The corporate tax rate during the Kennedy Administration was lower than the corporate
tax rate today.
Banks will never hold any additional reserves beyond what is required.
This year’s nominal GDP is this year’s output of final goods and services evaluated in
base year dollars.
An increase in U.S. interest rates relative to Canadian interest rates will cause the U.S.
dollar to appreciate.
Headquartered in Washington, D.C., the Board of Governors of the Federal Reserve
determines monetary policies and strategies based on the state of the economy.
If a person has an absolute advantage in some activity, she must have a comparative
advantage in that activity as well.
Autonomous consumption is consumer spending which is based on income levels.
The principles of comparative advantage and specialization apply to trade between
countries.
Both the CPI and the chain index for GDP understate actual changes in prices.
When the Federal Reserve decreases the money supply, it generally does so by
purchasing bonds.
The multiplier is equal to 1/(1 – MPS).
The marginal propensity to consume can be negative.
The principle that states that what matters to people is the real value or purchasing
power of money is the
A) marginal principle.
B) principle of diminishing returns.
C) spillover principle.
D) real-nominal principle.
The Bretton Woods exchange rate system was:
A) a fixed exchange rate system.
B) a single currency system.
C) a floating exchange rate system.
D) both a fixed and a flexible exchange rate system.
Figure 16.1 Refer to Figure 16.1 to answer this question. Suppose the economy is
initially at Point A. If labor leaders successfully negotiate a wage increase, then the Fed
must:
A) increase AD if it wants to fight inflation in the short run.
B) increase AD if wants to fight unemployment in the short run.
C) increase AS if it wants to fight unemployment in the short run.
D) decrease AD if it wants to fight unemployment in the short run.
If the Fed enhances its credibility when it sets its own inflation targets:
A) long term interest rates will be more responsive to changes in the short term interest
rates.
B) long term interest rates will be less responsive to changes in the short term interest
rates.
C) short term interest rates will be more responsive to changes in the long term interest
rates.
D) short term interest rates will be less responsive to changes in the long term interest
rates.
A decrease in the discount rate
A) reduces the cost of borrowing from the Fed.
B) signals the Fed’s desire to decrease the money supply.
C) signals the Fed’s desire to reduce lending to commercial banks.
D) increases the cost of reserves borrowed from the Fed.
Table 5.3
Refer to Table 5.3. Suppose this economy produces only the two goods X and Y. If year
1 is the base year, Real GDP in year 3 is:
A) $340.
B) $404.
C) $490.
D) $528.
Suppose bad weather in Florida unexpectedly results in a much smaller citrus crop than
had been projected. This would tend to cause the labor demand curve for citrus pickers
to shift to the
A) right, increasing wages.
B) right, decreasing wages.
C) left, increasing wages.
D) left, decreasing wages.
The tax multiplier is calculated using which formula?
A) 1/(1-MPC)
B) –MPC/(1-MPC)
C) 1/MPC
D) (1-MPC)/MPC
The quantity equation is derived from:
A) the definition of velocity.
B) the definition of money.
C) the definition of real GDP.
D) the definition of economics.
The presence of unemployment in the labor market implies that:
A) at the current wage, there are people who want to work but cannot find work.
B) people are not willing to work at the current wage.
C) there are some people who will not work at the current wage.
D) there is excess demand in the labor market.
Which of the following was a case in which the WTO concluded that dumping had
occurred?
A) Hong Kong VCRs sold in Europe
B) steel from Brazil, India, and Japan sold in the United States
C) American beef sold in Mexico
D) all of the above
Joe runs a business and needs to decide how many hours to stay open. Figure 2.2
illustrates his marginal benefit of staying open for each additional hour. Suppose that
we observe Joe staying open 5 hours per day. If he is following the marginal principle,
what must his marginal cost per hour be?
A) $16
B) $24
C) $32
D) $40
What is the total demand for goods and services in an entire economy called?
A) supply and demand
B) aggregate demand
C) consumer demand
D) GDP demand
Assume that consumption is represented by the following: C = 400+ 0.75Y. Also
assume that investment (I) equals 100.
(a) Given the information, calculate the equilibrium level of income.
(b) Given the information, calculate the level of consumption and saving that occurs at
the equilibrium level of income.
(c) Suppose investment increases by 100. Calculate the new equilibrium level of
income.
(d) Will the level of saving and consumption change as the economy adjusts to this
change in investment? Explain.
Figure 10.1 Refer to Figure 10.1 to answer this question. Suppose that the economy
were at point A, and the government increases taxes. In the short run, the economy will
move to point:
A) B.
B) C.
C) D.
D) E.
Recall Application 1, “Falling Home Prices, the Wealth Effect, and Decreased
Consumer Spending,” to answer the following questions:
According to the application, estimates predicted that a decrease in wealth by $1 would
cause a decrease in consumption by:
A) $0.02 – $0.07.
B) $0.12 – $0.17.
C) $0.20 – $0.70.
D) $0.25 – $0.37.
Because of the principle of diminishing returns, growth promotion through capital
deepening works better in countries that:
A) have a low capital stock.
B) have high capital stock.
C) have low saving rate.
D) have a high level of real GDP per capita.
Economists use assumptions to:
A) make things simpler.
B) focus on what really matters.
C) simplify decision-making.
D) all of the above
Expected Real Rates of Interest for Five Countries
Source: Trading Economics, September, 2010Refer to Table 12.1. The inflation rate
forecast for Japan is
A) -0.9%.
B) 0.9%.
C) 1.1%.
D) cannot be determined from the information provided.
Who pays the interest on government debt for the money it borrows today?
A) the Federal Reserve
B) the Congressional Budget Office
C) future generations of taxpayers
D) The government does not pay interest on money it borrows.