If the federal budget has an actual budget surplus of $75 billion, but a cyclically
adjusted budget surplus of $50 billion, then the economy must be above potential real
GDP.
One of the main sources of comparative advantage is natural resources.
The three most important financial centers in the world today are New York, London,
and Tokyo.
Nominal income is equal to real income if the CPI is less than 100.
The Fed was founded in 1913 to serve as lender of last resort to bankers during bank
runs and panics.
In a free market there are virtually no restrictions, or at best few restrictions, on how a
good or service can be produced or sold.
The nominal interest rate plus the inflation rate equals the real interest rate.
U.S. currency continues to be backed by the gold standard to this day.
Centrally-planned economies tend to grow more quickly than market economies.
If the rate of productivity growth in the United States exceeds the rate of productivity
growth in Great Britain we would expect the U.S. dollar to depreciate in value against
the British pound.
When a business is set up as a sole proprietorship, the owner of the business faces
limited liability.
“An increase in the price of oranges will increase the demand for grapefruits.” This
statement is an example of a normative economic statement.
Financial markets and financial intermediaries comprise the financial system.
A car that is produced in 2013 is not sold until 2014. According to the definition of
GDP, in which year’s GDP should it be counted?
A) 2013
B) 2014
C) Half of the sales price will count as part of 2013 GDP and half will count as part of
2014 GDP.
D) The production cost will count as part of 2013 GDP while the sales price will count
as part of 2014 GDP.
If the quantity of hearing aids demanded is represented by the equation QD = 40 – P
then the corresponding price of hearing aids is represented by the equation
A) P = 0.5QD + 20.
B) P = 40 – QD.
C) P = 0.25 – 4QD.
D) P = QD + 40.
In a small economy, consumption spending in 2013 is $6,000, government spending is
$1,200, gross investment is $1,500, exports are $2,000, and imports are $1,000. What is
gross domestic product in 2013?
A) $9,700
B) $9,800
C) $10,800
D) $11,700
Which of the following will shift the demand for the euro to the right?
A) an increase in interest rates in the European Union
B) an increase in incomes in countries that buy goods from the European Union
C) expectations among speculators that the price of the euro will rise in the future
D) All of the above will shift the demand for the euro to the right.
Economic surplus is maximized in a competitive market when
A) demand is equal to supply.
B) the deadweight loss equals the sum of consumer surplus and producer surplus.
C) marginal benefit equals marginal cost.
D) producers sell the quantity that consumers are willing to buy.
Pegging a country’s exchange rate to the dollar can be advantageous if
A) the country does not trade much with the United States.
B) investors believe the dollar to be more stable than the domestic country’s currency.
C) a country wishes to conduct independent monetary policy.
D) imports are not a significant fraction of the goods the country’s consumers buy.
If a stock’s dividend is expected to grow at a constant rate of eight percent in the future
and it has just paid a dividend of $1.25 a share, and you have an alternative investment
of equal risk that will earn a 12 percent rate of return, what would you be willing to pay
per share for this stock?
A) $31.25
B) $1.40
C) $1.25
D) $1.12
The central bank of the European Union is called the
A) Bundesbank.
B) Banco Europe.
C) Federal Reserve.
D) European Central Bank.
Which of the following could decrease unemployment and inflation simultaneously?
A) a decrease in oil prices
B) expansionary monetary policy
C) contractionary monetary policy
D) an increase in the real wage
In the United States in 2013, the Bureau of Economic Analysis began counting
spending by firms and individuals on developing entertainment products as investment.
This change will
A) take away from GDP.
B) add to GDP.
C) not change GDP.
D) only change GDP if the development occurs within the borders of the United States.
A bank’s largest liability is its
A) short-term borrowing.
B) long-term debt.
C) deposits of its customers.
D) shareholder equity.
Table 7-3
Mateo and Celeste produce custom saddles and spurs. Table 7-3 lists the number of
saddles and pairs of spurs Mateo and Celeste can each produce in one month.
Refer to Table 7-3. Select the statement that accurately interprets the data in the table.
A) Mateo has a greater opportunity cost than Celeste for making saddles.
B) Mateo’s opportunity cost for making saddles is less than Celeste’s.
C) Celeste has a greater opportunity cost than Mateo for making saddles.
D) Mateo’s opportunity cost for making saddles and making spurs are both greater than
Celeste’s.
A good measure of the standard of living is
A) real GDP per capita.
B) nominal GDP per capita.
C) total real GDP.
D) total nominal GDP.
Of the $840 billion American Recovery and Reinvestment Act stimulus package which
was enacted in 2009, the largest spending increase occurred in which category?
A) energy and the environment
B) military, veterans, and homeland security
C) health care, social services, and education
D) transportation and housing
A decrease in capital outflows from the United States will
A) decrease the balance on the financial account.
B) increase the balance on the financial account.
C) increase the balance on the capital account.
D) decrease the balance on the current account.
What causes a production possibilities frontier to shift outward?
To understand why someone cannot get a job, it helps to know the three types of
unemployment. List the three types of unemployment and explain what causes each
type. What advice for finding a job would be appropriate for someone in each type of
unemployment?
What is the underground economy and how could it hurt an economy? How does it hurt
developing economies?
Explain why increasing the government budget deficit can decrease investment
spending.
In a corporation, what are “inside directors” and “outside directors”?
How do economic growth rates affect a nation’s standard of living?