Refer to Figure 14-4. If the interest rate is currently 12 percent, we would expect the
a. interest rate to fall to 10 percent
b. interest rate to remain at 12 percent
c. interest rate to fall to 6 percent
d. quantity of money held to decrease to $500 billion
e. money supply to increase to $700 billion
Federal subsidies to higher education have the effect of
a. increasing the number of people seeking higher education and lowering tuition
b. increasing the number of people seeking higher education and raising tuition
c. decreasing the number of people seeking higher education and lowering tuition
d. decreasing the number of people seeking higher education and raising tuition
The costs of unemployment is (are)
a. foregone output and psychological effects
b. foregone output and physical effects
c. psychological and physical effects
d. foregone output, psychological effects and physical effects
e. foregone output
“As income rises, the demand for most goods also rises.” This statement
a. is inconsistent with the law of demand
b. suggests that many goods are inferior goods
c. shows that the quantity demanded is inversely related to price
d. suggests that most goods are normal goods
e. does not apply to goods traded in competitive markets
Consider an economic model designed to analyze the purchasing decisions of
households. An assumption that a household chooses between only two goods would be
an example of a
a. simplifying assumption
b. critical assumption
c. macroeconomic assumption
d. financial assumption
e. positive assumption
Suppose Bob and Tom are writing jokes for a their new TV show. Suppose there are
two types of jokes, political jokes and jokes about celebrities. The number of jokes that
can be produced by each person in each category are listed in Figure 2-12. From this
table you can tell that
Figure 2-12
a. Bob has an absolute advantage in both political and celebrity jokes
b. Tom has an absolute advantage in both political and celebrity jokes but a comparative
advantage in political jokes only
c. Bob has an comparative advantage in both political and celebrity jokes
d. Tom has an comparative advantage in both political and celebrity jokes
e. Tom has an absolute advantage in both political and celebrity jokes but a comparative
advantage in celebrity jokes only
Classical economists believed that
a. the government should play an active role in controlling the economy
b. the government can best help the economy by leaving it alone
c. the economy is controlled by the government
d. laissez faire will hurt the economy
e. economists should offer guidance to governmental leaders
If the Fed reduces the money supply, there will be a decline in
a. government purchases
b. unemployment
c. purchases of consumer durables
d. demand for bonds
e. deflationary pressures
Which of the following would be counted in U.S. GDP?
a. the purchase of an old house
b. the purchase of a new textbook
c. the purchase of a $1,000 government savings bond
d. washing your car in the driveway
e. the purchase of 50 shares of IBM stock
In the classical model, markets clear
a. in the short run
b. every month
c. immediately
d. in the long run
e. as soon as any shock occurs
Along a society’s production possibilities frontier,
a. the level of technology is changing
b. more of one good can be produced without giving up some of the other good
c. resources are not being fully utilized
d. available resources are being used efficiently
e. there is productive inefficiency in the economy
Figure 2-1 illustrates the trade-off for a particular student between time spent studying
per week and income per week from working part-time. What is the opportunity cost
for this person of moving from point a to point b?
Figure 2-1
a. $5 of income per week
b. $10 of income per week
c. two hours of studying per week
d. $10 per hour of studying per week
e. $20 of income per week
A positive demand shock will
a. shift the AD curve to the left.
b. increase real GDP and the price level in the short run.
c. decrease real GDP and the price level in the short run.
d. increase real GDP and decrease the price level in the short run.
e. decrease real GDP and increase the price level in the short run.
Which of the following might explain why the government would create a price ceiling
for a certain good?
a. The equilibrium price that would result in the market would be considered too high
b. The equilibrium price that would result in the market would be considered too low
c. The equilibrium quantity that would result in the market would be considered too
high
d. The equilibrium quantity that would result in the market would be considered too low
e. The government never has a reason to create price floors or price ceilings
The United States economy has achieved the target rate of unemployment, as set by the
Full Employment and Balanced Growth Act (1978), for most years over the last few
decades.
If the economy is operating at an unemployment rate above the full employment rate,
a. actual output is above potential output
b. actual output is below potential output
c. frictional unemployment has been eliminated
d. structural unemployment has been eliminated
e. actual output equals potential output
If the economy is on the aggregate supply curve but to the right of the aggregate
demand curve, which of the following will be the first market force to lead the economy
toward an equilibrium?
a. At the current output level, prices will be too low and firms will increase their prices.
b. At the current price level, output will be too low, inventories will diminish, and firms
will increase their production.
c. At the current output level, prices will be too low and firms will lower their prices.
d. At the current price level, output will be too high and so prices will drop so that
output will drop.
e. At the current price level, output will be too high, inventories will pile up and firms
will cut back on their production.
In which of the following situations would a person be best off in real terms?
a. Receiving a 10 percent increase in a nominal wage, with an 8 percent rate of inflation
in the economy
b. Receiving a 3 percent increase in a nominal wage, with a 0 percent rate of inflation in
the economy
c. Receiving a 4 percent increase in a nominal wage, with a 5 percent rate of inflation in
the economy
d. Receiving no increase in a nominal wage, with a 5 percent rate of deflation in the
economy
e. Receiving a 2 percent decrease in a nominal wage, with a 6 percent rate of deflation
in the economy
Which of the following will the Federal Reserve do to decrease the money supply?
a. Decrease the salaries of government employees.
b. Sell government bonds.
c. Buy government bonds.
d. Raise taxes.
e. Sell corporate bonds.
In the loanable funds market, if the government is running a deficit
a. it is a supplier of funds as it is taking in more than it is spending
b. it is a demander of funds as it is taking in more than it is spending
c. it is a supplier of funds as it is spending more than it is taking in
d. it is neither be a supplier or demander
e. it is a demander of funds as it is spending more than it is taking in.