Assume that the consumption function is C = 100 + 0.8Y, income (Y) is $1,000 billion,
and investment I is $50 billion, then the unplanned inventory change will be $
________ billion.
A) -50
B) 0
C) 50
D) 100
If the Federal Reserve purchases newly issued government bonds, the government is
said to be
A) borrowing from the public.
B) fiscalizing the deficit.
C) monetizing the deficit.
D) borrowing from itself.
Figure 18.4
For the good in Figure 18.5, with free trade, the people in the country will produce:
A) Q1.
B) Q3.
C) Q4.
D) Q5.
The measurement of Gross Domestic Product (GDP) according to the production
approach:
A) includes the value of intermediate goods minus depreciation.
B) includes sales of stocks and bonds.
C) excludes services.
D) excludes the value of intermediate goods.
What would happen to a government’s total debt if it ran a budget deficit?
A) Spending would decrease.
B) Spending would increase.
C) Total debt would increase.
D) Total debt would decrease.
Which of the following statements is false?
A) One problem with any fixed-bundle index as a measure of the cost of living is that it
does not account for substitutions that consumers might make in response to price
changes.
B) The chain index for GDP overstates actual changes in prices.
C) The best overall indicator of inflationary pressures in the economy is the GDP price
index.
D) The consumer price index understates changes in the cost of living.
When relative prices are taken into consideration, the country with the highest level of
real GDP per capita in 2011 was:
A) Germany.
B) Japan.
C) the United States.
D) Qatar.
Figure 18.1
Refer to Figure 18.1. Mutually beneficial terms of trade between the United States and
Canada are
A) 1 bicycle for 8 hang gliders.
B) 1 hang glider for 3 bicycles.
C) 1 hang glider for 1/4 of a bicycle.
D) 1 hang glider for 1/2 of a bicycle.
Table 3.3
Consider two individuals, Nigel and Mia, who produce hair pins and bandanas. Nigel’s
and Mia’s hourly productivity are shown in Table 3.3. Which of the following is true?
A) Mia has an absolute advantage in producing hair pins but not bandanas.
B) Mia has an absolute advantage in producing bandanas but not hair pins.
C) Mia has an absolute advantage in producing both goods.
D) Mia does not have an absolute advantage in producing either good.
What are some of the reasons why people protest against free trade?
A) People believe that trade can cause income inequality.
B) Trading with other countries, as opposed to self-sufficiency, diminishes our
independence and sovereignty.
C) Trading with other countries causes us to lose our cultural identity.
D) All of the above are correct.
As firms reduce their stock of capital, labor demand ________ and labor supply
________.
A) increases; increases
B) decreases; decreases
C) increases; stays the same
D) decreases; stays the same
Recall Application 2, “More Disability, Less Unemployment?” to answer the following
questions:
According to the application, the federal Disability Insurance program provides income
to:
A) non-elderly workers who are deemed unable to engage in substantial employment.
B) elderly workers who are deemed unable to engage in substantial employment.
C) non-elderly workers who are deemed able to engage in substantial employment.
D) elderly workers who are deemed able to engage in substantial employment.
The price of one country’s currency in terms of another country’s currency is the:
A) balance of trade.
B) exchange rate.
C) terms of trade.
D) comparative advantage.
Which of the following is NOT an example of private investment expenditure?
A) new plants and equipment added during the year
B) new houses built during the year
C) using credit cards to purchase durable and nondurable goods
D) increases in inventories on goods produced during the year
Economic models are used to
A) explain every detail of an economic theory.
B) explore decision making by individuals, firms and other organizations.
C) build physical renditions of government construction projects.
D) represent the complexities of economic environments.
The maximum amount a person is willing to pay today to receive a payment in the
future is known as
A) nominal interest.
B) present value.
C) real interest.
D) retained earnings.
Who suffers primarily when the federal government has to bail out a financial
intermediary through the deposit insurance system?
A) the bank officers
B) the bank shareholders
C) the taxpayers
D) the U.S. Treasury
Figure 19.1
Referring to Figure 19.1, the peso is likely to appreciate if the exchange rate is either
________ or ________ pesos to the dollar.
A) 10; 11
B) 11; 12
C) 12; 13
D) 13; 14