Economists consider the minimum wage to be a
Economic growth policies always involve
a. trade-offs
b. lower taxes
c. higher government spending
d. more investment
e. more transfer payments
The phenomenon of wages in many industries changing very little or not at all for a
year or more after a change in output is referred by economists as
a. wage lag effect.
b. wage stickiness.
c. compensation inflexibility.
d. inertia.
e. reservation wage effect.
The Consumer Price Index (CPI) is a weighted average of all the prices paid by
households for goods and services.
Economists regard some inflation as good for the economy.
If the expenditure multiplier is 10 and investment spending decreases by $1,000 billion,
what will be the change in GDP?
a. -$10,000
b. $2,500
c. $1,000
d. $10,000
e. -$1,000
A lumpy input is one that
Which of the following occurs during a recession?
a. Output rises, employment rises and unemployment falls.
b. Output falls, employment falls and unemployment rises.
c. Output rises, employment falls and unemployment falls.
d. Output rises, employment rises and unemployment rises.
e. Output rises, employment rises and tax revenues fall.
Assume that net exports are -$340, private investment is $1500, tax revenues are $800,
government purchases are $2000, and GDP – using the expenditure approach – is
$9,000. In this case, consumption expenditures must be
a. $1,840
b. $12,960
c. $5,840
d. $4,360
e. $5,160
Say’s law will prevent recessions only if a critical assumption of the classical model
holds: That the interest rate adjusts until saving is equal to business and government
borrowing.
Suppose the current exchange rate is $1.60 per pound. A sweater purchased by an
American in London costing 50 pounds would cost
a. $31.25
b. $80.00
c. $51.60
d. $48.40
e. $100.00
If the price of good X (measured on the horizontal axis of a budget line diagram)
increases at the same time that the price of good Y (measured on the vertical axis)
increases, the budget line
If the interest rate is 5 percent (0.05) per year, what is the present value of $3,000 to be
received two years from now?
Which of the following would cause the consumption function to shift downward?
a. A decrease in taxes
b. A decrease in interest rates
c. Consumers become more pessimistic about the future
d. Consumers become more optimistic about the future
e. None of the above
Deflation can render monetary policy powerless.
The difference between an interest rate and some other, benchmark interest rate is
known as the
a. spread.
b. rate difference
c. rate of return differential.
d. rent.
e. income differential.