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Diminishing returns to labor implies that:
A) as labor increases output increases.
B) as output increases, labor increases.
C) as labor increases, output decreases.
D) as labor increases, labor productivity decreases.
A single variable can be illustrated as:
A) a bar graph.
B) a pie chart.
C) a time-series graph.
D) all of the above.
Real GDP is gross domestic product measured:
A) at a constant output level but at current prices.
B) in current dollars.
C) using the prices of a specified base year.
D) as the difference between the current year's GDP and last year's GDP.
The proposition that states that whether government finances its deficit by borrowing or
by increasing taxes is irrelevant was named after:
A) David Ricardo.
B) Adam Smith.
C) John Maynard Keynes.
D) Paul Samuelson.
Figure 9.1
Refer to Figure 9.1. A reduction in the money supply causes:
A) the economy to move from Point A to Point B, but will not shift the aggregate
demand curve.
B) the aggregate demand curve to shift from to .
C) the aggregate demand curve to shift from to .
D) neither a shift of the aggregate demand curve nor a change in real GDP.
If the price of a stock equals the present value of expected future dividend payments,
then when the firm expects losses in the future due to a downturn in the economy, we
should expect that the price of the stock should:
A) decrease.
B) increase.
C) stay constant.
D) increase at a decreasing rate.
Recall the Application about the time involved in including cell phones in the
calculation of the CPI to answer the following question.
According to this Application, cell phones were introduced to the public in 1983, but it
took the Bureau of Labor Statistics ________ to include them in calculating the CPI.
A) 3 years
B) 7 years
C) 15 years
D) 24 years
During recessions, unemployment ________ while the budget deficit as a percentage of
GDP ________.
A) decreases; decreases
B) increases; increases
C) increases; decreases
D) decreases; increases
To determine the change in the capital stock, the level of new investment must be
adjusted for depreciation because some new investment
A) is not used immediately.
B) merely replaces existing, but worn out, capital.
C) replaces existing workers.
D) is more efficient than existing capital.
Suppose the unemployment rate is ________ the natural rate. We would expect to see
GDP ________ potential output, falling wages, and falling prices.
A) above; below
B) above; above
C) below; below
D) below; above
Governments in developing countries can hinder economic growth by:
A) pursuing policies that lead to high inflation.
B) enforcing laws that inhibit the growth of the financial sector.
C) promoting policies that tax exports.
D) All of the above are policies that hinder economic growth.
Recall the Application about the relationship between tax rates and tax revenues which
was proposed by Yu Juo, one of the twelve wise men who succeeded Confucius in
ancient China, to answer the following question(s).According to this Application, Yu
Juo proposed that the Chinese government should ________ the tax rate in the case of a
famine if the government had insufficient funds, and this would ________ the standard
of living.
A) increase; increase
B) cut; increase
C) cut; decrease
D) increase; decrease
A consumption tax is likely to increase savings as long as individuals:
A) choose to consume more, even though the lower tax on savings makes them less
wealthy.
B) choose to retire later, so that their pension funds are taxed less severely.
C) choose to consume less, even though the lower tax on savings makes them wealthier.
D) choose to transfer balances from saving accounts with no tax advantages into
tax-favored investments.
Figure 18.1 Refer to Figure 18.1. In autarky, the maximum amount of sunglasses that
Duckland can produce is:
A) 90.
B) 100.
C) 150.
D) 120.
The adjustment-process model used in this chapter, which highlights the speed at which
the economy goes back to potential GDP, was first developed by:
A) Modigliani and Patinkin.
B) Milton Friedman.
C) Keynes.
D) Say
Figure 7.2 Refer to Figure 7.2. Which of the following can change the equilibrium
wage rate from $8 to $7?
A) The value people put on their leisure time increases.
B) The value of what firms produce increases.
C) The productivity of workers decreases.
D) all of the above
