Economics Final Quiz Questions
In macroeconomics, a _________________ is used to show the relationship between output and the input price level. A. Phillips curve B. microeconomic model C. expenditure-output model D. Keynesian framework
A
In the long-run neoclassical view, when wages and prices are flexible, ________________________ determine the size of real GDP. A. potential GDP and aggregate supply B. potential GDP and aggregate demand C. levels of output and aggregate supply D. levels of wages and aggregate demand
A
It is sometimes argued that nation should not depend too heavily on other countries for supplies of certain key products. This argument is commonly known as the _______________. A. National Interest Argument B. Import Limitation Argument C. Anti-Dumping Argument D. Buy-American Argument
A
A __________________ often results in an outflow of financial capital leaving the domestic economy and being invested in the global economy? A. trade surplus B. trade deficit C. fiscal deficit D. twin surplus
A
A ______________________ is created each time the federal government spends more than it collects in taxes in a given year. A. budget deficit B. budget surplus C. corporate tax D. regressive tax
A
A government annually collects $230 billion in tax revenue and allocates $29 billion to its universal healthcare spending. What percentage of this government's budget is spent on healthcare? A. 12.60% B. 26.63% C. 16.43% D. 21.90%
A
A government began 2013 with a budget surplus and a trade deficit. Due to the onset of recession, the government changed its policy and is now running a budget deficit. If all other factors hold constant, this change in policy will cause: A. the exchange rate and the trade deficit to increase. B. the exchange rate and the trade deficit to decrease. C. the exchange rate to decrease and the trade deficit to increase. D. the exchange rate to increase and the trade deficit to decrease.
A
A rule that every imported product must be opened by hand and inspected with a magnifying glass, by one of just three government inspectors available at any given time might be referred to as __________________. A. a non-tariff barrier B. a quota C. a government bureaucracy D. an import quota
A
A tariff differs from a quota in that a tariff is: A. a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported. B. a tax levied on exports, whereas a quota is a limit on the number of units of a good that can be exported. C. levied on exports, whereas a quota is imposed on imports. D. levied on imports, whereas a quota is imposed on exports
A
According to the Keynesian framework, ________________________ may cause a recession, but not inflation. A. a major trading partner's economic slowdown B. a decrease in interest rates C. an increase in domestic investment D. a decrease in a major trading partners export prices
A
According to the Keynesian framework, ____________________________ will not help reduce inflation, but may help a country get out of a recession. A. increased spending by the government on health care B. increased taxes on business investments C. decreased military spending D. increased consumer tax rate
A
According to the quantity theory, if constant growth in the money supply is combined with fluctuating velocity, which of the following is most likely to result? A. unpredictable rises and falls in nominal GDP B. monetary policy will become inevitably imprecise C. quantity of credit rises above where it otherwise be D. innovations relating to banking and finance
A
Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If the terms of trade are established as 1 apple for 2 oranges, then: A. there are no incentives for Alpha to specialize and trade with Beta. B. it is in the interest of both countries to specialize and trade with one another. C. it is in the interest of Beta to grow oranges and trade for apples. D. there are no incentives for Beta to engage in international specialization and trade of apples and oranges
A
An import quota or tariff on French wine that raises the prices for wine will probably: A. hurt domestic wine drinkers but help domestic wineries, which will gain from the higher prices. B. hurt both domestic wine drinkers and domestic wineries, but this will be more than offset by a reduction in driving fatalities. C. hurt both domestic wine drinkers and domestic wine producers because of a reduction in competition. D. hurt domestic wineries, which will lose business as a result of the higher prices.
A
Currently, the US government accumulated debt to GDP ratio: A. is lower than its historical high point. B. is higher than it has ever been. C. is lower than it has ever been. D. has remained relatively steady for the past decade.
A
During the second half of the twentieth century, trade barriers have in general: A. declined quite substantially both in the U.S. economy and in the global economy. B. declined quite substantially in the U.S. economy but not in the global economy. C. increased quite substantially in the U.S. economy and in the global economy. D. increased quite sbstantially in the U.S. economy but not in the global economy.
A
From a neoclassical view, which of the following is less important? A. fighting unemployment B. encouraging long-term growth C. fighting inflation D. level of potential GDP
A
If Sarah uses her smart card to purchase movies over the internet, then the money to pay the retailer will come from: A. Sarah's M1 funds. B. the smart card company's M1 funds. C. the smart card company's M2 funds. D. Sarah's M2 funds.
A
If South Dakota's governor reports a budget surplus in 2011, that state government likely: A. received more in taxes than it spent in that year. B. increased the proportional tax level. C. equalized spending and taxes in that year. D. increased the corporate income tax rate.
A
If a Keynesian expenditure-output model shows that aggregate demand for both goods and labor has shifted to the left to D1, while wages remained at w0 and prices remained at P0, what will be the result? A. excess supply B. natural rate of unemployment C. coordinated wage reductions D. depression
A
If a country's economic data shows that private savings equal $250 million, government spending equals $400 million, taxes equal $350, and the trade surplus equals $150 million, then what does investment equal? A. $50 million B. $75 million C. $450 million D. $350 million
A
If aggregate supply is vertical, then which of the following statements must be true? A. Aggregate demand does not affect the quantity of output. B. Aggregate demand does not cause inflationary changes in price level. C. Inflation will accompany any rise in output. D. Inflation creates greater social benefits.
A
If loans become far less available, then sectors of the economy that ______________ like business investment, home construction, and car manufacturing can be dealt a crushing blow. A. depend on borrowed money B. typically generate extraordinary gains C. make loans to financial capital markets D. failed to diversify risk
A
If the economy is at equilibrium as shown in the diagram, then a contractionary monetary policy will A. increase unemployment, but have little effect on inflation. B. increase unemployment and decrease inflation. C. increase output and increase inflation. D. have no effect on output, but increase inflation.
A
If the government's budget deficit increases while the economy is producing substantially less then potential GDP and expansionary monetary policy is implemented, then any ________________ from government borrowing would be _____________________________ from that monetary policy. A. higher interest rates; largely offset by the lower interest rates B. lower interest rates; largely offset by the higher interest rates C. increase in interest rates; reduced by private sector investment D. inflationary increase in price level; crowding out private investment
A
If the original level of aggregate demand is AD0, then an expansionary monetary policy that shifts aggregate demand to AD1 will only: A. create an inflationary increase in price level. B. create an increase in GDP. C. create an increase in unemployment. D. create a deflationary loss in price level.
A
In India one person can produce 330 pounds of rice or 110 shirts in one year. In China one person can produce 400 pounds of rice or 200 shirts in one year. Which of the following statements is true? A. India has a comparative advantage in the production of rice. B. China has a comparative advantage in the production of rice. C. China has both an absolute and comparative advantage in the production of rice. D. India has an absolute advantage in the production of rice.
A
In an economy with _______________, money loses some buying power each year, but it remains money. A. inflation B. currency C. deflation D. a market orientation
A
In macroeconomics, a _______________ describes the common way in which market values are measured in an economy. A. unit of account B. medium of exchange C. store of value D. unit of exchange
A
Referring to the diagram, complete the following sentence: Any increase in aggregate demand in the short-run will lead to:(prices vs. output) A. an increase in output (Q1 to Q2), but it will also lead to prices increasing. B. an increase in output (Q1 to Q2), but it will also lead to a recession. C. a 45 degree supply curve, which will lead to increasing unemployment. D. a 45 degree supply curve, which will lead to recession.
A
Regardless of the outcome in the long run, ______________________ always has the effect of stimulating the economy in the short run. A. expansionary monetary policy B. contractionary monetary policy C. reverse quantitative easing policy D. tight monetary policy
A
Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 36 units of food per year or 18 units of clothing. Which of the following is true? A. Georgeland has an absolute but not a comparative advantage in producing clothing. B. Georgeland has both an absolute and a comparative advantage in producing clothing. C. Alland has an absolute but not a comparative advantage in producing food. D. Alland has both an absolute and a comparative advantage in producing food.
A
Some nations that seek to produce all of their own needs face the problem that: A. some industries are too small to be efficient if restricted to their domestic markets alone. B. they can deplete their natural resources as a result. C. the opportunity cost of producing some of their own goods is lower than that of trading with others for them. D. they will not be able to satisfy the wants of all of their citizens.
A
Stealth bank has deposits of $350 million. It holds reserves of $30 million and government bonds worth $70 million. If the bank sells its loans at market value of $400 million, what will its total assets equal? A. $500 million B. $750 million C. $450 million D. $380 million
A
Suppose that Canada can produce 100,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek, while Germany can produce 90,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek. From these numbers, we can conclude: A. Canada has a comparative advantage in the production of hockey sticks. B. Germany has a comparative advantage in the production of hockey sticks. C. Canada has an absolute advantage in the production of maple syrup. D. Germany has an absolute advantage in the production of maple syrup.
A
Suppose that a rise in business confidence has led to more investment in the economy and higher levels of output. In the short-run Keynesian analysis, the rise in aggregate demand will: A. lower unemployment. B. cause government to lower taxes. C. cause government to increase spending. D. exports will drop.
A
Suppose that out of the original 100 increase in government spending, 33 will be recycled back into purchases of domestically produced goods and services in the second round and 10.89 is spent in the third round. Following this multiplier effect, what value would be recycled in the fourth round of this cycle? A. 3.59 B. 9.89 C. 3.37 D. 5.23
A
Tariffs are taxes imposed on _________________. A. imported products B. exported products C. hazardous goods D. surplus goods
A
The equilibrium quantity of labor decreases and the equilibrium wage increases when: A. labor supply shifts to the left, if wages are flexible. B. labor demand shifts to the left, if wages are flexible. C. labor demand shifts to the right, if wages are flexible. D. labor supply shifts to the right, if wages are flexible,
A
The federal government levies _____________________________ on people who pass assets ____________________________, either after death or during life. A. an estate and gift tax; to the next generation B. a regressive tax; to non-family members C. an excise tax; to their children D. a progressive tax; to non-family members
A
The opportunity cost of producing a pair of pants in the USA is 5 bushels of wheat, while in China, it is 2 bushels of wheat. As a result: A. there can be mutual gains from trade to the two countries if the USA exports wheat to China in exchange for pants. B. The USA has a comparative advantage over China in the production of pants. C. China has a comparative advantage over the USA in the production of wheat. D. there can be mutual gains from trade to the two countries if the USA exports pants to China in exchange for wheat.
A
The reasons that nations trade includes the fact that: A. no one country produces all of what citizens within the country want. B. the wants of their citizens exceeds their productive capacity. C. different countries have different levels of greed. D. labor costs are too high in some countries to efficiently produce goods.
A
The sum of all the income received for contributing resources to GDP is called ___________________. A. national income (Y) B. national revenue (Y) C. marginal income (X) D. marginal revenue (X)
A
The theory of comparative advantage shows that the gains from international trade do not just result from the absolute advantage of producing at lower cost, but also from pursuing comparative advantage and producing at a lower ________________. A. opportunity cost B. absolute cost C. relative cost D. comparative cost
A
Using a neoclassical model, what will the level of cyclical unemployment be when an economy is producing at potential GDP? A. zero B. never 0% C. 1% - 3% D. 3% - 5%
A
What term is used to describe the interest rate charged by the central bank when it makes loans to commercial banks? A. discount rate B. reserve requirement C. Fed rate D. open market rate
A
When a Central Bank makes a decision that will cause an increase in both the money supply and aggregate demand, it is: A. following a loose monetary policy. B. following a tight monetary policy. C. following a contractionary monetary policy. D. reversing quantitative easing.
A
When a shift in ________________ occurs, rational expectations hold that its impact on output and employment will only be temporary. A. aggregate demand B. aggregate supply C. wage levels D. price levels
A
When the government passes a new law that explicitly changes overall tax or spending levels, it is enacting: A. discretionary fiscal policy. B. progressive fiscal policy. C. regressive fiscal policy. D. fiscal policy.
A
When the interest rate in an economy increases, it is likely the result of either: A. a decrease in the government's budget surplus or an increase in its budget deficit. B. a decrease in the government budget surplus or its budget deficit. C. an increase in the government budget surplus or a decrease in its budget deficit. D. an increase in the government budget surplus or its budget deficit.
A
Which of the following government policies would be supported by neoclassical macroeconomic assumptions? A. focus on long-term growth and on controlling inflation B. focus on short-term recession and controlling inflation C. focus on combating depression and cyclical unemployment D. focus on real GDP and cyclical unemployment
A
Which of the following is a valid criticism of the use of money as a store of value in modern economies? A. annual inflationary loss of buying power B. money supply is too narrowly defined C. storing money is wasteful D. imperfect as a unit of account
A
Which of the following is not a short-run impact of imposing quotas on the American industries they seek to protect? A. government tax revenues increase B. domestic production and sales by the protected industries increase C. consumers' real incomes decrease D. prices of the goods produced by protected industries increase
A
Which of the following will cause the multiplier to be smaller and cause changes in investor confidence to have a smaller effect in an economy? A. bigger leakages B. smaller leakages C. increased trade D. decreased trade
A
________________ serves society in three functions: medium of exchange, unit of account, and store of value. A. Money B. Currency C. Barter D. A double coincidence of wants
A
__________________ pool the deposits of many investors together and invest them in a safe way like short-term government bonds. A. Money market funds B. Savings deposits C. Time deposits D. Certificates of deposit
A
A ______________________ means that government spending and taxes are equal. A. fiscal budget B. balanced budget C. contractionary fiscal policy D. discretionary fiscal policy
B
A decrease in the government's budget surplus will cause the interest rate to: A. decrease. B. increase. C. either increase or decrease. D. remain the same.
B
A government collects $600 billion annually in tax revenue. Each year it allocates $35 billion to healthcare and $50 billion for education. What percentage of annual tax revenue is allocated to these two categories of government spending? A. 21.37% B. 14.16% C. 17.51% D. 26.41%
B
A government collects $700 billion annually in tax revenue. Each year it allocates $70 billion to the justice system and $130 billion for its own administrative costs. What percentage of annual tax revenue is allocated to these two categories of government spending? A. 37.15% B. 28.57% C. 17.51% D. 27.58%
B
A new American import quota on imported steel would be likely to: A. increase the production of steel-using American firms. B. increase American production of steel. C. generate tax revenue to the government. D. reduce the cost of production to steel-using American firms.
B
A typical ____________________________ fiscal policy allows government to decrease the level of aggregate demand, through increases in taxes. A. expansionary B. contractionary C. discretionary D. standardized
B
According to the Keynesian framework, ________________ in __________________ may cause inflation, but not a recession. A. decrease; interest rates B. an increase; domestic investment C. a decrease; a major trading partner's economy D. a decrease; a major trading partner's export prices
B
According to the Keynesian framework, which of the following will not help a country to get out of a recession, but may help that country reduce inflation? A. an increase in military spending B. a decrease in military spending C. increase in spending by the government on health care D. decrease in spending by government on health care
B
According to the basic quantity equation of money, if price and output fall while velocity increases, then: A. the quantity of money will rise. B. the quantity of money will fall. C. the quantity of money will rise before it falls. D. the quantity of money will rise slowly.
B
After the USA introduces a tariff in the market for gigastraps, the price of gigastraps in the USA will: A. decrease. B. increase. C. remain the same. D. change in an indeterminate manner.
B
Alternate Outputs from One Day's Labor Input:USA: 12 bushels of wheat or 3 yards of textiles.India: 3 bushels of wheat or 12 yards of textiles. From the data, the USA: A. has an absolute advantage over India in the production of textiles. B. has an absolute advantage over India in the production of wheat. C. has a comparative advantage in the production of textiles. D. should export textiles to India.
B
An import quota does which of the following? A. decreases the price of the imported goods to consumers B. increases the price of the domestic goods to consumers C. redistributes income away from domestic producers of those products toward domestic producers of exports D. both a and c
B
An increase in government borrowing can: A. allow private investment to expand. B. crowd out private investment in physical capital. C. increase the incentive to invest in technology. D. cause a substantial decrease in interest rates.
B
As international trade increases, it contributes to a shift in jobs away from industries where that economy does not have a(n) __________ advantage and toward industries where it has a(n) ___________ advantage. A. absolute; absolute B. comparative; comparative C. comparative; competitive D. comparative; absolute
B
At the beginning of 2009, a government had a total debt of $540 billion dollars. It ended 2009 with a $6 billion dollar budget surplus. In 2010, its budget surplus reached $8 billion dollars. What is the total debt of the government equal to at the end of 2010? A. $554 billion B. $540 billion C. $0 D. $14 billion
B
Banks typically come under financial stress because of: A. the money multiplier effect. B. a widespread decline in the value of their assets. C. diversification of loan assets. D. risks associated with extraordinary economic gains.
B
Because of the difference between the discipline imposed by market competition and the discipline imposed by political decisions, which of the following is most likely? A. reduced government borrowing to avoid crowding out private investment B. difficulty managing public investment so it's done in a cost effective way C. government budgets will exactly shadow the rate of private investment D. tax budgets increase without a corresponding drop in private investment
B
Economists would say tariffs: A. protect domestic producers of exported goods. B. limit voluntary exchanges. C. protect foreign producers of goods. D. protect domestic consumers of goods.
B
How are the specific interest rates for the lending and borrowing markets determined? A. U.S. Treasury Department Board policy B. by the forces of supply and demand C. through open market operations D. by altering the discount rate
B
If Bill performs plumbing upgrades for Alice in exchange for her incorporating his business, then their _________________________ will be satisfied. A. balance of trade B. double coincidence of wants C. convenience of exchange D. division of labor
B
If GDP is 2400 and the money supply is 600, then what is the velocity? A. 18.3 B. 4 C. 4.57 D. 12
B
If Japan does not have a comparative advantage in producing rice, the consequences of adopting a Japanese policy reducing or eliminating imports of rice into the country would include: A. Japan will be able to consume a combination of rice and other goods beyond their domestic production possibilities curve. B. the real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall. C. the real incomes of Japanese rice consumers would rise, but the real incomes of Japanese rice producers would fall. D. the price of rice in Japan will fall.
B
If a country's economic data shows private savings of $500 million, government spending of $300 million, tax revenue of $400 million, and a trade surplus of $100 million, then what does investment equal? A. $600 million B. $500 million C. $700 million D. $900 million
B
If a country's economic data shows that private savings equal $350 million, government spending equals $375 million, taxes equal $300, and the trade surplus equals $125 million, then what does investment equal? A. $50 million B. $150 million C. $425 million D. $600 million
B
If government tax policy requires Jane to pay $25,000 in taxes on annual income of $200,000 and Mary to pay $10,000 in tax on annual income of $100,000, then the tax policy is: A. regressive. B. progressive. C. proportional. D. optional.
B
If individual income tax accounts for more total revenue than the payroll tax in the U.S., why would over half the households in the country pay more in payroll taxes than in income taxes? A. income tax is a proportional tax B. income tax is a progressive tax C. payroll tax is a regressive tax D. payroll tax is a progressive tax
B
If markets throughout the global economy all have flexible and continually adjusting prices, then: A. all market-oriented economies will implement coordinated wage reductions. B. each economy will always head for its natural rate of unemployment. C. each economy must shift in aggregate demand and create additional employment. D. all changes in prices and wages will create additional employment.
B
If the U.S. economy is producing at a level that is substantially less than potential GDP and the government's budget deficits are increasing aggregate demand, then ____________________________ is not much of a danger A. a tight monetary policy B. an inflationary increase in the price level C. international financial investment D. the central bank's contractionary monetary policy
B
If the government initiates an expansionary monetary policy at the same time that its budget deficit increases, then the interest rate will __________________. A. remain unchanged B. either increase or decrease C. increase D. decrease
B
In good economic times, a surge in lending exaggerates the episode of economic growth. Which of the following adaptations of monetary policy can moderate these exaggerated effects? A. price stability to reinforce effect of deposit insurance B. monitoring asset prices and leverage C. quantitative easing when banks are under stress D. inflation-targeting lender of last resort policies
B
In order to shift the vertical supply curve to the left, which of the following would have to occur? A. increase in productivity B. breakdown of key market institutions C. expansion of potential GDP D. flexible wage and price adjustments
B
In the neoclassical model, the AS curve shifts to the right over time as_______________________ and potential GDP expands. A. the macroeconomy adjusts back to real GDP B. productivity increases C. the level of real output drops D. aggregate demand increases
B
Intra-industry trade between similar trading partners allows the gains from ______________________ that arise when firms and workers specialize in the production of a certain product. A. comparative advantage B. learning and innovation C. creating the value chain D. relative advantage
B
Introducing a tariff on vitamin Z would: A. reduce exports of vitamin Z. B. increase American consumption of domestically produced vitamin Z. C. increase total American consumption of vitamin Z. D. decrease domestic production of vitamin Z.
B
Low-wage U.S. workers suffer from protectionism in all the industries that they don't work in, because: A. protectionism provides a barrier to entry to the job markets that the low-wage earners want entry to. B. protectionism forces them to pay higher prices for basic necessities like clothing and food. C. protectionism will encourage foreign workers to apply for American jobs. D. protectionism will prevent them from applying for those jobs in other industries.
B
Over the long run, a surge in aggregate demand from a neoclassical perspective will most likely result in: A. a rise in level of output. B. an increase in price level. C. downward pressure on the price level. D. pressure for a lower level of inflation.
B
Referring to the diagram, which of the following is a true statement? A. The increase in supply (Q1 to Q2) may come about because of increased money supply. B. The increase in output (Q1 to Q2) may come about because of lower levels of taxation. C. The increase in supply (Q1 to Q2) may result from decreased government spending. D. The increase in output (Q1 to Q2) may result from increased levels of taxation.
B
Stealth bank has deposits of $300 million. It holds reserves of $20 million and has purchased government bonds worth $300 million. The bank's loans, if sold at current market value, would be worth $600 million. What does Stealth bank's net worth equal? A. $20 million B. $620 million C. $1.22 billion D. $920 million
B
Stealth bank has deposits of $700 million. It holds reserves of $20 million and has purchased government bonds worth $350 million. The bank's loans, if sold at current market value, would be worth $600 million. What does Stealth bank's net worth equal? A. $120 million B. $270 million C. $1.02 billion D. $970 million
B
Suppose that out of the original 100 of government spending, 33 will be recycled back into purchases of domestically produced goods and services in the second round and 10.89 is spent in the third round. Following this multiplier effect, what will the value of the total aggregate expenditures be after the fourth round in the cycle is completed? A. 141.70 B. 147.48 C. 147.62 D. 144.41
B
The Keynesian economic framework is based on an assumption that: A. an increase in government spending will cause the aggregate demand curve to shift to the left. B. prices and wages are sticky and do not adjust rapidly. C. an increase in government spending will cause the aggregate demand curve to shift to the left. D. people can afford a high level of government services.
B
The Keynesian view of economics assumes that: A. the Keynesian Phillips curve is vertical. B. wages are sticky. C. the economy must focus is on long-term growth. D. economic output is primarily determined by aggregate supply.
B
The United States national minimum wage is _____________. A. $6.25/hour B. $7.25/hour C. $8.25/hour D. $9.25/hour
B
The acronym GATT stands for: A. General Association for Trade and Tariffs. B. General Agreement on Tariffs and Trade. C. General Accounting for Tariff and Trade. D. General Association on Technology and Trade.
B
The concept of _________________ means that as the measure of output goes up, average costs of production decline-at least up to a point. A. relative advantage B. economies of scale C. absolute advantage D. comparative advantage
B
The current level of US government accumulated debt, when measured in nominal dollars: A. has reached higher levels in the past. B. is higher than it has ever been. C. is lower than it has ever been. D. has remained steady for the past decade.
B
The diagram refers to a private closed economy. In this instance, the equilibrium GDP is: A. $60 billion. B. $180 billion. C. between $60 and $180 billion. D. $60 billion at all levels of GDP.
B
The equilibrium quantity of labor and the equilibrium wage increase when: A. labor supply shifts to the right, if wages are flexible. B. labor demand shifts to the right, if wages are flexible. C. labor demand shifts to the left, if wages are flexible. D. labor supply shifts to the left, if wages are flexible.
B
The infant industry argument for protectionism suggests that an industry must be protected in the early stages of its development so that: A. firms will be protected from subsidized foreign competition. B. domestic producers can attain the economies of scale to allow them to compete in world markets. C. there will be adequate supplies of crucial resources in case they are needed for national defence. D. it will not be subjected to a takeover from a foreign competitor.
B
The neoclassical perspective on macroeconomics emphasizes that in the long run, the economy seems to rebound back to its _____________ and its ____________________. A. long term growth; cyclical unemployment B. potential GDP; natural rate of unemployment C. natural level of output; cyclical unemployment rate D. real GDP; natural rate of unemployment
B
The quantitative easing policies adopted by the Federal Reserve are usually thought of as: A. short term loans to fill out reserves. B. temporary emergency measures. C. traditional monetary policies. D. a relatively weak tool.
B
The quantity of money in an economy and the _____________________ are inextricably intertwined. A. value of assets for loans B. quantity of credit for loans C. financial stress in the banking system D. extraordinary gains that can be made with money
B
The slope of the production possibility frontier is determined by the ________________ of expanding production of one good, measured by how much of the other good would be lost A. absolute advantage B. opportunity cost C. relative advantage D. specialization
B
The theory of _____________________ holds that people will use all information available to them to form the most accurate possible expectations about the future. A. adaptive expectations B. rational expectations C. Keynesian economics D. Neoclassical economics
B
The time lag for monetary policy is typically ________________ the time lag for fiscal policy. A. longer than B. shorter than C. about the same as D. the same as
B
Trade allows each country to take advantage of _________________ in the other country. A. economies of scale B. lower opportunity costs C. specialization D. worker productivity
B
When a country's economy is producing at a level that exceeds its potential GDP, the standardized employment budget will show a __________________ than the actual budget. A. smaller surplus B. smaller deficit C. larger deficit D. surplus
B
When banks hold excess reserves because they don't see good lending opportunities: A. it negatively affects contractionary monetary policy. B. it negatively affects expansionary monetary policy. C. expansionary monetary policy is unaffected. D. contractionary monetary policy is unaffected.
B
When inflation begins to climb to unacceptable levels in the economy, the government should: A. use contractionary fiscal policy to shift aggregate demand to the right. B. use contractionary fiscal policy to shift aggregate demand to the left. C. use expansionary fiscal policy to shift aggregate demand to the right. D. use expansionary fiscal policy to shift aggregate demand to the left.
B
Which of the following is a valid criticism of the rational expectations theory? A. prices do not wait on events B. the assumption seems too strong C. people form the most accurate possible expectations D. adjustment of wages and prices might be quite rapid
B
Which of the following is considered to be a relatively weak tool of monetary policy? A. quantitative easing B. altering the discount rate C. reserve requirements D. reducing the money supply
B
Which of the following is least likely to benefit the civilian economy? A. R&D carried out in government laboratories B. R&D aimed at producing new weapons C. direct private sector R&D spending D. tax policy promoting civilian R&D spending
B
Which of the following is not a consequence of an increase in the government's budget deficit? A. private savings increases while holding everything else constant B. exports increase while imports and all other variables are held constant C. imports increase while exports and all other variables are held constant D. investment falls while holding everything else constant
B
Which of the following is the best example of a quota? A. a tax placed on all small cars sold in the domestic market B. a limit imposed on the number of men's suits that can be imported from a foreign country C. a subsidy from the American government to domestic manufacturers of men's suits so they can compete more effectively with foreign producers of men's suits D. a $100-per-car fee imposed on all small cars imported
B
Which of the following would be expected if the tariff on foreign-produced automobiles were increased? A. The domestic price of automobiles would fall. B. The supply of foreign automobiles to the domestic market would be reduced, causing auto prices to rise. C. The number of unemployed workers in the domestic automobile industry would rise. D. The demand for foreign-produced automobiles would increase, causing the price of automobiles to increase in other nations.
B
Why would foreign firms export a product at less than its cost of production-which presumably means making a loss? A. Many nations participate in poor planning and as a result produce a surplus of product which they sell at a loss. B. This may be part of a long-term strategy in which foreign firms would sell at below the cost of production in the short-term for a time, and when they have driven out the domestic U.S. competition, they would then raise prices. C. Many nations simply wish to keep their workers employed, no matter what the cost. D. Many nations simply produce and sell inferior goods at prices that reflect this fact.
B
____________ means selling goods below their cost of production. A. Protectionism B. Dumping C. Import quotas D. Non-tariff barriers
B
_____________ are a form of financial instrument through which corporations and governments borrow money from financial investors and promise to repay with interest. A. Certificates of deposit B. Bonds C. Money market funds D. Time deposits
B
_____________ are numerical limitations on the quantity of products that can be imported. A. Tariffs B. Import quotas C. Taxes D. Nontariff barriers
B
_______________________ that require the depositor to commit to leaving their funds in the bank for a certain period of time, in exchange for a higher rate of interest are also called ________________. A. Demand deposits; certificates of deposit B. Certificates of deposit; time deposits C. Money market funds; time deposits D. Bonds; term deposits
B
_________________________ are included in the aggregate amount of MI money currently in circulation. A. Savings deposits B. Traveler's checks C. Short-term bonds D. Foreign currency deposits
B
___________are funds that the bank keeps on hand that are not loaned out or invested in bonds. A. Certificates of deposit B. Reserves C. Time deposits D. Demand deposits
B
A government annually collects $230 billion in tax revenue and allocates $70 billion to military spending. What percentage of this government's budget is spent on its military? A. 27.50% B. 36.63% C. 30.43% D. 41.90%
C
A prolonged period of budget deficits may lead to ___________________. A. outflows of financial capital abroad B. lower inflation C. lower economic growth D. increasing exchange rates
C
A vertical AS curve means that the level of aggregate supply (or potential GDP) will determine the real GDP of the economy, regardless of the level of: A. cyclical unemployment. B. real unemployment. C. aggregate demand. D. inflationary pressures.
C
After reports of the subprime mortgage crisis began to appear in the media, which of the following most likely caused housing prices to fall? A. neoclassical theory B. cyclical expectations C. rational expectations D. Keynesian theory
C
Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. The opportunity cost of producing 1 orange for Alpha and Beta, respectively, are: A. 0.25 apples; 0.5 apples. B. 9 apples; 4 apples. C. 0.5 apples; 0.25 apples. D. 2 apples; 4 apples
C
Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles.India: 3 bushels of wheat or 12 yards of textiles. The opportunity cost of one bushel of wheat in India is: A. 1 yard of textiles. B. 3 yards of textiles. C. 4 yards of textiles. D. 12 yards of textiles.
C
By June, 2010, the U.S. government owed $13.6 trillion dollars ________________ that, over time, has remained unpaid. A. from decreases in excise tax B. from decreases in income tax C. in accumulated government debt D. from decreases in corporate tax
C
Central bank policy requires all banks to hold 10% of deposits as reserves. Pacific Bank policy prevents it from holding excess reserves. Suppose banks cannot trade any of the bonds they already have. If the central bank decides to lower the reserve requirement to 9%, which of the following will result? A. the money supply in the economy decreases B. decrease of $1 million in Pacific's net worth C. increase of $1 million in Pacific's loan assets D. increase of Pacific's bond assets by $1million
C
Consumption, investment, government spending, exports, and imports are: A. all complementary elements of a market-orientated economy. B. some of the opposing elements found in a market-orientated economy. C. all components of aggregate demand. D. some of the building blocks of Keynesian analysis.
C
From a neoclassical perspective, which of the following would most likely be viewed as an element that underpins long-run productivity growth in the economy? A. flexible price levels B. flexible market forces C. investments in human capital D. higher unemployment
C
If Brent uses his credit card to purchase a new television, then the money to pay the retailer is taken from: A. his M1 funds. B. his M2 funds. C. the credit card company's M1 funds. D. the credit card company's M2 funds.
C
If David Ricardo's theory holds completely true, then any change in budget deficits or budget surpluses would be completely offset by which of the following? A. a change in currency exchange rates B. a sustained pattern of trade imbalances C. a corresponding change in private saving D. a dependence on inflows of capital
C
If a Central Bank decides it needs to decrease both the aggregate demand and the money supply, then it will: A. follow expansionary monetary policy. B. follow loose monetary policy. C. follow tight monetary policy. D. follow quantitative easing policy
C
If a Phillips curve shows that unemployment is high and inflation is low in the economy, then that economy: A. is producing at its potential GDP. B. is producing at a point where output is more than potential GDP. C. is producing at a point where output is less than potential GDP. D. is producing at its equilibrium point.
C
If a country's GDP decreases, but its debt increases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes. A. decrease B. increase or decrease C. increase D. decrease because GDP decreased
C
If a country's economic data shows private savings of $300 million, government spending of $350 million, tax revenue of $400 million, and a trade surplus of $75 million, then what does investment equal? A. $775 million B. $475 million C. $275 million D. $700 million
C
If a government decides to finance an investment in ________________ with higher taxes or ____________________ in other areas, it need not worry that it is crowding out private investment. A. roads and bridges; increased borrowing B. water supply and sewers; by raising capital spending C. public physical capital; lower government spending D. hydroelectric dams and windmills; government R&D
C
If a nation has a comparative disadvantage in the production of some commodity: A. it cannot gain from international trade unless it has an absolute advantage in every other commodity. B. it cannot gain from international trade in the commodity. C. it can still gain from international trade in that commodity, by getting it at a lower opportunity cost than if it produced it domestically. D. it can gain from international trade in that commodity only if it has an absolute advantage in that commodity.
C
If a neoclassical model shows increasing wages in the economy over the long run, what else will likely occur? A. change in government policy to decrease in aggregate demand B. substantial short-term off-setting decrease in output C. inflationary increase in price level D. short-run decrease in cyclical unemployment
C
If government tax policy requires Bill to pay $20,000 in taxes on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is: A. regressive. B. progressive. C. proportional. D. optional
C
If nominal GDP is 1800 and the money supply is 450, then what is velocity? A. 25 B. 4.5 C. 4 D. 22
C
If nominal GDP is 2700 and the money supply is 900, what is velocity? A. 25 B. 13.5 C. 3 D. .33
C
If the central bank decreases the amount of reserves banks are required to hold from 20% to 10%, then: A. the money multiplier will increase and the supply of money in the economy will decrease. B. both the money multiplier and the supply of money in the economy will decrease. C. both the money multiplier and the supply of money in the economy will increase. D. the money multiplier will decrease and the supply of money in the economy will increase.
C
If the economy is producing less than its potential GDP, _____________________ will show a larger deficit than the actual budget. A. discretionary fiscal policy B. the automatic stabilizers C. the standardized employment budget D. expansionary fiscal policy
C
If the government initiates an expansionary monetary policy at the same time that its budget deficit decreases, then the interest rate will ______________________. A. increase B. either increase or decrease C. decrease D. remain unchanged
C
If you were to survey central bankers from around the world and ask them what they believe the primary task of monetary policy should be, what would the most popular answer likely be? A. leverage cycle B. bank runs C. fighting inflation D. bank supervision
C
Import tariffs generally ________ the output of domestic producers of the affected products and also _________ the output of domestic exporters. A. decrease; decrease B. decrease; increase C. increase; decrease D. increase; increase
C
In a Keynesian cross diagram, what name is given to the distance between an output level that is below potential GDP and the level of potential GDP? A. expenditure-output B. inflationary gap C. recessionary gap D. national income (Y)
C
In macroeconomics, _____________________________ describes a situation where a bank's liabilities can be withdrawn in the short-term while its assets are being repaid in the long-term. A. diversification B. reserve ratio C. an asset-liability time mismatch D. a negative net worth
C
In macroeconomics, what name is given to the costs of changing prices that businesses must consider? A. opportunity costs B. internal costs C. menu costs D. customer costs
C
In the neoclassical view, changes in ____________________ can only have a short-run impact on output and on unemployment. A. wage levels B. aggregate supply C. aggregate demand D. tax levels
C
International trade is fundamentally a ________________________. A. win-lose situation B. lose-lose situation C. win-win situation D. war which is won by the strongest
C
Jethro has a(n) __________________ in all aspects of camping: he is faster at carrying a backpack, gathering firewood, paddling a canoe, setting up tents, making a meal, and washing up. A. relative advantage B. opportunity cost C. absolute advantage D. comparative advantage
C
Lance paid $175,000 for his house in 2003 and sold it for $325,000 in 2006. What function did the house serve during the time Lance owned it? A. medium of exchange B. unit of account C. store of value D. unit of exchange
C
Refer to the graph shown below. This graph illustrates a: (Inflation vs. Unemployment) A. Keynesian Curve. B. Neoclassical Curve. C. Phillips Curve. D. Labor Demand Curve.
C
Referring to the diagram, which of the following is a true statement? A. Short-run increased output will lower output costs, but demand for higher profits will increase prices. B. Higher cost levels will result because government will increase taxes as output rises. C. Higher cost levels of increased output will force an increase in price for the product. D. Short-run lower output costs will result because government will decrease taxes as output rises.
C
Suppose that the USA can make 15,000,000 cars or 20,000,000 bottles of wine with one year's worth of labor. France can make 10,000,000 cars or 18,000,000 bottles of wine with one year's worth of labor. From these numbers, we can conclude: A. The USA has a comparative advantage in the production of wine. B. France has a comparative advantage in the production of cars. C. The USA has an absolute advantage in the production of cars. D. France has an absolute advantage in the production of wine.
C
The ___________________ argument tends to view inflation as a cost that offers no offsetting gains in terms of lower unemployment? A. market forces B. Keynesian C. neoclassical D. flexible wage and price
C
The equilibrium quantity of labor and the equilibrium wage level decrease when: A. labor supply shifts to the right, if wages are flexible. B. labor demand shifts to the right, if wages are flexible. C. labor demand shifts to the left, if wages are flexible. D. labor supply shifts to the left, if wages are flexible.
C
The market in which loans are bought and sold is called the: A. loan market. B. money market. C. secondary loan market. D. primary loan market.
C
The people in an economy have $10 million in money. There is only one bank that all the people deposit their money in and it holds 5% of the deposits as reserves. What is the money multiplier in this economy? A. 5 B. 1 C. 20 D. 10
C
The process of banks making loans in financial capital markets is intimately tied to the: A. redistribution of wealth. B. financial stress levels of banks. C. creation of money. D. home construction industry.
C
The race to the bottom scenario of global environmental degradation is explained roughly like this: A. Companies seek to reduce their costs of operations on plant and equipment design and this results in higher levels of pollution. B. Companies seek the lowest market prices on products in order to gain market share, resulting in inferior goods and increased waste and pollution. C. Profit-seeking multinational companies shift their production from countries with strong environmental standards to countries with weak standards, thus reducing their costs and increasing their profits. D. Companies seek to influence environmental legislation standards are set to the lowest possible standards in the USA in order to maximize profits
C
The slope of the production possibility frontier is determined by the ________________ of expanding production of one good, measured by how much of the other good would be lost. A. absolute advantage B. relative cost C. opportunity cost D. comparative advantage
C
What do goods like gasoline, tobacco, and alcohol typically share in common? A. A progressive tax is imposed on each of them. B. A regressive tax is imposed on each of them. C. They are all subject to government excise taxes. D. They are all subject to government fiscal taxes.
C
When increasing oil prices cause aggregate supply to shift to the left, then: A. unemployment and inflation decrease. B. unemployment decreases and inflation increases. C. unemployment and inflation increase. D. unemployment increases and inflation decreases.
C
When nations increase production in their area of _________________ and trade with each other, both sides can benefit. A. relative advantage B. absolute advantage C. comparative advantage D. opportunity cost
C
When the central bank decides it will sell bonds using open market operations: A. interest rates decrease. B. the money supply increases. C. the money supply decreases. D. the money supply is unaffected.
C
When the economy is in a recession, the government will want to increase output. If the multiplier equals 2.5 and the government increases spending by 200, how much will output increase by? A. 100 B. 300 C. 500 D. 900
C
When the interest rate in an economy decreases, it is most likely as a result of: A. an increase in the government budget surplus or its budget deficit. B. a decrease in the government budget surplus or its budget deficit. C. an increase in the government budget surplus or a decrease in its budget deficit. D. a decrease in the government budget surplus or an increase in its budget deficit.
C
Which of the following is least likely to be the result of economic disruptive patterns caused by a prolonged period of government budget deficits? A. high inflation B. substantial inflows of foreign financial capital C. increasing exchange rates D. strains on a country's financial system
C
Which of the following is the percentage of annual US government spending allocated to foreign aid? A. 21% B. 10% C. 1% D. 17%
C
Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank? A. discount requirements B. deposit requirements C. reserve requirements D. monetary requirements
C
Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing? A. financial policies B. monetary policies C. fiscal policies D. economic policies
C
Which of the following would be classified in the M1 category of the money supply? A. savings deposits B. money market deposit C. demand deposits D. certificates of deposit
C
Why do neoclassical economists tend to put relatively more emphasis on long-term growth than on fighting recession? A. price and wage stickiness is reasonable in the short run B. government focuses more on recession and cyclical unemployment C. standard of living is ultimately determined by long-term growth D. upward trend of potential GDP determines the rate of inflation
C
____________ is a completely inadequate mechanism ____________________ in a modern advanced economy. A. Currency; for providing a medium of exchange B. Money; for providing a store of value C. Barter; for trying to coordinate trades D. Money; to use as a unit of account
C
____________________ will not cause a shift of the AS curve in a Keynesian framework. A. Prices of inputs B. Changes in input prices C. Changes in output prices D. Changes in inputs
C
Which of the following is a building block of neoclassical economics? A. the size of the economy is determined by real GDP B. sticky wages and prices C. aggregate demand model D. wages and prices will adjust in a flexible manner
D
_____________________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation. A. Standardized employment budgets B. Discretionary fiscal policies C. Automatic stabilizers D. Budget expenditures
C
"Tariffs and other trade restrictions increase the domestic scarcity of products from abroad. Such policies benefit domestic producers of the restricted products at the expense of domestic consumers." This statement: A. contains one error; the trade restraints do not increase the scarcity of foreign-produced goods. B. contains one error; domestic producers gain at the expense of foreign producers rather than domestic consumers. C. contains two errors; trade restraints do not increase the domestic scarcity of product and neither do they harm domestic consumers. D. is essentially correct.
D
A ____________________________ is one economic mechanism by which government borrowing can crowd out private investment. A. deficit decrease B. smaller trade surplus C. larger trade surplus D. higher interest rate
D
A government annually collects $320 billion in tax revenue and allocates $42 billion to education spending. What percentage of this government's budget is spent on education? A. 24.50% B. 12.31% C. 30.13% D. 13.12%
D
A government deficit has increased from 30 to 50. The country's trade deficit is 100 and private savings equal 65 and investment equal 90. If Ricardian neutrality holds true, after this change in the government's budget, private savings will equal: A. 40. B. 105. C. 95. D. 85
D
A government will likely ____________________________ to encourage investment in technology R&D by private firms? A. reduce R&D grants to nonprofit organizations B. reduce R&D grants to universities C. spend more on R&D in government laboratories D. implement fiscal policy establishing tax incentives
D
A reduction in government borrowing can: A. decrease the incentive to invest. B. increase the interest rate. C. crowd out private investment in human capital. D. give private investment an opportunity to expand.
D
A typical Keynesian aggregate supply (AS) curve _______________ and a typical Keynesian Phillips curve _____________. A. is vertical; is vertical B. slopes downward; slopes downward C. slopes upward; slopes upward D. slopes upward; slopes downward
D
A vertical aggregate supply curve, where the quantity of output is consistent with many different price levels, also implies: A. an upward sloping Phillips curve. B. a downward sloping aggregate demand curve. C. a vertical aggregate demand curve. D. a vertical Phillips curve
D
According to the Keynesian framework, which of the following may help a country reduce inflation, but will not help that country to get out of a recession? A. increased spending by the government on health care B. an increase in taxes on business investments C. an increase in military spending D. a decrease in the tax rate on consumer income
D
According to the _____________________ argument, a market-oriented economy has no obvious way to implement a plan of systematic wage reductions. A. sticky wage and price B. sticky wage C. Keynesian D. Coordination
D
Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. Which of the following statements is true? A. Alpha should export to Beta, but Beta should not export to Alpha. B. Since Alpha has an absolute advantage in both goods, no mutual gains from trade are possible. C. If Alpha specializes in growing oranges and Beta specializes in growing apples, they could both gain by specialization and trade. D. If Alpha specializes in growing apples and Beta specializes in growing oranges, they could both gain by specialization and trade.
D
Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. Which of the following terms of trade between apples and oranges would allow both Alpha and Beta to gain by specialization and exchange? A. 1 orange for 0.2 apples B. 2 apples for 3 oranges C. 3 apples for 3 oranges D. 1 apple for 3 oranges
D
An increase in the government's budget surplus will cause the interest rate to: A. either increase or decrease. B. remain the same. C. increase. D. decrease.
D
Assume that laws have been passed that require the federal government to run a balanced budget. During a recession, the government will want to implement _____________________, but may be unable to do so because such a policy would ____________________________. A. contractionary fiscal policy; lead to a budget deficit B. discretionary fiscal policy; lead to a budget surplus C. contractionary fiscal policy; lead to a budget surplus D. expansionary fiscal policy; lead to a budget deficit
D
Assume that one day's labor in Argentina can produce either 20 units of cloth or 2 units of wine, while in Chile one day's labor can produce either 24 units of cloth or 12 units of wine. If Argentina transfers 2 units of labor from wine to cloth and Chile transfers 1 unit of labor from cloth to wine, the increase in combined output by those two workers will be: A. 16 wine; 8 cloths B. 16 wine; 16 cloths C. 12 wine; 12 cloths D. 8 wine; 16 cloths
D
Banks can protect themselves against an unexpectedly high rate of loan defaults and against the risk of ____________________ by adopting a strategy that will ______________. A. rising interest rates; diversify its loans B. rising interest rates; provide loans to a variety of customers C. an increased reserve requirement; provide loans to a variety of customers D. an asset-liability time mismatch; diversify its loans
D
Central Bank policy requires Northern Bank to hold 10% of its deposits as reserves. Northern Bank policy prevents it from holding excess reserves. If the central bank purchases $30 million in bonds from Northern Bank what will be the result? A. Northern's loan assets increase by $30 million B. Northern's bond assets increase by $30 million C. Northern's net worth changes by $30 million D. the money supply in the economy decreases
D
Colombia produces coffee with less labor and land than any other country; it therefore necessarily has: A. a comparative advantage in coffee production. B. both a comparative and absolute advantage in coffee production. C. an absolute advantage and comparative disadvantage in coffee production. D. an absolute advantage in coffee production
D
Keynesian economics focuses on explaining why recessions and depressions occur, as well as offering a ______________________ for minimizing their effects. A. pricing strategy B. macro-economic model C. set of menu costs D. policy prescription
D
During a recession, if a government uses an expansionary fiscal policy to increase GDP, the: A. aggregate supply curve will shift to the right. B. aggregate supply curve will shift to the left. C. aggregate demand curve will shift to the left. D. aggregate demand curve will shift to the right.
D
From a macroeconomic point of view, which of the following is a source of demand for financial capital? A. savings by households and firms B. foreign financial investment C. domestic household private savings D. government borrowing
D
From a neoclassical view, which of the following is a true statement? A. Lower wages will cause an economy-wide increase in the price of a key input. B. Because wages are flexible, they are unaffected by high rates of unemployment. C. A surge in aggregate demand ends up as a rise in output, but does not increase price levels. D. The economy cannot sustain production above its potential GDP in the long run.
D
If Canada's economy moves into an expansion while its economy is producing more than potential GDP, then: A. government spending and tax revenue will increase because of automatic stabilizers. B. government spending and tax revenue will decrease because of automatic stabilizers. C. automatic stabilizers will increase government spending and decrease tax revenue. D. automatic stabilizers will decrease government spending and increase tax revenue.
D
If Evelyn uses her debit card to buy an iPod, then the money to pay the retailer will come from: A. the debit card company's M1 funds. B. the debit card company's M2 funds. C. her M2 funds. D. her M1 funds.
D
If GDP is 1800 and the money supply is 300, then what is the velocity? A. 18.3 B. 8 C. 4.57 D. 6
D
If GDP is 3600 and the money supply is 300, what is the velocity? A. 18 B. 8 C. 4.57 D. 12
D
If a country's GDP increases, but its debt also increases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes. A. decrease because GDP increased B. increase because its debt increased C. increase D. increase or decrease
D
If a country's economic data shows that private savings equal $300 million, government spending equals $400 million, taxes equal $300, and the trade surplus equals $100 million, then what does investment equal? A. $150 million B. $175 million C. $200 million D. $100 million
D
If a government experiences an increase in its budget surplus, which of the following possible outcomes will likely result? A. investment falls while everything else holds constant B. exports decrease while imports and all other variables are held constant C. imports increase while exports and all other variables are held constant D. private savings decrease while everything else holds constant
D
If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used? A. discretionary B. contractionary C. standardized D. expansionary
D
If an economy experiences a decrease in aggregate demand due to a decline in consumer confidence and output falls below potential GDP, which of the following is likely to occur? A. more consumption and less saving B. adjustment back to potential GDP C. increase in price inflation D. a rise in unemployment
D
If an economy has a budget deficit of 600, private savings of 2,000, and investment of 800. What is the balance of trade in this economy? A. deficit of 600 B. deficit of 2000 C. surplus of 2000 D. surplus of 600
D
If government tax policy requires Peter to pay $15,000 in tax on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is: A. optional. B. progressive. C. proportional. D. regressive
D
If mollusk shells were accepted as a method of payment in modern-day markets, what economic role would they play in the financial system? A. capital exchange B. currency exchange C. unit of exchange D. medium of exchange
D
If the central bank increases the amount of reserves banks are required to hold to 20%, then: A. the money multiplier will increase and the supply of money in the economy will decrease. B. both the money multiplier and the supply of money in the economy will increase. C. the money multiplier will decrease and the supply of money in the economy will increase. D. both the money multiplier and supply of money in the economy will decrease.
D
If the economy is at equilibrium as shown in the diagram, then an expansionary monetary policy will: A. have no effect on both unemployment and inflation. B. reduce unemployment, but increase inflation. C. reduce both unemployment and inflation. D. reduce unemployment, but have little effect on inflation.
D
If the government legislates policies that block imports of solar panels and gives domestic manufacturers a $5 billion dollar tax subsidy, the benefits to the U.S. solar panel manufacturing and distribution industry will be very visible. The bearers of the cost of the tax subsidy: A. are easy to identify. B. also fit this pattern of identifiable winners. C. will have their interests counterbalanced over time. D. are more anonymous.
D
If the neoclassical argument that the economy always moves back to potential GDP is accepted, then which of the following will be more important? A. encouraging higher wages B. fighting unemployment C. fighting recession D. encouraging long-term growth
D
In a market-oriented economy, private firms will undertake most of the _____________________________, and ________________ should seek to avoid a long series of large budget deficits that might crowd out such investment. A. economic growth activities; monetary policy B. economic growth activities; fiscal policy C. investment in human capital; monetary policy D. investment in physical capital; fiscal policy
D
In modern economies, _____________________ receive money from savers and provide funds to borrowers. A. governments B. credit unions C. banks D. financial intermediaries
D
In modern economies, credit cards are a _________________ because of their wide acceptance as a method of payment for both goods and services. A. unit of exchange B. store of value C. unit of account D. medium of exchange
D
Politicians often argue for tariff increases in order to reduce the nation's dependence on imports. If tariffs are increased, the long-run effect is most likely to be: A. an increase in American imports, and a decrease in American exports. B. an decrease in American imports, and an increase in American exports. C. an increase in both American imports and exports. D. a decrease in both American imports and exports.
D
Referring to a Keynesian Phillips curve, a reduction in inflation is likely to cause: A. at least a slight increase in aggregate demand. B. a vertical Phillips curve because aggregate supply remains fixed. C. unemployment to remain constant in the long run. D. at least a slight increase in unemployment.
D
Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 24 units of food per year or 12 units of clothing. Which of the following is true? A. Alland has both a comparative and absolute advantage in producing food. B. Alland has comparative advantage, but not an absolute advantage, in producing food. C. Georgeland has both a comparative and absolute disadvantage in producing clothing. D. Georgeland has an absolute disadvantage, but not a comparative disadvantage, in producing clothing.
D
Stealth bank has deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. If the bank sells its loans at market value of $400 million, what will its total assets equal? A. $110 million B. $710 million C. $480 million D. $510 million
D
Suppose that out of the original 100 increase in government spending, 60 will be recycled back into purchases of domestically produced goods and services. Following this multiplier effect, what value will be recycled in the next round in the cycle? A. 42 B. 3.6 C. 16.66 D. 36
D
Suppose that productivity growth in an economy over a two-year period has fallen to less than 2% per year, causing a severe recession. From the neoclassical view, which of the following will be more important in these circumstances? A. an increase in the annual unemployment rate B. supply and demand in the labor market C. the problem of cyclical unemployment D. the growth rate of long-term productivity
D
Suppose you are analyzing data for an economy in which Ricardian neutrality holds true. If the budget deficit increases by 50, then: A. investment will increase by 50 B. investment will decrease by 50 C. private savings will decrease by 50 D. private savings will increase by 50
D
The Central Bank has raised its reserve requirements from 10% to 12%. If Southern Bank finds that it is not holding enough in reserves to meet the higher requirements, then it will likely: A. keep track of whether money is flowing in or out of the bank. B. buy bonds to increase the size of its reserve assets. C. reduce the quantity of money and loans on the balance sheet. D. borrow for the short term from the central bank.
D
The central bank uses a ____________________ monetary policy to offset business related economic contractions and expansions? A. laissez faire B. loose C. contractionary D. countercyclical
D
The equilibrium quantity of labor increases and the equilibrium wage decreases when: A. labor demand shifts to the left, if wages are flexible. B. labor supply shifts to the left, if wages are flexible. C. labor demand shifts to the right, if wages are flexible. D. labor supply shifts to the right, if wages are flexible,
D
The idea behind comparative advantage reflects the possibility that one party: A. may be able to produce everything relatively more efficiently than another party. B. may be able to produce something at a lower dollar cost than another party. C. with an absolute advantage in producing two different may export goods both of those goods to the other party. D. may be able to produce something at a lower opportunity cost than another party.
D
The market where loans are made to borrowers is called the: A. secondary loan market. B. money market. C. loan market. D. primary loan market.
D
What matters most in determining the efficient distribution of production over the world is: A. absolute advantage. B. efficiency. C. the allocation of resources. D. comparative advantage.
D
When a business firm makes an investment in physical capital, what is that investment subject to? A. state and local government incentives B. economic output and productivity C. political orientated incentives D. the discipline of the market
D
When an economy is experiencing higher real interest rates, business firms will most likely be discouraged from investing in: A. mechanical devices. B. specialized services. C. computer or other technologies. D. tangible and/or intangible capital.
D
When government policy moves from a budget surplus to a budget deficit and the trade deficit remains constant: A. savings will decrease no matter what happens to investment. B. savings will decrease if investment remains constant. C. investment will increase if savings also remains constant. D. investment will decrease if savings also remains constant.
D
When the Central Bank acts in a way that causes the money supply to increase while aggregate demand remains unchanged, it is: A. following a contractionary monetary policy. B. following quantitative easing policy. C. following a tight monetary policy. D. following an expansionary monetary policy.
D
When the Federal Reserve announces that it is implementing a new interest rate policy, the ____________________ will be affected? A. real interest rate B. consumer lending rate C. nominal interest rate D. federal funds rate
D
When the central bank decides to increase the discount rate, the: A. money supply increases. B. interest rates decrease. C. interest rates are unaffected. D. interest rates increase.
D
When the consumption function ordinates MPT 0.2, MPS 0.3, MPI 0.5, and MPC 0.7 are plotted on a graph, what will their values reflect? A. flatter consumption function due to low marginal propensity to tax B. steeper consumption function due to low marginal propensity to save C. flatter consumption function due to high marginal propensity to invest D. steeper consumption function due to high marginal propensity to consume
D
Which of the following is described as an innovative and nontraditional method used by the Federal Reserve to expand the quantity of money and credit during the recent U.S. recession? A. increased discount rate B. increased reserves requirements C. open market operations D. quantitative easing
D
Which of the following is the best example of a tariff? A. a tax placed on all small cars sold in the domestic market B. a limit imposed on the number of small cars that can be imported from a foreign country C. a subsidy from the American government to domestic manufacturers of small cars so they can compete more effectively with foreign producers of small cars D. a $1000-per-car fee imposed on all small cars imported
D
Which of the following is true? A. A nation can have a comparative advantage in the production of a good only if it also has an absolute advantage. B. A nation can have a comparative advantage in the production of every good, but not an absolute advantage. C. A nation cannot have an absolute advantage in the production of every good. D. A nation cannot have a comparative advantage in the production of every good.
D
_____________________ identifies the area where a producer's absolute advantage is relatively greatest, or where the producer's absolute disadvantage in productivity is relatively least. A. relative advantage B. opportunity cost C. productivity advantage D. comparative advantage
D
_________________________ are a form of deposits held in banks that are available by making a cash withdrawal or writing a check. A. Direct deposits B. Savings deposits C. Time deposits D. Demand deposits
D
