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According to the new classical theory, if the public correctly anticipates a government
policy to increase aggregate demand, then
a. there will be a short-run tradeoff between inflation and unemployment, but there will
not be a long-run tradeoff.
b. there will be a long-run tradeoff between inflation and unemployment, but there will
not be a short-run tradeoff.
c. there will be both a long-run and a short-run tradeoff between inflation and
unemployment.
d. there will be neither a long-run nor a short-run tradeoff between inflation and
unemployment.
e. there may be a short-run tradeoff between inflation and unemployment, but one
cannot say for certain whether there will be a long-run tradeoff.
"Dumping" refers to
a. the sale of goods abroad at a price below their cost and below the price charged in the
domestic market.
b. unloading of foreign goods on domestic docks.
c. government actions to remedy "unfair" trade practices.
d. buying goods at low prices in foreign countries and selling them at high prices in the
United States.
Here is a consumption function: C = C0 + MPC(Yd). Which of the following is true
about the consumption function?
a. Consumption will rise if autonomous consumption or disposable income rise.
b. Consumption will fall if autonomous consumption falls or if the MPC rises.
c. Consumption will rise if autonomous consumption rises, MPC declines, or disposable
income rises.
d. For every $1 rise in autonomous consumption, consumption will also rise by $1.
e. a and d
In 2007, the Fed began using an additional monetary policy tool called the term auction
facility program.
a. True
b. False
If the economy is in long-run equilibrium,
a. prices will rise but wages will remain constant.
b. neither prices nor wages will change.
c. it is producing Natural Real GDP.
d. prices will remain constant but wages may rise.
e. b and c
The Federal Reserve System is the
a. federal government agency that collects taxes and spends these receipts on tanks,
bridges, government employees' salaries, etc.
b. company that delivers packages to your front door.
c. central bank of the United States.
d. federal government agency that collects and disseminates all the economic data that
economists are interested in.
In the United States, the largest expenditure component in GDP is
a. gross private domestic investment.
b. government purchases of goods and services.
c. consumption expenditures.
d. net exports.
e. none of the above
The Community Reinvestment Act (CRA) was passed in 1977 to encourage financial
institutions to_________________________.It was revised in 1995 to ____________
the percentage of mortgage loans going to low- and moderate-income borrowers.
a. lend to only the most qualified borrowers; increase
b. meet the needs of borrowers in all segments of their communities; decrease
c. meet the needs of borrowers in all segments of their communities; increase
d. lend to only the most qualified borrowers; decrease
Banks in the United States operate under a fractional reserve system, which means they
must maintain only a fraction of their deposits in the form of
a. debt.
b. loans.
c. an insurance policy.
d. reserves.
Exhibit 39-8
Assume that E1 represents the initial equilibrium in the market for grain X. As a result
of increased agricultural productivity, total revenues for farmers in this market will
a. increase if the demand curve is perfectly inelastic.
b. increase if the demand curve is inelastic between E1 and E2.
c. decrease if the demand curve is inelastic between E1 and E2.
d. decrease if the demand curve is inelastic between E1 and E3.
e. none of the above
If the purchase and sale of a currently illegal drug (for example, marijuana) were
decriminalized, economists would expect
a. an increase in demand and supply of this drug.
b. an increase in demand and a decrease in supply of this drug.
c. a decrease in demand and an increase in supply of this drug.
d. a decrease in demand and supply of this drug.
If the price level remains constant but the wage rate increases, then there will be
__________ in production and the SRAS curve will shift __________.
a. an increase; rightward
b. a decrease; rightward
c. an increase; leftward
d. a decrease; leftward
