One example of a microeconomic question is, “Should unemployment benefits be
increased?”
A decrease in the cost of production will shift the supply curve down and to the right.
For a given interest rate, a higher level of output means an increase in the number of
transactions and an increase in the demand for money.
If we eliminated our textile tariffs, the dislocated workers could easily switch to other
jobs.
The largest component of national income is compensation of employees.
The speculative demand for money states that in the short run, people hold on to money
because the return to holding bonds and stocks can be negative.
The number of people classified as employed is 220,000 and the number of people
classified as unemployed is 30,000. The size of the labor force:
A) equals 200,000.
B) equals 250,000.
C) equals 300,000.
D) cannot be determined from this information.
If the prices in the United States decrease, we would expect:
A) the demand for dollars to increase.
B) the demand for dollars to decrease.
C) the supply of foreign currency in the United States to decrease.
D) the demand for foreign currency in the United States to increase.
Recall Application 3, “Social Norms, Unemployment, and Perceived Happiness,” to
answer the following questions:
According to the application, men suffered ________ in well-being when ________
were also unemployed.
A) a smaller decline; their peers
B) a larger decline; their peers
C) a smaller increase; their family
D) a larger decline; their family
Table 13.3
Refer to Table 13.3. The required reserve ratio is:
A) 5%.
B) 6%.
C) 7%.
D) 8%.
The Law of Supply states that
A) producers should only produce what they can sell.
B) producers should only sell the items when the price is right.
C) there is a positive relationship between price and quantity supplied, ceteris paribus.
D) producers are legally required to make necessary items available in the marketplace.
Recall Application 1, “Beyond Purchasing Treasury Securities,” to answer the following
questions:
According to the application, which of the following is an example of the sharp change
in the Fed’s conduct of monetary policy in 2008?
A) The Fed increased total asset holdings by $1 trillion.
B) The Fed held mortgage backed securities.
C) The Fed intervened in the credit and the mortgage markets.
D) All of the above are correct.
In June 2012, the U.S. labor force consisted of 142,415,000 employed and 12,749,000
unemployed. The U.S. unemployment rate for June 2012 was about
A) 7.4 percent.
B) 8.2 percent.
C) 9.0 percent.
D) 11.2 percent.
In fiscal policy, the inside lags can take a long time because:
A) changes in taxes and government spending require approval from Congress and the
president.
B) macroeconomic data take time to gather and can be unreliable.
C) consumers are usually slow in spending their tax rebate checks.
D) A and B are both correct.
The reduction in investment spending in the long run resulting from an increase in
government expenditures is called:
A) crowding out.
B) crowding in.
C) the multiplier effect.
D) money neutrality.
When 7 of the 8 largest Japanese mortgage lenders in 1995 had gone bankrupt, the
response of the Japanese government was:
A) to bail out all the 7 bankrupt mortgage lenders.
B) to bail out 5 of the largest mortgage lenders.
C) to bail out the 3 largest mortgage lenders.
D) not to bail out any of the mortgage lenders.
Which of the following institutions was placed into government control following the
turmoil in the market for securitized loans in the U.S. in September 2008?
A) Fannie Mae and Freddie Mac
B) Merrill Lynch
C) Wachovia
D) All of the above were placed under government control in 2008.
Increases in unanticipated inflation will impact employment levels and would therefore
tend to cause
A) unemployment to rise above the natural rate.
B) the natural rate of unemployment to rise.
C) unemployment to fall below the natural rate.
D) the natural rate of unemployment to fall.
Recall Application 1, “Declining Labor Force Participation,” to answer the following
questions:
Which of the following does the Application identify as a possible explanation for the
declining labor force participation rate in the U.S. since 1999?
A) Poor job prospects discouraged many people from staying in the labor force.
B) Baby boomers are reaching retirement age.
C) The generous unemployment benefits provided by the government encouraged
workers to stay unemployed.
D) Both A and B are correct.
Recall Application 3, “Is a VAT in our Future?” to answer the following questions.
According to the application, which industrialized country does not have a value-added
tax (VAT)?
A) the U.S.
B) the U.K.
C) Canada
D) all of the above are correct.
This Application addresses the economic concept of
A) procyclical investment.
B) the multiplier-accelerator model.
C) financial intermediaries.
D) present value.
Which of the following is a public investment in infrastructure?
A) Southstar Steel has two office buildings separated by one-half mile. The company
lays a fiber optic cable between the buildings to take advantage of new technology.
B) The federal government makes it easier for college students to obtain loans and this
increases the number of students attending college.
C) The city of Robesonia builds a new sewage treatment plant.
D) Residents of a suburban housing development hire a private security force because
they have been concerned about crime.
Though a powerful tool, the reserve requirement is seldomly used by the Fed to control
the money supply because:
A) it causes significant disruptions in the banking system.
B) using the reserve requirement can be inflationary.
C) it takes a long time for the policy to be implemented.
D) it is very difficult for the Fed to monitor the reserve requirement.
Suppose a car is completely produced and assembled in Germany and is sold to the
United States. In this example, if the United States restricts the purchase of the car from
Germany, then the country whose overall welfare would be reduced by this policy
would be:
A) the United States.
B) Germany.
C) neither Germany nor the United States.
D) both Germany and the United States.
With a fixed labor force, diminishing returns means that as capital deepening continues:
A) depreciation decreases as net investment decreases.
B) the marginal product of labor becomes larger.
C) the marginal product of capital becomes smaller.
D) the growth rate of output becomes negative.
An import quota is illegal under the rules of the:
A) World Trade Organization.
B) Congress.
C) Federal Reserve.
D) World Wide Web.
What is meant by the term “inside lags”?
Name two types of jobs most likely affected by ‘seasonal unemployment.”
Table 11.4 Assume a closed economy with no government. Why doesn’t equilibrium
exist at aggregate output level Y = 400 in Table 11.4? Why doesn’t equilibrium exist at
aggregate output level Y = 1,000 in Table 11.4?
What are some reasons why coordination of economic affairs through the price system
may not work perfectly?
Briefly discuss the structure of the Federal Reserve.
Define a nation’s balance of payments. Identify the major accounts of a country’s
balance of payments and explain their relationship.
How costly are biases in the CPI?
What is the difference between comparative and absolute advantage.
What things are included when we measure the stock of capital?
What is frictional unemployment?