As more efficient capital equipment becomes available, the demand for labor will
________, the real wage will ________, and the quantity of labor hired will ________.
A) increase; increase; increase
B) increase; remain the same; increase
C) increase; remain the same; decrease
D) increase; decrease; remain the same
If the equilibrium output exceeds potential output:
A) unemployment rises.
B) aggregate demand increases.
C) the price level decreases.
D) inflation usually increases.
Which of the following is NOT a component of private investment, for purposes of
GDP accounting?
A) newly produced housing
B) additions to firms’ stock of inventories
C) purchases by firms of used machinery
D) newly built factories
Recall the Application about the increase in Chinese demand for pecans to answer
the following question(s). Between 2006 and 2009, Chinese imports of U.S. pecans
increased from 9 million pounds per year to 88 million pounds per year, and as a
result of the increase in demand, the equilibrium price increased by about 50
percent. The increase in demand was caused in part by widespread reports in the
Chinese media extolling the health benefits of pecans. According to this Application,
between 2006 and 2009, Chinese demand for pecans increased by roughly ________
percent.
A) 79
B) 90
C) 456
D) 877
Table 5.1
Refer to Table 5.1. Assume that this economy produces only two goods: Good X and
Good Y. If year 1 is the base year, the value for this economy’s GDP Deflator in year 3
is:
A) 100.0.
B) 128.8.
C) 141.0.
D) 158.2.
In the Solow Model, a higher depreciation rate is illustrated as:
A) a shift in the sY line upwards.
B) a flatter dK line.
C) a shift in the sY line downwards.
D) a steeper dK line.
Recall the Application about the increase in purchases of hybrid vehicles to answer
the following question(s).
According to the Application, one factor which was responsible for roughly one-fifth of
hybrid vehicles purchased in 2007 was a federal subsidy of up to $3,400 per hybrid
vehicle. The increase in sales due to this subsidy is an example of which element of the
economic way of thinking?
A) responding to incentives
B) thinking at the margin
C) isolating variables
D) using assumptions to simplify
Purchasing power parity does not provide accurate predictions of exchange rates
because
A) almost all goods and services are traded across nations.
B) non-traded goods account for approximately 50 percent of the value of production in
an economy.
C) governments currently fix exchange rates.
D) firms are unable to set prices differently across nations.
_______________________
Suppose:
C = 100 + .75 (y-T)
I = 200
G = 300
T = 300
_______________________
Table 11.5
Refer to Table 11.5. If G increases to 400 (all other components constant), then the
equilibrium income in this economy increases by:
A) 500.
B) 100.
C) 400.
D) 600.
Recall Application 1, “Global Warming, Rich Countries and Poor Countries,” to answer
the following questions:
Based on what you learned from the application, which industries are negatively
affected by global warming?
A) agriculture and light manufacturing in poor countries
B) agriculture and light manufacturing in poor and rich countries
C) agriculture in rich countries and light manufacturing in poor countries
D) agriculture and light manufacturing in rich countries
Recall the Application about the Fed increasing bank reserves during the financial crisis
in 2008 to answer the following question(s). During the height of the financial crisis in
September 2008, The Fed injected large amounts of reserves into banks, and in the next
month, they started paying interest to banks on these reserves. Prior to this time, banks
earned no interest on either required or excess reserves.
According to the Application, the Fed started paying interest to banks on reserves. Since
this change has occurred,
A) total reserves now far exceed required reserves.
B) total reserves are finally equal to required reserves.
C) all total reserves are now excess reserves.
D) required reserves now exceed total reserves.
The nominal interest rate is:
A) the real cost of borrowing to the borrower.
B) the interest rate as quoted in the market.
C) the real rate of return to the lender.
D) all of the above.
Normative economic analysis:
A) is the focus of most modern economic reasoning.
B) answers the question “What ought to be?”
C) predicts the consequences of alternative actions.
D) All of the above are correct.
Increases in unanticipated inflation will impact employment levels, but once workers
recognize higher inflation rates, they will incorporate them into their expectations of
inflation. This will tend to cause
A) unemployment to fall below the natural rate.
B) unemployment to return to its natural rate.
C) the natural rate of unemployment to rise.
D) the natural rate of unemployment to fall.
________ is a monetary system in which the money has no intrinsic value. In this
system, the money is backed by the government.
A) Fiat money
B) Commodity money
C) The gold standard
D) The barter system
Suppose an economy has a balanced federal budget, and a large increase in oil prices
plunges the economy into a recession. Tax revenues will ________ and expenditures on
transfer payments will ________, resulting in a budget ________.
A) fall; increase; deficit
B) increase; increase; surplus
C) fall; fall; deficit
D) increase; fall; surplus
“Recession” refers to a period when real GDP in the economy
A) declines for at least six months.
B) suffers due to political instability.
C) grows rapidly.
D) experiences a rise in living standards.
According to the U.S. Secret Service, approximately $2.6 billion of U.S. paper currency
in circulation is counterfeit. Undetected counterfeit U.S. currency being held by the
public both at home and abroad will impact the level of
A) the reserve ratio.
B) the money multiplier.
C) M1.
D) commodity money.