A real appreciation of the dollar is caused by either a nominal appreciation of the dollar,
a rise in the foreign price level, or a fall in the U.S. price level.
An increase in the purchasing power of money need not lead to an increase in the
purchasing power of income because the falling price level would likely mean falling
wages and salaries.
If the GDP deflator is equal to 100, then for that year nominal GDP is equal to real
GDP.
If a country is producing efficiently and is on the production possibilities frontier,
producing more of one good would result in a movement along the frontier.
In absolute value, the tax multiplier is greater than the government purchases multiplier.
If the price of peaches, a substitute for plums, increases the demand for plums will
decrease.
Expansionary fiscal policy is used to increase aggregate demand in an attempt to fight
rising inflation.
Recent rapid economic growth in India and China has reduced the amount of “brain
drain” in those countries.
Inflation is generally the result of total spending growing faster than total production.
In March 2008, the Fed announced that primary dealers would be eligible to receive
discount loans.
Net foreign investment is a measure of net capital outflows, equal to capital outflows
minus capital inflows in a given period of accounting.
One reason why many low-income countries experience low rates of growth is because
of low rates of saving and investment in those countries.
An increase in the interest rate should ________ the demand for dollars and the value of
the dollar, and net exports should ________.
A) decrease; decrease
B) decrease; increase
C) increase; decrease
D) increase; increase
E) increase; not change
Which of the following would cause the dollar to appreciate?
A) an increase in the demand for dollars
B) a decrease in the demand for dollars
C) an increase in the supply of dollars
D) an increase in the demand for imports from foreign countries
The way in which a corporation is structured and the impact a corporation’s structure
has on the firm’s behavior is referred to as
A) corporate taxation.
B) structure composition theory.
C) structural behavior.
D) corporate governance.
Figure 11-4
Refer to Figure 11-4. The movement from A to B to C illustrates
A) an improvement in technology.
B) a decline in capital per worker.
C) diminishing returns to capital.
D) diminishing returns to labor.
According to a study by economists Raymond Fisman and Edward Miguel, as the
________ increases, so does the number of parking violations by the country’s United
Nations delegates.
A) level of corruption in a country
B) population of a country
C) per capita income of a country
D) rate of investment in a country
Assume that the demand curve for DVD players shifts to the left and the supply curve
for DVD players shifts to the right, but the supply curve shifts more than the demand
curve. As a result
A) both the equilibrium price and quantity of DVD players will decrease.
B) the equilibrium price of DVD players will decrease; the equilibrium quantity may
increase or decrease.
C) the equilibrium price of DVD players may increase or decrease; the equilibrium
quantity will increase.
D) the equilibrium price of DVD players will decrease; the equilibrium quantity will
increase.
The slope of the consumption function is equal to
A) the change in consumption divided by the change in disposable income.
B) the change in consumption divided by the change in personal income.
C) the change in disposable income divided by the change in consumption.
D) the change in national income divided by the change in consumption.
Owners of a corporation share in the profits of the firm
A) by selling any bonds or stocks owned and realizing a capital gain.
B) through coupon payments on that firm’s bonds.
C) through dividend payments on shares of that firm’s stock.
D) by raising the interest rate on bonds.
Opportunity cost is defined as
A) the benefit of an activity.
B) the monetary expense associated with an activity.
C) the highest valued alternative that must be given up to engage in an activity.
D) the total value of all alternatives that must be given up to engage in an activity.
Table 2-1
Production Choices for Dina’s Diner
Refer to Table 2-1. Assume Dina’s Diner only produces sliders and hot wings. A
combination of 60 sliders and 25 hot wings would appear
A) along Dina’s production possibilities frontier.
B) inside Dina’s production possibilities frontier.
C) outside Dina’s production possibilities frontier.
D) at the vertical intercept of Dina’s production possibilities frontier.
What is meant by the term “economic efficiency”?
List four types of government policies which can aid economic growth.
Using an aggregate demand graph, illustrate the impact of an increase in the price level
on aggregate demand.
With state and multistate lotteries, winners are typically given the choice between a
lump sum payment today or a 20 year series of annuities. How should a winner decide
which is better?
Table 11-2
Refer to Table 11-2. Calculate the GDP per capita for each country in the table. Which
country has the highest standard of living? Why?
Using equations for public and private saving, show that saving must equal investment
in a closed economy. Begin with the expression for total saving in the economy.
Describe how a lender can lose during inflation if the inflation is unanticipated and the
loan is a fixed-interest-rate loan. How would a variable-interest-rate loan (one that
adjusts over the contract period) eliminate these loses?
What is the main reason for changes in GDP in the short run?
Illustrate and explain the effects of tax reduction and simplification using the dynamic
aggregate demand and supply model. To simplify the analysis, assume that aggregate
demand is not affected by the tax cut.
Given Table 12-5 below, fill in the values for saving. Assume there are no taxes.
Table 12-5
