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The primary purpose of WTO is to:
a. protect the United States from cheap foreign labor.
b. foster trade among nations.
c. promote the dumping of foreign products.
d. increase worldwide tariffs.
e. form a union of European nations.
If no fiscal policy changes are made, suppose the current aggregate demand curve will
increase horizontally by $1,000 billion and cause inflation. If the marginal propensity to
consume is 0.75, federal policymakers could follow Keynesian economics and restrain
inflation by decreasing:
a. government spending by $250 billion.
b. taxes by $100 billion.
c. taxes by $1,000 billion.
d. government spending by $1,000 billion.
Exhibit 5-3 Expenditure approach National income accountBillions of
dollars
Personal consumption expenditures (C) $1,000
Exports (X) 120
Federal government spending (G) 200
State and local government spending (G) 400
Imports (M) 20
Gross private domestic investment (I) 75 As shown in Exhibit 5-3, total expenditures by
households for domestically produced goods is:
a. $1,000 billion.
b. $100 billion.
c. $600 billion.
d. $20 billion.
Members of the Federal Reserve Board of Governors serve one nonrenewable term of:
a. 4 years.
b. 7 years.
c. 14 years.
d. life.
A vaccination shot provides a(n):
a. beneficial opportunity cost.
b. positive externality.
c. out-resourcing benefit.
d. managed-care opportunity benefit.
Exhibit 16-6 Money, investment and product markets
In Exhibit 16-6, if the interest rate falls from i1 to i2, then:
a. the quantity demanded of investment increases from I1 to I2 and investment spending
shifts the aggregate demand curve from AD2 to AD1, decreasing the level of real GDP.
b. the quantity demanded of investment increases from I1 to I2 and investment spending
shifts the aggregate demand curve from AD1 to AD2, increasing the level of real GDP.
c. the quantity demanded of investment decreases from I2 to I1 and investment spending
shifts the aggregate demand curve from AD1 to AD2, decreasing the level of real GDP.
d. the quantity demanded of investment decreases from I2 to I1 and investment spending
shifts the aggregate demand curve from AD2 to AD1, increasing the level of real GDP.
e. the quantity demanded of investment stays the same causing the aggregate demand
curve to shift from AD2 to AD1 decreasing the level of real GDP.
Suppose Connie Rich deposits $500 in the bank in Exhibit 15-4. The result would be
that the bank must increase its required reserves to:
a. $4,100.
b. $4,500.
c. $5,100.
d. $5,500.
Equal increases in government spending and taxes will:
a. cancel each other out so that the equilibrium level of real GDP will remain
unchanged.
b. lead to an equal decrease in the equilibrium level of real GDP.
c. lead to an equal increase in the equilibrium level of real GDP.
d. lead to an increase in the equilibrium level of real GDP real GDP that is larger than
the initial change in government spending and taxes.
e. lead to an increase in the equilibrium level of output that is smaller than the initial
change in government spending and taxes.
The ratio of a change in consumption to a change in income is the:
a. consumption function.
b. propensity to consume.
c. average propensity to consume.
d. extra propensity to consume.
e. marginal propensity to consume.
Which of the following is not included in the current account?
a. Exports of goods.
b. Imports of goods.
c. U.S. capital inflow and outflow.
d. Unilateral transfers.
Which of the following statements is true?
a. A political business cycle is one created by the incentive for politicians to manipulate
the economy to get re-elected.
b. Adaptive expectations theory argues that the best indicator of the future is recent
information.
c. Incomes policies tend to be ineffective over time.
d. Incomes policies include jawboning, wage-price guidelines, and wage-price controls.
e. All of these.
The price of a good will fall if:
a. there is an excess demand of the good.
b. demand and supply of the good are the same.
c. there is an excess supply of the good.
d. the price is below the equilibrium price.
e. the price is near the equilibrium price.
Sharon was being treated unfairly by her boss, so she stormed off the job and two days
later found another position. For two days, Sharon experienced:
a. cyclical unemployment.
b. structural unemployment.
c. seasonal unemployment.
d. frictional unemployment.
e. being out of the labor force.
Which of the following is true?
a. Nations achieve high rates of economic growth primarily because of their natural
resource endowments.
b. Human and physical capital investments are largely irrelevant to economic growth.
c. Poor nations grow slowly because they do not have access to modern technology.
d. A favorable political environment attracts more investment in human and physical
capital.
In a system in which all banks have a uniform reserve requirement, the money
multiplier is equal to 1 divided by the required reserve ratio.
A country with a high GDP per capita can be classified as an industrially advanced
country (IAC) regardless of its industrial development.
In a traditional economy, innovation is encouraged.
Demand-pull inflation occurs during a period of time in which total spending is
increasing less than total output (GDP) is increasing.
Investment is lowered by expansionary monetary policy.
Full employment, which is always expected to occur, consists of the frictionally and
cyclically unemployed.
The marginal propensity to consume (MPC) is the change in consumption divided by
the change in saving.
The command system relies on prices set by firms on the basis of consumer demands.
A straight line or curve can shift when a factor not included on the vertical axis or
horizontal axis changes.
Real GDP, as opposed to money (nominal) GDP, has been adjusted for changes in the
general level of prices.
