New classical macroeconomic theory emphasizes the role of ‘sticky” prices in the
economy.
GDP is not a complete measure of well-being.
The Fed can simultaneously reduce the inflation rate and stimulate growth through
lowering interest rates.
If unemployment persists for a long period of time, the natural rate of unemployment
rises.
If it costs Vijay $150 to design 5 websites and $175 to design 6 websites, then $175 is
the marginal cost of producing the 6th Websites.
The only type of business that faces unlimited liability is a sole proprietorship.
The total value of production from Ford’s manufacturing plant in Cologne, Germany
would be included in Germany’s gross national product.
Corporations are legally owned by their shareholders.
Over time, people in the United States and other high-income countries have, on
average, become taller, which is an indication that their nutritional status has improved.
If income is unequally distributed in an economy, increases in GDP may not raise
well-being in an economy.
A country which incurs a current account deficit will most likely have a financial or
capital account surplus.
An appropriate fiscal policy response when aggregate demand is growing at a faster rate
than aggregate supply is to decrease the money supply.
An appropriate fiscal policy response when aggregate demand is growing at a slower
rate than aggregate supply is to cut taxes.
Suppose real GDP is $14 trillion and potential real GDP is $14.4 trillion. An increase in
government purchases of $400 billion would cause real GDP to ________ potential real
GDP (assuming a constant price level).
A) equal
B) be less than
C) be more than
D) There is insufficient information given here to draw a conclusion.
The three main monetary policy tools used by the Federal Reserve to manage the
money supply are
A) interest rates, tax rates, and government spending.
B) tax rates, government purchases, and government transfer payments.
C) open market operations, discount policy, and reserve requirements.
D) open market operations, the exchange rate of the dollar against foreign currencies,
and government purchases.
In what ways do economists and policymakers who believe that the federal government
should have a larger role in the health care system criticize the Patient Protection and
Affordable Care Act (ACA)?
Mortgages issued to borrowers whose credit histories include failures to make payments
on bills are known as ________ mortgages.
A) catastrophic
B) variable rate
C) subprime
D) Alt-A
The major criticism of real business cycle models is
A) negative technology shocks are uncommon and can’t explain all business cycle
fluctuations.
B) positive technology shocks actually push real GDP above the economy’s potential
GDP.
C) negative technology shocks actually push real GDP below the economy’s potential
GDP
D) this model relies too heavily on monetary explanations for fluctuations in real GDP.
Figure 13-4
Refer to Figure 13-4. Given the economy is at point A in year 1, what will happen to
the price level in year 2?
A) It will rise.
B) It will fall.
C) It will remain constant.
D) not enough information to answer the question
Figure 3-8
Refer to Figure 3-8. The graph in this figure illustrates an initial competitive
equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A). If
there is an increase in the wages of motorcycle workers and an increase in the price of
motorcycle insurance, a complement to motorcycles, the equilibrium could move to
which point?
A) A
B) B
C) C
D) E
Carmelita can perform either a combination of 35 manicures and 70 pedicures or a
combination of 50 manicures and 45 pedicures. If she now performs 35 manicures and
70 pedicures, what is the opportunity cost of performing an additional 15 manicures?
A) 5 pedicures
B) 20 pedicures
C) 25 pedicures
D) 45 pedicures
Table 2-8
Table 2-8 shows the output per month of two people, Wilma and Betty. They can either
devote their time to making marble statues or making marble benches.
Refer to Table 2-8. Which of the following statements istrue?
A) Wilma has an absolute advantage in making both products.
B) Betty has an absolute advantage in making both products.
C) Betty has an absolute advantage in making statues and Wilma in making benches.
D) Betty has an absolute advantage in making benches and Wilma in making statues.
If an increase in investment spending of $50 million results in a $400 million increase
in equilibrium real GDP, then
A) the multiplier is 0.125
B) the multiplier is 3.5
C) the multiplier is 8
D) the multiplier is 50
According to census figures and the Congressional Budget Office, the number of people
________ is projected to increase and the number of people ________ is projected to
decrease by the year 2020.
A) who are uninsured; who are insured
B) who are uninsured; age 65 and older
C) age 65 and older; who are uninsured
D) who are insured; age 65 and older
Fiat money
A) has no or very little value except as money.
B) is rarely used in modern economies.
C) functions well only if can be redeemed for gold or other precious metals.
D) serves well as a medium of exchange, but not as a store of value.
Over the past several decades there has been a rapid growth in international trade. This
growth has been due to all except one of the following factors. Which factor has not
contributed to the growth of international trade?
A) the spread of reliable communications
B) a change in the tariffs charged on many goods
C) a reduction in shipping costs
D) favorable changes in government policies
The automatic mechanism ________ the price level in the case of ________ and
________ the price level in the case of ________.
A) raises; recession; lowers; expansion
B) raises; expansion raises; recession
C) lowers; expansion; lowers; recession
D) lowers; recession; raises; expansion
If, in response to an increase in the price of pineapples, the quantity demanded of
pineapples decreases, economists would describe this as
A) an decrease in demand.
B) a decrease in quantity demanded.
C) a change in consumer income.
D) a decrease in consumers’ taste for coffee.
If actual inflation is greater than expected inflation,
A) real wages rise.
B) real wages fall.
C) the Phillips curve is a vertical line.
D) the unemployment rate rises.
Fiat money is generally issued by
A) private banks.
B) central banks.
C) brokerage firms.
D) major multinational corporations.
The “Buy American” provision in the 2009 stimulus package required that stimulus
money be spent only on U.S.-made goods, effectively acting as a quota of zero imports
when stimulus money was being spent. The “Buy American” provision would
________ consumer surplus and ________ producer surplus for industries that
produced protected products in the United States.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
A car dealer sells you a car today in exchange for money in the future. This illustrates
which function of money?
A) medium of exchange
B) unit of account
C) store of value
D) standard of deferred payment
Figure 4-7
Refer to Figure 4-7 which shows the market for watermelons. Suppose the government
imposes a price floor of Pw. How will the price floor affect the quantity supplied,
quantity demanded and quantity exchanged?
Explain why the rates of death due to kidney disease and diabetes has slightly increased
in the United States since 1981.
Calculate the value of the government purchases multiplier if the marginal propensity to
consume equals 0.8, the tax rate equals 0.2, and the marginal propensity to import
equals 0.05.
Suppose that the bank has the following balance sheet:
If the required reserve ratio is 10 percent, what is the maximum the bank can loan out?
Suppose the bank makes this loan and the borrower spends the money, which is
deposited in a different bank. Show the impact of these transactions on the bank’s
balance sheet.
What actions should the Fed take if it believes the economy is about to experience a
high rate of inflation?
The Bureau of Economic Analysis divides it’s statistics on GDP into four major
categories. List the categories of expenditures and define each.