One of the key economic questions is “where should products be produced?”
The balanced-budget multiplier is calculated as the government spending multiplier
minus the tax multiplier.
Macroeconomics helps explain economic fluctuations, why the economy shrinks and
expands and why some of the economy’s resources are idle.
If the opportunity cost of 1 wristwatch is 4 wall clocks in Japan and 2 wall clocks in
Germany, it makes sense for Japan to produce wristwatches.
If Eddie can produce 40 milk shakes or 20 banana splits in an hour, and Tina can
produce 30 milk shakes or 16 banana splits in an hour, then Eddie has a comparative
advantage in producing milk shakes.
If the Fed wishes to increase the money supply, it should buy government bonds.
The term “classical” refers to an economic theory which states that over a relatively
short period of time, wages and prices will adjust quickly to bring the economy back to
full employment.
The dollar will depreciate against the euro when the European Central Bank raises
interest rates.
If the growth rate of money changes, there will be short-run effects on real interest
rates.
Unemployment and recessions are sometimes necessary to curb high inflation.
The Fed directly controls long-term interest rates.
New growth theory:
A) considers population growth to be the key to economic growth.
B) considers human capital to be superior to physical capital.
C) considers capital deepening an obsolete engine of economic growth.
D) accounts for technological progress within a model of economic growth.
Lacey buys a bond issued by XYZ Corporation. XYZ Corporation uses the funds from
the sale of its bonds to build a new factory. Which of the following statements is
correct?
A) From what you learned in Chapter 12, both Lacey and XYZ Corporation are
investing.
B) From what you learned in Chapter 12, neither Lacey nor XYZ Corporation is
investing.
C) From what you learned in Chapter 12, Lacey is investing while XYZ Corporation is
not.
D) From what you learned in Chapter 12, XYZ Corporation is investing while Lacey is
not.
The opportunity cost of something is:
A) the cost of the labor used to produce it.
B) what you sacrifice to get it.
C) the price charged for it.
D) the search cost required to find it.
If a firm charges a foreign market a lower price than it charges the domestic market that
firm is said to be ________ its product.
A) disposing of
B) dumping
C) transferring
D) stumping
A decrease in spending on new homes will, other things equal,
A) increase aggregate demand.
B) decrease aggregate demand.
C) increase aggregate supply.
D) decrease aggregate supply.
The presence of automatic stabilizers means that federal budget deficit is ________
than it otherwise would be in a recession and ________ than it otherwise would be in
an expansion.
A) larger; smaller
B) smaller; larger
C) smaller; smaller
D) larger; larger
Recall Application 1, “Energy Price Uncertainty Reduces Investment Spending,” to
answer the following questions:
The Application cited the decrease in oil prices from ________ per barrel in 2008 to
________ a year later as an example of the uncertainty in energy prices that energy
producers face.
A) $145; $50
B) $100; $90
C) $200; $34
D) $120; $70
Table 13.2 Refer to Table 13.2. The required reserve ratio is 20%. If the First Charter
Bank is meeting its reserve requirement and has no excess reserves, its loans equal:
A) $710.
B) $460.
C) $550.
D) $760.
To decrease the money supply using the reserve requirements, what would the Fed
typically do?
A) raise the reserve requirement for banks
B) reduce the reserve requirement for banks
C) make each bank voluntarily set its own reserve levels
D) let each bank get less currency from the Treasury
All other things equal, an appreciation of the U.S. real exchange rate causes:
A) an increase in imports and a decrease in exports.
B) a decrease in imports and a decrease in exports.
C) an increase in imports and an increase in exports.
D) a decrease in imports and an increase in exports.
The permanent income view of consumption spending postulate when households
receive a tax cut that is deemed temporary, then their consumption spending:
A) will not change and the tax rebate is saved.
B) will decrease.
C) will increase by less than the tax cut.
D) will increase by the full amount of the tax cut.
Resources are all of the following except:
A) unlimited and in abundance.
B) the things we use to produce goods and services.
C) limited in quantity and can be used in different ways.
D) scarce and therefore requiring choices to be made.
A decrease in demand for coffee can be caused by:
A) an increase in demand for substitute products by younger populations.
B) a decrease in demand due to changing preferences for healthier products.
C) an increase in income and coffee is an inferior good.
D) all of the above.
Can the real interest rate be negative? Explain.
Does crowding out occur in the long run or the short run? Explain.
( the prices of goods and services
Did Keynes believe that Say’s Law was true? Explain.
Explain why there is an inverse relationship between investment and the real interest
rate.
The U.S. has a lot of both skilled and unskilled workers in the economy. Suppose that
the U.S.’s comparative advantage is in industries that require more skilled workers.
Instead of using protectionist policies, what other policy can the government use to
dampen the negative effects unskilled workers may face a result of free trade?