If a technological advance makes it possible to produce bananas at a lower cost:
A) the demand for bananas increases.
B) the demand for bananas decreases.
C) the supply of bananas increases.
D) the supply of bananas decreases.
Suppose that union leaders negotiate a significant increase in nominal wages. If the
Federal Reserve holds the growth in the money supply constant, in the long run,
unemployment
A) remains constant while prices increase.
B) remains constant will prices decrease.
C) and prices both remain constant.
D) decreases while prices increase.
Recall Application 1, “Law of Demand and Cigarettes,” to answer the following
questions:
In the application, what was the reason why the government decreased the tax rates of
cigarettes?
A) to discourage smuggling of cigarettes from the United States
B) to encourage smoking
C) to discourage smoking
D) to give in to consumer demands of lower taxes in the country
What happens to the equilibrium wage rate in the U.S. and Canada when more
American workers migrate to Canada?
A) The real wage in Canada will increase while the real wage in the US will decrease.
B) The real wage in Canada will decrease while the real wage in the US will increase.
C) The real wage in Canada and the US will increase.
D) The real wage in Canada and the US will decrease.
Automatic stabilizers are changes in ________ that occur automatically as economic
activity changes.
A) taxes and transfer payments
B) unemployment
C) inflation
D) the money supply
The long-run aggregate supply curve is vertical because:
A) wages are flexible and they always change quickly to clear the labor market.
B) the labor market is always in shortage.
C) unemployment exists.
D) prices are sticky in the long run.
In March 2012, M1 totaled:
A) $1,028 billion.
B) $763 billion.
C) $2,220 billion.
D) $424 billion.
Suppose that, over the past century, real GDP per capita in the country of Fictionia has
grown at a rate of 1.75 percent per year. How many years will it take for real GDP per
capita to double if it continues to grow at this rate? Suppose that that real GDP per
capita is currently $15,000 in Fictionia. What will be the real GDP per capita in
Fictionia 200 years from now if it continues to grow at 1.75 percent per year?
If firms have more capital, it is ________ for workers.
A) harmful
B) beneficial
C) ineffective
D) unimportant
Recall Application 4, “Coping with the Financial Chaos Caused by the Mortgage
Crisis,” to answer the following questions:
According to Application 4, the reason why the Fed allowed large currency swaps with
other central banks was to:
A) provide foreign banks with dollars to lend when needed.
B) provide a system of check collection and clearing.
C) pay down the US Federal government’s total debt.
D) increase the value of the US dollar.
The federal government runs a budget deficit when:
A) it buys back more bonds than it issues.
B) it spends less than it receives in tax revenues.
C) it spends more than it receives in tax revenues.
D) the economy is growing rapidly.
When the economy is producing its potential output, an increase in government
spending must necessarily reduce some component of private spending. This
phenomenon is called
A) fiscal policy.
B) crowding out.
C) the multiplier effect.
D) entitlement spending.
In the year ________, for the first time in 30 years, the federal government ran a
surplus.
A) 1980
B) 1985
C) 1990
D) 1998
An increase in the marginal propensity to import will cause equilibrium GDP to:
A) decrease.
B) decrease if the marginal propensity to import is negative.
C) increase.
D) increase if the marginal propensity to import is negative.
If an automobile maker producing a certain kind of car suddenly experiences a decrease
in the demand for the car. In the short run:
A) the demand for steel goes up but the steel prices remain the same.
B) the demand for steel goes up and the price of steel goes up by a lot.
C) the demand for steel goes down and the price of steel goes down by a lot.
D) the demand for steel goes down but the price of steel stays the same.
Gross Domestic Product measured in current dollars is called ________ GDP.
A) natural
B) real
C) weighted
D) nominal
Wages and prices throughout an economy will rise above previous inflation rates when
A) imports increase dramatically.
B) fewer goods are exported abroad.
C) output exceeds potential output.
D) unemployment has highs and lows.
The best measure of economic growth is:
A) an increase in real GDP per capita.
B) an increase in nominal GDP per capita.
C) an increase in capital stock per capita.
D) an increase in real GDP.
The date at which a recession starts is called the
A) trough.
B) peak.
C) plateau.
D) depression.