Higher taxes is an example of an expansionary fiscal policy.
According to the Application, all countries that are involved in a war will experience
hyperinflation.
In the determination of production of goods or services with respect to GDP, transfer
payments are included.
Markets exist to facilitate exchange between people.
Absolute advantage is when one producer has greater productivity compared to another
producing the same product.
Recall the Application about the factors which allow the United States to continue to
run large current account trade deficits with the rest of the world to answer the
following question(s). The 2006 Economic Report of the President addressed the issue
of whether the United States can continue to run large current account deficits. The
report stated that the current account deficits would eventually be reduced and
highlighted a number of factors that suggested the deficits could continue for a long
period of time.According to this Application, if the United States is running a current
account deficit, then the United States
A) is selling more financial and produced assets than it is buying.
B) has negative net sales of assets.
C) has a positive total of net exports + income received from abroad + transfers from
abroad.
D) must also have a balance of payment deficit.
Table 2.4 Refer to Table 2.4. The
principle of diminishing returns sets in with the addition of the ________ tank of
fertilizer.
A) 2nd
B) 3rd
C) 4th
D) 5th
According to the theory of purchasing power parity, the exchange rate between two
countries reflects
A) differences in the overall price levels in the two countries.
B) the unemployment rates in the two countries.
C) the interest rates in the two countries.
D) government spending in the two countries.
Net investment is
A) what is left over from total new private investment after depreciation.
B) the total amount of private investment purchases, whether new or previously
existing.
C) the total amount of new private investment purchases.
D) gross investment plus depreciation.
Which of the following is a microeconomic question?
A) Should companies pay for employees’ health insurance?
B) Why do some countries have higher economic growth rates than other countries?
C) Should Congress and the president take action to reduce the unemployment rate?
D) Should the Fed attempt to influence the interest rate to control potential inflation?
Which of the following was the Fed’s primary function when it first was created in
1913?
A) to act as a lender of last resort
B) conduct monetary policy
C) provide a system of check collection and clearing
D) regulate banks
If the marginal propensity to consume is 0.8 and marginal propensity to import is 0.3,
then an increase in exports by 100 will cause equilibrium GDP to increase by:
A) 200.
B) 500.
C) 330.
D) 90.
Refer to Figure 15.2. Output is likely to fall and prices are likely to rise if the economy
is at point
A) a.
B) .
C) c.
D) d.
The proposition that states that whether government finances its deficit by borrowing or
by increasing taxes is irrelevant is called:
A) the Ricardian Equivalence.
B) the quantity theory of money.
C) the law of demand.
D) monetizing the deficit.
When interest rates are ________, the opportunity cost of holding ________ outside
banks is ________.
A) low; cash; high
B) high; stocks and bonds; low
C) high; cash; high
D) low; stocks and bonds; high
Which of the following situations will arise in the domestic market following the
removal of an import quota?
A) Imports increase, domestic production increases, prices increase.
B) Imports increase, domestic production decreases, prices decrease.
C) Imports decrease, domestic production increases, prices decrease.
D) Imports decrease, domestic production decreases, prices increase.
All other things equal, an appreciation of the U.S. real exchange rate causes consumers
to buy ________ domestic goods and ________ foreign goods.
A) more; fewer
B) fewer; fewer
C) more; more
D) fewer; more
One drawback of a fixed exchange rate is that it:
A) makes international transactions more expensive.
B) makes international transactions less efficient.
C) requires previous authorization of the IMF in order to be altered.
D) requires the coordination of economic policies between countries.
The reason why the budget deficit decreases during economic expansions is:
A) higher welfare payments.
B) higher tax revenues.
C) lower tax revenues.
D) Both A and B are correct.
List the two ways in which the national debt can place a burden on future generations.
Explain why the production function is shaped the way it is.
Suppose you earn $50,000 per year in 2009. If your income increases by 8 percent
while inflation increases by 10% in 2010, then calculate how much your real income
has increased between 2009 and 2010.
Explain the rational expectations theory of inflation.
Name two actions a government could take if it wants to implement a contractionary
fiscal policy.
What is the difference between crowding out in an open economy and in a closed
economy?