Archives: Quiz

GDP is: A) a measure of all spending in the economy on foreign and domestic goods and services. B) the total market value of all final goods and services produced within a country in a given year. C) the value […]

If the Fed wished to decrease interest rates, it could A) increase the reserve requirement or conduct an open market sale. B) increase the reserve requirement or conduct an open market purchase. C) decrease the reserve requirement or conduct an […]

The Mexican financial crisis of 1994 was not caused by: A) improved tourism from the U.S. to Mexico. B) the country experiencing increasingly larger trade deficits. C) the rising Mexican inflation rate. D) a loss of confidence in the economy […]

One way to prove the Ricardian equivalence is true is to show that when the government deficit increases, (the) ________ also increase(s). A) private sector saving B) country’s imports C) consumption expenditures D) money supply A bank’s reserves A) are […]

Recall the Application about the market for meteorites to answer the following question(s). According to the Application, people in Morocco bring meteorites picked up in the desert to local dealers, who then sell them to the public through Websites. If […]

If the consumption function is C = 100 + 0.8Y, then the Savings Function is: A) S = 100 + 0.8 Y. B) S = -100 + 0.8Y. C) S = -100 + 0.2Y. D) S = 100 + 0.2Y. […]

One of the flaws of GDP is that it A) includes only transactions that take place in formal businesses. B) ignores transactions that do not take place in organized markets. C) includes measures of the underground economy. D) includes measures […]

Recall Application 4, “The Introduction of Cell Phones and the Bias in the CPI,” to answer the following questions: According to the application, the failure to include cell phones in the calculation of the CPI creates an upward bias on […]

Table 2.1 A group of people has formed a house cleaning and yard maintenance business. The number of houses or yards that they can clean or maintain in any given day is depicted in Table 2.1. The opportunity cost of […]

Suppose a product suddenly loses popularity and the firms producing the product begin to realize large losses. As firms exit the market, the equilibrium price in the market will: A) increase and make the remaining firms stay in business. B) […]

Although government spending increased during the 1930s: A) the money supply increased too, so there was no net monetary expansion. B) the exchange rate rose too, so there was no net trade expansion. C) taxes increased too, so there was […]

What government agency has the option to purchase government bonds issued by the U.S. Treasury? A) the IRS B) the Federal Reserve C) the Commerce Department D) the Congressional Budget Office Let C = 550 + 0.8y and I = […]

A man is fired from his job because he was late for work too many times. While he is searching for another job he would be classified as: A) not in the labor force because his employer had a legitimate […]

Expansionary policies are policies designed to A) increase the level of real GDP. B) reduce the level of real GDP. C) decrease government spending. D) reduce the federal deficit. In order to prevent a wage-price spiral from emerging when the […]

If increases in government spending on infrastructure projects “crowd out” private investment spending, this will lead to A) higher levels of real income and wages in the future. B) no effects on real income and wages in the future. C) […]

The Obama stimulus package included fiscal policy actions designed to assist the economy in its recovery from recession. These fiscal policy actions would include ________ government spending and ________ taxes. A) increasing; decreasing B) decreasing; increasing C) increasing; Increasing D) […]

Recall Application 3, “The Broken Window Fallacy and Keynesian Economics,” to answer the following questions: In the Application, why might fixing a broken window not be good for society? A) because the money spent on fixing the broken windows could […]

Philip Cagan, a student of Milton Friedman, is best known for his work on: A) money and real GDP. B) hyperinflation. C) the quantity theory of money. D) measuring money supply. A reason that economists keep an eye on both […]

If the government estimates that the marginal cost of building a bridge is $100 million, while the marginal benefit is $150 million, the marginal principle dictates that the government should: A) build the bridge. B) never build the bridge. C) […]

Figure 4.3 illustrates the demand for tacos. An increase in price of tacos would bring about a movement from A) point a to point c. B) point c to point a. C) D2 to D0. D) D0 to D1. Recall […]

Figure 19.1 Referring to Figure 19.1, if the exchange rate is currently 14 pesos per dollar, then we expect the dollar to ________ and the peso to ________. A) depreciate; depreciate B) depreciate; appreciate C) appreciate; depreciate D) appreciate; appreciate […]

Assume there is no government or foreign sector. If the multiplier is 5, a $10 billion increase in investment will cause equilibrium output to increase by: A) $5 billion. B) $10 billion. C) $50 billion. D) $200 billion. Figure 9.5 […]

A bank has reserves of $40, loans of $110, deposits of $90, and owners’ equity of $60. Which of the following represents the bank’s total assets? A) $180 B) $110 C) $130 D) $150 Crowding out refers to A) an […]

In the supply and demand for U.S. dollars in Europe, who is a supplier in that market? A) the Americans who want to invest in Europe B) the Europeans who want to invest in the U.S. C) the Americans who […]

Classical economists assumed: A) involuntary unemployment exists. B) there is never full employment. C) the wage rate adjusts to maintain labor market equilibrium. D) the wage rate cannot adjust to equate the quantity of labor demanded with quantity of labor […]

The crowding-in effect implies that a decrease in government purchases causes: A) interest rates to fall, which decreases investment. B) interest rates to fall, which increases investment. C) interest rates to rise, which decreases investment. D) interest rates to rise, […]

Which of the following is not counted in the GNP of the United States? A) the wage of a U.S. citizen who works in a foreign country for a foreign firm B) the interest earned by a U.S. bank on […]

Assume that last year’s inflation rate is the same as the expectation of inflation for the next year. According to the expectations Phillips curve, if the inflation rate increases relative to the expected rate, the unemployment rate A) decreases. B) […]

An open market ________ by the Fed increases interest rates and ________ output. A) sale; increases B) sale; decreases C) purchase; increases D) purchase; decreases Rising wages and input prices: A) cause the aggregate demand curve to shift to the […]

Recall Application 2, “Increased Political Independence for the Bank of England Lowered Inflation Expectations,” to answer the following questions: According to the application, there is evidence that supports the conjecture that: A) more central bank independence is associated with lower […]

Refer to Figure 15.2. Adjustment from a short-run equilibrium to the long-run equilibrium is represented by a movement from point ________ to point ________. A) a; e B) a; c C) e; D) a; A supply curve is defined as […]

COLA is an acronym that stands for: A) Cost of Living Adjustment. B) Cost of Living Annually. C) Cost of Living Alone. D) Cost of Living Account. Table 6.3 Refer to Table 6.3. The number of people not in the […]

Why were cell phones not included in the CPI basket immediately after it was introduced? A) Most American families did not have cell phones when they were first introduced. B) The cell phones were all made in Japan, so they […]

If the multiplier = 2.5, the MPS would be A) 0.25. B) 0.4. C) 0.6. D) 0.75. If the economy is in long run equilibrium at full employment, the level of overall economic activity: A) is positively affected by changes […]

Recall Application 1, “Increasing Life Expectancy and Aging Populations Spur Costs of Entitlement Programs,” to answer the following questions: According to the application, increasing life expectancy would affect the budget because: A) as the population grows older, the Social Security […]

Recall Application 2, “How Fast to Sail?” to answer the following questions: Based on the Application, the marginal benefit of sailing a ship faster is: A) more cargo delivered per year. B) more fuel cost incurred. C) less fuel costs […]

An increase in the marginal propensity to import will cause the aggregate expenditure line to: A) become flatter. B) become steeper. C) shift upwards. D) shift downwards. Suppose that in the time it takes for him to bake a cake, […]

An increase in the reserve requirement A) increases the money supply, which leads to increased interest rates and a decrease in GDP. B) increases the money supply, which leads to decreased interest rates and a decrease in GDP. C) decreases […]

Recall Application 3, “Sources of Growth in China and India,” to answer the following questions: According to the application, which country has a low GNP per capita relative to the U.S.? A) China B) India C) Both A and B […]

Table 5.3 Refer to Table 5.3. Assume that this economy produces only two goods: Good X and Good Y. If year 1 is the base year, the value for this economy’s GDP Deflator in year 2 is: A) 113.8. B) […]

Figure 14.5 Refer to Figure 14.5. Assume the interest rate equals 8% and the money supply decreases from to . If the interest rate remains at 8%: A) money demand will increase. B) money demand will decrease. C) there will […]

Imagine two countries, Bruceland and Davidia. Bruceland is producing everything at a lower absolute cost than Davidia. If the two countries trade what is the reason? The Kennedy administration endorsed substantial tax cuts because: A) tax rates were very high, […]

Investment is “crowded out” by an increase in government spending when A) an increase in government spending causes output and prices to rise, which in turn causes interest rates to rise. B) an increase in government spending causes output and […]

Which of the following is an example of a Federal Reserve action that increases the money supply? A) an increase in the required reserve ratio B) a decrease in the discount rate C) an increase in the federal funds rate […]

To determine the equilibrium price level and equilibrium level of real GDP, the aggregate demand and aggregate supply must A) be considered separately. B) intersect. C) be disregarded. D) be considered as a multiplier. The demand for money that arises […]

If the Federal Reserve wanted to change the money supply in the economy, it would be least likely to A) buy bonds on the open market. B) sell bonds on the open market. C) change the level of reserves required […]

Table 6.10 Refer to Table 6.10. If 1999 is the base year, then the inflation rate (i.e., the growth rate of the price index) between 2000 and 2001 is: A) about 11 percent. B) about 13 percent. C) about 9 […]

An increase in supply of a product results when A) taxes on the product are increased. B) the companies that produce the product have higher materials costs. C) technological innovations are introduced in the manufacturing process. D) the government reduces […]

Insurance companies can reduce risk by accepting premiums from A) many people to insure against independent events. B) few people to insure against independent events. C) many people to insure against dependent events. D) few people to insure against dependent […]

If the economy is in equilibrium at full employment, a decrease in aggregate demand will: A) decrease the price level and leave the level of output unchanged in the short run. B) increase the price level and leave the level […]