1) in the depth of the great depression, the unemployment rate in the united states was
about:
a.15 percent.
b.33 percent.
c.25 percent.
d.40 percent.
2) For a firm selling its product in a purely competitive market, the marginal revenue
product of labor can be found by:
A.adding marginal product to total product as one more unit of labor is employed.
B.adding marginal revenue to total product as one more unit of labor is employed.
C.multiplying marginal product by product price.
D.dividing marginal product by product price.
3) To reduce the Federal funds rate, the Fed would:
A.increase the discount rate.
B.increase the reserve requirement.
C.sell government securities.
D.buy government securities.
4) The introduction of mortgage-backed securities:
A.helped solve the mortgage debt crisis.
B.fully insulated banks from loan defaults.
C.created the fourth tool of monetary policy.
D.fueled the mortgage debt crisis by encouraging banks to issue riskier loans.
5) Other things equal, the resource demand curve of an imperfectly competitive seller
will:
A.lie below its marginal revenue product curve.
B.be subject to increasing marginal productivity.
C.be less elastic than that of a purely competitive seller.
D.be more elastic than that of a purely competitive seller.
6) Unions often oppose increases in the prices of complementary inputs (for example,
truck drivers may oppose increases in taxes on diesel fuel). They do this because
increases in the prices of complementary inputs might:
A.increase the supply of competing labor through the output effect.
B.increase the supply of competing labor through the substitution effect.
C.decrease the demand for union labor through the output effect.
D.decrease the demand for union labor through the substitution effect.
7) A Federal funds rate reduction that is caused by monetary policy will:
A.increase the prime interest rate.
B.decrease the size of the monetary multiplier.
C.increase the Fed’s discount rate.
D.decrease the prime interest rate.
8) most economists agree that the immediate determinant of the volume of output and
employment is the:
a.composition of consumer spending.
b.ratio of public goods to private goods production.
c.level of total spending.
d.size of the labor force.
9) The basis for the Bretton Woods international monetary system was:
A.a completely fixed system of exchange rates.
B.an adjustable peg system of exchange rates.
C.the gold standard.
D.a freely flexible system of exchange rates.
10) Upon buying a car having airbags, Indy begins to drive recklessly. This is an
example of the:
A.principal-agent problem.
B.adverse selection problem.
C.moral hazard problem.
D.free-rider problem.
11) If population is expanding at the same rate as real output:
A.real per capita output will increase.
B.real per capita output will decrease.
C.real per capita output will remain unchanged.
D.living standards will increase.
12) which of the following countries has the largest number of immigrants, as a
percentage of the labor force (as of 2004)?
a.japan
b.switzerland
c.united states
d.australia
13) Explain the effect of a discretionary increase in government spending of $50 billion
on the economy when the economys marginal propensity to consume is .75.
14) Suppose an economic advisor to the President recommended a personal income tax
increase. Indicate the expected effects on aggregate demand and on aggregate supply.
15) Explain the three reasons given for the downward slope of the aggregate demand
curve.
16) What is the risk-free interest rate?
17) Describe the process that occurs with demand-pull inflation in the extended
aggregate demand and aggregate supply model.
18) What are the simplifications used in this chapter to derive the aggregate
expenditures model?
19) Why is a balance-of-payments deficit not necessarily good or bad if it occurs in one
given year, but potentially very harmful if maintained over a number of years?