Look at the table Peanut Butter and Jelly Economy. Between 2010 and 2011, nominal
GDP:
A) increased by 12.5%.
B) decreased by 12.5%.
C) increased by 16.67%.
D) increased by 31.25%.
A household’s wealth is always equal to its income in the current year.
A) True
B) False
Most recessions originate from:
A) an increase in investment spending.
B) a decrease in investment spending.
C) an increase in aggregate supply.
D) a decrease in aggregate supply.
Figure: AD”ASModel II
Look at the figure AD”AS Model II. If nominal wages fall, in the short run the _____
curve will shift to the _____.
A) SRAS; left
B) SRAS; right
C) LRAS; right
D) AD; right
The labor supply curve is positively sloped because:
A) more people are willing to work at low wages than at high wages.
B) more people are willing to work at high wages than at low wages.
C) employers are willing to hire more people at low wages.
D) employers are willing to hire more people at high wages.
A common strategy to reduce the risk of a large financial loss is:
A) to buy and sell assets through a mutual fund, since mutual funds cannot lose money.
B) to diversify financial assets so that their risks of failure are unrelated.
C) to buy financial assets from developing countries, because the rates of return are
very high and safe and their national currencies are much more stable than the U.S.
dollar.
D) to buy real instead of financial assets.
Implicit liabilities refers to promises made by the government, such as:
A) aid to foreign countries.
B) building roads and bridges.
C) Social Security and Medicare payments.
D) contributions to the National Endowment for the Arts.
Look at the table The Production Possibilities for Tractors and Crude Oil. The
opportunity cost of _____ is _____ in the United States as (than) in Mexico.
A) tractors; higher
B) tractors; the same
C) tractors; lower
D) crude oil; lower
In an economy with no taxes and no imports, disposable income increases from $2,000
to $3,000. If consumption increases from $1,500 to $2,100, the multiplier is:
A) 6.
B) 2.5.
C) 0.60.
D) 0.40.
An increase in the demand for loanable funds would most likely be caused by a(n):
A) increase in the market interest rate.
B) increase in business tax rates.
C) increase in expected business opportunities.
D) decrease in expected business opportunities.
The severe inflation in Israel during the mid-1980s was due to a war, an unstable
government, and civil unrest in the country.
A) True
B) False
You are choosing whether to purchase a bond or stock. If you purchase the bond, you
are likely to receive a _____ return in exchange for a _____ level of risk.
A) higher; higher
B) lower; lower
C) lower; higher
D) higher; lower
Scenario: Money Supply Changes
The reserve requirement is 10% and Jack withdraws $5,000 travel money from his
checkable deposit. Assume that banks do not hold any excess reserves and that the
public holds no currency, only checkable bank deposits.
Look at the scenario Money Supply Changes. After the withdrawal reserves _____, and
checkable deposits _____ by $5,000.
A) decrease by $5,000; decrease
B) decrease by $5,000; increase
C) increase by $5,000; decrease
D) increase by $500; increase
Figure: Consumption of Pizza and Tacos
Look at the figure Consumption of Pizza and Tacos. The figure shows the number of
tacos and pizza slices Matt can eat in a day. The relation is nonlinear, and there is a
negative relation between the number of tacos and pizza slices that Matt can eat in a
day.
A) True
B) False
Figure: Good Xand Good Y
Look at the figure Good X and Good Y. If we move from point C to point B in the
figure, the x-variable has ______ units and the y-variable has ______ units.
A) decreased by 2; increased by 15
B) increased by 2; decreased by 15
C) decreased by 15; increased by 2
D) increased by 15; decreased by 2
Increased government transfers constitute contractionary fiscal policy.
A) True
B) False
Figure: The Great Disinflation
Look at the figure The Great Disinflation. In the early 1980s, the inflation rate was
beaten down by the Federal Reserve’s tight monetary policy. In the short run this policy
led to a _____ level of actual output and a _____ rate of unemployment.
A) high; high
B) low; high
C) low; low
D) high; low
Approximately how many prices are used to calculate the consumer price index each
month?
A) 9
B) 1,000
C) 80,000
D) 1 million
Which of the following is (are) a tool(s) of monetary policy used by the Federal
Reserve?
I. tax rates
II. government purchases of goods and services
A) I only
B) II only
C) I and II
D) neither I nor II
Which of the following is FALSE about the circular-flow diagram?
A) Households are the primary demanders of goods and services.
B) Firms are the primary suppliers of goods and services.
C) Money flows from households to firms as households offer factors of production for
sale.
D) Money flows in the direction opposite to goods and services and factors of
production.
If aggregate consumption equals $100 million + 0.75 YD, then the marginal propensity
to consume is:
A) 0.75.
B) 0.25.
C) $75 million.
D) $100 million.
High inflation rates in the 1970s were harmful to S&Ls because they decreased the
value of the thrifts’ long-term mortgages.
A) True
B) False
The aggregate demand curve is negatively sloped because of:
A) the substitution effect of an aggregate price level change.
B) the wealth effect of an aggregate price level change.
C) the elasticity effect of an aggregate price level change.
D) the fiscal policy effect.
The benefits of floating exchange rates served as one of the motivations for the
international system of floating rates established after World War II.
A) True
B) False
The purpose of Regulation Q was to:
A) prevent commercial banks from trading stocks and bonds.
B) require investment banks to purchase deposit insurance.
C) prevent unhealthy competition between banks by limiting the number of customers
each bank could serve.
D) prevent banks from paying interest on checking accounts.
Table: Lemonade and Cookies
Look at the table Lemonade and Cookies. Assume that an economy produces only
lemonade and cookies. Assuming that 2014 was the base year, the growth rate of real
GDP from 2013 to 2014 was:
A) “5%.
B) 4.7%.
C) 11.25%.
D) 20%.
If a country has a working-age population of 200 million, 135 million people with jobs,
10 million people who were looking for a job but have given up, and 5 million people
unemployed and seeking employment, then the number of discouraged workers is:
A) 25 million.
B) 15 million.
C) 10 million.
D) 5 million.
The wealth effect suggests:
A) a positive relationship between the price level and consumption spending.
B) that price level changes do not affect real wealth.
C) a negative relationship between the price level and consumption spending.
D) that when the price level increases, the real value of money increases also.
If a government has large consecutive budget deficits and if the public debt is growing
faster than GDP, its ratio of debt to GDP will increase.
A) True
B) False
According to the infant industry argument, import protection is needed because:
A) foreign workers are often paid less than U.S. workers.
B) it enables our protected industries to achieve technological efficiency and thus
become competitive with mature foreign industries.
C) the nation’s security depends on a strong industrial base.
D) it provides consumers with more and better goods in the long run.
In February 2012, the Bureau of Labor Statistics calculated the unemployment rate to
be 8.3%. If frictional unemployment was 2% and structural unemployment was 3.2%,
then cyclical unemployment was:
A) 2.5%.
B) 3.1%.
C) 12.5%.
D) 5.5%.
If an economy finds itself in a liquidity trap:
A) consumers are trapped by an abundance of liquidity and are spending abundantly.
B) the economy is trapped by the inability of monetary policy to reduce nominal
interest rates further.
C) money markets are trapped in a state of continuous disequilibrium.
D) monetary authorities cannot stop nominal interest rates from rising.
A change in _____ would cause a shift in the short-run aggregate supply curve.
A) the quantity of real output supplied
B) the price level
C) commodity prices
D) aggregate demand