Keynes explained that recessions and depressions occur because of
a. excess aggregate demand.
b. inadequate aggregate demand.
c. excess aggregate supply.
d. inadequate aggregate supply.
According to studies using international data, an increase in the saving rate
a. does not increase the growth rate of output.
b. increases the growth rate of output for a few years.
c. increases the growth rate of output for about a decade.
d. increases the growth rate of output for several decades.
The EconomicReportofthePresident
a. discusses recent developments in the economy and presents analysis of current policy
issues.
b. is written by the Council of Economic Advisers.
c. is the responsibility of the economists at the Office of Management and Budget.
d. Both a and b are correct.
Over the past two decades the U.S. has persistently had trade deficits.
a. True
b. False
When the market price is above the equilibrium price, suppliers are unable to sell all
they want to sell.
a. True
b. False
If prices and wages adjusted rapidly and producers could quickly distinguish the
difference between a change in the price level and a change in the relative price of their
products, then an increase in the money supply growth rate would have at most a very
short-lived affect on unemployment.
a. True
b. False
Which of the following includes everyone in the adult population that the Bureau of
Labor Statistics counts as “unemployed”?
a. anyone who is not employed
b. anyone who is not employed, is available for work, and has looked for work in the
past four weeks
c. anyone who is not employed, is available for work, has looked for work in the past
four weeks, and anyone who is waiting to be recalled from a job from which they have
been laid off
d. anyone who is not employed, is available for work, has looked for work in the past
four weeks, anyone who is waiting to be recalled from a job from which they have been
laid off, and anyone who is employed part time and has searched for full time
employment in the past 4 weeks
Which of the following statements about market economies is correct?
a. In a market economy, no one is looking out for the economic well-being of society as
a whole.
b. Market economies are characterized by decentralized decision making and
self-interested decision makers.
c. Market economies have proven remarkably successful in promoting overall economic
well-being.
d. All of the above are correct.
Suppose that real interest rates in the U.S. rise relative to real interest rates in other
countries. This increase would make foreigners
a. more willing to purchase U.S. bonds, so U.S. net capital outflow would fall.
b. more willing to purchase U.S. bonds, so U.S. net capital outflow would rise.
c. less willing to purchase U.S. bonds, so U.S. net capital outflow would fall.
d. less willing to purchase U.S. bonds, so U.S. net capital outflow would rise.
The long-run aggregate supply curve would shift left if the amount of labor available
a. increased or Congress made a substantial increase in the minimum wage.
b. decreased or Congress abolished the minimum wage.
c. increased or Congress abolished the minimum wage.
d. decreased or Congress made a substantial increase in the minimum wage.
Which of the following is not generally regarded by economists as a legitimate reason
for the government to intervene in a market?
a. to promote efficiency
b. to promote equality
c. to enforce property rights
d. to protect an industry from foreign competition
The last $2,000 of Rolanda’s wealth adds less to her utility than the previous $2,000.
Based on this information,
Rolanda has
a. increasing marginal utility of wealth and is risk averse.
b. increasing marginal utility of wealth and is not risk averse.
c. decreasing marginal utility of wealth and is risk averse.
d. decreasing marginal utility of wealth and is not risk averse.
Both Arnold and Will work 10 hours a day. Arnold can produce six baskets of goods per
hour while Will can produce four baskets of the same goods per hour. It follows that
Arnold’s
a. productivity is greater than Will’s.
b. output is greater than Will’s.
c. standard of living is higher than Will’s.
d. All of the above are correct.
Resources are
a. scarce for households but plentiful for economies.
b. plentiful for households but scarce for economies.
c. scarce for households and scarce for economies.
d. plentiful for households and plentiful for economies.
In the base year, the GDP deflator is always
a. -1.
b. 0.
c. 1.
d. 100.
Suppose that consumers decide to walk to work more frequently and drive cars less.
Companies that make walking shoes hire workers, while automobile companies lay off
workers. This is an example of
a. frictional unemployment created by sectoral shifts.
b. frictional unemployment created by efficiency wages.
c. structural unemployment created by efficiency wages.
d. structural unemployment created by sectoral shifts.
If a U.S. shirt maker purchases cotton from Egypt, U.S. net exports
a. increase, and U.S. net capital outflow increases.
b. increase, and U.S. net capital outflow decreases.
c. decrease, and U.S. net capital outflow increases.
d. decrease, and U.S. net capital outflow decreases.
When the money market is drawn with the value of money on the vertical axis, if the
price level is below the equilibrium level, there is an
a. excess demand for money, so the price level will rise.
b. excess demand for money, so the price level will fall.
c. excess supply of money, so the price level will rise.
d. excess supply of money, so the price level will fall.
Figure27-4. The figure shows a utility function for Alex.
RefertoFigure27-4. If most people’s utility functions look like Alex’s utility function,
then it is easy to explain
why
a. people buy various types of insurance.
b. we observe a trade-off between risk and return.
c. most people prefer to hold diversified portfolios of assets to undiversified portfolios
of assets.
d. None of the above are correct.
Which of the following statements about recessions is true?
a. An old rule of thumb defining recession is two consecutive quarters of falling
nominal GDP.
b. Recessions occur at regular intervals and last standard amounts of time.
c. There is no ironclad rule for the declaration of recessions.
d. Recessions are associated with low unemployment and high income.
A decrease in demand shifts the demand curve to the left.
a. True
b. False
Which of the following would necessarily increase the equilibrium interest rate?
a. The demand for and the supply of loanable funds shift right.
b. The demand for and the supply of loanable funds shift left.
c. The demand for loanable funds shifts right and the supply of loanable funds shifts
left.
d. The demand for loanable funds shifts left and the supply of loanable funds shifts
right.
The sticky-wage theory of the short-run aggregate supply curve says that when the price
level is lower than expected,
a. production is more profitable and employment rises.
b. production is more profitable and employment falls.
c. production is less profitable and employment rises.
d. production is less profitable and employment falls.
In the circular-flow diagram,
a. firms are buyers in the markets for goods and services.
b. households are sellers in the markets for the factors of production.
c. firms are sellers in the markets for factors of production and in the markets for goods
and services.
d. dollars that are spent on goods and services flow directly from firms to households.
Who would be included in the labor force?
a. Louie, who is waiting for his new job to start
b. Daisey, who has become discouraged looking for a job and has quit looking
c. Donald, an unpaid stay-at-home father
d. None of the above is correct.
Which of the following countries benefited significantly from the catch-up effect in the
last half of the twentieth century?
a. Ethiopia
b. the United States
c. Canada
d. South Korea
If the supply for loanable funds shifts to the left, then the equilibrium interest rate
a. and quantity of loanable funds rises.
b. and quantity of loanable funds falls.
c. rises and the quantity of loanable funds falls.
d. falls and the quantity of loanable funds rises.
Figure 3-19
Refer to Figure3-19. If Chile and Colombia switch from each country dividing its time
equally between the production of coffee and soybeans to each country spending all of
its time producing the good in which it has a comparative advantage, then total
production of soybeans will increase by
a. 3 pounds.
b. 6 pounds.
c. 9 pounds.
d. 12 pounds.
GDP is the most closely watched economic statistic because it is thought to be the best
single measure of a society’s economic well-being.
a. True
b. False
Which of the following events would cause a movement downward and to the left along
the supply curve for mangos?
a. The number of sellers of mangos decreases.
b. There is an advance in technology that reduces the cost of producing mangos.
c. The price of mangos falls.
d. The price of fertilizer increases, and fertilizer is an input in the production of mangos.
Net exports of a country are the value of
a. goods and services imported minus the value of goods and services exported.
b. goods and services exported minus the value of goods and services imported.
c. goods exported minus the value of goods imported.
d. goods imported minus the value of goods exported.
Other things the same, a decrease in the real interest rate
a. increases the quantity of loanable funds demanded.
b. shifts the demand for loanable funds curve to the right.
c. decreases the quantity of loanable funds demanded.
d. shifts the demand for loanable funds curve to the left.