A decrease in the marginal income tax rate is a fiscal policy which will increase
aggregate demand.
The Congressional Budget Office estimates that the additional taxes and fees enacted
under the ACA will be enough to pay for the plan and reduce the federal government’s
budget deficit.
The ratio at which a country can trade its exports for imports from other countries is
called comparative advantage.
Expansionary monetary policy refers to the Fed’s increasing the money supply and
increasing interest rates to increase real GDP.
During the 1960s, in face of moderate and stable inflation, people tended to form
adaptive expectations of future inflation rates.
Due to adverse selection, very few lemons will be sold in the market for used cars.
A cash withdrawal reduces deposits, reserves and excess reserves in the banking
system.
What two factors are the keys to determining labor productivity?
A) the business cycle and the growth rate of real GDP
B) the growth rate of real GDP and the interest rate
C) technology and the quantity of capital per hour worked
D) the average level of education of the workforce and the price level
The required reserves of a bank equal its ________ the required reserve ratio.
A) deposits divided by
B) deposits multiplied by
C) loans divided by
D) loans multiplied by
Of the following high-income countries, which has the highest infant mortality rate?
A) Canada
B) Japan
C) the United Kingdom
D) the United States
Figure 12-20
If the market price is P1, what is the allocatively efficient output level?
A) Q0
B) Q1
C) Q2
D) There is no allocatively efficient output level because the firm is making a loss.
In preparing their estimates of the stimulus package’s effect on GDP, Obama
administration economists estimated a government purchases multiplier of 1.57.
Economist Robert Barro argues that during wartime, the government purchases
multiplier would be ________ the administration’s estimate, and economists Lawrence
Christiano, Martin Eichenbaum, and Sergio Rebelo argued that when short-term interest
rates are near zero, the multiplier would be ________ the administration’s estimate.
A) higher than; lower than
B) lower than; higher than
C) higher than; equal to
D) equal to; lower than
Which of the following is considered a negative supply shock?
A) increasing immigration in the economy causes the labor supply to rise
B) an improvement in technology
C) an increase in unemployment
D) an unexpected decrease in the refining capacity for oil
If, for a given percentage decrease in price, quantity supplied decreases by a
proportionately smaller percentage, then supply is
A) unit-elastic.
B) perfectly elastic.
C) relatively inelastic.
D) elastic.
Tony’s Italian Ice is a monopolistically competitive firm. If Tony’s earns a profit in the
short run, which of the following is most likely to occur?
A) New firms that sell Italian ice will enter the market and Tony’s cost curves will shift
to the left.
B) New firms that sell Italian ice will enter the market and Tony’s demand curve will
shift to the left.
C) New firms that sell Italian ice will enter the market and Tony’s demand curve will
shift to the right.
D) New firms that sell Italian ice will enter the market and Tony’s demand curve will
become more inelastic.
Total income in an economy is equal to
A) GDP minus net exports.
B) income minus taxes.
C) the sum of wages, interest, rent, and profit.
D) firm revenues.
Joss is a marketing consultant. Iris and Daphne are potential customers interested in
commissioning Joss to undertake a market survey and compile the findings in a report.
Iris is willing to pay $500 for the service while Daphne is willing to pay $800. Suppose
that the opportunity cost of Joss’s time is $1,200. Assume that Iris and Daphne do not
know each other. Which of the following statements is true?
A) Joss should charge each customer $600; that way he will earn his opportunity cost
and it will be fair to both Iris and Daphne.
B) Joss should charge Iris $500 and Daphne no more than $700; that way he earns his
opportunity cost and there is no loss in economic surplus.
C) Joss should charge Iris $500 and Daphne $800; that way economic surplus is
maximized.
D) Joss should charge Iris $500 but charging Daphne $800 is unfair because it allows
Joss to earn more than his opportunity cost.
To understand why someone cannot get a job, it helps to know the three types of
unemployment. List the three types of unemployment and explain what causes each
type. What advice for finding a job would be appropriate for someone in each type of
unemployment?
What is the law of supply? What does this law imply about the shape of the supply
curve?
Briefly explain the economic concept of elasticity.
What variables cause the short-run aggregate supply curve to shift? For each variable,
identify whether an increase in that variable will cause the short-run aggregate supply
curve to shift to the right or to the left.
What is the Difference between scarcity and a shortage?
Is it possible for a firm to have an absolute advantage in producing something without
having a comparative advantage? Why or why not?
Define microeconomics.
What is the difference between total costs, variable costs, and fixed costs?