The standard way to measure the effect of debt in an economy is the stock of debt
relative to the GDP.
When you use money to fill your car with gas every week, you are using money as a
unit of account.
An increase in search costs will decrease structural unemployment.
If the dollar depreciates against the euro it means that French-made goods become more
expensive in the United States.
If a large number of people are classified as being out of the labor force when they are
really looking for work, this will lead to an official unemployment rate that is lower
than the true unemployment rate.
Markets do not determine the quantity of goods sold, only the price.
You should invest in a project if the cost you incur today is greater than the present
value of the future payments from the project.
A comparative advantage is the ability of one person or nation to produce a good at an
opportunity cost that is lower than that of another person or nation.
If households base their consumption spending on permanent income, then a tax
increase will decrease consumption only if the tax is deemed permanent.
Basically, the marginal principle helps us to evaluate the factors involved in taking an
action or if doing something is worth the effort.
In order for money to be an effective medium of exchange, it is important to have it
serve as a unit of account.
Unemployment insurance typically replaces a worker’s full earnings.
Trade theory suggests that increased trade leads to increased wage equality.
Specialization in production will increase total output.
Evidence suggests that Republican presidents usually guide the economy to faster
economic growth than their Democratic counterparts.
A supply curve is defined as the relationship between:
A) the price of a good and the quantity that consumers are willing to buy.
B) the price of a good and the quantity that producers are willing to sell.
C) the income of consumers and the quantity of a product that consumers are willing to
buy.
D) the income of consumers and the quantity of a product that producers are willing to
sell.
In a market economy, what specifies the terms of exchange, facilitating exchange
between strangers?
A) contracts
B) insurance
C) patents
D) accounting rules
Table 2.2 Julianne runs a business and needs to
decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying
open for each additional hour. Suppose that we observe Julianne staying open 5 hours
per day. If she is following the marginal principle, what must her marginal benefit be?
A) $10
B) $16
C) $20
D) $24
An economic ________ refers to either an upturn or a downturn in the economy.
A) stagnation
B) model
C) fluctuation
D) chain index
As the price level ________, the purchasing power of money ________.
A) increases; increases
B) increases; decreases
C) decreases; decreases
D) decreases; stays the same
According to the neoclassical theory of investment, which of the following is not the
important determinant of investment?
A) taxes
B) real interest rates
C) nominal interest rates
D) All of the above are correct answers.
Recall the Application about the lack of property rights in Peru, and why clear property
rights are important for economic growth in developing countries, to answer the
following question(s). Clear property rights give owners an incentive to make long-term
investments in their property, and are vital for the property owners to be able to borrow
funds.According to this Application, clear property rights are important for economic
growth, because without a clear title to property,
A) the property cannot be used as collateral for loans.
B) people will not reside on the property.
C) no utilities will be available for the property.
D) the property has no value.
Because banks have been required to keep 10 percent of deposits exceeding $71 million
as reserves in 2012, one would expect that on the basis of the formula the money
multiplier is:
A) 10.
B) 3.
C) 1.
D) 20.
Table 2.2
Krystal runs a nail salon and needs to decide how many hours to stay open. Table 2.2
illustrates her marginal costs of staying open for each additional hour. Suppose that we
observe Krystal staying open 5 hours and her marginal benefit of staying open per hour
is $36. If she is following the marginal principle, Krystal should
A) stay open 1 more hour.
B) stay open 2 more hours.
C) stay open 1 fewer hour.
D) stay open 2 fewer hours.
When GDP is below potential output, prices fall because
A) firms can easily find new workers and are forced to offer higher wages, which
decreases the costs of production.
B) firms can easily find new workers and can offer lower wages, which decreases the
costs of production.
C) firms find it difficult to hire and retain workers and are forced to offer higher wages,
which increases the costs of production.
D) firms find it difficult to hire and retain workers and can offer higher wages, which
decreases the costs of production.
Figure 7.1
Refer to Figure 7.1. In equilibrium, the real wage is ________ and the amount of labor
employed is ________.
A) Z; C
B) Y; C
C) X; C
D) Y; B
Governments in developing countries can promote economic growth by:
A) taxing imports of foreign goods that compete with domestic goods.
B) reducing the presence of foreign direct investment in their economies.
C) slowing down the growth of the financial sector.
D) creating the proper legal and economic environment.
Explain why deflation could prevent people from being able to repay their debts.
Determine the impact of an increase in government spending of $10 billion when the
marginal propensity to consume is 0.8. Determine the impact of a decrease in
government spending of $5 billion when the marginal propensity to save is 0.25.
What is meant by monetizing the debt?
Comment on the following statement: “An economy’s aggregate demand curve is
derived by horizontally summing the market demand curves for all the products
consumed in the economy.”
What is the multilateral real exchange rate? What is the effect in the U.S. of an increase
in its multilateral real exchange rate?
________ occurs in a market when consumers are willing to buy more than producers
are willing to sell, or can supply