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In the short run, the level of GDP is determined primarily by the aggregate supply.
If supply of a product increases and demand for the product decreases, equilibrium
price will definitely change.
The George W. Bush administration inherited budget surpluses from the Clinton
administration before starting to run large budget deficits itself.
If product prices decrease more than nominal wages decrease, the real value of wages
will increase.
The unemployment rate is generally the same across demographic groups.
When product prices increase slower than nominal wages increase, the real value of
wages decreases.
When using rational expectations, all information available to the public will be used.
Having the single goal of price stability would make the Fed more subject to political
pressure.
The equilibrium price under an import quota is below the price that occurs with free
trade.
Seignorage refers to the revenue raised through money creation.
A public good is any good that is produced by the government.
According to the principle of diminishing returns, an additional worker decreases total
output.
Stabilization policies are actions taken to bring the economy closer to full employment.
Investment spending tends to be closely related to the current pace of economic growth.
The federal corporate tax is levied on corporate revenue.
An increase in consumer spending based on an increase in income is reflected by
A) an upward rotation of the consumption function.
B) an increase in the MPC.
C) a downward shift in the consumption function.
D) a movement up along the consumption function.
Refer to Figure 18.4. With a tariff, how much does the government collect for each
glove imported into Duckland?
A) $0
B) between $2 and $3
C) between $8 and $10
D) more than $10
Recall Application 3, "Jasper Johns and House Painting," to answer the following
questions:
Suppose that a house painter can earn $200 per day painting houses while Jasper Johns
earns $5,000 per day painting art. According to the application, Jasper Johns should:
A) paint his house if he can paint his house at least 25 times faster than a house painter.
B) never hire a house painter.
C) never paint his house.
D) paint his house if he can paint it in less than 25 days.
The unemployment rate is the number of unemployed people
A) divided by the number of people who are working.
B) divided by the total working-age population.
C) divided by the sum of the number of people who are working and the number of
people who are looking for work.
D) and the number of people working fewer than their desired number of hours, divided
by the number of people who are working or looking for work.
If total output grows at 4 percent per year while labor and capital grow at 2.0 percent
and 2.0 percent pre year, respectively, then:
A) technology grew by 2.0 percent per year.
B) there was no technological progress.
C) technology declined by 0.4 percent per year.
D) technology grew by 4.0 percent per year.
How do diminishing returns affect the shape of the production function?
A) The slope of the production function increases as more of an input is used.
B) The production function becomes flatter as more of an input is used.
C) The production function is downward-sloping.
D) The production function becomes convex.
The supply of dollars in the foreign exchange market is likely to be upward sloping
because as the price of a dollar falls (the dollar depreciates):
A) Americans demand fewer foreign goods because these goods have become more
expensive to American consumers.
B) Americans demand more foreign goods because these goods have become less
expensive to American consumers.
C) foreigners demand more American goods because these goods have become less
expensive to foreign consumers.
D) foreigners demand more foreign goods because these goods have become more
expensive to foreign consumers.
Figure 2.1
Referring to Figure 2.1, if you increase the production of farm goods, what other area is
affected?
A) the price of produce
B) the production of factory goods
C) how much people can purchase
D) the wages earned by farm workers
After the implementation of the congestion tax in London, traffic volume was reduced
and travel time for cars and buses was cut in half. This is an example of
A) responding to incentives.
B) the role of pricing in allocating resources.
C) caveat emptor.
D) comparative advantage.
Figur
e 15.3 Refer to Figure 15.3 If this economy is initially in a recession, its movement
back to full employment would be complete when it reaches point ________ in graph
(A), point ________ in graph (B), and point ________ in graph (C).
A) ; c; e
B) a; d; f
C) a; c; e
D) ; d; f
Which of the following assets is easiest to make transactions with?
A) currency
B) checking deposits
C) money market mutual funds
D) time deposits
In a production function that is graphed with output on the y-axis and labor on the
x-axis, a decrease in the capital stock is illustrated as:
A) an upward shift in the production function.
B) an upward movement along the production function.
C) a downward shift in the production function.
D) a downward movement along the production function.
Recall Application 1, "Absolute Advantage and Comparative Disadvantage in Latvia,"
to answer the following questions:
According to the Application, which good does Latvia have absolute advantage on?
A) timber
B) grain
C) milk
D) none of the above
Budget deficits inevitably lead to inflation in
A) nations that can easily borrow from the public.
B) nations that are unable to borrow from the public.
C) budget deficits have no effect on inflation.
D) small nations.
According to the rule of 70, if Variable A grows at x% each year, then Variable A will
double in approximately:
A) 70x years.
B) 70/x years.
C) x/70 years.
D) 70(1-x) years.
People are interested in how much their money can buy. This is called the ________.
What happens to the number of workers a firm wants to hire if the wage falls? Explain.
A decrease in the cost of labor or some other input will make the production of a
product less costly and more profitable at a given price, so producers will supply more
of it. This is an example of ________.
What are the three properties of money?
Identify the different actions that the Fed needs to undertake if it seeks to decrease the
money supply.
( r
What are the three reasons Adam Smith said led to increase productivity with
specialization and division of labor?
Explain the effect of an increase in the money supply on an open economy.
Explain what is meant by the velocity of money.
Explain why ill-timed fiscal policies can magnify economic fluctuations instead of
smoothing them out.
