The marginal propensity to consume (MPC) is the fraction of additional income that is
spent.
An increase in the price level in the United States relative to the price level in Mexico
will cause an appreciation of the dollar against the peso.
The opportunity cost of going to a particular college is not the same for everyone.
If Eddie can produce 40 milk shakes or 20 banana splits in an hour, and Tina can
produce 30 milk shakes or 16 banana splits in an hour, then Eddie has a comparative
advantage in producing banana splits.
The federal budget runs a surplus if tax revenues exceed government spending.
According to the classical model, an excess supply of labor would drive up wages to a
new equilibrium level and therefore unemployment would not persist.
The aggregate demand curve shows the equilibrium output level at different price levels
determined from the income-expenditures model.
The purchasing power of money decreases as the price level increases.
Market failure happens when a market does not generate the most efficient outcome.
An increase in the money supply will cause an increase in interest rates, and an increase
in investment.
The income-expenditure model is best used for short-run analysis of economic
fluctuations.
There is an inverse relationship between the amount of labor supplied and real wages.
According to the Solow Model, an increase in technology will always result in an
increase in output.
An increase or decrease in population will increase or decrease demand.
Eventually the process of capital deepening comes to a halt as depreciation catches up
with total saving.
The price of oranges has risen dramatically. Which of the following is likely to happen?
A) The quantity of oranges supplied will increase.
B) The quantity of oranges supplied will decrease.
C) The supply of oranges will decrease.
D) The supply of oranges will increase.
Recall the Application about opting for a lump sum of $500,000 for your retirement or
$35,000 per year for the rest of your life to answer the following question(s).If the
interest rate is 4 percent, how much interest would the retiree earn the first year if she
opted for the lump sum payment, and chose to invest the entire payment at this interest
rate?
A) $1,400
B) $20,000
C) $55,000
D) $235,000
Growth promotion through capital deepening is constrained due to:
A) slow population growth.
B) the income effect.
C) the principle of diminishing returns.
D) the principle of opportunity cost.
Based on economists’ estimate of the natural unemployment rate today, the U.S.
economy (8 percent unemployment in 2012) is:
A) less than 3 percentage points above the natural rate of unemployment.
B) more than 3 percentage points above the natural rate of unemployment.
C) exactly at the natural rate of unemployment.
D) more than 1 percentage point below the natural rate of unemployment.
Figure 15.2
Refer to Figure 15.2. If the economy is currently producing at point A and the Fed
decreases the money supply, the economy will move to Point ________ in the short run
and to Point ________ in the long run.
A) B; C
B) D; E
C) E; D
D) C; B
All else constant, if the GDP in an economy increases then:
A) demand for money increases.
B) demand for money decreases.
C) the quantity demanded for money increases.
D) the quantity demanded for money decreases.
The Asian Pacific Economic Cooperation (APEC) was modeled after NAFTA.
If the prices of goods and services were expressed in terms of carved wooden beads,
then the carved wooden beads would be serving as a
A) medium of exchange.
B) store of value.
C) unit of account.
D) mechanism for transforming present purchases into future purchases.
Which of the following is in the capital account?
A) statistical discrepancy
B) net purchases of foreign assets
C) net exports
D) net investment income
Recall Application 1, “Beyond Purchasing Treasury Securities,” to answer the following
questions:
When the Fed is conducting quantitative easing, it is directly trying to influence:
A) the long term interest rates.
B) the core inflation rate.
C) the fed funds rate.
D) the U.S. national debt.
Because investment is generally procyclical, it usually ________ when the economy
________.
A) decreases; is in an expansion
B) increases; in a recession
C) reaches its peak; in a recession
D) decreases; is in a recession
Recall Application 3, “A Troubled Euro,” to answer the following questions:
According to the application, why did the investors not pour investments into Italy and
Greece before the creation of the euro?
A) Italy and Greece had large budget deficits.
B) Italy and Greece are poorer countries compared to the other European countries.
C) Italy and Greece had very unpopular presidents.
D) Italy and Greece are allies of the United States.