A comparative advantage is the ability of one person or nation to produce a good at an
opportunity cost that is lower than that of another person or nation.
In a barter economy, the exchange of goods trade requires a double coincidence of
wants.
Raising the tax rate lowers the tax-adjusted MPC.
Trade will be beneficial for a nation with a comparative advantage in producing a
certain product.
Under a market system, the people with information about buyers’ desires, production
technology and resources make the decisions.
GDP is equal to GNP plus depreciation.
M1 does not include savings deposits.
Typically, in the United States, the ratio of debt to GDP has risen during times of war.
When interest rates fall, bond prices fall.
According to the Solow Model, a higher depreciation rate will always result in a
decrease in output.
A store of value transfers purchasing power to the future.
Friedman believes that the aggregate supply curve is vertical at the full employment
level of output.
According to the Application, a U.S. recession could cause a recession abroad.
GDP measures underestimate the value of output produced by an economy because they
include services not transferred through markets.
In the long run, the natural rate of unemployment depends primarily on the growth rate
of the money supply.
According to this Application, economists Carol Corrado and Charles Hulten found that
in recent years, as a source of economic growth,
A) the contributions from tangible capital and intangible capital are, at best, negligible.
B) the contributions from tangible capital and intangible capital are about the same.
C) the contribution from intangible capital exceeded the contribution from tangible
capital.
D) the contribution from tangible capital exceeded the contribution from intangible
capital.
Autonomous consumption is
A) the sum of consumption that depends on the level of income and consumption that
does not depend on income.
B) the part of consumption that depends on the level of income.
C) the part of consumption that does not depend on income.
D) the relationship between consumption spending and the level of income.
Carla lost her job and immediately started looking for another job. As a result the:
A) unemployment rate increases.
B) labor force increases.
C) labor force decreases.
D) unemployment rate remains constant.
In the final two decades of the twentieth century, average per capita global income
A) increased by approximately 35 percent.
B) remained relatively unchanged.
C) decreased by approximately 6 percent.
D) increased by more than 75 percent.
If crowding out occurs in the long run and the government increases spending for
infrastructure projects such as roads and bridges, then the additional government
spending:
A) replaces an equivalent amount of private investment.
B) replaces a larger amount of private investment.
C) decreases total consumption spending in the economy.
D) enhances private investment by the same amount.
Higher U.S. interest rates cause the value of the dollar to
A) rise, making U.S. goods relatively cheaper on world markets.
B) rise, making U.S. goods relatively more expensive on world markets.
C) fall, making U.S. goods relatively cheaper on world markets.
D) fall, making U.S. goods relatively more expensive on world markets.
An increase in the amount of subsidies that a public university receives would result in:
A) an upward movement along the supply curve for college classes.
B) an downward movement along the supply curve for college classes.
C) a shift in the supply of college classes to the left.
D) a shift in the supply of college classes to the right.
Recall the Application about the decrease in taxes on cigarettes in several
Canadian provinces in 1994 to answer the following question(s). According to this
Application, after the government deceased cigarette taxes in several Canadian
provinces in 1994, the price of cigarettes in these provinces decreased by roughly
________ percent.
A) 8
B) 17
C) 50
D) 88
If labor union leaders believe that the Fed is more inclined to fight inflation than
unemployment, then they are more likely to:
A) demand a wage hike.
B) demand a wage decrease.
C) be reluctant in demanding a wage hike.
D) demand an increase in the number of work days for the same wage.
The “flat tax” designed by Robert Hall and Alvin Rabushka feature:
A) a flat tax for corporations that is lower than the flat tax for individuals.
B) a flat tax for corporations that is higher than the flat tax for individuals.
C) a single flat tax for corporations and for individuals.
D) a single flat tax levied only on those individuals who earn more than $500,000 a
year.
Which of the following would not be included in M2?
A) demand deposits
B) money market accounts
C) checking accounts
D) credit cards
Indicate which of the following represents investment as defined in Chap 12.
(a) Michael purchases a bond issued by the federal government.
(b) Joe buys a new delivery van for his floral shop.
(c) Peter buys 200 shares of stock in IBM Corporation.
(d) Lucy buys a new sink for her beauty salon.
(e) Can-Can Incorporated purchases new machinery for its factory.
Table 3.1
Consider two individuals, Jesse and April, who hand paint kites and snowboards. Table
3.1 shows how much of each good Jesse and April can paint in one hour. April’s
opportunity cost of painting one kite is painting
A) 1/12 of a snowboard.
B) 1/4 of a snowboard.
C) 3 snowboards.
D) 4 snowboards.
Which of the following is NOT a macroeconomic statement?
A) Aggregate worker productivity decreased by three percent in 2012.
B) The price of cell phones decreased by 18 percent last year.
C) Gross domestic product in Peru increased 4 percent from 2011 to 2012.
D) The U.S. inflation rate was two percent in 2012.
Recall the Application about the causes of oil price increases to answer the following
question(s). Economist Lutz Kilian examined the importance of supply disruptions to
the U.S. oil market by constructing measures of supply disruptions in oil producing
countries based on a detailed examination of prior trends in demand and specifications
in oil contracts.According to this Application, if speculators believe oil prices are going
to rise in the future, they will ________ oil now, which will tend to ________ the
current price of oil.
A) buy; decrease
B) buy; increase
C) sell; decrease
D) sell; increase
An increase in the marginal propensity to save will tend to cause:
A) the demand line to become flatter and a given change in investment to have a
smaller effect on output.
B) the demand line to become flatter and a given change in investment to have a greater
effect on output.
C) the demand line to become steeper and a given change in investment to have a
smaller effect on output.
D) none of the above.
Recall Application 2, “The Growth in Excess Reserves,” to answer the following
questions:
Based on what you learned from the application, the Fed can induce banks to lend more
and increase the money supply by:
A) lowering the interest rate for excess reserves.
B) raising the interest rate for excess reserves.
C) requiring banks to hold on to more excess reserves.
D) raising the reserve requirement.
An appreciation is
A) a decrease in the value of currency.
B) a decrease in the trade deficit.
C) an increase in the trade surplus.
D) an increase in the value of currency.
Why do classical economists believe that the labor market always clears?
What is the difference between comparative advantage and absolute advantage?
Table 8.2
Refer to Table 8.2. Calculate the growth of real GDP per capita from 1995 to 2001.
How might economic policy be used to fight a recession? What would happen to prices
in this case?
Illustrate examples of the countercyclical effects of the automatic stabilizers.
How do financial intermediaries reduce the risk faced by households?
What is liquidity?
Using a graph, illustrate the effect that an increase in production costs will have on the
equilibrium price and quantity of a good.