We say there is productive inefficiency in saving lives if
a. there is some way to save more lives
b. there is some way to save more lives without sacrificing any other goods or services
c. all resources are devoted to saving lives
d. no resources are devoted to saving lives
e. anyone dies before reaching his or her life expectancy
A credit union is an example of a financial intermediary.
Most economists believe that the CPI
a. accurately measures the inflation rate
b. accurately measures the inflation rate except during years when there are major
economic shocks like the Arab oil embargo
c. slightly underestimates the inflation rate
d. seriously underestimates the inflation rate
e. overstates the inflation rate
Economic growth policies always involve
a. trade-offs
b. lower taxes
c. higher government spending
d. more investment
e. more transfer payments.
If political influences, independent of any economic forces, lead to a larger government
budget deficit, what will be the effect on the loanable funds market?
a. The interest rate will rise and the amount of saving will increase.
b. The interest rate will fall and the amount of saving will increase.
c. The interest rate will rise and the amount of saving will decrease.
d. The interest rate will fall and the amount of saving will decrease.
e. The interest rate will rise but the change in saving will be ambiguous.
Which of the following is the Fed’s best strategy for dealing with demand shocks?
a. Maintain a money supply target
b. Decrease the money supply
c. Maintain a passive monetary policy
d. Neutralize the impact with an increase in the money supply
e. Increase the interest rate.
Which of the following would be most likely to encourage households to save a greater
proportion of their income? a. a reduction in the sales tax rate
b. an increase in the capital gains tax rate
c. an elimination of tariffs (taxes on imported goods)
d. changing to a flat income tax (with a single tax rate charged on all income)
e. changing from an income tax to a consumption tax
The classical model is one of the best that economists have for capturing the rapidly
changing nature of the supply and demand for labor and ultimately for explaining
recessions.
Parvez is trying to decide whether or not he should lend $1,000 to Eli for a year. Eli
would pay a fixed nominal interest rate of 8 percent. Parvez expects the inflation rate to
be 4 percent for the year. If he does not lend the $1,000 to Eli, Parvez will purchase an
indexed savings bond that pays an interest rate of 4 percent, or he will put the money in
a (nonindexed) savings account earning 6 percent. Parvez
a. will earn 4 percent in real terms if he loans Eli the money, 0 percent in real terms if
he buys the bond, and 6 percent in real terms if he puts the money into a savings
account
b. is better off holding his money as cash
c. is indifferent between lending the money to Eli and buying the bond because the real
interest rate is the same in either case
d. should purchase the bond because it earns the highest real rate of interest
e. earns the highest real rate of interest if he puts his $1,000 into a savings account
In the short-run macro model, an open-market purchase of bonds by the Fed will
a. raise the interest rate, reduce spending, and increase output
b. raise the interest rate, reduce spending, and decrease output
c. lower the interest rate, reduce spending, and decrease output
d. lower the interest rate, increase spending, and decrease output
e. lower the interest rate, increase spending, and increase output
Which of the following is an essential feature of any economic system?
a. absolute advantage
b. the profit motive for producers
c. a voting procedure for choosing leaders
d. prices determine resource allocation
e. scarce resources
Society’s resources include
a. land and labor
b. labor and machinery
c. land, labor, and capital
d. land, capital, and money
e. labor, capital, and money