When the budget is in deficit, the government generally:
A) raises taxes.
B) increases the public debt.
C) sells public assets like national parks.
D) decreases military spending.
An increase in the value of a floating currency is called an appreciation.
A) True
B) False
A $300 million decrease in investment spending will increase real GDP by more than
$300 million.
A) True
B) False
Following the 2008 financial crisis:
A) both the United States and the European Union recovered very quickly, with output
reaching its previous level by early 2009.
B) recovery in both the United States and the European Union was very slow.
C) the United States recovered very quickly, but recovery in the European Union was
very slow.
D) the European Union recovered very quickly, but recovery in the United States was
very slow.
Figure: Monetary Policy III
Look at the figure Monetary Policy III. Expansionary monetary policy will lead to an
equilibrium price level of:
A) P1.
B) P2.
C) P3.
D) P4.
National savings is the sum of:
A) private savings plus the budget balance.
B) private savings plus government spending.
C) investment spending plus consumption.
D) consumption spending minus government spending.
A _____ is a nonprofit institution that collects the savings of its members and invests
those funds in a diversified portfolio to provide income to members when they retire.
A) life insurance company
B) pension fund
C) commercial bank
D) investment bank
Since 2005, Latvia has _____ government spending and had a sharp _____ in economic
growth.
A) cut; increase
B) increased; increase
C) cut; decrease
D) increased; decrease
Suppose the university offers the following payment plan: Either you pay $80,000 when
enrolling as a freshman or you pay $25,000 at the beginning of your freshman year and
$25,000 at the beginning of every year for the next three years. If the annual interest
rate is 5%, then you should take option 1 and pay $80,000 at the beginning of your first
year.
A) True
B) False
In 2014, Ben Bernanke was succeeded as chair of the Board of Governors of the
Federal Reserve by:
A) Janet Yellen.
B) Paul Ryan.
C) Joe Biden.
D) Nancy Pelosi.
Figure: Circular-Flow Model
Look at the figure Circular-Flow Model. How does the government finance its
purchases of goods and services?
A) by printing money
B) by taxes
C) by borrowing
D) by taxes and borrowing
The _____ tomatoes will decrease if fertilizer prices rise.
A) demand for
B) quantity demanded of
C) supply of
D) equilibrium price of
The demand curve for videos has shifted to the right. What could have caused it?
A) a fall in the price of videos
B) an increase in the price of videos
C) an increase in the supply of videos
D) an increase in the incomes of buyers
If the actual unemployment rate is 7% and the natural rate is 5%, then the cyclical rate
is:
A) 2%.
B) 5%.
C) 7%.
D) 9%.
Margo spends $10,000 on one year’s college tuition. The opportunity cost of spending
one year in college for Margo is:
A) $10,000.
B) whatever she would have purchased with the $10,000 instead.
C) whatever she would have earned had she not been in college.
D) whatever she would have purchased with the $10,000 plus whatever she would have
earned had she not been in college.
Suppose a bank faces a 10% required reserve ratio and it has $100 in required reserves.
If it is fully loaned out, what is the amount of deposits in this bank?
A) $900
B) $10
C) $1,000
D) $10,000
Under which conditions do some macroeconomists believe the natural rate hypothesis
does NOT work?
A) periods of rapidly rising inflation
B) high but constant inflation
C) low or negative inflation
D) high economic growth
Table: Lemonade and Cookies
Look at the table Lemonade and Cookies. Assume that an economy produces only
lemonade and cookies. Nominal GDP in 2014 was:
A) $400.
B) $420.
C) $445.
D) $820.
Figure: Aggregate Expenditures Curve I
Look at the figure Aggregate Expenditures Curve I. Suppose that the government’s
purchases of goods and services in this economy rise by $100. Real GDP will:
A) decrease by $100.
B) increase by $200.
C) increase by $800.
D) decrease by $200.
Figure: The Demand and Supply of Wheat
Look at the figure The Demand and Supply of Wheat. A price of _____ will result in a
_____.
A) $6; shortage
B) $8; surplus
C) $8; shortage
D) $4; surplus
Written in 1972, the book that argued that long-run economic growth was not
sustainable because of limited supplies of natural resources was called:
A) An Essay on the Principle of Population.
B) The Limits to Growth.
C) The Wealth of Nations.
D) Aftershock: The Next Economy and America’s Future.
Figure: Expanded Circular-Flow Model
Look at the figure Expanded Circular-Flow Model. How much is total government
spending?
A) $20
B) $220
C) $370
D) $200
The unemployment rate is the ratio of the unemployed to the labor force.
A) True
B) False
According to estimates of the aggregate production function, each 1% increase in
physical capital, holding human capital and technology constant, raises labor
productivity by 0.33%.
A) True
B) False
Your elderly grandma tells you: “I haven’t been taking my beloved walks because I’m
concerned about falling and getting hurt. See, there is always a cost to doing something.
But if you don’t do anything, then there is no cost.” Your grandma does not understand
the economic concept of:
A) scarcity.
B) efficiency.
C) opportunity cost.
D) marginal analysis.
The Fed uses _____ to target the federal funds rate.
A) open market operations
B) changes in the discount rate
C) changes in deposit insurance maximums
D) government spending
Suppose the reserve ratio is 25%; the money multiplier is:
A) 5.
B) 0.25.
C) 4.
D) 0.04.
An increase in the level of business opportunities will not change investment spending.
A) True
B) False
Table: The Economy of Albernia
Real GDP
(in billions) Disposable Income
(in billions) Consumption
(in billions) Planned Investment
(in billions)
$ 0 $ 0 $ 400 $600
500 500 700 600
1,000 1,000 1,000 600
1,500 1,500 1,300 600
2,000 2,000 1,600 600
2,500 2,500 1,900 600
3,000 3,000 2,200 600
Look at the table The Economy of Albernia. If real GDP is $1,500 billion, then the level
of unplanned inventories is:
A) $400 billion.
B) “$400 billion.
C) $600 billion.
D) “$600 billion.
A country’s exports minus its imports during a period are:
A) net exports.
B) gross exports.
C) net imports.
D) gross imports.
Tariffs and import quotas tend to:
A) increase the quantity of imports as compared to free trade.
B) generate government revenue.
C) increase consumer surplus as compared to free trade.
D) reduce total surplus as compared to free trade.