When federal government spending amounts to less than tax revenues, the federal
government runs a budget deficit.
Money is anything that is regularly used in exchange.
The government debt tends to rise when GDP rises, and tends to fall when GDP falls.
A U.S. fast-food chain opens a branch in Spain. The sales of the restaurant is counted as
part of the U.S. GDP and the Spanish GNP.
Most modern economic analysis is positive in nature, but many issues also involve
questions with normative economics.
The Q-theory of investment postulates that high stock prices lead to high investment.
Consumer expenditures on household appliances represent which of the following
components of Consumption Expenditures?
A) services
B) nondurable goods
C) durable goods
D) inventory investment
Which of the following is not true?
A) Tax revenues move in the same direction as the business cycle.
B) Expenditures on transfer payments move in the opposite direction of the business
cycle.
C) The federal budget deficit works as a sort of automatic economic stabilizer.
D) The selling of government securities to pay for a deficit spurs private investment
spending.
Printing presses, forklifts and assembly plants are examples of which factor of
production?
A) physical capital
B) human capital
C) entrepreneurship
D) labor
In the short run, increases in the growth rate of the money supply will ________
nominal rates of interest and ________ real rates of interest.
A) decrease; increase
B) increase; decrease
C) decrease; decrease
D) increase; increase
Figure 4.3 illustrates the demand for tacos. Assume tacos are an inferior good. An
increase in income would bring about a movement from
A) point a to point .
B) point c to point .
C) D2 to D1.
D) D0 to D1.
A nation can produce anywhere ________ its production possibilities curve.
A) on
B) outside
C) inside
D) both A and C
Recall Application 5, “Repaying Student Loans,” to answer the following
questions:
According to the application, if you are a debtor who owes student loans, you are
helped in paying back your student loans by:
A) unexpected deflation.
B) unexpected inflation.
C) expected inflation.
D) expectedly deflation.
Table 2.5
Refer to the table above. What happened to the real value of the minimum wage
between 1974 and 2011?
A) It remained the same.
B) It increased.
C) It decreased.
D) It could not be determined from the given information.
The amount of time it takes a given policy action to bring about a change in the state of
the economy is called the:
A) inside lag.
B) external lag.
C) outside lag.
D) stabilization lag.
Recall the Application about the impact Chinese imports have on U.S. labor markets to
answer the following question(s).
This Application addresses the idea that
A) imports are only beneficial to a community if they are equally matched by exports
from that community.
B) imports ultimately have a positive impact on all communities.
C) imports have an equal impact on all communities.
D) imports have a bigger impact on some communities than on others.
If the economy is in a boom, the prices and wages will ________ causing the short-run
AS curve to shift ________ until the economy reaches its long run equilibrium.
A) drop; right
B) drop; left
C) rise; right
D) rise; left
Table 5.1
Refer to Table 5.1. Assume that this economy produces only two goods: Good X and
Good Y. If year 1 is the base year, the value for this economy’s real GDP in year 1 is:
A) $110.
B) $200.
C) $146.
D) $241.
Which of the following is not an original member of the European Union?
A) The United Kingdom
B) Belgium
C) Germany
D) France
There is a positive relationship between two variables if the two variables:
A) have positive values.
B) move in opposite directions.
C) move in the same direction.
D) have negative values.
Recall Application 2, “Did Fed Policy Cause the Commodity Boom?” to answer the
following questions:
According to the Application, how did the Fed cause the commodity boom in 2010?
A) The lower interest rates caused the U.S. dollar to depreciate and made the prices of
commodities increase.
B) The lower interest rates caused the U.S. dollar to appreciate and made the prices of
commodities increase.
C) The lower interest rates caused speculators to borrow funds to buy more
commodities and made the prices of commodities increase.
D) The lower interest rates caused speculators to borrow funds to less more
commodities and made the prices of commodities increase.
The exchange rate between currencies of different countries is controlled primarily by
________ in currency markets.
A) diplomatic relations
B) supply and demand
C) tariff rates
D) the outsourcing agreements
A government policy that leads to an increase in aggregate demand is called:
A) an aggregate demand policy.
B) an expansionary policy.
C) a fiscal policy.
D) an economic growth policy.
Suppose economists find a way to include all economic activity (underground or
otherwise) in GDP. How will this affect the GDP of rich and poor countries? Will the
new GDP per capita exhibit more income inequality across countries? Explain.
When a person producing a particular product has a lower opportunity cost than another
person, that person is considered to have a ________ over the other.
What is a voluntary export restraint?
Suppose you buy a $40,000 BMW from your local dealership. The car was built
completely in Germany. Assuming no dealer mark-up on the car, how would your
purchase be recorded in U.S. GDP accounts? By how much would U.S. GDP increase
as a result of your purchase?
What are some of the features of Robert Hall and Alvin Rabushka’s flat tax?
Graphically illustrate an increase in labor supply and explain its impact on the
equilibrium wage rate and quantities.
Compare and contrast the financial crises in Mexico in 1994 and in Asia in 1997.