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When the economy slows down and national income falls, the government will have
________ tax revenue to fund programs.
A) more
B) less
C) about the same
D) a rapid increase in
A movement along the consumption function is the result of a change in
A) autonomous consumption.
B) income.
C) consumer wealth.
D) expected wealth.
Why would an individual choose to hold money for speculative purposes when the
nominal return to holding money is zero?
A) because zero is the best any asset can get
B) because in the short run, stocks and bonds can have a negative rate of return
C) because in the long run, stocks and bonds get negative rates of return
D) because all economies experience deflation regularly, so the real return is still
positive
Table 2.1 A group of people has formed a house cleaning and yard
maintenance business. The number of houses or yards that they can clean or maintain in
any given day is depicted in Table 2.1. As the group cleans more houses, the
opportunity cost of cleaning houses:
A) falls.
B) rises.
C) stays the same.
D) is the sum of the opportunity costs of cleaning all the houses prior to that one.
The economy needs some unemployment to operate efficiently, because without it
A) firms will find it difficult to recruit workers, leading to increased wages and prices.
B) firms will find it difficult to recruit workers, leading to reduced wages and prices.
C) workers will find it difficult to find a job, leading to increased wages and prices.
D) workers will find it difficult to find a job, leading to reduced wages and prices.
Refer to Figure 11.2. Suppose that Ca = 40, MPC = 0.8, I = 10. What is the value of
consumption in equilibrium?
A) 32
B) 80
C) 240
D) 320
Herbert Simon believed that the public uses rules of thumbs to predict inflation in the
future because:
A) the public lacks the sophistication needed to analyze the complexity of the economy.
B) the economy moves in very predictable ways.
C) inflation is usually constant.
D) he believes that the public is irrational.
Table 11.6 Refer to Table 11.6. The equilibrium level of income is:
A) 4,800.
B) 5,800.
C) 4,600.
D) 5,600.
Suppose that the government debt is $100 million at the beginning of the year. If
government collects $55 million in taxes and incurs $50 million in expenditures this
year, then the government is experiencing a ________ and the debt will be ________ at
the end of the year.
A) deficit, $105 million
B) surplus, $95 million
C) deficit, $95 million
D) surplus, $105 million
From the application, the lack of growth in the real wages of laborers in England from
the 1200s to the 1800s implies that during this period:
A) there was little technological improvement.
B) there was a large decline in the population.
C) there was rapid technological improvement.
D) there was a large increase in the capital stock.
Increased labor demand will result in
A) lower wages.
B) no change in wages.
C) higher wages.
D) more employment benefits.
Recall Application 3, "A Troubled Euro," to answer the following questions:
According to the application, why was the currency union not as successful as the
currency union in the United States?
A) Unlike the United States, Europe did not adopt a single fiscal policy.
B) Unlike the United States, Europe did not have a single central bank.
C) The economic policy makers in the United States were clearly more superior than
their European counterparts.
D) The GDP of the United States was larger than the combined GDP of all member
European countries.
Suppose a bank has $200,000 in deposits and a reserve ratio of 15 percent. Its required
reserves are
A) $350.
B) $1,500.
C) $3,000.
D) $30,000.
If the nominal minimum wage is unchanged while prices fall, then the real minimum
wage:
A) rises.
B) falls.
C) stays the same.
D) is unaffected.
