How are the prices of various goods and services determined for the Consumer Price
Index (CPI)?
a. By an extensive annual household survey
b. By an extensive monthly survey of stores, apartments, and owner-occupied homes
c. By an extensive annual survey of stores, apartments, and owner-occupied homes
d. By an extensive monthly household survey
e. Through the same survey used to determine the typical market basket
If the economy is on the aggregate supply curve but to the right of the aggregate
demand curve, which of the following will be the first market force to lead the economy
toward an equilibrium?
a. At the current output level, prices will be too low and firms will increase their prices.
b. At the current price level, output will be too low, inventories will diminish, and firms
will increase their production.
c. At the current output level, prices will be too low and firms will lower their prices.
d. At the current price level, output will be too high and so prices will drop so that
output will drop.
e. At the current price level, output will be too high, inventories will pile up and firms
will cut back on their production.
The three problems of resource allocation are faced by
If output exceeds its full-employment level, the wage rate will eventually fall, causing a
drop in the price level and a drop in real GDP until full employment is restored.
If cyclical unemployment is eliminated
a. GDP is at its full-employment level
b. GDP is at its equilibrium level
c. the loanable funds market is in equilibrium
d. the aggregate supply curve shifts upward
e. potential output has increased
Aggregation is important in macroeconomics because
a. it is a basic tool of reasoning
b. we need a model with as much information as possible
c. it allows us to comprehend the entire economy in all its detail
d. it allows us to keep different markets separate in our minds
e. we need to consider the entire economy at once with a model as simple as possible
Due to society’s overall scarcity of resources,
The U.S. government has tended to keep its deficit-to-GDP ratio significantly above 10
percent for the last 50 years.
Refer to Figure 9-14. Which of the following combination of policies would shift the
curves as indicated?
a. A decrease in income tax rates coupled with increased employment subsidies to
firms.
b. An increase in income tax rates coupled with increased employment subsidies to
firms.
c. An increase in the safety net available to individuals coupled with a decrease in
income tax rates.
d. Increased employment subsidies available to firms coupled with an increase in the
safety net available to firms.
e. A decrease in income tax rates.
Stocks and bonds are
a. financial assets; therefore, they are considered to be money
b. highly-liquid financial assets; therefore, they are considered to be money
c. not highly-liquid financial assets; therefore, they are not considered to be money
d. widely accepted means of payment; therefore, they are considered to be money
e. not financial assets; therefore, they are not considered to be money
Crazy Cryptography is a software corporation that has 1,000 shares of stock in
existence. The corporation has just surprised the market by announcing a new software
package that will increase the company’s after-tax profit by $500,000 each year, forever.
If the interest rate is 8 percent (0.08) per year, by how much will the value of a single
share of stock increase?
Who was the economist that began modern macroeconomics?
a. Adam Smith
b. Paul Samuelson
c. Milton Friedman
d. John Maynard Keynes
e. Ben Bernanke
According to the law of demand,