Whenever prices are rising, the inflation rate is rising.
The Federal Reserve Banking Act of 1978
a. attempted to guarantee stability of the banking system
b. was a reaction to the savings and loan crisis
c. added full employment to the list of objectives for the Fed
d. strengthened deposit insurance programs
e. pledged the Fed to keep the inflation rate low
The income and expenditure approaches to calculating GDP will produce the same
result because for every dollars worth of output that is produced a dollars worth of
income will be generated as income for the owners of the factors of production used to
produce the output.
When there is an improvement in technology, holding all else constant,
a. the production possibilities frontier will shift inward
b. society faces larger opportunity costs from shifting productive resources from one
use to another
c. goods and services will increase in price
d. the economy must have some idle resources
e. the production possibilities frontier will shift outward
Inventories – goods produced but not sold – are included in GDP because we want to
measure total production, not just what is purchased
Inflation is harmful to society because it often
a. causes consumers’ purchasing power to decline
b. causes sellers’ costs to increase
c. causes nominal wages to fall
d. causes purchasing power to be redistributed in haphazard ways
e. has no effect at all on anyone’s purchasing power
In the short run, a negative supply shock
a. causes firms’ unit costs to decrease
b. shifts the AS curve to the right
c. causes output to decrease and the price level to increase
d. shifts the AD curve to the left
e. causes both output and the price level to decrease
The evidence from wage data allows us to conclude that nonsupervisory workers were
economically worse off in 2008 than 1975.
a. This conclusion is correct because such workers have been suffering form increasing
unemployment since 1975
b. This conclusion is correct because such workers have been receiving an
ever-decreasing share of their income in nonwage benefits.
c. This conclusion is correct because nominal wages for such workers have stayed
constant since 1975.
d. This conclusion is correct because nominal wages for such workers have fallen since
1975.
e. This is a mistaken conclusion because the CPI overstates inflation.
In the short-run macro model, an increase in the money supply will
a. move the economy to the right along the aggregate expenditure line.
b. move the economy to the left along the aggregate expenditure line.
c. shift the aggregate expenditure line upward.
d. shift the aggregate expenditure line downward.
e. cause the aggregate expenditure line to rotate until it is flat.
While tax cuts may increase productivity, the government is forced to redistribute the
tax burden or cut its own spending.