When will stabilization policy be most effective in combating inflation?
a. when AS is flat
b. when AS is very steep
c. when AS has a moderately upward slope
d. when AS has a moderately downward slope
Self correcting mechanism reveals that
a. real wages will increase if there is an increase in price.
b. nominal wages will fall if there is inflationary gap.
c. nominal wages will increase if there is recessionary gap.
d. in the long run economy will be in equilibrium at potential GDP.
Production indifference curves generally have a positive slope.
a. True
b. False
If the quantity supplied of euro were greater than the quantity demanded, then the price
of the
a. euro would rise.
b. euro would fall.
c. dollar would fall.
d. euro would be in equilibrium.
In a situation of free trade
a. countries with comparative advantage will export more than countries with
comparative disadvantage import.
b. the total quantity of an item exported will be greater than the total quantity imported.
c. importing countries will always produce some good, so that total quantity imported is
less than total quantity exported.
d. the total quantity of an item exported will equal the total quantity imported.
Lately, the Chinese authorities seem to be backing away from ____ and the Yuan has
____ relative to the dollar.
a. managed-float; devalued
b. currency peg; depreciated
c. floating rate; revalued
d. currency peg; appreciated
Which of the following best describes the assumption that monetarists make regarding
velocity?
a. It is fairly predictable in the short run and certainly in the long run.
b. It is not possible to predict velocity in the short or long run.
c. It is variable in the long run but predictable in the short run.
d. It is constant in the long run but variable in the short run.
The statement “Resources employed in producing X are better suited to making Y” is
another way of saying
a. the production possibilities frontier is “bowed out.”
b. the production possibilities frontier is a straight line.
c. the production possibilities frontier is “bowed in.”
d. resources are unproductive.
e. resources have no opportunity cost.
If you assume that the equation of exchange is a dependable economic model, then the
Fed can control
a. real GDP.
b. aggregate supply.
c. nominal GDP.
d. economic growth.
A monopolist will operate where
a. MR = MC and charge a price equal to marginal revenue.
b. MR = MC and charge a price equal to marginal cost.
c. MR = MC and charge a price corresponding to demand at that level.
d. MC = MR and charge a price corresponding to average cost.
Figure 13-1
In Figure 13-1, which panel shows the effect of an expansionary monetary policy on the
interest rate?
a. Panel (A)
b. Panel (B)
c. Panel (C)
d. Panel (D)
Composites of stock prices
a. are completely random and unpredictable.
b. fluctuate randomly around a rising trend.
c. are destabilized by speculations.
d. show no trend, but fluctuate widely.
During a war, a government will often draft people, most of whom are presently
employed, into the army. An economist, computing the real cost of the war, would be
sure to include which of the following items?
a. the value of the civilian goods no longer produced by the new soldiers
b. the cost of feeding and clothing the new soldiers
c. the dollar cost of the payroll
d. the higher prices of civilian goods due to wartime shortages
e. the cost of transporting the soldiers to combat
The primary reason unionization in the United States has been declining is the shift of
the U.S. labor force into service industries and out of manufacturing.
a. True
b. False
A reduction in the capital gains tax, often advocated by proponents of supply-side
economics, is supposed to stimulate increased
a. consumer spending.
b. net exports.
c. investment spending.
d. government spending.
Consumer spending is an injection in the circular flow of income and spending.
a. True
b. False
A fall in the domestic interest rate leads to capital
a. outflows and exchange rate appreciation.
b. outflows and exchange rate depreciation.
c. inflows and exchange rate depreciation.
d. inflows and exchange rate appreciation.
The concept of opportunity cost in a fully employed economy with technology and
resources held constant tells us that
a. expansion of output in one industry means expansion cannot occur in another
industry.
b. expansion of output in one industry means output in another industry must contract.
c. output cannot be increased in any industry.
d. output of all industries must contract until more resources are found.
The distribution of income in the United States has grown substantially more unequal
since about:
a. 1970
b. 1980
c. 1990
d. 2000
Centrally planned economies do not use the price system for anything.
a. True
b. False
Both demand and supply curves usually have positive slopes.
a. True
b. False
A prolonged recession in Europe should decrease the
a. supply of U.S. dollars.
b. demand for U.S. dollars.
c. supply of U.S. goods and services.
d. demand by Americans for euros.
Banking under a system of fractional reserves is a(n)
a. inherently risky business that is unsafe regardless of bank management.
b. inherently risky business that is relatively safe under prudent management.
c. fairly safe business unless management is irresponsible.
d. fairly safe business with no unusual risks.
Laws that assign owners the rights to use assets as they see fit are called
a. human rights.
b. economic rights.
c. property rights.
d. government rights.
The aggregate demand curve
a. slopes upward.
b. slopes downward.
c. is perfectly vertical.
d. is perfectly horizontal.
The clearest sign of inflation would be a(n)
a. increase in the price level.
b. increase in the quantity of total final output.
c. decrease in the quantity of total final output.
d. simultaneous increase in both output and prices.
Table 11-2
In Table 11-2, MC of the last unit produced at the profit-maximizing output is
a. $5.
b. $7.
c. $8.
d. $10.
Appropriate fiscal policy in the U.S. in 2009 would attempt to
a. increase taxes.
b. decrease aggregate supply.
c. increase aggregate demand.
d. decrease aggregate demand.
Scatter diagrams are a useful way to depict the relationship between two variables.
a. True
b. False
Eliminating important details in economic analysis is necessary to understand the
complexity of the economy.
a. True
b. False
What is the primary threat of monopoly and oligopoly to the public interest?
a. Cartels
b. Predatory pricing
c. Price wars
d. Monopoly power
The structural deficit does not depend on the state of the economy.
a. True
b. False
An increase in supply will have what effect on equilibrium price and quantity?
a. Price will increase; quantity will decrease.
b. Price will decrease; quantity will increase.
c. Both price and quantity will increase.
d. Both price and quantity will decrease.