The federal budget works as an automatic economic stabilizer because:
A) budgetary lags are shorter than monetary lags.
B) federal agencies can not be crowded out.
C) it is activated by a constitutional amendment.
D) it does not require explicit action by the President or Congress.
In the consumption function C = Ca + bY, the term Ca represents:
A) the multiplier effect.
B) the marginal propensity to consume.
C) the autonomous consumption spending.
D) the marginal propensity to save.
The process by which monopoly profits leads to technological progress in known as
A) imperfect competition.
B) destructive creation.
C) creative destruction.
D) economies of scale.
Which of the following benefits from a quota or VER?
A) consumers
B) domestic producers
C) the government
D) all of the above
Figure 9.1 shows three aggregate demand curves. A movement from curve AD1 to curve
AD0 could be caused by a(n)
A) increase in the money supply.
B) decrease in taxes.
C) increase in the price level.
D) decrease in government spending.
Suppose the annual growth rate of GDP in Nepal is 5 percent. In 35 years, GDP in
Nepal will double
A) 1.75 times.
B) 2.5 times.
C) 7 times.
D) 24.5 times.
Recall the Application about how to estimate the shifts in the natural rate of
unemployment to answer the following question(s).
According to the Application, if the labor market becomes more efficient in matching
jobs with individuals, there will be ________ job vacancies and the natural rate of
unemployment will ________.
A) more; rise
B) more; decline
C) fewer; rise
D) fewer; decline
A(n) ________ in the capital stock can ________ output, without a corresponding labor
force ________.
A) decrease; increase; increase
B) decrease; increase; decrease
C) increase; decrease; decrease
D) decrease; decrease; decrease
If firms receive an economic forecast predicting future decreases in the growth of real
GDP, they are likely to respond by
A) decreasing their level of investment spending to decrease future production capacity.
B) increasing their level of investment spending to increase current production capacity.
C) increasing their level of investment spending to increase future production capacity.
D) decreasing their level of investment spending to decrease current production
capacity.
If the U.S. sends food aid to Zimbabwe to help the thousands who are dying from
hunger, then the value of the aid is included in the ________ component of ________.
A) net exports; current account
B) net transfer payments; current account
C) net income from abroad; financial account
D) net income from abroad; capital account
When there is a recession (a fall in output) and prices are increasing, and this situation
is caused by adverse supply shocks, the term economists use to describe it is
A) aggregate shifts.
B) stagnation.
C) inflation.
D) stagflation.
During a recession, tax revenues ________ while government transfer payments
________, thereby mitigating part of the adverse effects of a recession and stabilizing
the economy.
A) fall; increase
B) fall; decrease
C) rise; increase
D) rise; decrease
The idea that a $1 increase in infrastructure spending will generate more than $1 in
economic growth is a representation of
A) the multiplier effect.
B) an outside lag.
C) an inside lag.
D) an automatic stabilizer.
The accelerator theory describes the impact of:
A) a change in investment on future GDP.
B) a change in government spending on future GDP.
C) a change in planned aggregate expenditures on future GDP.
D) a change in future GDP on investment.
According to the text, the solution economists propose to the problem of traffic
congestion is to:
A) impose a tax for the use of a road during peak times.
B) make cars smaller.
C) make gasoline cheaper.
D) make the roads wider.
The value of money or income in terms of the quantity of goods the money can buy is
called its:
A) real value.
B) marginal value.
C) nominal value.
D) implicit value.
An example of money is
A) a dollar bill.
B) a checking account balance.
C) a traveler’s check.
D) all of the above
A monetary system in which gold backs up paper money is called:
A) the silver standard.
B) the gold standard.
C) the commodity standard.
D) the golden age.
What happens if the price of a product is below the equilibrium price?
A) The buyers will stop purchasing a “cheap” product.
B) The producer will lower the price to make more profit.
C) There will be an excess demand for the product.
D) none of the above