The natural rate of unemployment
a. is a specific unemployment rate that can be a target for the Fed
b. changes as the inflation rate changes
c. is natural because it does not change from period to period
d. is a measure of the quality of the Fed’s performance
e. changes as the efficiency of job searches change
Use the graph shown in Figure 11-5 to determine equilibrium in the economy.
a. $1,000
b. $2,000
c. $3,000
d. $3,250
e. There is no equilibrium in this economy.
The process of moving from disequilibrium to equilibrium in labor markets creates
special problems because
a. we are all workers threatened by recession
b. we cannot spend money we have not earned
c. the process is very short
d. the process is especially lengthy
e. negative shocks create economic expansions
In a floating exchange rate system, the equilibrium exchange rate is determined
a. by the price of the foreign currency
b. by the government of the country issuing the foreign currency
c. by the interest rate in the country issuing the foreign currency
d. by the Federal Reserve
e. at the intersection of the demand curve and supply curve for the foreign currency
Many of the Fed’s actions were aimed squarely at stopping the downward spiral of
falling assets prices.
In the classical model, if the amount households wish to save exceeds the sum of the
amount businesses wish to invest plus the government’s budget deficit, the loanable
funds market
a. will be in disequilibrium, but this does not prevent equilibrium in the total economy
b. will be in disequilibrium, and we would expect the supply of funds to decrease
c. will be in disequilibrium, and we would expect the interest rate to rise
d. will be in disequilibrium, and we would expect the interest rate to fall
e. may be in equilibrium, because unplanned inventory changes have not been included
The principle of comparative advantage states that
The production possibilities frontier illustrates
Refer to Figure 9-10. Assume that A represents the minimum level of investment
necessary to increase capital per worker and B represents the minimum production of
consumer goods acceptable to the population. If the economy is currently at point D and
if the population continues to grow,
a. the production possibilities frontier will shift outward very rapidly
b. the production possibilities frontier will shift outward, but not fast enough to increase
living standards
c. the economy will move to point C on the production possibilities frontier
d. the economy will remain at point D on the production possibilities frontier
e. the production possibilities frontier will shift inward and living standards will
deteriorate
Which of the following is considered in the AS/AD model but was not considered in the
short-run macro model?
a. The effect of price changes.
b. The effect of interest rate changes.
c. Increases in government spending.
d. Monetary policy.
e. Decreases in government spending.