People are said to have rational expectations if they:
A) use all available information in forming their expectations.
B) assume that this year’s inflation rate will be equal to the average inflation rate over
the past 10 years.
C) merely guess at the inflation rate.
D) assume that this year’s inflation rate will be the same as last year’s inflation rate.
The aggregate demand curve shows the relationship between prices and the:
A) level of real GDP demanded.
B) level of nominal GDP demanded.
C) level of real GDP produced.
D) level of nominal GDP produced.
Figure 18.4
Refer to Figure 18.4. With an import ban, what is the equilibrium quantity of artichokes
in Duckland?
A) 85
B) 75
C) 65
D) 30
Can we infer that pecans are normal and inferior goods, just purely from reading the
Application?
A) No. The Application made no mention of changes in income.
B) No. The Application did not mention the quality of the pecans.
C) Yes, pecans are inferior goods.
D) Yes, pecans are normal goods.
A rightward shift in the aggregate demand curve cannot be caused by:
A) an increase in government spending.
B) an increase in the money supply.
C) an increase in taxes.
D) an increase in net exports.
Recall the Application that questions if the United States can or should adopt a
value-added tax (VAT) to answer the following question(s). The value-added tax is
essentially a sales tax that is levied on each stage of production. Firms pay the value
added tax on their sales and then receive a credit for value-added taxes paid by their
suppliers. Unlike a sales tax, the value-added tax is embedded in the price of
goods.According to this Application, some conservatives worry that a value-added tax
________ and some liberals worry that a value-added tax ________.
A) will result in consumers not realizing all the taxes they pay; is regressive
B) will discourage consumers from saving; will decrease federal tax revenue
C) is progressive; will reduce investment.
D) will penalize high-income individuals; will decrease per-capita GDP
The argument that calls for the trade protection of only newly developing industries is
known as the ________ argument.
A) learning by doing
B) predatory dumping
C) infant industry
D) developing nation
The present value of a payment to be received in the future is:
A) equal to the borrowed principal minus the total value of interest payments.
B) the maximum amount a person is willing to pay today to get that payment later.
C) the interest rate equivalent to the foregone stream of income.
D) always larger than the current value of the repayment, once inflation is discounted.
Recall Application 2, “The Confucius Curve?” to answer the following questions:
According to the application, the reason why Yu Juo advocated a tax cut if a famine
occurs is because:
A) a tax cut increases economic activity.
B) a tax cut increases the government’s mandatory spending.
C) a tax cut allows people to buy more food.
D) a tax cut raises inflation and causes people to buy less.
If the variable on the vertical axis increases by 24 and the variable on the horizontal
axis decreases by 3, the slope of the line is
A) -24.
B) -8.
C) 3.
D) 72.
Figure 4.5 Figure 4.5 illustrates the supply of guitars. A technological advancement that
makes guitars cheaper to produce would most likely cause a movement from:
A) point B to point C.
B) point B to point A.
C) S1 to S0.
D) S1 to S2.
A change in quantity supplied of a product is the result of a change in
A) consumer income.
B) the state of production technology.
C) the cost of producing the product.
D) the price of the product.
If the classical models provided an accurate description of the workings of the economy
during the Great Depression, then:
A) the Great Depression would have lasted much shorter.
B) the Great Depression would have lasted much longer.
C) the Great Depression would have been much deeper.
D) the Great Depression would have occurred exactly the way it did.
If the velocity of money is 4 and the money supply is $16 trillion, then nominal GDP is
A) $64 trillion.
B) $12 trillion.
C) $4 trillion.
D) $0.25 trillion.
Over time, a country’s real GDP per capita typically
A) shrinks
B) grows.
C) remains stable.
D) increases and decreases randomly.
Recall Application 7, “Lack of Property Rights Hinders Growth in Peru,” to answer the
following questions:
According to the application, the houses in urban slums lack:
A) water.
B) electricity.
C) clear ownership of property.
D) properly functioning sewage systems.