Positive unplanned inventory investment occurs when:
A) actual depreciation is less than expected.
B) actual sales are less than expected.
C) actual depreciation is more than expected.
D) actual sales are higher than expected.
When an economy has debt deflation:
A) aggregate demand increases, since the real debt burden is reduced.
B) aggregate demand is not affected, since real variables are not affected.
C) aggregate demand decreases as borrowers’ real debts increase, which leads to less
spending.
D) the economy moves quickly to its potential output.
In the United States, government spending accounts for approximately_____ of GDP.
A) 5%
B) 10%
C) 20%
D) 30%
Expansionary monetary policy works by decreasing consumption, allowing other
sectors of the economy to spend more.
A) True
B) False
Since the 1960s, the U.S. price level has _____ and the inflation rate has _____.
A) remained constant; increased
B) increased; fluctuated
C) decreased; decreased
D) fluctuated; remained constant
Other things equal, if the amount of money demanded is greater than the amount of
money supplied, then the interest rate may fall.
A) True
B) False
The European Central Bank was established:
A) during the French Revolution at the end of the eighteenth century.
B) in 1913, at the same time as the U.S. Federal Reserve System.
C) as part of the treaty ending World War II.
D) in 1999, when the euro was adopted.
An economy that is primarily agricultural will have a _____ aggregate _____ curve.
A) horizontal; supply
B) nearly vertical; supply
C) horizontal; demand
D) nearly vertical; demand
Look at the table Employment Data. If marginally attached workers are included in the
labor force, the labor force is:
A) 1 million.
B) 11 million
C) 32 million.
D) 33 million.
If the natural rate of unemployment is 5% and the actual rate of unemployment is 4%:
A) disinflation is likely.
B) it will not affect prices.
C) inflation will increase.
D) the short-run Phillips curve will shift down.
The appropriate monetary policy to stabilize the economy during a recession is an
expansionary policy.
A) True
B) False
If the exchange rate for the yen is $0.009784, $1 exchanges for 9.784.
A) True
B) False
Since labor is relatively scarce in Canada, free trade should cause the wages paid to
Canadian labor to rise.
A) True
B) False
Table: Real and Nominal Output
Look at the table Real and Nominal Output. Nominal output in year 3 is:
A) $20.
B) $50.
C) $100.
D) $1,500.
The budget balance equals:
A) taxes minus government spending.
B) taxes plus government spending.
C) GDP minus consumption and government spending.
D) GDP plus taxes.
Table: Unemployment and Employment Data
Look at the table Unemployment
and Employment Data. The labor force in this economy is:
A) 170 million.
B) 140 million.
C) 100 million.
D) 98 million.
In 2010, the U.S. spent 38% of its GDP on investment, while China spent only 16% of
its GDP on investment.
A) True
B) False
The classical macroeconomists believed that fiscal policy was even less effective than
monetary policy.
A) True
B) False
Other things equal, if there is an excess demand for money, the interest rate may rise.
A) True
B) False
If the price of mozzarella cheese (an ingredient in pizza) declines, there will be:
A) a decrease in the supply of pizza.
B) an increase in the supply of pizza.
C) a decrease in the quantity of pizza supplied.
D) no change in the supply of pizza.
Which question is the most appropriate to the study of MICROECONOMICS?
A) How does the aggregate price level affect consumer spending?
B) How does the level of interest rates affect investment spending?
C) How much will Sony charge for the new game system to be introduced later this
year?
D) How does the GDP affect overall government spending?
Human capital refers to:
A) output per worker.
B) the education and knowledge embodied in the workforce.
C) society’s investment in capital goods.
D) people working with capital goods.
Look at the table The Production Possibilities for Tractors and Crude Oil. Which of the
following is TRUE?
A) The opportunity cost of crude oil is lower in the United States than in Mexico.
B) The opportunity cost of crude oil is higher in the United States than in Mexico.
C) Crude oil costs are the same in the United States and in Mexico.
D) Tractor costs are the same in the United States and in Mexico.
An increase in wealth or an increase in government spending will result in a:
A) left-shift of the aggregate supply curve.
B) right-shift of the aggregate demand curve.
C) right-shift of the aggregate supply curve.
D) movement along the aggregate demand curve.
The relation between a country’s level of saving and investment:
A) affects its trade balances.
B) does not affect an open economy.
C) has often been used to correct a trade deficit but not a trade surplus.
D) pertains to trade surpluses only.
Suppose the marginal propensity to consume is0.8. If the government cut taxes by $100
billion, then real GDP would increase by $400 billion.
A) True
B) False
If the consumer price index for 2010 was 160.6 and for 2011 was 163.1, what was the
inflation rate between the two years?
A) 0.25%
B) 1.56%
C) 2.59%
D) 5%
In an economy with no taxes or imports, if disposable income increases by $2,000 and
consumption increases by $1,400, the marginal propensity to save is 0.21.
A) True
B) False
If the unemployment rate rose, a classical economist would counsel the government to
do nothing.
A) True
B) False
Because bonds are more standardized than loans, transactions costs for bonds are
typically lower than transactions costs for loans.
A) True
B) False