Look at the following data: The frictional unemployment rate is 2 percent, the structural
unemployment rate is 3.5 percent, and the actual unemployment rate is 9.5 percent.The
natural unemployment rate is ____________ percent and the cyclical unemployment
rate is __________ percent.
a. 1.5; 4
b. 5.5; 4
c. 1.5; 6
d. 6; 15
Which of the following is a point made by economist Richard Easterlin (for whom the
Easterlin Paradox is named) based on his research?
a. Rich people tend to be happier than poor people in the same country.
b. People in richer countries tend to be no happier than people in poorer countries.
c. People in richer countries tend to be much happier than people in poorer countries.
d. People in poorer countries tend to be much happier than people in richer countries.
e. a and b
The economy can be in equilibrium and in a recessionary gap simultaneously.
a. True
b. False
In a barter economy,
a. money trades for goods, goods trade for services, and services trade for money.
b. goods and services trade for other goods and services.
c. some goods are more readily accepted in exchange than others.
d. making exchanges takes less time (on average) than in a money economy.
e. b and c
The _________________ the opportunity cost of bad behavior, the
_________________ likely one is to exhibit bad behavior.
a. higher; less
b. lower; more
c. higher; more
d. lower; less
e. a and b
Economist A says all of the following: The economy needs expansionary fiscal policy
to remove it from a recessionary gap.Government should either raise its
_____________ or cut ___________________.I believe the government spending
multiplier is ____________ than the tax multiplier, so I favor
_____________________.
a. spending; taxes; larger; cutting taxes
b. taxes; spending; larger; raising; spending
c. spending; taxes; larger; raising; spending
d. b or c
e. a or c
If the SRAS curve intersects the AD curve to the right of Natural Real GDP, the
economy is
a. in a recessionary gap.
b. in either a recessionary gap or an inflationary gap, but we need more information to
determine which one.
c. in an inflationary gap.
d. at full-employment Real GDP.
Exhibit 6-2
The labor force participation rate in year 1 is
a. 12 1/2 percent.
b. 80 percent.
c. 87 1/2 percent.
d. 70 percent.
e. 10 percent.
Which of the following statements is false?
a. The list of stocks that are included in the Dow Jones Industrial Average changes from
time to time, and is determined by the editors of the Wall Street Journal.
b. The Dow Jones Industrial Average first appeared on the scene in 1896.
c. When the Dow Jones Industrial Average was first computed, prudent investors
bought bonds, not stocks.
d. The Dow Jones Industrial Average is computed by summing the prices of the thirty
stocks included in the average and dividing by 30.
In all cases, microeconomics deals with
a. what is.
b. what should be.
c. relatively small units in the economy.
d. the entire economy.
Saying “the marginal costs are greater than the marginal benefits” is the same as saying
a. the average costs are greater than the average benefits.
b. the total costs are greater than the average benefits.
c. the benefits are greater than the costs.
d. the additional costs are greater than the additional benefits.
e. the costs minus the benefits equal the net costs.
Which of the following statements is false?
a. As the price paid for a bond rises, the yield declines.
b. If you purchase stock from an individual that currently owns the stock, you are
buying it in the secondary market.
c. The yield on a bond is another term for the coupon rate on a bond.
d. A rating of Aaa from Moody’s is the highest bond rating given by that rating agency.