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Social insurance taxes are paid by wages and investment income.
Based in part on the budget surplus, in 2001 President Bush and Congress passed a
permanent tax cut.
Excess supply in an unregulated market will cause the price of a product to fall.
Import restrictions create an incentive to smuggle.
Induced innovations can only be achieved through government taxation of certain
activities.
From 1974 to 2011, as the nominal minimum wage rose from $2 to $5.85, the real
minimum wage fell.
Environmental regulations increase trade and economic well-being.
Recall Application 2, "What Have Been the Local Effects of Chinese Imports?" to
answer the following questions:
According to the Application, Chinese Imports have only been disadvantageous to U.S.
local communities.
Since the 1930s the United States has experienced continuous deflation.
Banks prefer to make loans than keep reserves because they earn interest on loans and
must pay interest on reserves.
A disadvantage of prolonged unemployment is that it causes a worker to lose some of
his skills.
In a business cycle, the date at which a recession starts is called a trough.
According to the Solow Model, an increase in saving rate will always result in an
increase in output.
The level of the natural rate of unemployment in the economy is determined by
Congress and the President.
Congestion taxes tend to cause an increase in traffic volume during rush hours.
If the U.S. government imposes an import ban on German made cars, then:
A) no German made cars can enter the U.S.
B) any German made car after a certain predetermined number is not allowed.
C) no German made can can enter the U.S without being taxed.
D) any German made car after a certain predetermined number is taxed.
Which of the following contributed to the increase in the unemployment rate in 1983?
A) The Fed actively tried to reduce inflation via contractionary policies.
B) The Fed actively tried to increase inflation via contractionary policies.
C) The Fed actively tried to make the US dollar appreciate via contractionary policies.
D) The Fed actively tried to make the US dollar depreciate via contractionary policies.
If the nominal interest rate is 5 percent and the rate of inflation is 1 percent, then the
real interest rate is:
A) 5 percent.
B) 4 percent.
C) 6 percent.
D) 5.5 percent.
Suppose that the population of a country decreases. Assuming that people in that
country enjoy eating steak, we would predict that the equilibrium quantity of steak will
________ and the equilibrium price of steak will ________ in that country.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
Let C = 300 + 0.75y and I = 200. Assume no government or foreign sectors. Investment
needs to decrease by ________ to decrease equilibrium output by a total of $750.
A) $75
B) $100
C) $150
D) $187.50
Figure 9.2
Refer to Figure 9.2. A movement from point c to point could be caused by a
simultaneous ________ and ________.
A) decrease in government spending; decrease in the price of oil
B) decrease in taxes; increase in the price of oil
C) increase in taxes; decrease in government spending
D) increase in government spending; increase in the money supply
Recall the Application about productivity in the nation of Latvia in the 1990s to
answer the following question(s).
According to this Application, in the 1990s EU countries had ________ in the
production of all products compared to Latvia.
A) an absolute advantage and a comparative advantage
B) an absolute advantage but not a comparative advantage
C) a comparative advantage but not an absolute advantage
D) neither an absolute advantage nor a comparative advantage
Suppose consumption is $10,000 when income is $9,000 and the marginal propensity to
save equals 0.2. When income increases to $9,500, consumption will be:
A) $9,800.
B) $10,400.
C) $10,800.
D) $10,200.
Specialization and trade exploit differences in productivity across workers and
A) only benefit the exporter.
B) only benefit the importer.
C) make everyone better off.
D) make everyone worse off.
"Final goods and services" are those that are
A) produced outside the United States.
B) used in the production of other goods and services.
C) double counted in the calculation of GDP.
D) sold to ultimate or final purchasers.
Bank of Sim City has $250 million in deposits. Bank of Sim City is meeting its reserve
requirement and has no excess reserves. It has $50 million in reserves. Bank of Sim
City faces a required reserve ratio of:
A) 1.25%.
B) 4%.
C) 20%.
D) 37.5%.
Suppose the growth rate of GDP in the United States is 4.2 percent. If 1.1 percent and
1.4 percent of GDP growth are due, respectively, to capital and labor growth, the
amount resulting from technological progress is
A) 0.3 percent.
B) 1.1 percent.
C) 1.4 percent.
D) 1.7 percent.
Recall Application 1, "Law of Demand and Cigarettes," to answer the following
questions:
In the application, when the government lowered the price of cigarettes by lowering the
tax rates, the response of the consumer was:
A) an increase in quantity demanded.
B) an increase in demand.
C) a decrease in demand.
D) a decrease in quantity demanded.
Rank these three wage rates in the order of least sticky to most sticky: minimum wage
workers, nurses, movie stars.
A) movie stars, nurses, minimum wage workers
B) minimum wage workers, nurses, movie stars
C) movie stars, minimum wage workers, nurses
D) minimum wage workers, movie stars, nurses
Which of the following is a macroeconomic question?
A) Should we have a constitutional amendment requiring the government to implement
a national consumption tax to replace the current income tax?
B) Why did a leading computer manufacturer establish call centers in India?
C) Why does a pharmaceutical manufacturer try to lower its production costs?
D) Should the government put a tax on alcohol in an attempt to assist in the funding of
support groups like Alcoholics Anonymous?
A decrease in the level of real GDP in the economy leads to
A) a leftward shift in the demand for money curve.
B) a rightward shift in the demand for money curve.
C) a leftward movement along the demand for money curve.
D) a rightward movement along the demand for money curve.
Consider a firm that is trying to determine how many hours to remain open in a day.
How would the firm make this decision?
