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Look at the table Pizza Economy II. GDP in this economy is:
A) $74,000.
B) $45,000.
C) $29,000.
D) $16,000.
In an attempt to reduce shooting deaths, some cities have offered money to people who
turn in illegal guns. This program is an example of the government using _____ to
influence behavior.
A) incentives
B) law
C) marginal analysis
D) the gains from trade
The supply curve for apartments in Oregon reflects how many apartments landlords are
willing and able to offer for rent at a specific price.
A) True
B) False
An increase in the value of a fixed rate currency is called an appreciation.
A) True
B) False
Boeing buys $3 million worth of steel, $2.5 million worth of computer hardware and
software, and $1 million worth of mechanical tools to manufacture a certain model of
aircraft. Boeing sells this particular model at $10 million. The value added by Boeing is
equal to:
A) $3.5 million.
B) $16.5 million.
C) $13 million.
D) $15.5 million.
Figure: Technological Progress and Productivity Growth
Look at the figure
Technological Progress and Productivity Growth. Which of the following changes in
real GDP is most likely to have resulted from an increase in the quality (as well as
quantity) of public health measures?
A) A to B
B) B to C
C) B to A
D) C to B
Which of the following is considered to be money?
A) stock
B) bonds
C) credit cards
D) checkable bank deposits
All other things unchanged, an increase in demand for loanable funds would most likely
be caused by a(n):
A) decrease in expected business opportunities.
B) increase in the market interest rate.
C) increase in corporate income tax rates.
D) increase in government borrowing.
If the U.S. dollar changes from $1 = 200 to $1 = 100, then:
A) the dollar has depreciated relative to the yen.
B) the dollar has been fixed by the United States and Japan.
C) the dollar has appreciated relative to the yen.
D) U.S. goods are now more expensive in Japan.
Medicare covers much of the cost of medical care for Americans with low incomes.
A) True
B) False
Figure: Fiscal Policy Options
Look at the figure Fiscal Policy Options. If the aggregate demand curve is AD , the ʺ
most appropriate discretionary fiscal policy is to _____ government spending and
_____ income tax rates.
A) increase; decrease
B) increase; maintain
C) decrease; decrease
D) decrease; maintain
Income to the owners of commercial real estate is in the form of:
A) interest.
B) dividends
C) transfer payments.
D) rent and profit from selling the property at a price higher than its purchase price.
Suppose that the aggregate output level is lower than potential output. Which of the
following is FALSE?
A) Workers are abundant.
B) Jobs are scarce.
C) Nominal wages will fall over time.
D) The short-run aggregate supply curve will gradually shift to the left.
A choice made _____ is a choice whether to do a little more or a little less of
something.
A) at the front end
B) in the beginning
C) at the margin
D) ceteris paribus
Figure: Shifts in Demand and Supply IV
Look at the figure Shifts in Demand and Supply IV. The figure shows how supply and
demand might shift in response to specific events. Suppose half of the people in San
Diego pack up and move to Colorado Springs. Which panel BEST describes how this
will affect the supply of houses in San Diego?
A) panel A
B) panel B
C) panel C
D) panel D
According to the convergence hypothesis, differences in GDP per capita among
countries tend to narrow over time because countries that start with a lower real GDP
per capita tend to have higher growth rates.
A) True
B) False
Scenario: Money Supply Changes
The reserve requirement is 10% and Jack withdraws $5,000 travel money from his
checkable deposit. Assume that banks do not hold any excess reserves and that the
public holds no currency, only checkable bank deposits.
Look at the scenario Money Supply Changes. By how much must the bank's loans
decrease as a result of the withdrawal?
A) $5,000
B) $4,500
C) $500
D) $0
A financial investor from Los Angeles purchases bonds issued by the government of
Peru. In the accounting for U.S. international transactions, this transaction would appear
in the _____, and it would be entered as a payment _____ foreigners.
A) current account; from
B) current account; to
C) financial account; from
D) financial account; to
When the Fed changes tax rates, interest rates change, and this changes real GDP.
A) True
B) False
Keynes believed that to end the Great Depression:
A) only a government takeover of industry could save the economy.
B) the capitalist system needed only a narrow technical fix.
C) a decrease in government spending would increase the budget deficit.
D) a decrease in the money supply would cause inflation.
Efficiency wages are usually set by employers to:
A) reduce unemployment.
B) increase employment.
C) provide an incentive for better performance.
D) increase employment and provide better incentives for performance.
Contractionary monetary policy entails _____ the money supply, _____ interest rates,
and _____ aggregate demand.
A) increasing; increasing; increasing
B) increasing; decreasing; decreasing
C) decreasing; decreasing; decreasing
D) decreasing; increasing; decreasing
You are a college student and not working or looking for work. You are:
A) unemployed.
B) in the labor force but not employed.
C) not part of the labor force.
D) counted in the labor force as underemployed.
Figure: The Production Possibilities for Two Countries
Look at the figure The Production Possibilities for Two Countries. If Indonesia and
Malaysia trade 1 radio for 1 tire, the most that Indonesia can consume is _____ radios
and _____ tires, while the most that Malaysia can consume is _____ radios and _____
tires.
A) 300; 600; 800; 200
B) 200; 900; 600; 300
C) 1,200; 400; 800; 200
D) 600; 600; 1,000; 600
Figure: Monetary Policy I
Look at the figure Monetary Policy I. If the economy is initially in equilibrium at E2and
the central bank chooses to sell Treasury bills_____shift to _____ a(n) _____ gap.
A) AD2will; right, causing; inflationary
B) AD2may; AD1, causing; recessionary
C) AD1may; AD2, closing; recessionary
D) AD1will; left, increasing; recessionary
Figure: Labor Force Participation Rate
Look at the figure Labor Force Participation Rate. During 1970"1985, the labor force
participation rate was _____ for women and _____ for men.
A) increasing; decreasing
B) increasing; increasing
C) decreasing; increasing
D) decreasing; decreasing
All points outside the production possibility frontier are:
A) efficient.
B) inefficient.
C) infeasible.
D) economic growth.
China's current account surplus and private capital inflows resulted in an equilibrium
exchange rate below the target exchange rate.
A) True
B) False
Which of the following is a NEGATIVE side effect of using macroeconomic policies to
offset a recessionary gap?
A) a crowding-out of private investment
B) possibly unpredictable consequences
C) a higher aggregate price level
D) All of the answers are correct.
Figure: The Production Possibility Frontiers for Jackson and Tahoe
Look at the figure The Production Possibility Frontiers for Jackson and Tahoe. In
autarky, Jackson produces and consumes 30 head of cattle and 80 bushels of wheat,
while Tahoe produces and consumes 80 head of cattle and 60 bushels of wheat. _____
has a(n) _____ advantage in the production of _____.
A) Jackson; comparative; cattle
B) Tahoe; comparative; wheat
C) Jackson; comparative; wheat
D) Jackson; absolute; cattle
What is meant by the interest rate effect, and why does it help to explain the shape of
the aggregate demand curve?
Suppose that on January 1 the exchange rate was US$1.40 per euro. On December 31 of
that year, a person needed $1.45 to buy a euro. Over the course of that year, did the
dollar appreciate or depreciate against the euro? Did the change in the exchange rate
make it easier or more difficult for U.S. college students to spend a semester at a
European university? Explain.
Why does a recession, all else equal, decrease the demand for money?
Suppose that the United States and Canada are the only trading partners in the world
and the U.S. Congress passes more restrictive import policies. Assuming that the
Canadian Parliament does not retaliate, what will happen to the U.S. balance of
payments on the current account? All else equal, how will more restrictive import
policies affect the U.S. balance of payments on the financial account? Explain the
thinking behind your conclusions.
In a typical business cycle recession, the unemployment rate rises and the inflation rate
falls. Explain these two trends.
The United States imports coffee from Brazil and exports cars to Brazil. Is this a
macroeconomic or microeconomic issue?
You are reading an editorial in your local newspaper. The editorial says: "The United
States had a trade deficit of $18.4 billion in February 2008. This is a clear indication to
our leaders that we must renegotiate our trade agreements with China to make them
fairer for the American worker." What part of this editorial is positive and what part is
normative?
An apartment complex included a fixed price of water in the monthly rent. One day the
city decided to attach a water meter to each individual apartment and charge the tenant
for actual water usage. As a result, water usage in the apartment complex went way
down. Explain this situation using a principle of economics.
Explain the difference between fiscal stimulus and fiscal austerity in dealing with the
recessions that occurred in many countries after the 2008 financial crisis.
Suppose that real GDP is $500, potential GDP is $1,000, and the marginal propensity to
consume is 0.9. If the government is going to spend and does not impose taxes, what
specific fiscal policy action should policy makers take?
What are the costs of fixing the exchange rate?
You read a newspaper article that says the unemployment rate rose this month. Are we
in a recession? Explain.
Why does a $1,000 tax cut generate a smaller multiplier effect than a $1,000 increase in
government purchases?
Explain the difference between fiscal and monetary policy.
What is meant by sticky wages, and how does this explain the shape of the short-run
aggregate supply curve?
How does rising consumer optimism affect the aggregate demand curve? Explain your
response.
Explain the trade-off between rate of return and liquidity. How do banks affect the
trade-off?
You have recently graduated from high school and are debating whether to attend
college or get a job. Assume that you can spend $50,000 today for tuition and receive
your college degree in only one year. When you graduate, you will receive a job that
pays you $100,000 immediately and $100,000 the following year. If you begin working
immediately, you can earn $35,000 today and each of the next two years. If the annual
interest rate is 10%, should you go to college?
