Recall Application 3, “The Effectiveness of Committees,” to answer the following
questions:
The time it takes policymakers to recognize the need for and implement an economic
policy to stimulate the economy is known as the outside lag.
The ratio of the labor force to the number of people employed is called the labor-force
participation rate.
A production function describes the relationship between the quantity of inputs used in
production and the quantity of output produced.
Macroeconomics helps explain economic fluctuations, why the economy shrinks and
expands and why some of the economy’s resources are idle.
Money is neutral both in the short run and in the long run.
Nominal GDP uses current year prices to measure GDP.
The government uses the buying power of wages rather than face value or nominal
value in reporting changes in “real wages” in the economy.
An increase in the federal budget deficit will lower the level of crowding out in the
economy.
Purchasing power parity suggests that the exchange rate between two currencies reflects
differences in the overall price levels in the two countries.
The natural rate of unemployment changes over time.
Changes in government purchases affect aggregate demand only indirectly through
consumption spending.
In terms of technological progress, economists interpret this as meaning an economy
operates more efficiently by producing more output without using any more inputs.
Scarcity is a situation in which resources are limited in quantity and can be used in
different ways.
A decrease in inflationary expectations that causes a decrease in the growth rate of
firms’ prices shifts the:
A) aggregate demand curve to the right.
B) aggregate demand curve to the left.
C) aggregate supply curve to the right.
D) aggregate supply curve to the left.
If the economy is in equilibrium at full employment, a decrease in aggregate demand
will:
A) decrease the price level and leave the level of output unchanged in the long run.
B) increase the price level and leave the level of output unchanged in the long run.
C) increase both the price level and the level of output in the long run.
D) decrease both the price level and the level of output in the long run.
Employment status of the working age population of Metropolis is approximately:
Table 6.1Given the data in Table 6.1, the unemployment rate of Metropolis is
approximately
A) 6 percent.
B) 9 percent.
C) 12 percent.
D) 22 percent.
When the price of almonds falls
A) the demand for almonds decreases, ceteris paribus.
B) the demand for almonds increases, ceteris paribus.
C) the quantity of almonds demanded decreases, ceteris paribus.
D) the quantity of almonds demanded increases, ceteris paribus.
If the total assets of the bank exceeds the banks total liabilities, then:
A) owner’s equity is positive.
B) owner’s equity equals the total assets.
C) owner’s equity is negative.
D) owner’s equity is larger than the bank’s total assets.
Exporting nations often agree to voluntary export restraints in an attempt to:
A) employ more workers in the importing nation.
B) avoid more restrictive trade policies.
C) increase global welfare.
D) decrease inflation.
The U.S. current account equals
A) U.S. exports + U.S. imports + net income from foreign investments + net transfers
from abroad.
B) U.S. imports – U.S. exports + net income from foreign investments + net transfers
from abroad.
C) U.S. exports – U.S. imports + net income from foreign investments + net transfers
from abroad.
D) U.S. exports – U.S. imports – net income from foreign investments + net transfers
from abroad.
Suppose that real GDP starts at 100 and grows at a rate of 10 percent per year for two
years. In the third year real GDP would be
A) 110.
B) 110.1.
C) 120.
D) 121.
The additional cost resulting from a small increase in some activity is called the:
A) opportunity cost.
B) marginal benefit.
C) marginal cost.
D) diminishing returns of the activity.
Nominal GDP is not an accurate measure of the real level of economic activity in a
country because:
A) the GDP deflator constantly underestimates the real cost of living.
B) inflation distorts the real value of all the goods and services produced.
C) base year prices are likely to experience substitution bias.
D) taxes distort the real value of all the goods and services produced.
What is the present value of an asset that pays you $5000 next year and $5000 two
years from now? Assume that the real interest rate is 5 percent.
What does it mean for a person or nation to have a comparative advantage in producing
a product?
Draw an aggregate supply and aggregate demand graph which shows the economy
producing an output which exceeds potential output in the short run, and the adjustment
that will occur as the economy adjusts to long-run equilibrium.
When the U.S. economy experienced a recession and the unemployment rate increased
to over 10 percent, does this imply that the potential output of the economy decreased?
Why was deposit insurance created in the United States?
When a firm hired its tenth worker, its factory output increased by four units per month.
Would you expect the firm’s output to increase by eight more units per month if the firm
hired two more workers?