The expectations augmented Phillips curve argues that unemployment varies with
anticipated inflation.
If a company’s total costs per day increase from $200 to $400 by adding another
worker, but its additional benefits are $300, it is sensible to add that additional worker.
Dumping is sometimes legal under international trade agreements.
The U.S. dollar will appreciate if inflation rises from 3 percent to 7 percent in the
United States.
The money multiplier is represented by 1/(1-reserve ratio).
The fall in value of one currency relative to another is an appreciation of a currency.
The existence of lags in implementing fiscal policy can magnify economic fluctuations.
The majority of spending in the government purchases category comes from the federal
government.
An increase in the price level shifts the planned expenditures curve upward.
Investment, a key component of aggregate demand, can cause recessions and booms
based on fluctuations in its levels.
A key assumption of most economic analysis is that people are altruistic, meaning that
they act in their own self-interest.
If there were no frictional unemployment the economy would grow faster.
Frictional unemployment is unemployment reflecting a mismatch of skills and jobs.
The only source of economic growth is growth in the number of workers in the
economy.
According to the law of one price
A) a company can only charge one price for a product, no matter which nation the
product is sold in.
B) the price of gold should differ between nations.
C) interest rates across nations should be the same when adjusted for exchange rates.
D) goods that are easily tradable across nations should sell for the same price expressed
in a common currency.
Recall the Application about the decline in honeybee colonies and its effect on the
price of ice cream to answer the following question(s). In the last few years
thousands of honeybee colonies have vanished, a result of bee colony collapse
disorder (CCD). Roughly one third of the U.S. food supply–including a wide
variety of fruits, vegetables, and nuts–depends on pollination from bees. The
decline of honeybees threatens $15 billion worth of crops in the United States. This
Application exemplifies how a change in ________ in one market impacts the
________ in a different market.
A) demand; demand
B) demand; supply
C) supply; supply
D) supply; demand
In the money market, the demand and supply of money determine the equilibrium:
A) nominal interest rate.
B) inflation rate.
C) real interest rate.
D) mortgage interest rate.
The slope of the consumption function equals ________ while the slope of the 45
degree line equals ________.
A) the MPC; one.
B) the MPC; zero
C) MPS; MPC
D) one; zero
A depreciation of the U.S. dollar will likely cause U.S. net exports to ________ and
U.S. real GDP to ________.
A) decrease; decrease
B) increase; decrease
C) increase; increase
D) decrease; increase
Refer to Figure 19.3. At the exchange rate of 90 yen per dollar, the United States is
experiencing a
A) current account deficit.
B) balance of payments deficit.
C) capital account surplus.
D) balance of payments surplus.
The GDP for the nation of Economia is currently below potential output. If the
adjustment to the long-run equilibrium occurs rapidly, the government of Economia is
likely to pursue a policy of
A) increasing government spending to increase aggregate demand.
B) increasing the money supply to increase aggregate demand.
C) taking no action and allowing the economy to adjust naturally.
D) decreasing government spending to increase aggregate demand.
If the total assets of the bank is less than the banks total liabilities, then:
A) owner’s equity is positive.
B) owner’s equity equals the total assets.
C) owner’s equity is negative.
D) owner’s equity is larger than the bank’s total assets.
In response to the troubles in the U.S. financial system in 2008, Congress authorized a
bailout package of about ________ to shore up the financial sector.
A) $700 billion
B) $350 billion
C) $900 billion
D) $2 trillion
If demand decreases and supply increases in Figure 4.7, then the equilibrium:
A) price rises.
B) price falls.
C) quantity rises.
D) quantity falls.
An economic model is:
A) a small but completely working economy.
B) a simplified representation of an economic environment.
C) any graph.
D) all of the above.
Suppose workers receive a 5 percent increase in wages and prices are rising by 5
percent. Workers will experience
A) an increase in nominal wages and a decrease in real wages.
B) an increase in nominal wages and an increase in real wages.
C) an increase in nominal wages but real wages are unchanged.
D) a decrease in nominal wages and a decrease in real wages.
An open economy refers to an economy with
A) unrestricted immigration.
B) international trade.
C) no trade barriers.
D) no government intervention.
What is an import quota?
What is a “cost-of-living” adjustment?
What is a balance of payments system, and what three types of international
transactions are typically found in the balance of payments?
List and briefly describe the five factors of production.
How can a government policy be used to prevent a wage-price spiral? Explain.
Suppose investment becomes more responsive to changes in the interest rate. What
effect will this have on the effectiveness of monetary policy? Specifically, what will
happen to the output given an increase in the money supply?
Using the real business cycle theory, explain the effects of an adverse technological
shock on the labor market and on the output market. Illustrate graphically how the
adverse technology shock affects labor demand and supply. Why is this theory
controversial?
List some limitations of GDP as a measurement of social welfare.