Equilibrium real GDP is
a. independent of the price level
b. determined solely in the loanable funds market
c. controlled by the Fed
d. directly related to the interest rate
e. the level of output at which total spending equals total output for a given price level
In the long run, unusually high unemployment
a. indicates that an economy is operating above potential GDP
b. forces the wage rate down
c. eventually causes the aggregate supply curve to shift upward
d. pushes the price level upward
e. causes the aggregate demand curve to shift rightward
Which of the following statements about markets is false?
Which of the following groups exerts the most control over the money supply in the
United States?
a. The executive branch of government
b. The legislative branch of government
c. The judicial branch of government
d. The Federal Reserve
e. The U.S. Treasury Department
Net taxes are
a. the total amount of taxes paid to the government
b. total tax revenues of the federal government
c. total tax revenues plus transfer payments
d. total tax revenues minus transfer payments
e. total tax revenues minus taxes paid by firms
In the classical model with an open economy, an increase in government purchases may
not cause complete crowding out, but crowding out will be complete worldwide.
Assume the economy is currently in equilibrium. Use the following information to
calculate the total value of injections
Total injections are
a. $10.7 trillion
b. $5.1 trillion
c. $5.9 trillion
d. $5.7 trillion
e. $5.3 trillion
Because financial markets clear, we know that leakages in the economy will equal
injections and, therefore, there will be enough spending in the economy to purchase
whatever amount of output level produced.
A substitute good is one that
If the inflation rate is 2 percent and nominal wages increase by 1 percent, what happens
to real wages?
a. They rise by 1 percent.
b. They fall by 1 percent.
c. They remain constant.
d. They fall by 2 percent.
e. They rise by 3 percent.
You have a choice among three options. Option 1: receive $900 immediately. Option 2:
receive $1,200 one year from now. Option 3: Receive $2,000 five years from now. The
interest rate is 15 percent (0.15) per year. Rank these three options from highest present
value to lowest present value.
In the long run,
a. the government’s tax policies do not affect the rate of investment spending.
b. lower tax rates will have no effect on the average standard of living.
c. lower tax rates will lead to faster growth in the average standard of living.
d. higher tax rates will lead to slower growth in the average standard of living.
e. the debt and the deficit will converge to zero.
If there are no restrictions on contracts, and if all parties in the economy accurately
predict the rate of inflation over the next year, then
a. there will be no redistribution of purchasing power
b. purchasing power will be redistributed from wage earners to business owners
c. purchasing power will be redistributed from business owners to wage earners
d. purchasing power will be redistributed from lenders to borrowers
e. purchasing power will be redistributed from borrowers to lenders
A mutually advantageous trade leads a Pareto improvement.
Which of the following indicates that the average standard of living is rising?
a. Real GDP decreases faster than the price level.
b. Real GDP increases faster than the price level.
c. The population increases.
d. Real GDP increases faster than the population.
e. Population increases faster than real GDP.
Molly needs 30 minutes to wash the car and 45 minutes to mow the lawn. Renee needs
1 hour to wash the car and 2 hours to mow the lawn. Which of the following statements
is correct?
Under Section 2 of the Sherman Act,
Which of the following factors would be the most useful in determining the structure of
a market?
If the demand for new automobiles falls when income falls, automobiles are said to be
normal goods.
The monthly Household Survey by the United States Census Bureau (on behalf of the
Bureau of Labor Statistics) has a national sample size of
a. 8,000 households
b. 400,000 households
c. 150,000 households
d. 60,000 households
e. 20,000 households