Market equilibrium occurs where the quantity supplied is equal to the quantity
demanded.
In the United States, domestic investment is greater than national saving.
Potential GDP is always greater than real GDP in an economy.
Expansionary monetary policy refers to the Fed’s increasing the money supply and
increasing interest rates to increase real GDP.
The Social Security and Medicare programs have been a failure in terms of reducing
poverty among elderly U.S. citizens.
The gold in Fort Knox backs all U.S. currency.
In the case of an upward-sloping aggregate supply curve, the change in real GDP
brought about by a change in government spending will be less than that predicted by
the simple government purchases multiplier.
Potential GDP is the maximum output a firm is capable of producing.
Table 2-4
Table 2-4 shows the output per day of two gardeners, George and Jack. They can either
devote their time to mowing lawns or cultivating gardens.
Refer to Table 2-4. What is George’s opportunity cost of mowing a lawn?
A) half a garden cultivated
B) two lawns mowed
C) two-thirds of a garden cultivated.
D) one and a half lawns mowed
By drawing a demand curve with price on the vertical axis and quantity on the
horizontal axis, economists assume that the most important determinant of the demand
for a good is
A) consumer income.
B) consumer tastes and preferences.
C) the price of the good.
D) the quality of the good.
________ occurs when economic benefits are distributed fairly.
A) Productive efficiency
B) Allocative efficiency
C) Equality
D) Equity
Which of the following would be classified as fiscal policy?
A) The federal government passes tax cuts to encourage firms to reduce air pollution.
B) The Federal Reserve cuts interest rates to stimulate the economy.
C) A state government cuts taxes to help the economy of the state.
D) The federal government cuts taxes to stimulate the economy.
E) States increase taxes to fund education.
Because Federal Reserve Notes (paper currency) are legal tender,
A) U.S. workers must accept them as payment for labor services.
B) U.S. creditors must accept them in payment of debts.
C) U.S. firms must accept them as payment for goods and services.
D) All of he above are correct.
Expansionary fiscal policy ________ the price level and ________ equilibrium real
GDP.
A) decreases; increases
B) increases; decreases
C) increases; increases
D) decreases; decreases
Which of the following is not one of the key services provided by the financial system?
A) decreasing taxes
B) risk sharing
C) liquidity
D) generating information
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 S2 (point B). If
there is an increase in number of companies producing motorcycles and a decrease in
income (assume motorcycles are a normal good), the equilibrium could move to which
point?
A) A
B) B
C) C
D) E
Increasing the growth rate of GDP per capita and sustaining this growth rate in an
economy can
A) increase infant mortality.
B) increase standards of living.
C) increase the level of poverty.
D) lower life expectancy.
All of the following have enhanced the Fed’s credibility in conducting monetary policy
except
A) following through with changes it has announced.
B) revealing the Fed’s target for the federal funds rate.
C) making the minutes of the open market committee meetings public.
D) discontinuing the policy of announcing whether it considered the economy to be at
greater risk of inflation or recession following each FOMC meeting.
Using the quantity equation, if the velocity of money grows at 5 percent, the money
supply grows at 10 percent, and real GDP grows at 4 percent, then the inflation rate will
be
A) 19 percent.
B) 15 percent.
C) 11 percent.
D) 6 percent.
What are some reasons why the unemployment rate is typically lower in the United
States as compared to Canada and some Western European countries?
What are the differences between national income, personal income, and disposable
personal income?
In which types of business do owners have unlimited personal liability and in which do
owners have limited personal liability?
Briefly describe the Sarbanes-Oxley Act and explain why it was passed.
What are sticky prices, and how can contracts make them ‘sticky”?
Examples of comparative advantage often begin with two countries that each produce
the same two goods. Each country is then shown to have a comparative advantage in
producing the good it can produce at a lower opportunity cost, and specializes in the
production of the good for which it has a comparative advantage. How do these
examples prove that both nations are made better off as a result of trade than they would
be without trade?
Use the following supply schedule for cherries to draw a graph of the supply curve. Be
sure to label the supply curve and each axis, and show each point on the supply curve.
