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Recall the Application about the possibility of increases in health-care expenditures
crowding out consumption or investment spending to answer the following question(s).
In 1950, health-care expenditures in the United States were 5.2 percent of GDP; by
2000, this share had risen to 15.4 percent. Driving these increases were several factors:
increasing relative prices of health care compared to other goods, a larger population of
the elderly, and increased longevity. Since 1950, the average life span has increased by
1.7 years per decade.
According to the Application, increases in health-care expenditures will have to crowd
out some other component of GDP. The preferred outcome stated in the Application is
that increased spending on health-care would come at the expense of
A) investment spending.
B) spending on consumer durables or larger houses.
C) spending on non-durables such as food and clothing.
D) spending on services such as higher education.
Figure 11.4 Refer to Figure 11.4. Between expenditure lines C + I + G0 and C + I +
G1, the equilibrium output increased by:
A) $600.
B) $400.
C) $200.
D) $1400.
Suppose that for a given year money growth is 12 percent, real GDP growth is 3
percent, and velocity growth is 2 percent. According to the growth version of the
quantity equation, the inflation rate would be
A) -3 percent.
B) 9 percent.
C) 11 percent.
D) 12 percent.
Table 3.3
Consider two individuals, Nigel and Mia, who produce hair pins and bandanas. Nigel's
and Mia's hourly productivity are shown in Table 3.3. Mia's opportunity cost of
producing one bandana is
A) 1/3 of a hair pin.
B) 2.5 hair pins.
C) 3 hair pins.
D) 9 hair pins.
In the United States during the Vietnam War era, as military spending increased
A) unemployment dropped to very low levels.
B) both frictional and cyclical unemployment increased.
C) frictional unemployment dropped, but cyclical unemployment increased.
D) overall unemployment rates did not change.
A decrease in consumer wealth will
A) not change autonomous consumption and rotate the consumption function upward.
B) not change autonomous consumption and rotate the consumption function
downward.
C) increase autonomous consumption and shift the consumption function upward.
D) decrease autonomous consumption and shift the consumption function downward.
The Latin phrase ceteris paribus means that when a relationship between two variables
is being studied:
A) both are treated as unpredictable.
B) neither of those two variables is allowed to change.
C) all other variables are held fixed.
D) we recognize that some factors are unknown.
Table 2.3 Refer to Table 2.3. The
principle of diminishing returns sets in with the addition of the ________ worker.
A) 1st
B) 2nd
C) 3rd
D) 4th
Government expenditures are defined as
A) the excess of total expenditures over total revenues.
B) the excess of total revenues over total expenditures.
C) government spending on goods and services plus transfer payments.
D) the sum of all past borrowing by the government.
Since 1973 in the United States, wages of skilled workers have
A) risen more slowly than those of unskilled workers.
B) fallen due to foreign trade.
C) remained constant.
D) risen faster than those of unskilled workers.
Which of the following countries have central banks that explicitly target inflation?
A) the United Kingdom
B) Canada
C) Australia
D) the United States
During hyperinflations, the real value of money
A) rises rapidly.
B) falls rapidly.
C) falls slowly.
D) does not change.
A decrease in the inflation rate is likely to be associated with
A) an increase in the unemployment rate.
B) decreased unemployment benefits.
C) a decreased in the unemployment rate.
D) less unemployment benefits being paid.
The revenue raised by the government from printing money is called:
A) seignorage.
B) treasury bills.
C) taxes.
D) federal funds.
An import quota:
A) limits the amount of a good that can be imported, thus decreasing prices.
B) limits the amount of a good that can be imported, thus increasing prices.
C) increases the amount of a good imported, thus decreasing prices.
D) increases the amount of a good imported, thus increasing prices.
Figure 1.1
Refer to Figure 1.1. If hours worked are zero in Figure 1.1, then income is:
A) zero.
B) $200.
C) $100.
D) $50.
Suppose that the CPI in 2000 was 102 and the CPI in 2001 was 104. The rate of
inflation between 2000 and 2001 was:
A) 2.24%.
B) 2.42%.
C) 4.22%.
D) 1.96%.
