The marginal propensity to consume is always greater than unity.
A government’s budget deficit or surplus is the difference between what it spends and
what it collects in taxes in a year.
In the short run, the price level is determined primarily by the supply of goods.
Purchases of goods and services are included in GDP, but transfer payments are not
included.
As the supply of plumbers in the U.S. declines, the wages paid to plumbers will rise.
Macroeconomics involves the study of the decision-making of individual firms or
individuals.
An import quota is the same as an import ban.
From 1992-1993, the U.S. economy experienced the trade-off between inflation and
unemployment described by the Phillips curve.
An inflation rate greater than 50 percent per month is known as
A) disinflation.
B) stagflation.
C) deflation.
D) hyperinflation.
A U.S. individual buys shares in a Swiss company. This transaction will be entered as:
A) a negative in the U.S. current account.
B) a positive in the U.S. current account.
C) a positive in the U.S. capital account.
D) a negative in the U.S. financial account.
The sum of all past deficits is called:
A) the government debt.
B) the government deficit.
C) the government surplus.
D) the government expenditures.
Stabilization policies are policies designed to
A) keep output constant.
B) keep prices constant.
C) move the economy closer to potential output.
D) increase trade.
The transaction demand for money comes mostly from the fact that
A) money is a store of value.
B) money is a medium of exchange.
C) money is a unit of account.
D) money has low opportunity cost.
An open-market sale of government bonds by the Fed results in ________ in bank
reserves and ________ in the supply of money.
A) an increase; a decrease
B) an increase; an increase
C) a decrease; an increase
D) a decrease; a decrease
Suppose Bob converted his portfolio into cash in 2008 as a result of the bad return he
has received in the stock market. In this scenario, the reason Bob holds on to money is
the:
A) transactions demand for money.
B) liquidity demand for money.
C) speculative demand for money.
D) All of the above are correct.
Fluctuations in economic activity can result from
A) the loss of crops due to drought or insects.
B) increases in the price of oil.
C) wars.
D) all of the above
From the Application, we can infer that the wine lakes will grow faster if:
A) the government set minimum prices further above the equilibrium.
B) the government set maximum prices further below the equilibrium.
C) the government set maximum prices further above the equilibrium.
D) the government set minimum prices further below the equilibrium.
The 3 key economic questions include all of the following EXCEPT
A) “what products do we produce?”
B) “how do we produce these products?”
C) “where should these products be produced?”
D) “who consumes the products?”
Because the long run aggregate supply curve is vertical at the full employment level of
GDP, then this would imply that the long run aggregate supply curve:
A) is independent of changes in the price level.
B) increases as the price level increases.
C) decreases as the price level increases.
D) shifts to the right when the price level increases.
Figure 8.1
Refer to Figure 8.1 If the saving rate is s1, and the economy currently has K3 level of
capital. Which of the following is true?
A) Depreciation is greater than saving and the level of capital will decrease.
B) Depreciation is greater than saving and the level of capital will increase.
C) Depreciation is less than saving and the level of capital will decrease.
D) Depreciation is less than saving and the level of capital will increase.
Figure 2.4 Joe runs a business and needs to decide how many hours to stay open.
Figure 2.4 illustrates his marginal benefit of staying open for each additional hour.
Suppose that Joe’s marginal cost of staying open per hour is $40. How many hours
should Joe stay open?
A) 3 hours
B) 4 hours
C) 5 hours
D) 6 hours
Figure 18.4
For the good in Figure 18.5, with the tariff, the people in the country will produce:
A) Q1.
B) Q2.
C) Q4.
D) Q5.
Suppose a friend borrowed $1000 from you in March 2007. He proposes two payment
plans. Plan A pays you $500 in March 2008 and another $500 in March 2009. Plan B
pays you $1070 in March 2009. If interest rates were 10 percent:
a) What is the present value of Payment Plan A?
b) What is the present value of Payment Plan B?
c) Which payment Plan should you take?
Assume that GDP = $10,000 and the MPC = 0.75. If policy makers want to increase
GDP by 30 percent, and they want to change taxes and government spending by equal
amounts, how much would government spending and taxes each need to increase?
A) $300
B) $750
C) $1,000
D) $3,000
Why are some insurance companies interested in programs for nationwide disaster
insurance for floods, earthquakes, and hurricanes?
What is the difference between GDP and GNP?
Define a financial intermediary.
( t
Use the marginal principle to explain why government mandated safety features in
automobiles during the 1960s and 1970s resulted in an increase in collisions between
automobiles and bicycles.
Suppose that a bond promises to pay $107 next year but the interest rate falls from 7
percent to 3 percent per year. How much will the price of the bond be and why?
List three things that could shift the aggregate demand curve to the right.