The main reason why the government enforces contracts and maintains a legal system
that punishes those who violate contracts is:
A) to facilitate exchange.
B) to decrease imperfect competition.
C) to decrease imperfect information.
D) to increase uncertainty.
Recall the Application about the impact inflation has on your potential future
salary and the repayment of student loans to answer the following question(s).
According to this Application, more years of work would be required to pay off a
student loan if all prices
A) remained stable.
B) increased by 20 percent.
C) decreased by 10 percent.
D) increased by 40 percent.
Capital gains are profits of investors when they:
A) sell stocks and other assets.
B) sell their labor.
C) sell used cars.
D) sell their services.
When the federal government runs a budget deficit:
A) it borrows money from the public by issuing bonds.
B) interest payments on the existing debt decrease.
C) the US Mint prints the money to pay the deficit.
D) the total value of the national debt decreases.
Currency is included in
A) M1 only.
B) M2 only.
C) neither M1 nor M2.
D) both M1 and M2.
Table 13.1
Refer to Table 13.1. First Commercial Bank’s excess reserves equal $ ________.
A) 150,000
B) 250,000
C) 100,000
D) 50,000
The prospect of future deficits
A) encourages government to conduct expansionary fiscal policy.
B) would prompt government to vastly expand discretionary spending.
C) requires a government to eliminate all entitlement spending.
D) limits the ability of government to conduct fiscal policy in the near future.
President Obama needs to get Congressional approval to enact measures to boost the
economy. The time involved to formulate and get approval for these policies are called
A) inside lags.
B) outside lags.
C) automatic stabilization.
D) crowding in.
The extra benefit resulting from a small increase in an activity is called the
A) opportunity cost.
B) marginal benefit.
C) marginal cost.
D) diminishing returns of the activity.
If the expectations Phillips curve holds true, then the unemployment rate varies with
the:
A) unanticipated inflation rate.
B) anticipated inflation rate.
C) money supply.
D) long-run growth rate of real GDP.
Critics of inflation targeting worry that if the Fed focuses only in fighting inflation:
A) Congress would have no tools to fight a recession.
B) Congress would have nothing left to fight.
C) Congress would have no tools to fight a boom.
D) Congress would have no tools left to fight a deficit.
Excess supply in the money market causes:
A) an increase in the equilibrium interest rate.
B) a decrease in the money supply.
C) an increase in the demand for money.
D) a decrease in the equilibrium interest rate.
The value of all final goods and services produced during a given time period measures
a nation’s
A) gross domestic product.
B) net national product.
C) consumer price index.
D) net exports.
Figure 7.1 Please refer to Figure 7.1. Suppose the economy is at point D. A health
pandemic that results in the loss of the lives to countless workers will:
A) move the economy to point B.
B) move the economy to point C.
C) move the economy to point A.
D) keep the economy at point D.
Recall the Application about the Fed’s expanded involvement in the economy following
the financial crisis in 2008 to answer the following question(s).According to the
Application, in 2010 the Fed
A) the Fed ended its support of the mortgage market.
B) the Fed converted all its assets to cash.
C) held over $1 trillion in mortgage-backed securities.
D) stopped trading in Treasury securities.
How many broad categories are used by economists to define the GDP?
A) 3
B) 4
C) 6
D) 8