Recall Application 1, “Increasing Life Expectancy and Aging Populations Spur Costs of
Entitlement Programs,” to answer the following questions:
According to the application, increasing life expectancy would affect the budget
because:
A) as the population grows older, the Social Security payments will increase.
B) as the population grows older, Medicare payments would increase.
C) as the population grows older, Medicaid payments would increase.
D) All of the above are correct.
The slope of a curve measures
A) the change in one variable in response to the change in the other variable.
B) the length of the curve.
C) only the change in the horizontal variable.
D) only the change in the vertical variable.
Joe runs a business and needs to decide how many hours to stay open. Figure 2.2
illustrates his marginal benefit of staying open for each additional hour. Suppose that
Joe’s marginal cost of staying open per hour is $24. How many hours should Joe stay
open?
A) 3 hours
B) 4 hours
C) 5 hours
D) 6 hours
When making economic policies or taking actions to fight inflation, a central bank will
likely find ________ an acceptable part of the solution.
A) lower interest rates
B) increasing unemployment
C) expansionary policies
D) contractionary polices
Recall the Application about how the Fed kept the U.S. financial system in operation
following the attacks of September 11, 2001, to answer the following question(s). To
help prevent financial firms from defaulting on their debts, the Fed took several steps to
provide additional funds to the financial system, including allowing banks to borrow
more, increasing the difference between the credits and debits it extended while serving
as a clearinghouse for checks, purchasing government securities, and providing dollars
to foreign central banks. Together, these actions increased the credit extended by the
Fed by over $90 billion.
According to this Application, following the attacks of September 11, 2001, the Federal
Reserve purchased government securities, putting $30 billion in the hands of private
citizens and their banks. By extending cash to banks during the potential financial crisis
following the September 11 attacks, the Fed was attempting to
A) fend off a financial panic.
B) decrease the federal deficit.
C) reduce potential inflation.
D) decrease net exports.
Recall the Application about the possible link between the value of the U.S. dollar and
the worldwide increase in commodity prices to answer the following question(s).
Starting in the summer of 2010, there was a rise in prices of commodities such as oil
and food worldwide. Some economists suggested that monetary policy in the United
States was the cause of the worldwide commodity boom.According to this Application,
Janet L. Yellen, the Vice-Chair of the Board of Governors, believes that ________ in
worldwide demand and ________ of supply were the primary cause of the worldwide
increase in commodity prices.
A) increases; surpluses
B) increases; shortages
C) decreases; surpluses
D) decreases; shortages
The term investment refers, in general, to
A) only large projects, such as building a new factory, undertaken by private firms.
B) only the creation of capital goods undertaken by private firms or the government.
C) any action today that has costs today but provides expected benefits in the future.
D) any action today that has costs today.
When a consumer’s income decreases, the consumer:
A) has less to spend.
B) buys a smaller quantity of normal goods.
C) buys more of inferior goods.
D) all of the above
Importers collect additional revenues from a ________, and governments collect
additional revenues from ________.
A) tariff; voluntary export restraints
B) quota; import bans
C) quota; tariffs
D) voluntary export restraint; quotas
The ratio of changes in the equilibrium level of output to a change in autonomous
spending is the:
A) elasticity coefficient.
B) multiplier.
C) automatic stabilizer.
D) marginal propensity of the autonomous variable.
Recall the Application about the study by Thomas J. Sargent of hyperinflations after
World War I in Germany, Austria, Hungary, and Poland, and how those hyperinflations
ended, to answer the following question(s).
According to this Application, Sargent found that in each of the four cases studied,
hyperinflation ended
A) when governments stopped relying on their central banks to finance their debt and
instead sold their debt to private parties.
B) when governments stopped relying on private parties to finance their debt and
instead sold their debt to their central banks.
C) when central banks stopped issuing money and instead relied on increased tax
revenues to finance government debt.
D) when governments implemented austerity programs which banned the issuance of
any new government bonds.
At the equilibrium level of income, the value of consumption is equal to
A) (consumption – savings).
B) (income – investment).
C) (income + investment).
D) (savings + investment).
Figure 2.1
On the production possibilities curve in Figure 2.1 the opportunity costs of increasing
agricultural production from 400 tons to 600 tons is:
A) 600 tons of manufacturing.
B) 500 tons of manufacturing.
C) 200 tons of manufacturing.
D) 100 tons of manufacturing.
Recall Application 1, “Energy Price Uncertainty Reduces Investment Spending,” to
answer the following questions:
According to the Application, the wild swing in the price of oil in 2008-2009 resulted
in:
A) an increase in uncertainty and a decrease in investment in energy saving technology.
B) a decrease in uncertainty and a decrease in investment in energy saving technology.
C) an increase in uncertainty and an increase in investment in energy saving technology.
D) a decrease in uncertainty and an increase in investment in energy saving technology.
Suppose that the required reserve ratio is 0.4. If a customer withdraws $10 million from
a bank, then the money supply could potentially:
A) decrease by $40 million.
B) decrease by $25 million.
C) increase by $40 million.
D) increase by $2.5 million.
Figure 9.5 Refer to Figure 9.5. Suppose the economy is a point B. A large ________ in
the price of crude oil leads to a shift from ________ to ________.
A) increase; ;
B) increase; ;
C) increase; ;
D) decrease; ;
Which of the following is not an example of seasonal unemployment?
A) lost farming jobs during the winter
B) lost textiles jobs due to a recession
C) lost retail jobs after the Christmas
D) lost accounting jobs after April