ECON Final Quiz

Suppose that the greater availability of online job placement services generates a reduction in frictional unemployment during an interval in which the inflation rate remains unchanged. Would the result be a movement along or a shift of the ​short-run Phillips​ curve? Part 2 A. A leftward shift of the​ short-run Phillips curve. Your answer is correct. B. A rightward shift of the​ short-run Phillips curve. C. An upward movement along the​ short-run Phillips curve. D. A downward movement along the​ short-run Phillips curve.

A. A leftward shift of the​ short-run Phillips curve.

When investors engage in the rapid withdrawal of foreign investment and loans from a nation this is known as Part 2 A. adverse selection. B. international financial crisis. Your answer is correct. C. moral hazard. D. the flight of investment.

B. international financial crisis

Since​ 1990, the region receiving the highest percentage of World Bank loans has been A. North America. B. Europe and Central Asia. C. Latin America and the Caribbean. D. Africa.

D. Africa

When firms get​ investors' money and use it in riskier projects than the investors anticipated there is Part 2 A. adverse selection. B. moral hazard. Your answer is correct. C. dead capital. D. an international financial crisis.

B. moral hazard.

Consider the data in the table to the right. Would Indian residents gain from the trade of Indian apps for U.S. tablets if the rate of exchange of tablet devices for digital apps happened to be 0.75 tablet per​ app? Part 2 The opportunity cost of apps in India without trade is . 31.31 tablets per app.​ Thus, Indian residents will gain from trading Indian apps for U.S. tablets at a rate of exchange of 0.75 tablets per​ app, because if they did export​ apps, they would be able to obtain . 44.44 more tablets for each app they export. ​(Enter your responses rounded ) // Product United States India Digital Apps 9393 9898 Tablet Devices 213213 30

.31, gain, .44, more

The economy is depicted by the graph to the right. It is presently operating at point A. Part 2 Suppose that the central bank attempts to expand the economy through purchasing US government securities. ​1.) Using either the line drawing or the​ 3-point curved line drawing tool​, show the effect of the central​ bank's purchases of government securities on the economy. Properly label your line. ​2.) Using either the line drawing or the​ 3-point curved line drawing tool​, show the effect on the economy such that this policy is fully anticipated by the public. Properly label your curve. ​3.) Using the point drawing tool​, indicate the new equilibrium point. Label this point​ 'B'. Part 3

1) AD shifts rightward 2) SRAS shifts leftward 3) New equilbirum is where SRAS, AD, and LRAS all meet

The economy is depicted by the graph to the right. It is presently operating at point A. Part 2 Suppose that the central bank attempts to expand the economy through purchasing US government securities. ​1.) Using the line drawing and or the​ 3-point curved line drawing tools​, show the effect of this​ shock, assuming the policy is not anticipated by the public. Properly label your new curve or curves. ​2.) Using the point drawing tool​, identify the new ​short-run equilibrium point. Label this point ​'​H'.

1) AD shifts rightward 2) short run equilibrium is where AD and SRAS meet

Suppose there is a​ $1 trillion increase in the money supply that causes the aggregate demand curve to shift rightward. If people anticipateanticipate the increase in the money​ supply, in the short​ run, the​ short-run supply curve A. does not shiftdoes not shift. B. shifts leftward immediatelyshifts leftward immediately. Your answer is correct. C. shifts rightward immediately. D. becomes horizontal. Part 2 In the short​ run, there is a movement from A. Upper A to Upper CA to C. Your answer is correct. B. C to B. C. Upper A to Upper BA to B. D. B to C. Part 3 In the long​ run, there is A. movement from A to C. B. movement from C to B. C. movement from Upper B to Upper Cmovement from B to C. D. no further changeno further change.

1) B. shifts leftward immediatelyshifts leftward immediately. 2) A. A to C 3) no further change

The economy is currently in a​ long-run equilibrium as depicted to the right. Suppose the U.S. economy experiences an oil embargo by OPECan oil embargo by OPEC. Part 2 Show the new long run equilibrium in the economy from the perspective of the real business cycle model. by drawing the​ following: ​1.) Using the line drawing tool​, draw the new LRAS. Label this line ​'LRAS Subscript 1​'. ​2.) Using the​ 3-point curved line drawing tool​, draw the new SRAS. Label this curve ​'SRAS Subscript 1​'. ​3.) Using the point drawing tool​, identify the​ long-run equilibrium point. Label this point​ 'X'.

1) LRAS shifts leftward 2)SRAS shifts leftward 3) long run equilibrium point is where AD meets the new LRAS

Consider the data in the table to the right. Would U.S. residents gain from the trade of U.S. tablets for Indian apps if the rate of exchange of tablet devices for digital apps happened to be 3 tablets per​ app? Part 2 The opportunity cost of apps in the United States without trade is 2.532.53 tablets per app.​ Thus, U.S. residents will not gain from trading U.S. tablets for Indian apps at a rate of exchange of 3 tablets per​ app, because if they did export​ tablets, they would have to give up . 47.47 more tablets for each app they import. ​(Enter your responses rounded to two decimal​ places.) //Question content area right Part 1 Product United States India Digital Apps 9595 103103 Tablet Devices 240240 57

2.53, not gain, .47, more

A​ country's real GDP is growing at an annual rate of 3.23.2 ​percent, and the current rate of growth of per capita real GDP is 0.40.4 percent. Calculate the population growth rate in this nation. 2.82.8 percent.

2.8

Which of the following arguments is used in support of undertaking passive​ policymaking? Part 2 A. Aggregate demand shocks play little or no role in the economy in the short run. Your answer is correct. B. Wage flexibility is uncommon because of efficiency wages. C. Pure competition is not typical in most markets as imperfect competition dominates the economy. D. The Phillips curve varies with inflation expectations.

A. Aggregate demand shocks play little or no role in the economy in the short run.

How can a government increase the amount of dead capital in a​ country? Part 2 A. By creating government regulations and red tape that can impose high costs on those who register capital ownership. Your answer is correct. B. By discouraging the amount of corruption. C. By encouraging the hiring of labor in the production process rather than capital. D. By making it easy to register ownership of capital.

A. By creating government regulations and red tape that can impose high costs on those who register capital ownership.

Which of the following statements is correct when considering the choice between active and passive policy​ making? Part 2 A. Economists believing that markets are stable and efficient support passive policy​ making; economists that believe that there are rigidities in markets support active policy making. Your answer is correct. B. Economists believing that markets are stable and efficient support monetary​ policy; economists that believe that there are rigidities in markets support fiscal policy. C. Economists believing that markets are stable and efficient support contractionary policy​ making; economists that believe that there are rigidities in markets support expansionary policy making. D. Economists believing that markets are stable and efficient support active policy​ making; economists that believe that there are rigidities in markets support passive policy making.

A. Economists believing that markets are stable and efficient support passive policy​ making; economists that believe that there are rigidities in markets support active policy making.

Most economists agree that active policymaking will have sizable​ long-run effects on a​ nation's economy. A. False Your answer is correct. B. True

A. False

Stagflation is the result of lower real GDP and lower inflation. A. False Your answer is correct. B. True Part 2 A permanent reduction in the supply of a productive resource will cause A. a leftward shift of the SRAS curve but no shift of the LRAS curve. B. a leftward shift of both the SRAS and LRAS curves. Your answer is correct. C. no shift of either the SRAS or LRAS curves. D. no shift of the SRAS curve but a leftward shift of the LRAS curve.

A. False B. a leftward shift of both the SRAS and LRAS curves.

Consider a situation in which a future president has appointed Federal Reserve leaders who conduct monetary policy much more erratically than in past years. The consequence is that the quantity of money in circulation varies in a much more unsystematic​ and, hence,​ hard-to-predict manner. According to the policy irrelevance​ proposition, is it more or less likely that the​ Fed's policy actions will cause real GDP to change in the short​ run? Part 2 A. More​ likely, since much of the changes in the money supply will be unanticipated. Your answer is correct. B. More​ likely, since the price level will be more sticky in the future. C. Less​ likely, since much of the changes in the money supply will be unanticipated. D. Less​ likely, since according to the policy irrelevance​ proposition, monetary policy is not relevant for real GDP change.

A. More​ likely, since much of the changes in the money supply will be unanticipated.

Which of the following economic theories is most likely to support active​ policymaking? Part 2 A. New Keynesian model. Your answer is correct. B. Real business cycle theory. C. New classical model. D. Monetarism.

A. New Keynesian model.

Which of the following arguments is used in support of undertaking active​ policymaking? Part 2 A. The Phillips curve is stable in the short run and predictable in the long run. Your answer is correct. B. Aggregate demand shocks play little or no role in the economy in the short run. C. Pure competition is widespread in markets throughout the economy. D. Price flexability is common because firms adjust immediate when demand changes.

A. The Phillips curve is stable in the short run and predictable in the long run.

How do developing countries benefit from international​ investment? Part 2 A. There will be an increase in economic growth. Your answer is correct. B. International investment leads to an increase in the amount of dead capital that leads to an increase in profits. C. International investment will replace local investment allowing the residents to buy more. D. The more private investment a country can​ attract, the greater the amount the World Bank will give the country.

A. There will be an increase in economic growth.

Which of the following is a key function of the International Monetary​ Fund? Part 2 A. To stabilize international financial flows. Your answer is correct. B. To make loans to governments that have been successful in obtaining private investments. C. To finance capital investments in countries that have trouble attracting funds from private investors. D. To encourage the use of dead capital.

A. To stabilize international financial flows.

All of the countries that grant considerable economic freedom have experienced positive rates of economic growth. A. True Your answer is correct. B. False

A. True

Question content area Part 1 Dead capital is defined as A. any capital resource that lacks clear title of ownership. Your answer is correct. B. any capital resource that has no labor resources used with it. C. any capital resource that is not utilized efficiently. D. any capital resource that is obsolete.

A. any capital resource that lacks clear title of ownership.

Dead capital is usually found in Part 2 A. developing countries. Your answer is correct. B. large corporations. C. small countries. D. developed countries.

A. developing countries.

In the long​ run, imports are paid for by exports because Part 2 A. for the most​ part, foreigners want U.S. produced goods in exchange for the goods that are shipped to the United States. Your answer is correct. B. all U.S. dollars ultimately must be held in the United States. C. the regulations of the World Bank stipulate that this is how international accounts must be settled. D. All of the above.

A. for the most​ part, foreigners want U.S. produced goods in exchange for the goods that are shipped to the United States.

Habit formation A. is an inclination for household choices to become automatic through frequent repetition. Your answer is correct. B. weakens the argument that policy changes can exert significant​ longer-term effects on aggregate demand. C. implies that policies that boost current spending cause future spending to be lower. D. All of the above.

A. is an inclination for household choices to become automatic through frequent repetition.

When dead capital exists Part 2 A. it cannot be allocated to its most efficient use. Your answer is correct. B. it prohibits more technologically advanced capital from being used because the dead capital has totally depreciated. C. there is an environmental hazard created. D. firms will try to sell it to get rid of it.

A. it cannot be allocated to its most efficient use.

New Keynesian economics differs from the new classical and real business cycle theories in that Part 2 A. new Keynesians do not assume either perfect competition or flexible prices in their analysis of aggregate economic fluctuations. Your answer is correct. B. new Keynesians do not believe fluctuations in​ short-run aggregate supply are useful in explaining aggregate economic fluctuations. C. new Keynesians do not believe fluctuations in aggregate demand are useful in explaining aggregate economic fluctuations. D. All of the above.

A. new Keynesians do not assume either perfect competition or flexible prices in their analysis of aggregate economic fluctuations.

Question content area Part 1 The United States economy is considered by the Institute for Management Development to be the most competitive economy because Part 2 A. of widespread entrepreneurship. Your answer is correct. B. Americans are willing to work harder than anyone else is. C. of selected restrictions on imports from Japan and Europe. D. of a high saving rate.

A. of widespread entrepreneurship.

According to the real business cycle theory Part 2 A. only​ supply-side factors matter in influencing unemployment. Your answer is correct. B. unemployment is fixed at the natural rate and cannot be affected by anything the government does. C. investment spending by business is the only factor that affects changes in real GDP or unemployment. D. only​ demand-side factors matter in influencing unemployment.

A. only​ supply-side factors matter in influencing unemployment.

With specialization and​ trade, Part 2 A. production and output for each trading partner will exceed that without trade. Your answer is correct. B. production and output for one of the trading partners will exceed the other. C. only one country can possibly gain. D. All of the above.

A. production and output for each trading partner will exceed that without trade.

The following table gives the labor requirements for the production of one unit of each good in each country. For​ example, the production of one movie in Germany requires the use of 10​ worker-days. Product United States​ (worker-days) Germany​ (worker-days) Movies 5 10 Autos 10 15 If​ Germany's 1,500 workers specialize and produce only the good for which it has a comparative advantage and the U.S.​ 1,000 person labor force specializes and produces only the good for which it has a comparative​ advantage, then Part 2 A. the U.S. will produce 200 movies and Germany will produce 100 autos. Your answer is correct. B. the U.S. will produce 200 movies and Germany will produce 75 autos. C. the U.S. will produce 150 autos and Germany will produce 200 movies. D. the U.S. will produce 100 autos and Germany will produce 150 movies.

A. the U.S. will produce 200 movies and Germany will produce 100 autos.

In new Keynesian models of aggregate economic​ activity, "sticky" prices and wages are explained by Part 2 A. the small​ menu-cost and efficiency wage​ theories, respectively. Your answer is correct. B. monetary disturbances in the aggregate economy. C. ​supply-side factors such as technology and changes in the composition of the labor force. D. inaccuracies in​ people's forecasts of the future.

A. the small​ menu-cost and efficiency wage​ theories, respectively.

States is essentially a regional free trade bloc. No U.S. state government can establish a tariff on goods manufactured in another U.S. state.​ Recently, the U.S. government placed a 55 percent​ anti-dumping duty on cement imported from Mexico. Part 2 a. Major Mexican cement firms have responded by buying U.S. cement manufacturing operations in Texas and other states. A few of the Mexican firms have periodically transported some of the resources used to produce cement to those U.S.​ operations, manufactured​ cement, and sold the cement to customers throughout the United States. The Mexican firms are engaging in Part 3 A. trade deflection. Your answer is correct. B. trade diversion. C. voluntary import expansion. D. a voluntary restraint agreement.

A. trade deflection.

The Phillips curve shows​ that, in the​ short-run: Part 2 A. unexpected changes in aggregate demand produce an inverse relationship between inflation and unemployment. Your answer is correct. B. expected changes in aggregate demand produce an inverse relationship between inflation and unemployment. C. unexpected changes in aggregate demand produce a positive relationship between inflation and unemployment. D. expected changes in aggregate demand produce a positive relationship between inflation and unemployment. Part 3 Suppose people expect the inflation rate to be 3 percent. The government engages in a​ one-time expansionary monetary policy in order to lower unemployment. Once people realize what has happened Part 4 A. there will be a movement along the Phillips​ curve, causing the inflation rate to return to 3 percent. B. the Phillips curve will shift​ outward, causing unemployment to return to its natura

A. unexpected changes in aggregate demand produce an inverse relationship between inflation and unemployment. B. the Phillips curve will shift​ outward, causing unemployment to return to its natural rate.

Suppose that people who previously had held jobs become structurally unemployed due to establishment of new government regulations during a period in which the inflation rate remains unchanged. Would the result be a movement along or a shift of the​ short-run Phillips​ curve? Part 2 A. A downward movement along the​ short-run Phillips curve. B. A rightward shift of the​ short-run Phillips curve. Your answer is correct. C. A leftward shift of the​ short-run Phillips curve. D. An upward movement along the​ short-run Phillips curve.

B. A rightward shift of the​ short-run Phillips curve.

Read through the descriptions below to correctly match the action and the type of policy undertaken. Part 2 A. Active policy​ making: The U.S. progressive tax​ system; Passive policy​ making: A decrease in the marginal tax rates approved by Congress and the President. B. Active policy​ making: Fed buying U.S. government securities in response to a​ recession; Passive policy​ making: Unemployment compensation paid out by the government. Your answer is correct. C. Active policy​ making: Unemployment compensation paid out by the​ government; Passive policy​ making: Fed buying U.S. government securities in response to a recession. D. Active policy​ making: Fed buying U.S. government securities in response to a​ recession; Passive policy​ making: Congress increasing government spending.

B. Active policy​ making: Fed buying U.S. government securities in response to a​ recession; Passive policy​ making: Unemployment compensation paid out by the government.

Since​ 1980, U.S. exports of goods and services have exceeded U.S. imports of goods and services. A. True B. False

B. False

What does research indicate about the role of political freedom in determining economic​ growth? Part 2 A. Political freedom is much more important in increasing economic growth than economic freedom. B. The extent of political freedom does not necessarily increase the rate of economic growth. Your answer is correct. C. Increasing the amount of political freedom increases the amount of dead capital that will reduce growth rates. D. Countries that grant full political freedom experience positive rates of economic growth.

B. The extent of political freedom does not necessarily increase the rate of economic growth.

Not only does comparative advantage result in an overall increase in the output of goods produced and​ consumed, it also aids in the transmission of ideas. A. False B. True

B. True

People called​ "Fed watchers" earn their living by trying to forecast what policies the Federal Reserve will implement within the next few weeks and months. Suppose that Fed watchers discover that the current group of Fed officials is following very systematic and predictable policies intended to reduce the unemployment rate. The Fed watchers then sell this information to​ firms, unions, and others in the private sector. If pure competition​ prevails, prices and wages are​ flexible, and people form rational​ expectations, then the​ Fed's policies Part 2 A. are likely to have their intended effects on the unemployment rate. B. are likely to have no effect on the unemployment rate. Your answer is correct. C. are likely to have a measurable effect on both unemployment and inflation rates. D. may or may not have an effect on the unemployment rat

B. are likely to have no effect on the unemployment rate.

A capital resource lacking clear title of ownership is A. misused capital. B. dead capital. Your answer is correct. C. frozen capital. D. stagnant capital.

B. dead capital.

If a firm in China sells its product in the U.S. at a price below its cost of​ production, the firm is said to be Part 2 A. experiencing diseconomies of scale. B. dumping its goods in the U.S. market. Your answer is correct. C. acting in the interest of consumers and producers in U.S. market. D. None of the above.

B. dumping its goods in the U.S. market.

When a​ firm's production is subsidized by its government and then the firm sells its products in a foreign country at a price below the cost of​ production, this is called Part 2 A. a quota. B. dumping. Your answer is correct. C. a tariff. D. involuntary export expansion.

B. dumping.

Question content area Part 1 Suppose that a foreign resident has bought 20 percent of the shares of a company based in a developing nation but is experiencing difficulty determining whether the firm has responded to this purchase by engaging in risker behavior. What type of investment has this foreign resident​ undertaken, and what type of asymmetric information problem is she or he​ experiencing? Part 2 The foreign resident A. has undertaken a foreign direct investment and is experiencing an​ adverse-selection problem. B. has undertaken a foreign direct investment and is experiencing a moral hazard problem. Your answer is correct. C. has undertaken a portfolio investment and is experiencing a moral hazard problem. D. has undertaken a portfolio investment and is experiencing an​ adverse-selection problem.

B. has undertaken a foreign direct investment and is experiencing a moral hazard problem.

Suppose a country wanted to increase the rate of growth of its per capita real GDP. It could do this by Part 2 A. increasing the growth rate of real GDP and increasing the population growth rate. B. increasing the growth rate of real GDP and decreasing the population growth rate. Your answer is correct. C. decreasing the growth rate of real GDP and increasing the population growth rate. D. decreasing the growth rate of real GDP and decreasing the population growth rate.

B. increasing the growth rate of real GDP and decreasing the population growth rate.

If a country has an absolute advantage in the production of some good then Part 2 A. that country should specialize in the production of that good and produce until the marginal benefit to society of the production of that good is zero. B. that country has the ability to produce more output from given inputs of resources than other producers can. Your answer is correct. C. that country should specialize in the production of that good and not trade with other nations so that they can keep all the gains themselves. D. All of the above.

B. that country has the ability to produce more output from given inputs of resources than other producers can.

Over the past 60 years in the United​ States, a clear​ trade-off seems to have existed between the unemployment rate and the inflation rate. A. True B. False Your answer is correct. Part 2 Research by Milton Friedmand and Edmond Phelps indicates that A. any inflation rate is possible for any given unemployment rate. Your answer is correct. B. inflation rates and unemployment rates will always move in the same direction. C. inflation rate increases will accompany unemployment rate​ decreases, but inflation rate decreases do not occur when unemployment rates increase. D. inflation rates always tend to increase as unemployment rates decrease

B. False A. any inflation rate is possible for any given unemployment rate.

Suppose that people who previously had held jobs become cyclically unemployed at the same time the inflation rate declines. Would the result be a movement along or a shift of the​ short-run Phillips​ curve? Part 2 A. A leftward shift of the​ short-run Phillips curve. B. An upward movement along the​ short-run Phillips curve. C. A downward movement along the​ short-run Phillips curve. Your answer is correct. D. A rightward shift of the​ short-run Phillips curve

C. A downward movement along the​ short-run Phillips curve.

Which of the following is not an argument against free​ trade? Part 2 A. Exporting technologies can pose a threat to national defense. B. Dumping. C. Comparative advantage. Your answer is correct. D. Infant industry.

C. Comparative advantage

What is the rational expectations​ hypothesis? Part 2 A. The actual unemployment rate will not equal the natural rate of unemployment. B. People will exploit the Phillips curve and demand higher wages. C. People form their expectations on the values of economic variables based on all available past and current information and their understanding of how the economy functions. Your answer is correct. D. If people anticipate a relationship between the actual inflation rate and the unemployment rate then the natural rate of unemployment will be reduced. Part 3 The combination of rational expectations and perfectly competitive markets is best reflected in which of the following​ models? Part 4 A. Real Business Cycle. B. Monetarist. C. New Classical. Your answer is correct. D. Keynesian.

C. People form their expectations on the values of economic variables based on all available past and current information and their understanding of how the economy functions. C. New Classical

What is the difference between portfolio investment and foreign direct​ investment? Part 2 A. Foreign direct investment is the acquisition of stock in the company while portfolio investment is the loaning of money. B. Foreign direct investment is the purchase of less than 10 percent of the shares of ownership while portfolio investment is the acquisition of more than 10 percent. C. Portfolio investment is the purchase of less than 10 percent of the shares of ownership while foreign direct investment is the acquisition of more than 10 percent. Your answer is correct. D. Portfolio investment is the acquisition of stock in the company while foreign direct investment is the loaning of money.

C. Portfolio investment is the purchase of less than 10 percent of the shares of ownership while foreign direct investment is the acquisition of more than 10 percent.

Which of the following is a key function of the World​ Bank? Part 2 A. To stabilize international financial flows. B. To make loans to governments that have been successful in obtaining private investments. C. To finance capital investments in countries that have trouble attracting funds from private investors. Your answer is correct. D. To encourage the use of dead capital.

C. To finance capital investments in countries that have trouble attracting funds from private investors.

The largest volume of trade flows occurs A. between the Americas and Asia. B. between Asia and Europe. C. between the Americas and Europe.

C. between the Americas and Europe.

Question content area Part 1 One of the most significant impediments to growth of per capita incomes in developing countries is A. insufficient regulations. B. excessive patent protection laws. C. dead capital. Your answer is correct. D. All of the above.

C. dead capital.

In the long​ run, an increase in the money supply A. has no effect on real GDP but lowers unemployment. B. raises real GDP and lowers unemployment. C. has no effect on real GDP or unemployment. Your answer is correct. D. raises real GDP but has no effect on unemployment.

C. has no effect on real GDP or unemployment.

Suppose that a foreign resident is contemplating buying 5 percent of the shares of a company based in a developing nation but is experiencing difficulty determining whether the firm is riskier than others in that country. What type of investment is this foreign resident​ considering, and what type of asymmetric information problem is he or she​ experiencing? Part 2 The foreign resident A. is considering a foreign direct investment and is experiencing an​ adverse-selection problem. B. is considering a foreign direct investment and is experiencing a moral hazard problem. C. is considering a portfolio investment and is experiencing an​ adverse-selection problem. Your answer is correct. D. is considering a portfolio investment and is experiencing a moral hazard problem.

C. is considering a portfolio investment and is experiencing an​ adverse-selection problem

The natural rate of unemployment in the U.S. Part 2 A. has increased steadily and with out interruption since the conclusion of World War II. B. is equal to frictional unemployment plus cyclical unemployment. C. is the rate of unemployment that exists in the long run after everyone in the economy has fully adjusted to changes that have occurred. Your answer is correct. D. is equal to cyclical unemployment plus structural unemployment. Part 3 The actual rate of unemployment is Part 4 A. less than the natural rate of unemployment when cyclical unemployment is positive. B. greater than the natural rate of unemployment when cyclical unemployment is positive. Your answer is correct. C. always equal to the natural rate of unemployment. D. greater than the natural rate of unemployment when cyclical unemployment is zero.

C. is the rate of unemployment that exists in the long run after everyone in the economy has fully adjusted to changes that have occurred. B. greater than the natural rate of unemployment when cyclical unemployment is positive. Your answer is correct.

If inflationary expectations​ rise, the Phillips curve A. becomes flatter. B. becomes steeper. C. shifts up. Your answer is correct. D. shifts down.

C. shifts up.

Economists have not reached agreement on how lengthy the time horizon for​ "the long​ run" is in the context of Phillips curve analysis. Because of the advent of more sophisticated computer and communications​ technology, the time horizon that defines the​ "long-run" is likely to be Part 2 A. either shorter or longer depending on the business cycles. B. not affected because of the existence of rational expectation. C. shortened as it provides immediate access to information. Your answer is correct. D. extended as it provides immediate access to information

C. shortened as it provides immediate access to information.

If a country has a comparative advantage in the production of some good then Part 2 A. that country should specialize in the production of that good and not trade with other nations so that they can keep all the gains for themselves. B. that country should let other nations produce that good so that they may focus on new products that will expand job opportunities for their citizens. C. that country can produce the good at a lower opportunity cost compared to other producers. Your answer is correct. D. All of the above.

C. that country can produce the good at a lower opportunity cost compared to other producers. Your answer is correct.

According to the Swiss Institute for Management​ Development, the top country in terms of overall productive efficiency is Part 2 A. Japan. B. Germany. C. the United States. Your answer is correct. D. Switzerland.

C. the United States.

Question content area Part 1 Between 1981 and​ 2000, annual rates of growth of per capita real GDP in advanced nations remained above or close to growth rates in emerging and developing​ nations, but since​ 2000, this relationship has been reversed. In​ addition, over the entire​ 1981-2017 period, average rates of population growth have been higher in nearly all emerging and developing nations than in advanced nations. What do these facts tell us about the average rate of growth of real GDP since 2000 in emerging and developing nations compared with advanced​ nations? Part 2 Because emerging and developing nations have had both higher average growth of per capita real GDP and higher average population growth than advanced nations since​ 2000, A. the average growth of real GDP has been significantly lower in the former than in the latter. B. the average growth of real GDP has been about the same in the f

C. the average growth of real GDP has been significantly higher in the former than in the latter. Your answer is correct.

If prices are sticky in the short​ run, a decreasea decrease in aggregate demand will lead to A. a small decreasedecrease in real GDP. B. no change in real GDP. C. the largest possible decreasedecrease in real GDP. Your answer is correct. D. either an increase or a decrease in real​ GDP, depending on whether expectations are rational. Part 2 Because of the effect of sticky prices on real GDP in the short​ run, new Keynesian economists advocate active policymaking.

C. the largest possible decreasedecrease in real GDP. active

The main argument against using active policymaking is that Part 2 A. passive policymaking is destabilizing. B. foreign economies can easily counter the policy undertaken by the U.S. government or Fed. C. time lags make it very difficult to judge when the policy will have an effect. Your answer is correct. D. the Fed may offset fiscal policy.

C. time lags make it very difficult to judge when the policy will have an effect.

According to the real business cycle​ theory, a supply​ shock, such as the oil shocks in the​ 1970s, leads to a reduction in aggregate supply. In the new​ long-run equilibrium Part 2 A. unemployment is higher and the natural rate of unemployment is higher too. B. unemployment returns to its original level and workers are as well off as they were before the shock. C. unemployment returns to its original level but workers are worse off because their real wages are lower. Your answer is correct. D. unemployment is higher but the natural rate of unemployment is not higher.

C. unemployment returns to its original level but workers are worse off because their real wages are lower.

Real business cycle theory assumes that Part 2 A. unemployment always is equivalent to the natural rate of unemployment. B. prices are sticky downward. C. wages and prices are perfectly flexible. Your answer is correct. D. the LRAS curve remains stationary. Part 3 Which of the following are failures of the real business cycle​ theory? Part 4 A. It cannot explain all facets of the business cycle. B. It cannot explain the Great Depression. C. It fails to explain the rigidity of wages and prices in the economy. D. All of the above are failures of the real business cycle theory. Your answer is correct. E. None of the above are​ failures, as the real business cycle model addresses all these issues.

C. wages and prices are perfectly flexible. D. All of the above are failures of the real business cycle theory.

The new Keynesian​ model, using the theories of sticky prices and efficiency​ wages, suggests that the Part 2 A. the aggregate demand curve is downward sloping. B. ​short-run aggregate supply curve has a steep positive slope. C. ​short-run aggregate supply curve is horizontal. Your answer is correct. D. ​long-run aggregate supply is vertical.

C. ​short-run aggregate supply curve is horizontal.

The following table gives the labor requirements for the production of one unit of each good in each country. For​ example, the production of one movie in Germany requires the use of 10​ worker-days. Product United States​ (worker-days) Germany​ (worker-days) Movies 5 10 Autos 10 15 The opportunity cost of movies in the U.S. is​ ______ and the opportunity cost of movies in Germany is​ ______. Part 2 A. 0.5​ autos; 1.5 autos B. 2​ autos; 0.67 autos C. 2​ autos; 1.5 autos D. 0.5​ autos; 0.67 autos Your answer is correct.

D. 0.5​ autos; 0.67 autos Your answer is correct

Inefficient government regulation A. tends to reduce investment in new capital goods. B. can be a major barrier to economic growth. C. is a major factor contributing to the problem of dead capital in many developing nations. D. All of the above.

D. All of the above.

Suppose that the economy is currently in​ long-run equilibrium. Which of the following would be likely to cause a​ short-run decreasedecrease in the unemployment rate relative to the natural​ rate? A. An increaseAn increase in union membership B. Upper A contractionaryA contractionary fiscal policy that was not fully anticipated C. A permanent decreasedecrease in the minimum wage D. An expansionaryAn expansionary monetary policy that was not fully anticipated

D. An expansionaryAn expansionary monetary policy that was not fully anticipated

How does the International Monetary Fund determine a​ nation's quota​ subscription? Part 2 A. By vote of existing members. B. By the amount of dead capital in the country. C. By special drawing rights. D. By the​ country's national income. Your answer is correct.

D. By the​ country's national income.

Is political freedom or economic freedom more important in determining economic​ growth? Part 2 A. Both political freedom and economic freedom are equally important in determining economic growth. B. Political freedom is more​ important, which can then lead to economic freedom. C. Neither political freedom nor economic freedom is very important in determining economic growth. D. Economic freedom is more​ important, which can then lead to political freedom.

D. Economic freedom is more​ important, which can then lead to political freedom.

Which of the following is not​ true? Part 2 A. In the long​ run, imports are paid for by exports. B. Any restriction of imports ultimately reduces exports. C. Protecting U.S. jobs by restricting foreign competition ultimately leads to fewer jobs in U.S. export industries. D. Import restrictions will not elicit retaliation.

D. Import restrictions will not elicit retaliation.

Question content area Part 1 Which of the following statements about the policy irrelevance proposition is not​ true? Part 2 A. The policy irrelevance proposition is associated with the natural rate of unemployment. B. The policy irrelevance proposition assumes that people​ don't make the same mistakes in forecasting the future. C. The policy irrelevance proposition implies that any anticipated policy will have no effect on the level of real GDP. D. The policy irrelevance proposition implies that the there is a short run change in real​ GDP, but no long run change in real GDP. Your answer is correct. Part 3 According to the rational expectations​ hypothesis, a policy cannot have a​ long-run effect on real GDP or the unemployment rate because Part 4 A. people do not persistently make the same mistakes in forecasting the future. B. in the long​ run, people's expectations will correctly anticipate the effect

D. The policy irrelevance proposition implies that the there is a short run change in real​ GDP, but no long run change in real GDP. D. All of the above.

Which of the following statements is true about the importance of international trade in the world​ economy? Part 2 A. Trade accounts for a constant share of a​ country's economic activity. B. Trade is not important in the world economy. C. Trade accounts for an increasingly lower share of a​ country's economic activity. D. Trade accounts for an increasingly higher share of a​ country's economic activity. Your answer is correct.

D. Trade accounts for an increasingly higher share of a​ country's economic activity.

​Rational-inattention theory A. indicates that people will not always possess enough information to alter their inflation​ expectations, resulting in a vertical Phillips curve. B. is inconsistent with the new Keynesian theory of inflation dynamics. C. is an inclination for household choices to become automatic through frequent repetition. D. can be described as choosing to acquire information infrequently and to make decisions based on incomplete knowledge of the state of the economy during the intervals between updates.

D. can be described as choosing to acquire information infrequently and to make decisions based on incomplete knowledge of the state of the economy during the intervals between updates.

The ability to produce more output at a lower opportunity cost than other producers is Part 2 A. production advantage. B. absolute advantage. C. relative advantage. D. comparative advantage. Your answer is correct.

D. comparative advantage.

The type of policy making that is not in response to actual or potential changes in overall economic activity is called Part 2 A. active policy making. B. discretionary policy making. C. discriminatory policy making. D. passive policy making.

D. passive policy making.

In the figure to the​ right, we can conclude that prices are A. not sticky so that the AD curve is downward sloping. B. sticky so that the AD curve is downward sloping. C. not sticky so that the SRAS curve is horizontal. D. sticky so that the SRAS curve is horizontal. Your answer is correct. Part 2 Suppose that initially the economy is producing at point A. Move the cursor to show the ​short-run effect of a fall in aggregate demand from AD Subscript 1 to AD Subscript 2.

D. sticky so that the SRAS curve is horizontal. cursor moves to point B

What is the world poverty​ rate? The world poverty rate is defined as A. the total number of global residents who lack the financial resources to maintain a minimum standard of living. B. the ratio of global residents living in absolute poverty compared to those residents meeting World Bank standards. C. the percentage of global residents subsisting on an​ inflation-adjusted amount of​ $19.00 or less per day. D. the percentage of global residents subsisting on an​ inflation-adjusted amount of​ $1.90 or less per day.

D. the percentage of global residents subsisting on an​ inflation-adjusted amount of​ $1.90 or less per day.

In the short​ run, unexpected increases in aggregate demand cause the price level to​ ________ and the unemployment rate to​ ________. A. ​fall; fall B. ​fall; rise C. ​rise; rise D. ​rise; fall

D. ​rise; fall

Emerging nations are developing countries that have adopted policy changes that have generated sufficiently increased economic growth to move the nations closer to ​advanced-nation status.

Increased, closer to

Both the traditional Keynesian theory and the new Keynesian theory indicate that the​ short-run aggregate supply curve is horizontal. a. In terms of their ​short-run implications for the price level and real​ GDP, is there any difference between the two​ approaches? No Part 2 b. In terms of their ​long-run implications for the price level and real​ GDP, is there any difference between the two​ approaches? Yes

No Yes

ThePhillips curve exhibits a negative​ short-run relationship between the inflation rate and the unemployment rate that can be observed when there are unanticipated changes in aggregate demand. Part 2 A movement along the Phillips curve occurs when actual inflation changes with inflation expectations unchanged. If expected inflation ​changes, there is a shift in the position of the Phillips curve. Part 3 Activist policymakers seek to take advantage of a proposed Phillips curve​ trade-off between inflation and unemployment.

Phillips, demand, inflation, inflation, activist

Why does the existence of dead capital retard investment and economic growth in a developing​ country? Part 2 A. The unofficial owners of dead capital will not use it efficiently because of the difficulty of trading it and enforcing rights to the capital. Your answer is correct. B. Dead capital takes up valuable space where​ new, more productive equipment could be placed. C. The existence of dead capital leads to an increase in the unemployment rate causing a decrease in the level of economic growth. D. Developing countries are slow to embrace technological change and therefore continue to utilize less efficient capital.

The unofficial owners of dead capital will not use it efficiently because of the difficulty of trading it and enforcing rights to the capital.

Consider the following situations currently faced by international investors. Part 2 Among the governments of several developing countries that are attempting to issue new bonds this​ year, it is certain that a few will fail to collect taxes to repay the bonds when they mature. It is​ difficult, however, for investors considering buying government bonds to predict which governments will experience this problem. This situation is an example of adverse selection. Part 3 Foreign investors are contemplating purchasing stock in a company​ that, unknown to​ them, may have failed to properly establish legal ownership over a crucial capital resource. This situation is an example of adverse selection. Part 4 Companies in a less developed nation have already issued bonds to finance the purchase of new capital goods. After receiving the funds from the bond​ issue, however, the​ company's managers pay themselves larg

adverse selection, adverse selection, moral hazard, adverse election

The three main categories of international flows of investment funds are loans by banks​, portfolio investment that involves purchasing less than 10 percent of the shares of ownership in a​ company, and foreign direct investment that involves purchasing more than 10 percent of a​ company's ownership shares. Part 2 On​ net, an average of about ​$80 billion in international investment funds flows to developing nations each year. In years​ past, bank loans were the source of most foreign funding of investment in developing​ countries, but recently portfolio investment and foreign direct investment have increased. Part 3 Obstacles to private financing of capital accumulation and growth in developing nations include adverse selection and moral hazard problems caused by asymmetric​ information, which can restrain and sometimes destabilize private flows of funds.

banks, portfolio, foreign direct, $80, portfolio, foreign direct, adverse selection, moral hazard

A central feature of behavioral economics is the concept of bounded rationality. This is the hypothesis that people are limited in their ability to consider every conceivable choice available to them. Behavioral economists propose that bounded rationality constrains individuals to rely upon simple rules of thumb to choose among the set of options that the individuals happen to identify. Part 2 Psychologists have long studied​ people's habit formation​, or the tendency for households to make certain​ behaviors, such as purchases of goods and​ services, automatic through frequent repetition. Part 3 Individuals subject to bounded rationality have difficulties taking into account all available information. A consequence might be that people experience rational inattention​, meaning that because of the problems that households and firms confront in acquiring​ information, they opt to do so infrequently.

bounded, limited, bounded, simple rules of thumb, habit formation, bounded, rational inattention, infrequently

Suppose that more unemployed people who are classified as part of frictional unemployment decide to stop looking for work and start their own businesses instead. What is likely to happen to each of the​ following, other things being​ equal? a. The natural unemployment​ rate: decreases. Part 2 b. The​ economy's Phillips​ curve: shifts left.

decreases, shifts left

Suppose that an economy is initially in equilibrium at E Subscript 1 in the figure to the right. Part 2 In this​ case, the unemployment rate equals the natural rate of unemployment. Part 3 Cyclical unemployment is zero. Part 4 Suppose that there is a supply shock. Part 5 Move the cursor to the new equilibrium point. Part 6 ​Now, the unemployment rate exceeds the natural rate of unemployment. Part 7 Cyclical unemployment is positive. Part 8 Assuming there is an activist policy reponsean activist policy reponse​, move the cursor to the new equilibrium point. Part 9 ​Now, the unemployment rate equals the natural rate of unemployment.

equals, zero, exceeds, positive, equals

The World Bank is an umbrella institution for five international​ organizations, each of which has more than 140 member​ nations, which coordinate long​-term loans to governments and private firms in developing nations. Part 2 The International Monetary Fund is an organization with more than 180 member nations. It coordinates mainly short​-term and some​ longer-term financial assistance to developing nations in an effort to stabilize international flows of funds. Part 3 Like other​ lenders, the World Bank and the IMF confront adverse selection and moral hazard problems.​ Recently, there have been suggestions for restructuring the operations of both​ institutions, but so far there is little agreement about how to do so.

five, long, short, stabilize, adverse selection, moral hazard

Consider the following situations. Part 2 The World Bank offers to make a loan to a company in an impoverished nation at a lower interest rate than the company had been about to agree to pay to borrow the same amount from a group of private banks. The above situation indicates that the world bank is not effectively following its own stance. Part 3 The World Bank makes a loan to a company in a developing nation that has not yet received formal approval to operate​ there, even though the government approval process typically takes 15 months. The above situation indicates that the world bank is investing in dead capital. Part 4 The IMF extends a loan to a developing​ nation's government, with no​ preconditions, to enable the government to make already overdue payments on a loan it had previously received from the World Bank. The above situation indicates that the IMF is facing moral hazard

is not effectively following its own stance, is investing in dead capital, is facing moral hazard

Consider the following situations. Part 2 The IMF extends a​ long-term loan to a​ nation's government to help it maintain publicly supported production of goods and services that the government otherwise would have turned over to private companies. The above situation indicates that the IMF is not following its own mission. Part 3 The World Bank makes a loan to companies in an impoverished nation in which government officials typically demand bribes equal to 50 percent of​ companies' profits before allowing them to engage in any new investment projects. The above situation indicates that the World Bank is is not carrying out its mission. Part 4 The IMF offers to make a loan to banks in a country in which the​ government's rulers commonly require banks to extend credit to finance​ high-risk investment projects headed by the​ rulers' friends and relatives. The above situation indicates that the IMF is facin

is not following its own mission, is not carrying out its mission, is facing to an adverse selection problem

A nation has a comparative advantage when its residents are able to produce a good or service at a lower opportunity cost than residents of another nation. Part 2 Specializing in production of goods and services for which residents of a nation have a comparative advantage allows the​ nation's residents to consume more of all goods and services. Part 3 Gains from trade arise for all nations in the world that engage in international trade because specialization and trade allow​ countries' residents to consume more goods and services without necessarily giving up consumption of other goods and services.

lower, a comparative advantage, consume, gains, consume

Dead capital is a capital resource without clear title of ownership. It is difficult for a buyer to​ trade, insure, or maintain a right to use dead capital. Part 2 The inability to put dead capital to its most efficient use contributes to lower economic​ growth, particularly in developing ​nations, where dead capital can be a relatively large portion of total capital goods. Part 3 Inefficient government bureaucracies contribute to the dead capital​ problem, which reduces the incentive to invest in additional capital goods.

ownership, lower, developing, bureaucaries

The rational expectations hypothesis assumes that​ individuals' forecasts incorporate all readily available​ information, including an understanding of government policy and its effects on the economy. Part 2 If the rational expectations hypothesis is​ valid, there is pure​ competition, and all prices and wages are​ flexible, then the policy irrelevance proposition​ follows: Fully anticipated monetary policy actions cannot alter either the rate of unemployment or the level of real GDP. Part 3 Even if all prices and wages are perfectly​ flexible, aggregate supply shocks such as sudden changes in technology or in the supplies of factors of production can cause national economic fluctuations. To the extent that these real business cycles predominate as sources of economic​ fluctuations, the case for active policymaking is weakened.

rational expectations, policy irrelevance, real business

For a given rate of growth of aggregate real​ GDP, higher population growth tends to reduce the growth of per capita real GDP. Part 2 To the extent that increased population growth also leads to greater labor force participation that raises the growth of total real​ GDP, a higher population growth rate can potentially increase the rate of growth in per capita real GDP. Part 3 In​ general, the extent of political freedom does not necessarily increase the rate of economic growth. A greater degree of economic ​freedom, however, does have a positive effect on a​ nation's growth prospects.

reduce, labor force, increase, political, economic

Identify each of the following situations as something that either promotes growth or retards growth. Part 2 Increasing corruption allows government officials to steal​ people's homes: Retards economic growth. Part 3 A nation introduces patent laws for the first​ time: Promotes economic growth. Part 4 A court order shuts down all banks​ permanently: Retards economic growth. Part 5 A nation adopts a​ free-trade policy: Promotes economic growth. Part 6 A formerly communist country adopts free​ markets: Promotes economic growth.

retards economic growth, promotes economic growth, retards economic growth, promotes economic growth, promotes economic growth

Some new Keynesian economists suggest that small menu costs inhibit many firms from making speedy changes in their prices and that this price stickiness can make the​ short-run aggregate supply curve horizontal. Variations in aggregate demand have the largest possible effects on real GDP in the short​ run, so policies that influence aggregate demand also have the greatest capability to stabilize real GDP in the face of aggregate demand shocks. Part 2 Even though there is little evidence supporting a​ long-run trade-off between inflation and​ unemployment, new Keynesian theory suggests that activist policymaking may be able to stabilize real GDP and employment in the short run. This is​ possible, according to the​ theory, if stickiness of price adjustment is sufficiently great that policymakers can exploit a short​-run ​trade-off between inflation and real GDP.

small menu, horizontal, short, price, short