Refer to Figure 8-1. If the real hourly wage rate was $6, what would be the effect?
a. There would be a shortage of 40 million workers and the wage rate would rise.
b. There would be a shortage of 20 million workers and the wage rate would rise.
c. There would be a surplus of 40 million workers and the wage rate would fall.
d. There would be a surplus of 20 million workers and the wage rate would fall.
e. There would be unemployment.
Budget deficits cause interest rates to be high.
Which of the following sequences results from a decrease in the price level?
a. the money demand curve shifts leftward, the interest rate decreases, investment
spending and autonomous consumption increase, the aggregate expenditure line shifts
upward, and there is a rightward movement along the aggregate demand curve.
b. the money demand curve shifts rightward, the interest rate increases, investment
spending and autonomous consumption increase, the aggregate expenditure line shifts
downward, and there is a rightward movement along the aggregate demand curve.
c. the money demand curve shifts leftward, the interest rate decreases, investment
spending and autonomous consumption increase, the aggregate expenditure line shifts
upward, and there is a leftward movement along the aggregate demand curve.
d. the money demand curve shifts rightward, the interest rate decreases, investment
spending and autonomous consumption increase, the aggregate expenditure line shifts
upward, and there is a movement upward along the aggregate demand curve.
e. the money demand curve shifts leftward, the interest rate increases, investment
spending and autonomous consumption increase, the aggregate expenditure line shifts
upward, and there is a leftward movement along the aggregate demand curve.
Which of the following is the Fed’s best strategy for dealing with shifts of the money
demand curve?
a. A neutralization response
b. Decrease the money supply
c. Maintain a constant money value target
d. Maintain a money supply target
e. Increase the interest rate.
If you know the number of euros that can be exchanged for one dollar, you can easily
figure out the number of dollars needed to obtain one euro by finding the reciprocal of
the exchange rate for dollars per euro.
When economists disagree about whether legislation is a good idea, even when they
agree about its impacts, the disagreements are usually over
a. normative issues
b. positive issues
c. the mathematical calculations in an economic model
d. whether microeconomics or macroeconomics is more important
e. whether economic theory is useful in explaining the behavior of actors in the
economy
Assume that the U.S. population is 300 million. If 70 million individuals are legally
classified as unable to work (or are less than 16 years of age), 80 million are classified
as unwilling to work, and 14 million are unemployed, what is the unemployment rate?
a. 10.3 percent
b. 6.4 percent
c. 4.7 percent
d. 9.3 percent
e. 6.7 percent
When the Federal Reserve buys new government bonds, it is borrowing from the
government.
The money supply curve is vertical because
a. real income does not influence the quantity of money supplied
b. the price level does not influence the level of spending
c. only the interest rate influences the quantity of money supplied
d. the Federal Reserve sets the money supply
e. nominal income does not influence the quantity of money supplied
Which of the following could lead to a rightward shift of the demand curve for a good?
a. a decrease in the price of a substitute good
b. an increase in the price of a complementary good
c. a decrease in the price of the good, assuming it is a normal good
d. an increase in the price of the good, assuming it is an inferior good
e. expectations that the price of the good will rise in the future
Refer to Figure 14-5. If the Fed wishes to reduce the interest rate, it will
a. shift the demand curve to the right
b. shift the demand curve to the left
c. shift the supply curve of money to the right
d. shift the supply curve of money to the left
e. simply set a lower market interest rate
Which of the following trends would lower the unemployment rate associated with full
employment?
a. People become less educated over time.
b. More people are willing to move to find a job.
c. The government spends money to reduce the loss of jobs during a recession.
d. A larger proportion of jobs are seasonal in nature.
e. The federal government increases unemployment benefits.
A critical assumption made by all economic models is that
a. few economic decision makers face constraints under capitalism
b. few economic decision makers face constraints under communism
c. every economic decision maker, except the extremely wealthy, faces constraints
d. every economic decision maker, except the federal government, faces constraints
e. every economic decision maker faces constraints under every economic system
Which of the following is true?
a. Structural unemployment is caused by the fact that it takes a short time to search for a
job.
b. Cyclical unemployment is caused by the fact that it takes a short time to search for a
job.
c. Frictional unemployment is caused by a lack of skills or information about jobs.
d. Structural unemployment is caused by a lack of skills or information about jobs.
e. Cyclical unemployment is caused by a lack of skills or information about jobs.
In the long run, the Fed can change the inflation rate but not the unemployment rate.
Human capital consists of the skills and knowledge that workers possess.
If there are no restrictions on contracts, and if all parties in the economy accurately
predict the rate of inflation over the next year, then
a. there will be no redistribution of purchasing power
b. purchasing power will be redistributed from wage earners to business owners
c. purchasing power will be redistributed from business owners to wage earners
d. purchasing power will be redistributed from lenders to borrowers
e. purchasing power will be redistributed from borrowers to lenders
Refer to Figure 8-6. Suppose that a $1 trillion increase in government spending shifted
the demand for funds curve from D1 to D2. What would happen to the sum of
investment and consumption spending? That sum would
a. remain unchanged
b. rise by $0.6 trillion
c. rise by $1 trillion
d. fall by $1 trillion
e. fall by $0.4 trillion
Most recessions last approximately three years.
In what way is the result of an excise tax imposed on either demanders or suppliers
similar to the result of a price floor?
a. The amount that consumers pay for the good will be less than they previously paid
b. The amount of the good that will be traded in the market will be greater than
previously traded
c. both price floors and excise taxes create excess demand
d. The amount that consumers pay for the good will be greater than they previously paid
e. Both price floors and excise taxes create excess supply