Figure: Inflationary and Recessionary Gaps
Look at the figure Inflationary and Recessionary Gaps. At E3, the economy:
A) is in equilibrium.
B) has an inflationary gap.
C) has a recessionary gap.
D) is stagnating.
Internet employment agencies have simplified the job search for the applicants. They
have also led to a(n) _____ unemployment.
A) increase in frictional
B) increase in cyclical
C) decrease in frictional
D) decrease in structural
Net exports are calculated by subtracting:
A) imports from exports.
B) exports from imports.
C) out all intermediate goods.
D) I, G, and value added from GDP.
International data for 1970″2010 show that monetary neutrality occurs only in wealthy
countries.
A) True
B) False
A competitive market occurs when there are many buyers and sellers of the same good.
A) True
B) False
Intermediate goods are not counted in GDP because:
A) to do so would result in double counting.
B) these goods are not produced for the market.
C) these goods are produced in the underground economy.
D) these goods involve financial transactions.
A decrease in the demand for loanable funds would most likely be caused by a(n):
A) decrease in the market interest rate.
B) decrease in corporate income tax rates.
C) increase in expected business opportunities.
D) decrease in expected business opportunities.
Increases in unemployment compensation:
A) reduce unemployment.
B) increase unemployment.
C) increase the number of jobs available.
D) decrease the number of jobs available.
Figure: Circular-Flow Model
Look at the figure Circular-Flow Model. If the circular-flow model is in equilibrium
(the sum of money flowing into each box is equal to the sum of the money flowing out
of it) and there is an increase in exports, which of the following is likely to happen?
A) a decrease in the nominal GDP
B) a decrease in the real GDP
C) a decrease in the unemployment rate
D) a decrease in the inflation rate
An increase in income will always shift the demand curve to the right.
A) True
B) False
Suppose a local community decides to give all of its citizens over age 60 a parking pass
that will enable them to park in the front of parking lots. For people over 60, this policy
is:
A) equitable and efficient, since it applies to all citizens over 60.
B) equitable but not efficient, since it applies to all citizens over 60.
C) efficient but not equitable, since it applies to all citizens over 60.
D) neither equitable nor efficient.
An increase in the minimum wage would likely:
A) cause a movement up the short-run aggregate supply curve from left to right.
B) cause a movement down the short-run aggregate supply curve from right to left.
C) shift the short-run aggregate supply curve to the right.
D) shift the short-run aggregate supply curve to the left.
The Federal Open Market Committee has decided that the federal funds rate should be
2% rather than the current rate of 1.5%. The appropriate open market action is to _____
Treasury bills to _____ money _____.
A) sell; decrease; demand
B) sell; decrease; supply
C) buy; decrease; supply
D) buy; increase; demand
Look at the scenario Assets and Liabilities of the Banking System. Suppose that the
reserve ratio is 10% and the Federal Reserve sells $66,700 worth of U.S. Treasury bills
to the banking system. If the banking system does NOT want to hold any excess
reserves, _____ will be _____ the money supply.
A) $667,000; subtracted from
B) $667,000; added to
C) $250,000; subtracted from
D) $250,000; added to
Changes in the reserve requirement are the monetary policy tool used most often by the
Fed.
A) True
B) False
Increases in unemployment benefits:
A) increase the natural rate of unemployment.
B) decrease the natural rate of unemployment.
C) affect everyone the same by increasing the natural rate of unemployment.
D) affect everyone the same by decreasing the natural rate of unemployment.
Marginal analysis:
A) refers to decisions about whether or not to engage in a particular activity.
B) is primarily used when making an either-or choice.
C) is used primarily when deciding how much of an activity should be done.
D) does not help when making a “how much” choice.
The role of the government can explain growth differences among countries. All of the
following are government actions that contribute to differences in growth EXCEPT:
A) an active role in building infrastructure.
B) significant cost sharing for higher education.
C) excessive intervention in business practices and licensing.
D) emphasis on research and development projects.
The government has a budget surplus if _____ expenditures.
A) its revenues are equal to
B) its revenues are less than
C) its revenues are greater than
D) the money supply is less than
Holding all other things constant, if ramen noodles are an inferior good to Vanessa, then
as her income increases, her demand curve for ramen noodles:
A) will shift left.
B) will shift right.
C) will not shift at all.
D) may shift left or right, but we’re not sure by how much.
The total value of all final goods and services produced in the economy in a given year,
calculated with the prices current in the year in which the output is produced, is
nominal GDP.
A) True
B) False
Figure: International Capital Flows
Look at the figure International Capital Flows. At an interest rate of 4%, the quantity of
loanable funds supplied by British lenders is _____ the quantity of loanable funds
demanded by British borrowers.
A) greater than
B) less than
C) equal to
D) not related to
Because one person’s spending is another person’s income, if one group in the economy
spends more, the incomes of other groups will increase.
A) True
B) False
Which of the following is NOT one of the three tasks of a financial system?
A) reduction of transaction costs
B) risk management
C) provision of liquidity
D) determination of fiscal policy
Figure: Supply of Coconuts
Look at the figure Supply of Coconuts. If the price of coconuts decreased, it would be
represented in the figure as a movement from:
A) A to B.
B) B to A.
C) C to A.
D) E to B.
When it was established in 1913, the Federal Reserve was given the authority to require
all banks to hold adequate reserves for their deposits and to inspect their accounts.
A) True
B) False
A hedge fund is a relatively unregulated private investment partnership open only to
wealthy individuals and institutions.
A) True
B) False
The real rate of interest is the nominal rate of interest times the inflation rate.
A) True
B) False
The monetary policy tools used by the Federal Reserve to adjust the money supply are
changes in tax rates and government purchases of goods and services.
A) True
B) False
If the opportunity cost of manufacturing machinery is lower in the United States than in
Britain and the opportunity cost of manufacturing sweaters is higher in the United
States than in Britain, then the United States will:
A) export both sweaters and machinery to Britain.
B) import both sweaters and machinery from Britain.
C) export sweaters to Britain and import machinery from Britain.
D) import sweaters from Britain and export machinery to Britain.
The cyclically balanced budget deficit doesn’t fluctuate as much as the actual budget
deficit.
A) True
B) False
Because of an increase in the price of wheat, an important ingredient in the production
of bread, combined with an increase in the number of people consuming bread:
A) both the equilibrium price and quantity will increase.
B) equilibrium quantity will decrease, but equilibrium price may decrease, increase, or
stay the same.
C) both the equilibrium price and quantity will decrease.
D) equilibrium price will increase, but equilibrium quantity may decrease, increase, or
stay the same.
As an inflationary gap self-corrects, the equilibrium price level _____ and the
equilibrium real output _____.
A) rises; decreases
B) rises; increases
C) falls; decreases
D) falls; increases
There is a zero bound to:
A) the real money supply.
B) nominal interest rates.
C) potential output.
D) real money demand.
Which of the following factors have contributed to the lack of economic growth in
Africa?
I. political instability
II. lack of spending on education and infrastructure
III. malnutrition and disease
A) I only
B) II only
C) III only
D) I, II, and III