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The income-expenditure model focuses on changes in price levels.
Social insurance taxes are paid by corporations based on their profits.
The Keynesian short-run aggregate supply curve is vertical.
Nominal GDP is calculated using a constant set of prices from a base year.
Exports are products produced in the home country and sold in another country.
If a person without a job is not actively looking for work, that person is classified as not
being in the labor force.
Recall Application 2, "The Value of an Annuity," to answer the following questions:
According to the Application, if you calculate the expected value of your annuity to
exceed $500,000, then you should decide annuity over the lump-sum payment.
In a market-based economy, only the government can reduce economic uncertainty.
Increased immigration is likely to lead to the labor demand curve shifting to the right.
Holding everything else constant, the U.S. real exchange with India will increase if the
rupee depreciates.
The unemployment rate is calculated by dividing the number unemployed and looking
for work by the sum of the number employed and the number unemployed and looking
for work.
If the current account is in deficit, we know that the capital account is in deficit.
Two parties engage in exchange when each one expects to be made better off by the
exchange.
Refer to Application 2, "Recovering From a Recession," to answer the following
questions:
According to the application, the recession that started in 2007 took ________ to
recover to its previous peak.
A) 2 years
B) 18 months
C) 3.5 years
D) 6 months
Recall Application 1, "Law of Demand and Cigarettes," to answer the following
questions:
In the application, what was/were the reason(s) why a lower price of cigarettes will
increase the quantity demanded for cigarettes?
A) Lower prices make current smokers smoke more cigarettes.
B) Lower prices encourage people to start smoking.
C) Lower prices encourage people to quit smoking.
D) A and B are both correct.
The rule of thumb used to measure the cost of reducing inflation suggests that if the
actual unemployment rate exceeds the natural rate of unemployment by 1 percentage
point for one year, the inflation rate:
A) falls by 1 percentage point per year.
B) rises by 1 percentage point per year.
C) falls by 0.5 percentage point per year.
D) falls by 1.5 percentage points per year.
Which of the following sequence of events follows an increase in taxes?
A) aggregate demand real GDP money demand real interest rate investment
B) aggregate demand real GDP money demand real interest rate investment
C) aggregate demand real GDP money demand real interest rate investment
D) aggregate demand real GDP money demand real interest rate investment
Monetary neutrality implies that an increase in the money supply will:
A) increase real interest rates.
B) increase the price level.
C) lower real GDP.
D) lower the unemployment rate.
In order to shorten a recession when the economy is producing below full employment,
the monetary authority could:
A) contract the money supply.
B) expand the money supply.
C) raise taxes in order to close the budget deficit.
D) decrease government spending.
Recall the Application about the increase in Chinese demand for pecans to answer
the following question(s). Between 2006 and 2009, Chinese imports of U.S. pecans
increased from 9 million pounds per year to 88 million pounds per year, and as a
result of the increase in demand, the equilibrium price increased by about 50
percent. The increase in demand was caused in part by widespread reports in the
Chinese media extolling the health benefits of pecans. Recall the Application. The
equilibrium price of pecans increased because the demand curve shifted
A) up and to the right.
B) down and to the left.
C) down and to the right.
D) up and to the left.
Adam Smith
A) is considered the founder of economics.
B) introduced the concept of ceteris paribus to the discussion of supply and demand.
C) is responsible for refining the model of supply and demand.
D) is the author of this text.
Quantity of Frozen Latte-On-A-Stick Supplied
Table 4.1
Refer to Table 4.1, which shows Flo's and Rita's individual supply schedules for frozen
latte-on-a-stick. Assuming Flo and Rita are the only suppliers in the market, if the
market quantity supplied is 18, the price must be
A) $2.
B) $3.
C) $4.
D) $5.
Which of the following would cause an increase in aggregate demand in the short run?
A) an increase in the supply of money
B) a decrease in the price level
C) an increase in taxes
D) a crop failure
The U.S. real exchange rate appreciates when:
A) a US basket of goods can exchange for more baskets of goods from other countries.
B) a foreign basket of goods can exchange for more baskets of goods from the US.
C) the number of dollars you need to buy a basket of foreign goods decrease.
D) the number of dollars you need to buy a basket of foreign goods increase.
If the unemployment rate is ________ the natural rate, then we expect to see ________
wages, causing the short-run aggregate supply curve to shift up.
A) less than; increasing
B) less than; decreasing
C) greater than; increasing
D) greater than; decreasing
