If the balance of the current account in the United States is -$900 billion, which of the
following is most likely to be true?
A) The balance on the financial account is positive.
B) The trade balance is positive.
C) Net foreign investment is positive.
D) The balance on the capital account is negative.
If a person withdraws $500 from his/her savings account and puts it in his/her checking
account, then M1 will ________ and M2 will ________.
A) increase; decrease
B) increase; not change
C) not change; increase
D) not change; decrease
E) not change; not change
Which of the following could cause nominal GDP to increase, but real GDP to
decrease?
A) The price level rises and the quantity of final goods and services produced rises.
B) The price level rises and the quantity of final goods and services produced falls.
C) The price level falls and the quantity of final goods and services produced rises.
D) The price level falls and the quantity of final goods and services produced falls.
According to the short-run Phillips curve, if unemployment is 3.2% and inflation is
1.3%, an increase in the inflation rate might result in which of the following?
A) an increase in the unemployment rate to 3.4%
B) a decrease in the unemployment rate to 3.0%
C) a decrease in the demand for labor in the economy
D) a return to the original inflation rate of 1.3%
Figure 2-2
Figure 2-2 above shows the production possibilities frontier for Vidalia, a nation that
produces two goods, roses and orchids.
Refer to Figure 2-2. Suppose Vidalia is currently producing 20 dozen orchids per
period. How many roses is it also producing, assuming that resources are fully utilized?
A) 30 dozen roses
B) 50 dozen roses
C) 100 dozen roses
D) 150 dozen roses
In a closed economy, public saving plus private saving is equal to
A) investment.
B) taxes minus transfers.
C) the budget surplus.
D) the budget deficit.
Following a decrease in government spending, as the price level falls we would expect
the level of interest rates to ________ and investment to ________.
A) decrease; decrease
B) decrease; increase
C) increase; decrease
D) increase; increase
When the marginal benefit equals the marginal cost of the last unit sold in a competitive
market
A) the net benefit of consumers is equal to the net benefit of producers.
B) an economically efficient level of output is produced.
C) producer surplus is equal to consumer surplus.
D) total benefit is equal to total cost.
Which of the following would you expect to increase the equilibrium interest rate?
A) an increase in the percentage of income after net taxes that households save
B) an increase in the budget deficit
C) a decrease in the profitability of investment projects firms are considering
D) a change from an income tax to a consumption tax
According to new growth theory, the accumulation of ________ capital is subject to
diminishing returns at the ________ level, but not at the level of the economy as a
whole.
A) physical; firm
B) technological; personal
C) knowledge; firm
D) physical; production
In the long run, the Federal Reserve can control which of the following?
A) the inflation rate
B) the unemployment rate
C) the growth rate of real GDP in the economy
D) the natural rate of unemployment