New Keynesian macroeconomic theory emphasizes the role of ‘sticky” prices in the
economy.
On a diagram of a production possibility frontier, opportunity cost is represented by the
slope of the production possibility frontier.
The aggregate demand curve shows the relationship between the price level and the
level of planned aggregate expenditure in the economy.
Normative analysis is concerned with “what ought to be,” while positive analysis is
concerned with “what is.”
Vaccinations tend to result in a negative externality.
If planned aggregate expenditure is less than real GDP, some firms will experience
unplanned increases in inventories.
A central bank can help stop a bank panic by
A) raising the required reserve ratio.
B) calling in consumer loans.
C) acting as a lender of last resort.
D) decreasing income taxes.
Which of the following is not an advantage of starting a new business as a
proprietorship?
A) The owner has complete control over the business.
B) A proprietorship has few government rules and regulations to comply with.
C) Business profits are only taxed once, not twice.
D) A proprietorship can easily attain additional funding.
Table 2-1
Production Choices for Dina’s Diner
Refer to Table 2-1. Assume Dina’s Diner only produces sliders and hot wings. A
combination of 40 sliders and 50 hot wings would appear
A) along Dina’s production possibilities frontier.
B) inside Dina’s production possibilities frontier.
C) outside Dina’s production possibilities frontier.
D) at the vertical intercept of Dina’s production possibilities frontier.
Which of the following accurately describes an effect of hurricane Katrina on GDP?
A) GDP would decrease reflecting the costs of cleanup.
B) GDP would increase reflecting the costs of cleanup.
C) GDP would increase reflecting the decrease in production that occurred during the
storm and the productive capacity lost in the storm.
D) GDP would increase well-being.
If there is currently a shortage of dollars, which of the following would you expect to
see in the foreign exchange market?
A) The dollar will appreciate.
B) The dollar will depreciate.
C) There will be an increase in the demand for dollars.
D) There will be an increase in the supply of dollars.
Several studies have shown promising links between green tea consumption and cancer
prevention. How does this affect the market for green tea?
A) The quantity of green tea demanded increases because of a change in tastes in favor
of green tea.
B) The green tea demand curve shifts to the right because of a change in tastes in favor
of green tea.
C) The green tea demand curve shifts to the left because this new information will
increase the price of green tea.
D) The quantity of green tea demanded decreases because this new information will
increase the price of green tea.
The basic aggregate demand and aggregate supply curve model helps explain ________
fluctuations in real GDP and the price level.
A) short-term
B) long-term
C) both short-term and long-term
D) unrelated
According to Robert Fogel, economic growth ________ health, and health ________
economic growth.
A) improves; worsens
B) improves; improves
C) worsens; improves
D) worsens; worsens
Figure 15-13
Refer to Figure 15-13. In the figure above, if the economy in Year 1 is at point A and
expected in Year 2 to be at point B, then the appropriate monetary policy by the Federal
Reserve would be to
A) lower interest rates.
B) raise interest rates.
C) lower income taxes.
D) raise income taxes.
Figure 11-4
Refer to Figure 11-4. Suppose the per-worker production function in the figure above
represents the production function for the U.S. economy. If the United States decided to
cut its support of university research in half, this would cause a movement from
A) B to A.
B) B to E.
C) B to C.
D) B to D.
If expected inflation falls, the long-run Phillips curve will
A) shift to the right.
B) not be affected.
C) shift to the left.
D) become negatively sloped.
Equations for C, I, G, and NX are given below. If the equilibrium level of GDP is
$32,000, what will the new equilibrium level of GDP be if government spending
increases to 2,500?
C = 5,000 + (MPC)Y
I = 1,500
G = 2,000
NX = -500
A) $32,500
B) $34,000
C) $38,000
D) $42,000
Which of the following is an example of an implicit cost a firm might incur?
A) the out-of-pocket expense to hire resources
B) taxes owed to the state and Federal governments
C) the rental value of the office space the company owns and uses for itself
D) the revenue a firm generates in using its resources
The underground economy can be described as
A) production of intermediate goods and services.
B) economic production that includes mining.
C) economic activity that is hidden from the government to avoid taxes or because the
activity is illegal.
D) production of infrastructure that spurs growth in the rest of the economy.
What are the three main sets of factors that cause the supply and demand curves in the
foreign exchange market to shift?
Write out the expression for the Taylor rule. Use the Taylor rule to explain how a
decline in real GDP below potential GDP will affect the Federal Reserve’s target for the
federal funds rate.
How does the U.S. federal government assist workers who have lost their jobs due to
international trade?
Explain the Law of Demand.
Describe how the Fed uses open market operations to change short-term and long-term
interest rates.