency in circulation, checking account deposits in banks, and holdings of
traveler’s checks.
B) currency in circulation, savings account balances, and checking account deposits in
banks.
C) currency in circulation, savings account balances, checking account deposits in
banks, and holdings of traveler’s checks.
D) coins, savings account balances, traveler’s checks.
You earned $30,000 in 2000, and your salary rose to $80,000 in 2013. If the CPI rose
from 82 to 202 between 2000 and 2013, which of the following is true?
A) There was deflation between 2000 and 2013.
B) The purchasing power of your salary fell between 2000 and 2013.
C) The purchasing power of your salary remained constant between 2000 and 2013.
D) The purchasing power of your salary increased between 2000 and 2013.
By offering training to workers whose firms laid them off because of competition from
foreign firms, the federal government is attempting to reduce
A) frictional unemployment.
B) structural unemployment.
C) cyclical unemployment.
D) seasonal unemployment.
E) unnatural unemployment.