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If a central bank is credible in its desire to fight inflation, it can deter the private sector
from taking aggressive actions that drive up prices.
When demand changes and the demand curve shifts, equilibrium price and equilibrium
quantity change in the same direction.
Among all age groups, workers 16-19 years old have the highest unemployment rate.
Education is an integral part of economic growth.
Among the problems associated with subsidizing an industry in the hope of establishing
a worldwide monopoly is that if two nations subsidize firms in the same industry, each
could lose money.
The U.S. dollar will depreciate if the Canadian inflation rate falls from 5 percent to 3
percent.
An inflation rate that exceeds 50 percent per month is referred to as
A) anticipated inflation.
B) destructive deflation.
C) hyperinflation.
D) superflation.
For each of the following, indicate if the change would lead to an increase or decrease
in the equilibrium level of output. Explain each of your answers.
(a) planned investment increases
(b) consumers become pessimistic about the future of the economy
(c) households begin to save a larger fraction of their income
Developing countries send their best students for education in developed countries to
help develop
A) more education people.
B) a channel of communications.
C) a skilled work force.
D) better political skills.
In periods when GDP fails to grow at its normal rate, the actual unemployment rate will
be ________ than the natural rate of unemployment.
A) lower
B) higher
C) the same
D) falling faster
Outsourcing allows a company to take advantage of the ________ of other countries,
and in doing so it can produce its products at a lower cost.
A) comparative advantages
B) diminishing returns
C) trade imbalances
D) market failures
An increase in the federal budget deficit during a recession serves as an automatic
economic stabilizer because:
A) increased transfer payments from unemployment insurance partly offset the fall in
household income.
B) lower personal income translates into a lower tax load and so consumption spending
declines slightly less.
C) lower corporate profits translate into a lower tax load and so investment spending
declines slightly less.
D) All of the above are correct.
During an economic boom
A) actual output exceeds potential output.
B) potential output exceeds quantity demanded.
C) potential output exceeds actual output.
D) aggregate demand exceeds aggregate supply.
Which of the following is a function of the Federal Reserve?
A) supply currency to the economy
B) conduct monetary policy
C) provide a system of check collection
D) All of the above are functions of the Federal Reserve.
An upward shift of the planned expenditure curve resulting from a decrease in the price
level corresponds to
A) aggregate demand shifting to the right.
B) aggregate demand shifting to the left.
C) a movement down along the aggregate demand curve.
D) a movement up along the aggregate demand curve.
Figure 18.3 Refer to Figure 18.3. The opportunity cost of producing pogo sticks in
Livonia is
A) 2/3 of a scooter.
B) 4/5 of a scooter.
C) 6/5 scooters.
D) 1.25 scooters.
Which of the following is a macroeconomic question?
A) Should a country adopt policies to encourage personal savings?
B) Why do some countries grow faster than others?
C) Why do prices tend to increase over time?
D) All of the above are macroeconomic questions.
Figure 15.4
Refer to Figure 15.4. Suppose that the economy is originally in equilibrium at point a.
In the short run, as the supply of money increases, the economy moves to point
A) a.
B) .
C) c.
D) d.
Recall Application 2, "More Disability, Less Unemployment?" to answer the following
questions:
According to the application, as more individuals avail of disability benefits:A) the
unemployment rate increases because they are not part of the labor force.
B) the unemployment rate decreases because they are now considered employed.
C) the unemployment rate decreases because they are not part of the labor force.
D) the unemployment rate increases because they are now considered unemployed.
If the MPC is 0.75, then the spending multiplier is:
A) 4.
B) 3.
C) -3.
D) 0.75.
The growth version of the quantity equation
A) determines foreign exchange rates.
B) links the growth rates of money, velocity, prices and real output.
C) links money, velocity, prices, and real output.
D) determines the growth of the money supply.
The use of seat belts and other automobile safety features making bicycling more
hazardous can be explained by the economic concept known as
A) the real-nominal principle.
B) the marginal principle.
C) the principle of voluntary exchange.
D) the principle of diminishing returns.
Growth accounting refers to the method used to
A) identify the contribution of economic growth from increased capital, labor, and
technological progress.
B) identify the costs of promises made by the government today but paid for by future
generations.
C) measure the growth in the labor force.
D) measure growth in the capital stock.
If U.S. interest rates fall relative to British interest rates:
A) the demand for the pound increases and the dollar depreciates.
B) the demand for the pound decreases and the dollar depreciates.
C) the demand for the pound increases and the dollar appreciates.
D) the demand for the pound decreases and the dollar appreciates.
Figure 4.3
Figure 4.3 illustrates the supply and demand for blue jeans. If the actual price of blue
jeans is $50, there is:
A) excess demand of 40 pairs of blue jeans.
B) excess supply of 40 pairs of blue jeans.
C) excess demand of 50 pairs of blue jeans.
D) excess supply of 50 pairs of blue jeans.
The level of GDP at which planned expenditure equals the amount of output produced
is the
A) potential output.
B) long-run output.
C) autonomous output.
D) equilibrium output.
Marginal cost is the additional cost resulting from a large or small increase in some
activity.
Can the real interest rate be greater than the nominal interest rate? Explain.
Explain how unemployment compensation operates as an automatic stabilizer within
the economy during a recession.
What countries are in NAFTA?
Define capital gains.
Explain what would happen to the equilibrium price and quantity of gasoline if the
supply of gasoline decreased while the demand for gasoline also decreased.
Briefly explain the "international trade effect" explanation for why aggregate demand
curve is downward sloping.
Richard runs a pizza delivery restaurant. List the three basic types of decisions studied
in economics and give an example from Richard's restaurant.
