If current unemployment is close to the natural rate of unemployment, the level of real
GDP is likely to be close to the level of potential output.
Fiat money refers to a monetary system in which gold backs up paper money.
Recall the Application about the government of Mexico City repainting highway lane
lines to transform a 4-lane highway into a 6-lane highway to answer the following
question(s).
Using the midpoint formula, the percent change of the number of TVs from 1 to 2
should be the same if you instead go from 2 to 1.
High money supply growth is generally the cause of hyperinflation.
If we eliminated our textile tariffs, the dislocated workers could easily switch to other
jobs.
As real rates of interest increase in the economy, real investment spending increases.
Keynes believed that, without government intervention, the liquidity trap could prevent
economies from recovering from a recession.
If the economy is in long-run equilibrium at full employment, an increase in the money
supply will lead to a higher aggregate demand and a higher price level in the short run.
If the reserve ratio is designated by “,” the amount of deposits a bank can hold as excess
reserves is equal to 1 / (1 – ).
The tendency for increases in government spending to cause reductions in private
saving is known as the crowding out effect.
The convergence hypothesis suggests that, all else equal, poor countries grow more
rapidly than rich countries.
If the Federal Reserve wants interest rates to decrease, it will buy government bonds.
Figure 4.5 illustrates a set of supply and demand curves for hamburgers. An increase in
supply and an increase in quantity demanded are represented by a movement from
A) point a to point .
B) point a to point c.
C) point d to point .
D) point c to point d.
Entitlements and net interest are the ________ the U.S. federal budget.
A) only two declining components of
B) two fastest-growing components of
C) two slowest-growing components of
D) only two components with negative values in
Recall the Application about the incentives to buy hybrid vehicles to answer the
following question(s).
In the Application, which of the following increased the incentive to buy hybrid
vehicles?
A) Purchases of hybrid vehicles qualified for a $3400 subsidy from the federal
government.
B) Oil prices decreased.
C) Hybrid vehicles were more expensive than regular vehicles.
D) Hybrid vehicles had similar emissions as the non-hybrid vehicles.
________ is a simplified representation of an economic environment.
A) An economic model
B) Microeconomics
C) Scarcity
D) Normative Analysis.
A key feature of consumption taxation is that you should:
A) not pay more taxes if you choose to save more of your income.
B) pay more taxes if you choose to save more of your income.
C) pay more taxes if you are richer.
D) pay more taxes if you are poorer.
Table 11.6 Refer to Table 11.6. If net taxes (T) increases from 200 to
300, the new equilibrium output is:
A) $5500.
B) $5700.
C) $5600.
D) $6000.
When the consumption function is expressed as C = Ca + b (1-t)y, income taxes act as
an automatic stabilizer because:
A) when the economy experiences a large increase in GDP, the government’s tax
collection increases without government action, decreasing disposable income and
consumption.
B) when the economy experiences a large increase in GDP, the government’s tax
collection decreases without government action, decreasing disposable income and
consumption.
C) when the economy experiences a large increase in GDP, the government’s tax
collection increases without government action, increasing disposable income and
consumption.
D) when the economy experiences a large increase in GDP, the government’s tax
collection increases without the approval from Congress, increasing disposable income
and consumption.
Refer to Figure 11.5. A decrease in the marginal propensity to import is best illustrated
by diagram
A) A.
B) B.
C) C.
D) D.
In a graph with output on the x-axis and expenditures on the y-axis, a 45-degree line
starting from the origin represents the locus of points where:
A) output = expenditures.
B) output + expenditures = zero.
C) output is greater than expenditures.
D) output is less than expenditures.
How long do economists think it takes the U.S. economy to move from the short run to
the long run?
A) two years
B) three years
C) four years
D) None of the above; economists disagree on the answer.
Recall the Application about Jasper Johns and house painting to answer the
following question(s). In this Application, it is assumed that Johns can earn $5,000
per day by painting works of art, and therefore should hire a house painter who
charges $150 per day, and takes 10 days, to paint his house. Based on the
Application, Jasper Johns’ daily earnings are 33.33 times more than the house painter’s
daily earnings. If Jasper Johns’ earnings per day were only twice as much as the house
painter’s earnings, what should he do?
A) He should still hire the house painter to paint his house.
B) He should paint his house himself.
C) He should hire a less productive house painter.
D) He should remain indifferent as to who paints the house, for the difference in daily
earnings would now be much less significant.
Recall the Application about the difficulty in estimating the size of multipliers and the
historical record of the size of multipliers to answer the following
question(s).According to this Application, economists Robert Barro and Charles
Redlick found that multipliers ________ when there was more unemployment in the
economy.
A) were smaller
B) were larger
C) were negative
D) were unaffected
Which of the following will not lead to greater economic growth?
A) more resources
B) government taxation of the private sector in order to engage in consumption
spending
C) technological improvements
D) government investment in infrastructure
Crowding in leads to
A) higher levels of real income and wages in the future.
B) no effects on real income and wages.
C) lower levels of real income and wages in the future.
D) lower prices.
If your wealth is held as currency or in checking accounts, or other assets that you can
convert to money on short notice, your assets are considered to be
A) abundant.
B) fast moving.
C) interest bearing.
D) liquid.