If the exchange rate changes from 150 yen per U.S. dollar to 125 yen per U.S. dollar,
then the U.S. dollar has appreciated.
Personal disposable income is pre-tax income that flows directly to households.
An increase in the price level lowers the real value of wealth.
Credit cards are part of the money supply.
Human capital is equally, if not more, important than physical capital.
An outside lag is the time period it takes economists to formulate a stabilization policy.
Economists argue that individuals should continue to consume until total benefit equals
total cost.
A pie chart show the relationship between two variables.
An increase in the amount of capital in the economy will shift the demand curve for
labor to the left.
Economists will never reach the same conclusions in their positive analyses.
Recall the Application about the government of Mexico City repainting highway lane
lines to transform a 4-lane highway into a 6-lane highway to answer the following
question(s).
Using simple percentage change formulas, the percent change of the number of TVs
from 1 to 2 should be the same if you instead go from 2 to 1.
Since 1998, the U.S. federal government has continuously run a budget surplus.
Classical economists assumed:
A) involuntary unemployment exists.
B) there is never full employment.
C) the wage rate adjusts to maintain labor market equilibrium.
D) the wage rate cannot adjust to equate the quantity of labor demanded with quantity
of labor supplied.
In March 2012, the total currency held by the public amounted to:
A) $1,028 billion.
B) $763 billion.
C) $2,220 billion.
D) $424 billion.
Prior to the recession which began in late 2007, the Federal Reserve purchased
________ of the government budget deficit.
A) none
B) a small portion
C) about 50 percent
D) all
Table 3.2
Consider two individuals, Rose and Sharon, who produce fish and coconuts. Rose and
Sharon’s hourly productivity are shown in Table 3.2. Which of the following is true?
A) Rose has an absolute advantage in producing coconuts but not fish.
B) Rose has an absolute advantage in producing fish but not coconuts.
C) Rose has an absolute advantage in producing both goods.
D) Rose does not have an absolute advantage in producing either good.
Keynesian fiscal policy refers to the use of government spending and taxation:
A) to influence the level of GDP in the short run.
B) to influence the money supply in the short run.
C) to influence the level of GDP in the long run.
D) to influence the inflation rate in the short run.
If the marginal propensity to import is 0.2, then a $1,000 decrease in income will:
A) decrease net exports by 200.
B) increase net exports by 1000.
C) increase net exports by 200.
D) decrease net exports by 2000.
Two goods are complements if:
A) the supply of one good decreases when the price of the other increases.
B) the supply of one good decreases when the price of the other decreases.
C) the demand for one good decreases when the price of the other increases.
D) the demand for one good decreases when the price of the other decreases.
In the United States, the ________ has the official responsibility for foreign exchange
intervention.
A) State Department
B) Treasury Department
C) International Trade Commission
D) Department of Commerce
Prior to the financial crisis and recession which began in 2007, credit for mortgages was
________ , creating a ________.
A) virtually unavailable; housing bubble
B) only available to borrowers with high credit scores; shortage of affordable housing
C) easily obtained; housing boom
D) unavailable to low-income borrowers; large demand for rental properties
The financial crisis and recession which began in 2007
A) impacted only high-income countries.
B) was only severe in the United States.
C) had a global impact.
D) impacted only low-income countries.
The labor-force participation rate of women 20 years or older in has increased in the
last 50 years, but has reached a plateau in 1997 of about:
A) 60 percent
B) 40 percent
C) 50 percent
D) 70 percent
Assume that consumption is represented by the following: C = 400 + 0.5Y. Also assume
that investment (I) equals 100.
(a) Given the information, calculate the equilibrium level of income.
(b) Given the information, calculate the level of consumption and saving that occurs at
the equilibrium level of income.
(c) What is the marginal propensity to save?
An example of a tool used by the Fed that decreases the money supply is:
A) a decrease in the required reserve ratio.
B) the Fed selling government bonds in the open market.
C) a decrease in the discount rate.
D) a decrease in the federal funds rate.
Returns on Investment
Table 12.2
Referring to Table 12.2, if the nominal interest rate is 9.5 percent and there is no
inflation, which investments will be undertaken?
A) E
B) E and D
C) C, D, E
D) none of the above
Name a supply shock that has affected the U.S. economy on more than one occasion.
What three effects can alter the aggregate demand curve?
( An increase in the stock of capital.
Draw a graph illustrating a labor market in equilibrium. Illustrate and explain the effect
of an increase in immigration.
The additional cost resulting from a one unit increase in the production of a good is
known as the ________.
If the prices of goods begin to rise rapidly, people may find it difficult to maintain their
lifestyles. Explain why.
Suppose the public expects money supply and money demand to increase by 10 percent
this year. If the Fed decided to allow money supply to increase by only 8 percent,
explain what will happen to the real interest rates and investments in the short run.
Explain how the computer and Internet revolution of the 1990s could be responsible for
the increase in productivity growth.
What is the “good news” and the “bad news” about a higher value of the U.S. dollar?