eco final

Which of the following is a market transaction?

A college student purchases a laptop computer.

Countries that have higher saving rates are likely to have

A higher investment rate as a percentage of GDP and a higher growth rate of real GDP.

In the long run, an increase in aggregate demand will lead to

A higher price level only.

A decline in total real output for two or more consecutive quarters is referred to as

A recession.

According to supply-side theory, which of the following will shift the aggregate supply curve to the right?

A reduction in discrimination.

Higher unemployment and higher inflation rates will most likely occur with

A rightward shift of the Phillips curve.

Expansionary monetary and fiscal policies are designed to move the economy in Figure 17.1, in the short run, from point

A to point D.

A movement up the Phillips curve will cause

A trade-off between unemployment and inflation.

According to supply-side theorists, taxes

Alter disposable income and affect the incentives to work and produce.

The closer the economy is to capacity, the greater the risk that fiscal or monetary stimulus will cause

An increase in the price level and no change in output.

Ceteris paribus, which of the following is most likely to cause an increase in the quantity supplied of perfume?

An increase in the price of perfume.

If a country engages in trade with other countries, it is known as

An open economy.

With greater deficit spending, ceteris paribus,

Any inflationary gap will become larger.

Ceteris paribus, if the AD shortfall equals $600 billion, then the federal government can close it by increasing

Government spending by less than $600 billion.

The optimal mix of output is always the same as the

Most desired combination on a production possibilities curve.

When the APC is greater than 1, the APS must be

Negative.

Economists often define economic growth in terms of changes in

Potential GDP.

Desired investment equals

Purchases of new plants and equipment plus desired changes in business inventories.

In order to decrease the money supply, the Fed can

Raise the reserve requirement, increase the discount rate, or sell bonds.

When the price of a product rises faster than the inflation rate,

Real incomes of the consumers of that product fall.

Debt ceilings are designed to

Reduce the deficit.

If banks do not have enough reserves to satisfy the reserve requirement, they can

Sell securities.

The Fair Labor Standards Act of 1938

Set a minimum wage of 25 cents per hour.

Corporations in the United States spend a lot of money to familiarize management with global markets. This should

Shift the economy's production possibilities curve outward.

A long-run expansion in capacity

Shifts the production possibilities curve rightward.

Phillips developed a curve that shows the trade-off between the

Unemployment rate and inflation rates.

When unemployed people stop looking for jobs, the

Unemployment rate decreases and the labor force decreases.

Real GDP is the

Value of final output produced in a given period, adjusted for changing prices.

A shift from LRAS1 to LRAS2 in Figure 17.6 indicates that

The capacity of the economy has increased.

The effect of monetary policy is greatest

When investment demand becomes more responsive to changes in the interest rate.

Assuming the aggregate supply curve is vertical, which of the following is most likely to occur if the Fed pursues expansionary monetary policy?

The equilibrium price level will increase but output will stay the same.

Which of the following is possible when the market fails?

The mix of goods and services is on the production possibilities curve.

The tax elasticity of supply is

The percentage change in quantity supplied divided by the percentage change in tax rates.

If corn and wheat are alternative pursuits for a farmer, a change in the supply of corn will take place when, ceteris paribus,

The price of wheat changes.

Assume the MPC is 0.80. The change in total spending for the economy due to a $200 billion government spending increase is

$1 trillion.

Suppose a bank has $160,000 in deposits and a required reserve ratio of 10 percent. Then required reserves are

$16,000.

Suppose a bank has $200,000 in deposits and a required reserve ratio of 15 percent. Then required reserves are

$30,000.

Suppose a bank has $2 million in deposits, a required reserve ratio of 10 percent, and total reserves of $500,000. Then it has excess reserves of

$300,000.

Refer to Figure 11.1. Assume aggregate demand is represented by AD1 and full employment output is $6.0 trillion. The equilibrium level of income is

$5.8 trillion.

If the MPC equals 0.75, a $100 billion transfer payment decrease will decrease consumption in the first round by

$75 billion.

If the CPI increases from 250 to 275 for one year, the rate of inflation for that year is

10 percent.

If the anticipated inflation rate is 5 percent and the nominal interest rate is 9 percent, the real interest rate will be

4 percent.

The employment rate is measured as the percentage of the

Adult population that is employed.

Disposable income is

After-tax income of households; personal income less personal taxes.

Which of the following shifts, ceteris paribus, will cause lower rates of both unemployment and inflation?

An increase in aggregate supply.

Assume that pencils and pens are substitutes. If the price of pencils rises ceteris paribus, then we will see

An increase in the demand for pens.

When the money market is at an equilibrium in the liquidity trap,

An increase in the money supply does not affect interest rates.

The rule of 72

Can be used to determine how long it will take for GDP to double.

External shocks can

Cause economic forecasts based on leading economic indicators to become inaccurate.

A proportional tax is one that

Collects the same rate on every dollar of income.

An essential function for a bank is to

Create money through lending.

The type of unemployment that economists generally associate with normal growth of the labor force and expanding job opportunities in a dynamic economy is

Frictional unemployment.

A decrease in the marginal propensity to save is likely to

Decrease physical capital investment.

The Gramm-Rudman-Hollings Act of 1985 created a

Deficit ceiling.

Aggregate demand is the total quantity of output

Demanded at alternative price levels in a given time period.

Actual investment equals

Desired investment plus undesired investment.

As a result of outsourcing,

Domestic workers may become more productive.

The best measure of living standards is

GDP per capita.

Supply-side economists favor tax incentives that

Encourage saving.

Capital, as economists use the term, refers to

Final goods that are used to produce other goods and services.

An example of a positive externality is

Increased factory use of private sector robotics that came from government research.

Assume the real U.S. GDP in 1998 was $7,552 billion and the U.S. population was 270 million, and the real U.S. GDP in 2000 was $10 trillion and the U.S. population was 280 million. From 1998 to 2000, the per capita real GDP

Increased.

Outsourcing leads to

Increases in productivity and increases in total output.

Investment in human capital

Increases labor productivity.

When the Fed buys bonds from the public, it

Increases the flow of reserves to the banking system.

According to supply-side theory, which of the following would cause a leftward shift in the aggregate supply curve?

Increasing government regulations.

A recession can be represented by a point

Inside the production possibilities curve.

Which of the following policy levers definitely enhances productivity?

Investment in human capital.

From the long-run perspective of economic growth, saving

Is a basic source of investment financing.

Economic growth

Is measured using real GDP.

Rightward AS shifts will cause

Leftward Phillips curve shifts.

According to Keynes, cyclical unemployment is caused by too

Little aggregate demand.

The term "nominal income" refers to

Money income measured in current dollars.

The United States has an absolute advantage in producing T-shirts, but not a comparative advantage, because

Other countries, such as China, can produce T-shirts at a lower opportunity cost relative to the United States.

Productivity is a measure of

Output per unit of input.

Supply-siders believe that

Tax rebates have no effect on work effort.

Disposable income is less than GDP due to

Taxes by governments and income held back as saving by businesses.

The Federal Open Market Committee is responsible for

The Fed's daily activity in financial markets.