The production possibility frontier is bowed out because:
A) resources are not equally suited for the production of both goods.
B) resources are scarce.
C) economic growth leads to inefficiency.
D) resources are inefficiently used.
The worst inflation in the United States in modern times occurred in the late 1970s,
when prices were increasing at an annual rate of 13%.
A) True
B) False
The Federal Open Market Committee sets the target interest rate for the next:
A) three months.
B) six months.
C) three weeks.
D) six weeks.
Scenario: Exchange Rates
The value of a euro goes from US$1.25 to US$1.50.
Look at the scenario Exchange Rates. In Germany, exports will _____ and imports will
_____.
A) increase; decrease
B) increase; increase
C) decrease; increase
D) decrease; decrease
Financial markets spread the potential gains and losses of borrowing and lending
operations among many individuals, therefore decreasing the overall uncertainty. This is
an example of:
A) reducing transaction costs.
B) reducing risk.
C) providing liquidity.
D) guaranteeing rates of return.
Mark and Julie are going to sell brownies and cookies for their third annual fundraiser
bake sale. In one day, Mark can make 40 brownies or 20 cookies, and Julie can make 15
brownies or 15 cookies. With specialization, _____ brownies and _____ cookies will be
made in one day.
A) 15; 20
B) 40; 20
C) 40; 15
D) 55; 35
Overall, trade between China and the United States will:
A) benefit the United States more than China.
B) benefit China more than the United States.
C) benefit both countries.
D) hurt both countries.
If a bank has deposits of $10,000 and reserves of $5,000 and if the reserve requirement
is 20%, its excess reserves are $3,000.
A) True
B) False
The problem of determining what goods and services society should produce:
A) exists because we can produce more than we need or want.
B) exists because there are not enough resources to provide all of the goods and
services that people want.
C) would not exist if all goods and services were scarce.
D) would not exist if government owned all of the resources.
The cost of leaving a championship soccer match before it ends is _____, while the cost
of staying for the entire match is _____.
A) the opportunity cost of not seeing the winning goal with two minutes to go; zerothe
ticket to the match is already paid so there is no cost
B) the opportunity cost of not seeing the winning goal with two minutes to go; the
opportunity cost of whatever else you could have done during that time
C) zeroyou don’t have to pay to leave; zerothe ticket to the match is already paid, so
there is no cost
D) the cost of the ticket; the cost of the ticket
When short-run aggregate supply decreases, it means that the short-run aggregate
supply curve shifts to the _____ and the quantity of aggregate output that producers are
willing to supply _____.
A) right; decreases
B) right; increases
C) left; decreases
D) left; increases
The idea of sticky wages and prices is most closely associated with:
A) monetarism.
B) classical economics.
C) Keynesian economics.
D) rational expectations theory.
The losses to S&L depositors were paid entirely from the assets of the failed thrifts and
funds of the owners.
A) True
B) False
Reserve requirements:
A) set the maximum amount of reserves a bank must hold.
B) set the minimum amount of reserves a bank must hold.
C) are established by Congress.
D) are set by the American Bankers Association.
Suppose the economy is in long-run equilibrium. The government has just decided to
lower income taxes. The long-run impact of this policy will be _____ in the natural rate
of unemployment and _____ in inflation.
A) a decrease; an increase
B) a decrease; no change
C) no change; an increase
D) no change; no change
Table: Per Capita GDP
Look at the table Per Capita GDP. The growth rate of nominal GDP from 2011 to 2014
was:
A) 37.5%.
B) 60%.
C) 62.5%.
D) 166.7%.
The Great Moderation consensus is that fiscal policy has no effect on aggregate
demand.
A) True
B) False
Which of the following does NOT qualify as physical capital?
A) shovel
B) factory
C) backhoe
D) mineral deposits
A trade-off involves weighing costs and benefits.
A) True
B) False
A positive relationship between swimsuits purchased and ice cream purchased could be
the result of:
A) reverse causality.
B) a magnified scale on the swimsuit axis.
C) a truncation of the ice cream axis.
D) an omitted variable, such as the external temperature.
Before 1864 American banking was dominated by:
A) a federally regulated system of national banks.
B) an unregulated system of state banks, each issuing its own currency, with little
regulation.
C) the Federal Reserve System in Washington D.C.
D) European banks that supplied coins and paper money for the U.S. economy.
The Keynesian cross was developed by:
A) John Maynard Keynes.
B) Paul Samuelson.
C) Adam Smith.
D) Robert Heilbroner.
If the marginal propensity to save is 0.2, the multiplier will be 5.
A) True
B) False
An inflationary gap occurs if:
A) actual real GDP is less than potential output.
B) actual real GDP is greater than potential output.
C) actual real GDP is equal to potential output.
D) unemployment is greater than the natural rate.
Economic growth in sub-Saharan Africa has been dismal. Which of the following is
NOT a reason for Africa’s problem?
A) stable governments
B) government corruption
C) a lack of property rights
D) a lack of infrastructure
Figure: The Money Supply and Aggregate Demand
Look at the figure The Money Supply and Aggregate Demand. Panel _____ illustrates
what happens when the Fed decides to _____ Treasury bills and _____ the money
supply.
A) (a); sell; increase
B) (b); buy; increase
C) (b); sell; decrease
D) (a); buy; decrease
Which pair of policies is likely to reduce the natural rate of unemployment?
A) job training and employment subsidies
B) high minimum wages and generous unemployment benefits
C) job training and higher minimum wages
D) employment subsidies and policies designed to strengthen labor unions
The government returns part of the money it raises from taxes in the form of
government transfers.
A) True
B) False
Which of the following statements is TRUE?
A) In the past century, the population of the United States has grown faster than output.
B) Long-run growth models and business cycle models are the same.
C) Since World War II, the economy of Argentina has grown faster than the economy of
Canada.
D) The level of saving is important for long-run growth.
In the long run changes in the money supply change prices but not real output and
interest rates.
A) True
B) False
A negative supply shock raises production costs and increases the quantity producers
are willing to supply at any given price level.
A) True
B) False
Figure: Shifts in Demand and Supply
Look at the figure Shifts in Demand and Supply. The figure shows how supply and
demand might shift in response to specific events. Suppose a fall frost destroys
one-third of the nation’s orange crop. Which panel BEST describes how this will affect
the market for oranges?
A) panel A
B) panel B
C) panel C
D) panel D
In an economy with no taxes or imports, if disposable income decreases by $2,000 and
consumption decreases by $1,500, the marginal propensity to consume is “0.25.
A) True
B) False
During the financial crisis of 2008, the Fed:
A) was closed for a three-week bank holiday by President George W. Bush.
B) remained open but was severely limited in its operations.
C) was merged with the Treasury Department to increase its power to deal with the
crisis.
D) expanded its operations by lending to institutions other than commercial banks and
buying financial assets other than Treasury bills.
The set of ideas known as the new Keynesian economics states that:
A) markets clear in the short run because prices adjust whenever there are surpluses or
shortages.
B) market imperfections tend to make prices sticky in the short run.
C) markets tend to be in equilibrium because of the inherent forces in the economy.
D) wage and price inflation is the main problem that most economies face in the short
run.