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Economists who are in favor of smaller 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
Exhibit 2-1
If the economy is at point C, it follows that
a. more guns and more butter could be produced with available resources than are
currently being produced.
b. only more guns could be produced with available resources than are currently being
produced.
c. only more butter can be produced with available resources than are currently being
produced.
d. C is an unattainable point.
Rational ignorance exists because voters are apathetic.
a. True
b. False
The opportunity cost of attending college is
a. the money one spends on college tuition, books, and so forth.
b. the highest valued alternative one forfeits to attend college.
c. the least valued alternative one forfeits to attend college.
d. equal to the salary one will earn when one graduates from college.
The answer is: "rational ignorance." What is the question?
a. Why do special interest groups lobby politicians?
b. What causes a candidate in a two-person political race to take polls?
c. What explains why voters often know very little about the candidates and the issues?
d. What motivates the free rider?
A commercial bank can receive a loan from another commercial bank in the
a. federal funds market.
b. bank loan market.
c. Fed market.
d. discount market.
Which of the following statements is true?
a. Special interest groups are more likely to push for policies that increase the size of
the economic pie than to increase their slice of the pie.
b. Special interest groups are likely to push for policies that increase the size of their
slice of the economic pie even if it means that the overall size of the economic pie will
shrink.
c. Special interest groups are more likely to favor policies that increase the size of their
slice of the economic pie than policies that favor economic growth.
d. a and c
e. b and c
In the federal funds market,
a. banks make loans to the Fed.
b. banks make loans to other banks.
c. the Fed makes short-term loans to banks.
d. the Fed makes long-term loans to banks.
Exhibit 39-4
At the government-established support price of $5 per bushel, the wheat surplus that
government buys equals
a. 600 bushels.
b. 400 bushels.
c. 200 bushels.
d. 0 bushels.
One theory discussed in the textbook is that there is a direct relationship between the
opportunity cost of having children and the number of children a woman will have.
a. True
b. False
Which of the following is not a monetary policy tool of the Fed?
a. changing the required reserve ratio
b. changing the discount rate
c. setting the price level and the market rate of interest
d. conducting open market operations
The difference between new classical theory and new Keynesian theory is that
a. in new classical theory wages are assumed to be flexible, and in new Keynesian
theory wages are assumed to be somewhat inflexible.
b. in new classical theory wages are assumed to be somewhat inflexible, and in new
Keynesian theory wages are assumed to be flexible.
c. adaptive expectations is the dominant expectations theory in new classical theory, and
rational expectations is the dominant expectations theory in new Keynesian theory.
d. in new Keynesian theory the short-run aggregate supply curve is vertical, and in new
classical theory the short-run aggregate supply curve is upward sloping.
Look at the following data: consumption = $915 billion; exports = $40 billion; imports
= $33 billion; inventory investment = $123 billion; fixed investment = $500 billion;
government purchases = $300 billion.GDP is equal to
a. $1,632 billion.
b. $1,466 billion.
c. $1,911 billion.
d. $1,845 billion.
e. none of the above
Under an acreage allotment program,
a. the government sets a limit on the quantity of a product that a farmer is allowed to
bring to market, which is intended to cause farmers to cut back on the number of acres
they cultivate.
b. farmers are paid to take part of their land out of cultivation.
c. farmers are given limits as to the number of acres that can be farmed.
d. farmers are paid the difference between the market price of their product and a
governmentally determined price that would maintain an established price parity.
e. the government establishes a minimum price that farmers will be paid for their
product, which causes the farmers to cut back on the number of acres planted.
Exhibit 16-1
Suppose the economy is currently at point B on the short-run Phillips curve, SRPC1.
What could get the economy to move to point C on SRPC2?
a. The realization on the part of workers that their currently held expected inflation rate
is too high; they revise it upward, thus shifting the short-run aggregate supply curve
rightward.
b. The realization on the part of workers that their currently held expected inflation rate
is too high; they revise it downward, thus shifting the short-run aggregate supply curve
rightward.
c. The realization on the part of workers that their currently held expected inflation rate
is too low; they revise it upward, thus shifting the short-run aggregate supply curve
leftward.
d. The realization on the part of workers that their currently held expected inflation rate
is too low; they revise it downward, thus shifting the short-run aggregate supply curve
rightward.
Under a gold standard, if the market price of gold is above the official price of gold (set
by the monetary authority), people will be more likely to sell gold
__________________, which will cause the money supply to _______________ and
the price level.to _______________.
a. to the monetary authority; fall; fall
b. to the monetary authority; rise; rise
c. in the gold market; fall; fall
d. in the gold market; rise; rise
Milton Friedman argued that there is a
a. permanent downward-sloping Phillips curve.
b. temporary downward-sloping Phillips curve.
c. temporary upward-sloping Phillips curve.
d. permanent upward-sloping Phillips curve.
As the interest rate __________, the quantity supplied of money __________ and the
quantity demanded of money __________.
a. falls; rises; falls
b. rises; remains unchanged; falls
c. falls; remains unchanged; falls
d. rises; rises; rises
e. none of the above
At a price of $15 each, Marta buys 4 books per month. When the price increases to $20,
Marta buys 3 books per month. Luz says that Marta's demand for books has decreased.
Is Luz correct?
a. Yes, Luz is correct.
b. No, Luz is incorrect. Marta's demand has increased.
c. No, Luz is incorrect. Marta's quantity demanded has decreased, but her demand has
stayed the same.
d. No, Luz is incorrect. Marta's quantity demanded has increased, but her demand has
stayed the same.
e. No, Luz is incorrect. Marta's quantity demanded has decreased and her demand has
increased.
