Survey of Economics
Test Preparation
Course Introduction
Survey of Economics provides an overview of fundamental economic principles, exploring both microeconomics and macroeconomics. Topics include supply and demand, market structures, the role of government, inflation, unemployment, monetary and fiscal policy, and international trade. Students will develop an understanding of how individuals, firms, and governments make decisions regarding resource allocation and how these decisions affect the economy as a whole. The course emphasizes real-world applications and critical thinking to analyze contemporary economic issues.
Recommended Textbook Principles of Macroeconomics 8th Edition by N. Gregory Mankiw
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158 Chapters
11779 Verified Questions
11779 Flashcards
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Page 2
Chapter 1: Ten Principles of Economics
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Sample Questions
Q1) In considering how to allocate its scarce resources among its various members,a household considers
A)each member's abilities.
B)each member's efforts.
C)each member's desires.
D)All of the above are correct.
Answer: D
Q2) Which of the following products would be considered scarce?
A)bread
B)baseballs autographed by Babe Ruth
C)motorcycles
D)All of the above are correct.
Answer: D
Q3) Which of the following is a subject that economists study?
A)the growth in average income
B)the fraction of the population that cannot find work
C)the rate at which prices are rising
D)All of the above are correct.
Answer: D
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Page 3
Chapter 1: Ten Principles of Economics: How People Make Decisions
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139 Verified Questions
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Sample Questions
Q1) Which of the following industries has a marginal cost that is close to zero?
A)automobile
B)aircraft
C)software
D)furniture
Answer: C
Q2) The property of society getting the most it can from its scarce resources is called
A)efficiency.
B)equality.
C)externality.
D)productivity.
Answer: A
Q3) The adage,"There is no such thing as a free lunch," means A)even people on welfare have to pay for food.
B)the cost of living is always increasing.
C)people face tradeoffs.
D)all costs are included in the price of a product.
Answer: C
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Chapter 1: Ten Principles of Economics: How People Interact
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Sample Questions
Q1) The principle that "trade can make everyone better off" applies to interactions and trade between A)families.
B)states within the United States.
C)nations.
D)All of the above are correct.
Answer: D
Q2) When the "invisible hand" guides economic activity,prices of products reflect
A)only the values that society places on those products.
B)only the costs to society of producing those products.
C)both the values that society places on those products and the costs to society of producing those products.
D)none of the above;when the "invisible hand" guides economic activity,prices of products are set by the government in a manner that is thought to be "fair."
Answer: C
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Chapter 1: Ten Principles of Economics: How the Economy
As a Whole Works
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Sample Questions
Q1) In the short run,which of the following rates of growth in the money supply is likely to lead to the lowest level of unemployment in the economy?
A)3 percent per year
B)5 percent per year
C)7 percent per year
D)9 percent per year
Q2) In less than two years in the early 1920s,the cost of a German newspaper rose from 0.30 marks to 70,000,000 marks.This is a spectacular example of
A)market power caused by a change in the country's standard of living.
B)market power caused by a single firm controlling the newspaper production.
C)inflation caused by increased productivity in the economy.
D)inflation caused by an increase in the quantity of money in the economy.
Q3) What is the most important factor that explains differences in living standards across countries?
A)the quantity of money
B)the level of unemployment
C)productivity
D)equality
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Chapter 1: Ten Principles of Economics: Part A
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53 Verified Questions
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Sample Questions
Q1) Refer to Scenario 1-1.What is your opportunity cost of studying economics?
Q2) Refer to Scenario 1-5.What is your opportunity cost of working?
Q3) Zack quits his job at a consulting firm,which pays $40,000 a year,to enroll in a two-year graduate program.His annual school expenses are $30,000 for tuition,$2,000 for books,and $600 for food.What is his opportunity cost of attending the two-year graduate program?
Q4) Consider two countries,Muria and Zenya.In Muria total annual output is worth $800 million and people work 40 million hours.In Zenya total annual output is worth $900 million and people work 50 million hours.In which country is productivity higher?
Q5) Give an example of government intervention that is intended to reduce an externality.
Q6) Invisible hand is a term used by the economist ------ to describe how the decisions of households and firms lead to desirable market outcomes.
Q7) Explain the concept of externality and give an example.
Q8) In the short run,an increase in the money supply is likely to lead to ------ inflation and ------ unemployment.
Q9) Refer to Scenario 1-3.What is the company's marginal cost?
Q10) What is another word for "marginal"?
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Chapter 1: Ten Principles of Economics: Part B
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Sample Questions
Q1) An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of that activity.
A)True
B)False
Q2) Market failure occurs when no individual has the ability to substantially influence market prices.
A)True
B)False
Q3) Market failure refers to a situation in which the market does not allocate resources efficiently.
A)True
B)False
Q4) Efficiency means everyone in the economy should receive an equal share of the goods and services produced.
A)True
B)False
Q5) Inflation and unemployment both increase as the money supply increases.
A)True
B)False
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Chapter 2: Thinking Like an Economist
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Sample Questions
Q1) The language of economics is
A)needlessly arcane.
B)valuable because it provides a new and useful way of learning about the world.
C)easy to learn within a day.
D)unnecessary to learn for a thorough understanding of economics.
Q2) Studying which of the following is helpful in learning to think like an economist?
A)theory.
B)case studies.
C)examples of economics in the news.
D)all of the above.
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Chapter 2: Thinking Like an Economist: The Economist As Scientist
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256 Verified Questions
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Sample Questions
Q1) In the simple circular flow diagram,the flow of money from the firms to the markets for factors of production is called
A)spending.
B)revenue.
C)income.
D)wages,rent,and profit.
Q2) Refer to Figure 2-16.The opportunity cost of obtaining 30 additional widgets by moving from point A to point C is approximately A)10 gadgets.
B)30 widgets
C)10 gadgets and 30 widgets.
D)0 gadgets.
Q3) Refer to Figure 2-1.Which arrow represents the flow of goods and services?
A)A
B)B
C)C
D)D
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Page 10
Chapter 2: Thinking Like an Economist: The Economist As Policy Adviser
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Sample Questions
Q1) "Prices rise when the quantity of money rises rapidly" is an example of a A)negative economic statement.
B)positive economic statement.
C)normative economic statement.
D)statement that contradicts one of the basic principles of economics.
Q2) The Federal Reserve
A)designs tax policy.
B)enforces the nation's antitrust laws.
C)sets the nation's monetary policy.
D)analyzes data on workers.
Q3) Normative statements are not
A)descriptive.
B)prescriptive.
C)claims about how the world should be.
D)made by economists speaking as policy advisers.
Q4) When an economist evaluates a positive statement,he or she is primarily
A)examining evidence.
B)acting as a scientist.
C)concerned with verifying how the world is.
D)All of the above are correct.
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Chapter 2: Thinking Like an Economist: Why Economists
Disagree
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Sample Questions
Q1) Yi and Avik are both economists.Yi thinks that taxing consumption,rather than income,would result in higher household saving because income that is saved would not be taxed.Avik does not think that household saving would respond much to a change in the tax laws.In this example,Yi and Avik
A)hold different normative views about the tax system.
B)disagree about the validity of a positive theory.
C)have a fundamental misunderstanding of the tax system.
D)More than one of the above is correct.
Q2) Almost all economists agree that tariffs and import quotas
A)reduces general economic welfare.
B)increases general economic welfare.
C)have no effect on general economic welfare.
D)stimulate a less than fully employed economy.
Q3) Economists sometimes give conflicting advice because
A)graduate students in economics are encouraged to argue with each other.
B)economists have different values and scientific judgment.
C)economists acting as scientists do not like to agree with economists acting as policy advisers.
D)economics is more of a belief system than a science.
Page 12
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Sample Questions
Q1) When a government program is justified not on its merits but on the number of jobs it will create,
A)the program is an efficient use of taxpayer dollars.
B)it should be approved only if the unemployment rate is low.
C)taxes should be raised to fund the program.
D)it is known as the "broken window fallacy."
Q2) John Maynard Keynes referred to economics as an easy subject,
A)at which very few excel.
B)but not as easy as philosophy or the pure sciences.
C)which very few can enjoy.
D)which deals primarily with common sense.
Q3) Congressman Dearmark justified spending $3 million on a new entertainment complex in his district because it will create 450 new jobs for his residents.As a student of economics,you know that
A)this is a case of the "broken window fallacy."
B)this is a great use of taxpayer dollars.
C)this policy diverts money from spending somewhere else in the economy.
D)Both a and c are correct.
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Chapter 2: Thinking Like an Economist: Graphing a Brief Review
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Sample Questions
Q1) The slope of a line is equal to
A)rise divided by run.
B)run divided by rise.
C)rise minus run.
D)rise plus run.
Q2) Refer to Figure 2-18.Which of the following could result in a movement from point B to point Z?
A)a change in the price of a restaurant meal
B)a change in the number of restaurant meals demanded
C)a change in income
D)Both a and b are correct.
Q3) Refer to Figure 2-16.The graph shown is known as a A)time-series graph.
B)bar graph.
C)scatterplot.
D)pie chart.
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Chapter 2: Thinking Like an Economist: Part A
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56 Verified Questions
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Sample Questions
Q1) Like biologists and physicists,economists use the dispassionate development and testing of how the world works known as the
Q2) Refer to Figure 2-3.What do the rectangles represent in the figure?
Q3) Refer to Figure 2-22.What is the x-coordinate of point R?
Q4) Who would be more likely to study the effects of rent control on housing in New York City,a macroeconomist or a microeconomist?
Q5) When economists disagree about whether a policy is fair,they are expressing a difference in
Q6) Refer to Figure 2-3.What is the name of the model depicted in the figure?
Q7) Refer to Figure 2-22.Is a move from point A to point B considered a shift of the curve or a movement along the curve?
Q8) Is the following a positive or normative statement? The Federal Reserve should set an inflation target and employ policies to meet the target.
Q9) When economists disagree about whether the government should tax a household's income or its consumption,they are expressing a difference in
Q10) In the markets for goods and services in the circular flow diagram,households act as
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Chapter 2: Thinking Like an Economist: Part B
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) The circular flow model is not used anymore because it fails to perfectly replicate real world situations.
A)True
B)False
Q2) A production possibilities frontier will be bowed outward if some of the economy's resources are better suited to producing one good than another.
A)True
B)False
Q3) The scientific method can be applied to the study of economics.
A)True
B)False
Q4) Economists may disagree about the validity of alternative positive theories about how the world works.
A)True
B)False
Q5) Economic models are most often composed of diagrams and equations.
A)True B)False
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Chapter 3: Interdependence and the Gains From Trade
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2 Verified Questions
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Sample Questions
Q1) People who provide you with goods and services
A)are acting out of generosity.
B)do so because they get something in return.
C)have chosen not to become interdependent.
D)are required to do so by the government.
Q2) When an economist points out that you and millions of other people are interdependent,he or she is referring to the fact that we all
A)rely upon the government to provide us with the basic necessities of life.
B)rely upon one another for the goods and services we consume.
C)have similar tastes and abilities.
D)are concerned about one another's well-being.
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17
Chapter 3: Interdependence and the Gains From Trade: A
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60 Verified Questions
60 Flashcards
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Sample Questions
Q1) Refer to Figure 3-3.If Arturo and Dina both spend all of their time producing tacos,then total production is
A)400 tacos and 0 burritos.
B)400 tacos and 250 burritos.
C)800 tacos and 0 burritos.
D)800 tacos and 500 burritos.
Q2) Refer to Figure 3-8.If the production possibilities frontiers shown are each for one day of production,then which of the following combinations of pounds of coffee and pounds of soybeans could Chile and Colombia together not make in a given day?
A)4 pounds of coffee and 17 pounds of soybeans
B)8 pounds of coffee and 14 pounds of soybeans
C)16 pounds of coffee and 9 pounds of soybeans
D)24 pounds of coffee and 3 pounds of soybeans
Q3) Refer to Figure 3-10.If Alice produces only lemonade,she can produce
A)200 pitchers per day.
B)300 pitchers per day.
C)400 pitchers per day.
D)450 pitchers per day.
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Chapter 3: Interdependence and the Gains From Trade:
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Sample Questions
Q1) Refer to Figure 3-14.Without trade,Arturo produced and consumed 240 tacos and 120 burritos and Dina produced and consumed 100 tacos and 150 burritos.Then,each person agreed to specialize in the production of the good in which they have a comparative advantage and trade 260 tacos for 156 burritos.As a result,Arturo gained A)20 tacos and 24 burritos and Dina gained 40 tacos and 6 burritos.
B)20 tacos and 36 burritos and Dina gained 160 tacos and 6 burritos.
C)260 tacos and 144 burritos and Dina gained 140 tacos and 156 burritos.
D)260 tacos and 156 burritos and Dina gained 260 tacos and 156 burritos.
Q2) Refer to Figure 3-19.Chile would incur an opportunity cost of 36 pounds of coffee if it increased its production of soybeans by A)12 pounds.
B)27 pounds.
C)30 pounds.
D)48 pounds.
Q3) Refer to Figure 3-21.Azerbaijan's opportunity cost of one nail is A)1/4 bolt and Uzbekistan's opportunity cost of one nail is 1/2 bolt.
B)1/4 bolt and Uzbekistan's opportunity cost of one nail is 2 bolts.
C)4 bolts and Uzbekistan's opportunity cost of one nail is 1/2 bolt.
D)4 bolts and Uzbekistan's opportunity cost of one nail is 2 bolts.
Page 19
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Chapter 3: Interdependence and the Gains From Trade:
Applications of Comparative Advantage
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Sample Questions
Q1) Refer to Figure 3-25.Chile should specialize in the production of
A)coffee and import soybeans.
B)soybeans and import coffee.
C)both goods and import neither good.
D)neither good and import both goods.
Q2) Which of the following would not result from all countries specializing according to the principle of comparative advantage?
A)The size of the economic pie would increase.
B)Worldwide production of goods and services would increase.
C)The well-being of citizens in each country would be enhanced.
D)Each country's production possibilities frontier would shift inward.
Q3) In which of the following cases should the United States produce more noodles than it wants for its own use and trade some of those noodles to Italy in exchange for wine?
A)Americans know less than Italians know about cooking noodles.
B)The United States has an absolute advantage over Italy in producing noodles.
C)Italy has a comparative advantage over the United States in producing wine.
D)The opportunity cost of producing a gallon of wine is the same for Italy as it is for the United States.
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Chapter 3: Interdependence and the Gains From Trade:
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Sample Questions
Q1) Which of the following is not an example of the principle that trade can make everyone better off?
A)Americans buy tube socks from China.
B)Residents of Maine drink orange juice from Florida.
C)A homeowner hires the kid next door to mow the lawn.
D)All of the above are examples of the principle that trade can make everyone better off.
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21
Chapter 3: Interdependence and the Gains From Trade:
Part A
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Sample Questions
Q1) If the U.S.could produce 5 televisions per hour of labor and China could produce 3 televisions per hour of labor,would it necessarily follow that the U.S.should specialize in television production?
Explain your answer using the concepts of comparative and or absolute advantage.
Q2) What does a production possibilities frontier represent?
Q3) What does a consumption possibilities frontier represent?
Q4) Economists use the term ------ to refer to the ability to produce a good at a lower opportunity cost than another producer.
Q5) It takes Heather 1 hour to change the oil in the car and 20 minutes to do the dishes.It takes Zach 1.5 hours to change the oil in the car.For Zach to have a comparative advantage changing the oil it must take him more than ------ minutes to do the dishes.
Q6) Refer to Scenario 3-1.What is Catherine's opportunity cost of producing ice cream? Explain how you derived your answer.
Q7) Refer to Figure 3-26.What is Mary's opportunity cost of one muffin?
Q8) Refer to Scenario 3-1.What is Catherine's opportunity cost of producing cake? Explain how you derived your answer.
Q9) Refer to Figure 3-26.Who has a comparative advantage in making cookies?
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Chapter 3: Interdependence and the Gains From Trade:
Part B
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Sample Questions
Q1) It takes Ross 6 hours to produce a bushel of corn and 2 hours to wash and polish a car.It takes Courtney 6 hours to produce a bushel of corn and 1 hour to wash and polish a car.Courtney and Ross cannot gain from specialization and trade,since it takes each of them 6 hours to produce 1 bushel of corn.
A)True
B)False
Q2) When each person specializes in producing the good in which he or she has a comparative advantage,each person can gain from trade but total production in the economy is unchanged.
A)True
B)False
Q3) International trade may make some individuals in a nation better off,while other individuals are made worse off.
A)True
B)False
Q4) Opportunity cost measures the trade-off between two goods that each producer faces.
A)True
B)False
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Chapter 4: The Market Forces of Supply and Demand
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Sample Questions
Q1) The two words economists use most often are
A)inflation and trade.
B)supply and demand.
C)competition and prices.
D)markets and equilibrium.
Q2) In a market economy,supply and demand are important because they
A)are direct policy tools used by government agencies to regulate the economy.
B)illustrate when an market is in equilibrium,but they are not helpful when a market is out of equilibrium.
C)can be used to predict the impact on the economy of various events and policies.
D)All of the above are correct.
Q3) The two words most often used by economists are
A)prices and quantities.
B)resources and allocation.
C)supply and demand.
D)efficiency and equity.
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24
Chapter 4: The Market Forces of Supply and
Demand:Markets and Competition
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Sample Questions
Q1) Assume Leo buys coffee beans in a competitive market.It follows that
A)Leo has a limited number of sellers from which to buy coffee beans.
B)Leo will negotiate with sellers whenever he buys coffee beans.
C)Leo can influence the price of coffee beans if he buys a large quantity of them.
D)None of the above is correct.
Q2) In a competitive market,the price of a product
A)is determined by buyers,and the quantity of the product produced is determined by sellers.
B)is determined by sellers,and the quantity of the product produced is determined by buyers.
C)and the quantity of the product produced are both determined by sellers.
D)None of the above is correct.
Q3) In competitive markets,which of the following is not correct?
A)Firms produce identical products.
B)No individual buyer can influence the market price.
C)Some sellers can set prices.
D)Buyers are price takers.
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Page 25
Chapter 4: The Market Forces of Supply and Demand: Demand
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Sample Questions
Q1) Refer to Figure 4-7.The movement from Db to Da could be caused by
A)a decrease in price.
B)an increase in the price of a complement.
C)a technological advance.
D)an increase in the price of a substitute.
Q2) Kara receives a promotion at work,which increases her income.We would expect Kara's demand for
A)each good she purchases to remain unchanged.
B)normal goods to decrease.
C)substitute goods to increase.
D)inferior goods to decrease.
Q3) Which of the following is not held constant in a demand schedule?
A)income
B)tastes
C)price
D)expectations
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26
Chapter 4: The Market Forces of Supply and Demand: Supply
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Sample Questions
Q1) The line that relates the price of a good and the quantity supplied of that good is called the supply
A)schedule,and it usually slopes upward.
B)schedule,and it usually slopes downward.
C)curve,and it usually slopes upward.
D)curve,and it usually slopes downward.
Q2) A decrease in quantity supplied
A)results in a movement downward and to the left along a fixed supply curve.
B)results in a movement upward and to the right along a fixed supply curve.
C)shifts the supply curve to the left.
D)shifts the supply curve to the right.
Q3) Which of the following would cause a movement along the supply curve for cupcakes?
A)an improvement in technology for commercial mixers
B)a decrease in the price of cupcakes
C)an increase in the price of cake flour
D)All of the above are correct.
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Page 27
Chapter 4: The Market Forces of Supply and Demand:
Supply and Demand Together
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Sample Questions
Q1) Refer to Figure 4-20.If price is $25,then quantity demanded and quantity supplied,respectively,are
A)500 units and 500 units.
B)500 units and 800 units.
C)600 units and 600 units.
D)800 units and 500 units.
Q2) If the demand for a product increases,then we would expect equilibrium price
A)to increase and equilibrium quantity to decrease.
B)to decrease and equilibrium quantity to increase.
C)and equilibrium quantity both to increase.
D)and equilibrium quantity both to decrease.
Q3) Refer to Figure 4-26.Which of the following movements would illustrate the effect in the market for wedding cakes resulting from a decrease in the number of pastry chefs?
A)Point A to Point B
B)Point C to Point B
C)Point C to Point D
D)Point A to Point D
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Chapter 4: The Market Forces of Supply and
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Sample Questions
Q1) The signals that guide the allocation of resources in a market economy are A)surpluses and shortages.
B)quantities.
C)government policies. D)prices.
Q2) Suppose the United States had a short-term shortage of farmers.Which mechanisms would adjust to remove the shortage?
A)The government would provide tax incentives to encourage people to become farmers.
B)The government would subsidize the production of food.
C)The prices of food and the wages of farmers would adjust.
D)There are no mechanisms to remove the shortage.
Q3) In any economic system,scarce resources have to be allocated among competing uses.Market economies harness the forces of
A)government to allocate scarce resources.
B)supply and demand to allocate scarce resources.
C)credit cards to allocate scarce resources.
D)nature to allocate scarce resources.
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Chapter 4: The Market Forces of Supply and Demand: Part
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Sample Questions
Q1) If income rises in the market for a normal good,will the demand curve for the normal good shift to the right or to the left?
Q2) Refer to Figure 4-31.At a price of $6,is there a shortage or surplus,and how large is the shortage/surplus?
Q3) Refer to Figure 4-31.What are the values of the equilibrium price and quantity?
Q4) If income rises in the market for an inferior good,will the demand curve for the inferior good shift to the right or to the left?
Q5) Refer to Figure 4-30.In this market for iPhones,the technology improves while all other factors remain constant.Which curve(s)shift(s)and in which direction?
Q6) Refer to Figure 4-28.Using the points on the figure,describe the change that would occur if a news report stated that the price of this good was expected to increase next week.
Q7) Refer to Figure 4-30.In this market for tablet computers,more suppliers enter the market and the price of laptops,a substitute good,increases,while all other factors remain constant.Explain the change(s)in the equilibrium price and quantity.
Q8) Refer to Figure 4-29.The movement from S1 to S2 is a
Q9) Refer to Scenario 4-1.What is the equilibrium quantity in this market?
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Chapter 4: The Market Forces of Supply and Demand: Part
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Q1) If orange juice and apple juice are substitutes,an increase in the price of orange juice will shift the demand curve for apple juice to the left.
A)True
B)False
Q2) The equilibrium price is the same as the market-clearing price.
A)True
B)False
Q3) If the demand for a good falls when income falls,then the good is called an inferior good.
A)True
B)False
Q4) In a perfectly competitive market,the goods offered for sale are all exactly the same.
A)True B)False
Q5) If a good or service has only one seller,then the seller is called a monopoly. A)True B)False
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Chapter 5: Elasticity and Its Applications
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Q1) When studying how some event or policy affects a market,elasticity provides information on the
A)equity effects on the market by identifying the winners and losers.
B)magnitude of the effect on the market.
C)speed of adjustment of the market in response to the event or policy.
D)number of market participants who are directly affected by the event or policy.
Q2) When studying how some event or policy affects a market,elasticity provides information on the A)change in the costs of production.
B)tradeoff between equality and efficiency.
C)effect on the budget deficit or surplus.
D)direction and magnitude of the effect.
Q3) In general,elasticity is a measure of
A)the extent to which advances in technology are adopted by producers.
B)the extent to which a market is competitive.
C)how firms' profits respond to changes in market prices.
D)how much buyers and sellers respond to changes in market conditions.
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Chapter 5: Elasticity and Its Applications: The Elasticity of Demand
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Sample Questions
Q1) For a particular good,an 8 percent increase in price causes a 4 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?
A)There are many close substitutes for this good.
B)The good is a luxury.
C)The market for the good is broadly defined.
D)The relevant time horizon is long.
Q2) For a particular good,an 8 percent increase in price causes a 12 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?
A)There are no close substitutes for this good.
B)The good is a necessity.
C)The market for the good is broadly defined.
D)The relevant time horizon is long.
Q3) Refer to Figure 5-12.Using the midpoint method,the price elasticity of demand between point Y and point Z is
A)0.5.
B)0.75.
C)1.0.
D)1.3.
Page 33
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Chapter 5: Elasticity and Its Applications: The Elasticity of Supply
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Sample Questions
Q1) Refer to Figure 5-15.Using the midpoint method,what is the price elasticity of supply between points C and D?
A)0.21
B)0.29
C)0.73
D)1.36
Q2) Refer to Figure 5-14.Over which range is the supply curve in this figure the least elastic?
A)$16 to $40
B)$40 to $100
C)$100 to $220
D)$220 to $430
Q3) If the quantity supplied is the same regardless of price,then supply is A)elastic.
B)perfectly elastic.
C)perfectly inelastic.
D)inelastic.
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Q1) Given the market for illegal drugs,when the government is successful in reducing the flow of drugs into the United States,
A)supply decreases,demand is unaffected,and price increases.
B)demand decreases,supply is unaffected,and price decreases.
C)demand and supply both decrease,leaving price essentially unchanged.
D)supply decreases,demand increases,and price increases substantially.
Q2) An advance in farm technology that results in an increased market supply is
A)good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food.
B)bad for farmers because total revenue will fall but good for consumers because prices for food will fall.
C)good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption.
D)bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue.
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Chapter 5: Elasticity and Its Applications: Part A
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Sample Questions
Q1) If a supply curve is perfectly horizontal,what is the value of the price elasticity of supply?
Q2) If the cross-price elasticity of demand between two goods is positive,what is the relationship between the two goods?
Q3) Suppose that good X has few close substitutes and that good Y has many close substitutes.Which good would you expect to have more price inelastic demand?
Q4) In the short run,as compared to the long run,both the price elasticity of demand and the price elasticity of supply tend to be more
Q5) Suppose a freeze in Florida significantly reduces the supply of oranges this year.As a result,would you expect the total revenue from the sale of orange juice to rise or fall? Explain.
Q6) Suppose the price elasticity of demand for a product is 1.3.If a supplier wants to increase revenue,what change should it make to price,if any?
Q7) What is the price elasticity of demand at any point on a perfectly elastic demand curve?
Q8) If the cross-price elasticity of demand between two goods is negative,what is the relationship between the two goods?
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Chapter 5: Elasticity and Its Applications: Part B
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Sample Questions
Q1) If the price elasticity of demand is equal to 0,then demand is unit elastic.
A)True
B)False
Q2) In general,demand curves for necessities tend to be price elastic.
A)True
B)False
Q3) Price elasticity of supply measures how much the quantity supplied responds to changes in the price.
A)True
B)False
Q4) An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.
A)True
B)False
Q5) The cross-price elasticity of garlic salt and onion salt is -2,which indicates that garlic salt and onion salt are substitutes.
A)True
B)False
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Chapter 6: Supply Demand and Government Policies
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Q1) Price controls
A)always produce a fair outcome.
B)always produce an efficient outcome.
C)can generate inequities of their own.
D)All of the above are correct.
Q2) Which of the following is not an example of a public policy?
A)rent-control laws
B)minimum-wage laws
C)taxes
D)equilibrium laws
Q3) Rent-control laws dictate
A)the exact rent that landlords must charge tenants.
B)a maximum rent that landlords may charge tenants.
C)a minimum rent that landlords may charge tenants.
D)both a minimum rent and a maximum rent that landlords may charge tenants.
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Chapter 6: Supply Demand and Government Policies:
Controls on Prices
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Q1) Refer to Figure 6-15.For a price ceiling to be binding in this market,it would have to be set at
A)any price below $3.
B)a price between $2 and $3.
C)a price between $3 and $4.
D)any price above $3.
Q2) A minimum wage that is set above a market's equilibrium wage will result in an excess
A)demand for labor,that is,unemployment.
B)demand for labor,that is,a shortage of workers.
C)supply of labor,that is,unemployment.
D)supply of labor,that is,a shortage of workers.
Q3) Refer to Figure 6-13.If the government imposes a price ceiling of $4 on this market,then there will be
A)no shortage.
B)a shortage of 5 units.
C)a shortage of 10 units.
D)a shortage of 20 units.
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Chapter 6: Supply Demand and Government Policies: Taxes
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Sample Questions
Q1) Suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages.The tax would shift
A)demand,raising both the equilibrium price and quantity in the market for artificially-sweetened beverages.
B)demand,lowering the equilibrium price and raising the equilibrium quantity in the market for artificially-sweetened beverages.
C)supply,raising the equilibrium price and lowering the equilibrium quantity in the market for artificially-sweetened beverages.
D)supply,lowering the equilibrium price and raising the equilibrium quantity in the market for artificially-sweetened beverages.
Q2) A tax imposed on the sellers of a good will lower the
A)price paid by buyers and lower the equilibrium quantity.
B)price paid by buyers and raise the equilibrium quantity.
C)effective price received by sellers and lower the equilibrium quantity.
D)effective price received by sellers and raise the equilibrium quantity.
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Chapter 6: Supply Demand and Government Policies: Part
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Q1) If the demand curve is more price elastic than the supply curve,will the buyers or the sellers bear a greater burden of a tax? Draw a diagram to illustrate your answer.
Q2) Refer to Figure 6-32.If the government set a price ceiling at $80,would there be a shortage or surplus,and how large would be the shortage/surplus?
Q3) Will a binding price floor result in a shortage or a surplus in the market?
Q4) Refer to Scenario 6-1.If the government set a price floor at $7,would there be a shortage or surplus,and how large would be the shortage/surplus?
Q5) Refer to Scenario 6-2.Suppose the government sets a price ceiling at $12 for this product.Is this price ceiling binding,and what will be the size of the shortage/surplus in this market?
Q6) Refer to Figure 6-31.If the government set a price floor at $17,would there be a shortage or surplus,and how large would be the shortage/surplus?
Q7) Refer to Figure 6-31.If the government set a price ceiling at $8,would there be a shortage or surplus,and how large would be the shortage/surplus?
Q8) Refer to Scenario 6-1.What are the equilibrium price and quantity in the market for good X?
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Chapter 6: Supply Demand and Government Policies: Part B
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Sample Questions
Q1) If the equilibrium wage is $4 per hour and the minimum wage is $5.15 per hour,then a shortage of labor will exist.
A)True
B)False
Q2) When a binding price ceiling is imposed on a market for a good,some people who want to buy the good cannot do so.
A)True
B)False
Q3) A tax on golf clubs will cause buyers of golf clubs to pay a higher price,sellers of golf clubs to receive a lower price,and fewer golf clubs to be sold.
A)True
B)False
Q4) A tax on sellers shifts the supply curve but not the demand curve.
A)True
B)False
Q5) A price floor set above the equilibrium price causes a surplus in the market. A)True
B)False
42
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Chapter 7: Consumers Producers and the Efficiency of Markets
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Sample Questions
Q1) An example of normative analysis is studying
A)how market forces produce equilibrium.
B)surpluses and shortages.
C)whether equilibrium outcomes are socially desirable.
D)income distributions.
Q2) Welfare economics is the study of
A)the well-being of less fortunate people.
B)welfare programs in the United States.
C)how the allocation of resources affects economic well-being.
D)the effect of income redistribution on work effort.
Q3) Welfare economics is the study of how
A)the allocation of resources affects economic well-being.
B)a price ceiling compares to a price floor.
C)the government helps poor people.
D)a consumer's optimal choice affects her demand curve.
Q4) Welfare economics is the study of A)taxes and subsidies.
B)how technology is best put to use in the production of goods and services.
C)government welfare programs for needy people.
D)how the allocation of resources affects economic well-being.
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Chapter 7: Consumers Producers and the Efficiency of
Markets: Consumer Surplus
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Sample Questions
Q1) Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction.Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist.This maximum is called
A)deadweight loss.
B)willingness to pay.
C)consumer surplus.
D)producer surplus.
Q2) Consumer surplus
A)is closely related to the supply curve for a product.
B)is represented by a rectangle on a supply-demand graph when the demand curve is a straight,downward-sloping line.
C)is measured using the demand curve for a product.
D)does not reflect economic well-being in most markets.
Q3) Which of the following is not true when the price of a good or service falls?
A)Buyers who were already buying the good or service are better off.
B)Some new buyers,who are now willing to buy,enter the market.
C)The total consumer surplus in the market increases.
D)The total value of purchases before and after the price change is the same.
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Chapter 7: Consumers Producers and the Efficiency of
Markets: Producer Surplus
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Q1) Refer to Figure 7-12.If the equilibrium price is $350,what is the producer surplus?
A)$60,000
B)$15,000
C)$30,000
D)$70,000
Q2) Suppose the demand for peaches decreases.What will happen to producer surplus in the market for peaches?
A)It increases.
B)It decreases.
C)It remains unchanged.
D)It may increase,decrease,or remain unchanged.
Q3) Refer to Figure 7-16.Suppose the price of the good is $450.Then,on the first unit of the good that is sold,producer surplus is
A)$250,and on the second unit of the good that is sold,producer surplus is $100.
B)$250,and on the second unit of the good that is sold,producer surplus is $150.
C)$350,and on the second unit of the good that is sold,producer surplus is $100.
D)$350,and on the second unit of the good that is sold,producer surplus is $150.
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Chapter 7: Consumers Producers and the Efficiency of
Markets: Market Efficiency
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Q1) Which of the following is correct?
A)Efficiency deals with the size of the economic pie,and equality deals with how fairly the pie is sliced.
B)Equality can be judged on positive grounds whereas efficiency requires normative judgments.
C)Efficiency is more difficult to evaluate than equality.
D)Equality and efficiency are both maximized in a society when total surplus is maximized.
Q2) Refer to Figure 7-23.If the price were P3,consumer surplus would be represented by the area
A)A.
B)A+B+C.
C)D+H+F.
D)A+B+C+D+H+F.
Q3) At present,the maximum legal price for a human kidney is $0.The price of $0 maximizes
A)consumer surplus but not producer surplus.
B)producer surplus but not consumer surplus.
C)both consumer and producer surplus.
D)neither consumer nor producer surplus.
Page 46
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Chapter 7: Consumers Producers and the Efficiency of
Markets: Conclusion Market Efficiency and Market Failure
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Sample Questions
Q1) Inefficiency can be caused in a market by the presence of A)market power.
B)externalities.
C)imperfectly competitive markets.
D)All of the above are correct.
Q2) Which of the following statements is not correct?
A)An invisible hand leads buyers and sellers to an equilibrium that maximizes total surplus.
B)Market power can cause markets to be inefficient.
C)Externalities can cause markets to be inefficient.
D)The invisible hand can remedy all types of market failures.
Q3) Market power refers to the
A)side effects that may occur in a market.
B)government regulations imposed on the sellers in a market.
C)ability of market participants to influence price.
D)forces of supply and demand in determining equilibrium price.
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Chapter 7: Consumers Producers and the Efficiency of
Markets: Part A
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Q1) What do economists call the highest amount a consumer will pay to purchase a good?
Q2) Refer to Figure 7-31.If the market equilibrium price is $35,how much is total producer surplus in this market?
Q3) Refer to Figure 7-34.Suppose there is initially a price ceiling set at $4 in this market.If the government removed the price ceiling,by how much would total producer surplus change?
Q4) Refer to Scenario 7-1.If the market equilibrium price falls from $10 to $5,how much additional consumer surplus do consumers initially in the market at the $10 price receive?
Q5) Refer to Figure 7-30.If the market equilibrium price falls from $120 to $80,how much is the change in total consumer surplus in the market?
Q6) Refer to Figure 7-34.Suppose the government imposes a price floor at $10 per unit in this market.With the price floor,how much is total producer surplus assuming those producers with the lowest cost are the ones who supply the market?
Q7) Refer to Scenario 7-1.If the market equilibrium price rises from $10 to $15,what is the change in total consumer surplus in the market?
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Chapter 7: Consumers Producers and the Efficiency of
Markets: Part B
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Q1) Free markets allocate (a)the supply of goods to the buyers who value them most highly and (b)the demand for goods to the sellers who can produce them at least cost.
A)True
B)False
Q2) If producing a soccer ball costs Jake $5,and he sells it for $40,his producer surplus is $45.
A)True
B)False
Q3) The current policy on kidney donation effectively sets a price ceiling of zero.
A)True
B)False
Q4) Producer surplus is the amount a seller is paid minus the cost of production.
A)True
B)False
Q5) If the United States legally allowed for a market in transplant organs,it is estimated that one kidney would sell for at least $100,000.
A)True
B)False
49
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Chapter 8: Application the Cost of Taxation
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Q1) Which of the following tools help us evaluate how taxes affect economic well-being? (i)Consumer surplus
(ii)Producer surplus (iii)Tax revenue
(iv)Deadweight loss
A)(i)and (ii)only B)(i), (ii),and (iii)only C)(iii)and (iv)only D)(i), (ii), (iii),and (iv)
Q2) To fully understand how taxes affect economic well-being,we must compare the A)consumer surplus to the producer surplus.
B)price paid by buyers to the price received by sellers.
C)reduced welfare of buyers and sellers to the revenue raised by the government. D)consumer surplus to the deadweight loss.
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Chapter 8: Application the Cost of Taxation: The
Deadweight Loss of Taxation
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Q1) Refer to Scenario 8-2.If Karla hires Roland to mow her lawn,Karla's consumer surplus is
A)$3.
B)$5.
C)$8.
D)$25.
Q2) Refer to Figure 8-10.Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2.With the tax,the consumer surplus is A)(P0-P2)x Q2.
B)1/2 x (P0-P2)x Q2.
C)(P0-P5)x Q5.
D)1/2 x (P0-P5)x Q5.
Q3) Refer to Figure 8-2.The loss of producer surplus for those sellers of the good who continue to sell it after the tax is imposed is
A)$0.
B)$1.
C)$2.
D)$3.
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Chapter 8: Application the Cost of Taxation: The Determinants
of the Deadweight
Loss
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Q1) Taxes on labor encourage all of the following except
A)older workers to take early retirement from the labor force.
B)mothers to stay at home rather than work in the labor force.
C)workers to work overtime.
D)people to be paid "under the table."
Q2) Economists generally agree that the most important tax in the U.S.economy is the A)income tax.
B)tax on labor.
C)inheritance or death tax.
D)tax on corporate profits.
Q3) When a tax is imposed on a good for which both demand and supply are very elastic,
A)sellers effectively pay the majority of the tax.
B)buyers effectively pay the majority of the tax.
C)the tax burden is equally divided between buyers and sellers.
D)None of the above is correct;further information would be required to determine how the burden of the tax is distributed between buyers and sellers.
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Chapter 8: Application the Cost of Taxation: Deadweight
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Q1) Suppose the federal government doubles the gasoline tax.The deadweight loss associated with the tax
A)also doubles.
B)triples.
C)quadruples.
D)rises by a factor of 8.
Q2) Which of the following scenarios is consistent with the Laffer curve?
A)The tax rate is 1 percent,and tax revenue is very low.
B)The tax rate is 1 percent,and tax revenue is very high.
C)The tax rate is 99 percent,and tax revenue is very high.
D)The tax rate is moderate (between very high and very low),and tax revenue is very low.
Q3) A decrease in the size of a tax is most likely to increase tax revenue in a market with
A)elastic demand and elastic supply.
B)elastic demand and inelastic supply.
C)inelastic demand and elastic supply.
D)inelastic demand and inelastic supply.
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Chapter 8: Application the Cost of Taxation: Conclusion
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Q1) Taxes are of interest to
A)microeconomists because they consider how to balance equality and efficiency. B)microeconomists because they consider how best to design a tax system.
C)macroeconomists because they consider how policymakers can use the tax system to stabilize economic activity.
D)All of the above are correct.
Q2) Taxes are costly to market participants because they A)transfer resources from market participants to the government. B)alter incentives.
C)distort market outcomes.
D)All of the above are correct.
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Chapter 8: Application the Cost of Taxation: Part A
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Q1) Refer to Figure 8-29.As the size of the tax increases from $3 to $6 to $9,what happens to tax revenues?
Q2) Refer to Figure 8-25.Suppose the government places a $4 tax per unit on this good.What price will sellers receive for the good after the tax is imposed?
Q3) Refer to Figure 8-25.Suppose the government places a $4 tax per unit on this good.How much is total surplus after the tax is imposed?
Q4) John has been in the habit of mowing Willa's lawn each week for $20.John's opportunity cost is $15,and Willa would be willing to pay $25 to have her lawn mowed.What is the maximum tax the government can impose on lawn mowing without discouraging John and Willa from continuing their mutually beneficial arrangement?
Q5) Refer to Figure 8-25.Suppose the government places a $4 tax per unit on this good.How much is producer surplus after the tax is imposed?
Q6) Refer to Figure 8-27.Suppose that Market A is characterized by Demand 1 and Supply 1,and Market B is characterized by Demand 2 and Supply 1.If an identical tax is imposed on each market,the tax will create a larger deadweight loss in which market? Explain.
Q7) Refer to Figure 8-25.How much is consumer surplus at the market equilibrium?
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Chapter 8: Application the Cost of Taxation: Part B
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Q1) The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.
A)True
B)False
Q2) The deadweight loss of a tax rises even more rapidly than the size of the tax.
A)True
B)False
Q3) When a tax is imposed on sellers,producer surplus decreases but consumer surplus increases.
A)True
B)False
Q4) Economists use the government's tax revenue to measure the public benefit from a tax.
A)True
B)False
Q5) When a tax is imposed,the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.
A)True
B)False
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Chapter 9: Application International Trade
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Q1) A logical starting point from which the study of international trade begins is
A)the recognition that not all markets are competitive.
B)the recognition that government intervention in markets sometimes enhances the economic welfare of the society.
C)the principle of absolute advantage.
D)the principle of comparative advantage.
Q2) Which of the following is not an important question for economic policy raised by the experience of the textile industry?
A)How does international trade affect consumer well-being?
B)Who gains and who loses from free trade among countries?
C)How do the gains from trade compare to the losses?
D)Which argument for restricting free trade is politically feasible?
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Chapter 9: Application International Trade: The
Determinants of Trade
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Q1) Suppose Jamaica has an absolute advantage over other countries in producing sugar,but other countries have a comparative advantage over Jamaica in producing sugar.If trade in sugar is allowed,Jamaica
A)will import sugar.
B)will export sugar.
C)will either import sugar or export sugar,but it is not clear from the given information.
D)would have nothing to gain either from exporting or importing sugar.
Q2) Suppose Brazil has a comparative advantage over other countries in producing almonds,but other countries have an absolute advantage over Brazil in producing almonds.If trade in almonds is allowed,Brazil
A)will import almonds.
B)will export almonds.
C)will either import almonds or export almonds,but it is not clear from the given information.
D)would have nothing to gain either from exporting or importing almonds.
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58
Chapter 9: Application International Trade: The Winners and
Losers From Trade
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Q1) Refer to Figure 9-17.When the country moves from free trade to trade and a tariff,consumer surplus
A)decreases by $576 and producer surplus does not change.
B)decreases by $576 and producer surplus increases by $192.
C)decreases by $792 and producer surplus does not change.
D)decreases by $792 and producer surplus increases by $192.
Q2) Refer to Figure 9-6.The size of the tariff on roses is
A)$4.
B)$2.
C)$2
D)$1.
Q3) When a country allows trade and becomes an exporter of a good,
A)domestic producers become better off,and domestic consumers become worse off.
B)domestic producers become worse off,and domestic consumers become better off.
C)domestic producers become better off,but the effect on the well-being of domestic consumers is ambiguous.
D)domestic consumers become worse off,but the effect on the well-being of domestic producers is ambiguous.
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Chapter 9: Application International Trade: The Arguments for Restricting Trade
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Q1) Since World War II,GATT has been responsible for reducing the average tariff among member countries from about
A)40 percent to about 5 percent.
B)40 percent to about 20 percent.
C)80 percent to about 20 percent.
D)20 percent to about 10 percent.
Q2) The problem with the protection-as-a-bargaining-chip argument for trade restrictions is
A)if it works consumer surplus will decline.
B)if it works producer surplus falls.
C)if it fails the country faces a choice between two bad options.
D)if it fails total surplus will increase.
Q3) If the United States threatens to impose a tariff on Colombian coffee if Colombia does not remove agricultural subsidies,the United States will be
A)better off regardless of how Colombia responds.
B)better off if Colombia removes the subsidies,and will be no worse off if it doesn't.
C)worse off if Colombia doesn't remove the subsidies in response to the threat.
D)worse off regardless of how Colombia responds.
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Chapter 9: Application International Trade: Conclusion
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Q1) Economists view the fact that Florida grows oranges,Texas pumps oil,and California makes wine as
A)confirmation of the virtues of free trade.
B)confirmation of the infant-industry argument.
C)confirmation that free trade agreements are not necessary.
D)confirmation that specialization in absolute advantage works.
Q2) In 2008,the Los Angeles Times asked members of the American public whether free international trade has helped or hurt the economy.Of those surveyed,
A)57 percent said free international trade helped the economy.
B)26 percent said free international trade helped the economy.
C)30 percent said free international trade hurt the economy.
D)16 percent said free international trade hurt the economy.
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Chapter 9: Application International Trade: Part A
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Q1) Refer to Figure 9-27.If the country allows free trade,how many units will domestic consumers demand and how many units will domestic producers produce?
Q2) Refer to Figure 9-29.Suppose the country imposes a $1 per unit tariff.If the country allows trade with a tariff,how much is total surplus?
Q3) List five arguments given to support trade restrictions.
Q4) Refer to Scenario 9-3.Suppose the world price in this market is $8 per unit,and suppose the country imposes a $1 per unit tariff.If the country allows trade with a tariff,how much are consumer surplus,producer surplus,tariff revenue,and total surplus?
Q5) Refer to Figure 9-27.With no trade allowed,how much are consumer surplus,producer surplus,and total surplus?
Q6) Refer to Figure 9-26.With no trade allowed,what are the equilibrium price and equilibrium quantity in this market?
Q7) Characterize the two different approaches a nation can take to achieve free trade.Does one approach have an advantage over the other?
Q8) Refer to Scenario 9-3.With no trade allowed,what are the equilibrium price and quantity in this market?
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Chapter 9: Application International Trade: Part B
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Q1) "Trade raises the economic well-being of a nation in the sense that the gains of the winners exceed the losses of the losers." This statement is correct for a nation that exports manufactured goods,but it is not correct for a nation that imports manufactured goods.
A)True
B)False
Q2) Suppose the Ivory Coast,a small country,imports wheat at the world price of $4 per bushel.If the Ivory Coast imposes a tariff of $1 per bushel on imported wheat,then,other things equal,the price of wheat in Ivory Coast will increase,but by less than $1.
A)True
B)False
Q3) Import quotas and tariffs both cause the quantity of imports to fall.
A)True
B)False
Q4) The small-economy assumption is necessary to analyze the gains and losses from international trade.
A)True
B)False
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Chapter 10: Measuring a Nations Income
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Q1) Which of the following questions is more likely to be studied by a microeconomist than a macroeconomist?
A)Why do prices in general rise by more in some countries than in others?
B)Why do wages differ across industries?
C)Why do national production and income increase in some periods and not in others?
D)How rapidly is GDP currently increasing?
Q2) Which of the following topics are more likely to be studied by a macroeconomist than by a microeconomist?
A)the effect of taxes on the prices of airline tickets,and the profitability of automobile-manufacturing firms
B)the price of beef,and wage differences between genders
C)how consumers maximize utility,and how prices are established in markets for agricultural products
D)the percentage of the labor force that is out of work,and differences in average income from country to country
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Chapter 10: Measuring a Nations Income: The Economy's
Income and Expenditure
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Q1) According to the circular-flow diagram GDP
A)can be computed as the total income paid by firms or as expenditures on final goods and services.
B)can be computed as the total income paid by firms,but not as expenditures on final goods and services.
C)can be computed as expenditures on final goods and services,but not as the total income paid by firms.
D)cannot be computed as either total income paid by firms or expenditures on final goods and services.
Q2) For an economy as a whole,income must equal expenditure because
A)the number of firms is equal to the number of households in an economy.
B)individuals can only spend what they earn each period.
C)every dollar of spending by some buyer is a dollar of income for some seller.
D)every dollar of saving by some consumer is a dollar of spending by some other consumer.
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Chapter 10: Measuring a Nations Income: The Measurement
of GDP
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Q1) The government of a country,which has adopted American GDP accounting conventions,reported that seasonally adjusted GDP in quarter 3 was $48 billion at an annual rate.This means that the seasonally-adjusted market value of all final goods and services produced within this country in quarter 3 was
A)$4 billion.
B)$12 billion.
C)$16 billion.
D)$48 billion.
Q2) A U.S.-owned car factory in Mexico produces $5 million of cars.$2.5 million of these cars are sold in Mexico and the other $2.5 million are sold in the U.S.In both cases $1 million of the value of the cars was due to U.S-owned equipment located in Mexico and U.S.managers working in Mexico.How much did this production contribute to U.S.GDP?
A)$0
B)$1 million
C)$2 million
D)None of the above are correct
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Chapter 10: Measuring a Nations Income: The Components of GDP
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Q1) All of the following are examples of a nondurable good except A)a pencil.
B)one gallon of gasoline.
C)a queen-size bed.
D)a pair of shoes.
Q2) In the economy of Talikastan in 2015,consumption was two-thirds of GDP,government purchases were $1000 more than investment,investment was one-ninth of GDP,and the value of exports exceeded the value of imports by $500.What was Talikastan's GDP in 2015?
A)$1688
B)$9000
C)$13,500
D)$15,000
Q3) The consumption component of GDP includes spending on
A)durable goods and nondurable goods,but not spending on services.
B)durable goods and services,but not spending on nondurable goods.
C)nondurable goods and services,but not spending on durable goods.
D)durable goods,nondurable goods,and services.
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Chapter 10: Measuring a Nations Income: Real Versus Nominal GDP
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Q1) A country reported nominal GDP of $200 billion in 2010 and $180 billion in 2009.It also reported a GDP deflator of 125 in 2010 and 105 in 2009.Between 2009 and 2010,
A)real output and the price level both rose.
B)real output rose and the price level fell.
C)real output fell and the price level rose.
D)real output and the price level both fell.
Q2) If nominal GDP is $8 trillion and real GDP is $10 trillion,then the GDP deflator is
A)80,and this indicates that the price level has decreased by 20 percent since the base year.
B)80,and this indicates that the price level has increased by 80 percent since the base year.
C)125,and this indicates that the price level has increased by 25 percent since the base year.
D)125,and this indicates that the price level has increased by 125 percent since the base year.
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68
Chapter 10: Measuring a Nations Income: Is GDP a Good Measure of Economic Well-Being
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Q1) Suppose the government passes a law eliminating holidays and,as a result,the production of goods and services increases because people work more days per year (and thus enjoy less leisure per year).Based on this scenario,which of the following statements is correct?
A)GDP would definitely increase,despite the fact that GDP includes leisure.
B)GDP would definitely increase because GDP excludes leisure.
C)GDP could either increase or decrease because GDP includes leisure.
D)GDP could either increase or decrease because GDP excludes leisure.
Q2) GDP is not a perfect measure of well-being;for example,
A)GDP excludes the value of volunteer work.
B)GDP does not address the distribution of income.
C)GDP does not address environmental quality.
D)All of the above are correct.
Q3) The underground economy
A)excludes the amount of criminal activity in an economy.
B)is larger for developed nations than developing nations when measured as a percent of GDP.
C)includes otherwise legal transactions that go unreported or unrecorded.
D)in the United States is insignificant is size when compared to the official measure of GDP.
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Chapter 10: Measuring a Nations Income: Part A
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Sample Questions
Q1) The U.S.buys $500 billion of goods and $250 billion of services from foreign countries.Foreign countries buy $250 billion of goods and $300 billion of services from the U.S.What is net exports?
Q2) Calculate GDP for an economy with exports of $5 trillion,investment of $1.5 trillion,consumption spending of $11 trillion,imports of $6 trillion,and government purchases of $3 trillion.
Q3) Consumption is $5.5 trillion,investment is $1 trillion,government expenditures are $1.5 trillion,transfer payments are $.5 trillion,exports are $.75 trillion and imports are $1.25 trillion.What is GDP?
Q4) Explain how GNP differs from GDP.
Q5) Define gross domestic product.
Q6) GDP is defined as the market value of all final goods and services produced within a country in a given period of time.In spite of this definition,some production is left out of GDP.Explain why some final goods and services are not included.
Q7) What are exports,and how are they different from imports?
Q8) Calculate the inflation rate for a country where the GDP deflator rises from 120 to 165.
Q9) Refer to Figure 23-2.Identify the location of firms and households.
Page 70
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Chapter 10: Measuring a Nations Income: Part B
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Q1) In 2015,the level of U.S.real GDP was more than four times its 1965 level.
A)True
B)False
Q2) The goal of macroeconomics is to explain the economic changes that affect many households,firms,and markets simultaneously.
A)True
B)False
Q3) An increase in nominal U.S.GDP necessarily implies that the United States is producing a larger output of goods and services.
A)True
B)False
Q4) GDP can measure either the total income of everyone in the economy or the total expenditure on the economy's output of goods and services,but GDP cannot measure both at the same time.
A)True
B)False
Q5) Changes in real GDP reflect only changes in the amounts being produced.
A)True
B)False
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Chapter 11: Measuring the Cost of Living
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Q1) When the overall level of prices in the economy is increasing,economists say that the economy is experiencing
A)economic growth.
B)stagflation.
C)inflation.
D)deflation.
Q2) When the consumer price index falls,the typical family
A)has to spend more dollars to maintain the same standard of living.
B)can spend fewer dollars to maintain the same standard of living.
C)finds that its standard of living is not affected.
D)can save less because they do not need to offset the effects of rising prices.
Q3) The term inflation is used to describe a situation in which
A)the overall level of prices in the economy is increasing.
B)incomes in the economy are increasing.
C)stock-market prices are rising.
D)the economy is growing rapidly.
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Chapter 11: Measuring the Cost of Living: The Consumer Price Index
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Q1) In an imaginary economy,consumers buy only razors and cologne.The fixed basket consists of 6 razors and 4 bottles of cologne.A razor cost $20 in 2009 and $25 in 2010.A bottle of cologne cost $30 in 2009 and $40 in 2010.Using 2009 as the base year,which of the following statements is correct?
A)For the typical consumer,the number of dollars spent on razors is equal to the number of dollars spent on cologne in each of the two years.
B)The consumer price index is 310 in 2010.
C)The rate of inflation is 29.17% in 2010.
D)None of the above is correct.
Q2) The substitution bias in the consumer price index refers to the
A)substitution by consumers toward new goods and away from old goods.
B)substitution by consumers toward a smaller number of high-quality goods and away from a larger number of low-quality goods.
C)substitution by consumers toward goods that have become relatively less expensive and away from goods that have become relatively more expensive.
D)substitution of new prices for old prices in the CPI basket of goods and services from one year to the next.
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Chapter 11: Measuring the Cost of Living: Correcting
Economic Variables for the Effects of Inflation
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Q1) If the CPI was 68 in 1965 and is 285 today,then $100 today purchases the same amount of goods and services as
A)$23.86 purchased in 1965.
B)$32.47 purchased in 1965.
C)$68.00 purchased in 1965.
D)$419.12 purchased in 1965.
Q2) Suppose that over the past year,the real interest rate was 6 percent and the inflation rate was -2 percent.It follows that
A)the dollar value of savings increased at 4 percent,and the purchasing power of savings increased at 6 percent.
B)the dollar value of savings increased at 4 percent,and the purchasing power of savings increased at 8 percent.
C)the dollar value of savings increased at 8 percent,and the purchasing power of savings increased at 4 percent.
D)the dollar value of savings increased at 8 percent,and the purchasing power of savings increased at 6 percent.
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Chapter 11: Measuring the Cost of Living: Part A
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Q1) Explain how the prices of goods and services used in the CPI differ from the prices reflected by GDP deflator.
Q2) Write the formula for computing the cost of a basket of goods in a given period assuming you only have two goods,X and Y,which are bought in quantities Qx and Qy,and sold at prices of Px and Py.
Q3) What measure reflects the overall cost of goods and services produced domestically?
Q4) In 1954,Mickey Mantle earned $21,000 playing for the New York Yankees.The CPI in 1954 was 26.9,and the CPI in 2010 was 218.06.What is Mickey Mantle's 1954 salary in 2010 dollars?
Q5) Refer to Scenario 24-5.Using 2009 as the base year,what is the inflation rate in 2010?
Q6) Refer to Scenario 24-5.Using 2010 as the base year,what is the inflation rate in 2010?
Q7) Michael Jordan's rookie salary in 1984 was $550,000.The CPI in 1984 was 103.9,while the CPI in 2010 was 218.1.What is Michael Jordan's rookie salary in 2010 dollars?
Q8) Suppose that the CPI in 2009 is 220 and that the inflation rate is 5% in 2010.What is the CPI in 2010?
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Chapter 11: Measuring the Cost of Living: Part B
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Q1) When some dollar amount is automatically corrected for inflation by law or contract,the amount is said to be indexed for inflation.
A)True
B)False
Q2) Kristine has a savings account at a bank.If the nominal interest rate she earns exceeds the rate of inflation,then her purchasing power increases over time.
A)True
B)False
Q3) The inflation rate reported in the news is usually calculated from the GDP deflator rather than the consumer price index.
A)True
B)False
Q4) The largest sector in the consumer price index market basket is food and beverage purchases.
A)True B)False
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Chapter 12: Production and Growth
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Q1) A country experiencing a growth rate of 12% per year can go from being one of the poorest to one of the richest in how many generations?
A)one
B)two
C)three
D)four
Q2) Average income in some East Asian countries,as measured by real GDP per person,has recently grown at an average annual rate that implies income will double about every
A)10 years.
B)15 years.
C)20 years.
D)25 years.
Q3) In which of the following countries has economic growth been sufficiently high that income would double every ten years?
A)Singapore
B)Nigeria
C)India
D)Indonesia
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Chapter 12: Production and Growth: Economic Growth
Around the World
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Q1) The rate of real economic growth
A)is underestimated using measures of income growth.
B)is overestimated using measures of income growth.
C)is underestimated using measures of technological growth.
D)is overestimated using measures of technological growth.
Q2) Which of the following countries had the highest level of real GDP per person in 2014?
A)Germany
B)Canada
C)United States
D)Japan
Q3) In 1870,the richest country in the world was
A)Germany.
B)Japan
C)the United Kingdom.
D)the United States.
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Page 78
Chapter 12: Production and Growth: Productivity Its Role and Determinants
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Q1) Last year a country had 800 workers who worked an average of 8 hours and produced 12,800 units.This year the same country had 1000 workers who worked an average of 8 hours and produced 14,000 units.This country's productivity was
A)higher this year than last year.A possible source of this change in productivity is a change in the size of the capital stock.
B)higher this year than last year.A change in the size of the capital stock does not affect productivity.
C)lower this year than last year.A possible source of this change in productivity is a change in the size of the capital stock.
D)lower this year than last year.A change in the size of the capital stock does not affect productivity.
Q2) Which of the following statements is true?
A)Productivity is calculated as hours worked divided by output produced.
B)Americans have a higher standard of living than Indonesians because American workers are more productive than Indonesian workers.
C)Both A and B are correct.
D)None of the above are correct.
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Page 79
Chapter 12: Production and Growth: Economic Growth and Public Policy
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Q1) If a country were to increase its saving rate,then in the long run it would also increase its
A)level of income.
B)growth rate of income.
C)growth rate of productivity.
D)All of the above are correct.
Q2) Countries that pursued outward-oriented policies in the 20th century
A)experienced lower rates of economic growth than did countries that pursued inward-oriented policies.
B)experienced higher levels of political instability than did countries that pursued inward-oriented policies.
C)include Singapore,South Korea,and Taiwan.
D)All of the above are correct.
Q3) The return to schooling for society is higher than the return to schooling for the individual if
A)the concept of diminishing returns applies to education.
B)the concept of constant returns to scale applies to education.
C)human capital conveys positive externalities.
D)investment in human capital involves no opportunity costs.
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Chapter 12: Production and Growth: Conclusion the
Importance of Long-Run Growth
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Q1) In order to promote growth in living standards,policymakers must A)protect property rights.
B)maintain political stability.
C)encourage the accumulation of factors of production.
D)All of the above
Q2) Economists differ in their views of the role of the government in promoting economic growth.A controversial idea is that government should A)lend support to the invisible hand by maintaining property rights and political stability. B)lower barriers and impediments to free trade.
C)encourage capital formation.
D)target and subsidize specific industries important for technological progress.
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Chapter 12: Production and Growth: Part A
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Q1) The level of real GDP is a good measure of economic prosperity,and the growth of real GDP is a good measure of ----------.
Q2) Studies have found that there is a relationship between height and productivity.Briefly explain.
Q3) Because of its vast oil reserves,Saudi Arabia is a rich country.Saudi Arabia exemplifies the general fact that differences in ---------- are responsible for some of the differences in standards of living around the world.
Q4) Refer to Figure 25-1."When the amount of capital per worker increases by one unit,a poor country experiences a greater benefit than does a rich country." Does the figure illustrate this notion? Briefly explain.
Q5) What are the long-run effects on productivity and income of an increase in the saving rate?
Q6) When a country imposes tariffs, intending to protect domestic firms from foreign competition, it is pursuing _______ oriented policies.
Q7) What term do we use to refer to the understanding of the best ways to produce goods and services?
Q8) What is the difference between human capital and technology?
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Chapter 12: Production and Growth: Part B
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Q1) In countries where women are discriminated against,policies that increase the likelihood of career success and educational opportunities for women are likely to decrease the birth rate.
A)True
B)False
Q2) Over the last 140 years or so,on average Canada's real GDP per-person grew faster than that of the U.K.
A)True
B)False
Q3) In some countries in Sub-Saharan Africa real GDP per person has been stagnant for many years.
A)True
B)False
Q4) If your company opens and operates a branch in a foreign country,your company engages in foreign direct investment.
A)True
B)False
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Chapter 13: Saving Investment and the Financial System
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Q1) Institutions that help to match one person's saving with another person's investment are collectively called the
A)Federal Reserve system.
B)banking system.
C)monetary system.
D)financial system.
Q2) When opening a print shop you need to buy printers,computers,furniture,and similar items.Economists call these expenditures
A)capital investment.
B)investment in human capital.
C)business consumption expenditures.
D)personal saving.
Q3) When a country saves a larger portion of its GDP than it did before,it will have
A)more capital and higher productivity.
B)more capital and lower productivity.
C)less capital and higher productivity.
D)less capital and lower productivity.
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84
Chapter 13: Saving Investment and the Financial System:
Financial Institutions in the US economy
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177 Verified Questions
177 Flashcards
Source URL: https://quizplus.com/quiz/79750
Sample Questions
Q1) Other things the same,which bond would you expect to pay the highest interest rate?
A)a bond issued by the U.S.government
B)a bond issued by Microsoft Corporation
C)a bond issued by the state of Montana
D)a bond issued by a new chain of Brazilian-style restaurants
Q2) A high demand for a company's stock is an indication that A)the company is in need of funds.
B)the company has recently sold a large quantity of bonds.
C)people are optimistic about the company's future.
D)people are pessimistic about the company's future.
Q3) Which of the following is both a financial institution and a financial intermediary?
A)banks
B)stock exchanges
C)the bond market
D)All of the above are correct.
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Chapter 13: Saving Investment and the Financial System:
Saving and Investment in the National Income Accounts
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98 Verified Questions
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Sample Questions
Q1) Refer to Scenario 26-1.This economy's government is running a
A)budget surplus of $3,000.
B)budget surplus of $12,000.
C)budget deficit of $3,000.
D)budget deficit of $12,000.
Q2) Which of the following would be included as investment in the GDP accounts?
A)the government buys goods from another country
B)someone buys stock in an American company
C)a firm increases its capital stock
D)All of the above are correct.
Q3) Melinda buys new equipment for her dental office with funds she borrowed from a bank that raised funds from depositors.Which of the following is correct?
A)Melinda is an investor.
B)The depositors are investors.
C)Both Melinda and the depositors are investors.
D)Neither Melinda nor the depositors are investors.
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Chapter 13: Saving Investment and the Financial System:
The Market for Loanable Funds
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201 Verified Questions
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Sample Questions
Q1) At some point during the financial crisis of 2008-2009,people with uninsured deposits at financial institutions withdrew money from their accounts at those institutions.This phenomenon characterized which element of the financial crisis?
A)the decline in confidence in financial institutions
B)the credit crunch
C)the economic downturn
D)the decline in asset prices
Q2) National saving is the sum of _____ and _____. In a closed economy it is equal to _____ in equilibrium.
Q3) When the government runs a budget deficit,
A)interest rates are lower than they would be if the budget were balanced.
B)national saving is higher than it would be if the budget were balanced.
C)investment is lower than it would be if the budget were balanced.
D)All of the above are correct.
Q4) What variable adjusts to balance demand and supply in the market for loanable funds?
Q5) In a closed economy, Y - C - G equals _____. The variable Y is _____, C is _____, and G is _____.
Q6) How do banks make profits?
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Chapter 13: Saving Investment and the Financial System:
Part A
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57 Verified Questions
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Sample Questions
Q1) Using a graph representing the market for loanable funds,show and explain what happens to interest rates and investment if the government budget goes from a deficit to a surplus.
Q2) A higher interest rate makes _____ more attractive. Therefore the quantity of loanable funds supplied increases.
Q3) In the terminology of macroeconomics,what's the difference between a saver and an investor?
Q4) The income that households have left after paying their taxes and paying for their consumption is known as______.
Q5) What are the basic differences between bonds and stocks?
Q6) What is the source of the supply of loanable funds?
Q7) Robert buys bonds.Rachel buys a new truck for her landscaping business.Identify both as savers,investors,both,or neither.
Q8) Congress and the President implement an investment tax credit.Which curve in the market for loanable funds shifts,which direction does it shift,and what happens to the interest rate?
Page 88
Q9) If federal tax rates increased,what would happen to the interest rate on municipal bonds?
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Chapter 13: Saving Investment and the Financial System:
Part B
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Sample Questions
Q1) In a closed economy,investment must be equal to private saving.
A)True
B)False
Q2) On a graph that depicts the market for loanable funds,the nominal interest rate is measured along the vertical axis.
A)True
B)False
Q3) When economists refer to investment,they mean the purchasing of stocks and bonds and other types of saving.
A)True
B)False
Q4) Managed mutual funds perform better on average than index funds because stock prices are usually a good predictor of a company's true value.
A)True
B)False
Q5) Lenders buy bonds and borrowers sell them.
A)True
B)False
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Chapter 14: The Basic Tools of Finance
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Sample Questions
Q1) Which of the following statements best describes the economist's view of finance and the financial system?
A)The financial system is very important to the functioning of the economy,and the tools of finance are often helpful to us as individuals when we find ourselves making certain decisions.
B)The financial system,while interesting,is not very important to the functioning of the economy;however,the tools of finance are often helpful to us as individuals when we find ourselves making certain decisions.
C)The financial system is very important to the functioning of the economy;however,the tools of finance are not particularly helpful to us as individuals since we seldom make decisions for which those tools are useful.
D)The field of finance is intimately concerned with the financial system and the tools of finance,and financial economists see great importance in them;however,the "mainstream" economist sees little value in studying financial markets or the tools of finance.
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Chapter 14: The Basic Tools of Finance: Present Value
Measuring the Time Value of Money
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Sample Questions
Q1) Veronica deposited $1,000 into an account two years ago.The first year she earned 7 percent interest;the second year she earned 5 percent.How much money does Veronica have in her account today?
A)$1,133.31
B)$1,120.00
C)$1,123.50
D)None of the above are correct to the nearest cent.
Q2) The K-Nine dog food company is considering the purchase of additional canning equipment.They expect that adding the equipment will yield $200,000 at the end of the first year and $250,000 at the end of the second year and then nothing after that.At which of the following prices and interest rates would K-Nine buy the equipment?
A)$415,000 if the interest rate is 5%
B)$419,000 if the interest rate is 4%
C)K-Nine would buy the equipment in both cases.
D)K-Nine would not buy the equipment in either case.
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Page 92
Chapter 14: The Basic Tools of Finance: Managing Risk
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Sample Questions
Q1) Refer to Figure 27-3.Suppose the vertical distance between the points (0,A)and (0,B)is 10.If his wealth increased from $700 to $900,then
A)Paul's utility would increase by less than 10 units.
B)Paul's utility would increase by more than 10 units.
C)Paul's utility would increase by exactly 10 units.
D)Any of the above could be correct.
Q2) There are many concerns for risk-averse lenders.Consider the following: 1.Lenders are concerned that borrowers with the greatest risk are the ones most likely to actively pursue loans.2.Lenders are concerned that real GDP will decline leading to reduced corporate profits.3.Lenders are concerned that products produced by certain corporations will become obsolete.
A)1 is market risk;2 is firm-specific risk
B)2 is market risk;3 is firm-specific risk
C)3 is market risk;1 is firm-specific risk
D)2 is firm-specific risk;3 is market risk
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93
Chapter 14: The Basic Tools of Finance: Asset Valuation
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Sample Questions
Q1) If asset markets are driven by the "animal spirits" of investors,then
A)those markets reflect rational behavior.
B)those markets reflect irrational behavior.
C)the efficient markets hypothesis is correct.
D)the stock market exhibits informational efficiency.
Q2) If you believe that stock prices follow a random walk,then probably you
A)do not believe that there is positive relationship between risk and return.
B)do not believe that stock prices reflect all available information.
C)believe in the validity of the efficient markets hypothesis.
D)believe that it is a good idea to engage in fundamental analysis.
Q3) An asset market is said to experience a speculative bubble when
A)the price of the asset rises above what appears to be its fundamental value.
B)the price of the asset appears to follow a random walk.
C)the market cannot establish an equilibrium price for the asset.
D)the asset is a natural resource and its supply is manipulated by foreign nations and foreign firms.
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94
Chapter 14: The Basic Tools of Finance: Conclusion
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Sample Questions
Q1) Economists disagree as to whether
A)the stock price of a company should reflect the company's expected profitability.
B)the basic tools of finance reflect valid ideas.
C)stock prices reflect rational estimates of a company's true worth.
D)there is any relationship between stock market fluctuations and fluctuations in the economy more broadly.
Q2) Stock market fluctuations
A)often go hand in hand with fluctuations in the economy more broadly.
B)rarely have anything to do with fluctuations in the economy more broadly.
C)have few,if any,macroeconomic implications.
D)are attributable to the widespread belief that the efficient markets hypothesis is correct.
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95
Chapter 14: The Basic Tools of Finance: Part A
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Sample Questions
Q1) Refer to Scenario 27-2.Suppose Dave is faced with a choice between two options.With option A Dave receives a guaranteed $2 million.With option B Dave faces a lottery that pays $10 million with probability P and pays $0 with probability (1-P).Given Dave's utility function,how high does P need to be before he will prefer option B over option A?
Q2) According to the efficient markets hypothesis,what changes the price of a share of a corporation's stock? Make up an example.
Q3) If a friend tells you that he is certain a stock price will rise based on information he heard on television or saw on the Internet,should you be skeptical? Explain.
Q4) The objective of diversification is to reduce risk.How does a person diversify a stock portfolio? How is risk measured?
Q5) Write the formula to find the present value of $750 to be paid in 5 years if the interest rate is 3 percent.
Q6) Bill gets medical insurance and then exercises less.Lilly has health concerns and so applies for medical insurance.Identify each of these as moral hazard or adverse selection.
Q7) Refer to Scenario 27-1.Is Lisa risk averse? Explain.
Q8) How does adverse selection affect the insurance market?
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Chapter 14: The Basic Tools of Finance: Part B
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Sample Questions
Q1) Diversification cannot reduce market risk.
A)True
B)False
Q2) Speculative bubbles may arise in part because the value of the stock to a stockholder depends on the final sale price.
A)True
B)False
Q3) Moral hazard is illustrated by people who take greater risks after they purchase insurance.
A)True
B)False
Q4) The sooner a payment is received and the higher the interest rate,the greater the present value of a future payment.
A)True
B)False
Q5) Actively managed mutual funds usually fail to outperform index funds,and this fact provides evidence in favor of the efficient markets hypothesis.
A)True
B)False
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Chapter 15: Unemployment
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Sample Questions
Q1) An economy's natural rate of unemployment is the
A)economy's long-run target level of unemployment.
B)amount of unemployment that the economy normally experiences.
C)lowest rate of unemployment the economy can achieve.
D)All of the above are correct.
Q2) The natural rate of unemployment is the
A)unemployment rate that would prevail with zero inflation.
B)rate associated with the highest possible level of GDP.
C)difference between the long-run and short-run unemployment rates.
D)amount of unemployment that the economy normally experiences.
Q3) The amount of unemployment that an economy normally experiences is called the
A)average rate of unemployment.
B)natural rate of unemployment.
C)cyclical rate of unemployment.
D)typical rate of unemployment.
Q4) The natural rate of unemployment
A)varies less than the measured unemployment rate.
B)cannot be changed by government policy.
C)is closely associated with the ups and downs in economic activity.
D)is set by the Federal Reserve.
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Chapter 15: Unemployment: Identifying Unemployment
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163 Verified Questions
163 Flashcards
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Sample Questions
Q1) Since 1960,the natural rate of unemployment in the U.S.has been between
A)0% and 1%.
B)5% and 6%.
C)10% and 12%.
D)12% and 24%.
Q2) Esmerelda worked part-time for her mother's business without pay.Tabitha was absent from work because she had strep throat.Who is counted as "employed" by the Bureau of Labor Statistics?
A)Esmerelda but not Tabitha
B)Tabitha but not Esmerelda
C)both Esmerelda and Tabitha
D)neither Esmerelda nor Tabitha
Q3) The Bureau of Labor Statistics produces data on unemployment and other aspects of the labor market from a regular survey of about A)600 households.
B)6,000 households.
C)60,000 households.
D)6,000,000 households.
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Chapter 15: Unemployment: Job Search
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40 Verified Questions
40 Flashcards
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Sample Questions
Q1) Which of the following is a source of frictional unemployment?
A)changes in the composition of demand among industries or regions
B)minimum wages
C)labor unions
D)None of the above is correct.
Q2) Wanda quit her job because she was unhappy at work.Arnold was fired from his landscaping job because his company was downsizing.Who is eligible for unemployment insurance benefits?
A)both Wanda and Arnold
B)Wanda but not Arnold
C)Arnold but not Wanda
D)neither Wanda nor Arnold
Q3) Which of the following is not correct?
A)Frictional unemployment is inevitable in a dynamic economy.
B)Although the unemployment created by sectoral shifts is unfortunate,in the long run such changes lead to higher productivity and higher living standards.
C)Workers tend to move to jobs where they are most valued.
D)Churning of the labor force signals that the economy is functioning poorly.
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Chapter 15: Unemployment: Minimum-Wage Laws
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Sample Questions
Q1) Minimum-wage laws
A)create unemployment.
B)do not apply in states with right-to-work laws.
C)affect highly-educated workers more than high school dropouts.
D)cause labor shortages,which further raise wages above equilibrium.
Q2) Wages in excess of their equilibrium level help explain
A)frictional but not structural unemployment.
B)structural but not frictional unemployment.
C)both frictional and structural unemployment.
D)neither frictional nor structural unemployment.
Q3) Minimum-wage laws can keep wages
A)above equilibrium and cause a surplus of labor.
B)above equilibrium and cause a shortage of labor.
C)below equilibrium and cause a surplus of labor.
D)below equilibrium and cause a shortage of labor.
Q4) Workers searching for jobs that best suit them is most closely associated with
A)cyclical unemployment.
B)frictional unemployment.
C)seasonal unemployment.
D)structural unemployment.
Page 101
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Chapter 15: Unemployment: Unions and Collective Bargaining
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Sample Questions
Q1) Unions contribute to
A)frictional but not structural unemployment.
B)structural but not frictional unemployment.
C)both frictional and structural unemployment.
D)neither frictional nor structural unemployment.
Q2) Which of the following is correct?
A)In unionized industries,wages are below the level that would prevail in competitive markets.
B)The introduction of a union in an industry increases the quantity of labor demanded in that industry,causes some workers in that industry to be unemployed,and increases wages in the rest of the economy.
C)Critics argue that the allocation of labor resulting from unions is both inefficient and inequitable.
D)All of the above are correct.
Q3) Unions contribute to
A)structural unemployment but not the natural rate of unemployment.
B)the natural rate of unemployment but not structural unemployment.
C)both structural unemployment and the natural rate of unemployment.
D)neither structural unemployment nor the natural rate of unemployment.
Page 102
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Chapter 15: Unemployment: The Theory of Efficiency Wages
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Sample Questions
Q1) The theory of efficiency wages provides a possible explanation as to why
A)workers form unions.
B)firms should try to reduce surpluses of labor.
C)firms may be inclined to keep their workers' wages above the equilibrium level.
D)firms may be inclined to keep their workers' wages below the equilibrium level.
Q2) Suppose that efficiency wages become more common in the economy.Imposing efficiency wages
A)increases the quantity demanded and decreases the quantity supplied of labor.
B)decreases the quantity demanded and increases the quantity supplied of labor.
C)increases the quantity demanded and decreases the quantity supplied of labor
D)decreases the quantity demanded and increases the quantity supplied of labor
Q3) Ariana is the CEO of a corporation that hires nonunion labor.According to the theory of efficiency wages,if she decides to pay her workers more than the competitive equilibrium wage,then
A)the profits of her firm might increase.
B)she will face a shortage of labor.
C)the turnover of her workers may increase.
D)None of the above is correct.
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Chapter 15: Unemployment: Part A
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Sample Questions
Q1) Do economists believe that labor unions are good or bad for the U.S. economy?
Q2) Write the formula for calculating the labor force participation rate.
Q3) How does the government measure the economy's rate of unemployment?
Q4) Most spells of unemployment are short,and most unemployment observed at any given time is long term.How can this be?
Q5) Define the natural rate of unemployment and cyclical unemployment.
Q6) Some degree of unemployment is __________ in a complex economy.
Q7) Give an historical example of an efficiency wage that was considered by the firm to be "one of the finest cost-cutting moves we ever made."
Q8) Compare the 2014 unemployment rates and labor-force participation rates of whites,blacks,adults of prime working age (ages 25-54),and teenagers (ages 16-19).
Q9) Explain the effect of right-to-work laws on the collective bargaining power of labor unions.
Q10) The Internet may reduce frictional unemployment because it __________.
Q11) Ignoring the differences across states,explain the benefit provided to the typical worker in the United States from unemployment insurance.
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Q12) Briefly summarize the advantages and disadvantages of unemployment insurance.
Chapter 15: Unemployment: Part B
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Sample Questions
Q1) The adult population must equal the sum of the employed,the unemployed,and those not in the labor force.
A)True B)False
Q2) Structural unemployment results when the number of jobs is insufficient for the number of workers.
A)True B)False
Q3) Over the past several decades,the difference between the labor-force participation rates of men and women in the U.S.has gradually decreased.
A)True
B)False
Q4) Most spells of unemployment are short,and most unemployment observed at any given time is long-term.
A)True B)False
Q5) Long-run unemployment arises from a single problem that has a single solution. A)True B)False
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Chapter 16: The Monetary System
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Sample Questions
Q1) The existence of money
A)reduces specialization.
B)makes trade easier.
C)allows for barter.
D)hinders production.
Q2) When we say that trade is roundabout we mean that
A)people sometimes trade goods for goods.
B)trades require a double coincidence of wants.
C)currency is accepted primarily to make further trades.
D)people must spend time searching for the products they wish to purchase.
Q3) The existence of money leads to
A)greater specialization in production,but not to a higher standard of living.
B)a higher standard of living,but not to greater specialization.
C)greater specialization and to a higher standard of living.
D)neither greater specialization nor to a higher standard of living.
Q4) Money
A)is more efficient than barter.
B)makes trades easier.
C)allows greater specialization.
D)All of the above are correct.
106
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Chapter 16: The Monetary System: The Meaning of Money
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Sample Questions
Q1) If traveler's checks were $1000 higher and saving deposits were $500 higher,M1 would be
A)$500 higher and M2 would be $1,500 higher.
B)$1,000 higher and M2 would be $1,500 higher.
C)M2 and M1 would be $1,500 higher.
D)$1,000 high and M2 would be $500 higher.
Q2) The primary difference between commodity money and fiat money is that
A)commodity money is a medium of exchange but fiat money is not.
B)fiat money is a medium of exchange but commodity money is not.
C)commodity money has intrinsic value but fiat money does not.
D)fiat money has intrinsic value but commodity money does not.
Q3) Which of the following is included in M2 but not in M1?
A)demand deposits
B)corporate bonds
C)large time deposits
D)money market mutual funds
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Chapter 16: The Monetary System: The Federal Reserve System
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Q1) The Federal Reserve Board of Governors
A)rotate each four years.
B)are appointed by the President and confirmed by the Senate.
C)are elected by popular vote.
D)hold lifetime appointments.
Q2) Which of the following does the Federal Reserve not do?
A)conduct monetary policy
B)act as a lender of last resort
C)convert Federal Reserve Notes into gold
D)serve as a bank regulator
Q3) At the Federal Reserve,
A)the nation's monetary and fiscal policies are made by the Federal Open Market Committee,which meets about every six weeks.
B)the nation's monetary and fiscal policies are made by the Federal Open Market Committee,which meets twice a year.
C)the nation's monetary policy is made by the Federal Open Market Committee,which meets about every six weeks.
D)the nation's monetary policy is made by the Federal Open Market Committee,which meets twice a year.
Page 108
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Chapter 16: The Monetary System: Banks and the Money Supply
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Sample Questions
Q1) If a bank desires to hold no excess reserves,the reserve requirement is 8 percent,and it receives a new deposit of $500,
A)its required reserves increase by $40.
B)its total reserves initially increase by $460.
C)it will be able to make a new loan of up to $492.
D)All of the above are correct.
Q2) Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 6 percent.If you deposit $8,000 into First Raven Bank,
A)First Raven's required reserves increase by $480.
B)First Raven will be able to lend out $7,520.
C)First Raven's assets and liabilities both will increase by $8,000.
D)All of the above are correct.
Q3) If the reserve ratio is 20 percent,then $100 of new reserves can generate
A)$60 of new money in the economy.
B)$250 of new money in the economy.
C)$500 of new money in the economy.
D)$2,000 of new money in the economy.
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Page 109
Chapter 16: The Monetary System: The Feds Tools of Monetary Control
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Sample Questions
Q1) Refer to Scenario 29-1.Suppose the Central Bank of Namdia loaned the banks of Namdia 5 million dias.Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same.By how much would the money supply of Namdia change?
A)60 million dias
B)50 million dias
C)40 million dias
D)None of the above is correct.
Q2) Refer to Scenario 29-2.Assuming the only other thing Tazian banks have on their balance sheets is loans,what is the value of existing loans made by Tazian banks?
A)6,900 million tazes
B)7,125 million tazes
C)7,350 million tazes
D)None of the above is correct.
Q3) The Fed sets the interest that borrowers pay on loans from
A)the discount window and the term auction facility
B)the discount window but not the term auction facility
C)the term auction facility but not the discount window
D)neither the discount window nor the term auction facility
Page 110
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Chapter 16: The Monetary System: Part A
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Sample Questions
Q1) What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?
Q2) Name three actions the Fed can take to increase the money supply.
Q3) A bank has $1000 in deposits and maintains a 12 percent reserve ratio. Its reserves are $_____.
Q4) When the federal funds rate is below the target rate, the Fed will _____ bonds. This action will _____ the money supply
Q5) Monetary policy has an important influence on _____ and _____ in the short run.
Q6) The interest rate charged by the Fed to member banks is called the _____.
Q7) Explain how each of the following changes the money supply.
a.the Fed buys bonds
b.the Fed auctions credit
c.the Fed raises the discount rate
d.the Fed raises the reserve requirement
Q8) Suppose the required reserve ratio is 20%.What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general,why might the actual amount of total money creation be less than the maximum?
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Q9) Why is the president of the New York Fed always a voting member of the FOMC?
Chapter 16: The Monetary System: Part B
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Sample Questions
Q1) M1 includes savings deposits.
A)True
B)False
Q2) Money allows people to specialize in what they do best,thereby raising everyone's standard of living.
A)True
B)False
Q3) Under a 100-percent-reserve banking system,banks do not influence the supply of money.
A)True
B)False
Q4) Marc puts prices on surfboards and skateboards at his sporting goods store.He is using money as a unit of account.
A)True
B)False
Q5) Other things the same,if banks decide to hold a smaller part of their deposits as excess reserves,the money supply will fall.
A)True
B)False
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Chapter 17: Money Growth and Inflation
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22 Verified Questions
22 Flashcards
Source URL: https://quizplus.com/quiz/79726
Sample Questions
Q1) Inflation can be measured by the
A)change in the consumer price index.
B)percentage change in the consumer price index.
C)percentage change in the price of a specific commodity.
D)change in the price of a specific commodity.
Q2) Which of the following statements about U.S.inflation is not correct?
A)Low inflation was viewed as a triumph of President Carter's economic policy.
B)There were long periods in the nineteenth century during which prices fell.
C)The U.S.public has viewed inflation rates of even 7 percent as a major economic problem.
D)The U.S.inflation rate has varied over time,but international data show even more variation.
Q3) Which country is correctly matched with its 2015 inflation rate?
A)9 percent inflation in the United States.
B)3.6 percent inflation in Russia.
C)59 percent inflation in Venezuela.
D)4.9 percent inflation in India.
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Chapter 17: Money Growth and Inflation: The Classical
Theory of Inflation
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245 Verified Questions
245 Flashcards
Source URL: https://quizplus.com/quiz/79725
Sample Questions
Q1) Suppose the money supply tripled,but at the same time velocity doubled and real GDP was unchanged.According to the quantity equation the price level
A)is 1.5 times its old value.
B)is 3 times its old value.
C)is 6 times its old value.
D)is the same as its old value.
Q2) According to the classical dichotomy,which of the following is influenced by monetary factors?
A)real GDP
B)unemployment
C)nominal interest rates
D)All of the above are correct.
Q3) Over time both real GDP and the price level have trended upward.Which of these trends would the classical dichotomy say could be explained by an upward trend in the money supply?
A)both the upward trend in real GDP and the upward trend in the price level
B)the upward trend in real GDP but not the upward trend in the price level
C)the upward trend in the price level but not the upward trend in real GDP
D)neither the upward trend in the price level nor the upward trend in real GDP
Page 114
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Chapter 17: Money Growth and Inflation: The Costs of Inflation
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Sample Questions
Q1) When inflation rises,people will desire to hold
A)less money and will go to the bank less frequently.
B)less money and will go to the bank more frequently.
C)more money and will go to the bank less frequently.
D)more money and will go to the bank more frequently.
Q2) For a given real interest rate,an increase in inflation makes the after-tax real interest rate
A)decrease,which encourages savings.
B)decrease,which discourages savings.
C)increase,which encourages savings.
D)increase,which discourages savings.
Q3) The idea of menu costs suggests that
A)firms alter prices less frequently as inflation increases.
B)firms alter prices more frequently as inflation increases.
C)firms always alter prices when costs increase.
D)firms alter prices as interest rates rise.
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Chapter 17: Money Growth and Inflation: Conclusion
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Source URL: https://quizplus.com/quiz/79723
Sample Questions
Q1) Inflation costs are minimized during periods of A)hyperinflation.
B)large,unexpected deflation.
C)moderate inflation.
D)rapid money growth.
Q2) Inflation costs are minimized under which inflation rate?
A)-20 percent
B)5 percent
C)15 percent
D)575 percent
Q3) In order to maintain stable prices,a central bank must A)maintain low interest rates.
B)keep unemployment low.
C)tightly control the money supply.
D)sell indexed bonds.
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116
Chapter 17: Money Growth and Inflation: Part A
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Sample Questions
Q1) A decrease in the value of money ________the quantity of money demanded.On a graph with the value of money on the vertical axis this effect on the value of money on quantity demanded is shown as ________.
Q2) According to the Fisher effect,if the central bank raises the rate of money supply growth,what happens to the nominal and the real interest rate?
Q3) What assumptions are necessary to argue that the quantity equation implies that increases in the money supply lead to proportional changes in the price level?
Q4) According to the classical dichotomy,what changes nominal variables? What changes real variables?
Q5) Your grandfather tells you that his annual income increased at an average rate of eight percent over his lifetime.He complains,however,that the average inflation rate of three percent reduced his ability to buy all the things he could have purchased if inflation had been zero.You respectfully tell your grandfather that he is committing the_________,because his annual income would have increased at an average rate of only five percent if inflation had been zero.
Q6) An increase in the price level means that a dollar buys__________ goods and services so the value of a dollar __________.
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Page 117
Chapter 17: Money Growth and Inflation: Part B
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Sample Questions
Q1) An increase in money demand would create a surplus of money at the original value of money.
A)True
B)False
Q2) When the Fed increases the money supply and creates inflation,it erodes the real value of the unit of account and makes it more difficult for investors to sort successful from unsuccessful firms.
A)True
B)False
Q3) The United States has never had deflation.
A)True
B)False
Q4) Nominal GDP measures output of final goods and services in physical terms.
A)True
B)False
Q5) Suppose the nominal interest rate is 5 percent,the tax rate on interest income is 30 percent,and the after-tax real interest rate is 2.1percent.Then the inflation rate is 2 percent.
A)True
B)False
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Chapter 18: Open Economy Macroeconomics Basic Concepts
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Source URL: https://quizplus.com/quiz/79722
Sample Questions
Q1) Which type(s)of economies interact with other economies?
A)only closed economies
B)only open economies
C)closed economies and open economies
D)neither closed nor open economies
Q2) International trade
A)raises the standard of living in all trading countries.
B)lowers the standard of living in all trading countries.
C)leaves the standard of living unchanged.
D)raises the standard of living for importing countries and lowers it for exporting countries.
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Chapter 18: Open Economy Macroeconomics Basic
Concepts: The International Flows of Goods and Capital
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Sample Questions
Q1) The country of Sylvania has a GDP of $900,investment of $200,government purchases of $200,and net capital outflow of -$100.What is consumption?
A)$700
B)$600
C)$500
D)$300
Q2) Foreign-produced goods and services that are purchased domestically are called A)imports.
B)exports.
C)net imports.
D)net exports.
Q3) U.S.-based John Deere sells machinery to residents of South Africa who pay with South African currency (the rand).
A)This increases U.S.net capital outflow because the U.S.acquires foreign assets.
B)This decreases U.S.net capital outflow because the U.S.acquires foreign assets.
C)This increases U.S.net capital outflow because the U.S.sells capital goods.
D)This decreases U.S.net capital outflow because the U.S.sells capital goods.
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Page 120
Chapter 18: Open Economy Macroeconomics Basic
Concepts: The Prices for International Transactions Real and Nominal Exchange Rates
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76 Verified Questions
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Sample Questions
Q1) The exchange rate is 1.5 Bosnian markas per U.S.dollar.The price of a refrigerator in Bosnia is 1,200 markas while in the U.S.it is $1,000.The real exchange rate is
A)9/5
B)5/4
C)4/5
D)None of the above are correct.
Q2) Suppose the real exchange rate is 1.25 pounds of bananas in Guatemala per pound of bananas in the U.S.If a pound of bananas in the U.S.costs $.50,and the exchange rate is 10 Guatemalan Quetzals per dollar,what is the price of bananas in Guatemala?
A)2.50 Quetzals per pound
B)4.00 Quetzals per pound
C)5.75 Quetzals per pound
D)6.25 Quetzals per pound
Q3) If the U.S.real exchange rate appreciates,U.S.exports
A)increase and U.S.imports decrease.
B)decrease and U.S.imports increase.
C)and U.S.imports both increase.
D)and U.S.imports both decrease.
Page 121
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Chapter 18: Open Economy Macroeconomics Basic
Concepts: A First Theory of Exchange-Rate Determination
Purchasing-Power Parity
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Sample Questions
Q1) Prices in both the U.S.and China rise,but prices in China increase by a larger percentage.According to purchasing-power parity,the U.S.dollar
A)gains value both in terms of the domestic goods and services it can buy and in terms of the Chinese currency it can buy.
B)gains value in terms of the domestic goods and services it can buy,but loses value in terms of the Chinese currency it can buy.
C)loses value in terms of the domestic goods and services it can buy,but gains value in terms of the Chinese currency it can buy.
D)loses value both in terms of the domestic goods and services it can buy and in terms of the Chinese currency it can buy.
Q2) From 1970 to 1998 the U.S.dollar
A)gained value compared to the Italian lira because inflation was higher in Italy.
B)gained value compared to the Italian lira because inflation was lower in Italy.
C)lost value compared to the Italian lira because inflation was higher in Italy.
D)lost value compared to the Italian lira because inflation was lower in Italy.
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Page 122
Chapter 18: Open Economy Macroeconomics Basic
Concepts: Part A
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67 Verified Questions
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Source URL: https://quizplus.com/quiz/79653
Sample Questions
Q1) Why are net exports and net capital outflow always equal?
Q2) Last year a country had $700 billion of saving and $900 of investment.This year it had $1000 billion of saving and $800 billion of investment.By how much did net capital outflow change? By how much did net exports change? How is it possible for a country to have saving that is greater than investment?
Q3) A country recently had a GDP of $1000 billion.Its consumption expenditures were $650 billion,its government spent $250 billion,and it had domestic investment of $150 billion.What was the value of this country's net capital outflow? Explain how you found your answer.
Q4) A U.S.mutual fund uses $1 million to buy yen from a Japanese bank.It then uses these yen to buy stocks in a Japanese electronics firm.The Japanese electronic firm then exchanges the $1 million dollars of yen for dollars from a U.S.bank.It uses these dollars to buy equipment manufactured by a company located in the U.S. As a result of these exchanges,by how much,if at all,and in which direction does:
A.U.S.net exports change?
B.U.S.net capital outflow change?
Q5) What is the logic behind the theory of purchasing-power parity?
Page 123
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Chapter 18: Open Economy Macroeconomics Basic
Concepts: Part B
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63 Verified Questions
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Sample Questions
Q1) Other things the same,an increase in the U.S.real exchange rate makes U.S.goods more expensive relative to foreign goods.
A)True
B)False
Q2) If the purchasing power of the dollar is always the same at home and abroad,then the nominal exchange rate defined as units of foreign currency per dollar decreases if the U.S.price level rises more than the price level in foreign countries.
A)True
B)False
Q3) Other things the same,an increase in foreign prices raises the real exchange rate.
A)True B)False
Q4) Other things the same,if the government reduced its budget deficit,the country's trade balance would rise.
A)True
B)False
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Page 124
Chapter 19: A Macroeconomic Theory of the Open Economy
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Sample Questions
Q1) Over the past three decades,the United States has
A)generally had,or been very near to a trade balance.
B)had trade deficits in about as many years as it has trade surpluses.
C)persistently had a trade deficit.
D)persistently had a trade surplus.
Q2) The open-economy macroeconomic model includes
A)only the market for loanable funds.
B)only the market for foreign-currency exchange.
C)both the market for loanable funds and the market for foreign-currency exchange.
D)neither the market for loanable funds nor the market for foreign-currency exchange.
Q3) The open-economy macroeconomic model examines the determination of
A)the output growth rate and the real interest rate.
B)unemployment and the exchange rate.
C)the output growth rate and the inflation rate.
D)the trade balance and the exchange rate.
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Chapter 19: A Macroeconomic Theory of the Open
Economy: Supply and Demand for Loanable Funds and for
Foreign-Currency Exchange
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141 Verified Questions
141 Flashcards
Source URL: https://quizplus.com/quiz/79717
Sample Questions
Q1) If the demand for loanable funds shifts left,then
A)the real interest rate and the equilibrium quantity of loanable funds both fall.
B)the real interest rate falls and the equilibrium quantity of loanable funds rises.
C)the real interest rate and the equilibrium quantity of loanable funds both rise.
D)the real interest rate rises and the equilibrium quantity of loanable funds falls.
Q2) A country has domestic investment of $200 billion.Its citizens purchase $600 of foreign assets and foreign citizens purchase $300 of its assets.What is national saving?
A)$400 billion
B)$500 billion
C)$600 billion
D)$800 billion
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Chapter 19: A Macroeconomic Theory of the Open
Economy: Equilibrium in the Open Economy
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45 Verified Questions
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Source URL: https://quizplus.com/quiz/79716
Sample Questions
Q1) In the open-economy macroeconomic model,which of the following increases net capital outflow?
A)a fall in the real exchange rate,but not a fall in the real interest rate
B)a fall in the real interest rate,but not a fall in the real exchange rate
C)both a fall in the real exchange rate and a fall in the real interest rate
D)neither a fall in the real exchange rate nor a fall in the real interest rate
Q2) The quantity of U.S.bonds foreigners want to buy is taken into account
A)in the U.S.supply of loanable funds and the supply of dollars in the market for foreign-currency exchange.
B)in the U.S.supply of loanable funds and the demand for dollars in the market for foreign-currency exchange.
C)in the U.S.demand for loanable funds and the supply of dollars in the market for foreign-currency exchange.
D)in the U.S.demand for loanable funds and the demand for dollars in the market for foreign-currency exchange.
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Page 127
Chapter 19: A Macroeconomic Theory of the Open
Economy: How Policies and Events Affect an Open Economy
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172 Verified Questions
172 Flashcards
Source URL: https://quizplus.com/quiz/79715
Sample Questions
Q1) An increase in the budget deficit makes domestic interest rates
A)rise because the supply of loanable funds shifts left.
B)fall because the supply of loanable funds shifts left.
C)rise because the demand for loanable funds shifts right.
D)fall because the demand for loanable funds shifts right.
Q2) From 1980 to 1987,U.S.net capital outflows decreased.According to the open-economy macroeconomic model,which of the following could have caused this?
A)an increase in the demand for U.S.currency in the market for foreign-currency exchange
B)a decrease in the demand for U.S.currency in the market for foreign-currency exchange
C)an increase in the supply of loanable funds
D)a decrease in the supply of loanable funds
Q3) According to the open-economy macroeconomic model,import quotas increase which of the following
A)net exports and net capital outflow
B)net exports but not net capital outflow.
C)net capital outflow but not net exports.
D)neither net exports nor net capital outflow.
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Chapter 19: A Macroeconomic Theory of the Open
Economy: Part A
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47 Verified Questions
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Sample Questions
Q1) Suppose that U.S.savers decide that holding Brazilian assets has become riskier.What happens to U.S.net capital outflow? What happens to the U.S.real interest rate?
Q2) If the exchange rate rises, domestic goods become relatively ______ expensive. This change in the affordability of domestic goods makes domestic goods _____ attractive to foreigners. So, _______ ______.
Q3) An economy recently had 800 billion euros of saving and 600 billion euros of net capital outflow.What was its investment? What was its quantity of loanable funds supplied?
Q4) Why do higher real interest rates lead to lower net capital outflow?
Q5) What is the source of the supply of dollars in the market for foreign-currency exchange?
Q6) If the exchange rate falls, domestic goods become relatively ______ expensive. This change in the affordability of domestic goods makes domestic goods _____ attractive to domestic residents. So, _______ ______.
Q7) Suppose a presidential candidate promises to increase the government budget surplus and claims that doing so will stop U.S.citizens from investing in foreign companies and increase the value of the dollar.Evaluate this candidate's promise.
Page 129
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Chapter 19: A Macroeconomic Theory of the Open
Economy: Part B
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Source URL: https://quizplus.com/quiz/79629
Sample Questions
Q1) If C+I+G>Y,then net exports and net capital outflow are both greater than zero. A)True
B)False
Q2) In the long run,import quotas increase net exports.
A)True
B)False
Q3) In the open-economy macroeconomic model,if there were a surplus in the market for foreign-currency exchange,the real exchange rate would appreciate. A)True
B)False
Q4) In the 1980s,both the U.S.government budget and U.S.trade deficits increased. A)True
B)False
Q5) If Argentina suffers from capital flight,Argentinean domestic investment and Argentinean net exports will both decline. A)True
B)False
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Page 130
Chapter 20: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) During recessions
A)workers are laid off.
B)factories are idle.
C)firms may find they are unable to sell all they produce.
D)All of the above are correct.
Q2) On average,over the last 50 years,real GDP has grown by about
A)3 percent per year.
B)2 percent per year.
C)1 percent per year.
D)4 percent per year.
Q3) A relatively mild period of falling incomes and rising unemployment is called a(n) A)depression.
B)recession.
C)expansion.
D)business cycle.
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Chapter
Three Key Facts About Economic Fluctuations
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Sample Questions
Q1) Which of the following fall during a recession?
A)both retail sales and employment
B)retail sales but not employment
C)employment but not retail sales
D)neither employment nor retail sales
Q2) Which of the following is correct?
A)Over the business cycle investment fluctuates more than consumption.
B)Economic fluctuations are easy to predict.
C)During recessions employment rises.
D)Because of government policy the U.S.had zero recessions in the last 25 years.
Q3) Refer to Figure 33-1.Line A is
A)investment spending.
B)real GDP.
C)unemployment rate.
D)CPI.
Q4) During recessions
A)sales and profits fall.
B)sales and profits rise.
C)sales rise,profits fall.
D)profits fall,sales rise.
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Explaining Short-Run Economic Fluctuations
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Sample Questions
Q1) "Money is a veil" best describes the A)new-Keynesian view.
B)Keynesian view.
C)classical view.
D)economy in the short run but not the long run.
Q2) The aggregate demand and aggregate supply graph has
A)quantity of output on the horizontal axis.Output can be measured by the GDP deflator.
B)quantity of output on the horizontal axis.Output can be measured by real GDP.
C)quantity of output on the vertical axis.Output can be measured by the GDP deflator.
D)quantity of output on the vertical axis.Output can be measured by real GDP.
Q3) We depart from the assumptions of classical economics when we focus on the relationship between
A)the quantity of output and the price level.
B)the quantity of output and the unemployment rate.
C)the price level and the inflation rate.
D)inflation and the nominal interest rate.
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The Aggregate-Demand Curve
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Sample Questions
Q1) Other things the same,the aggregate quantity of goods demanded in the U.S.increases if
A)real wealth rises.
B)the interest rate rises.
C)the dollar appreciates.
D)All of the above are correct.
Q2) As the price level rises
A)people will want to buy more bonds,so the interest rate rises.
B)people will want to buy fewer bonds,so the interest rate falls.
C)people will want to buy more bonds,so the interest rate falls.
D)people will want to buy fewer bonds,so the interest rate rises.
Q3) Other things the same,as the price level falls,
A)the dollar depreciates.
B)the interest rate rises.
C)people feel less wealthy.
D)All of the above are correct.
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134
The Aggregate-Supply Curve
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Sample Questions
Q1) An increase in the expected price level shifts the
A)short-run and long-run aggregate supply curves left.
B)the short-run but not the long-run aggregate supply curve left.
C)the long-run but not the short-run aggregate supply curve left.
D)neither the long-run nor the short-run aggregate supply curve left.
Q2) When the price level rises more than expected,a firm with a sticky price will sell its output at a price that is
A)less than it desires and increase its production.
B)less than it desires and decrease its production.
C)more than it desires and increase its production.
D)less than it desires and decrease its production
Q3) The long-run aggregate supply curve shifts right if
A)the price level rises.
B)the price level falls.
C)the capital stock increases.
D)the capital stock decreases.
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Chapter 20: Aggregate Demand and Aggregate Supply:
Two Causes of Economic Fluctuations
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Sample Questions
Q1) An increase in the price level and a reduction in output would result from A)a fall in stock prices.
B)a decrease in the supply of an important resource.
C)an increase in government expenditures.
D)an increase in taxes.
Q2) In the mid-1970s the price of oil rose dramatically.This A)shifted aggregate supply left,the price level rose,and real GDP fell.
B)caused U.S.prices to fall,and real GDP rose.
C)caused an increase in U.S.prices and real GDP.
D)caused a decrease in U.S.prices and real GDP.
Q3) Suppose that during World War II the long-run aggregate supply curve shifted right.In order for price and output to have changed in the direction they did,what would have to have happened to aggregate demand?
A)It would have to have shifted left by less than aggregate supply shifted
B)It would have to have to shifted left by more than aggregate supply shifted.
C)It would have to have shifted right by less than aggregate supply shifted
D)It would have to have to shifted right by more than aggregate supply shifted.
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Page 136
Chapter 20: Aggregate Demand and Aggregate Supply:
Part A
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Sample Questions
Q1) Explain how an increase in the price level changes interest rates.How does this change in interest rates lead to changes in investment and net exports?
Q2) List the three alternative explanations for the upward slope of the short run aggregate supply curve.
Q3) Other things the same,what happens to the price level and quantity of output when an adverse shift in the short run aggregate supply curve occurs?
Q4) The exchange-rate effect helps explain what feature in the aggregate demand and aggregate supply model?
Q5) Explain how a recession differs from a depression.
Q6) During periods of stagflation,what happens to output and prices in the economy?
Q7) Refer to Figure 33-12.Explain how the aggregate demand and aggregate supply model changed during periods 1 and 2.
Q8) Explain how a change in the expected price level would shift the short-run and long-run aggregate-supply curves.
Q9) Using the aggregate demand and aggregate supply model,a decrease of what curve is by itself consistent with the changes in prices and output that occurred during the onset of the Great Depression?
Page 137
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Chapter 20: Aggregate Demand and Aggregate Supply:
Part B
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Sample Questions
Q1) A decrease in the money supply causes the interest rate to rise so that investment falls.
A)True B)False
Q2) The aggregate-demand curve shows the quantity of domestic goods and services that households,firms,the government,and customers abroad want to buy at each price level.
A)True B)False
Q3) Other things the same,a decrease in the price level makes the interest rate decrease,which leads to a depreciation of the dollar in the market for foreign-currency exchange.
A)True B)False
Q4) A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward. A)True B)False
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Chapter 21: The Influences of Monetary and Fiscal Policy on Aggregate Demand
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Q1) Shifts in aggregate demand affect the price level in
A)the short run but not in the long run.
B)the long run but not in the short run.
C)both the short and long run.
D)neither the short nor long run.
Q2) Fiscal policy affects the economy
A)only in the short run.
B)only in the long run.
C)in both the short and long run.
D)in neither the short nor the long run.
Q3) A goal of monetary policy and fiscal policy is to
A)offset the shifts in aggregate demand and thereby eliminate unemployment.
B)offset shifts in aggregate demand and thereby stabilize the economy.
C)enhance the shifts in aggregate demand and thereby create fluctuations in output and employment.
D)enhance the shifts in aggregate demand and thereby increase economic growth
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139
Chapter 21: The Influences of Monetary and Fiscal Policy on
Aggregate Demand: How Monetary Policy Influences
Aggregate Demand
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Q1) In recent years,the Federal Reserve has conducted policy by setting a target for the A)size of the money supply.
B)growth rate of the money supply.
C)federal funds rate.
D)discount rate.
Q2) A surplus or shortage in the money market is eliminated by adjustments in the price level according to
A)both liquidity preference theory and classical theory.
B)neither liquidity preference theory nor classical theory.
C)liquidity preference theory,but not classical theory.
D)classical theory,but not liquidity preference theory.
Q3) Which of the following actions might we logically expect to result from rising stock prices?
A)Jim decreases his consumption spending.
B)Firms sell fewer shares of new stock.
C)Firms spend more on investment.
D)None of the above is correct.
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Chapter 21: The Influences of Monetary and Fiscal Policy on Aggregate Demand:
How Fiscal Policy Influences
Aggregate Demand
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Q1) Suppose the MPC is 0.60.Assume there are no crowding out or investment accelerator effects.If the government increases expenditures by $200 billion,then by how much does aggregate demand shift to the right? If the government decreases taxes by $200 billion,then by how much does aggregate demand shift to the right?
A)$300 billion and $180 billion
B)$300 billion and $300 billion
C)$500 billion and $300 billion
D)$500 billion and $500 billion
Q2) Which of the following are effects of an increase in government spending financed by a tax increase?
A)the tax increase reduces consumption;the change in the interest rate reduces residential construction
B)the tax increase reduces consumption;the change in the interest rate raises residential construction
C)the tax increase raises consumption;the change in the interest rate reduces residential construction.
D)the tax increase raises consumption;the change in the interest rate reduces residential construction
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Chapter 21: The Influences of Monetary and Fiscal Policy on
Aggregate Demand: Using Policy to Stabilize the Economy
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Q1) Which U.S.president,when asked why he had proposed a tax cut,responded by saying "To stimulate the economy.Don't you remember your Economics 101?"
A)Dwight D.Eisenhower
B)John F.Kennedy
C)Ronald Reagan
D)Bill Clinton
Q2) Suppose there is an increase in government spending.To stabilize output,the Federal Reserve would
A)increase government spending.
B)increase the money supply.
C)decrease government spending.
D)decrease the money supply.
Q3) The lag problem associated with fiscal policy is due mostly to
A)the fact that business firms make investment plans far in advance.
B)the political system of checks and balances that slows down the process of implementing fiscal policy.
C)the time it takes for changes in government spending or taxes to affect the interest rate.
D)All of the above are correct.
Page 142
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Chapter 21: The Influences of Monetary and Fiscal Policy on
Aggregate Demand: Part A
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Q1) Suppose that there are no crowding-out effects and the MPC is .9.By how much must the government increase expenditures to shift the aggregate demand curve right by $10 billion?
Q2) A European recession that reduces U.S.net exports by $50 billion may ultimately lead to a $----- billion reduction in aggregate demand if the MPC is 0.75.
Q3) An open-market purchase by the Federal Reserve creates an excess ----- of money.This causes interest rates to ----- and investment to -----.The change in investment causes aggregate demand to shift to the -----.
Q4) Policymakers use ----- policy and ----- policy to stabilize ----- and ----- in the short run.
Q5) An increase in taxes shifts the aggregate ----- curve to the -----.
Q6) A decrease in taxes will shift aggregate demand to the -----,cause consumption to -----,and cause output to -----.Due to the crowding-out effect,investment will -----.
Q7) To offset increased pessimism by households,the government may ----government spending and/or ----- taxes.
Q8) Describe the process in the money market by which the interest rate reaches its equilibrium value if it starts above equilibrium.
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Chapter 21: The Influences of Monetary and Fiscal Policy on Aggregate Demand:
Part B
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Q1) An increase in the money supply decreases the equilibrium interest rate and shifts the aggregate-demand curve to the right.
A)True
B)False
Q2) During recessions,unemployment insurance payments tend to rise.
A)True
B)False
Q3) Depending on the size of the multiplier and crowding-out effects,the rightward shift in aggregate demand from a tax cut could be larger or smaller than the tax cut.
A)True
B)False
Q4) The theory of liquidity preference was developed by Irving Fisher.
A)True
B)False
Q5) The interest-rate effect is partially explained by the fact that a higher price level reduces money demand.
A)True
B)False
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Chapter 22: The Short Run Trade Off Between Inflation and Unemployment
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Q1) In the long run,
A)the natural rate of unemployment depends primarily on the level of aggregate demand.
B)inflation depends primarily upon the money supply growth rate.
C)there is a tradeoff between the inflation rate and the natural rate of unemployment.
D)All of the above are correct.
Q2) The misery index is supposed to measure the
A)social cost of unemployment.
B)health of the economy.
C)lost output associated with a particular unemployment rate.
D)short-run tradeoff between inflation and unemployment.
Q3) In the long run,
A)the natural rate of unemployment depends primarily on the level of aggregate demand.
B)inflation depends primarily upon the money supply growth rate.
C)there is a tradeoff between the inflation rate and the natural rate of unemployment.
D)All of the above are correct.
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Page 145
Chapter 22: The Short Run Trade Off Between Inflation and Unemployment:
The Phillips Curve
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Q1) According to the short-run Phillips curve,if the central bank increases the money supply,then
A)inflation and unemployment will both fall.
B)inflation and unemployment will both rise.
C)inflation will fall and unemployment will rise.
D)inflation will rise and unemployment will fall.
Q2) In the short run,policy that changes aggregate demand changes
A)both unemployment and the price level.
B)neither unemployment nor the price level.
C)only unemployment.
D)only the price level.
Q3) In the long run,policy that changes aggregate demand changes
A)both unemployment and the price level.
B)neither unemployment nor the price level.
C)only unemployment.
D)only the price level.
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Page 146
Chapter 22: The Short Run Trade Off Between Inflation and Unemployment:
Shifts in the Phillips Curve the Role of Expectations
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Q1) A policy change that changes the natural rate of unemployment changes
A)neither the long-run Phillips curve nor the long-run aggregate supply curve.
B)both the long-run Phillips curve and the long-run aggregate supply curve.
C)the long-run Phillips curve,but not the long-run aggregate supply curve.
D)the long-run aggregate supply curve,but not the long-run Phillips curve.
Q2) A policy that raised the natural rate of unemployment would shift
A)both the short-run and the long-run Phillips curves to the right.
B)the short-run Phillips curve right but leave the long-run Phillips curve unchanged.
C)the long-run Phillips curve right but leave the short-run Phillips curve unchanged.
D)neither the long-run Phillips curve nor the short-run Phillips curve right.
Q3) If the Federal Reserve decreases the rate at which it increases the money supply,then unemployment is higher in
A)the long run and the short run.
B)the long run but not the short run.
C)the short run but not the long run.
D)neither the short run nor the long run.
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Chapter 22: The Short Run Trade Off Between Inflation and
Unemployment: Shifts in the Phillips Curve the Role of Supply Shocks
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Q1) After an oil price shock,which of the following would move unemployment back towards its natural rate?
A)the Fed sells bonds
B)the government raises taxes
C)the government increases expenditures
D)All of the above are correct.
Q2) If a central bank wants to counter the change in the price level caused by an adverse supply shock,it could change the money supply to shift
A)aggregate demand right.
B)aggregate demand left.
C)aggregate supply right.
D)aggregate supply left.
Q3) There is an adverse supply shock.In response the Federal Reserve pursues an expansionary monetary policy.Taking into account both the shock and the Federal Reserve's policy,which of the following are we sure of?
A)unemployment will be higher
B)unemployment will be lower
C)inflation will be higher
D)inflation will be lower
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Chapter 22: The Short Run Trade Off Between Inflation and Unemployment:
The Cost of Reducing Inflation
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Sample Questions
Q1) Refer to Monetary Policy in Mokania.The Bank of Mokania publicizes that it intends to reduce the inflation rate to 5%.If Mokanians lower their inflation expectations,which curve shifts to the left?
A)both the short-run and the long-run Phillips curves
B)neither the short-run nor the long-run Phillips curves
C)only the short-run Phillips curve
D)only the long-run Phillips curve
Q2) Suppose the economy is currently experiencing 6% inflation per year.If the Fed wants to reduce inflation to 2% and the sacrifice ratio is 5,then how much annual output must be sacrificed in the transition?
A)5%
B)10%
C)15%
D)20%
Q3) The experience of the Volcker disinflation of the early 1980s
A)generally increased estimates of the sacrifice ratio.
B)generally decreased estimates of the sacrifice ratio.
C)clearly refuted the predictions of the proponents of rational expectations.
D)clearly refuted the predictions of the opponents of rational expectations.
Page 149
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Chapter 22: The Short Run Trade Off Between Inflation and Unemployment:
Part A
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Q1) Are the effects of an increase in aggregate demand in the aggregate demand and aggregate supply model consistent with the Phillips curve? Explain.
Q2) U.S.net exports fall due to recessions in foreign countries.
A.According to the aggregate demand and supply model,what happens to the price level and output in the short run?
B.According to the short-run Phillips curve what happens to inflation and unemployment in the short run?
C.If the Fed wanted to reverse the effects of this shock on output,what should it do?
Q3) If asset prices fall and inflation expectations remain unchanged,what happens to inflation and unemployment? Defend your answer.
Q4) Use the sticky-wage theory of aggregate demand to explain the short-run Phillips curve.
Q5) If expected inflation rises but actual inflation remains the same,what happens to the unemployment rate? Defend your answer.
Q6) List three things that shift the short-run Phillips curve to the right.
Q7) What does the natural-rate hypothesis claim?
Q8) What is meant by the natural rate of unemployment?
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Chapter 22: The Short Run Trade Off Between Inflation and Unemployment:
Part B
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Q1) Other things the same,if the Fed increases the rate at which it increases the money supply then the short-run Phillips curve shifts right in the long run.
A)True
B)False
Q2) Other things the same,a decrease in aggregate demand decreases both inflation and unemployment.
A)True
B)False
Q3) According to the Friedman-Phelps analysis,in the long run actual inflation equals expected inflation and unemployment is at its natural rate.
A)True
B)False
Q4) The analysis of Friedman and Phelps argues that an expected change in inflation has no impact on the unemployment rate.
A)True
B)False
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Page 151
Chapter 23: Six Debates Over Macroeconomic Policy:
Should Monetary and Fiscal Policymakers Try to Stabilize the Economy
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Q1) All of the following are arguments against stabilization policy except
A)Economic forecasting is highly imprecise.
B)Long lags may cause stabilization policies to in fact destabilize the economy.
C)Monetary policy affects aggregate demand by changing interest rates.
D)Fiscal policy must go through a long political process.
Q2) "Leaning against the wind" is exemplified by a(n)
A)tax increase when there is a recession.
B)increase in the money supply when there is a recession.
C)decrease in government expenditures when there is a recession.
D)All of the above are correct.
Q3) The principal lag for monetary policy
A)and fiscal policy is the time it takes to implement policy.
B)and fiscal policy is the time it takes for policy to change spending.
C)is the time it takes to implement policy.The principal lag for fiscal policy is the time it takes for policy to change spending.
D)is the time it takes for policy to change spending.The principal lag for fiscal policy is the time it takes to implement it.
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Chapter 23: Six Debates Over Macroeconomic Policy:
Should the Government Fight Recessions With Spending
Hikes Rather Than Tax Cuts
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Q1) Suppose a tax cut affected aggregate demand and aggregate supply.The shift in aggregate supply would make the
A)price level and real GDP change by more than otherwise.
B)price level change by more than otherwise and real GDP change by less than otherwise.
C)price level change by less than otherwise and real GDP change by more than otherwise.
D)price level and real GDP change by more than otherwise
Q2) Suppose a tax cut affects aggregate demand and aggregate supply.Which of the shifts raise the price level?
A)both the shift of aggregate demand and the shift of aggregate supply
B)the shift of aggregate demand,but not the shift of aggregate supply
C)the shift of aggregate supply,but not the shift of aggregate demand
D)neither the shift of aggregate demand nor the shift of aggregate supply
Q3) Which of the following can tax cuts influence?
A)aggregate demand and aggregate supply
B)aggregate demand but not aggregate supply
C)aggregate supply but not aggregate demand
D)neither aggregate demand nor aggregate supply
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Chapter 23: Six Debates Over Macroeconomic Policy:
Should Monetary Policy Be Made by Rule Rather Than by Discretion
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Q1) Assume a central bank follows a rule that requires it to take steps to keep the price level constant.If the price level rose because of an increase in aggregate demand and a decrease in aggregate supply that kept output unchanged,then
A)the central bank would have to decrease the money supply which would decrease output.
B)the central bank would have to decrease the money supply which would increase output.
C)the central bank would have to increase the money supply which would decrease output.
D)the central bank would have to increase the money supply which would increase output.
Q2) Suppose that the central bank must follow a rule that requires it to increase the money supply when the price level falls and decrease the money supply when the price level rises.If the economy starts from long-run equilibrium and aggregate supply shifts left,the central bank must
A)decrease the money supply so interest rates rise.
B)decrease the money supply so interest rates fall.
C)increase the money supply so interest rates rise.
D)increase the money supply so interest rates fall.
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Chapter 23: Six Debates Over Macroeconomic Policy:
Should the Central Bank Aim for Zero Inflation
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Q1) Which of the following could the government do to decrease the costs of inflation without lowering the inflation rate?
A)Avoid unexpected changes in the inflation rate.
B)Rewrite the tax laws so that nominal gains were taxed instead of real gains.
C)Make policy that would discourage firms from issuing indexed bonds.
D)All of the above are correct.
Q2) In the early 1980's the Fed tightened monetary policy.Over the next few years
A)inflation remained high and unemployment rose.
B)inflation fell but unemployment rose temporarily.
C)inflation and unemployment fell.
D)inflation and unemployment rose.
Q3) Which of the following is not a cost of inflation identified by economists?
A)menu costs associated with more frequent adjustment of prices
B)confusion and inconvenience resulting from a changing value of the unit of account
C)reduced price flexibility
D)arbitrary redistributions of wealth associated with dollar-denominated debts
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Page 155
Chapter 23: Six Debates Over Macroeconomic Policy:
Should the Government Balance Its Budget
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Q1) Suppose that the country of Aquilonia has an inflation rate of about 2 percent per year and a real growth rate of about 3 percent per year.Suppose also that it has nominal GDP of about 400 billion units of currency and current nominal national debt of 200 billion units of domestic currency.Which of the following government spending and taxation figures will keep the debt to-income ratio constant?
A)government spending equal to 30 billion units and tax collections equal to 25 billion units
B)government spending equal to 30 billion units and tax collections equal to 20 billion units
C)government spending equal to 30 billion units and tax collections equal to 10 billion units
D)government spending equal to 30 billion units and tax collections equal to 5 billion units
Q2) Over time,continued budget deficits lead to
A)a higher capital stock and higher productivity.
B)a higher capital stock and lower productivity.
C)a lower capital stock and higher productivity.
D)a lower capital stock and lower productivity.
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Chapter 23: Six Debates Over Macroeconomic Policy:
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Sample Questions
Q1) Which of the following does the U.S.currently have?
A)means-tested government benefits and tax laws that tax capital income only once
B)means-tested government benefits and tax laws that tax some capital income twice
C)tax laws that tax capital income only once,but not means-tested government benefits
D)tax laws that tax some capital income twice,but not means-tested government benefits
Q2) Double taxation means that both
A)the profits of corporations and the dividends shareholders receive are taxed,which is not currently the case in the United States.
B)the profits of corporations and the dividends shareholders receive are taxed,which is currently the case in the U.S.
C)wage income and employee benefits are taxed,which is not currently the case in the United States.
D)wage income and employee benefits are taxed,which is currently the case in the United States.
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Chapter 23: Six Debates Over Macroeconomic Policy:
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Q1) The six debates over macroeconomic policy exist mostly because A)economists disagree over basic issues such as the importance of saving for economic growth.
B)there are tradeoffs and people disagree about the best way to deal with them.
C)politicians offer misleading information.
D)people fail to clearly see the benefits or the costs of most changes.
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Chapter 23: Six Debates Over Macroeconomic Policy: Part
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Q1) Which kind of lag is important for monetary policy? Which kind of lag is important for fiscal policy?
Q2) If net exports fall,what actions could a central bank take to stabilize the economy?
Q3) If businesses become more pessimistic about the future,what fiscal policies could the government take to stabilize the economy?
Q4) Suppose the nation's price level rises as a result of an increase in aggregate demand and a decrease in aggregate supply which leaves output unchanged.If the Fed is required to follow a rule that stabilizes the price level,what will the Fed do to the money supply and what impact will this have on total output in the economy?
Q5) Advocates of cutting taxes rather than increasing government expenditures in response to a recession argue that the increase in spending by consumers and business may be more effective than that of the government.Explain this argument.
Q6) According to a 1977 amendment to the Federal Reserve Act of 1913,what weights should the Fed put on the goals of maximum employment,stable prices,and moderate long-term interest rates?
Q7) Provide an example of how current expenditures might benefit future generations.
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Chapter 23: Six Debates Over Macroeconomic Policy: Part
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Q1) Many studies indicate changes in monetary policy have most of their effect on aggregate demand about six months after the change is made.
A)True
B)False
Q2) When the government has a deficit,a burden is necessarily imposed on future generations of taxpayers.
A)True
B)False
Q3) The cost of inflation reduction is less if people believe that the central bank will really reduce inflation.
A)True
B)False
Q4) Tax cuts affect only aggregate demand not aggregate supply.
A)True
B)False
Q5) Some studies have found that saving is not very sensitive to the rate of return on saving.
A)True
B)False
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Chapter 24: A-Financial-Overview-Of-The-US
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Q1) An estate tax is an example of a(n)
A)individual income tax.
B)social insurance tax.
C)corporate income tax.
D)None of the above is correct.
Q2) The government's health plan for the elderly is called
A)Medicaid.
B)Medicare.
C)Social Security.
D)food stamps.
Q3) In general,the largest sources of revenue for state and local governments come from:
A)Sales taxes and property taxes
B)Sales taxes and corporate taxes
C)Property taxes and individual income taxes
D)Individual income taxes and sales taxes
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