ECO202 Final Exam (Cumulative)

If the​ short-run aggregate supply curve​ (SRAS) were a horizontal​ line, what would be the impact on the size of the government purchases and tax multipliers ​? A. The impact of the multiplier would be larger if the SRAS curve is horizontal. B. The impact of the multiplier would not be changed if the SRAS curve is horizontal. C. The impact of the multiplier would be impossible to determine if the SRAS curve is horizontal. D. The impact of the multiplier would be smaller if the SRAS curve is horizontal.

A. The impact of the multiplier would be larger if the SRAS curve is horizontal.

If the government cuts taxes in order to increase aggregate​ demand, the action is called A. a discretionary fiscal policy. B. a procyclical policy. C. an automatic stabilizer. D. a discretionary monetary policy.

A. a discretionary fiscal policy

A country that allows demand and supply to determine the value of its currency has A. a floating currency. .B. a managed float exchange rate system. C. a pegged exchange rate. D. a fixed exchange rate system.

A. a floating currency.

Currency​ ___________ occurs when the market value of a​ country's currency rises relative to the value of another​ country's currency, while currency​ ____________ occurs when the market value of a​ country's currency declines relative to value of another​ country's currency. A. appreciation; depreciation B. deflation; inflation C. depreciation; appreciation D ​inflation; deflation

A. appreciation; depreciation

The reference to​ "favorable currency​ effects" means the value of the euro A. fell, so that it takes fewer units of foreign currency to buy one​ euro, encouraging exports. B. fell, so that it takes more units of foreign currency to buy one​ euro, encouraging exports. C. rose, so that it takes fewer units of foreign currency to buy one​ euro, encouraging exports. D. rose, so that it takes more units of foreign currency to buy one​ euro, encouraging exports.

A. fell, so that it takes fewer units of foreign currency to buy one​ euro, encouraging exports.

A depreciation in the domestic currency will A. increase exports and decrease​ imports, thereby increasing net exports. B. increase both exports and​ imports, thereby increasing net exports. C. decrease exports and increase​ imports, thereby decreasing net exports. D. decrease both exports and​ imports, thereby decreasing net exports.

A. increase exports and decrease​ imports, thereby increasing net exports.

The federal government would not want to increase its​ spending, even if the result were to increase real GDP and employment in the short​ run, if A. it would lead to a greater federal deficit and an increase in the national debt. B. productivity is falling. C. it would result in deflation. D. tax receipts are falling.

A. it would lead to a greater

The theory of purchasing power parity states that the​ long-run level of the exchange rate must A. make it possible to buy equivalent bundles of goods in either country. B. be fair to the countries that are trading. C. make financial assets evenly priced in either country. D. be based on the supply and demand for currency.

A. make it possible to buy equivalent bundles of goods in either country.

An article in BusinessWeek in 2013 reported that Fed Chairman Ben Bernanke testified to Congress​ that: ​"If we see continued improvement and we have confidence that that is going to be​ sustained, then we couldlong dashin the next few meetingslong dashwe could take a step down in our pace of​ purchases." According to the​ article, Bernanke also told Congress that​ "'premature tightening' could​ 'carry a substantial risk of slowing or ending the economic​ recovery.'" ​Source: Nick​ Summers, "Confusion about the Fed Slowing Its​ $85 Billion in Monthly Bond Buying Is Roiling the​ Markets," Bloomberg BusinessWeek​, June​ 10-16, 2013. The purchases Fed Chairman Bernanke is referring to are A. open market purchases of government securities. B. purchases of foreclosed homes. C. open market purchases of commercial bonds. D. purchases of foreign currencies.

A. open market purchases of government securities.

A baseball fan with a Mike Trout baseball card wants to trade it for a Giancarlo Stanton baseball​ card, but everyone the fan knows who has a Stanton card​ doesn't want a Trout card. Economists characterize this problem as a failure of the A. principle of a double coincidence of wants. .B. irrational exuberance doctrine. C. market clearing mechanism. D. theory of comparative advantage.

A. principle of a double coincidence of wants.

One advantage of a fixed exchange rate system is that it A. reduces uncertainty for businesses about the value of a currency. B makes a currency stronger against the dollar or euro. C. keeps the interest rate at a low level. D. lets market forces determine the exchange rate.

A. reduces uncertainty for businesses about the value of a currency.

Congress broadened the​ Fed's responsibility since A. the 1930s as a result of the Great Depression.. B. the end of World War II. C. World War I. D. 1987 when Alan Greenspan was appointed the chair of the Fed.

A. the 1930s as a result of the Great Depression..

Healthier, more educated workers tend to be more productive. Greater overall productivity per hour worked is a fundamental component of long-term economic growth. However, many very successful individuals often find few opportunities in their own developing countries, and leave them for industrial countries. By improving health and education, developing countries can generate economic growth, and increase incomes. This will help combat the prevalence of educated people leaving their home countries for opportunities elsewhere. That is, it will combat A. the brain drain B. communism C. political reform D. corruption

A. the brain drain

In the short​ run, increases in federal spending will increase real GDP and employment if A. the economy is producing at less than its potential output and has some cyclical unemployment. B. wages and prices do not change. C. the price level remains stable. D. the economy is experiencing inflation.

A. the economy is producing at less than its potential output and has some cyclical unemployment.

Since the​ 1950s, total government​ expenditures, as a percentage of​ GDP, have increased and total government​ purchases, as a percentage of​ GDP, have decreased The major cause of these trends is A. there has been a major increase in the amount of transfer payments the government makes through programs such as Social Security and unemployment insurance. B. there has been a decrease in income tax rates for most households in the U.S. C. there has been a reduction in the nominal amount of government purchases on military as the U.S. does not engage in military conflicts. D. All of the above.

A. there has been a major increase in the amount of transfer payments the government makes through programs such as Social Security and unemployment insurance.

When the economy is an expansion experiencing an expansion automatic stabilizers will​ cause: A. transfer payments to decrease and tax revenues to increase. B. transfer payments and tax revenues to be unaffected. C. transfer payments to decrease and tax revenues to decrease. D. transfer payments to increase and tax revenues to increase.

A. transfer payments to decrease and tax revenues to increase.

The largest and​ fastest-growing category of federal expenditures is A. transfer payments. B. grants to state and local governments. C. defense spending. D. interest on the national debt.

A. transfer payments.

Historically, in order to rapidly expand the money​ supply, a country needed to abandon the gold standard because A. under the gold standard the size of the money supply was dependent on the amount of gold that was available in the country and it was not possible to rapidly increase the availability of gold. B. any changes in monetary policy needed to be approved by all other countries under the gold standard. C. a rapid increase in the money supply would have sharply raised the price of gold. D. under the gold standard a country was required to keep a fixed money supply.

A. under the gold standard the size of the money supply was dependent on the amount of gold that was available in the country and it was not possible to rapidly increase the availability of gold.

When will the demand curve for dollars in exchange for yen shift to the​ right? A. when speculators decide that the value of the dollar will rise relative to the value of the yen B. when incomes in Japan fall C. when interest rates in the United States fall D. All of the above.

A. when speculators decide that the value of the dollar will rise relative to the value of the yen

Which of the following is not a correct statement about​ M2? A.M2 is the best definition of money as a medium of exchange. B. M2 includes all of the assets in M1. C.M2 is a broader definition of money compared to M1 and currency. D. M2 includes savings​ accounts, small-denomination time​ deposits, and money market mutual funds.

A.M2 is the best definition of money as a medium of exchange. B. M2 includes all of the assets in M1.

When Congress established the Federal Reserve in​ 1913, its main responsibility was A.to make discount loans to banks suffering from large withdrawals by depositors. B. to control the money supply. C. to adjust interest rates. D. to design tax policies.

A.to make discount loans to banks suffering from large

The economic growth model explains growth in real GDP per capita in the long run. Because of the importance of labor productivity in explaining economic growth, the economic growth model focuses on the causes of increases in long-run labor productivity. What are the key factors that determine labor productvity? (mark all that apply) a. efficiency wages b. quantity of capital per hour worked c. trade d. technological change

B and D

Which of the following is an example of an expansionary fiscal​ policy? A. An increase in the money supply. B. A decrease in taxes. C. An increase in investment spending. D. A decrease in government spending.

B. A decrease in taxes.

When the Federal Reserve increases the required reserve ratio as a part of a contractionary monetary​ policy, there​ is: A. A decrease in the money supply and a decrease in the interest rate. B. A decrease in the money supply and an increase in the interest rate. C. An increase in the money supply and an increase in the interest rate. D. An increase in the money supply and a decrease in the interest rate.

B. A decrease in the money supply and an increase in the interest rate.

What is an exchange rate​ system? A. A system of rules governing international monetary transactions. B. An agreement between countries on how exchange rates should be determined. C. A method of regulating the money supply by the​ nation's central bank. D. An accounting method used in calculating the balance of payments

B. An agreement between countries on how exchange rates should be determined.

Suppose that at the same time Congress and the president pursue an expansionary fiscal​ policy, the Federal Reserve pursues an expansionary monetary policy. How might an expansionary monetary policy affect the extent of crowding out in the short​ run? A. An expansionary monetary policy would have no effect on the extent of crowding out. B. An expansionary monetary policy would decrease interest rates and thus reduce the extent of crowding out. C. An expansionary monetary policy would only affect the extent of crowding out in the long run. D. An expansionary monetary policy would increase interest rates and thus increase the extent of crowding out.

B. An expansionary monetary policy would decrease interest rates and thus reduce the extent of crowding out.

Which of the following is a problem that can result from pegging a​ country's currency? A. It can increase inflation due to domestic monetary expansion. B. If the pegged value is above the market​ value, there may be a speculative run on the currency. C. It can limit the use of domestic fiscal policies and thus can be recessionary. D. It can increase transactions costs for businesses that borrow in the currency that the domestic currency is pegged to.

B. If the pegged value is above the market​ value, there may be a speculative run on the currency.

what is the disadvantage of holding money? A. Money cannot be readily used to buy financial assets. B. Money, in the form of currency or checking account​ deposits, earns either no interest or a very low rate of interest. C. Money can be easily stolen or lost. D. Money is not very​ "liquid."

B. Money, in the form of currency or checking account​ deposits, earns either no interest or a very low rate of interest.

The text states that​ "the globalization of financial markets has helped increase growth and efficiency in the world​ economy." Which of the following is a reason why globalization has increased growth in the world​ economy? A. Savers earn a higher rate of return on their funds. B. Savings around the world can be channeled into the most productive investments. C. The U.S. government can more easily finance its budget deficit. D. All savings will flow to the United​ States, which is the​ highest-growth economy in the world.

B. Savings around the world can be channeled into the most productive investments.

Monetary policy is defined​ as: A. The actions Congress takes to manage tax policy and interest rates. B. The actions the Federal Reserve takes to manage the money supply and interest rates. C. The actions the Federal Reserve takes to manage tax policy and interest rates. D. The actions Congress takes to manage the money supply and interest rates.

B. The actions the Federal Reserve takes to manage the money supply and interest rates.

Which of the following statements is not correct about the effects of the​ euro? A. The euro helped economic growth in euro zone countries by making it easier for consumers and firms to buy and sell across borders. B. The euro increased the ability of participating countries to run independent monetary policies. C. The euro is used as currency in​ Germany, France, and Italy. D. The euro reduced costs and increase competition.

B. The euro increased the ability of participating countries to run independent monetary policies.

he Federal Reserve has multiple economic goals for monetary policy to​ achieve, ​ However, it can be difficult to manage all of the goals at once. Which of the following is not true regarding the multiple goals of the​ Fed? A. As the Fed tries to ensure economic​ growth, it can also focus on financial market stability because efficient financial markets make it easier for investment to occur and create additional economic growth. B. The goal of financial market stability means that the Fed tries to ensure that asset​ prices, such as stock​ prices, increase at a very high rate so investors can make more money. C. Achieving the goals of price stability and economic growth can be difficult because often the forces that lead to economic growth also can make prices increase at a rate higher than the Fed would desire. D. Having dual goals of high employment and economic growth does not create many issues because most of the time when the economy experiences economic​ growth, the economy also achieves higher rates of employment.

B. The goal of financial market stability means that the Fed tries to ensure that asset​ prices, such as stock​ prices, increase at a very high rate so investors can make more money.

Explain whether you agree with this​ argument: If the Fed actually ever carried out a contractionary monetary​ policy, the price level would fall. Because the price level has not fallen in the United States over an entire year since the​ 1930s, we can conclude that the Fed has not carried out a contractionary policy since the 1930s. A.The statement is true. If there had been a contractionary​ policy, the price level would have fallen. B. The statement is false. A contractionary policy could result in a lower rate of inflation rather than a fall in the price level C. The statement is uncertain because it is not possible to determine what policies the Fed has chosen. D. There is not enough information to tell whether the statement is true or false.

B. The statement is false. A contractionary policy could result in a lower rate of inflation rather than a fall in the price level

When countries agree to keep the value of their currencies​ constant, there is A. no exchange rate system. B. a fixed exchange rate system. C. exchange rate integration. D. a managed float exchange rate system

B. a fixed exchange rate system.

Which of the following is not one of the monetary policy goals of the Federal Reserve​ ("the Fed")? A. stability of financial markets B. a high foreign exchange rate of the U.S. dollar relative to other currencies C. high employment D. price stability

B. a high foreign exchange rate of the U.S. dollar relative to other currencies

When actual GDP is below potential GDP the budget deficit increases because​ of: A. a decrease in transfer payments and a decrease in tax revenues. B. an increase in transfer payments and a decrease in tax revenues. C. an increase in transfer payments and an increase in tax revenues. D. an decrease in transfer payments and an increase in tax revenues

B. an increase in transfer payments and a decrease in tax revenues.

Changes in taxes and spending that happen without actions by the government are called A. transfer payments. B. automatic stabilizers. C. autonomous fiscal expenditures. D. discretionary fiscal policy changes.

B. automatic stabilizers.

When the euro was introduced in January​ 1999, the exchange rate was​ $1.19 per euro. In February 2019​, the exchange rate was $ 1.13 per euro. ​*Real-time data provided by Federal Reserve Economic Data​ (FRED), Federal Reserve Bank of Saint Louis. For U.S. firms exporting goods and services to​ Europe, this change in the value of the euro was A. good news because one euro would buy fewer ​dollars, making U.S. goods less expensive for European buyers. B. bad news because one euro would buy fewer ​dollars, making U.S. goods more expensive for European buyers. C. good news because one euro would buy more ​dollars, making U.S. goods more expensive for European buyers. D. bad news because one euro would buy more ​dollars, making U.S. goods less expensive for European buyers.

B. bad news because one euro would buy fewer ​dollars, making U.S. goods more expensive for European buyers.

A​ "premature tightening" of the​ "pace of​ purchases" would slow down the economic recovery because this action would be A. expansionary, reducing lending and economic activity. B. contractionary, reducing lending and economic activity. C. expansionary​, increasing lending and economic activity. D. contractionary, increasing lending and economic activity.

B. contractionary, reducing lending and economic activity.

From an initial -- macroeconomic​ equilibrium, if the Federal Reserve anticipated that next year aggregate demand would grow significantly slower than -- aggregate​ supply, then the Federal Reserve would most likely A. decrease income tax rates. B. decrease interest rates. C. increase interest rates. D. increase income tax rates.

B. decrease interest rates.

The interest rate that banks charge each other for overnight loans is called the A. discount rate. B. federal funds rate. C. Treasury bill rate. D. prime lending rate.

B. federal funds rate.

Expansionary fiscal policy is less effective in an open economy because A. increases in government spending will be partly spent on imported​ goods, which do not benefit the domestic economy. B. increases in government spending can increase interest​ rates, which increases the value of the dollar and crowds out net exports. C. increases in taxes reduce​ consumption, which in turn reduces consumption of imports and increases net exports. D. increases in the money supply will reduce interest rates and lower the value of the​ dollar, reducing aggregate demand.

B. increases in government spending can increase interest​ rates, which increases the value of the dollar and crowds out net exports.

If all of the​ firm's production and sales were within​ Europe, these effects would A. still have raised​ Bayer's profits, because the relative price of the​ firm's product would have decreased. B. not have raised​ Bayer's profits, because there would have been no​ "currency effects." C. not have raised​ Bayer's profits, because the​ firm's costs would not have fallen. D. still have raised​ Bayer's profits, because the relative price of the​ firm's product would have increased.

B. not have raised​ Bayer's profits, because there would have been no​ "currency effects."

If investors come to believe that the Fed might not be increasing interest​ rates, the value of the dollar would decline because A. the lower expected return on U.S.​ dollar-denominated assets would decrease the supply of dollars. B. the lower expected return on U.S.​ dollar-denominated assets would decrease the demand for dollars. C. investment would be expected to decrease and savings would​ increase, so the demand for dollars would decrease. D. investment would be expected to increase and savings would​ decrease, so the demand for dollars would increase.

B. the lower expected return on U.S.​ dollar-denominated assets would decrease the demand for dollars.

If real GDP​ increases, A. there is a movement down along a stationary money demand curve. B. the money demand curve shifts to the right. C. the money demand curve shifts to the left. D. there is a movement up along a stationary money demand curve.

B. the money demand curve shifts to the right.

Which of these variables are the main monetary policy targets of the​ Fed? A. the inflation rate and the unemployment rate B. the money supply and the interest rate C. real GDP and the price level D. economic growth and productivity

B. the money supply and the interest rate

When the Federal Reserve purchases Treasury securities in the open​ market, A. the buyers of these securities pay for them with checks drawn on their bank account and bank reserves increase. B. the sellers of such securities deposit the funds in their banks and bank reserves increase. c. the public starts buying houses and firms invest in anticipation of bank increasing their reserves. D. the sellers of such securities buy new securities in the open market and there is an increase in bank reserves.

B. the sellers of such securities deposit the funds in their banks and bank reserves increase.

When interest rates on Treasury bills and other financial assets are​ low, the opportunity cost of holding money is​ _________, so the quantity of money demanded will be​ _________. A. high; high B. ​low; high C.low; low D. high; low

B. ​low; high

The Federal Reserve Bank of New York is always a voting member of the FOMC because A.it has the most political affiliations of the Federal Reserve districts. B.it carries out the policy directives of the FOMC. C. it is the largest of the Federal Reserve districts. D. it always has an employee as a member of the Board of Governors.

B.it carries out the policy directives of the FOMC.

Indicate whether each of the following transactions represents the purchase of a final good: 1. The purchase of tires from Bridgestone tire company by an automobile manufacturer. 2. The purchase of an aircraft carrier by the federal government. 3. The purchase of domestic wine by a French consumer. 4. The purchase of a new machine tool by the Ford Motor Company.

1. is not the purchase of a final good 2. is the purchase of a final good 3. is the purchase of a final good 4. is the purchase of a final good

If real GDP equals $11,567 billion in 2006 and $11,916 billion in 2007, and assuming population is constant over those two years, how many years will it take for real GDP per capita to double?

23.2 years

Real GDP per capita in the country of Arcadia grew from about $4,715 in 1900 to about $47,879 in 2008, which represents an annual growth rate pf 2.17 percent. If Arcadia continues to grow at this rate, calculate the number of years when its real GDP per capita will double. ______ years.

32

in an economy, the working age population is 200 million. Of this total, 150 million workers are employed 8.0 million workers are unemployed 32.0 million workers are not available for work (homemakers, students, etc) 6.0 million workers are available for work but are discouraged and thus are not seeking work 4.0 million workers are available for work but are not currently seeking work due to transportation or childcare problems. the labor force participation rate in this economy is ________.

79%

An increase in the labor force or capital is illustrated by _________. An increase in the expected price of an important natural resource is indicated by a __________. An improvement in technology is shown as a __________. An increase in the expected future price level causes _____.

A to B B to A A to B B to A

Which of the following is not one of the main sets of factors that cause the supply and demand curves in the foreign exchange market to​ shift? A. Changes in the U.S. supply of oil and changes in the foreign supply of oil. B. Changes in the demand for​ U.S.-produced goods and services and changes in the demand for​ foreign-produced goods and services. C. Changes in the desire to invest in the U.S. and changes in the desire to invest in foreign countries. D. Changes in the expectations of currency traders about the likely future value of the dollar and the likely future value of foreign currencies.

A. Changes in the U.S. supply of oil and changes in the foreign supply of oil

What is an expansionary fiscal​ policy? A. Expansionary fiscal policy includes increasing government spending and decreasing taxes to increase aggregate demand. B. Expansionary fiscal policy includes decreasing government spending and increasing taxes to increase aggregate demand. C. Expansionary fiscal policy includes increasing government spending and taxes to increase aggregate demand. D. Expansionary fiscal policy includes decreasing government spending and taxes to increase aggregate demand.

A. Expansionary fiscal policy includes increasing government spending and decreasing taxes to increase aggregate demand.

What is fiscal​ policy? A. Fiscal policy can be described as changes in government spending and taxes to achieve macroeconomic policy objectives. B. Fiscal policy can be described as changes in government spending and interest rates to achieve macroeconomic policy objectives. C. Fiscal policy can be described as changes in interest rates to achieve macroeconomic policy objectives. D. Fiscal policy can be described as changes in interest rates and taxes to achieve macroeconomic policy objectives.

A. Fiscal policy can be described as changes in government spending and taxes to achieve macroeconomic policy objectives.

Suppose that the economy is currently at potential​ GDP, and the federal budget is balanced. If the economy moves into​ recession, what will happen to the federal​ budget? A. If the budget is balanced at potential GDP and the economy moves into​ recession, then there will be a budget deficit as government expenditures increase and tax revenues decrease. B. If the budget is balanced at potential GDP and the economy moves into​ recession, then the budget will remain balanced as government expenditure increases and tax revenue decreases will exactly offset each other. C. If the budget is balanced at potential GDP and the economy moves into​ recession, then the budget will remain balanced as government expenditure decreases and tax revenue decreases will exactly offset each other. D. If the budget is balanced at potential GDP and the economy moves into​ recession, then there will be a budget deficit as government expenditures decrease and tax revenues increase.

A. If the budget is balanced at potential GDP and the economy moves into​ recession, then there will be a budget deficit as government expenditures increase and tax revenues decrease.

What changes should they make if they decide a contractionary fiscal policy is​ necessary? A. In this​ case, Congress and the president should enact policies that decrease government spending and increase taxes. B. In this​ case, Congress and the president should enact policies that increase government spending and increase taxes. C. In this​ case, Congress and the president should enact policies that increase government spending and decrease taxes. D. In this​ case, Congress and the president should enact policies that decrease government spending and decrease taxes.

A. In this​ case, Congress and the president should enact policies that decrease government spending and increase taxes.

f Congress and the president decide an expansionary fiscal policy is​ necessary, what changes should they make in government spending or​ taxes? A. In this​ case, Congress and the president should enact policies that increase government spending and decrease taxes. B. In this​ case, Congress and the president should enact policies that increase government spending and increase taxes. C. In this​ case, Congress and the president should enact policies that decrease government spending and increase taxes. D. In this​ case, Congress and the president should enact policies that decrease government spending and decrease taxes.

A. In this​ case, Congress and the president should enact policies that increase government spending and decrease taxes.

What is the cyclically adjusted budget deficit or​ surplus? A. The cyclically adjusted budget deficit or surplus is the deficit or surplus in the federal​ government's budget if the economy were at potential GDP. B. The cyclically adjusted budget deficit or surplus requires the federal budget to always be in​ balance, therefore avoiding a deficit or surplus. C. The cyclically adjusted budget deficit or surplus is the deficit or surplus in the federal​ government's budget if the economy were above potential GDP. D. The cyclically adjusted budget deficit or surplus is the deficit or surplus in the federal​ government's budget if the economy were below potential GDP.

A. The cyclically adjusted budget deficit or surplus is the deficit or surplus in the federal​ government's budget if the economy were at potential GDP.

The United States produces computers and sells them to Mexico. At the same time Mexico produces cars and sells them to the United States. Suppose there is an appreciation in the dollar. This will​ cause: A. A decrease in imports into the United States and a decrease in exports to Mexico​, which will cause a decrease in aggregate demand and real GDP. B. An increase in imports into the United States and an increase in exports to Mexico​, which will cause an increase in aggregate demand and real GDP. C. An increase in imports into the United States and a decrease in exports to Mexico​, which will cause a decrease in aggregate demand and real GDP. D. A decrease in imports into the United States and an increase in exports to Mexico​, which will cause an increase in aggregate demand and real GDP.

C. An increase in imports into the United States and a decrease in exports to Mexico​, which will cause a decrease in aggregate demand and real GDP.

Consider the importance of growth in GDP, particuraly real GDP per capita, to the quality of the life of a country's citizens. Indicate whether you agree/disagree: 1. Increases in real GDP per capita do not increase the amount of goods and services available a country's citizens 2. Increases in real GDP per capita increase life expectancy at birth 3. increases in real GDP per capita mean people will have lower portion of leisure time over the course of their lives

disagree agree disagree

The theory of purchasing power parity ______________ explain exchange rates well in the long run.

does not

According to the dynamic AD-AS model, what is the most common cause of inflation? a. total spending increases faster than total production b. AD increases by more than LRAS c. the US mint prints too much currency d. all of the above e. A and B only

e. A and B only

which of the following will increase planned investment spending on the part of firms? a. increased optimism about future demand for its product b. a lower real interest rate c. increases in the corporate income tax d. all of the above e. a and b only

e. a and b only

we say that the economy as a whole is in economic equilibrium if a. total spending equals GDP b. total spending equals total production c. aggregate expenditure equals GDP d. aggregate expenditure equals total production e. all of the above

e. all of the above

at the beginning of a recession, aggregate expenditure __________ GDP. As a result, firms _________ large amounts of unplanned inventory and GDP and employment _________.

falls short of accumulate decrease

_______________ represent total government spending including​ goods, services, grants to state and local​ governments, and transfer payments.

government expednitures

______________ are spending by the government on​ goods, services, and factors of production.

government purchases

Monetary policy has _____________- impact on aggregate demand in an open economy than in a closed economy

greater

Consider the following​ statement: ​"The Fed has an easy job. Say it wants to increase real GDP by​ $200 billion. All it has to do is increase the money supply by that​ amount." The statement is _________________ because an increase in the money supply _______ affect real GDP directly.

incorrect; does not

During the expansion phase of the business cycle, production, employment, and income ________. During the recession phase of the business cycle, production, employment, and income ________.

increase decrease

For each of the following policies, indicate whether it will or will not increase the rate of economic growth in the United States. A. Congress passes an investment tax credit, which reduces a firm's taxes if it installs new machinery and equipment. It is likely that the rate of economic growth will ______. B. Congress passes a law that allows taxpayers to reduce their income taxes by the amount of state sales taxes they pay. It is likely that the rate of economic growth will _________. C. congress provides more funds for low-interest loans to college students. It is likely that the rate of economic growth will _______.

increase increase increase

If you move​ $100 from your savings account to your checking​ account, then M1 will ___________________ and M2 will ___________________ .

increase by 100 remain the same

Since the​ 1950s, total government​ expenditures, as a percentage of​ GDP, have _____ and total government​ purchases, as a percentage of​ GDP, have ________ .

increase; decreased

indicate whether each of the following is a final good, an intermediate good, or neither coffee beans purchased by a coffee shop: one share of google stock: a new pick-up truck purchased by a consumer: a new home purchased by a family:

intermediate good neither final good final good

If a large amount of production within a country takes place at foreign owned facilities, then it is likely that the country's GDP will be __________ GNP.

larger than

The United Kingdom decided not to join with other European Union countries and use the euro LOADING... as its currency. One opponent of adopting the euro​ argued, ​"It comes down to economics. We just​ don't believe that​ it's possible to manage the entire economy of Europe with just one interest rate policy. How do you alleviate recession in Germany and curb inflation in​ Ireland?" ​ To alleviate recession in​ Germany, it would be desirable to ____________ interest​ rates, while to curb inflation in​ Ireland, it would be desirable to ___________ interest rates.

lower rasie

Which of the following best describes the difference between crowding out in the short run and in the long​ run? A. In the short run and the long​ run, most economists believe that an increase in government purchases will result in complete crowding out of private expenditures. B. In the short run and the long​ run, an increase in government purchases may not fully crowd out private expenditures due to the stimulative effect of an increase in government purchases on aggregate demand. C. In the short​ run, an increase in government purchases may not fully crowd out private expenditures due to the stimulative effect of an increase in government purchases on aggregate demand. In the long​ run, most economists believe that a permanent increase in government purchases will result in complete crowding out of private expenditures. D. In the long​ run, an increase in government purchases may not fully crowd out private expenditures due to the stimulative effect of an increase in government purchases on aggregate demand. In the short​ run, most economists believe that a permanent increase in government purchases will result in complete crowding out of private expenditures.

C. In the short​ run, an increase in government purchases may not fully crowd out private expenditures due to the stimulative effect of an increase in government purchases on aggregate demand. In the long​ run, most economists believe that a permanent increase in government purchases will result in complete crowding out of private expenditures.

The Federal Reserve cannot affect the price level ​directly; therefore, the Fed typically uses the following as its policy​ target: A. Inflation. B. Government expenditures. C. Interest rates. D. Taxes.

C. Interest rates.

Which can be changed more​ quickly: monetary policy or fiscal​ policy? A. Fiscal policy can be changed more quickly than monetary policy. Monetary policy has much longer delays due to the larger number of legislators involved. B. Fiscal policy can be changed more quickly than monetary policy. Fiscal policy has much shorter delays due to the smaller number of legislators involved. C. Monetary policy can be changed more quickly than fiscal policy. Monetary policy can be changed at any of the FOMC meetings and the smaller number of individuals involved makes it easier to change policy. D. Monetary policy can be changed more quickly than fiscal policy. Fiscal policy can be changed at any of the FOMC meetings and the smaller number of individuals involved makes it easier to change policy.

C. Monetary policy can be changed more quickly than fiscal policy. Monetary policy can be changed at any of the FOMC meetings and the smaller number of individuals involved makes it easier to change policy.

Why was this catastrophic for borrowers in Argentina who had taken out dollar​ loans? A. There would be no loans available after the peg ended. B. Lenders would automatically call in loans since the peso had depreciated. C. Repaying the loans would now cost significantly more since the value of the peso had fallen. D. The price of imported goods would rise in​ Argentina, which is bad for borrowers.

C. Repaying the loans would now cost significantly more since the value of the peso had fallen.

Why would the Fed intentionally use contractionary monetary policy to reduce real​ GDP? A. The Fed intends to reduce​ unemployment, which occurs if real GDP is greater than potential GDP. B. The Fed intends to reduce real GDP so that real GDP will grow again but at a faster pace. C. The Fed intends to reduce​ inflation, which occurs if real GDP is greater than potential GDP. D. The Fed intends to raise interest rates to make buying new houses less expensive.

C. The Fed intends to reduce​ inflation, which occurs if real GDP is greater than potential GDP.

Who is responsible for fiscal​ policy? A. The Federal Reserve controls fiscal policy. B. The federal government and the Federal Reserve jointly control fiscal policy. C. The federal government controls fiscal policy. D. Fiscal policy is controlled by market forces.

C. The federal government controls fiscal policy.

What are the​ Fed's main monetary policy​ targets? A. High employment and economic growth B. Price stability and economic growth C. The money supply and interest rates D. Taxes and government spending

C. The money supply and interest rates

All of the following are expected benefits of the creation of the​ Euro, except​ which? A. The creation of the Euro would allow Western European countries to more closely integrate their economies. B. The creation of the Euro should reduce costs. C. The participating countries are no longer able to conduct independent monetary policies. .D. Having a common currency allow firms to sell across borders.

C. The participating countries are no longer able to conduct independent monetary policies.

When is it considered​ "good policy" for the government to run a budget​ deficit? A. When borrowing is used for current expenses. B. When borrowing is used to pay for social insurance programs. C. When borrowing is used for​ long-lived capital goods. D. All of the above.

C. When borrowing is used for​ long-lived capital goods.

Does government spending ever reduce private​ spending? A. Yes, due to reduced interest rates. B. No, due to crowding out. C. Yes, due to crowding out. D. No, they are unrelated.

C. Yes, due to crowding out

If the United States enters into an agreement with other countries to keep the exchange rate among their currencies fixed it is taking part​ in: A. a managed float​ exchange-rate system. B. a floating currency​ exchange-rate system. C. a fixed​ exchange-rate system. D. a gold standard​ exchange-rate system

C. a fixed​ exchange-rate system.

President Trump was assuming that in​ 2017, the economy was A. at full employment. B. in a severe recession and needed a job boost. C. able to create more jobs and expand without increasing the inflation rate. D. growing enough that the budget deficit would disappear.

C. able to create more jobs and expand without increasing the inflation rate.

Adopting the euro is important to interest rate policy because A. countries that use the euro as their currency will not be able to set their own independent fiscal policies. B. countries that use the euro as their currency will not have monetary policies. C. countries that use the euro as their currency will not be able to set their own independent monetary policies. D. countries that use the euro as their currency will each continue to set monetary policies independently.

C. countries that use the euro as their currency will not be able to set their own independent monetary policies.

Expansionary monetary policy is more effective in an open economy because A. decreases in interest rates have an impact on foreign direct​ investment, encouraging the construction of factories and the purchase of stocks. B. open market operations can be used to buy and sell foreign as well as domestic bonds. C. interest rate decreases also reduce the value of the​ dollar, which increases net exports and further increases aggregate demand. D. interest rate decreases also reduce the government budget​ deficit, which reduces the current account deficit and increases demand.

C. interest rate decreases also reduce the value of the​ dollar, which increases net exports and further increases aggregate demand.

Favorable currency effects increase​ Bayer's profits because the​ firm's A. productivity​ rises, which increases profit. B. costs​ fall, which increases profit. C. international sales​ rise, which increases revenue. D. prices​ rise, which increases profit.

C. international sales​ rise, which increases revenue.

The federal funds rate A. is set by the Federal Reserve Bank. B. equals the discount rate. C. is the rate that banks charge each other for​ short-term loans of excess reserves. D. only matters to banks and has very little impact on individual consumers.

C. is the rate that banks charge each other for​ short-term loans of excess reserves.

The federal​ government's day-to-day activities include running federal agencies like the Environmental Protection​ Agency, the​ FBI, the National Park​ Service, and the Immigration and Customs Enforcement. Spending on these types of activities make up A. about 85 percent of federal government expenditures. B. about 45 percent of federal government expenditures. C. less than 10 percent of federal government expenditures. D. less than 1 percent of federal government expenditures.

C. less than 10 percent of federal government expenditures.

"Strengthening of the​ dollar" means that one dollar will buy A. less foreign​ currency, or the dollar has appreciated. B. less foreign​ currency, or the dollar has depreciated. C. more foreign​ currency, or the dollar has appreciated. D. more foreign​ currency, or the dollar has depreciated.

C. more foreign​ currency, or the dollar has appreciated.

In an open​ economy, a contractionary fiscal policy will have a​ ________ impact on aggregate demand​ and, therefore, will be​ ________ effective in slowing down an economy. A. smaller; more B. ​larger; less C. smaller; less D. ​larger; more

C. smaller; less

When the Federal Reserve sells Treasury securities in the open​ market, A. the public starts selling houses and firms disinvest in anticipation of banks decreasing their reserves. B. the sellers of such securities deposit the funds in their banks and bank reserves decrease. C. the buyers of these securities pay for them with checks and bank reserves fall. d. the buyers of such securities buy new securities in the open market and there is a decrease in bank reserves.

C. the buyers of these securities pay for them with checks and bank reserves fall.

A double coincidence of wants refers to A. the situation where two parties are involved in a transaction where money is the medium of exchange. B. the situation in which a good that is used as money also has value independent of its use as money. C. the fact that for a barter trade to take place between two​ people, each person must want what the other one has. d. the idea that a barter economy is more efficient than an economy that uses money.

C. the fact that for a barter trade to take place between two​ people, each person must want what the other one has.

If the price level​ decreases, A. there is a movement up along a stationary money demand curve. B. there is a movement down along a stationary money demand curve. C. the money demand curve shifts to the left. D. the money demand curve shifts to the right.

C. the money demand curve shifts to the left.

If the Fed believes the economy is about to fall into​ recession, it should A. use its judgment to do nothing and let the economy make the self adjustment back to potential GDP. B. use an expansionary fiscal policy to increase the interest rate and shift AD to the right. C. use an expansionary monetary policy to lower the interest rate and shift AD to the right. D. use a contractionary monetary policy to lower the interest rate and shift AD to the left.

C. use an expansionary monetary policy to lower the interest rate and shift AD to the right.

An article in the Toronto Star discussed the Canadian teams that play in the National Hockey​ League, the National Basketball​ Association, Major League​ Baseball, and Major League Soccer. The article​ noted, "Under their collective agreements players get paid in U.S. dollars. The majority of​ [team] revenue,​ however, is in Canadian​ currency." ​ Canadian professional sports teams are better off when the value of the Canadian dollar relative to the U.S. dollar A. increases, because one Canadian dollar will buy fewer U.S.​ dollars, so paying the players will be less expensive. B. ​decreases, because one Canadian dollar will buy fewer U.S.​ dollars, so paying the players will be less expensive. C. ​increases, because one Canadian dollar will buy more U.S.​ dollars, so paying the players will be less expensive. D. decreases, because one Canadian dollar will buy more U.S.​ dollars, so paying the players will be less expensive

C. ​increases, because one Canadian dollar will buy more U.S.​ dollars, so paying the players will be less expensive.

In the long​ run, government tax policy can affect private investment which impacts the production function and factors of production. In other​ words, aggregate supply may be impacted by different types of taxes the government can use. Which of the following is not true in terms of potential long run impacts of tax​ policies? A. A reduction in individual income tax rates will increase the incentives for starting new businesses and aggregate supply will increase. B. Taxes on dividends for individuals are​ eliminated, which increases the return of investing for shareholders and thus creates more investment and an increase in aggregate supply. C. The government decides to reduce the corporate income tax​ rate, thereby, increasing the returns to firms for investment which creates more investment and increases aggregate supply. D. A tax rebate given one year will cause people to have more money and therefore they will spend more which will cause an increase in aggregate supply. E. All of the above are true statements.

D. A tax rebate given one year will cause people to have more money and therefore they will spend more which will cause an increase in aggregate supply.

Increased government debt can lead to higher interest rates​ and, as a​ result, crowding out of private investment spending. In terms of borrowing​ (debt-spending), what will offset the effect of crowding out in the long run so that government debt poses less of a problem to the​ economy? A. ​Debt-spending on education. B. Debt-spending on highways and ports. C. Debt-spending on research and development. D. All of the above.

D. All of the above

Which of the following factors cause both the demand curve and the supply curve for dollars in the foreign exchange market to​ shift? A. changes in the demand for​ U.S.-produced goods and services and changes in the demand for foreign produced goods and services B. changes in the desire of investors to invest in the United States and changes in the desire of investors to invest in foreign countries C. changes in the expectations of currency traders about the likely future value of the dollar and the likely future value of foreign currencies D. All of the above.

D. All of the above

Which of the following is not a correct comparison between an expansionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply​ model? A. If the economy is below full​ employment, expansionary fiscal policy will cause an increase in the price level in both models. B. The dynamic model assumes that potential GDP is constantly growing while the basic model assumes that it is static. C. In the dynamic​ model, expansionary policy would be used when demand does not grow​ sufficiently; in the basic​ model, expansionary policy would be used when demand falls. D. All of the above are correct statements about the two models. E. None of the above are correct statements about the two models.

D. All of the above are correct statements about the two models.

Why did the countries that adopted the euro as their currency choose to do​ that? A. To reduce transactions costs resulting from currency exchange. B. To encourage economic growth. C. To coordinate monetary policy in the European Union. D. All of the above are reasons to adopt the euro. E. None of the above are reasons to adopt the euro.

D. All of the above are reasons to adopt the euro.

Which of the following statements is​ correct? A. A majority of economists support the​ Fed's choice of the interest rate as its monetary policy​ target, but some economists believe the Fed should concentrate on the money supply instead. B. The effect of a change in the federal funds rate on​ long-term interest rates is usually smaller than it is on​ short-term interest rates. C. Changes in the federal funds rate usually will result in changes in both​ short-term and​ long-term interest rates on financial assets. D. All of the above are true.

D. All of the above are true.

The​ (FOMC) Federal Open Market Committee A.determines the target federal funds rate and the direction of open market operation policies. B.includes the Board of Governors and the presidents of the 12 Federal Reserve regional banks​ (though not all are voting​ members). C.makes decisions that are voted on by all 7 members of the Board of Governors but only 5 of the 12 regional bank presidents. D. All of the above. E. A and B only.

D. All of the above.

Which of the following are categories of federal government​ expenditures? A. transfer payments B. grants to state and local governments C. interest on the national debt D. All of the above.

D. All of the above.

Which of the following statements is true regarding international capital markets when interest rates in the United States​ decline? A. The value of the dollar will decrease. B. The value of the dollar will increase. C. Foreign investors may sell U.S. securities. D. Both A and C.

D. Both A and C.

Why would deflation cause​ "shoppers to hold​ back," and what does​ Evans-Pritchard mean when he​ says, "Once this psychology gains a​ grip, it can gradually set off a​ self-feeding spiral that is hard to​ stop"? A.Banks will be unwilling to lend when prices are​ falling, causing a decrease in investment and a fall in demand. B.Deflation increases purchasing​ power, so it is not necessary to buy as many goods. C.Decreases in the price level cause the money supply to​ decrease, which makes it difficult to purchase goods. D. Consumers delay​ purchases, expecting prices to fall​ more, and the lack of demand causes prices to fall further.

D. Consumers delay​ purchases, expecting prices to fall​ more, and the lack of demand causes prices to fall further.

What is a contractionary fiscal​ policy? A. Contractionary fiscal policy includes increasing government spending and taxes to decrease aggregate demand. B. Contractionary fiscal policy includes decreasing government spending and taxes to decrease aggregate demand. C. Contractionary fiscal policy includes increasing government spending and decreasing taxes to decrease aggregate demand. D. Contractionary fiscal policy includes decreasing government spending and increasing taxes to decrease aggregate demand.

D. Contractionary fiscal policy includes decreasing government spending and increasing taxes to decrease aggregate demand.

What is meant by crowding​ out? A. Crowding out is an increase in private expenditures as a result of increases in government purchases. B. Crowding out is a decline in private expenditures as a result of decreases in government purchases. C. Crowding out is an increase in private expenditures as a result of decreases in government purchases. D. Crowding out is a decline in private expenditures as a result of increases in government purchases.

D. Crowding out is a decline in private expenditures as a result of increases in government purchases.

Which of the following European countries does NOT use the euro as its​ currency? A. Germany B. France C. Belgium D. Denmark E. Luxembourg

D. Denmark

In addition to the Federal Reserve​ Bank, what other economic actors influence the money​ supply? A.The U.S. President and Vice President. B.The U.S. Senate and the U.S. House of Representatives. C.The U.S. Mint and the U.S. Treasury. D. Households, firms, and banks.

D. Households, firms, and banks.

Which of the following is NOT a monetary policy goal of the Federal Reserve bank​ (the Fed)? A.Low unemployment B.Higher living standards C. Stable financial markets D. Low prices

D. Low prices

What does it mean that​ Argentina's ​" peg collapsed"? A. The central bank was no longer able to increase the supply of pesos. B. Interest rates in Argentina rose so high that borrowers could not take out loans. C. Excessive capital inflow caused the value of the peso to appreciate. D. The central bank no longer had the dollar reserves to continue to buy pesos.

D. The central bank no longer had the dollar reserves to continue to buy pesos.

Why might cutting government spending as a fiscal policy be a more difficult policy than the use of monetary policy to slow down an economy experiencing​ inflation? A. The economy may have already slowed. B. The government has more concentrated power than the Fed. C. The legislative process works quickly. D. The legislative process experiences longer delays than monetary policy.

D. The legislative process experiences longer delays than monetary policy.

Suppose you decide to withdraw​ $100 in cash from your checking account. Which one of the following choices accurately shows the effect of this transaction on your​ bank's balance sheet. A.Your​ bank's balance sheet shows an increase in reserves by​ $100 and an increase in deposits by​ $100. B.Your​ bank's balance sheet shows an increase in reserves by​ $100 and a decrease in deposits by​ $100. C.Your​ bank's balance sheet shows a decrease in reserves by​ $100 and an increase in deposits by​ $100. D. Your​ bank's balance sheet shows a decrease in reserves by​ $100 and a decrease in deposits by​ $100.

D. Your​ bank's balance sheet shows a decrease in reserves by​ $100 and a decrease in deposits by​ $100.

When a central bank intervenes into the foreign exchange market to set a​ country's exchange rate over long periods of​ time, it is called A. a market exchange rate. B. an appreciating exchange rate. C. a floating exchange rate. D. a fixed exchange rate.

D. a fixed exchange rate.

The​ Fed's strategy of increasing the money supply and lowering interest rates in order to increase real GDP is called A. expansionary fiscal policy. B. contractionary monetary policy. C. contractionary fiscal policy. D. expansionary monetary policy.

D. expansionary monetary policy.

Historically, under the gold​ standard, a​ country's currency consisted of A. only paper currency that could be redeemed for gold. B. only gold coins. C. gold​ coins, bank checks and paper currency that could be redeemed for gold. D. gold coins and paper currency that could be redeemed for gold.

D. gold coins and paper currency that could be redeemed for gold.

With an expansionary monetary​ policy, investment,​ consumption, and net exports all​ ________, which results in the aggregate demand curve shifting to the​ ________, increasing real GDP and the price level. A. ​increase; left B. decrease; right C. decrease; left D. increase; right

D. increase; right

When one currency is​ "pegged" against another​ currency, A. its value is fixed in terms of all currencies. B. it cannot experience monetary inflation. C. it has a managed float exchange rate system. D. its value is fixed in terms of that currency.

D. its value is fixed in terms of that currency.

If the economy moves into​ recession, monetarists argue that the Fed should A. increase the federal funds rate. B. decrease the money supply. C. keep the money supply fixed. D. keep the money supply growing at a constant rate.

D. keep the money supply growing at a constant rate.

A strengthening of the dollar would reduce the inflation rate in the United States because A. net exports would decrease but aggregate supply would​ increase, lowering the price level. B. net exports would increase but aggregate supply would​ decrease, lowering the price level. C. net exports would increase but aggregate demand would​ fall, lowering the price level. D. net exports and aggregate demand would​ fall, lowering the price level.

D. net exports and aggregate demand would​ fall, lowering the price level.

The four determinants of exchange rates in the long run are A. relative price​ levels, relative productivity​ growth, relative supplies of gold​ reserves, and trade barriers. B. relative price​ levels, relative productivity​ growth, tastes, and relative supplies of gold reserves. C. relative price​ levels, relative productivity​ growth, relative size of​ economies, and trade barriers. D. relative price​ levels, relative productivity​ growth, tastes, and trade barriers.

D. relative price​ levels, relative productivity​ growth, tastes, and trade barriers.

A recession in the United States will A. leave the supply curve of dollars unchanged. B. shift the demand curve for dollars to the right. C. shift the supply curve of dollars to the right. D. shift the supply curve of dollars to the left.

D. shift the supply curve of dollars to the left.

When the exchange rate​ (measured as foreign currency per​ dollar) is above the equilibrium exchange​ rate, there is a​ ___________ of dollars​ and, consequently,​ ____________ pressure on the exchange rate. A. shortage; upward B. shortage; downward C. surplus; upward D. surplus; downward

D. surplus; downward

One of the goals of the Federal Reserve is price stability. For the Fed to achieve this​ goal, A. the level of unemployment should be​ low, less than​ 6%, and the inflation rate should be near zero percent. B. the inflation rate should be consistent but the rate of inflation can be​ zero, low​ (such as​ 1-3%), or high​ (such as​ 8-10%). C. prices should not be increasing and the inflation rate should be near zero percent. D. the rate of inflation should be​ low, such as​ 1% to​ 3%, and should be fairly consistent.

D. the rate of inflation should be​ low, such as​ 1% to​ 3%, and should be fairly consistent.

If the Fed believes the inflation rate is about to​ increase, it should A. use a combination of tax increases and spending cuts to keep the budget balanced. B. use a contractionary fiscal policy to increase the interest rate and shift AD to the left. C. use an expansionary monetary policy to lower the interest rate and shift AD to the right. D. use a contractionary monetary policy to increase the interest rate and shift AD to the left.

D. use a contractionary monetary policy to increase the interest rate and shift AD to the left.

Which of the following is true with respect to Irving​ Fisher's quantity​ equation, M x V = P x Y? A. V = (PxY)/M B. M​ = M1 definition of the money supply C. V​ = Average number of times a dollar is spent on goods and services D. P​ = the GDP deflator E. All of the above

E. All of the above

potential GDP a. measures the maximum that a firm is capable of producing b. increases over time as the labor force grows c. increases over time as technological change occurs d. all of the above e. B and C only

E. B and C only

During​ 2005, the FOMC was concerned that the inflation rate would begin to accelerate due to the continued boom in the housing​ market, so the Fed started decreasing the target for the federal funds rate. A. True B. False

False

The multiplier effect is only a consideration for increases in government purchases. True/Fasle

False

If some of the Roman coins had been taken to​ Germania, then the coins could have been a medium of exchange in Germania if people began to consider it safe and would have accepted it for payments. If coins could have been easily used to purchase goods and services in other​ areas, the coins would also have some intrinsic value. True/False

True

if the economy is initially at full employment equilibrium, then an increase in aggregate demand causes _______ in real GSP in short run and _____ in the price level in the long run. a, increase; increase b. decrease; increase c. increase; decrease d. decrease; decrease

a, increase; increase

The aggregate demand curve slopes downward for all of the following reasons except: a. a lower price level makes imports from other countries less expensive, and US citizens buy more imports b. A lower price level decreases the rate of interest, which increases private investment and consumption c. a lower price level makes US exports less expensive, thereby increasing net exports d. a lower price level increases the real wealth of households, thereby increasing household consumption

a. a lower price level makes imports from other countries less expensive, and US citizens buy more imports

which of the following statements is correct? a. an increase in the corporate income tax decreases the after-tax profitability of investment spending b. changes in tax laws have no effect on investment spending c. during periods of recession, the ability of firms to finance spending on new factories or machinery and equipment increases d. all of the above are correct

a. an increase in the corporate income tax decreases the after-tax profitability of investment spending

which of the following causes the short run aggregate demand curve to shift to the left? a. an increase in the expected price of an important natural resource b. a postive technological change c. an increase in the labor force d. an increase in productivity

a. an increase in the expected price of an important natural resource

how does the dynamic model of aggregate supply and aggregate demand explain inflation? a. by showing that if total spending in the economy grows faster than total production, prices will rise b. by showing that if total production in the economy grows faster then total spending, prices will rise c. by showing that increases in labor productivity usually lead to increases in prices d. none of the above

a. by showing that if total spending in the economy grows faster than total production, prices will rise

The near elimination of measles and the large decreases in childhood deaths from diarrhea in southern Africa and Egypt a. did not increase real GDP per capita, but increased productivity and human capital resulting in a higher standard of living b. helped the people of southern Africa and Egypt temporarily but did not make help much in the long run c. increased real GDP per capita, but decreased productivity and human capital resulting in a lower standard d. did not increase real GDP per capita, but productivity and human capital developed fell resulting in a lower rate of growth

a. did not increase real GDP per capita, but increased productivity and human capital resulting in a higher standard of living

Do you agree or disagree with the following​ statement? ​"I recently read that more than half of the money issued by the government is actually held by people in foreign countries. If​ that's true, then the United States is less than half as wealthy as the government statistics​ indicate." a. disagree. money is current plus checking deposits. wealth is the value of asset minus debts b. disagree. the people who hold dollars in forgien countries tend to be wealthy americans living abroad c. agree. wealth is the value of currency you hold minus any debts you have. less money means less wealth d. agree. money and wealth are synonomus. therefore, more money abroad is less wealth in the US

a. disagree. money is current plus checking deposits. wealth is the value of asset minus debts

the quantity theory of money is better able to... a. explain the inflation rate in the long run b. explain the full employment in the long run c. explain the inflation rate in the short run d. explain the natural rate of unemployment in the long run

a. explain the inflation rate in the long run

the US dollar can best be described as a. fiat money b. commodity backed money c. commodity money d. reserve money

a. fiat money

crowding occurs when a. governments must borrow funds which cause interest rates to rise and thus private investments is reduced b. interest rates increase as firms spend a larger amount of resources on research and development c. firms borrow more to expand operations which results in an increase in interest rates d. interest rates increase because the Federal Reserve reduces that economy's money supply

a. governments must borrow funds which cause interest rates to rise and thus private investments is reduced

government policy can increase the accumulation of knowledge capital in all the following ways except by: a. investing in capital accumulation b. protecting intellectual property with patents and copyrights c. subsidizing education d. subsidizing research and development

a. investing in capital accumulation

explain whether each of the following will cause a shift of the AD curve or a movement along the AD curve. a. firms become more optimistic and increase their spending on machinery and equipment. Because this is a change in _______, it will cause a ________ the aggregate demand curve b. the federal government increases taxes in an attempt to reduce a budget deficit. Because this is a change in _________, it will cause a _______ the aggregate demand curve c. the economy experiences a 4 percent inflation. Because this is a change in _______, it will cause a ______ the aggregate demand curve.

a. investment; shift to the right in b. consumption; shift to the left in c. the price level; movement along

a. an increase in the price level will cause a _____ the aggregate demand curve b. an increase in government purchases will cause a ____ the aggregate demand curve c. an increase in state income taxes will cause a _____ the aggregate demand curve d. an increase in interest rates will cause a ______ the aggregate demand curve e. a faster income growth in other countries will cause a ____ the US aggregate demand curve

a. movement along b. rightward shift of c. leftward shift of d. leftward shift of e. rightward shift of

Explain how each of the following A. an increase in the price level will ________ the SRAS curve because this is a change in _________ B. an increase what the price level is expected to be in the future will _________ the SRAS curve because this is a change in __________. C. The price level that is currently higher than expected will ______ the SRAS curve because this is a change in ______________. D. An unexpected increase in the price of an important raw material will ______ the SRAS curve because this is a change in ________. E. An increase in the labor force will __________ the SRAS curve because this is a change in _______.

a. not change; the price level b. decrease (left); expectations about future prices c. decrease (shift leftward); an adjustment to past errors in expectations about future prices d. decrease (shift leftward); the price of an important natural resource e. increase (shift right); the productive capacity of the economy

strong rule-of-law countries grow more rapidly than weak rule-of-law countries. What factor will most likely improve economic growth in weak rule-of-law countries? a. political reform b. capitalism c. communism d. corruption

a. political reform

In a closed economy, the values for GDP, consumption spending, investment spending, transfer payments, and taxes are as follows: Y= 15 trillion C= 10 trillion I= 4 trillion TR= 1 trillion T= 4 trillion Using the information above, what is the value of private saving and public saving? a. private saving equals $2 trillion and public saving equals $2 trillion b. private saving equals $2 trillion and public saving equals $1 trillion c. private saving equals $10 trillion and public saving equals $4 trillion d. private saving equals $4 trillion and public saving equals $10 trillion

a. private saving equals $2 trillion and public saving equals $2 trillion

Why does the short-run aggregate supply curve slope upward? a. profits rise when the prices of goods and services firms sell rise more rapidly than the prices they pay for inputs b. an increase in market prices results in an increase in quantities supplied, as stated by the law of supply c. as the number of workers, machinery, and equipment increase, and technological changes occurs, quantity supplied increases d. all of the above cause the short-run aggregate supply curve to slope upward

a. profits rise when the prices of goods and services firms sell rise more rapidly than the prices they pay for inputs

what can low-income countries do in order to increase the amount of loanable funds available to firms for investment projects such as new factories or improved technology? a. provide saving incentives b. increase the interest rate on borrowing c. print more money d. all of the above

a. provide saving incentives

how would an increase in interest rates affect investment? a. real investment spending declines b. real investment spending increases c. real investment spending may increase, decrease or remain the same depending on the rate of inflation d. real investment spending remains unchanged

a. real investment spending declines

An article in the Wall Street Journal reported in 2015 that the​ People's Bank of​ China, which is the central bank of​ China, "is freeing up cash by reducing the amount that banks must keep in​ reserve." ​Source: Lingling​ Wei,​ "China Central Bank Checks Europe Playbook on​ Credit," Wall Street Journal​, April​ 19, 2015. The monetary policy tool that the​ People's Bank of China was using was changes to the a. required reserve ratio b. interest rate c. discount rate d. volume of bonds

a. required reserve ratio

An article in the Wall Street Journal reported in 2015 that the​ People's Bank of​ China, which is the central bank of​ China, "is freeing up cash by reducing the amount that banks must keep in​ reserve." ​Source: Lingling​ Wei,​ "China Central Bank Checks Europe Playbook on​ Credit," Wall Street Journal​, April​ 19, 2015 This policy freed up cash because a. reserves that were requires are now excess reserves available for lending b. reserves that were excess are now required reserves available for lending c. total deposits would increase d. total reserves would increase

a. reserves that were requires are now excess reserves available for lending

a. The SRAS curve will _________ if there is an increase in the labor force or capital accumulation b. the SRAS curve will ______ if there is an increase in productivity c. the SRAS curve will _____ of there is a technological change d. the SRAS curve will ____ if there is an increase in the expected price of an important natural resource e. the SRAS curve will ____ if there is an increase in the adjustment of workers and firms prior underestimation of the price level f. the SRAS curve will ____ if there is an increase in expected future prices

a. shift to the right b. shift to the right c. shift to the right d. shift to the left e. shift to the left f. shift to the left

An article in the Wall Street Journal reported in 2015 that the​ People's Bank of​ China, which is the central bank of​ China, "is freeing up cash by reducing the amount that banks must keep in​ reserve." ​Source: Lingling​ Wei,​ "China Central Bank Checks Europe Playbook on​ Credit," Wall Street Journal​, April​ 19, 2015 The peoples bank of china was hoping this policy action would a. stimulate economic growth b. increase interest rate income for investors c. expand the banking sector d. lower the inflation rate

a. stimulate economic growth

often the multiplier formula is considered to be too simple because it ignores some real world complications. Which of the following is not such a reason? a. the formula ignores the impact of an increase in GDP on consumption b. the formula ignores the impact of an increase in GDP on inflation c. the formula ignores the impact of an increase in GDP on the interest rate d. the formula ignores the impact of an increase in GDP on imports

a. the formula ignores the impact of an increase in GDP on consumption

According to the quantity theory of money, inflation results from which of the following? a. the money supply grows faster than real GDP b. the money supply grows at the same rate as GDP c. the money supply grows slower than real GDP

a. the money supply grows faster than real GDP

As a result of the near elimination of measles and the large decrease in childhood deaths from diarrhea in south Africa and Egypt, a. the standard of living for these low-income countries increased significantly b. these low-income countries were on a path to catch-up with the living standards with high-income countries c. the real GDP per capita for these low-income countries increased significantly d. the mortality rate in these low-income countries became higher

a. the standard of living for these low-income countries increased significantly

aggregate expenditure is: a. the sum of total consumption, planned investment, government purchases, and net exports b. the same as consumption c. the sum of total consumption, planned investment, and government purchases d. the sum of total consumption, planned investment, and net exports

a. the sum of total consumption, planned investment, government purchases, and net exports

have poor countries been catching up to rich countries? a. there has been catch-up by some poor but industrialized countries b. there has been catch-up among all poor countries c. the rich countries are getting poorer and going down to the level of poorer countries d. there has been no catch-up by any of the poor countries

a. there has been catch-up by some poor but industrialized countries

what is the best use of the rule of 70 among those listed? a. to judge how rapidly real GDP per capita is growing over long periods of time b. to calculate the difference between the growth rate in real GDP and the growth rate in real GDP per capita c. to find the average annual growth rate of real GDP d. to forecast the duration of recessions

a. to judge how rapidly real GDP per capita is growing over long periods of timeq

what are the four categories of income? a. wages, interest, rent, and profit b. labor, capital, natural resources, and entrepreneurship c. consumption, investment, government purchases, and net exports d. wages, salaries, interest, and dividends

a. wages, interest, rent, and profit

which one of the following is not true when the economy is in macroeconomic equilibrium? a. when the economy is at long run equilibrium, firms will have excess capacity b. when the economy is at long run equilibrium, actual GDP = potential GDP c. when the economy is at long run equilibrium, SRAS = AD = LRAS d. when the economy is at long run equillibrium, total unemployment = frictional unemployment + structural unemployment

a. when the economy is at long run equilibrium, firms will have excess capacity

the wealth effect refers to the fact that: a. when the price falls, the real value of household wealth rises and so will consumption b. when income rises, consumption rises c. when the price level falls, the nominal value of assets rises, while the real value of assets remains the same d. all of the above

a. when the price falls, the real value of household wealth rises and so will consumption

in aggregate expenditure model, when is planned investment greater than actual investment? a. when there is an unplanned decrease in inventories b. when there is no unplanned change in inventories c. planned investment always equals actual investment in the aggregate expenditure model d. when there is an unplanned increase in inventories

a. when there is an unplanned decrease in inventories

Under a fixed exchange rate​ system, exchange rates are determined by ________. . Under a managed float​ system, exchange rates are determined by _________-

an agreement between countries supply and demand plus government intervention

National income is: a. GDP minus sales taxes b. GAP minus depreciation c. GNP plus depreciation d. NNP minus income taxes

b. GAP minus depreciation

consider the choices below. All of these except one only truly represent the record of productivity growth in the United States from 1800 to present. Find one that does not belong a. productivity growth since 2006 has fallen to an even lower rate than during the period of slow growth from the mid 1970s to the mid 1990s b. GDP per capita fell rapidly between 1900 and 1950 c. there was a rapid rise in the growth rate of per capita GDP between 1950 and 1973 d. growth of per capita real GDP slowed down considerably between 1974 and 1995

b. GDP per capita fell rapidly between 1900 and 1950

uppose you withdraw​ $1,000 from a money market mutual fund and deposit the funds in your bank checking account. How will this action affect M1 and​ M2? a. M2 will decrease and M1 will increase b. M2 will not be affected, but m1 will increase c. m2 will increase but m1 will not be affected d. m2 will increase and m1 will decrease

b. M2 will not be affected, but m1 will increase

In a fractional reserve banking system, what is the difference between a "bank run" and a "bank panic"? a. a bank run involves many banks; a bank panic involves one bank b. a bank run involves one bank; a bank panic involves many banks c. a bank run is a local issue; a bank panic is a national issue d. a bank run is a US issue; a bank panic is an international issue

b. a bank run involves one bank; a bank panic involves many banks

which of the following causes the short run aggregate supply curve to shift to the right? a. a decrease in the capital stock b. a postive technological change c. an increase in the expected price of an important natural resource d. a higher expected future price level

b. a postive technological change

if the economy adjusts through the automatic mechanism, then a decline in aggregate demand causes a. a recession in the short run and an increase in the price level in the long run b. a recession in the short run and a decline in the price level in the long run c. an expansion in the short run and an increase in the price level in the long run d. an expansion in the short run and a decline in the price level in the long run

b. a recession in the short run and a decline in the price level in the long run

Country's rate of economic growth is important because a. an economy that grows too slowly is always involved in human rights violence b. an economy that grows too slowly falls to raise the living standards of its citizens c. a slowly growing economy always invades its neighboring countries in search of wealth d. a slowly growing economy experiences very slow growth in population

b. an economy that grows too slowly falls to raise the living standards of its citizens

What is meant by Proffesor spencers statement "the printing of money will keep the deflation wolf from the door"? a. an increase in the money supply will cause consumers to demand more goods b. an increase in the money supply that exceeds the rate of growth of GDP will increase the price level c. an increase in the money supply will decrease the price level because money will be worth less d. an increase in the money supply will increase the velocity of money and thus there will be hyperflation

b. an increase in the money supply that exceeds the rate of growth of GDP will increase the price level

An initial decrease in a banks reserves will decrease checkable deposits a. by an amount less than the decrease in reserves b. by an amount greater than the decrease in reserves c. by an amount equal to the decrease in reserves d. an initial decrease in reserves will increase checkable deposits

b. by an amount greater than the decrease in reserves

How can government policies shift the aggregate demand curve to the right? a. by increasing business taxes b. by increasing government purchases c. by increasing personal income taxes d. all of the above

b. by increasing government purchases

how does the dynamic model of aggregate supply and aggregate demand explain inflation? a. by showing that if total production in the economy grows faster than total spending, prices will rise b. by showing that if total spending in the economy grows faster than total production, prices will rise c. by showing that increases in labor productivity usually lead to increases in prices d. none of the above

b. by showing that if total spending in the economy grows faster than total production, prices will rise

Pranab Bardhan, an economist at the University of California Berkley argues: "China may be close to exhausting the possibilities of technological catch-up with the West, particularly in manufacturing" Comparing the Chinese economy in the 1980s, it can be seen that both countries had a history of a. particular societies and central planning that have worked better than market systems, but have now transitioned to traditional markets and so will gave high future growth b. central planning and have introduced market systems, but have experienced problems in marketing the transition that have, and will continue to hinder future growth c. market planning and have eliminated market systems, but have experienced such success in making the transition that have, and will continue, have higher economic growth d. wars and market systems that have systems that have caused problems in making the transition to the new world order. But they have, and will continue to have, high economic growth

b. central planning and have introduced market systems, but have experienced problems in marketing the transition that have, and will continue to hinder future growth

Consider the graph. A movement from point A to point B on AD1 could be the result of a a. natural disaster b. change in price level c. change in the cost of production d. change in governmental policies

b. change in price level

Consider the graph. A movement from point A to point C could by a result of a. natural disaster b. change in the expectation of households c. change in the price level d. change in the cost of production

b. change in the expectation of households

A movement from point A to point B (a movement along) on SRAS could be the result of a a. change in government policies b. change in the price level c. change in exports d. natural disaster

b. change in the price level

How does an increase in the price level affect the quantity of real GDP supplied in the long run? a. in the long run, an increase in the price level increases inflation, which will decrease real GDP b. changes in the price level do not affect the level of GDP in the long run c. in the long run, an increase in the price level will increase real GDP d. in the long run, an increase in the price level decreases inflation, which will decrease real GDP

b. changes in the price level do not affect the level of GDP in the long run

which of the following is not a policy tool the federal reserve uses to manage the money supply? a. reserve requirement b. changing income tax rates c. open market operations d. discount policy

b. changing income tax rates

What are the four major categories of expenditure? a. wages, interest, rent, and profit b. consumption, investment, government purchases, and net exports c. labor, capital, natural resources, and entrepreneurship d. final goods, intermediate goods, production, and income

b. consumption, investment, government purchases, and net exports

which of the following is not a reason that the economy is considered to have been more stable in the 1950-2007 period than in other periods? a. the increasing importance of services and the declining importance of goods b. continually falling oil prices c. the establishment of unemployment insurance programs d. the use of active government policies to stabilize the economy

b. continually falling oil prices

Suppose two countries, country a and country b, have similar real GDP per capita. Country A has an average economic growth rate of 2% and country b has an average economic growth rate of 3.3%. In the long run, what can we predict about living standards in the two countries? a. the countries will experience similar increases in their living standards b. country Bs living standards will increase much more rapidly in the long run c. growth rates are not related to living standards d. country A's living standards will increase much more rapidly in the long run

b. country Bs living standards will increase much more rapidly in the long run

what are the four main determinants of investment? a. disposable income, interest rates, taxes and cash flow b. expectations of future probability, interest rates, taxes and cash flow c. expectations of future probability, interest rates, exchange rate and cash flow d. expectations of future probability, interest rates, disposable income and cash flow

b. expectations of future probability, interest rates, taxes and cash flow

how does the size of a country's GDP affect the quality of life of the country's people? a. when GDP is high, production from the underground economy, and therefore the crime rate is high b. generally, the more goods and services people have, the better off they are c. there is an inverse relationship between GDP and quality of life d. generally, the more goods and services people have, the worse off they are

b. generally, the more goods and services people have, the better off they are

In particular, the size of the health care sector in developing country a. falls since the developing country depends more on the advanced countries for their medical needs b. grows with economic prosperity as life expectancy increases c. falls with economic prosperity as life expectancy increases d. grows as the government provides more subsidy

b. grows with economic prosperity as life expectancy increases

Gross domestic product understates the total production of final goods and services because of the omission of a. intermediate goods b. household production c. inflation d. exports

b. household production

developing countries have benefited from globalization, because globalization can do all of the following except a. take poor countries out of a low saving-investment trap by providing foreign direct investment and foreign portfolio investment b. impose trade barriers and tariffs on imported goods so as to protect domestic industries c. open the developing countrie's market to foreign trade and thus help create a more robust economy d. help spread new and advanced technology and aid in capital accumulation in the developing world

b. impose trade barriers and tariffs on imported goods so as to protect domestic industries

how does the US economy create and destroy million of jobs each year (check all that apply) a. when unemployment is high, the federal government hires more workers to offset the effects of unemployment b. in the market system, new firms are constantly entering entering and exiting various industries c. some businesses are expanding, while others are contracting d. the federal government determines that certain industries

b. in the market system, new firms are constantly entering entering and exiting various industries c. some businesses are expanding, while others are contracting

increasing minimum wage will a. increase unemployment among workers whose market wage is higher than the new minimum wage b. increase unemployment among teenagers c. have a large effect on the unemployment rate in the United States d. increase the level of unemployment for all groups of workers

b. increase unemployment among teenagers

When low income countries begin to experience economic​ growth, they often do so at rates much higher than current growth rates of industrial nations. Which of the following does not provide an explanation of this​ phenomenon? a. developing countries may not need to engage in large amounts of R&D as they can borrow technologies that have already been developed in industrial nations b. industrial countries have higher rates of growth in physical capital and developing countries are not able to invest in large quantities of capital c. as industrial countries are growing, they have high levels of capital and face diminishing returns from investment in capital d. low income countries do not usually have large volumes of capital. they can grow from technology improvements and capital investments, without facing diminishing returns until they reach much larger levels of income

b. industrial countries have higher rates of growth in physical capital and developing countries are not able to invest in large quantities of capital

what is the effect on inventories, GDP, and employment when aggregate expenditure (total spending) exceeds GDP? a. inventories increase, GDP increases, and employment increases b. inventories decrease, GDP increases, and employment increases c. inventories decrease, GDP decreases, and employment increases d. inventories increase, GDP increases, and employment decreases

b. inventories decrease, GDP increases, and employment increases

The computation of the average annual growth rate of real GDP a. is the same for shorter periods of time as for longer periods of time b. is more complex when examining data for a long period of time than when examining data for only a few years c. involves computing the percentage change in real GDP between the first year and the last year for the period being examined d. involves simply averaging the growth rate for each year, but only is data for many years are available

b. is more complex when examining data for a long period of time than when examining data for only a few years

what do economist mean by the demand for money? a. it is the amount of money, currency and checking account deposits, that individuals use to pay for one transaction per day b. it is the amount of money, currency and checking account deposits, that individuals hold c. it is the amount of currency, checking account deposits and stocks and bonds that individuals hold d. it is the monetary value of total wealth of individuals

b. it is the amount of money, currency and checking account deposits, that individuals hold

what is the advantage of holding money? a. currency and checking account deposits held by individuals earn substantial interest income b. money can be used to buy goods, services, or financial assets c. an indivdual pays little or no taxes on the amount of money he holds d. money is held by an individual can be used to measure someones wealth

b. money can be used to buy goods, services, or financial assets

M1 includes more than just currency because a. the federal mint makes a profit from printing currency as dollar bills b. other assets can also be used to make transactions to buy goods and services c. the government wants to be able to quote that there is a large amount of money in the economy d. people hold money as other stores of value such as savings accounts and money market mutual funds

b. other assets can also be used to make transactions to buy goods and services

which of the following can give an early warning of future increases in the price levels? a. GDP deflator b. producer price index c. consumer price index d. all of the above

b. producer price index

Neutron inc., is one of the leading electric car manufactuers in Northbay.... Erics opinion is that given the high deamnd for nuetrons cars, the firm should increase price to improve profit Which of the following, if true, will support eric's view? a. a recent market research report reveals that consumer confidence is low b. the economy of Northbay is expected to grow at a remarkable pace of 9 percent in the upcoming year c. Northbay's aggregate imports decrease by 2 percent this year d. the current rate of unemployment in Northbay is high at 10 percent

b. the economy of Northbay is expected to grow at a remarkable pace of 9 percent in the upcoming year

Paul Schumer and Jim​ Miller, two analysts at a research​ institute, discuss the rising costs of higher education in their country. Paul feels that escalating tuition fees in colleges and universities are indicative of a bubble in the higher education market. According to​ Jim, however, the rising costs are the result of better quality education being provided by the institutions in recent years. Which of the​ following, if​ true, will weaken​ Paul's argument? a. the demand for student loans has fallen b. the gap between the earnings of college graduates and nongraduates is increasing c. salary levels in the education sector have remained more or less unchanged over the last few years d. students in most colleges complain of bad infrastructure e. the number of colleges offering PhD programs has declines in the last decade

b. the gap between the earnings of college graduates and nongraduates is increasing

A movement from point A to point C (a shift to the right) could be the result of a change in a. household wealth b. the labor force c. the price level d. government policies

b. the labor force

the position of the long run aggregate supply (LRAS) curve is determined by a. the price level, the available technology, and "sticky prices" b. the number of workers, the amount of capital, and the available technology c. the price level and aggregate demand d. consumption, investment, government purchases, and net exports

b. the number of workers, the amount of capital, and the available technology

how do unemployment insurance payments in the United States and social insurance programs in other countries increase the unemployment rates? a. the payments are costly and firms are are forced to lay off workers b. they decrease the opportunity cost of job search c. they increase the opportunity cost of job search d. they are paid as long as the unemployed person remains unemployed

b. they decrease the opportunity cost of job search

which of the following explains why fluctuations in real GDP have become less volatile in the United States since 1950? a. services have become a smaller fraction of GDP since the 1950s b. unemployment insurance and other government transfer programs are more prevalent since the 1950s c. the government has become more reluctant to intervene when real GDP declines and unemployment rises since the 1950s d. Both B and C

b. unemployment insurance and other government transfer programs are more prevalent since the 1950s

when is the economy in a recession? a. when the aggregate expenditure line does not intersect the 45 degree line anywhere b. when the aggregate expenditure line intersects the 45 degree line at a level of GDP below potential GDP c. when the aggregate expenditure line intersects the 45 degree line at a level of GDP above potential GDP d. when the aggregate expenditure line intersects the 45 degree line at a level of GDP equal to potential GDP

b. when the aggregate expenditure line intersects the 45 degree line at a level of GDP below potential GDP

Economist Charles Kenny of the World Bank has argued: The process technologies-- institutions like laws and inventory management systems-- that appear central to raising incomes per capita flow less like water and more like bricks. But ideas and inventions-- the importance of ABCs and vaccines for DPT-- really might flow more easily across borders and over distances. If Kenny is correct, these facts indicate that these low-income countries a. will need a much lower rate of economic growth to significantly close the gap in living standards with high-income countries b. will have a healthier and more productive labor force as there is significant improvement in health, education, and civil and poltiical liberties c. will have a healthier and more productive labor force that will increase rapidly their rates of growth of real GDP per capita in the decades ahead d. will remain in their phase of stagnating growth and will never be able to catch-up with the living standards with high-income countries

b. will have a healthier and more productive labor force as there is significant improvement in health, education, and civil and poltiical liberties

When the Federal Open Market Committee​ (FOMC) decides to increase the money​ supply, it ______ U.S. Treasury securities. If the FOMC wishes to decrease the money​ supply, it _______ U.S. Treasury securities.

buys; sells

The figure to the right shows a breakdown of the M1 definition LOADING...of the money supply in 2015. Which area corresponds to the amount of checking account​ deposits? A B C

c

Suppose the velocity is 3 and the money supply is $600 million. According to the quantity theory of money, nominal output equals a. 180 million b. 200 million c. 1.8 billion d. 2 billion

c. 1.8 billion

which of the following is the formula for the multiplier? a. 1-MPC b. 1/MPC c. 1/(1-MPC) d. MPC

c. 1/(1-MPC)

Suppose the reserve requirement is 15%. What is the effect on total checkable deposits in the economy if bank reserves increase by $60 billion? a. 900 billion increase b. 4 billion increase c. 400 billion increase d. 60 billion increase

c. 400 billion increase

Almora, a developing open​ economy, is experiencing an economic boom since it discovered oil reserves off its coast two years ago. Bill​ Hudson, an economist with the Finance Ministry of​ Almora, said in an interview that the oil boom has improved the average standard of living in the economy. Robin Peters is an industry analyst who does not agree with​ Hudson's view. In one of his recent articles in the​ country's leading business​ daily, Robin claimed that the high rate of inflation following the boom has actually weakened the expansionary impact on the economy. Which of the following, if true, will support Robin's argument? a. Almora reduced its petroleum imports this year b. employment in the country's oil industry reported an annual growth of 15 percent this year c. Almora's agriculture and manufacturing sectors have become less competitive in the world market d. the government of Almora is expected to have a budget surplus of 2 billion in the current financial year

c. Almora's agriculture and manufacturing sectors have become less competitive in the world market

Evaluate the following​ statement: Banks use deposits to make consumer loans to households and commercial loans to businesses. Banks will loan out every penny of their deposits in order to make a profit. A. True. Deposits that sit in a bank as vault cash earn no interest. B. False. Banks must hold a fraction of their deposits as vault cash or with the Federal Reserve. c. False. In​ reality, banks are rarely able to find borrowers for all of their deposits. d. True. Any money that is left over after a bank loans money to businesses and households will be loaned to other banks.

c. False. In​ reality, banks are rarely able to find borrowers for all of their deposits.

Consider the following data for a closed economy: Y=12 trillion C=8 trillion G= 2 trillion Spublic= -0.5 trillion T= 2 trillion Now suppose that government purchases increase from 2 trillion to 2.60 trillion but the values of Y and C are unchanged. What must happen to the values of S and I? a. S drops by .6 trillion and I increases by .6 trillion b. S increases by .6 trillion and I drops by .6 trillion c. S and I drop by .6 trillion d. S and I drop by .6 trillion

c. S and I drop by .6 trillion

velocity is defined as a. V = MxPxY b. V= M + P + y c. V= (PXY)/M D. V= M/(PXY)

c. V= (PXY)/M

What is price deflation? a. an increase in the rate of growth of the price level b. an increase in the price level c. a fall in the price level d. a decrease in the rate of growth of the price period

c. a fall in the price level

education and health care are important for economic growth because: a. its unfair when some people have better education and health care than others b. the average diet in India is far less healthy than in China c. a well-educated and healthy workforce has higher productivity d. jobs are being outsourced

c. a well-educated and healthy workforce has higher

The aggregate expenditure model can be written in terms of four spending categories. Which equation shows the relationship between aggregate expenditure and the four spending categories? a. ae = c - i - g - nx b. ae = c + i + g - NX c. ae = C + i + G + NX d. ae = C + I - g - nx

c. ae = C + i + G + NX

the aggregate demand curve is downward sloping because a. as income increases it causes an increase in the amount of planned expenditures b. a decrease in the government spending reduces prices and makes consumption demand increase c. an increase in the price level reduces real money holdings, which reduces the amount of expenditures d. an increase in the price of a good causes a decrease in market demand for that good

c. an increase in the price level reduces real money holdings, which reduces the amount of expenditures

reserve requirements are changed infrequently because a. banks set loan decisions based on credit ratings and do not need to focus on reserve requirements b. banks can determine the amount of reserves they wish to hold regardless of the reserve requirement c. banks set long term policy decisions, loan decisions, and deposit decisions based on the reserve requirement d. banks cannot usually meet the reserve requirement so the Fed does not monitor it

c. banks set long term policy decisions, loan decisions, and deposit decisions based on the reserve requirement

The behavior of consumption and investment over time can be described as follows: a. investment follows a smooth, upward trend, but consumption is subject to significant fluctuations b. both consumption and investment fluctuate significantly over time c. consumption follows a smooth, upward trend, but investment is subject to significant fluctuations d. neither consumption nor investment fluctuates significantly over time

c. consumption follows a smooth, upward trend, but investment is subject to significant fluctuations

globalization entails all of following expect: a. foreign direct investment b. open trade and technology transfers between countries c. cultural exchange between nations d. foreign portfolio investment

c. cultural exchange between nations

Aggregate demand (AD) is compromised of expenditure components that include: a. consumption, government spending, exports, and labor b. consumption, investment, exports, and taxes c. government spending, consumption, investment, and net exports d. government spending, taxes, exports, and labor

c. government spending, consumption, investment, and net exports

which of the following equals the amount of public savings ? a. the sum of government purchases and government tax revenue, minus transfer payments to households b. government transfer payments to households minus the sum of government tax revenue and government purchases c. government tax revenue minus the sum of government purchases, and transfer payments to households d. the sum of government tax revenue, government purchases, and government transfer payments to households

c. government tax revenue minus the sum of government purchases, and transfer payments to households

the interest rate effect refers to the fact that a higher price level results in a. higher interest rates and higher investment b. lower interest rates and higher investment c. higher interest rates and lower investments d. lower interest rates and lower investment

c. higher interest rates and lower investments

which of the following statements is true? a. in the long run, increases in the price level result in a decrease in real GDP b. in the long run, changes in the price level may either increase or decrease in real GDP c. in the long run, changes in the price level do not affect the level of real GDP d. in the long run, increases in the price level result in an increase in real GDP

c. in the long run, changes in the price level do not affect the level of real GDP

An article in the Economist magazine noted​ that: ​"the economy's potential to supply goods and services​ [is] determined by such things as labour force and capital​ stock, as well as inflation​ expectations." This list of the determinants of potential GDP is a. correct since changes in the expected price level affect short run aggregate supply which in turn determines potential GDP b. incorrect since changes in the expected price level do not affect aggregate supply c. incorrect since changes in the expected price level affect short run aggregate supply but not the long run aggregate supply d. correct since changes in the expected price level affect both the short run and the long run aggregate supply

c. incorrect since changes in the expected price level affect short run aggregate supply but not the long run aggregate supply

Even though individuals earn interest on financial investments such as​ bonds, mutual​ funds, and certificates of​ deposits, they may still hold wealth in checking accounts because a. the government says people must hold a portion of wealth as reserves b. individuals are uncertain of how much interest is appropriate for different types of securities c. individuals need money that is available to be spent on goods and services d. some individuals might not be rational

c. individuals need money that is available to be spent on goods and services

Pranab Bardhan, an economist at the University of California Berkley argues: "China may be close to exhausting the possibilities of technological catch-up with the West, particularly in manufacturing" When Bardhan refers to "technological catch up" he means that China a. is experiencing increasing returns to investment in technology b. has the best technology available and the US can't catch up c. is experiencing diminishing returns to investments in technology d. has the best technology available and no country can catch up

c. is experiencing diminishing returns to investments in technology

firms are likely to underinvest in research and development, which slows the accumulation of knowledge capital, slowing economic growth because a. they can save that money and invest in capital accumulation, which is much better for growth b. knowledge capital is both rival and excludable, and no other firms can freely access the research and development of one particular firm c. knowledge capital is both nonrival and nonexcludable; other firms can freely access the research and development of one particular firm d. research and development are expensive and at the firm level, it is subject to increasing returns

c. knowledge capital is both nonrival and nonexcludable; other firms can freely access the research and development of one particular firm

The economic growth model predicts that the a. level of per capita GDP in poor countries will decrease over time and the poor nations will not be able to catch up with the rich nations b. level of per capita GDP in rich countries will increase so fast that it will be difficult for poor countries with low income per capita to ever catch up with the rich countries c. level of per capita GDP in poor countries will increase faster than rich countries and the poor nations will catch up with the rich nations d. rich countries will have stagnant growth and will catch up with the poor countries, so that there will be a convergence toward a "poverty tap"

c. level of per capita GDP in poor countries will increase faster than rich countries and the poor nations will catch up with the rich nations

the ease with which a financial security can be exchanged for money is referred to as a. capital b. loanable funds c. liquidity d. retained earnings

c. liquidity

during the last half of the twentieth century, the US economy experienced a. long recessions, interrupted by relatively short expansions b. an inflation rate that increased during both recessions and expansions c. long expansions, interrupted by relatively short recessions d. much more severe swings in real GDP than in the first half of the 20th century

c. long expansions, interrupted by relatively short recessions

which of the following is a factor explaining why low-income countries have not experienced rapid economic growth? a. low income countries have governments that prefer more simple standards of living b. low income countries have started to grow too late and can never catch up to rich countries c. low income countries can often fail to enforce the rule of law d. low income countries are generally expected to grow more slowly than high income countries

c. low income countries can often fail to enforce the rule of law

The amount of U.S. currency outstanding averages to about​ $2,800 per person in the U.S. This large amount of currency per person can be partially explained because a. rich people hold massive amounts of currency in vaults and safes, which makes the average large b. most people carry large quantities of currency in their wallets and purses c. many US dollars are held outside of the country by foreigners d. all of the above

c. many US dollars are held outside of the country by foreigners

which of the following is included in M2 but not M1? a. travelers choice b. currency c. money markets deposit accounts in banks d. checking account deposits at banks

c. money markets deposit accounts in banks

the sum of the marginal propensity to consume (MPC) and the marginal propensity to save (MPS) equals a. zero b. national income c. one d. disposable income

c. one

which of the following would be included in the gross national product (GNP) of the united states? a. production from a Canadian firm that operates in Montana b. production from an Hungarian citizen who works in Denver, CO c. production from a US firm that operates in Mexico d. all of the above are included in the GNP of the US

c. production from a US firm that operates in Mexico

A columnist in the New York times observes that, "many analyst agree that economic reform, of which integration into the global economy was a key element, has lifted millions of people out of poverty in India" Integration into the global economy has a. did not reduce poverty in India despite an increase in the growth rate of the economy because a higher rate of economic growth does not generally result in faster poverty reduction b. had an ambiguous effect on reducing poverty because of the skewed distribution of income in India c. reduced poverty in india by increasing the growth rate of the economy and a higher rate of economic growth generally reuslts in faster poverty reduction d. not been successful in the reduction of poverty in India because poverty is determined by education, training and family background

c. reduced poverty in india by increasing the growth rate of the economy and a higher rate of economic growth generally reuslts in faster poverty reduction

which of the following policy tools is the federal reserve least likely to use in order to actively change the money supply? a. discount rate b. open market operations c. reserve requirements d. discount loans

c. reserve requirements

In a speech delivered in June​ 2008, Timothy​ Geithner, then president of the Federal Reserve Bank of New York and later U.S. Treasury​ secretary, said: The structure of the financial system changed fundamentally during the boom. . . .​ [The] non-bank financial system grew to be very large. . . .​ [The] institutions in this parallel financial system​ [are] vulnerable to a classic type of​ run, but without the protections such as deposit insurance that the banking system has in place to reduce such risks why would deposit insurance provide the banking system with protection against runs? a. deposit insurance gaurentees all deposits, and thus there is no incentive to withdraw funds b. deposit insurance gaurentees that banks cannot go out of business by losing deposits c. since most depositors are insured , it is less likely that panicked buyers will simultaneously withdraw funds d. to be covered by depopstiors insurance , depostiors must agree not to withdraw all their funds without notice

c. since most depositors are insured , it is less likely that panicked buyers will simultaneously withdraw funds

compared to the period between 1950 and 1973, the productivity of the US workers between 1974 and 1995? a. increased by more than once percentage point per year b. increased by less than one percentage point per year c. slowed by more than one percentage point per year d. grew by about the same amount per year

c. slowed by more than one percentage point per year

Suppose that Sally J. Society recently lost her job as an underwater welder. In looking for a new​ job, she discovers that the only available jobs are for economists and that there are no openings for underwater welders because the trade is now obsolete. If Sally J. Society decides to return to school to earn an Economics​ degree, what is the best classification of her unemployment​ status? a. cyclically unemployed b. frictionally unemployed c. structurally unemployed d. seasonally unemployed

c. structurally unemployed

The migration of highly educated and successful individuals from developing countries to high-income countries is called a. intellectual outsourcing b. the intelligence exodus c. the brain drain d. the human portfolio drain

c. the brain drain

which one of the following does the aggregate expenditure macroeconomic model seek to explain? a. cyclical unemployment b. inflation c. the business cycle d. long-run economic growth

c. the business cycle

Potential real GDP is a. the level of GDP attainted when most firms are producing at capacity and unemployment is low b. the level of GDP attainted when only some firms have excess capacity c. the level of GDP attainted when all firms are producing at capacity d. the level of GDP attainted when all firms have excess capacity

c. the level of GDP attainted when all firms are producing at capacity

which one of the following describes the effect of the business cycle on the inflation rate and the unemployment rate? a. the unemployment rate increases and the inflation rate increases during expansion b. the unemployment rate falls and the inflation rate falls during recessions c. the unemployment rate increases and the inflation rate falls during recessions d. the unemployment rate increases and the inflation rate falls during expansions

c. the unemployment rate increases and the inflation rate falls during recessions

macroeconomic equilibrium occurs where a. the unemployment rate is zero b. consumption equals investment and investment equals government expenditure c. total spending, or aggregate expenditure, equals total production, or GDP d. total production, or GDP, equals total planned investment

c. total spending, or aggregate expenditure, equals total production, or GDP

which of the following is not included in the calculation of total government purchases? a. a local government installs a new stop sign b. the salaries of high school teachers paid for by state government c. unemployment insurance benefits paid for by the federal government d. a new interstate highway purchased by the federal government

c. unemployment insurance benefits paid for by the federal government

using GDP per capita in 2014 (measured in US dollars, corrected for differences across countries in the cost of living), identify which one of the following statement is true: a. east asian countries such as singapore, south korea, and taiwan, are high-income countries b. most of the countries of africa, asia, and latin america are high-income countries c. western europe, austrailia, canada, japan, new zealand, and the united states d. all of the above are true

c. western europe, austrailia, canada, japan, new zealand, and the united states

economics arrives at the conclusion that economic growth will always improve economic well-being. Do you agree? a. No, economic growth has empowered multinational companies who often exploit workers and the environment of the host country b. No, economic growth has caused global warming that creates a very dangerous world for this and future generation c. yes, economic growth increases living standards, improves health and education, and builds a corruption-free society d. no, economic growth increase pollution, depletes natural resources, and creates a new kind of health problem

c. yes, economic growth increases living standards, improves health and education, and builds a corruption-free society

the demand curve for an individual product slopes downward due to....

consumers substituting the more expensive product for cheaper goods

who developed a growth model that suggests new products unleash a "gale of creative destruction" that drives old products out of the market? a. Alan Greenspan b. Ben Bernanke c. Adam Smith d. Joseph Schumpeter

d. Joseph Schumpeter

which of the following is not correct? a. MPS = 1 (change in c/ change in YD) b. MPS + MPC = 1 c. 0 < MPS < 1 d. MPS = 1 - (c/YD)

d. MPS = 1 - (c/YD)

the agency that identifies a recession is the a. BEA- bureau of economic analysis b. BLS- bureau of labor statistics c. federal d. NBER- national bureau of economic research

d. NBER- national bureau of economic research

which of the following factors does not cause the aggregate demand curve to shift? a. a change in the expectations of households and firms b. a change in foreign variables c. a change in government monetary or fiscal policies d. a change in the price level

d. a change in the price level

the international trade effect refers to the fact that an increase in the price level will result in a. a decrease in exports and a decrease in imports b. an increase in exports and an increase in imports c. an increase in exports and a decrease in imports d. a decrease in exports and an increase in imports

d. a decrease in exports and an increase in imports

would a larger multiplier lead to more severe recession or less severe recession? a. a larger multiplier means that large changes in spending lead to small changes in GDP, and thus recessions would be more severe b. a larger multiplier means that large changes in spending lead to small changes in GDP, and thus recessions would be less severe c. a larger multiplier means that small changes in spending lead to large changes in GDP, and thus recessions would be less severe d. a larger multiplier means that small changes in spending lead to large changes in GDP, and thus recessions would be more severe

d. a larger multiplier means that small changes in spending lead to large changes in GDP, and thus recessions would be more severe

which of the following is usually the cause of stagflation? a. a reduction in government purchases b. a decline the net exports as a result of a change in the exchange rate c. an increase in investment as a result of a reduction in interest rates d. a supply shock as a result of an unexpected increase in the price of a natural resource

d. a supply shock as a result of an unexpected increase in the price of a natural resource

typically, when will the national bureau of economic research (NBER) announce that the economy is in a recession? a. on the date that the recession begins b. typically, more than 10 years after the recession begins c. about six months before the recession begins d. a year or more after the recession has begun

d. a year or more after the recession has begun

which of the following is not a function of money? a. store of value b. medium of exchange c. unit of account d. acceptability

d. acceptability

as of August 2015, which of the following demographic groups has the highest unemployment rate? a. hispanics b. whites c. asians d. african americans

d. african americans

Consider the figure to the right. Why does the short-run aggregate supply curve slope upward? a. prices of final goods rise more quickly than prices of inputs b. contracts keep wages "sticky" c. firms and workers fail to predict changes in the price level d. all of the above e. a and b only

d. all of the above

Real GDP per capita is often used as a measure of general well-being. While increases in real GDP often do lead to increases in the well-being of the population, why is real GDP not a perfect measure of well being? a. the cost of pollution are not included b. GDP does not include crime rates or income distribution c. the value of leisure is not included d. all of the above

d. all of the above

Which of the following is a monetary policy tool used by the Federal Reserve​ Bank? A.Decreasing the rate at which banks can borrow money from the Federal Reserve. B.Increasing the reserve requirement from 10 percent to 12.5 percent. C.Buying​ $500 million worth of government​ securities, such as Treasury bills. D.All of the above.

d. all of the above

in the aggregate expenditure model, why is it important to know the factors that determine consumption spending, investment spending, government purchases, and net exports? Because they help us understand... a. the relationship between aggregate expenditure and real GDP b. how the real level of aggregate expenditure and GDP are determined in the economy c. how macroeconomic equilibrium is determined in the aggregate expenditure model d. all of the above

d. all of the above

indicate which of the following is correct about the multiplier effect. a. the multiplier ignores the effect on real GDP of imports, infaltion, and interest rates b. the larger the MPC, the more additional consumption that occurs c. a decrease in autonomous spending decreases real GDP by a multiple of the change d. all of the above

d. all of the above

the "normal" underlying level of unemployment in the economy is a. the sum of structural unemployment and frictional unemployment b. the natural rate of unemployment c. the full employment rate of unemployment d. all of the above

d. all of the above

the use of money a. allows for greater specialization b. eliminates the double coinsdience of wants c. reduces the transaction costs of exchange d. all of the above

d. all of the above

when the economy is at full employment, a. all remaining unemployment is either frictional or structural b. the unemployment rate is greater than zero c. the natural rate of unemployment prevails d. all of the above

d. all of the above

which of the following causes changes in the CPI to overstate the true inflation rate? a. new product bias b. substitution bias c. increase in quality bias d. all of the above

d. all of the above

which of the following contribute(S) to shorter recessions, longer expansions, and less severe fluctuations in real GDP? a. social security benefits b. a service-based economy c. monetary policy d. all of the above e. a and c only

d. all of the above

which of the following factors brought on the recession of 2007-2009? a. a rapid increase in the price of oil b. the end of the housing bubble c. the financial crisis d. all of the above

d. all of the above

which of the following factors will cause the long run aggregate supply curve to shift to the right? a. technological change b. an increase in the number of workers in the economy c. the accumulation of more machinery and equipment d. all of the above

d. all of the above

which of the following is true with respect to hyperinflation? a. it can be hundreds, even thousands, of percentage points per year b. it is caused by central banks increasing the money supply at a rate much greater than the growth rate of real GDP c. in the presence of hyperinflation, firms and households avoid holding money d. all of the above

d. all of the above

why do economic growth rates matter? a. high levels of sustained economic growth reduce infant morality b. when a country sustains high growth rates, life expectancy at birth increases c. high growth rates concide with improved living standards d. all of the above e. a and c only

d. all of the above

why does the failure of workers and firms to accurately predict the price level result in an upward sloping aggregate supply curve? a. because contracts between workers and firms make some wages and prices "sticky" b. because menu costs make some prices "sticky" c. because firms are often slow to adjust to wages d. all of the above

d. all of the above

which of the following are assertions made by opponents of globalization? a. globalization has contributed to multinational firms moving production to low-income countries so they can pay their workers very low wages b. globalization has undermined the distinctive cultures of many countries c. globalization has contributed to multinational firms moving production to low-income countries to avoid safety and environmental regulations that high-income countries require such firms to follow d. all of the above are assertions made by opponents of globalization

d. all of the above are assertions made by opponents of globalization

which of the following statements about investment spending is correct? a. when the economy moves into a recession, many firms will postpone buying investment goods even if the demand for their own product is strong b. a higher real interest rate results in less investment spending c. the optimism or pessimism of firms is an important determinant of investment spending d. all of the above are correct

d. all of the above are correct

why might the unemployment rate continue to rise during the early stages of recovery? a. employment growth may be slow relative to the growth in the labor force b. the number of discouraged workers may continue to increase c. some firms continued to operate well below their capacity even after a recession has ended d. because both a and c are true

d. because both a and c are true

which of the following is the largest liability of a typical bank? a. loans b. reserves c. treasury bills d. deposits

d. deposits

technological change is more important to long-run economic growth than changes in capital. The easiest way for firms to gain access to new technology is through a. wars and civil strife b. health and education c. savings and investment d. foreign direct investment

d. foreign direct investment

A columnist in the New York times observes that, "many analyst agree that economic reform, of which integration into the global economy was a key element, has lifted millions of people out of poverty in India" The term "integration into the global economy" means a. becoming a part of the global organization b. becoming part of EU c. becoming a part of NAFTA d. globalization and more integration of trade

d. globalization and more integration of trade

credit cards are a. included in both the M1 and M2 definitons of the money supply b. included in the M2 definition of the money supply but not the m1 definition c. included in the m1 definition of money supply but not the m2 definition d. included in neither the m1 definition of the money supply nor the m2 definition

d. included in neither the m1 definition of the money supply nor the m2 definition

when the economy reaches a trough in a business cycle, which of the following will occur? a. employment rises, but income and production will continue to fall b. income, production, and employment will continue to fall c. income and production will rise, but employment will continue to fall d. income, production, and employment will begin to rise

d. income, production, and employment will begin to rise

which of the following does NOT lead to long-run economic growth? a. technological change b. improved labor productivity c. increase in the capital stock d. increase in average workers

d. increase in average workers

Writing in 2016, economist Robert Gordon of Northwestern University stated his views of the effects of information technology on economy: "We dont eat computers or wear them..." If Gordon's observation about the information revolution are correct, that implies... a. that the US is engaged in further innovations in information and communications technology b. that the US is producing too many small, hand-held gadgets c. it will be easy to maintain high growth rates in US labor productivity in the future d. it will be difficult to growth rates in US labor productivity in the future

d. it will be difficult to growth rates in US labor productivity in the future

A study by the Mckinsey Global institute reported that labor productivity increased at an average annual rate of 5.8 percent between 1999 and 2013 in Mexico's large companies, but fell at an average annual rate of 6.5 percent over the same period for Mexico's smaller firms, such as family-owned stores and bakeries. Productivity growth would be much higher for Mexico's smaller firms, such as family-owned stores and bakeries. Productivity growth would be much higher for Mexico's largest companies than for its smaller companies because the a. smaller companies cannot achieve the scale to compete with larger companies b. smaller companies are more highly regulated and so have lower productivity growth c. larger companies have more employees, so they are more likely to be included in statistical information d. larger companies have greater access to better technology which stimulates productivity growth

d. larger companies have greater access to better technology which stimulates productivity growth

In a speech delivered in June​ 2008, Timothy​ Geithner, then president of the Federal Reserve Bank of New York and later U.S. Treasury​ secretary, said: The structure of the financial system changed fundamentally during the boom. . . .​ [The] non-bank financial system grew to be very large. . . .​ [The] institutions in this parallel financial system​ [are] vulnerable to a classic type of​ run, but without the protections such as deposit insurance that the banking system has in place to reduce such risks. What is a "classic type of run"? a. many banks simultaneously decide to issue mortgage backed securities, driving down their price b. many investors decide to purchase funds at the same time, which runs up the price or value of the asset c. many investors decide to sell funds at the same time, which runs down the price or value of the asset d. many depositors simultaneously decide to withdraw their money from a bank

d. many depositors simultaneously decide to withdraw their money from a bank

when sellers are willing to accept money in exchange for goods and services, money is acting as a. unit of account b. store or value c. standard of deffered payments d. medium of exchange

d. medium of exchange

In a speech delivered in June​ 2008, Timothy​ Geithner, then president of the Federal Reserve Bank of New York and later U.S. Treasury​ secretary, said: The structure of the financial system changed fundamentally during the boom. . . .​ [The] non-bank financial system grew to be very large. . . .​ [The] institutions in this parallel financial system​ [are] vulnerable to a classic type of​ run, but without the protections such as deposit insurance that the banking system has in place to reduce such risks. What did Giethner mean by the "non bank financial system"? a. banks that are outside the federal reserve system and this not subject to ordinary banking regulations b. buyers and sellers of stocks and bonds in asset markets that outside of the banking system c. credit unions, savings and loans, and other thrift institutions that are not classified as commercial banks but still take deposits and make loans d. money market mutual funds, hedge funds, and other financial firms that raise money from investors and provide it to firms and households

d. money market mutual funds, hedge funds, and other financial firms that raise money from investors and provide it to firms and households

disposable personal income is a. personal income minus indirect business taxes b. national income minus depreciation c. national income minus personal taxes d. personal income minus personal taxes

d. personal income minus personal taxes

If the GDP deflator in 2012 has a value of 98.0, then a. the prices have increased 9.8 percent between the base year and 2012 b. the inflation rate in 2012 is 2 percent c. the inflation rate in 2012 is -2 percent d. prices have decreased 2 percent between the base year and 2012

d. prices have decreased 2 percent between the base year and 2012

Productivity growth rates matter because a. the level of growth is a reliable predictor of Democrat or Republican control of Congress b. China relies upon high US productivity growth rates to outsource more American jobs c. if the labor force is highly productive then it will lead to a resurgence of unions d. productivity growth rates have a big impact on future economic growth

d. productivity growth rates have a big impact on future economic growth

Pranab Bardhan, an economist at the University of California Berkley argues: "China may be close to exhausting the possibilities of technological catch-up with the West, particularly in manufacturing" If Bardhan is correct, in the future, the Chinese economy might a. realize higher labor productivity b. realize faster economic growth c. be a more fierce economic competitor d. realize slower economic growth

d. realize slower economic growth

The elimination of measles and childhood deaths from diarrhea will a. remove a major impediment to growth, but productive will not change and this will not lead to economic growth b. remove a major impediment to growth, but productivity will not change and this will rise immediately c. be a motivating factor for the countries to save more and invest more but may not lead to economic growth d. remove a major impediment to growth, increase productivity and should eventually lead to increases in real GDP per capita

d. remove a major impediment to growth, increase productivity and should eventually lead to increases in real GDP per capita

when the economy is at full employment, unemployment is equal to a. normal rate of unemployment - abnormal rate of unemployment b. cyclical unemployment - seasonal unemployment c. zero d. the natural rate of unemployment

d. the natural rate of unemployment

which of the following refers to the minimum fraction of deposits banks that are required by law to keep as reserves? a. the cash to deposit ratio b. the simple deposit mulitplier c. the quantity equation d. the required reserve ratio

d. the required reserve ratio

an economist student raises the following objection: "the textbook said that a higher interest rate lowers investment, but this does not make sense. i know that if i can get a higher interest rate, i am certainly going to invest more in my savings account." The problem with the students argument is which of the following? a. investment is not related to the interest rate b. savings accounts do not earn interest c. higher interest rates are bad for savers d. the student is confusing saving with investment

d. the student is confusing saving with investment

Shortly before the fall of the Soviet Union, the economist Gur Ofer of the Hebrew University of Jerusalem, wrote this: " The most outstanding characterisitic of Soviet growth strategy is its consistent policy of very high rates of investment, leading to a rapid growth rate of the capital stock". This turned out to be a very poor strategy because a. the amount of capital per hour worked was decreasing b. the capital stock was increasing less rapidly than technology c. the amount of labor per unit of capital was increasing d. there were diminishing returns to capital

d. there were diminishing returns to capital

The largest component of gross domestic income is a. profits b. interest c. rent d. wages

d. wages

which component of gross domestic income is the largest? a. rent b. profits c. interest d. wages

d. wages

Economist Charles Kenny of the World Bank has argued: The process technologies-- institutions like laws and inventory management systems-- that appear central to raising incomes per capita flow less like water and more like bricks. But ideas and inventions-- the importance of ABCs and vaccines for DPT-- really might flow more easily across borders and over distances. As these countries become able to increase their standards of living, there a. may be an increase in income but higher rates of economic growth is needed for these countries to catch-up with high-income countries b. will be a significant drop in the rate of economic growth because these countries have very little growth in their incomes c. may be a decline in income and that will further lower the prospects of growth for these nations d. will be economic growth but in order to have sustainable growth, these countries need their incomes to increase

d. will be economic growth but in order to have sustainable growth, these countries need their incomes to increase

When ségoléne royal was running unsuccessfully for president of France, she proposed that workers who lost their jobs would receive unemployment payments equal to 90 percent of their previous wages during their first year of unemployment. If this proposal were enacted, the unemployment rate in France a. would have stayed the same because unemployment insurance programs do not affect the unemployment rate b. would have gone down as the opportunity cost of job search would have increased c. would have gone up as people from other countries would migrate to France because of their generous unemployment insurance d. would have gone up as the opportunity cost of job search have decreased

d. would have gone up as the opportunity cost of job search have decreased

An increase in _______ will increase/decrease net exports 1. the US price level relative to other countries' price levels 2. the growth rate of US GDP relative to other countries' 3. the exchange rate between the dollar and other currencies

decrease decrease decrease

In increase in the ______ will increase/decrease consumption: the price level; household wealth; expected future income; current disposable income; the interest rate;

decrease increase increase increase decrease

A technical change will cause the long run aggregate supply curve to ________.

shift to the right

The _______________________________ is considered the most relevant interest rate when conducting monetary policy.

short-term nominal interest rate

Think about the relationship between economic prosperity and life expectancy. The size of the health care sector in a less developed country is _______ than the size of the health care sector of a developed country.

smaller than

the aggregate demand curve shows the relationship between the ______ and ______.

the price level and output demanded

The aggregate demand curve slopes downward due to....

the wealth effect, the interest rate effect, and the international trade effect

Increase in government purchases will make the aggregate demand curve shift ____.

to the right

if inflation is unexpectedly high, borrowers will benefit and lenders will be harmed true/false

true

In the diagram to the right, moving from point A to point B is called a _________ the AD curve. Moving from point A to C is reffered to as a _____ the AD curve

movement along shift in

A change in the price level causes a ___________ the short-run aggregate supply (SRAS) curve. In the figure this is shown by moving from _______. A change in any other factor causes a _______ the SRAS curve. In the figure, this is shown by moving from point B to C.

movement along; A to B shift in; B to C

if a 3-month treasury bill pays 5.5% and the charge in the consumer price index (CPI) is 4.7% what is the real interest rate (the true return to lending)? a. 10.2% b. 4.7% c. 0.8% d. 5.5%

c. 0.8%

if the CPI was 207 in 2009 and 225 in 2013, what wage would someone who earned $50,000 income in 2009 have to earn in 2013 in order to keep her purchasing power constant? a. 54,000 b. 51,252 c. 54, 348 d. none of the above

c. 54,348

which of the following accurately describes an affect of hurricane Katrina on GDP? a. GDP would decrease reflecting the costs of clean up b. GDP would increase well being c. GDP would increase reflecting the costs of cleanup d. GDP would increase reflecting the decrease in production that occurred during the storm and the productive capacity lost in the storm

c. GDP would increase reflecting the costs of cleanup

Potential real GDP _________.

grows over time

Suppose the amount of federal government collects in personal income taxes decreases, while the level of GDP remains the same. What will happen to the values of national income, personal income, and disposable personal income? National income will _______________. Personal income will ______________. Disposable personal income will ________________.

1. remain teh same 2. remain the same 3. increase

suppose an economy is given by the following population = 277 million labor force = 132 million the number of people employed = 125.4 million the number of people unemployed = 6.6 million Given the information above, the unemployment rate is _____.

5.0%

the BLS uses the establishment survey to collect information on employment in the economy. indicate one drawback of the establishment survey compared to the current population survey indicate one advantage A. it does not include information about self-employed people b. it includes complete information about unemployment c. it is biased on unverifiable, self-reported survey responses d. it is based on company payroll and not on unverifiable answers

A. it does not include information about self-employed people d. it is based on company payroll and not on unverifiable answers

your father earned $34,000 per year in 1984. To the nearest dollar, what is that equivalent to in 2014 if the CPI in 2014 is 215 and the CPI in 1984 is 104? a. 70,288 b. 16,447 c. 73,100 d. 34,000

a. 70,288

National income is a. GDP minus depreciation b. nominal GDP minus personal taxes c. real GDP minus personal taxes d. nominal GDP minus personal taxes

a. GDP minus depreciation

which of the following is not a shortcoming of GDP as a measure of well-being? a. GDP only counts final goods and services and not intermediate goods b. GDP does not include the value of leisure c. GDP is not adjusted for the effects of pollution caused by the production of goods and services d. GDP is not adjusted for crime and other social problems

a. GDP only counts final goods and services and not intermediate goods

if Americans still worked 60 hour weeks, as they did in 1890, a. GDP would be much higher than it is, but the well being of the typical person would not be necessarily higher b. both GDP and the well-being of the typical person would be lower than they are c. both GDP and the well-being of the typical person would be much higher than they are d. GDP would be lower than it is, but the well-being of the typical person would be higher

a. GDP would be much higher than it is, but the well being of the typical person would not be necessarily higher

If the US Bureau of Economic Analysis (BEA) added up the values of every good and service sold during the year, would the total be larger or smaller than measured gross domestic product (GDP)? a. Larger: the value of all goods and services sold would include intermediate goods b. larger: measured GDP includes quantities of goods and services, not the values of goods and services c. smaller: measured GDP includes the values of every good and service sold AND the market value of all final goods d. equal: measured GDP is calculated by adding the values of every good and service sold during the year

a. Larger: the value of all goods and services sold would include intermediate goods

Which one of the following expressions shows the investment-saving equality? a. S = Y - C - G b. I = Y + TR - C - T c. S = Y + T -TR - G d. I = Y + TR - C - G

a. S = Y - C - G

what are the names of the following events in a business cycle? a. the highpoint of economic activity is called... b. the low point of economic activity is called... c. the period between the low point of economic activity and the following low point is called... d. the period between the low point of economic activity and the following high point is called...

a. a peak b. a trough c. a recession d. an expansion

an efficiency wage is a. an above market wage paid by a firm to maximize worker productivity b. equal to the market clearing wage, so that social welfare is maximized c. a below market wage paid by a firm to maximize firms profits d. an above market wage paid by a firm to maximize the output of the firm

a. an above market wage paid by a firm to maximize worker productivity

which of the following changes does not cause an increase in the quantity of goods and services that can be produced by one worker, or in one hour of work? a. an increase in the number of workers b. an increase in the quantity of capital per hour worked c. technological change d. an increase in the literacy rate

a. an increase in the number of workers

Firms that act as financial intermediaries match households that have excess funds with firms that want to borrow funds. What other key services does the financial system provide to savers and lenders? a. collects and communicates information about borrowers to savers b. allows savers to spread their money among many financial investments c. provides an easy method of exchanging a financial security for money d. offers fixed and stable interest rates e. insures assets up to $500,000 f. insures investments against decreasing in value

a. collects and communicates information about borrowers to savers b. allows savers to spread their money among many financial investments c. provides an easy method of exchanging a financial security for money

indicate whether you agree or disagree with the following statement: " IN years when people buy many shares of stock, investment will be high, and therefore, so will gross domestic product (GDP). a. disagree: investment as a component of GDP refers to the purchase of physical and human capital and inventory, not stock purchases b. agree: when investment is high, people must have more money to spend and therefore GDP increases c. agree: GDP = C + I + g + NX. therefore as "i" (investment) increases, GDP increases d. disagree: while GDP will not be high in this case, it is the result of an increase in consumer expenditure on stocks, not investment spending

a. disagree: investment as a component of GDP refers to the purchase of physical and human capital and inventory, not stock purchases

when the economy is at full employment, which types of unemployment remain? a. frictional and structural b. frictional and cyclical c. cyclical and structural d. none of the above. full employment means that there is no unemployment, so the unemployment rate would be zero

a. frictional and structural

in august 2015, which of the following demographic groups had a higher rate of unemployment than the unemployment rate for the total population? a. high school dropouts b. whites c. asians d. college graduates

a. high school dropouts

evaluate the following statement: "saving money is not lending. How can it be? When i save my money, I put it in a bank. I don't loan it out to someone else." The statement is... a. incorrect: the supply of loanable funds is determined by household saving b. correct: depositing money in a bank is borrowing, not saving c. incorrect: the supply loanable funds is determined by firms' willingness to borrow d. correct: depositing money in a bank is neither saving nor borrowing

a. incorrect: the supply of loanable funds is determined by household saving

the chapter explains that is impossible to know whether a particular nominal interest rate is "high" or "low" because a. it all depends on the inflation rate b. it is controlled by the Fed's open market operations c. it is all depends on the Fed's monetary policy rule d. it all depends on the federal funds rate

a. it all depends on the inflation rate

the unemployment rate in the United States is usually _______ than the unemployment rates in most other high-income countries, partly because the United States has ________ requirements for the unemployed to recieve government payments a. lower; more stringent b. higher; less stringent c. lower; less stringent d. higher more stringent

a. lower; more stringent

one major component of GDP that can be negative is a. net exports b. government expenditures c. consumption d. investment

a. net exports

between 2015 and 2016, if an economy's exports rise by 8 billion dollars and its imports fall by 8 billion dollars, by how much will GDP change between the two years, all else equal? a. net exports will increase GDP 16 billion dollars b. the increase in exports is offset by the decrease in imports, so there is no change in net exports and no effect on GDP c. net exports will decrease by GDP by 8 billion d. net exports will increase GDP by 8 billion

a. net exports will increase GDP 16 billion dollars

which of following changes will ensure that an economy experiences sustained economic growth? a. technological change b. increasing amount of labor c. increasing amount of capital d. increasing the amount of raw materials

a. technological change

gross domestic product (GDP) is a. the market value of all final goods and services produced in a country during a period of time b. the quantity of all final goods and services produced in a country during a period of time c. the amount of income generated from wages, rent, and profits in a country during a period of time d. the value of all expenditures made by households and firms in a country during a period of time

a. the market value of all final goods and services produced in a country during a period of time

the natural rate of unemployment is a. the sum of structural unemployment and frictional unemployment b. the sum of seasonal unemployment and cyclical unemployment c. the sum of cyclical unemployment and frictional unemployment d. the sum of structural unemployment and cyclical unemployment

a. the sum of structural unemployment and frictional unemployment

The gross national product (GNP) of the United States is equal to a. the value of final goods and services produced by US factors of production b. the value of final goods and services produced within the United States c. the value of the total income received by all households in the United States, after taxes are paid d. the value of the total income received by all of the residents of the United States

a. the value of final goods and services produced by US factors of production

indicate whether the following statement is true or false and why: "A wage rising slower than the rate of inflation is actually falling" a. true: if wages are increasing slower than the average price of goods and services, purchasing power falls b. false: a higher wage decreases purchasing power regardless of inflation c. false: a higher wage increase purchasing power regardless of inflation d. true: if wages are increasing slower than the average price of goods and services, purchasing power increases

a. true: if wages are increasing slower than the average price of goods and services, purchasing power falls

Why does inflation make nominal GDP a poor measure of the increase in total production from one year to the next? a. when nominal GDP increases from year to year, the increase is partly due to changes in prices and partly to changes in quantities b. nominal GDP separates increases in GDP as a result of price changes from increases in GDP as a result of quantity changes c. GDP is a measure of production in quantity terms d. all of the above e. a and b only

a. when nominal GDP increases from year to year, the increase is partly due to changes in prices and partly to changes in quantities

which of the following formulas does the Bureau of Labor Statistics use to calculate the unemployment rate? a. (number in the labor force / number of unemployed) x 100 b. (number of unemployed / number in the labor force) x 100 c. (number of unemployed / working age population) x 100 d. (number of unemployed/number of employed) x 100

b. (number of unemployed / number in the labor force) x 100

Scott is a woodworker and charges $125 an hour for his time manufacturing custom-made wood products. For his wife's birthday, he designs and creates an intricate birdseye maple jewelry box that takes him 15 hours to complete. By how much and in what direction does GDP change as a result of his efforts? a. GDP rises by $1,875 b. GDP is not affected by scotts production of the jewelry box c. GDP rises by $125 d. GDP falls by $1,875

b. GDP is not affected by scotts production of the jewelry box

which of the following is the best example of human capital? a. a manager buys workers more personal computer b. a worker gets a college degree c. a worker pays less taxes d. a manager devotes more spending to research and development

b. a worker gets a college degree

Household Production and the underground economy: a. are not considered important and, therefore, are not included when calculating GDP b. are not accounted for in the Bureau of Economic Analysis' estimates of GDP c. are fully accounted for in the Bureau of Economic Analysis' estimates of GDP d. are increasingly large fraction of economic activity in the United States

b. are not accounted for in the Bureau of Economic Analysis' estimates of GDP

An International Monetary Fund Factsheet makes the following observation regarding sound financial systems: "a country's financial system... provides framework... for supporting economic growth" Do you agree with this observation? A weak financial system might make economic growth difficult, since a. a strong financial sector is needed for expert-led economic growth b. capital investment, essential for rapid economic growth, is often financed by borrowed funds and an unstable financial system leads to difficulty attracting loanable funds c. a weak financial system implies that the government does not have enough resources d. a strong financial system is needed to provide employment for the country's labor force

b. capital investment, essential for rapid economic growth, is often financed by borrowed funds and an unstable financial system leads to difficulty attracting loanable funds

personal income a. national income plus government transfer payments b. national income minus retained corporate earnings plus government transfer payments and interest on government bonds c. equal to the value of all final goods and services produced within a country's boarders during one year d. national income minus income taxes

b. national income minus retained corporate earnings plus government transfer payments and interest on government bonds

the unemployment rate a. shows the percentage of the population that is considered unemployed b. shows the percentage of the labor force that is concerned with unemployed c. is the amount of the labor force that is not working d. is the amount of people in the population that are not working

b. shows the percentage of the labor force that is concerned with unemployed

Gross domestic product is best defined as a. the total value of all goods that can be found in a country b. the market value of all final goods and services produced a country during a period of time, typically one year c. the amount of all incomes earned by all citizens of a country, including those living overseas d. the total quantity of goods and services produced in a country during a period of time

b. the market value of all final goods and services produced a country during a period of time, typically one year

Which equation represents the relationship between GDP and the four major expenditure components? a. Y = C ( I + G + NX) b. Y = ( C + I ) / ( G + NX ) c. Y = C + I + G + NX d. Y = (C + I) - (G + NX)

c. Y = C + I + G + NX

a government that collects more in taxes than it spends experiences a. an increase in the national debit b. a budget deficit c. a budget surplus d. a budget balance

c. a budget surplus

The financial system of a country is important for long-run economic growth because a. people can increase their wealth very quickly under a healthy financial system b. most firms rely on their own retained earnings and do not use the financial system c. firms need the financial system to acquire funds from households d. firms that use the financial system predominately are being reckless

c. firms need the financial system to acquire funds from households

all of the following are correct except: a. gross domestic income is GDP calculated as the sum of income payments to households b. gross domestic income includes sales tax, depreciation, and other items c. gross domestic income does not include health insurance benefits recevied by employees d. gross domestic income = wages + interest + profits + rent

c. gross domestic income does not include health insurance benefits recevied by employees

According to most economist, is it a serious shortcoming of GDP that it does not count household production or production of the underground economy? a. most economist would answer "yes" because these types of production are likely to be a large component of the economy (or a large percentage of measured GDP), especially in countries like the United States b. most economist would answer "yes" because these types of production are likely to change significantly from one year to the next c. most economies would answer "no" because these types of production do not affect the most important use of the GDP measure, which is to measure changes in total production over short periods of time d. most economist would answer "no" because the purpose of measuring GDP is to see how the economy performs over fairly long periods of a decade or more

c. most economies would answer "no" because these types of production do not affect the most important use of the GDP measure, which is to measure changes in total production over short periods of time

what effect do labor unions have on the unemployment rate? a. labor unions can significantly increase the unemployment rate when members go on strike b. by increasing the wage above market equilibrium, labor unions considerably increase the unemployment rate c. since few non government workers are unionized, there is no significant effect on the unemployment rate d. by increasing the wage above market equilibrium, labor unions considerably decrease the unemployment rate

c. since few non government workers are unionized, there is no significant effect on the unemployment rate

If the CPI is currently 202, what does this tell you about inflation between last year and this year? a. inflation in the economy between this year and last year was 2% b. there was deflation in the economy between this year and last year c. the CPI measures only the level of prices in a given year, not the percentage change in prices from one year to the next d. inflation in the economy between this year and last year was 102%

c. the CPI measures only the level of prices in a given year, not the percentage change in prices from one year to the next

the real interest rate equals a. the inflation rate minus the nominal interest rate b. the nominal interest divided by the CPI for a given year c. the nominal interest rate minus the inflation rate d. the nominal interest rate plus the inflation rate

c. the nominal interest rate minus the inflation rate

even perfectly anticipated inflation imposes costs. why? a. menu costs b. paper money loses its purchasing power by the rate of inflation c. some wages will fail to keep up with anticipated inflation d. all of the above e. a and c only

d. all of the above

what is the relationship between the unemployment rate and enacting or increasing a minimum wage? When a minimum wage is enacted or increased across a country, the unemployment rate a. will increase and the impacts will be spread evenly across all groups of workers b. will decrease because workers will have more money which will increase demand and cause firms to hire more workers c. will increase some but the impacts will be much larger for some groups of workers d. is not affected because the minimum wage does not affect firm hiring decisions

c. will increase some but the impacts will be much larger for some groups of workers

A politician makes the following argument: "the economy would operate more efficiently if frictional unemployment were eliminated. therefore, a goal of government policy should be to reduce the frictional rate of unemployment to the lowest possible level. eliminating all frictional unemployment a. will not be good for the economy since the presence of frictional unemployment decreases job creation b. will be good for the economy since the presence of frictional unemployment increases job destruction c. will not be good for the economy since the presence of frictional unemployment increases economic efficiency d. will be good for the economy because the total unemployment will fall

c. will not be good for the economy since the presence of frictional unemployment increases economic efficiency

if the inflation rate is 6 percent and the nominal interest rate is 4 percent, then the real interest rate is a. 1.5 percent, which is the ratio of the nominal interest rate to the inflation rate b. 10 percent, which is the sum of the nominal interest rate and the inflation rate c. 2 percent, which is the inflation rate minus the nominal interest rate d. -2 percent, which is the nominal interest rate minus the inflation rate

d. -2 percent, which is the nominal interest rate minus the inflation rate

which of the following is considered to be a problem in using GDP as a measure of national well-being? a. items included in US GDP are measured in dollars b. GDP does not include the value of household production c. GDP does not include the value of goods and services produced in the underground economy d. GDP is not adjusted for changes in crime and other social problems

d. GDP is not adjusted for changes in crime and other social problems

What happens if we measure GDP by adding up the value of every good and service produced in the economy? a. this is the correct measure of nominal GDP but not real GDP b. GDP is underestimated because of double counting c. this is the correct measure of real GDP but not nominal GDP d. GDP is overestimated because of double counting

d. GDP is overestimated because of double counting

how does real GDP deal with the problem inflation causes with nominal GDP? a. by keeping prices constant, we know that changes in real GDP represent changes in the quantity of output produced b. real GDP separates price changes from quantity changes c. real GDP uses the prices of goods and services in the base year to calculate the value of goods in all other years d. all of the above e. a and c only

d. all of the above

In the US, gross domestic product (GDP) and gross national product (GNP) are close in value. Under what circumstances would GNP be much higher than GDP? a. many US citizens currently work in foreign countries while fellow few foreign citizens currently work in the US b. few foreign firms maintain facilities in the US while many US firms are currently operating abroad c. few foreign citizens currently work in the US and few foreign firms maintain facilities in the US d. all of the above would push GNP above GDP

d. all of the above would push GNP above GDP

What are the four major components of expenditures in GDP? a. consumption, intermediate goods, government purchases, and new expenditures b. consumption, intermediate goods, goods and services, and net exports c. consumption, investment, government purchases, and non durable expenditures d. consumption, investment, government purchases, and net exports

d. consumption, investment, government purchases, and net exports

which of the following is an example of cyclical unemployment? a. autoworkers lose jobs due to globalization and must retrain to find new jobs b. a worker moves to California and searches for a new job c. workers at ski resorts in Colorado are laid off during the summer d. during a recession, aircraft assemblers are laid off but expect to be recalled as the economy

d. during a recession, aircraft assemblers are laid off but expect to be recalled as the economy

what is the general relationship between the business cycle and unemployment and inflation? a. during an expansion, unemployment and inflation increase b. during a recession, unemployment and inflation decrease c. during a recession, unemployment and inflation increase d. during an expansion, unemployment falls and inflation increases

d. during an expansion, unemployment falls and inflation increases

Suppose John Q. Worker is currently unemployed. Each​ day, John Q. Worker spends the entire day searching available job openings for an appropriate position given his set of​ skills, abilities, and interests. If someone asks John Q. what he does for​ work, he tells them that he is currently​ "in-between jobs." Which of the following best classifies John​ Q.'s unemployment​ status? a. seasonally unemployed b. cyclically unemployed c. structurally unemployed d. frictionally unemployed

d. frictionally unemployed

which of the following is not a measure of the price level? a. consumer price index: an average of the prices of the goods and services a typical family of four would purchase b. GDP deflator: broadest measure of the average price level as it includes prices of every final good and service c. producer price index: an average of prices recieved by firms for goods and services at all stages of production d. government price index: an average of the prices paid by the government for goods and services used only by different government agencies

d. government price index: an average of the prices paid by the government for goods and services used only by different government agencies

inflation can affect the distribution of income because a. people with incomes rising slower than the rate of inflation enjoy an increasing purchase power, while people with incomes rising more quickly than the rate of inflation are hurt by a decreasing purchasing power b. when inflation is fully anticipated, mortgage lenders face very high default risk c. people with fixed incomes, such as a retired persons who may be recieving a pension of a fixed number of dollars each year, are not affected by the inflation rate, but people with varying incomes are d. people with incomes rising faster than the rate of inflation enjoy an increasing purchasing power, while people with incomes rising more slowly than the rate of inflation are hurt by a decreasing purchasing power

d. people with incomes rising faster than the rate of inflation enjoy an increasing purchasing power, while people with incomes rising more slowly than the rate of inflation are hurt by a decreasing purchasing power

which of the following is a problem of unanticipated inflation? a. costs to firms of changing prices b. redistribution of income from borrowers to lenders c. decreases in structural unemployment d. redistribution of income from lenders to borrowers

d. redistribution of income from lenders to borrowers

when compared to the Great Depression, the typical length of unemployment in the modern (post-Great Depression-era) US economy is a. slightly longer b. approximately longer c. significantly longer d. relatively brief

d. relatively brief

from a trough to a peak, the economy goes through a. falling real GDP b. the recessionary phase of the business cycle c. rising real GDP, but falling real GDP per capita d. the expansionary phase of the business cycle

d. the expansionary phase of the business cycle

We often use real GDP per capita as a measure of a country's well-being. Review the definition of real GDP per capita before answering the following question. Today, the typical American works fewer than 40 hours per week. In 1890, the typical American worked 60 hours per week. Would the difference between the real GDP per capita in 1890and the real GDP per capita today understate or overstate the difference in the population's economic well-being? a. the decrease in real GDP per capita between 1890 and today understates well-being because the value of leisure is not included in GDP b. the decrease in real GDP per capita between 1890 and today overstates well-being because the value of leisure is not included in GDP c. the increase in real GDP per capita between 1890 and today overstates well-being because the value of leisure is not included in GDP d. the increase in real GDP per capita between 1890 and today understates well-being because the value of leisure is not included in GDP

d. the increase in real GDP per capita between 1890 and today understates well-being because the value of leisure is not included in GDP

capital can be differentiated between physical capital and human capital. Human capital is... a. the goods manufactured to produce other goods and services b. the new developments in machinery and software c. the energy use to bring together the factors of production to produce goods and services d. the knowledge and skills workers acquire from education and training or from their life experiences

d. the knowledge and skills workers acquire from education and training or from their life experiences

why is the unemployment rate, as measured by the Bureau of Labor Statistics, an imperfect measure of the extent of joblessness in the economy? a. underemployed people are considered employed b. discourages workers are not considered employed c. it does not account for inaccurate responses to current population survey d. it fails to account for illegal activitites e. all of the above

e. all of the above