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Active fiscal policy is the main tool used by the Fed for economic stabilization.
Insurance companies such as Farmers Insurance are considered as financial
intermediaries.
Economists who have studied economic growth find strong evidence of convergence.
If taxes and government spending increase by the same amount, GDP will stay
constant.
Balancing the budget during an economic recession brings the economy closer to full
employment.
Basically, the marginal principle teaches us to evaluate the factors involved in taking an
action to decide if the action it is worth the effort.
The equilibrium price under an import quota is above the price that occurs with free
trade.
The marginal propensity to consume can never be equal to zero.
An increase in the reserve requirement will lead to increased net exports.
According to the real business cycle theory, shocks to aggregate demand and shocks to
aggregate supply both cause fluctuations in output.
If the cost of producing a product goes down, this will cause the equilibrium price of
the product to go down and the equilibrium quantity of the product to go up.
If a country bans the importation of a particular good, the market equilibrium is shown
by the intersection of the foreign demand curve and the domestic supply curve.
By making more or less money available, the Federal Reserve can alter both the
nominal and real interest rates in the long run.
Under a market system, the people with information about buyers' desires, production
technology, and resources make the decisions.
A voluntary export restraint occurs when one country prevents a specific product from
being imported from another country.
The chairperson of the Board of Governors of the Federal Reserve has terms of what
length?
A) 14 years
B) 10 years
C) 7 years
D) 4 years
Figure 19.2
Referring to Figure 19.2, a depreciation of the dollar is represented by a movement
from point
A) c to d.
B) to a.
C) a to c.
D) c to a.
If Cassie's Coffee House purchases 42 cents worth of ingredients and spends 28 cents
on wages per cup of coffee to produce an 89 cent cup of coffee, then Cassie's Coffee
House's value added per cup of coffee is
A) 19 cents.
B) 28 cents.
C) 47 cents.
D) 61 cents.
Figure 11.3
In Figure 11.3, if the MPS is 0.25 and the distance between points C0 and C1 is 200,
then the distance between points y0 and y1 must be
A) 50.
B) 200.
C) 400.
D) 800.
Suppose that your tuition to attend college is $14,000 per year and you spend $5,000
per year on room and board. If you were working full time, you could earn $26,000 per
year. What is your opportunity cost of attending college?
A) $19,000
B) $31,000
C) $40,000
D) $45,000
If the government prints a $500 bill and it takes the government $2.50 to print the bill,
then the seignorage that the government collects is:
A) $497.50.
B) $500.
C) $2.50.
D) $502.50.
Figure 8.2 Refer to Figure 8.2 The increase in the equilibrium capital stock from K2 to
K3 was brought about by:
A) an improvement in technology.
B) an increase in the saving rate.
C) a decrease in the population growth rate.
D) an increase in the investment rate.
In 2010, which of the following countries was the only one having negative net export
spending in GDP?
A) China
B) the United States
C) France
D) Germany
Table 5.2 Refer to Table 5.2.
Suppose this economy produces only the three goods A, B, and C. If we use year 2 as
the base year, then real GDP in year 2 is:
A) $6.20.
B) $7.80.
C) $8.50.
D) $9.70.
To increase the money supply using the reserve requirements, what would the Fed
typically do?
A) increase the reserve requirement for banks
B) reduce the reserve requirement for banks
C) make each bank set its own reserve levels
D) let each bank get more currency from the Treasury
Which of the following would cause an increase in GDP?
A) an open market purchase
B) an open market sale
C) a higher discount rate
D) a higher required reserve ratio
What is the fastest growing component of consumption in the United States?
A) new home construction
B) nondurable goods
C) durable goods
D) services
Table 3.1
Consider two individuals, Jesse and April, who hand paint kites and snowboards. Table
3.1 shows how much of each good Jesse and April can paint in one hour. Jesse's
opportunity cost of painting one snowboard is painting
A) 1/8 of a kite.
B) 1.5 kites.
C) 8 kites.
D) 12 kites.
Although running a budget deficit during a recession should not be a source of concern,
running a budget deficit when there is no recession is a bad policy due to:
A) crowding out.
B) long inside lags.
C) long outside lags.
D) crowding in.
The aggregate demand curve that shows the ________ relationship between the price
level and the quantity of real GDP demanded.
A) negative
B) positive
C) linear
D) exponential
An increase in the U.S. interest rate relative to the British interest rate will cause a(an):
A) appreciation of the dollar and an appreciation of the British pound.
B) appreciation of the dollar and a depreciation of the British pound.
C) depreciation of the dollar and an appreciation of the British pound.
D) depreciation of the dollar and a depreciation of the British pound.
Suppose a bank has $300,000 in deposits, a reserve ratio of 5 percent, and bank reserves
of $45,000. This bank can make new loans in the amount of
A) $345,000.
B) $45,000.
C) $30,000.
D) $15,000.
Figure 12.2 Refer to Figure 12.2 to answer the question. Which of the following series
is procyclical?
A) Series A
B) Series B
C) Series A and B
D) Neither Series A nor B
Suppose the economy is initially operating at the potential level of output. Graphically
illustrate and explain what effect a one-time increase in government spending will have
on output and the price level in the short run and in the long run.
Explain the three different types of unemployment. Give an example of each type.
When a consumer's income increases, that consumer tends to buy more ________.
Between an "individual demand curve" and a "market demand curve," which one has a
steeper slope?
What happens to investment and interest rates if the government runs a budget deficit in
a closed economy? Assume that the Ricardian Equivalence holds. Explain.
Explain the differences between a federal budget deficit, a federal budget surplus, and a
balanced federal budget.
