Stagflation
a. is caused by a negative demand shock
b. is theoretically impossible
c. is a long-run phenomenon
d. was rampant during the Great Depression
e. is the combination of rising price levels and negative GDP growth
Suppose that the country of Utopia produces only steel and coffee. In 1998, Utopia
produced 900 tons of steel and 500 pounds of coffee, while in 1999, it produced 1,000
tons of steel and 550 pounds of coffee. Assume that no technological changes occurred
in the production of either good and the resource endowment of Utopia did not change.
Which of the following is true?
a. Utopia’s opportunity cost of producing additional steel is 50 pounds of coffee.
b. Utopia’s production must have been productively inefficient in 1998.
c. Utopia’s opportunity cost of producing additional steel is 1/2 pound of coffee per ton
of steel.
d. Utopia’s opportunity cost of producing additional coffee is 100 tons of steel.
e. The production point in 1998 was unattainable given then-current resources and
technology.
When many banks fail simultaneously, this is known as a
a. run on the bank
b. depression
c. recession
d. banking panic
e. Federal Reserve crisis
Refer to Figure 17-1. Assume the equilibrium exchange rate is $0.008 per yen at point
A. If U.S. consumers decide to purchase more automobiles from Japan, then
a. nothing will happen
b. the supply curve will shift to S’ and the demand curve will shift to D’
c. the supply curve will shift to S’
d. the demand curve will shift to D’
e. exchange rate will return to $0.008 as soon as the market adjusts.
Used car dealerships add nothing to GDP because the cars they sell were already
recorded in GDP when they were new.
Suppose workers agreed to an indexed contract that increased their nominal wage by 4
percent plus 25 percent of any increase in the Consumer Price Index (CPI). If the CPI
increased by 8 percent, what would be the change in the real wage?
a. 4 percent
b. -2 percent
c. 0 percent
d. -4 percent
e. 2 percent
The opportunity cost of a particular activity
a. is the same for everyone pursuing this activity
b. may include both monetary costs and forgone income
c. always decreases as more of that activity is pursued
d. usually is known with certainty
e. measures the direct benefits of that activity
The marginal propensity to consume tells us the intercept of the consumption function.
Which of the following would shift the aggregate demand curve to the left?
a. increases in government purchases, investment spending, autonomous consumption,
taxes or the money supply
b. decreases in government purchases, investment spending, autonomous consumption,
or the money supply
c. increases in government purchases, investment spending, autonomous consumption
or the money supply
d. decreases in government purchases, investment spending, autonomous consumption,
taxes or an increase in the money supply
e. only increases in government purchases.
A bank failure occurs when a bank
a. cannot call in its loans
b. spends all of its reserves
c. is unable to meet its depositors’ requests to withdraw funds
d. cannot make any more loans
e. makes bad loans
We expect a rise in transfer payments when
a. the needs of the poor receive more publicity
b. taxes rise
c. GDP rises and inflation soars
d. the retirement age remains unchanged over time
e. recessions occur
In which of the following situations would the average standard of living rise?
a. GDP grows at the same rate as population
b. GDP grows more slowly than population
c. GDP grows faster than population
d. GDP per capita remains constant
e. GDP grows faster than transfer payments.
In a market system, resources are allocated by
a. the orders of authority
b. traditional practices
c. prices
d. absolute advantage
e. production possibilities frontiers
A logical explanation for recessions might be that households have suddenly altered
their willingness to work. A problem with this explanation is
a. it is inconsistent with patterns of job searches during recessions
b. the demand for labor rarely shifts
c. the large number of women who entered the labor force in the last four decades
d. it is inconsistent with the classical model
e. the work ethic that is responsible for the decline in American vacations.
The long-run Phillips curve is downward-sloping.
Government re-training programs, such as those that train workers who have lost their
jobs due to outdated skills, would best fight the problem of
a. frictional unemployment
b. cyclical unemployment
c. structural unemployment
d. underemployment
e. seasonal unemployment
After the Fed sells a government bond, which of the following is the impetus for the
money supply process that follows?
a. Banks now have excess reserves.
b. Banks now have deficient reserves.
c. Banks must print money to purchase the bonds.
d. Banks now have to hold more required reserves.
e. Banks now must be regulated closely.
Everything else being equal, a higher interest rate
a. increases consumption spending as people face increasing debt
b. reduces consumption spending as people have a greater incentive to save
c. does not change consumption spending because consumption is only affected by
income
d. does not change total consumption spending, but does change who does the spending
e. reduces both consumption spending and saving as people face increased debt.
A movement along the AD curve down and to the right is caused by
a. a rightward shift of the money demand curve
b. falling consumer confidence
c. a decreasing price level
d. expansionary open market transactions by the Fed
e. a stable price level and increases in consumption, investment, or government
spending