Licensing systems that limit the right of individuals to buy foreign currency are:
I. floating exchange rate regimes.
II. foreign exchange controls.
III. exchange market interventions.
A) I only
B) II only
C) III only
D) I, II, and III
If an economy has NOT achieved efficiency, there must be ways to:
A) increase opportunity costs.
B) eliminate inequity.
C) make some people better off without making others worse off.
D) increase the incentives for its citizens to follow their own self-interest.
The National Bureau of Economic Research announced that the U.S. economic
recession that began in December of 2007 hit a trough in June of 2009. During that
period, which type of unemployment increased for sure?
A) frictional
B) natural
C) cyclical
D) structural
Macroeconomics focuses on:
A) the economy as a whole.
B) individual decisions.
C) wages.
D) the allocation of scarce resources.
GDP for a given period measures the:
A) money circulating through an economy.
B) market value of the final goods and services produced within the borders of a
country.
C) market value of the final goods and services produced by the citizens of a country
regardless of their location.
D) amount of government spending undertaken.
The government’s budget balance is:
A) T ” G.
B) G ” T ” TR.
C) T ” G ” TR.
D) T + TR ” G.
Figure: Actual and Natural Rates of Unemployment
Look at the figure Actual and Natural Rates of Unemployment. In 2000 the output gap
was:
A) positive.
B) negative.
C) zero.
D) impossible to determine without more information.
Today China is the fastest-growing major economy and it also:
A) spends a lower share of its GDP on investment goods than did other major
economies.
B) spends a higher share of its GDP on investment goods than did other major
economies.
C) spends more of its GDP on national defense than any other country except for North
Korea.
D) was the first Asian country to join the European Union.
The Panic of 1907 came to an end when:
A) J. P. Morgan, John D. Rockefeller, and the Secretary of the Treasury increased bank
reserves.
B) the Social Security Act was passed.
C) the Federal Reserve was established.
D) Franklin Delano Roosevelt declared a bank holiday.
Suppose that the economy is operating at potential output and the money supply
increases. Aggregate output will _____ potential output, nominal wages will _____, and
the SRAS will shift _____.
A) rise above; rise; leftward
B) fall below; rise; leftward
C) rise above; fall; leftward
D) rise above; rise; rightward
Growth accounting estimates the contribution to economic growth of each factor in the
aggregate production function.
A) True
B) False
To finance your education, you borrow $10,000 from a relative at an annual interest rate
of 5%. You promise to pay her back in eight years. Which formula will provide the
correct formula for calculating the value of your payment in eight years?
A) $10,000(1 + 0.05)
B) $10,000(1 + 5)
C) $10,000(1 + 0.05)8
D) $10,000(1 + 0.5)8
When hyperinflation forces Pedro to change the price stickers on the books in his
bookstore very frequently to keep up with the aggregate price level, economists say that
Pedro has a:
A) shoe-leather cost.
B) menu cost.
C) unit-of-account cost.
D) debt deflation.
In economies with persistently high inflation, an increase in the money supply:
A) will translate into a proportional increase in the aggregate price level much faster
than usual.
B) will translate into a proportional increase in the aggregate price level only in the long
run.
C) will not affect either the aggregate price level or the aggregate output.
D) will translate into a proportional increase in the aggregate output much faster than
usual.
When a factory closes, why does it spell bad news for the local restaurants?
A) Sales taxes are likely to increase.
B) Unemployed factory workers have lower incomes and are less likely to dine out.
C) Unemployed factory workers are eligible for government unemployment benefits.
D) The opportunity cost of dining out has fallen.
Which of the following is the BEST explanation for an upward-sloping short-run
aggregate supply curve?
A) Prices are perfectly flexible.
B) Wages are perfectly flexible.
C) Wages and prices of some goods are sticky in the short run.
D) Wages and prices of some goods are flexible in the short run but sticky in the long
run.
GDP in the United States was $5,803 billion in 1994 and $11,734 billion in 2008, so we
can conclude that aggregate output roughly doubled over the 14-year period in the
United States.
A) True
B) False
The difference between a country’s exports and imports of goods alonenot including
servicesis the:
A) merchandise trade balance.
B) balance of payments on good and services.
C) balance of payments on current account.
D) current account.
Table: Pizza Economy III
Look at the table Pizza Economy III. Considering 2010 as the base year, given that total
population was 1,140 in 2010 and 1,300 in 2011, real GDP per capita in 2010 was:
A) $80.
B) $53.
C) $60.
D) $100.
France and the United Kingdom both produce wine and cloth with constant opportunity
costs. If opportunity costs in the two countries are different and France has a
comparative advantage in wine production, then England MUST have a comparative
advantage in cloth production.
A) True
B) False
Commodity-backed money’s value is guaranteed by a promise that it can be converted
to a useful good.
A) True
B) False
Expansionary monetary policy will _____ interest rates and _____ savings in the short
run.
A) raise; increase
B) raise; decrease
C) lower; increase
D) lower; decrease
Figure: Circular-Flow Model
Look at the figure Circular-Flow Model. What are net exports?
A) $0
B) $30
C) $60
D) $100
Look at the table The Production Possibilities for Tractors and Crude Oil. Both the
United States and Mexico will gain from trade if one tractor trades for _____ barrels of
oil.
A) 1,500
B) 4,500
C) 6,500
D) 8,500
“The rate of unemployment is 9%.” This statement:
A) is positive.
B) is normative.
C) involves a value judgment.
D) is a personal reflection and has no value in economics.
A nation’s exports minus its imports:
A) equals its private investment.
B) is net exports.
C) is always a positive number.
D) is equal to net transfer payments.
Between 1980 and 1994, growth rates of real GDP per capita in sub-Saharan Africa fell
by more than 10%.
A) True
B) False
Which of the following is an example of a positive statement?
A) The poverty rate should be 4%.
B) A high rate of economic growth should be a more important goal for the country
than a low rate of unemployment.
C) The federal government pays for 46% of U.S. health care costs.
D) Everyone in the country should be covered by national health insurance.
If foreign countries are increasing their demand for U.S. financial assets, then we can
expect the U.S. dollar to _____ and the current account balance to _____, all other
things equal.
A) appreciate; increase
B) appreciate; decrease
C) depreciate; increase
D) depreciate; decrease
A scatter diagram shows:
A) how far apart dependent variables are.
B) individual points of data showing both variable values.
C) the slope of a line.
D) the intercept of a curve.