Figure: Inflationary and Recessionary Gaps
Look at the figure Inflationary and Recessionary Gaps. At E1, the economy:
A) is in equilibrium.
B) has an inflationary gap.
C) has a recessionary gap.
D) has low unemployment.
The groundbreaking book The General Theory of Employment, Money, and Interest was
written by famed economist:
A) Ronald Reagan.
B) John Maynard Keynes.
C) Adam Smith.
D) Barack Obama.
Suppose Indiana produces only steel and corn, with fixed amounts of land, labor, and
capital resources. Which of the following best sets the stage for economic growth?
A) The unemployment rate in Indiana rises from 5% to 6%.
B) The Midwest has a devastating drought.
C) The percentage of Indiana residents with a college degree rises from 25% to 30%.
D) The United States imports more and more low-cost steel from Asian countries.
Nearly all economists agree that central banks should:
A) be subject to political control.
B) be elected by voters.
C) be independent.
D) play a minor role in the economy.
GDP in the table is:
A) $94 billion.
B) $188 billion.
C) $168 billion.
D) $139 billion.
Investment spending contributes to economic growth.
A) True
B) False
Following the financial crisis of 2008, commercial banks relied heavily on the Fed as a
lender of last resort, borrowing approximately $700 billion.
A) True
B) False
If a country has a trade deficit, does it indicate that the country has a serious problem?
A) No. Trade deficits occur when a country’s investment spending is higher than its
level of saving.
B) Yes. Trade deficits occur when a country has low productivity.
C) Yes. Trade deficits occur when a country does not have a comparative advantage in
production.
D) Yes. Trade deficits occur when a country has a high budget surplus.
In 2009 many lenders refused to make more loans to Greece because they were not
confident that Greece was able to repay its debt.
A) True
B) False
If the target exchange rate of a fixed currency is above the equilibrium exchange rate, to
reach the target rate, the government should sell that currency and buy foreign
currencies.
A) True
B) False
Nearly all economists agree that increases in government spending can _____ aggregate
_____.
A) increase; supply
B) decrease; supply
C) decrease; demand
D) increase; demand
If the U.S. receives increased capital inflows from Europe, the dollar will depreciate.
A) True
B) False
The government has a budget deficit if:
A) its total revenues are equal to its total expenditures.
B) its total revenues are less than its total expenditures.
C) its total revenues are greater than its total expenditures.
D) the money supply is less than total expenditures.
Look at the table Labor Force Data. Suppose the labor force participation rate is 70%.
The labor force is equal to:
A) 1,200 million.
B) 50 million.
C) 105 million.
D) 400 million.
When Angela puts cash in her desk drawer to save for Christmas shopping, she is using
money primarily as a store of value.
A) True
B) False
The policies that seemed to be effective during the Great Moderation seemed to be
inadequate to fight the Great Recession.
A) True
B) False
One difference between a closed and an open economy is that:
A) in the latter, foreign savings complement domestic savings in financing investment
spending.
B) in the latter, the government is more open to the idea of financing investment
spending than in the former.
C) in the former, foreign savings complement domestic savings in financing investment
spending.
D) in the former, foreign savings finance more investment spending than in the latter.
As measured by a percentage of the entire economic output of the United States,
imports have been _____ and exports have been _____.
A) increasing; increasing
B) decreasing; decreasing
C) increasing; decreasing
D) decreasing; increasing
If the cost of the market basket in the base year is $2,000 and in 2014 it is $2,100, the
price index for 2014 is:
A) 2,100.
B) 105.
C) 100.
D) 95.
The liquidity preference model uses the demand for and supply of money to determine:
A) GDP.
B) the price level.
C) the interest rate.
D) nominal output.
If disposable income increases:
A) the consumption function will shift upward.
B) there will be a rightward movement along the consumption function.
C) there will be a leftward movement along the consumption function.
D) the consumption function will shift downward.
Figure: Shifts of the AD”ASCurves
Look at the figure Shifts of the AD”AS Curves. An increase in wages in the short run is
illustrated by:
A) panel (a).
B) panel (b).
C) panel (c).
D) panel (d).
What was the main financial problem that the government of Greece faced in 2009?
A) It had a large budget surplus that it needed to invest, but it was unable to find
investments that offered a high rate of return.
B) It had a large budget surplus, but the president vetoed attempts to use the surplus to
give tax refunds to the citizens.
C) It had a large budget deficit, but the parliament refused to raise transfer payments to
reduce the deficit.
D) It had a large budget deficit, but most of its creditors were unwilling to make loans
to Greece or charged extremely high interest rates to compensate them for the risk of
loss.
Coworkers Yvonne and Rodney are washing dishes and sweeping the floors of the store.
They know that to finish both tasks as quickly as possible, each of them should focus on
just one task, but they don’t know who should do what. Yvonne and Rodney should
determine which one:
A) has the absolute advantage in dishwashing.
B) has the comparative advantage in dishwashing.
C) has the production possibility frontier that is farthest from the origin in dishwashing.
D) can wash the dishes faster.
Scenario: Closed Economy S= I
GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and
government spending is $2 trillion. Taxes are $0.5 trillion.
Look at the scenario Closed Economy S = I. What is the government budget balance?
A) a surplus of $1.5 trillion
B) a deficit of $1.5 trillion
C) a surplus of $0.5 trillion
D) a deficit of $0.5 trillion
Look at the scenario Monetary Base and Money Supply. How much are required
reserves?
A) $50 billion
B) $100 billion
C) $150 billion
D) $250 billion
Figure: The Minimum Wage
Look at the figure The Minimum
Wage. By how much does the quantity of labor demanded fall when the government
imposes a binding minimum wage of P3?
A) Q4 ” Q1
B) Q3 ” Q2
C) Q2 ” Q1
D) Q4 ” Q2
Each point on a Phillips curve is a different combination of:
A) price and quantity.
B) inflation and unemployment.
C) the interest rate and investment.
D) saving and disposable income.
Workers today are more productive than workers in the past because:
A) they now are physically stronger on average.
B) they now have more physical capital embodying better technology.
C) more of them use the same number of machines as in the past.
D) they are paid more.
Which of the following are considered to be the two types of macroeconomic policies?
A) monetary and fiscal policy
B) monetary and regulation policy
C) fiscal and regulation policy
D) fiscal policy and price controls
From 2010 to 2011 nation A’s real GDP increased from $100 billion to $106 billion and
its population grew from 50 million to 51 million. Its annual growth rate in real GDP
per capita was approximately:
A) 1%.
B) “3%.
C) 4%.
D) 6%.
When the price level decreases, firms in imperfectly competitive markets will:
A) decrease output and increase the price.
B) decrease output.
C) decrease output and decrease the price.
D) increase output.
When the economy is producing output above the potential, it has:
A) a Keynesian gap.
B) falling wages.
C) a recessionary gap.
D) an inflationary gap.