Tax cuts on business income increase aggregate demand by increasing
A) business investment spending.
B) consumption spending.
C) government spending.
D) wage rates.
Table 7-3
Mateo and Celeste produce custom saddles and spurs. Table 7-3 lists the number of
saddles and pairs of spurs Mateo and Celeste can each produce in one month. Select the
statement that accurately interprets the data in the table.
A) Celeste has a comparative advantage in making spurs.
B) Mateo has a comparative advantage in making spurs.
C) Celeste has a comparative advantage in making saddles and making spurs.
D) Neither Mateo nor Celeste has a comparative advantage in making spurs.
Caroline is an artist. She purchases canvas, paints, brushes, and accessories for $75. She
sells one of her original paintings to an art gallery for $1,500, which, in turn, sells it to
an art lover for $4,500. How much value does the gallery add?
A) $1,425
B) $1,500
C) $3,000
D) $4,500
The only way the standard of living of the average person in a country can increase is if
________ increases faster than ________.
A) production; population
B) population; GDP per capita
C) population; production
D) population; income
The per-worker production function shows the relationship between ________ per hour
worked and ________ per hour worked, holding ________ constant.
A) labor; real GDP; technology
B) capital; real GDP; technology
C) labor; capital; real GDP
D) capital; labor; real GDP
Which of the following would encourage economic growth through increases in the
capital stock?
A) a change from an income tax to a consumption tax
B) an increase in household saving
C) a decrease in the government deficit
D) all of the above
During an expansion, how do inflation and unemployment typically change?
A) Inflation and unemployment both rise.
B) Inflation and unemployment both fall.
C) Inflation falls and unemployment rises.
D) Inflation rises and unemployment falls.
An increase in the price level ________ real wealth, which causes consumption to
________.
A) lowers; increase
B) lowers; decrease
C) raises; increase
D) raises; decrease
Figure 17-1
What should the Federal Reserve do if it wants to move from point A to point C in the
short-run Phillips curve depicted in the figure above?
A) buy treasury bills
B) sell treasury bills
C) raise the discount rate
D) decrease the money supply
E) raise taxes
After an unexpected ________ in the price of oil, the long-run adjustment decreases the
price level and ________ the unemployment rate as they return to their original levels.
A) increase; increases
B) increase; decreases
C) decrease; increases
D) decrease; decreases