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If the minimum wage law sets a price floor above the equilibrium wage in the market
for unskilled labor, then the
a. minimum wage will create a surplus of unskilled labor.
b. minimum wage will create a shortage of unskilled labor.
c. minimum wage will not impact the unskilled labor market.
d. unskilled labor market will change, but we cannot be certain how.
Economists who are in favor of an increase in the size and scope of government tend to
prefer ________________ when expansionary _______________ policy is needed to
raise aggregate demand.
a. tax cuts; fiscal
b. tax cuts; monetary
c. more government spending; fiscal
d. more government spending; monetary
The employment rate equals the number of
a. employed persons divided by the number of unemployed persons.
b. unemployed persons divided by the civilian non-institutional population.
c. employed persons divided by the civilian labor force.
d. employed persons divided by the civilian non-institutional population.
e. none of the above
If the natural unemployment rate is 5.5 percent, then the economy is in a recessionary
gap when the actual unemployment rate is
a. greater than 5.5 percent.
b. between 0 and 5.5 percent.
c. 0 percent.
d. 5.5 percent.
Exhibit 10-6
If investment increases, it follows that
a. the TE curve will shift upward, possibly passing through point 2.
b. the TE curve will shift downward, possibly passing through point 3.
c. the TE curve will not change but the economy will move from point 1 to point 3.
d. the TE curve will not change but the economy will move from point 1 to point 2.
e. At the new equilibrium position, Real GDP will necessarily be Q1.
Special interest groups are subsets of __________ that hold (usually) intense
preferences for or against a particular government service, activity, or policy.
a. the general population
b. bureaucrats
c. elected officials
d. candidates for political office
e. all of the above
Exhibit 9-4
Which of the following is true at the Real GDP level of Q3?
a. The unemployment rate is equal to the natural unemployment rate.
b. The cyclical unemployment rate is zero.
c. The economy is in long-run equilibrium.
d. all of the above
e. none of the above
Resource X is necessary to the production of good Y. If the price of resource X rises,
the _____________ curve for good Y will shift ____________ resulting in a(n)
_____________ in the equilibrium price of Y and a(n) ____________ in the
equilibrium quantity of Y.
a. supply; rightward; decrease; increase.
b. demand; leftward; decrease; decrease
c. demand; rightward; increase; increase
d. supply; leftward; increase; decrease
e. supply; leftward; increase; increase
Exhibit 6-2
The labor force participation rate in year 4 is
a. 12 1/2 percent.
b. 72 percent.
c. 87 1/2 percent.
d. 30 percent.
e. 80 percent.
The United States currently has a progressive income tax structure.
a. True
b. False
If in the process of calculating GDP, the market value of all intermediate goods is added
to the market value of all final goods, this would
a. overstate the actual value of GDP.
b. produce the correct value of GDP.
c. understate the actual value of GDP.
d. avoid the possible error of double counting.
Exhibit 13-1
Assume that the required reserve ratio is 10%, that there are no cash leakages, and that
banks hold zero excess reserves.
Suppose that the Federal Reserve conducts open market operations by purchasing
$1,000 worth of government securities from Bank A.At the end of this process of
money creation, what equation would be used to determine the total amount of new
checkable deposits?
a. simple deposit multiplier x change in reserves resulting from the initial injection of
funds
b. 1/r x change in reserves resulting from the initial injection of funds
c. r x change in reserves resulting from the initial injection of funds
d. 1/r
e. a or b
Situation 4-1
During the winter of 1973-74, a general system of wage and price controls (including a
price ceiling on gasoline) was in force in the United States. At the beginning of 1974,
some oil-producing countries imposed an oil embargo (a legal prohibition on
commerce) on the West. In the spring of 1974, price controls were abolished. An
economist would have most likely predicted that once price controls were abolished in
the spring of 1974,
a. the price of gasoline would decline sharply.
b. the surplus of gasoline would go away.
c. the shortage of gasoline would go away.
d. the demand for gasoline would decrease.
e. both c and d
A share of stock is
a. a claim on the assets of the corporation that gives the purchaser an ownership right in
the corporation.
b. the share of profits distributed to stockholders.
c. a promise to pay for the use of someone else's money.
d. a promise to loan money to someone.
e. a and b
Exhibit 34-7
Assume that the current price of good X is $25 (which includes a $10 tariff on imports
of good X).Americans purchase ______ units of good X from U.S. producers and
import _______ units of good X from abroad.
a. 0; 50
b. 20; 25
c. 10; 30
d. 10; 40
What is the Dow Jones Industrial Average (DJIA)?Give a description of why the DJIA
was first created, how it is computed, and how it has evolved over time.
If an economy can produce a maximum of 100 units of good X and the opportunity cost
of 1X is always 5Y, then what is the maximum number of units of good Y the economy
can produce?
a. 250
b. 100
c. 20
d. 500
e. none of the above
Exhibit 34-1
The opportunity cost of one unit of X in country B is
a. 1 unit of Y.
b. 0.33 units of Y.
c. 2 units of Y.
d. 20 units of Y.
