Suppose a price floor on sparkling wine is proposed by the Health Minister of the
country of Vinyardia. What will be the likely effect on the market for sparkling wine in
Vinyardia?
A) Quantity demanded will decrease, quantity supplied will increase, and a surplus will
result.
B) Quantity demanded will increase, quantity supplied will decrease, and a surplus will
result.
C) Quantity demanded will decrease, quantity supplied will increase, and a shortage
will result.
D) Quantity demanded will increase, quantity supplied will decrease, and a shortage
will result.
The government purchases multiplier equals the change in ________ divided by the
change in ________.
A) government purchases; equilibrium real GDP
B) equilibrium real GDP; government purchases
C) government purchases; consumption spending
D) consumption spending; government purchases
What impact does an increase in the price level in the United States have on net exports
and why?
A) An increase in the price level decreases net exports because higher prices decrease
the value of the dollar.
B) An increase in the price level decreases net exports by increasing the relative cost of
American goods.
C) An increase in the price level increases net exports because higher prices lower the
value of the dollar.
D) An increase in the price level increases net exports because higher prices decrease
American spending on imports.
Figure 22-4
Suppose the economy gains more capital per hour worked and experiences
technological change. This is shown in the figure above by the movement from
A) E to B to D.
B) A to B to C.
C) A to E.
D) A to D.
Assume that inventories declined by more than analysts predicted. This implies that
A) planned aggregate expenditure was greater than real GDP.
B) planned aggregate expenditure was equal to real GDP.
C) planned aggregate expenditure was less than real GDP.
D) planned aggregate expenditure is unrelated to real GDP.
Suppose at the going wage rate of $20 per hour, firms can hire as many hours of
janitorial services as it desires. If any firm tries to lower the wage rate to $19, it will not
be able to hire any janitor. What does this indicate about the supply curve for janitorial
services?
A) Supply is unit-elastic.
B) Supply is perfectly elastic.
C) Supply is perfectly inelastic.
D) Supply is relatively inelastic.
An economic expansion tends to cause the federal budget deficit to ________ because
tax revenues ________ and government spending on transfer payments ________.
A) increase; rise; falls
B) increase; fall; rises
C) decrease; rise; falls
D) decrease; fall; rises
Crowding out refers to a decline in ________ as a result of an increase in ________.
A) tax revenues; unemployment
B) government purchases; tax rates
C) government purchases; private expenditures
D) private expenditures; government purchases
If the number of unemployed workers is 19 million, the number in the working-age
population is 500 million, and the unemployment rate is 4%, how many workers are in
the labor force?
A) 1 million
B) 20 million
C) 475 million
D) 481 million
The Federal Reserve can directly affect its monetary policy ________, which then
affect its monetary policy ________.
A) goals; targets
B) goals; tools
C) targets; goals
D) targets; tools
If actual inflation is greater than expected inflation, what is the relationship between the
actual real wage and the expected real wage?
A) The actual real wage will be lower than the expected real wage.
B) The actual real wage will be higher than the expected real wage.
C) The actual real wage will be equal to the expected real wage.
D) The relationship between the actual real wage and the expected real wage cannot be
predicted.
The GDP deflator in year 2 is 105, using year 1 as the base year. This means that, on
average, the cost of goods and services is
A) 5% higher in year 2 than in year 1.
B) 105% higher in year 2 than in year 1.
C) 5% higher in year 1 than in year 2.
D) 105% higher in year 1 than in year 2.