Figure 12.1
Refer to Figure 12.1. Which of the following causes a movement from Point A to Point
B?
A) an increase in the interest rate
B) positive growth in the GDP
C) negative growth in the GDP
D) a decrease in the interest rate
We measure gross domestic product by multiplying the quantities of goods by their
prices because it allows us to
A) express the values of products in a common unit of measurement.
B) correct for inflation.
C) directly compare the output of one economy to that of another.
D) calculate the total number of units of goods produced in an economy.
Recall the Application about the Fed’s response to the collapse of the investment house
Bear Stearns as well as its handling of the 2008 financial crisis with respect to other
financial institutions to answer the following question(s).
According to this Application, the Fed responded to the financial crisis by continuing to
develop new programs. One example of this was its announcement that it would now
purchase commercial paper, which is the short-term debt of corporations. This is an
example of the Fed acting as a
A) medium of exchange.
B) lender of last resort.
C) store of value.
D) unit of account.
People who want to work but have stopped looking for work because they could not
find jobs after actively searching are called
A) employed.
B) unemployed.
C) discouraged workers.
D) empowered.
According to the principle of diminishing returns, if the number of workers is increased
beyond the point of diminishing returns, then the additional worker
A) increases total output by the same amount as previous workers.
B) increases total output by more than the amount of previous workers.
C) increases total output by less than the amount of previous workers.
D) decreases total output.
Assume that chicken and beef are substitutes. When the price of beef increases:
A) the demand for chicken decreases.
B) the demand for chicken increases.
C) the supply of chicken increases.
D) the supply of chicken decreases.
The production function is . If there are 121 units of capital and 225 units
of labor, aggregate output is:
A) 120 units.
B) 165 units.
C) 240 units.
D) 330 units.
If the economy was operating above full employment, it could return to full
employment
A) by itself, through rising wages and prices.
B) through decreases in government spending or tax increases.
C) through open market sales.
D) all of the above
If demand increases and supply decreases in Figure 4.7, then the equilibrium:
A) price rises.
B) price falls.
C) quantity rises.
D) quantity falls.
During the Kennedy administration, what did economist Walter Heller propose to bring
the economy back to full employment?
A) a large government works program
B) insourcing
C) tax cuts
D) tariffs on imported goods
Recall the Application about why international trade may reduce measured inequality in
the United States to answer the following question(s). While it is conventional wisdom
now that inequality in the United States has increased in the last several decades, until
recently no one has taken a careful look at the actual living standards of different
income groups, taking into account the goods they purchase. Two economists from the
University of Chicago, Christian Broda and John Romalis, investigated the living
standards of low-income groups and high-income groups based on the goods these
groups purchase.
According to this Application, prices for the nondurable goods purchased by the poor
have ________ the prices of nondurable goods purchased by the rich.
A) increased more than
B) increased less than
C) increased at the same rate as
D) decreased at the same rate as
The government spending multiplier is positive because ________ in government
spending cause ________ in GDP.
A) decreases; decreases
B) increases; no change
C) increases; decreases
D) decreases; increases