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Sometimes the government varies its spending, depending on the needs of the country.
This statement best represents the economic concept that:
A) resources should be used as efficiently as possible to achieve society's goals.
B) when markets don't achieve efficiency, government intervention can improve
society's welfare.
C) overall spending sometimes gets out of line with the economy's productive capacity.
D) government policies can change spending.
Conditional convergence suggests that if adjustments were made for differences in
education, infrastructure, and other factors that contribute to growth, poorer countries
would have higher growth rates.
A) True
B) False
Trade without money requires a double coincidence of wants.
A) True
B) False
Contractionary monetary policy:
A) is appropriate during a recessionary gap.
B) decreases aggregate demand.
C) increases aggregate demand.
D) helps solve the problem of unemployment.
A law requiring the federal budget to be balanced each year would likely:
A) make business cycles more severe.
B) make business cycles less severe.
C) not affect the severity of business cycles.
D) increase the effectiveness of automatic stabilizers.
Human capital development often comes from:
A) financial markets.
B) government and private spending for education.
C) the private sector, but only in capitalist economies.
D) investment spending by businesses.
Unemployment that occurs because it takes workers and employees time to find each
other is _____ unemployment.
A) cyclical
B) structural
C) frictional
D) discouraged
If the cost of the market basket in the base year is $1,000 and the cost of the market
basket in 2013 is $1,080, the price index for 2013 is 80.
A) True
B) False
The _____ curve shows the negative relationship between the aggregate price level and
the quantity of aggregate output demanded in the economy.
A) aggregate demand
B) short-run aggregate supply
C) long-run aggregate supply
D) investment demand
Potential output is the level of real GDP that the economy would produce if all prices,
including nominal wages, were inflexible.
A) True
B) False
An increase in the supply of a good is caused by:
A) input prices rising.
B) a fall in the price of the good.
C) an increase in the number of sellers.
D) expectations of future price increases.
To bring disinflation to an economy, policy makers must:
A) slow down labor productivity growth.
B) increase the money supply to release the economy from the liquidity trap.
C) keep unemployment below its natural rate for an extended period.
D) lower expectations about inflation.
Money that the government has ordered to be accepted as money is:
A) fiat money.
B) not usable in international transactions.
C) convertible paper money.
D) commodity money.
Look at the table Comparative Advantage I. Sweden has an absolute advantage in
producing:
A) cell phones only.
B) herring only.
C) both cell phones and herring.
D) neither cell phones nor herring.
Scenario: Countries A and B
Two countries, A and B, produce two goods, wheat (W) and steel (S). Each has a linear
production possibility frontier in both goods. If country A spends all of its available
resources to produce wheat, it can produce 500 tons of wheat and no steel. If it uses all
of its resources to produce steel, it can produce 250 tons of steel and no wheat. If
country B spends all of its available resources producing wheat, it can produce 400 tons
of wheat, and if it spends all of its resources on the production of steel, it can produce
400 tons of steel.
Look at the scenario Countries A and B. If country B produces 300 tons of steel, how
many tons of wheat can it produce?
A) 100
B) 200
C) 300
D) 400
Changes in short-run aggregate supply can be caused by changes in:
A) wages.
B) wealth.
C) government spending.
D) consumption spending.
The changes in the economy of Ft. Myers, Florida, between 2003 and 2010 provide an
example of:
A) the risk associated with an agricultural economy.
B) positive and negative multiplier effects.
C) how public assistance programs can stimulate the economy.
D) the benefits of government budget surpluses.
Capital tends to move from:
A) less developed to more developed countries.
B) poorer countries to wealthier countries.
C) slow-growing countries to fast-growing countries.
D) fast-growing countries to slow-growing countries.
A decrease in bank deposits that is matched by an increase in currency in circulation:
A) decreases the monetary base.
B) does not affect the monetary base.
C) increases the monetary base.
D) increases the money supply.
Table: Price and Output Data
Look at the table Price and Output Data.
Between years 4 and 5, real GDP:
A) decreased by 14%.
B) did not change.
C) increased by 3%.
D) increased by 17%.
If unplanned inventory investment is positive, probably:
A) the economy is growing rapidly.
B) aggregate expenditures on goods and services are less than forecast.
C) the economy is doing the same, since inventory changes do not affect the economy.
D) the stock of inventories is declining.
Natural unemployment equals _____ unemployment plus _____ unemployment.
A) frictional; structural
B) cyclical; structural
C) frictional; cyclical
D) frictional; structural unemployment plus cyclical
The government saves when:
A) tax revenue is less than government spending.
B) tax revenue is more than government spending.
C) tax revenue equals government spending.
D) tax revenue is positive.
"A consistent countercyclical policy has no effect on employment and output, since
individuals will recognize those policies as systematic and will anticipate them
correctly." This statement is most closely associated with _____ theory.
A) classical
B) Keynesian
C) rational expectations
D) monetarist
Figure: Production Possibility Frontier
Look at the figure Production Possibilities Frontier. The combination of cars and
computers at point H:
A) can be attained but would cost too much.
B) cannot be attained given the level of technology and the resources available.
C) has no meaning, since it is not what consumers want.
D) is attainable but would increase unemployment.
Figure: Fiscal Policy Options
Look at the figure Fiscal Policy Options. If the aggregate demand curve is AD':
A) a contractionary fiscal policy may be warranted.
B) an expansionary fiscal policy may be warranted.
C) the economy is in long-run equilibrium.
D) the economy is experiencing an inflationary gap.
To be counted as unemployed, one must:
A) have had a job previously.
B) be out of work and be actively looking for a job during the past four weeks.
C) have had a job before and be actively looking for work.
D) be actively looking for a job and have at least a high-school diploma or its
equivalent.
Loans of reserves from one bank to another are made in the _____ market.
A) commodity
B) foreign exchange
C) stock
D) federal funds
During the Great Depression, consumers and producers in the United States
dramatically reduced their spending as compared to the quantity of goods and services
available at the time. This statement best represents this economic concept:
A) Resources are scarce.
B) When markets don't achieve efficiency, government intervention can improve
society's welfare.
C) Overall spending sometimes gets out of line with the economy's productive capacity.
D) Government policies can change spending.
If there is an increase in the government budget deficit, the _____ loanable funds will
_____, interest rates will _____, and the amount of borrowing will _____.
A) demand for; increase; increase; increase
B) demand for; decrease; decrease; decrease
C) supply of; increase; decrease; increase
D) supply of; decrease; increase; decrease
