A nation benefits from international trade if it:
a. exports more than it imports.
b. imports more than it exports.
c. imports goods for which it is a low opportunity cost producer.
d. exports goods for which it is a low opportunity cost producer.
A banking system that provides people immediate access to their deposits, but that
allows banks to hold only a portion of those deposits on reserve, is known as:
a. an excess reserve system.
b. a fractional reserve system.
c. the Fed.
d. the FDIC.
e. an asset-based system.
Two goods that are complementary are:
a. wrapping paper and scotch tape.
b. letter and fax.
c. beef and chicken.
d. bicycle and motorcycle.
e. Coke and Pepsi.
More than 70 percent of national income can be attributed to:
a. compensation of employees.
b. rental income.
c. corporate profit.
d. net interest.
e. proprietors’ income.
There is a technological advance in the production of digital watches. This will cause:
a. demand to increase.
b. supply to increase.
c. demand to decrease.
d. supply to decrease.
e. the price to increase.
Suppose a consumer is willing to pay $20 for one good X, $10 for a second, and $5 for
a third, and the market price is $4. The consumer surplus is:
a. $16.
b. $6.
c. $1.
d. $23.
The idea that a large national debt is “mortgaging the future of our children and
grandchildren” is misleading because:
a. it is the Federal Reserve that will be responsible for making interest payments on the
debt.
b. future generations will have to bear the opportunity costs of the resources that are
used today.
c. future generations will not be liable for the interest obligations of the national debt.
d. future generations will inherit the interest income as well as the interest obligations.
The consumer price index (CPI):
a. adjusts for changes in product quality.
b. includes separate market baskets of goods and services for both base and current
years.
c. includes only goods and services bought by typical urban consumer.
d. uses current year quantities of goods and services.
A rightward shift in the aggregate demand curve can be caused by an increase in:
a. the price level.
b. business investment spending.
c. taxes.
d. production costs.
Banks would be expected to minimize holding excess reserves because this practice is:
a. illegal.
b. not profitable. c. technically difficult.
d. subject to a stiff excess reserves tax.
Which of the following is included in the current account?
a. Net unilateral transfers.
b. Goods imports.
c. Goods exports.
d. All are included in the current account.
Which the following organizations is primarily responsible for establishing GAAP
today?
a. Financial Accounting Standards Board (FASB)
b. Securities and Exchange Commission (SEC)
c. Internal Revenue Service (IRS)
d. Federal Government
A graph showing the inverse relationship between the economy’s rate of unemployment
and rate of inflation is called the:
a. Laffer curve.
b. aggregate expenditure model.
c. Keynesian cross.
d. Phillips curve.
e. consumption curve.
In a congressional debate about agricultural price supports, senators, members of
congress, and other experts made the following four statements. Which of these is a
normative statement?
a. “Price supports are important because America should preserve the small family
farm.”
b. “Without price supports, the price of wheat and corn will fall by over twenty
percent.”
c. “The decline in commodity prices caused by the removal of price supports will result
in fewer, larger farms.”
d. “The decline in commodity prices caused by the removal of price supports will
reduce the number of tractors sold in the United States.”
Exhibit 17-5 Short-run and long-run Phillips curve
Suppose
the government shown in Exhibit 17-5 uses contractionary monetary policy to reduce
inflation from 9 to 6 percent. If people have rational expectations, then:
a. the economy will remain stuck at point E1.
b. the natural rate will permanently increase to 8 percent.
c. unemployment will rise to 8 percent in the short run.
d. unemployment will remain at 6 percent as the inflation rate falls.
Assume the economy is in short-run equilibrium at a real GDP above its potential real
GDP. According to classical theory, which of the following policies should be followed?
a. The Federal Reserve should use open market operations and buy U.S. government
securities.
b. The Federal Reserve should not follow a fixed rule.
c. The federal government should cut taxes.
d. Fiscal policy and monetary policy should not be activist.
Which of the following is a regressive tax?
a. A state tax of 5 percent of income.
b. A local sales tax of 5 percent.
c. The federal individual income tax.
d. A federal flat tax of 30 percent.