According to the law of comparative advantage, individuals and economies should
specialize in producing those goods and services in which they have a comparative
advantage.
Which of the following describes the relationship between GDP and government
spending?
a. Government spending = GDP + consumption + private investment – exports – imports
b. Government spending = GDP – consumption – private investment – exports – imports
c. Government spending = GDP – consumption – private investment + exports + imports
d. Government spending = GDP – consumption – private investment – exports + imports
e. Government spending = GDP + consumption – private investment + exports – imports
Which of the following would be included in a year’s GDP?
a. Susan cleans the fuel injectors on her car.
b. A private individual purchases 100 shares of IBM stock.
c. A timber company purchases land in Oregon.
d. A man buys an antique desk from his neighbor.
e. A college professor purchases a new computer.
Each Federal Reserve District has 9 directors. ____ are appointed by the member banks
in the district and ____ are appointed by the Board of Governors of the Federal Reserve
.
a. 9; 0.
b. 0; 9.
c. 4; 5.
d. 6; 3.
e. 7; 2.
How many times in the last 80 years has the official unemployment rate in the United
States reached 0 percent?
a. 0
b. 1
c. 2
d. 3
e. 4
In the dollar-pound market, whenever there is an appreciation of the dollar, there is
a. an appreciation of the pound
b. a depreciation of the pound
c. a devaluation of the pound
d. a revaluation of the pound
e. no change in the value of the dollar
A weakness in the classical economic claim that a recession is caused by a decrease in
labor demand curve is
a. that labor demand never changes
b. that labor demand increases during a recession
c. that labor supply decreases during a recession
d. the confusion between a shift of the labor demand curve and a movement along that
curve
e. the impossibility in the classical model of total spending ever being deficient
Which of the following is not a function of the Federal Reserve System?
a. Setting the required reserve ratio
b. Establishing the prime lending rate
c. Clearing checks
d. Regulating banking activity
e. Controlling the money supply.
A bank can only fail if it is not in good financial health.
Since 1959, the U.S. has experienced severe recessions in which three periods?
a. 1964-65, 1981-82, and 1990-91
b. 1974-75, 1981-82, and 2008-09
c. 1960-61, 1974-75, and 2008-09
d. 1960-61, 1981-82, and 2008-09
e. 1969-70, 1981-82, and 2008-09
As long as debt grows by the same percentage as nominal GDP, the debt-to-GDP ratio
will stay constant but the interest payments-to-GDP ratio will increase.
Say’s Law is the idea that
a. in the long run, the economy reaches full employment automatically
b. the aggregate production function, along with the labor market, determines the
economy’s level of output
c. total output will always exceed total spending
d. whenever a good or service is produced, an equal amount of income is created
e. markets always clear
An increase in oil prices is considered a supply shock because it would lead to a shift of
the aggregate supply curve.
In the classical model, if government tries to increase employment and output by
increasing its own purchases,
a. it will achieve its goal and economic conditions will improve
b. it will not attain its objective unless it also decreases taxes
c. its actions will cause the interest rate to rise, which will choke off investment
spending
d. firms will be motivated to increase their output, thereby creating even more jobs
e. saving will also increase, as more people are employed
The demand curve for a particular good indicates the various quantities
a. demanded at various prices, other things equal
b. demanded at different income levels, other things equal
c. actually purchased at various prices, other things equal
d. actually purchased at different income levels, other things equal
e. demanded at various prices and income levels, other things equal
Suppose that a market is initially in equilibrium. Then the government imposes a price
floor above the equilibrium price. Which of the following will occur in the absence of a
black market?
a. The market will remain in equilibrium.
b. The quantity sold will drop.
c. The quantity demanded will increase.
d. The quantity supplied will decrease.
e. An excess demand will develop.
Which of the following is most sensitive to fluctuations in GDP?
a. government purchases
b. government nonmilitary spending
c. transfer payments
d. military spending
e. interest on the national debt
A negative demand shock would lead to a decline in both the price level and output in
the short run.
Which of the following statements is true?
a. When a change in income causes consumption to change, the consumption-income
line shifts; however, when anything besides income changes, we move along the line.
b. When a change in income causes consumption to change, we move along the
consumption-income line; however, when anything besides income changes, the line
shifts.
c. When income or anything else affecting consumption changes, we move along the
consumption-income line.
d. When income or anything else affecting consumption changes, the
consumption-income line shifts.
e. There is no way to determine, without more information, whether a change in income
or anything else will shift the consumption line or cause movement along the
consumption-income line.
Money in the U.S. has value primarily because it is fiat money.