Recall Application 4, “The Introduction of Cell Phones and the Bias in the CPI,” to
answer the following questions:
According to the application, the failure to include cell phones in the calculation of the
CPI creates an upward bias on the telecommunications component of the CPI by 0.8 to
1.9 percent. If the measured inflation for telecommunications was 5%, then the actual
inflation was somewhere between:
A) 3.1 to 4.2 percent.
B) 0.8 to 1.9 percent.
C) 5.8 to 6.9 percent.
D) 5.9 to 6.8 percent
The study of the choices made by individual households, firms, and government is
called
A) macroeconomics.
B) microeconomics.
C) managerial economics.
D) market economics.
If a bond was to pay off one year from now for $630 and was purchased for $600, what
is the interest rate?
A) 3 percent
B) 5 percent
C) 15 percent
D) 30 percent
The principal reason why the chain-weighted index for GDP and the CPI both overstate
actual changes in prices is that
A) it is hard to measure quality changes.
B) the basket of goods purchased by consumers never changes.
C) price data is often inaccurate.
D) all of the above
A limit on the amount of a good that can be imported is known as:
A) a tax.
B) an export agreement.
C) a tariff.
D) an import quota.
A discouraged worker is:
A) marginally attached.
B) not in the labor force.
C) not currently looking for a job.
D) All of the above are correct.
One implication of Say’s Law is that:
A) there is no recession, as all goods produced in the economy will be purchased.
B) unemployment will always persist.
C) there will always be a recession, as not all goods in the economy will be purchased.
D) inflation will always exist, as all goods in the economy will be purchased.
If a large number of workers are classified as being out of the labor force when they are
really looking for work, this will lead to an official unemployment rate that is
A) overstated.
B) understated.
C) neither overstated or understated.
D) unbiased.
In the long run, the level of output:
A) depends on the money supply.
B) depends on the price level.
C) is determined by the supply of resources and the level of technological progress.
D) all of the above
Assuming that banks have loaned all excess reserves, then an increase in checking
account balances brought about by an increase in deposits is equal to
A) (the initial deposit) x (the reserve ratio).
B) (the initial deposit) x (1 / reserve ratio).
C) (total reserves) x (1 / reserve ratio).
D) (total reserves) x ( the reserve ratio).
If the demand for one good decreases when the price of another good decreases, the two
goods are ________ goods.
A) normal
B) inferior
C) complementary
D) substitute
Table 6.10
Refer to Table 6.10. If 1999 is the base year, the price index in 2000 is:
A) 102.4.
B) 100.9.
C) 89.2.
D) 101.4.
When deciding to implement a congestion tax, economists and the government would
use the elements of the economic way of thinking to primarily determine
A) if the tax would be allocated equitably.
B) what tax amount should be charged.
C) who should be exempt from the tax.
D) how much revenue will the tax generate.
If gross investment in 2009 is $600 billion and depreciation in 2012 is $50 billion, net
investment in 2012 is:
A) $50 billion.
B) $550 billion.
C) $600 billion.
D) none of the above.
The real exchange rate between the U.S. and Japan is expressed as:
A) the number of baskets of Japanese goods that you can buy with a basket of goods in
the U.S.
B) the number of baskets of Japanese goods that you can buy with a U.S. dollar.
C) the amount of dollars you can buy with a Japanese yen.
D) the number of baskets of U.S. goods that you can buy with a yen.
An inside lag is
A) a lag in implementing policy.
B) the period of time it takes for policies to work.
C) a policy aimed at increasing GDP.
D) a policy aimed at reducing GDP.
A loan made by a bank is considered ________ of that bank.
A) a liability
B) capital
C) owners’ equity
D) an asset
Recall Application 2, “Do European Soccer Stars Change Clubs to Reduce Their
Taxes?” to answer the following questions:
According to the application, why does the government have more difficulty raising tax
rates on the high income individuals than the low income individuals?
A) The high income individuals are smarter than the low income individuals.
B) The high income individuals are more than happy to pay higher taxes than the poor
individuals.
C) The high income individuals are more mobile than the poorer individuals.
D) The high income individuals do not work anyway, so higher tax rates on them would
be unnecessary.
If the marginal propensity to consume is 0.75, then the value of the tax multiplier is
A) -2.5.
B) -3.
C) 1.25.
D) 1.4.