Persons who choose not to become informed on political and governmental matters
because they feel that the costs of becoming informed exceed the benefits of becoming
informed are
a. rationally ignorant.
b. not acting in their own best interests.
c. members of special interest groups.
d. shortsighted.
The top 1% of income earners in the U.S. (those with the highest taxable incomes) pay
a. about the same percentage of their incomes in taxes as the average U.S. taxpayer.
b. a much lower percentage of their incomes in taxes than the average U.S. taxpayer.
c. a much higher percentage of their incomes in taxes than the average U.S. taxpayer.
d. about 15 percent of their incomes in income taxes
e. a and d
Real GDP is the value of all __________ goods and services produced in a given year
in __________ prices.
a. intermediate; that year’s
b. intermediate; base-year
c. final; that year’s
d. final; base-year
According to Keynes, what households plan to save
a. always equals what firms plan to invest.
b. sometimes equals what firms plan to invest.
c. is always greater than what firms plan to invest.
d. is always less than what firms plan to invest.
Which of the following describes a change that the Federal Reserve made in response to
the financial crisis of 2007-2009?
a. The Fed extended the lender of last resort function to institutions other than banks.
b. The Fed narrowed the scope of its open market operations, choosing to limit it to
only buying Treasury securities from banks.
c. The Fed discontinued its term auction facility (TAF) program.
d. all of the above
“If we come to a company’s rescue this time, they’ll take more risks and we’ll have to
come to their rescue next time, too.”The economist who said this most likely
a. believes that the AS curve is upward-sloping.
b. prefers monetary policy to fiscal policy when it comes to stabilizing the economy.
c. is against bailouts.
d. prefers increases in government spending to tax cuts when it comes to stimulating the
economy from the demand side.
e. none of the above
Which of the following is not a result of a reduction in the federal budget deficit?
a. a lower real interest rate
b. an appreciation of the currency
c. a rise in exports
d. a fall in the price of foreign inputs
In 2000, the top 100 transnational companies produced about _____________ percent
of the entire world’s output, which was approximately as much as what
________________ produced that year.
a. 4.1; Japan
b. 4.3; the United Kingdom
c. 10.9; China
d. 25.1; the United States
In year 1 the CPI is 174, and in year 2 the CPI is 190. If Sarah’s salary was $49,800 in
year 1, what salary in year 2 would cause her to exactly “keep up with inflation”?
a. $34,004
b. $42,942
c. $40,508
d. $54,379
Economists who asset that the AS curve is vertical believe that changes in Real GDP
originate only on the _____________of the economy; so government policy that is
intended to impact the ____________________ of the economy will change only
______________, not ________________.
a. demand side; supply side; Real GDP; prices
b. demand side; supply side; prices; Real GDP
c. supply side; demand side; Real GDP; prices
d. supply side; demand side; prices; Real GDP
Exhibit 5-3
which shows the demand and supply of a college athlete.Suppose that NCAA rules limit
the amount that the college can pay this athlete, such that their payment can not exceed
the cost of attending the college (currently $8,000).The impact of this ruling would be a
loss of income to the athlete of __________ and an equal gain in consumers’ surplus to
the college represented by ________________.
a. $2,000; area 2
b. $8,000; area 3
c. $10,000; area 2 + 3
d. $2,000; area 1 + 2
Exhibit 4-8
Suppose that wheat producerslobby the government for a price floor and receive
one.This price floor is set at PF.What is the quantity of wheat purchased at PF?
a. Q1
b. Q2
c. Q3
d. Q2 – Q1
Expansionary fiscal policy raises Real GDP more in a closed economy than in an open
economy.
a. True
b. False
A government agricultural policy in which a guaranteed price is set and no surplus is
created is the
a. marketing quota system.
b. acreage allotment program.
c. price support program.
d. target price system.
Suppose the economy’s short-run equilibrium is at a point to the right of Natural Real
GDP. Which of the following statements is true?
a. The economy is in an inflationary gap.
b. The economy is in a recessionary gap.
c. The economy is in long-run equilibrium.
d. This situation is actually impossible.
The purchases made by the foreign sector are called __________; the purchases made
by the household sector are called __________; the purchases made by the government
sector are called __________; and the purchases made by the business sector are called
investment.
a. net exports; consumption; net interest
b. net exports; domestic spending; government purchases
c. net exports; consumption; government purchases
d. exports; domestic spending; government product
e. imports; consumption; government expenditures
If Japan’s Real GDP rises, this tends to _________________ United States exports,
shifting the United States AD curve to the __________________.
a. raise; right
b. raise; left
c. lower; right
d. lower; left
An economic policy initiative results in the AD curve shifting to the right. As a result,
a. the price level will rise.
b. the price level will stay constant.
c. the price level will fall.
d. Real GDP will rise in the short run.
e. a and d
A production function specifies the relation between ____________ and the
___________ to ____________________.
a. technology; output; Real GDP
b. technology; the factor inputs; Real GDP
c. price; quantity; Real GDP
d. Real GDP; the factor inputs; the price level
In short-run equilibrium, the quantities supplied and demanded of Real GDP can be less
than or greater than Natural Real GDP.
a. True
b. False