A “lean against the wind” policy says the government should not use stabilization
policy and simply let the economy “weather the storm.”
a. True
b. False
Exceptionally favorable growing conditions in the vineyards of Napa Valley would
cause a(n)
a. increase in the demand for wine, increasing price.
b. increase in the supply of wine, decreasing price.
c. decrease in the demand for wine, decreasing price.
d. decrease in the supply of wine, increasing price.
Table 28-6
RefetoTable28-6.What is the U-5 measure of labor underutilization?
a. 7.5%
b. 7.9%
c. 8.1%
d. 26%
According to the Phillips curve, unemployment and inflation are positively related in
a. the short run and in the long run.
b. the short run, but not in the long run.
c. the long run, but not in the short run.
d. neither the long run nor the short run.
Other things the same, an increase in taxes shifts aggregate demand to the left. In the
short run this makes output fall which makes the interest rate rise.
a. True
b. False
Risk-averse people will choose different asset portfolios than people who are not risk
averse. Over a long period of time, we would expect that
a. every risk-averse person will earn a higher rate of return than every non-risk-averse
person.
b. every risk-averse person will earn a lower rate of return than every non-risk-averse
person.
c. the average risk-averse person will earn a higher rate of return than the average
non-risk-averse person.
d. the average risk-averse person will earn a lower rate of return than the average
non-risk-averse person.
If the interest rate is 7.5 percent, then what is the present value of $4,000 to be received
in 6 years?
a. $2,420.68
b. $2,591.85
c. $2,996.33
d. $3,040.63
Other things the same, if the expected return on U.S. assets increases, the
a. supply of dollars in the market for foreign-currency exchange shifts right.
b. supply of dollars in the market for foreign-currency exchange shifts left.
c. demand for dollars in the market for foreign-currency exchange shifts right
d. demand for dollars in the market for foreign-currency exchange shifts left.
Which of the following is notcorrect?
a. When a union is present in a labor market, wages are determined by the equilibrium
of supply and demand.
b. Like any cartel, a union is a group of sellers acting together in the hope of exerting
their joint market power.
c. The process by which unions and firms agree on the terms of employment is called
collective bargaining.
d. Most workers in the U.S. economy are not members of a union.
Which of the following is a liability of a bank and an asset of its customers?
a. deposits of its customers and loans to its customers
b. deposits of its customers but not loans to its customers
c. loans of its customers but not the deposits of its customers
d. neither the deposits of its customers nor the loans to its customers
An increase in government spending initially and primarily shifts
a. aggregate demand to the right.
b. aggregate demand to the left.
c. aggregate supply to the right.
d. neither aggregate demand nor aggregate supply in either direction.
Figure 3-17
Refer to Figure3-17. If Maxine and Daisy switch from each person dividing her time
equally between the production of pies and tarts to each person spending all of her time
producing the good in which she has a comparative advantage, then total production of
tarts will increase by
a. 7.
b. 10.
c. 17.
d. 20.
If a country increases its saving rate, which of the following permanently grow at a
higher rate?
a. productivity and real GDP per person
b. productivity but not real GDP per person
c. real GDP per person but not productivity
d. neither real GDP per person nor productivity
When looking at a graph of nominal and real interest rates you notice the graph for
nominal rates and the graph for real rates cross each other many times. From this you
conclude
a. consumer prices sometimes rose and sometimes fell in the time frame represented on
the graph.
b. consumer prices were always rising in the time frame represented on the graph.
c. the economy never experienced a recession in the time frame represented on the
graph.
d. GDP was always increasing for the time frame represented on the graph.
When wages are fixed by contract, inflation reduces
a. nominal wages; this likely makes labor markets more flexible.
b. nominal wages; this likely makes labor markets less flexible.
c. real wages; this likely makes labor markets more flexible.
d. real wages; this likely makes labor markets less flexible.
If a $1,000 increase in income leads to an $800 increase in consumption expenditures,
then the marginal propensity to consume is
a. 0.2 and the multiplier is 1.25.
b. 0.8 and the multiplier is 5.
c. 0.2 and the multiplier is 1.25.
d. 0.8 and the multiplier is 8.
Wanda quit her job because she was unhappy at work. Arnold was fired from his
landscaping job because his company was downsizing. Who is eligible for
unemployment insurance benefits?
a. both Wanda and Arnold
b. Wanda but not Arnold
c. Arnold but not Wanda
d. neither Wanda nor Arnold
Which of the following is correct?
a. Although levels of real GDP per person vary substantially from country to country,
the growth rate of real GDP per person is similar across countries.
b. Productivity is not closely linked to government policies.
c. The level of real GDP per person is a good gauge of economic prosperity, and the
growth rate of real GDP per person is a good gauge of economic progress.
d. Productivity may be measured by the growth rate of real GDP per person.
Soon after he became the chairman of the Federal Reserve System in 1979, Paul
Volcker embarked on a course
a. of accommodative monetary policy.
b. of disinflation.
c. that was designed to reduce the unemployment rate.
d. that produced results that were clearly consistent with those predicted by
rational-expectations theorists.
In a market economy, supply and demand are important because they
a. play a critical role in the allocation of the economy’s scarce resources.
b. determine how much of each good gets produced.
c. can be used to predict the impact on the economy of various events and policies.
d. All of the above are correct.
The experience of the Volcker disinflation of the early 1980s
a. generally increased estimates of the sacrifice ratio.
b. generally decreased estimates of the sacrifice ratio.
c. clearly refuted the predictions of the proponents of rational expectations.
d. clearly refuted the predictions of the opponents of rational expectations.
Suppose the money supply tripled, but at the same time velocity doubled and real GDP
was unchanged. According to the quantity equation the price level
a. is 1.5 times its old value.
b. is 3 times its old value.
c. is 6 times its old value.
d. is the same as its old value.
The Bureau of Labor Statistics defines marginally attached workers as persons who
currently are neither working nor looking for work but indicate that they want and are
available for a job and have looked for work sometime in the recent past.
a. True
b. False
During the 1970’s, U.S. inflation averaged 7% each year and real GDP increased.
Holding velocity constant and using the Quantity Equation, we conclude that
a. money growth must have been greater than the growth of real income.
b. money growth must have been less than the growth of real income.
c. prices fell during the 1970’s.
d. output fell during the 1970’s.
When the government’s budget deficit increases
a. the government is borrowing less and public savings falls.
b. the government is borrowing less and public savings increases.
c. the government is borrowing more and public savings falls.
d. the government is borrowing more and public savings increases.
What word do economists use to refer to the purchase of goods that will be used in the
future to produce more goods and services?
a. capital
b. consumption
c. investment
d. costs
Which of the following agencies calculates the CPI?
a. the National Price Board
b. the Department Of Weight and Measurements
c. the Bureau of Labor Statistics
d. the Congressional Budget Office
Suppose you put $500 into a bank account today. Interest is paid annually and the
annual interest rate is 8 percent. The future value of the $500 after 2 years is
a. $428.67.
b. $470.00.
c. $580.00. 1.
d. $583.20.
If a person had increasing marginal utility, then the decline in utility from losing $1,000
would be greater than the increase in utility from gaining $1,000.
a. True
b. False
Initially, the economy is in long-run equilibrium. The aggregate demand curve then
shifts $50 billion to the left. The government wants to change its spending to offset this
decrease in demand. The MPCis 0.80. Suppose the effect on aggregate demand from a
change in taxes is 4/5 the size of the change from government expenditures. There is no
crowding out and no accelerator effect. What should the government do if it wants to
offset the decrease in aggregate demand?
a. Raise both taxes and expenditures by $5.56 billion dollars.
b. Raise taxes by $40 billion dollars and increase expenditures by $50 billion dollars.
c. Reduce taxes by $10 billion dollars and increase expenditures by $10 billion dollars.
d. Reduce taxes by $5.56 billion dollars and increase expenditures by $5.56 billion
dollars.
Which of the following is not held constant when looking at an individual’s demand
curve?
a. income
b. price
c. preferences
d. the availability of alternative goods
Because resources are scarce, a society cannot give all individuals the standard of living
to which each aspires.
a. True
b. False
In which of the following countries has economic growth been sufficiently high that
income would double every ten years?
a. Singapore
b. Nigeria
c. India
d. Indonesia
Some economists believe that there are positives from a little inflation and that it may
“grease the wheels”
a. in the stock market.
b. in the foreign exchange market.
c. in the bond market.
d. in the labor market.