If inflation is perfectly anticipated, benefits are indexed, and there are no restrictions on
contracts, which group loses purchasing power because of inflation?
a. Borrowers, lenders and retirees
b. Only borrowers
c. Neither lenders, borrowers, nor retirees
d. Only lenders
e. Only retirees
An appreciating currency is always a sign of economic health.
Personal consumption spending now comprises approximately what fraction of GDP?
a. One-third
b. One-sixth
c. Three-quarters
d. One-quarter
e. One-half
The incidence of an excise tax
a. refers to who really pays it
b. always falls on suppliers
c. is equally divided between demanders and suppliers
d. is determined by the number of demanders
e. is decided by the government when the tax is imposed
Refer to Figure 15-13. Beginning at point A, suppose a supply shock shifts the
aggregate supply curve to AS2. In the long run, we would expect
a. an increase in the price level and a decrease in real GDP
b. an increase in the price level and a return of real GDP to its full-employment level
c. a decrease in the price level to below its level at point A, and a return of real GDP to
its full-employment level
d. the price level and real GDP to return to their original levels at point A
e. aggregate demand to increase until full employment is restored.
The reason a shock to one sector can spread to the whole economy is that
a. a decrease in production in one sector leads to an overall decrease in spending
b. firms will need to help bail out other firms that are having troubles
c. an increase in production in one sector will lead to an overall decrease in spending
d. most shocks are not sector-specific but economy-wide
e. workers laid off in the one sector will purchase more goods in another sector
If private investment increased by $50 billion while GDP remained the same, which of
the following could have occurred, all else being the same?
a. Consumption spending decreased by $50 billion
b. Exports increased by $50 billion
c. Imports decreased by $50 billion
d. Net exports increased by $50 billion
e. Government spending increased by $50 billion
Which of the following groups would not be considered part of the labor force?
a. U.S. senators
b. Self-employed individuals
c. Individuals who are employed five hours (or less) per week
d. Individuals who have given up looking for work because they have been unable to
find a job
e. Social Security recipients who work part time
An increase in the population will lead to
a. a rightward shift in every individual’s demand curve
b. no shift in the market demand curve
c. a rightward shift in the market demand curve
d. a rightward movement along every individual’s demand curve
e. a rightward movement along the market demand curve
In Figure 3-8, using the supply and demand curves denoted S1 and D1, respectively, the
equilibrium price and quantity are
a. $100 and 50,000
b. $100 and 100,000
c. $120 and 50,000
d. $120 and 75,000
e. $120 and 100,000
A real variable is one that is
a. not adjusted for the dollar’s changing value
b. measured in current dollars
c. adjusted for the dollar’s changing value
d. not measured in terms of goods and services
e. not adjusted for changes in the price level
In the classical model there is complete crowding out when government spending
increases, but in the short-run macro model there is only partial crowding out.
In the long run,
a. the government’s tax policies do not affect the rate of investment spending.
b. lower tax rates will have no effect on the average standard of living.
c. lower tax rates will lead to faster growth in the average standard of living.
d. higher tax rates will lead to slower growth in the average standard of living.
e. the debt and the deficit will converge to zero.
Macroeconomic models focus on the behavior of
a. individual households, business firms, and government agencies
b. individual nations in the foreign trade sector
c. the entire economy
d. large industrial sectors, such as manufacturing
e. individual business firms and government agencies
If cyclical unemployment is eliminated
a. GDP is at its full-employment level
b. GDP is at its equilibrium level
c. the loanable funds market is in equilibrium
d. the aggregate supply curve shifts upward
e. potential output has increased
Due to resource scarcity,
a. some economic activities have an opportunity cost
b. all economic activities have an opportunity cost
c. no economic activities have an opportunity cost
d. economic activities have opportunity costs equal to their market prices
e. economic activities have opportunity costs generally lower than their market prices
A Texas oil company extracts petroleum and sells it to a refinery for $1,000. After
processing, the refinery sells the gasoline to a wholesaler for $1,500, who then sells it to
a gas station for $1,700. The gas station sells it to customers for $2,500. In these
transactions, how much has been added to GDP?
a. $1,000
b. $1,500
c. $1,700
d. $2,500
e. $6,700
The Fed can decrease the money supply by
a. decreasing the reserve requirement
b. making open market purchases of bonds
c. selling government bonds
d. destroying printed currency
e. creating wealth