An illiquid asset can be quickly converted to cash with little or no loss of value.
A) True
B) False
The _____ curve shows the positive relationship between the aggregate price level and
the quantity of aggregate output supplied when wages and prices are not fully flexible.
A) aggregate demand
B) short-run aggregate supply
C) aggregate spending
D) long-run aggregate supply
In the income”expenditure model, contractionary monetary policy leads to _____
interest rates, a(n) _____ in planned investment spending, and a(n) _____ in
equilibrium GDP.
A) lower; increase; increase
B) lower; decrease; decrease
C) higher; increase; increase
D) higher; decrease; decrease
In the circular-flow model, households:
A) receive transfer payments from the government.
B) buy resources in the factor markets.
C) sell products in the market for goods and services.
D) issue stocks and bonds to raise capital.
Recessions are periods when:
A) output rises.
B) the aggregate price level rises.
C) the unemployment rate is falling.
D) output and employment are falling.
Consider an economy that is facing a recessionary gap. The Federal Reserve decides to
use expansionary monetary policy to close that gap. As a result of this policy, in the
short run the money supply will _____, the interest rate will _____, investment and
consumption spending will _____, and real GDP will _____.
A) decrease; fall; decrease; increase
B) increase; increase; decrease; decrease
C) decrease; increase; decrease; decrease
D) increase; fall; increase; increase
The short-run aggregate supply curve slopes upward because of:
A) wage and price stickiness.
B) wage and price flexibility.
C) increasing technology.
D) a reduction in resource availability at higher price levels.
If the price of a share of stock is expected to rise, then demanders will demand more of
it today, owners will be less willing to sell it today, and its price will rise today.
A) True
B) False
When a chef prepares a dinner for a customer, which of the following is physical
capital?
A) the chef
B) the oven
C) the food ingredients
D) the chef’s training and experience
The use of online banking increases the unit-of-account cost of a high inflation rate.
A) True
B) False
The person who is usually credited with developing national income accounts is:
A) Adam Smith.
B) John Maynard Keynes.
C) Simon Kuznets.
D) Milton Friedman.
Setting interest rates and the money supply in an effort to change overall spending in is
use of:
A) fiscal policy.
B) monetary policy.
C) investment.
D) the stock market.
According to the classical model:
A) the aggregate supply curve is horizontal.
B) increases in the money supply lead to proportional increases in the price level but
not to change in real output.
C) increases in the money supply lead to proportional changes in output but no change
in the price level.
D) we are all dead in the long run.
Real exchange rates are those that are recognized by the International Monetary Fund.
A) True
B) False
The loanable funds market examines the market outcome of the demand for funds from
savers and the supply of funds from borrowers.
A) True
B) False
An autonomous increase in aggregate spending _____ real GDP by _____.
A) reduces; that amount
B) increases; that amount
C) reduces; more than that amount
D) increases; more than that amount
A sudden increase in commodity prices will lead to a shift in the _____ curve to the
_____, resulting in _____ aggregate _____.
A) SRAS; right; higher; output
B) AD; right; higher; prices
C) SRAS ; left; lower; output
D) AD; left; lower; prices
You can spend $100 on either a new economics textbook or a new CD player. If you
choose to buy the new economics textbook, the opportunity cost is:
A) $100.
B) your enjoyment of the new CD player.
C) both the $100 and your enjoyment of the new CD player.
D) impossible to determine.
Scenario: The Aggregate Production Function
Holding the human capital per worker and technology unchanged, the estimated
aggregate production function in Jamaica is Y / L = 50 K / L, where Y = real output,L =
number of workers, and K = quantity of physical capital.
Look at the scenario The Aggregate Production Function. If K / L = $81, then real GDP
per worker is:
A) $4,050.
B) $4,000.
C) $4,096.
D) $40,500.
Look at the table Population
Data for Estill County. How many people are in the labor force?
A) 6,000
B) 9,400
C) 7,400
D) 6,500
When Fed officials worried about the possibility of “Japanification” in the United
States, it meant that they were worried that the U.S. economy would:
A) grow faster than the economy of Japan after World War II.
B) accumulate large trade surpluses, like Japan.
C) fall into a period of hyperinflation.
D) fall into a deflationary trap.
A market failure occurs when:
A) some people are able to buy many more goods than other people are.
B) the individual’s pursuit of self-interest means some people will not be able to buy all
of the goods they need.
C) the individual’s pursuit of self-interest makes the society worse off.
D) while pursuing their self-interest, some people may make a mistakefor example,
they may regret buying a particular car.
Inflation targeting occurs when the central bank sets an explicit goal for the inflation
rate and uses monetary policy to hit that goal.
A) True
B) False
If there are 100 million people in the total population, a labor force of 50 million, and
47 million employed workers, the unemployment rate is:
A) 3%.
B) 6%.
C) 8%.
D) 10%.
Money flows into the United States from other countries as a direct result of:
A) foreign purchases of U.S. goods and services.
B) U.S. purchases of foreign goods and services.
C) U.S. investment in foreign companies.
D) U.S. purchases of foreign assets.
Table: Lemonade and Cookies
Look at the table Lemonade and Cookies. Assume that an economy produces only
lemonade and cookies. If 2013 is the base year, real GDP in 2014 was:
A) $400.
B) $420.
C) $425.
D) $445.
When the unemployment rate is very low, most of it tends to be:
A) cyclical.
B) frictional.
C) seasonal.
D) structural.
If the money supply increases by 10%, in the long run:
A) unemployment drops by 10%.
B) the price level increases by 10%.
C) real GDP increases by 10%.
D) unemployment drops by 20%.
A loan is a liability to the issuer but an asset to the person taking it out.
A) True
B) False
In a closed economy, the savings”investment spending identity is:
A) I = GDP ” C ” G + (IM ” NX).
B) NS = GDP + I.
C) NS = GDP + (C ” T + TR) + (T ” TR ” G).
D) I = GDP ” C ” G.
In the loanable funds market, borrowers:
A) are best represented by the supply of loanable funds.
B) are not affected by changes in the inflation rate.
C) are best represented by the demand for loanable funds.
D) lose money to unexpected increases in the inflation rate.