An increase in the benefit from undertaking an activity will result in an increase in the
opportunity cost of that activity.
The law of demand states that there is a negative relationship between price and
quantity demanded, ceteris paribus.
When firms increase capital stock, the productivity of their workers increases.
An increase in the money supply will appreciate a country’s currency.
Structural unemployment exists because workers and employers try to find the right
employment matches.
The tax cuts of the first Reagan administration were intended to stimulate aggregate
supply, rather than to stimulate aggregate demand.
As the price of a product rises, the quantity supplied decreases.
The exchange rate is the rate at which one currency can be traded for another.
An economic model is a detailed version of an economic environment.
Public policies such as the government subsidies for corn are topics of concern in
microeconomics.
Recall Application 1, “Absolute Advantage and Comparative Disadvantage in Latvia,”
to answer the following questions:
According to the Application, Latvia would be better off if it does not trade with any of
its neighboring European countries.
There is a negative relationship between the real rate of interest and investment
spending.
The ability to produce a product at a lower resource cost than another nation can
produce the same product is called comparative advantage.
Nominal GDP measures the value of goods and services using current-year prices.
Which of the following shifts the entire consumption function upwards?
A) an increase in income
B) a decrease in the value of consumer durables
C) a decrease in consumer confidence
D) an increase in consumer wealth
In 2011, federal taxes were about ________ percent of GDP.
A) 16.4
B) 15.4
C) 17.5
D) 23.4
In the United States during the 1950s and 1960s
A) the inflation rate was frequently less than 2 percent a year.
B) prices fell.
C) prices rose sharply.
D) there was zero inflation.
Figure 4.6
Figure 4.6 illustrates a set of supply and demand curves for a product. When the
economy moves from point C to point E, there has been:
A) an increase in supply and a decrease in quantity demanded.
B) a decrease in supply and a decrease in quantity demanded.
C) a decrease in quantity supplied and a decrease in demand.
D) an increase in quantity supplied and a decrease in quantity demanded.
The theory of investment that emphasizes the role of expected growth in real GDP on
investment spending is known as
A) real business cycle theory.
B) the theory of animal spirits.
C) the accelerator theory.
D) the multiplier theory.
Suppose that the quantity of cars demanded exceeds the quantity of cars supplied. We
would expect that
A) the price of cars will increase.
B) the price of cars will decrease.
C) the supply will increase (supply will shift to the right) to meet the demand.
D) the demand will decrease (demand will shift to the left) to meet the supply.
Figure 19.5 From Figure 19.5 above, suppose the U.S. is currently fixing its exchange
rate at $1.25 per euro. If the U.S. wants to attain equilibrium in the foreign exchange
market, it must:
A) devalue its currency.
B) keep the exchange rate unchanged.
C) revalue its currency.
D) abandon the U.S. dollar in favor of the euro.
If a farmer buys a new tractor from John Deere for use on her cotton farm, it is included
in GDP as:
A) part of private investment.
B) a durable consumption good.
C) a service.
D) a nondurable consumption good.
In the product market of the circular flow diagram, households:
A) pay for goods and services supplied to these markets.
B) pay for goods and services demanded from these markets.
C) earn income for goods and services supplied to these markets.
D) earn income for goods and services demanded from these markets.
If we calculate GNP per capita of all countries using a similar set of prices, the United
States would rank ________ in 2011.
A) 6th highest
B) the highest
C) the second highest
D) the 14th highest
An increase in British demand for U.S. goods and services is likely to:
A) decrease the quantity of pounds supplied and not change the quantity of pounds
demanded.
B) not change the quantity of pounds supplied but increase the quantity of pounds
demanded.
C) increase the quantity of pounds demanded.
D) increase the quantity of pounds supplied.
Which of the following is a step that the Federal Reserve has taken to better control
expectations of long term interest rates?
A) The Fed now asks the members of the FOMC for their predictions of future
short-term interest rates and makes them public.
B) The Fed now asks the members of the FOMC for their predictions of future
long-term interest rates and makes them public.
C) The Fed now asks the members of the FOMC for their predictions of inflation rates
and makes them public.
D) None of the above is correct.
Blu-ray disc players, iPhones, and hybrid cars are generally considered to be ________
goods.
A) durable
B) nondurable
C) intermediate
D) service
An arrangement that allows buyers and sellers to exchange things is called
A) a contract.
B) a market.
C) money.
D) efficient.
Recall the Application about the impact inflation has on your potential future
salary and the repayment of student loans to answer the following question(s). In
considering the costs involved for student loans that must be repaid in ten years, this
Application is addressing the economic concept of
A) the marginal principle.
B) the principle of voluntary exchange.
C) the principle of diminishing returns.
D) the real-nominal principle.
Draw a graph illustrating a labor market in equilibrium. Illustrate and explain the effect
of an increase in the capital stock.
What is meant by a liquidity trap?
Define “money illusion” and explain its cause.
How can changes in wages and prices restore an economy to full employment?
Explain the impact of Fed open-market purchases of government bonds on the money
supply.
What are the components of M2?
Suppose the public expects money supply and money demand to increase by 10 percent
this year. If the Fed decided to allow money supply to increase by only 8 percent,
explain what will happen to the real interest rates and investments in the long run.
What is the primary reason why the U.S. government intervenes in financial markets
when the economy experiences a financial crisis similar to the one that was experienced
in 2008? How do they achieve this objective?