Suppose that real GDP starts at 200 and grows at a rate of 9 percent per year for two
years. In the third year real GDP would be
A) 183.49.
B) 236.
C) 237.62.
D) 239.24.
What was the U.S. response to the Mexican currency crisis of 1994?
A) The U.S., along with other international agencies, arranged for Mexico to borrow
dollars with an extended repayment period.
B) The U.S. bought a lot of Mexican-made goods to increase Mexico’s net exports.
C) The U.S. did not do anything, and allowed the Mexican economy to collapse.
D) The U.S. converted the Mexican peso into US dollars to shield itself from the
currency crisis.
If the economy finds itself at a point where planned spending is less than output, then
we will expect to see:
A) a decrease in inventories.
B) an increase in inventories.
C) a decrease in planned spending.
D) an equilibrium level of output.
Long-term budget deficits are bad for the economy for all the following reasons except:
A) they slow future economic growth.
B) they decrease investment spending.
C) they make costlier for businesses to raise funds in financial markets.
D) they are likely to lead to deflation.
Recall the Application about how society will cope with increased demands for
entitlement programs to answer the following question(s). This Application addresses
the impact of increasing life expectancy and aging populations on the costs of
government entitlement programs such as Social Security, Medicare and Medicaid, and
examines several possible solutions to the potential problem.
According to this Application, in the year 2075, the portion of GDP devoted to spending
on Social Security, Medicare and Medicaid is expected to be
A) significantly less than the share of GDP devoted to these programs today.
B) roughly equal to the total amount of GDP today.
C) larger than total federal spending’s share of GDP today.
D) greater than the consumption spending component’s share of GDP in 2075.
In addition to raising taxes, another way a budget deficit can be reduced or eliminated is
by
A) trying to increasing employment.
B) quickly reducing government spending.
C) increasing exports.
D) reducing foreign trade.
Active economic policies are more likely to destabilize the economy if:
A) policy lags are short.
B) the wage-price spiral is downward sloping.
C) the wage-price adjustment is quick enough.
D) Say’s law prevails.
According to the application, which economist made the observation all the way back
in the 19th century that maladies such as plagues would cause a temporary increase in
living standard?
A) Thomas Robert Malthus
B) John Maynard Keynes
C) Adam Smith
D) David Ricardo
If the Fed decided to target price levels and inflation was lower than its target for a
period of time, the Fed would be required to
A) temporarily raise inflation above its target to reach its price level target.
B) temporarily lower its inflation target to match its price level target.
C) permanently lower its price level target to align it with the inflation rate.
D) permanently raise inflation above its target to reach and maintain its price level
target.
A lower U.S. net exports caused by a higher U.S. price level will cause:
A) a rightward shift in the AD curve.
B) a leftward shift in the AD curve.
C) a movement upward along the AD curve.
D) a movement downward along the AD curve.
Suppose the public increase the level of savings in anticipation of higher future taxes to
service the national debt. This is an example of
A) Reaganomics.
B) Smithsonian equivalence.
C) Ricardian equivalence.
D) Monetary equivalence.
Part of the argument against budget deficits is that they ________ interest rates and
________ investment.
A) increase; increase
B) decrease; decrease
C) increase; decrease
D) decrease; increase
When consumers realize additional income in a household and spend the additional
monies, the portion of the additional income that is spent is measured by the
A) credit increase theory.
B) marginal propensity to consume.
C) aggregate demand factor.
D) measure of individual wealth.
Suppose that in the time it takes for him to bake a cake, Bob can sew 5 pairs of jeans. In
the time it takes for Joe to bake a cake, he can sew 8 pairs of jeans day. In this example,
who has the comparative advantage in baking a cake?
A) Joe
B) both Bob and Joe
C) Bob
D) neither Bob nor Joe
If the price index in 2000 is 120 and the price index in 2001 is 112, then the rate of
inflation between 2000 and 2001 is:
A) -8.7%.
B) -8.6%.
C) -4.17%.
D) -6.6%.
Suppose that people expect that the price of orange juice will rise next month. We
would predict that the equilibrium quantity of orange juice will ________ and the
equilibrium price of orange juice will ________ this month.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
In 2012, the city of Canfield collected $500,000 in taxes and spent $450,000. In 2012,
the city of Canfield had a:
A) budget surplus of $450,000.
B) budget surplus of $50,000.
C) budget deficit of $$50,000.
D) budget surplus of $5,000.