Tax changes that favor people who save will also tend to favor those with relatively
higher incomes.
Decreases in taxes shift the aggregate demand curve to the right.
As a component of GDP, consumption expenditures refers to purchases by consumers
of currently produced goods and services.
The largest component of GDP based on the expenditures approach is government
spending (at all levels: federal, state, and local).
Free trade will affect a country’s employment in different industries.
An increase in demand will cause the equilibrium price and quantity to rise, ceteris
paribus.
Two goods are substitutes if an increase in the price of one good leads to a decrease in
demand for the other.
Technological innovations are not necessarily major scientific breakthroughs.
The APEC (Asia Pacific Economic Cooperation) has more members than the EU.
What happens if the price of a product is below the equilibrium price?
A) The buyers will stop purchasing a “cheap” product.
B) The producer will lower the price to sell more product.
C) There will be an excess demand for the product.
D) There will be a surplus of the product.
How does real gross domestic product (GDP) differ from nominal GDP?
A) Nominal GDP controls for price changes, while real GDP does not.
B) Real GDP controls for price changes, while nominal GDP does not.
C) Nominal GDP can be used to directly compare the amount of output produced from
year to year, while real GDP cannot be used for such comparison.
D) There is no difference between nominal GDP and real GDP.
When the price of apples goes up:
A) the demand for apples will decrease.
B) the demand for apples will increase.
C) the quantity demanded for apples will decrease.
D) the quantity demanded for apples will increase.
Recall the Application about the causes of oil price increases to answer the following
question(s). Economist Lutz Kilian examined the importance of supply disruptions to
the U.S. oil market by constructing measures of supply disruptions in oil producing
countries based on a detailed examination of prior trends in demand and specifications
in oil contracts.According to this Application, oil supply disruptions explain ________
of the variability of oil prices.
A) about 50 percent
B) more than 90 percent
C) only a small fraction
D) absolutely none
In developing countries, the highest returns are from investing in
A) transportation systems.
B) sanitation systems.
C) education.
D) defense.
Daily Output of Russia and Panama
Table 18.1
Refer to Table 18.1. The opportunity cost of a hat in Panama is
A) 1/2 of a glove.
B) 3/4 of a glove.
C) 4/3 gloves.
D) 2 gloves.
An auto worker in Ohio who loses her job because the company relocated the plant to
another country represents an example of:
A) frictional unemployment.
B) structural unemployment.
C) cyclical unemployment.
D) natural unemployment.
Recall Application 1, “Global Warming, Rich Countries and Poor Countries,” to answer
the following questions:
Based on what you learned from the application, which countries are negatively
affected by global warming?
A) poor countries
B) rich countries
C) poor and rich countries
D) industrialized countries
Suppose that consumption expenditures, investment expenditures, and government
purchases are 75 billion, 25 billion and 20 billion, respectively. How large should the
GDP be so that the net exports is zero?
A) 120 billion
B) 70 billion
C) -100 billion
D) -25 billion
IRA, 401(k), 403(b), and Keogh plans:
A) impose added taxes on those who save.
B) place no limits on the amount that individuals can deposit in these accounts.
C) encourage saving while limiting tax liabilities.
D) are never taxed.
Figure 9.1 shows three aggregate demand curves. A movement from curve AD1 to curve
AD2 could be caused by a(n)
A) increase in the money supply.
B) increase in taxes.
C) increase in the price level.
D) decrease in government spending.
Government debt “crowds out” private investment because
A) the government can order the public to buy bonds.
B) the government and private firms compete in the same market for savings.
C) private firms stop borrowing money when the government enters the market.
D) the government’s increased demand for loans decreases interest rates.
We can use macroeconomic analysis to
A) learn how to balance a checkbook.
B) study the choices made by households.
C) understand marginal changes in the macroeconomy.
D) understand why economies grow.
If the consumption function is C = 200 + 0.75Y and there is a $10 million increase in
consumption spending, then the aggregate demand curve will shift horizontally to the
right by:
A) $40 million.
B) $75 million.
C) $7.5 million.
D) $750 million.
The first major international agreement after World War II was the:
A) General Agreement on Tariffs and Trade.
B) North American Free Trade Area.
C) World Trade Organization.
D) European Union.
What is meant by the term “velocity of money,” and how is the velocity of money
calculated?
What is a liquidity trap, and what happens if it occurs?
Analyze the statement below and explain why you agree or disagree. “When a firm
invests in additional capital stock, the firm will no longer need workers and this will
ultimately hurt all workers in the firm.”
If the country is experiencing 50 percent inflation per month, then how much will a $30
basket of goods cost in 2 years?
Define “autonomous consumption spending.”