In a dynamic economy under ideal conditions:
a. the unemployment rate should be near zero.
b. some unemployment would be present due to workers temporarily being out of work
while changing jobs.
c. unemployment would tend to move upward slightly as prices increased.
d. unemployment would tend to move slightly downward as unemployment
compensation benefits increased.
The sum of past federal deficits is reflected in the federal:
a. cyclical debt.
b. Congressional debt.
c. national debt.
d. GDP debt.
Using the expenditure approach, total spending by households for durable goods,
nondurable goods, and services is a category called:
a. gross private domestic investment.
b. capital consumption allowance.
c. personal consumption expenditures.
d. household investment.
Adam Smith’s book, The Wealth of Nations, was published at the time of the:
a. War of 1812.
b. U.S. Declaration of Independence.
c. U.S. Civil War.
d. Great Depression.
As a general rule, a recession is a decline in real GDP lasting at least:
a. one year.
b. six months.
c. three months.
d. one month.
If the economy is inflationary, the Fed would most likely:
a. encourage banks to provide loans by buying government securities.
b. encourage banks to provide loans by raising the discount rate.
c. encourage banks to provide loans by selling government securities.
d. restrict bank lending by selling government securities.
e. restrict bank lending by lowering the federal funds rate.
Which of the following questions would not be studied by a microeconomist but would
be studied by a macroeconomist?
a. Why do national economies grow?
b. What percentage of consumer income is spent on entertainment?
c. Why do workers prefer the 4-day workweek?
d. How is the electric industry harmed by the passage of new clean air legislation?
Exhibit 2-16 Production possibilities curve
In Exhibit 2-16, to move from U to B,
the opportunity cost:
a. would be 4 units of consumption goods.
b. would be 2 units of capital goods.
c. would be zero.
d. would be 5 units of capital goods.
e. cannot be estimated.
Under adaptive expectations theory, people persistently:
a. underestimate inflation when it is slowing down.
b. overestimate inflation when it is accelerating.
c. underestimate inflation when it is accelerating.
d. adapt to the prevailing inflation rate.
The purchase of U.S. assets by foreigners is a:
a. capital inflow.
b. capital outflow.
c. current account deficit.
d. unilateral transfer.
Real GDP per capita and other alternative measures of the quality of life are:
a. independent.
b. directly correlated.
c. poorly correlated.
d. inversely related.
If the marginal propensity to consume (MPC) is 0.60, what is the expenditure
multiplier?
a. 0.4.
b. 0.6.
c. 2.5.
d. 6.0.
Of factors which affect any economy’s production potential, the best two listed below
are:
a. resources and technology.
b. prices and outputs.
c. wages and prices.
d. taxes and prices.
e. resources and prices.
Suppose the Fed bought $150 million of U.S. securities from security dealers. The
reserve requirement is 20 percent, and there are no initial excess reserves. A few weeks
later, if the public’s holdings of currency are constant and the banks have loaned all
excess reserves, the money supply will increase by:
a. $150 million.
b. $300 million.
c. $600 million.
d. $750 million.
A production possibilities curve has “good X” on the horizontal axis and “good Y” on
the vertical axis. On this diagram, the opportunity cost of good X, in terms of good Y, is
represented by the:
a. distance to the curve from the horizontal axis.
b. distance to the curve from the vertical axis.
c. distance from the origin to the curve.
d. change in Y for each change in X along the curve.
The change in saving divided by the change in income is the:
a. propensity to save.
b. saving function.
c. average propensity to save.
d. extra propensity to save.
e. marginal propensity to save.