Recall Application 2, “The Confucius Curve?” to answer the following questions:
According to the application, the central idea for the Laffer curve is:
A) cutting tax rates may increase tax revenues.
B) cutting tax rates may increase GDP growth.
C) cutting tax rates may decrease tax revenues.
D) cutting tax rates may decrease inflation.
If the consumption function is C = 80 + 0.6Y, then the marginal propensity to consume
equals:
A) 0.6.
B) 0.4.
C) 0.5.
D) -0.4.
Table 5.2 Refer to Table 5.2.
Suppose this economy produces only the three goods A, B, and C. If we use year 2 as
the base year, then real GDP in year 1 is:
A) $6.20.
B) $7.80.
C) $8.50.
D) $9.70.
Suppose that 1999 is the base year and the price index for 2008 is 130. A basket of
goods that is valued $450 in 2008 would cost ________ in 1999.
A) $346
B) $585
C) $320
D) $4203
The opportunity cost of something is
A) a measure of the scarcity of the good.
B) what you sacrifice to get the good.
C) the price you pay for the good.
D) what you are willing to pay for the good.
Suppose that workers decrease their taste for leisure, and thus require less time away
from work. What is likely to happen to wages and the quantity of labor hired?
A) wages increase, quantity of labor hired increases
B) wages increase, quantity of labor hired decreases
C) wages decrease, quantity of labor hired increases
D) wages decrease, quantity of labor hired decreases
Technological progress occurs when the economy gets more output
A) without any more capital or labor.
B) by using more capital per worker.
C) by using more capital but not more workers.
D) by using more labor but not more capital.
A U.S. firm buys the copyrights of Beatles songs, formerly held by a British company.
This transaction is recorded as:
A) negative in the U.S. capital account.
B) negative in the U.S. current account.
C) positive in the U.S. capital account.
D) positive in the U.S. current account.
Figure 11.4 Refer to Figure 11.4. Between expenditure lines C + I + G0 and C + I +
G1, government purchases increased by:
A) $600.
B) $400.
C) $200.
D) $1400.
Assuming all excess reserves are loaned out, if the reserve ratio is 3.33 percent, the
money multiplier will be equal to
A) 0.67.
B) 3.33.
C) 6.67.
D) 30.
Suppose that workers develop a greater taste for leisure, and thus require more time
away from work. What is likely to happen to wages and the quantity of labor hired?
A) wages increase, quantity of labor hired increases
B) wages increase, quantity of labor hired decreases
C) wages decrease, quantity of labor hired increases
D) wages decrease, quantity of labor hired decreases
An increase in capital stock:
A) enhances labor productivity.
B) increases the demand for labor.
C) causes economic growth.
D) all of the above
Which of the following tariffs resulted in worldwide retaliation against the United
States during the Great Depression?
A) the Pasta Tariff
B) the Chicken tariff
C) the Smoot-Hawley tariff
D) the Tariff of Abominations
Suppose you have $400 and the inflation rate is 4 percent. In order to earn a real return
of $20 on your investment, the nominal interest rate must be
A) 1 percent.
B) 5 percent.
C) 9 percent.
D) 12 percent.
Fluctuations in economic performance is one of the two basic issues of
macroeconomics. The other is
A) tracking unemployment.
B) keeping interest rates in check.
C) long-run economic growth.
D) monitoring inflation rates.