macroecon final

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

$510 million

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

$540 billion

Stealth bank holds deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. The current market value of the bank's loans is $400 million. What is the value of the bank's total liabilities? a. $600 million b. $110 million c. $200 million d. $90 million

$600 million

Which of the following is the percentage of annual US government spending allocated to foreign aid? a 21% b 10% c 1% d 17%

1

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

1 apple for 3 oranges

Despite interlocking import quotas, tariffs, and nontariff barriers, the share of apparel sold in the United States that is imported rose from about _________ in 1999 to about ________ today. a. 10%; 25% b. 25%; 50% c. 50%; 75% d. 75%; 90%

50%; 75%

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

8 wine; 16 cloths

Why is there scarcity? a. Because the opportunity set determines this. b. Because theory dictates it. c. Because our unlimited wants exceed our limited resources d. Because human wants are limited.

Because our unlimited wants exceed our limited resources

In the circular flow diagram model: a. households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses. b. businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households. c. households receive revenue for selling goods and services to businesses, and use that revenue to buy inputs from businesses. d. Both (a) and (b) are correct.

Both (a) and (b) are correct.

In countries like _____________ the command economy predominates. a. Germany and France b. South Africa and Kenya c. China and Vietnam d. Cuba and North Korea

Cuba and North Korea

Are markets always in equilibrium? a. No, they never "settle down" into a stable price and quantity. b. No, but if there is no outside interference, they tend to move toward equilibrium. c. Yes, because very few things tend to alter supply and demand. d. Yes, they are always at the equilibrium point, or very close to it.

No, but if there is no outside interference, they tend to move toward equilibrium.

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.

automatic stabilizers will decrease government spending and increase tax revenue.

The demand measure of GDP accounting adds together: a. wages and salaries, rent, interest, and profit. b. consumption, investment, government purchases, and trade balance. c. consumption, government purchases, wages and salaries, and trade balance. d. consumption, interest, government purchases, and trade balance.

consumption, investment, government purchases, and trade balance.

Developing the means to increase human capital, and using existing technology to connect to the global economy are generally associated with growth policies of: a. all nations. b. technologically disconnected nations. c. nations that are technology leaders. d. converging nations.

converging nations.

A forestry worker who is out of work because of the temporarily low demand for wood products associated with a recession is defined as: a. cyclically unemployed b. underemployed. c. frictionally unemployed. d. naturally unemployed.

cyclically unemployed

The ___________ is the only price where quantity demanded is equal to quantity supplied. a. equilibrium price b. horizontal axis intercept c. vertical axis intercept d. market price

equilibrium price

The unemployment rate may underestimate the true extent of unemployment if: a. many people have a part time as well as a full time job. b. there are a large number of people working in the underground economy. c. many people become discouraged and cease looking for work. d. employees increase the number of hours they work overtime.

many people become discouraged and cease looking for work.

Most real-world choices aren't about getting all of one thing or another, instead, most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good. a. utility b. opportunity cost c. benefit analysis d. marginal analysis

marginal analysis

As a person receives more of a good, the _______________ from each additional unit of the good declines. a. utility b. sunk costs c. marginal utility d. budget constraint

marginal utility

In economics, the demand for a good refers to the amount of the good that people: a. would like to have if the good were free. b. will buy at various prices. c. need to achieve a minimum standard of living. d. will buy at alternative income levels.

will buy at various prices.

If the price index moves from 107 to 110, the rate of inflation is: a. 3% b. 30% c. 28% d. 2.8%

2.8%

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

20

If nominal GDP is 2700 and the money supply is 900, what is velocity? a. 25 b. 13.5 c. 3 d. .33

3

A country will roughly double its GDP in twenty years if its annual growth rate is: a. 12 percent. b. 7.5 percent. c. 3.5 percent. d. 2.5 percent.

3.5 percent.

The U.S. unemployment rate moves up and down as the economy moves in and out of recessions. But over time, the unemployment rate seems to return to a range of ____________. a. 2%-4% b. 4%-6% c. 6%-8% d. 8%-10%

4%-6%

Which of the following is a distinguishing characteristic of a Keynesian cross diagram? a. real GDP on the horizontal axis b. a flat line c. 45-degree line d. several different Phillips curves

45-degree line

The economy is in a recession and the government wants to increase output. If the multiplier equals 3 and the government increases spending by 250, how much will output increase by? a. 50 b. 100 c. 200 d. 750

750

If the unemployment rate is 8 percent, then this means: a. 8 percent of the population is unemployed. b. 8 percent of the population age over sixteen is unemployed. c. 8 percent of the labor force is unemployed d. the number of unemployed persons equals 8 percent of the employed persons.

8 percent of the labor force is unemployed

If the unemployment rate is 8 percent, then this means: a. 8 percent of the population is unemployed. b. 8 percent of the population age over sixteen is unemployed. c. 8 percent of the labor force is unemployed. d. the number of unemployed persons equals 8 percent of the employed persons.

8 percent of the labor force is unemployed.

The basket of goods in the Consumer Price Index consists of about _________ products; that is, several hundred specific products in over __________ broad-item categories. a. 200; 800 b. 80,000; 400 c. 80,000; 200 d. 800; 200

80,000; 200

If the unemployment rate is 6 percent and the number of persons unemployed is 6 million, then the number of people employed is equal to: a. 100 million. b. 94 million. c. 106 million. d. 6 million.

94 million.

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.

A nation cannot have a comparative advantage in the production of every good.

When an economy's output increases and the price level decreases, the _________ curve has shifted to the ____________. a. AS; left b. AD; left c. AD; right d. AS; right

AS; right

Which of the following statements most likely lies within the realm of microeconomics? a. A rapid acceleration of the supply of money may create inflation. b. An increase in labor costs will increase the additional cost of producing another bus. c. Unemployment rises during a recession and falls during an expansion. d. An increase in government spending will increase the aggregate demand for goods and services in the economy

An increase in labor costs will increase the additional cost of producing another bus.

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect: a. Andy's demand for pizza to increase. b. Andy's demand for pizza to decrease. c. Andy's quantity of pizza demanded to decrease. d. Andy's demand for beer to increase.

Andy's demand for beer to increase.

_____________ 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

Bonds

Nancy's union has negotiated a three-year wage contract that provides for a 2.4% increase indexed to inflation. The rates of inflation are forecast to be 1.62%, 1.93% and 2.21% respectively. How will Nancy's wage increase be expressed in the new contract? a. COLA plus 1.6% b. COLA plus 1.9% c. COLA plus 2.4% d. COLA plus 2.2%

COLA plus 2.4%

_______________________ 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

Certificates of deposit; time deposits

In _____________________________, firms and workers often build upon or copy technologies and industries developed by the technology leaders. a. Eastern Europe's disconnected economy b. China and India's converging economies c. the Middle East's low-income economies d. South Africa's developing economy

China and India's converging economies

___________ is about two-thirds of the demand side of GDP, but it moves relatively little over time. a. Government b. Consumption c. Investment d. Services

Consumption

In which of the following countries will the national government have the greatest influence with respect to the nation's economy? a. China b. Cuba c. Canada d. Chile

Cuba

In which of the following countries will the national government have the greatest influence with respect to the nation's economy? a. Cuba b. Chile c. China d. Canada

Cuba

In countries like _____________ the command economy predominates. a. Germany and France b. Cuba and North Korea c. China and Vietnam d. South Africa and Kenya

Cuba and North Korea

In countries like _____________ the command economy predominates. a. Germany and France b. Cuba and North Korea c. South Africa and Kenya d. China and Vietnam

Cuba and North Korea

Which of the following is correct? a. An increase in the quantity of labor always leads to economic growth. b. Increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital. c. A decrease in the productivity of labour leads to economic growth. d. Third World countries are rich in human capital.

Increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital.

Which of the following best describes the relationship between economic growth and literacy? a. As the economy grows, literacy declines because it becomes less and less useful in a developed economy. b. Increased literacy initially stimulates economic growth by raising labor productivity, but as the economy grows and the opportunity cost of education rises, literacy declines. c. Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education. d. There is no correlation between economic growth and literacy.

Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education.

The ____________________ is based on the prices of merchandise that are exported or imported. a. International Product Index b. Producer Price Index c. Foreign Price Index d. International Price Index

International Price Index

What name is given to the index based on the prices of exported or imported merchandise? a. U.S. Producer Trade Index b. International Trade Index c. International Price Index d. U.S. Producer Price Index

International Price Index

If they bake only cakes, then in a single day George can bake 10 cakes while Greta can bake 5 cakes. If they only make pies, then in a single day George can bake 10 pies while Greta can bake 4 pies. We then know that: a. George has an absolute advantage and a comparative advantage in making cakes. b. George has an absolute advantage and a comparative advantage in making pies. c. Greta has an absolute advantage and a comparative advantage in making cakes. d. Greta has an absolute advantage and a comparative advantage in making pies.

George has an absolute advantage and a comparative advantage in making pies.

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 16 units of food per year or 8 units of clothing. Which of the following is true? a. Georgeland has a comparative advantage, but not an absolute advantage, in producing clothing. b. Georgeland has both a comparative and absolute advantage in producing clothing. c. Alland has a comparative advantage, but not an absolute advantage, in producing food. d. Alland has an absolute advantage, but not comparative advantage, in producing food.

Georgeland has a comparative advantage, but not an absolute advantage, in producing clothing.

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.

If Alpha specializes in growing apples and Beta specializes in growing oranges, they could both gain by specialization and trade.

__________________ are ways that a nation can draw up regulations, inspections, and paperwork to make it more costly or difficult to import products. a. Tariffs b. Nontariff barriers c. Quotas d. Import ceilings

Nontariff barriers

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

Northern's loan assets increase by $30 million

________________________ are the result of improvements in human capital, physical capital, and technology interacting in a _____________________. a. High income economies; command economy b. Productivity improvements; market-driven economy c. Global economies; remarkably similar manner d. Sustainable balances of trade; global economy

Productivity improvements; market-driven economy

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.

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.

________________________ equalizes the prices of internationally traded goods across countries. a. The foreign exchange rate b. A floating exchange rate c. Purchasing power parity d. An international parity rate

Purchasing power parity

_________________ results when an economy experiences high unemployment and high inflation at the same time. a. Stagflation b. Deflation c. Reflation d. Recession

Stagflation

At the beginning 2010, the government of Norway had no debt and held $180 billion dollars in its sovereign fund. To stimulate its economy during 2011, Norway's government plans to spend $35 billion more than it will collect in tax revenue and in 2012, its spending will exceed tax revenues by $25 billion. What will the total government debt equal at the end of 2012? a. $60 billion b. $0 c. $120 billion d. $180 billion

$0

GDP in the United States in 2012 was about __________. a. $162 billion b. $1.62 trillion c. $16.2 trillion d. $162 trillion

$16.2 trillion

International trade currently involves about ______________ worth of goods and services thundering around the globe. a. $200 trillion b. $20 trillion c. $2 trillion d. $200 billion

$20 trillion

A country finds itself in the following situation: a government budget deficit of $900; total domestic savings of $200, and total domestic physical capital investment of $1300. According to the national saving and investment identity, if investment decreases by $300 while the government budget deficit and savings remain the same, what will happen to the current account balance? a. $200 deficit changes to $100 surplus b. surplus increases from $200 to $500 c. $200 surplus changes to $100 deficit d. deficit decreases from $900 to $600

$200 deficit changes to $100 surplus

The Czech Republic has a GDP of 2,000 billion koruny. The exchange rate is 20 koruny per U.S. dollar. The Czech population is 20 million. Calculate the per capita GDP of the Czech Republic in U.S. dollars. a. $5 b. $100,000 c. $500 d. $5000

$5000

In 2010, Americans had about _____________ outstanding in credit card debts not paid on time. a. $900 billion b. $90 billion c. $900 million d. $90 million

$900 billion

Stealth bank has deposits of $700 million. It holds reserves of $20 million and has purchased government bonds worth $350 million. The banks loans, if sold at current market value, would be worth $600 million. What is the total value of Stealth bank's assets? a. $1.3 billion b. $1.7 billion c. $970 million d. $470 million

$970 million

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.

0.5 apples; 0.25 apples.

The change in inventories, a component of aggregate supply, comprises roughly __________ of GDP. a. 20% b. 10% c. 1% d. 0.5%

0.5%

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 10% of the deposits as reserves. What is the money multiplier in this economy? a. 5 b. 10 c. 20 d. 1

10

Once every __________, the Census Bureau does a comprehensive survey of housing and residential finance. a. month b. 5 years c. 10 years d. 20 years

10 years

During the deep recessions of the early 1980s and of 2007-2009, unemployment reached roughly __________. a. 10% b. 20% c. 30% d. 40%

10%

In the United States, a typical credit card interest rate ranges from ______________ per year. a. .2% to .8% b. 2% to 8% c. 12% to 18% d. 22% to 28%

12% to 18%

The high-income economies of the world contain approximately __________ of the world's population and produce and consume ___________ of the World's GDP. a. 14%; over 50% b. 12%; over 60% c. 14%; over 70% d. 12%; over 80%

12%; over 60%

When Anders took out his first two-year membership with Maxima Gym in 2004, the fee was $540.00. He renewed his membership three times; in 2006 for $580.00, in 2008, for $600.00, and again in 2010, for $630.00. What is the overall rate of inflation for Anders' gym membership? a. 8.6% b. 5.4% c. 7.87% d. 16.66%

16.66%

An analyst needs to adjust the nominal GDP for the years 2000 and 2010 into real terms to conclude his comparison analysis. The nominal GDP in 2000 was $672 billion and $1,690 billion for 2010; the real interest rate was 6.79% in 2000 and 3.71% in 2010; the 2000 deflator was 24 and 51 in 2010. What is the real gain? a. 18.34% b. 38.58% c. 151.48% d. 70.61%

18.34%

The United States has approximately ___________ credit card holders. a. 1.8 million b. 18 million c. 80 million d. 180 million

180 million

During the last two centuries, the average rate of growth of GDP per capita in the leading industrialized countries has averaged about _________ per year. a. 2% b. 12% c. 22% d. 32%

2%

Assuming a country's economy maintains an 8% rate of growth, young adults starting at age 20 would see the average standard of living in their country more than double by the time they had reached age __________. a. 30 b. 40 c. 50 d. 60

30

In certain African countries like Niger, Tanzania, Nigeria, and Sudan, for example, GDP per capita at the start of the 2000s was still less than $___________. a. 30 b. 300 c. 3000 d. 30,000

300

Consumption in the United States is about ____________ of GDP, and it moves relatively little over time. a. 10% b. 33% c. 68% d. 90%

68%

On the supply side of the GDP, Structures account for around __________ of U.S. GDP. a. 7% b. 17% c. 37% d. 57%

7%

An economics professor is discussing a measure of inflation over time based on a basket of goods comprised of all the components of GDP. Which measure is it? a. Consumer Price Index b. GDP Price Index c. Consumer GDP d. GDP Deflator

GDP Deflator

If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that: a. the price of Good Y will increase. b. Goods X and Y are normal goods. c. Goods X and Y are substitute goods. d. Goods X and Y are complement goods.

Goods X and Y are complement goods.

Which of the following did not result in economic growth? a. Installing a network of irrigation ditches and pumping stations in order to grow fruits and vegetables in parts of southern California. b. The invention of a threshing machine for harvesting grains. c. Increased government funding of post-secondary education. d. Many citizens emigrating from Zimbabwe when a politically repressive regime took office.

Many citizens emigrating from Zimbabwe when a politically repressive regime took office.

________________ 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

Money

__________________ 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

Money market funds

Despite many negative feelings, a number of governments have decided that reducing barriers to trade is at least potentially beneficial to their economy. Which of the following is an example of countries reducing barriers through free trade? a. NAFTA b. NATO c. G20 d. GTO

NAFTA

_________ is calculated by taking _________ and then subtracting the value of how much physical capital is worn out, or reduced in value because of aging, over the course of a year. a. GNP; NNP b. NNP; GNP c. GDP; NNP d. NNP; GDP

NNP; GNP

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

National Interest Argument

_______________________ are economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the _____________. a. Keynesian economists; long run b. Keynesian economists; short run c. Neoclassical economists; long run d. Neoclassical economists; short run

Neoclassical economists; long run

________________ economists place an emphasis on __________ run economic performance. a. Phillips; short b. Keynesian; long c. Neoclassical; long d. Says; short

Neoclassical; long

The shape of the ______________ involves a tradeoff between unemployment and inflation. a. aggregate demand curve b. aggregate supply curve c. Phillips curve d. Keynesian demand curve

Phillips curve

______________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling. a. Rent controls b. Price ceilings c. Price floors d. Subsidies

Price floors

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.

They are all subject to government excise taxes.

Which of the following involves a financial outflow from the U.S. economy? a. South Korean investors buy firms in the U.S b. Chinese investors buy real estate across the U.S. c. returns paid on U.S. investments in France d. U.S. firms buying logging rights to China's forests

U.S. firms buying logging rights to China's forests

If a government's budget deficits are increasing aggregate demand when the economy is already producing near potential GDP, causing a threat of an inflationary increase in price levels, then the central bank may react with: a. a contractionary monetary policy. b. an expansionary monetary policy. c. a discretionary monetary policy. d. a loose monetary policy.

a contractionary monetary policy.

When a Central Bank takes action to decrease the money supply and increase the interest rate, it is following: a. a loose monetary policy. b. a contractionary monetary policy. c. a expansionary monetary policy. d. a quantitative easing policy.

a contractionary monetary policy.

Which of the following would most likely shift the production possibilities curve inward? a. an increase in the number of hours factories are in use b. a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time c. an increase in the production of capital goods d. technological progress

a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time

Which of the following is most likely a topic of discussion in macroeconomics? a. a decrease in the unemployment rate b. a decrease in the production of DVD players by a consumer electronics company c. an increase in the wage rate paid to automobile workers d. an increase in the price of a hamburger

a decrease in the unemployment rate

Which of the following is most likely a topic of discussion in macroeconomics? a. an increase in the price of a hamburger b. a decrease in the unemployment rate c. an increase in the wage rate paid to automobile workers d. a decrease in the production of DVD players by a consumer electronics company

a decrease in the unemployment rate

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 non-tariff barrier

After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is: a. no change; only the supply curve for beef is likely to be affected. b. a shift of the demand curve for beef to the left. c. a movement down along the demand curve for beef to the right. d. a shift of the demand curve for beef to the right.

a shift of the demand curve for beef to the left

In an AD/ASAD/AS diagram, __________________________ could explain a rise in cyclical unemployment? a. a shift to the left in either AS or AD b. a shift in AS to the left c. a shift in AS to the right d. a shift in AD to the left

a shift to the left in either AS or AD

Which of the following lies primarily within the realm of macroeconomics? a. a study of the demand for gasoline b. a study of the impact of "mad cow" disease on the price of beef worldwide c. a study of how tax cuts stimulate aggregate production d. an analysis of supply and demand conditions in the electricity market

a study of how tax cuts stimulate aggregate production

When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) __________________ in producing that product. a. relative advantage b. absolute advantage c. economy of scale d. production efficiency

absolute advantage

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.

aggregate demand curve will shift to the right.

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

altering the discount rate

In macroeconomics, the connection from inputs to outputs for the entire economy is called _______________. a. a production function b. an aggregate production function c. human capital d. physical capital

an aggregate production function

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.

at least a slight increase in unemployment.

If an economy moves into a recession, causing that country to produce less than potential GDP, then: a. automatic stabilizers will cause tax revenue to decrease and government spending to increase. b. automatic stabilizers will cause tax revenue to increase and government spending to decrease. c. tax revenue and government spending will be higher because of automatic stabilizers. d. tax revenue and government spending will be lower because of automatic stabilizers.

automatic stabilizers will cause tax revenue to decrease and government spending to increase.

Which of the following statements most likely lies within the realm of microeconomics? a. A rapid acceleration of the supply of money may create inflation. b. An increase in labor costs will increase the additional cost of producing another bus. c. An increase in government spending will increase the aggregate demand for goods and services in the economy d. Unemployment rises during a recession and falls during an expansion.

b. An increase in labor costs will increase the additional cost of producing another bus.

In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers. a. modern economy b. division of labor c. task economy d. interconnected economy

b. division of labor

The ________________ refers to the gap that can exist between what a nation's _____________, and a nation's ____________________. a. balance of trade; producers sell abroad; imports b. merchandise trade balance; exports; imports c. trade surplus; exported services; imported goods d. trade deficit; producers purchase abroad; exports

balance of trade; producers sell abroad; imports

A ______________________ means that government spending and taxes are equal. a. fiscal budget b. balanced budget c. contractionary fiscal policy d. discretionary fiscal policy

balanced budget

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.

borrow for the short term from the central bank.

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

breakdown of key market institutions

The nature of demand indicates that as the price of a good increases: a. more of it is desired. b. buyers desire to purchase less of it. c. suppliers wish to sell less of it. d. more of it is produced.

buyers desire to purchase less of it

The nature of demand indicates that as the price of a good increases: a. buyers desire to purchase less of it b. suppliers wish to sell less of it. c. more of it is desired. d. more of it is produced.

buyers desire to purchase less of it.

Specialization: a. allows workers to develop skills by working on a large number of tasks. b. is always the result of an inefficient use of resources. c. can lead to an increase in overall production. d. leads to greater self-sufficiency.

can lead to an increase in overall production

Specialization: a. can lead to an increase in overall production. b. leads to greater self-sufficiency. c. allows workers to develop skills by working on a large number of tasks. d. is always the result of an inefficient use of resources.

can lead to an increase in overall production.

When society has a higher level of capital per person, it is called ______________. a. physical capital b. human capital c. capital deepening d. technological gains

capital deepening

If the U.S. government uses an expansionary monetary policy to reduce interest rates, then it will: a. lead to higher imports and lower exports. b. cause the exchange rate for U.S. currency to depreciate. c. lower levels of consumption and investment. d. cause the exchange rate for U.S. currency to appreciate.

cause the exchange rate for U.S. currency to depreciate.

In the neoclassical view, changes in ____________________ can only have a short-run impact on output and on unemployment.

changes in aggregate demand

Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories. a. Specialization Model b. circular flow diagram c. financial investment market d. financial capital market

circular flow diagram

In the 1970s and 1980s, labor unions commonly negotiated wage contracts that had _______________________ which guaranteed that their wages would keep up with inflation. a. cost of living adjustments b. inflation protection plans c. inflation ceiling guarantees d. wage protection clauses

cost of living adjustments

When __________________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right. a. prices rise b. equilibrium is achieved c. costs of production fall d. there is a population increase

costs of production fall

Which of the following represents a Keynesian point of view of macroeconomics? a. focus on long-term growth in the economy b. aggregate supply is the primary determinate of economic output c. creating increases in aggregate demand to reduce unemployment d. vertical aggregate supply

creating increases in aggregate demand to reduce unemployment

In which of the following countries will the national government have the greatest influence with respect to the nation's economy? a. China b. Canada c. Chile d. Cuba

cuba

When the economy of a country is operating close to its full capacity: a. the unemployment rate is greater than the natural rate of unemployment. b. cyclical unemployment is close to zero. c. unemployment is close to zero. d. the unemployment rate is less than the natural rate of unemployment.

cyclical unemployment is close to zero.

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.

declined quite substantially both in the U.S. economy and in the global economy.

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

decrease

From a macroeconomic perspective, if GDP economic indicators show a decline of 10% or more in a single year, then which of the following outcomes is most likely to result? a. deep economic recession b. influx of foreign capital c. lessening of foreign aid d. merchandise trade surplus

deep economic recession

A country finds itself in the following situation: the government budget surplus is 2% of its GDP; private savings is 30% of GDP; and physical investment is 33% of GDP. Based on the national saving and investment identity, if the government budget surplus falls to zero, what will happen to this country's current account balance? a. surplus of 1% drops to 1% deficit of GDP b. surplus of 2% increases to 4% surplus of GDP c. deficit of 1% increases to 2% surplus of GDP d. deficit increases from 1% to 3% of GDP

deficit increases from 1% to 3% of GDP

Another term used to describe negative inflation is: a. counter inflation b. deflation c. hyperinflation d. GDP deflator

deflation

Melanie decided to save 20% of her annual earnings for 10 years so she would have a down payment for a house. After 5 years, what change in the economy would cause an increase in the purchasing power of the funds she has managed to save? a. recession b. depression c. deflation d. stagflation

deflation

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

demand deposits

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

depend on borrowed money

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

discount rate

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.

discretionary fiscal policy.

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

double coincidence of wants

Changes in the price level of the different components of aggregate demand are reflected in the AD/ASAD/AS macroeconomic model by a ________________________. a. flatter top portion of AD curve b. longer distance to equilibrium point c. downward sloping AD curve d. shorter distance to equilibrium point

downward sloping AD curve

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.

each economy will always head for its natural rate of unemployment.

The neoclassical view holds that long-term expansion of potential GDP due to _______________________ will determine ____________________. a. economic growth; the size of the economy b. government spending; aggregate demand c. government spending; aggregate supply d. economic adjustments; cyclical unemployment

economic growth; the size of the economy

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

encouraging long-term growth

The ____________ is the quantity where quantity demanded and quantity supplied are equal at a certain price. a. quantity demanded b. equilibrium quantity c. demand schedule d. supply schedule

equilibrium quantity

A country's economic data indicates that there has been a substantial reduction in the financial capital available to private sector firms. Which of the following most likely had the greatest influence on this economy? a. especially large and sustained household saving b. increased borrowing by private firms c. reduction in influx of funds for foreign financial investors d. especially large and sustained government borrowing

especially large and sustained government borrowing

The _____________ is an example of a large-scale common currency. a. euro b. dollar c. pound d. franc

euro

If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ___________________. a. excess supply b. excess demand c. ceteris paribus d. a price ceiling

excess demand

A central bank must be concerned about whether a large and unexpected ___________________________ will drive most of the country's existing banks into bankruptcy. a. exchange rate appreciation b. interest rate increase c. exchange rate depreciation d. increase in foreign investments

exchange rate depreciation

Portfolio investments are often made based on beliefs about how _______________ are likely to move in the near future. a. interest rates b. foreign investment tax rates c. exchange rates or rates of return d. bond rates and interest rates

exchange rates or rates of return

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

federal funds rate

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

fighting inflation

In modern economies, _____________________ receive money from savers and provide funds to borrowers. a. governments b. credit unions c. banks d. financial intermediaries

financial intermediaries

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.

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.

The main public policies of technological leading countries are _______________ focused on investment, including investment in human capital, in technology, and in physical plant and equipment. a. market-orientated policies b. monetary policies c. economic policies d. fiscal policies

fiscal policies

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

focus on long-term growth and on controlling inflation

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.

following a loose monetary policy.

People or firms use one currency to purchase another currency at the _______________________. a. international currency exchange b. foreign exchange market c. foreign currency exchange d. international parity market

foreign exchange market

The development of a nationwide computerized job bank listing of all job openings would be most likely to reduce: a. natural unemployment. b. frictional unemployment. c. seasonal unemployment. d. cyclical unemployment.

frictional unemployment.

Some recent economic research has suggested that African countries' economic growth may have been limited by __________________ . a. population b. geography and climate c. government interventionism d. technological challenges

geography and climate

In the ______________, households receive goods and services and pay firms for them. a. labor market b. goods and services market c. financial capital market d. savings market

goods and services market

A country's current account balance refers to a broad measure of the balance of trade that includes: a. merchandise, services, and foreign capital investments. b. goods, foreign capital investments, exported domestic services. c. goods and services, international flows of income, and foreign aid. d. merchandise, foreign aid and imported domestic services.

goods and services, international flows of income, and foreign aid

The effects of inflation are seen in: a. goods and services only b. wages and income levels only c. services and wages only d. goods, services, wages and income levels

goods, services, wages and income levels

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made. a. market b. business sector c. firm d. government

government

The two main tools of macroeconomic policy include monetary policy, and fiscal policy, which involves __________ spending. a. household b. capital market c. business d. government

government

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

government borrowing

Which of the following best describes a fiscal policy tool? a. government spending b. household spending c. financial capital markets d. bank lending

government spending

Which of the following will have the greatest influence on shifting the aggregate supply curves of high-income countries to the right? a. a market-driven economy b. investment in human capital c. risk of exchange rate fluctuations d. growth-oriented public policy

growth-oriented public policy

For most high-income countries of the world, GDP _________________ over time. a. has proven to be stable b. has risen gradually c. has declined slightly d. has sharply risen

has risen gradually

Greta starts using a new baking technique and she can now do twice as much of everything—in a single day Greta can now make 10 cakes or 8 pies, rather than the 5 cakes and 4 pies she could previously bake. We now know that Greta's production possibility curve: a. has shifted right, but her opportunity costs of making pies are unchanged. b. has shifted right, but her opportunity costs of making pies have decreased. c. has not changed, but her opportunity costs of making pies have increased. d. has not changed, but her opportunity costs of making pies have decreased. e. has shifted right, but her opportunity costs of making cakes have increased.

has shifted right, but her opportunity costs of making pies are unchanged.

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.

hurt domestic wine drinkers but help domestic wineries, which will gain from the higher prices.

When prices of outputs in an economy become sufficiently high causing production to exceed potential GDP, the resulting: a. hyper-intense production will be unsustainable in the long run. b. higher wages will encourage workers to produce more at high prices. c. lower prices will lead to a lower quantity of demand. d. downward slope in aggregate supply curve will be short run.

hyper-intense production will be unsustainable in the long run.

In the early 1990's extremely high inflation rates of 2500% were common in Russia. During that time, we can say that as a result of those inflation rates, Russia was experiencing ___________________. a. perpetual inflation b. ultra inflation c. hypo inflation d. hyperinflation

hyperinflation

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

implement fiscal policy establishing tax incentives

Gross Domestic Product equals $1.2 trillion. If consumption equals $690 billion, investment equals $200 billion, and government spending equals $260 billion, then: a. exports exceed imports by $50 billion. b. imports exceed exports by $50 billion. c. imports exceed exports by $150 billion. d. exports exceed imports by $150 billion.

imports exceed exports by $50 billion

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 ta c. payroll tax is a regressive tax d. payroll tax is a progressive tax

income tax is a progressive ta

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

increase

Inflation implies that the level of all prices _____________________. a. decrease b. stay the same c. increase d. none of the above

increase

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.

increase American consumption of domestically produced vitamin Z.

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.

increase.

Which of the following is most likely to contribute to economic growth as measured by GDP per capita? a. the imposition of tariffs and quotas on imported goods b. increased capital formation c. rapid population growth d. an increase in marginal tax rates

increased capital formation

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

increased spending by the government on health care

If the demand for software engineers __________ slower than does supply, then wages of software engineers will __________. a. increases; remain constant b. increases, rise c. increases; fall d. decreases; fall

increases; fall

The demand schedule for a good: a. indicates the quantity that people will buy at the prevailing price. b. indicates the quantities that suppliers will sell at various market prices. c. is determined primarily by the cost of producing the good. :d. indicates the quantities that will be purchased at alternative market prices.

indicates the quantities that will be purchased at alternative market prices.

The demand schedule for a good: a. indicates the quantity that people will buy at the prevailing price. b. indicates the quantities that suppliers will sell at various market prices. c. is determined primarily by the cost of producing the good. d. indicates the quantities that will be purchased at alternative market prices.

indicates the quantities that will be purchased at alternative market prices.

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

inflation

Which of the following is most strongly supported by the Keynesian perspective of macroeconomics? a. inflation is a price that might have to be paid to achieve lower unemployment b. inflation offers no offsetting gains in terms of higher unemployment c. more emphasis on economic growth and how labor markets work d. shifts in unemployment primary determine changes in the price level

inflation is a price that might have to be paid to achieve lower unemployment

If a government uses monetary policy to alter the exchange rate, then it cannot at the same time use monetary policy to address issues of ______________________. a. inflation or recession b. purchases or sales of foreign currencies c. how currency speculators react to rumors d. extreme short-term fluctuations

inflation or recession

__________ implies that pressure for price increases reaches across _______________markets, not just one. a. inflation; all b. deflation; most c. inflation; most d. deflation; all

inflation; most

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

inflationary increase in price level

The ____________ describes a situation where sufficient credit is available, but the economy experiences a reduction in consumption and investment. a. inflation rate effect b. interest rate effect c. wealth effect d. price effect

interest rate effect

Which of the following best describes a monetary policy tool? a. government spending b. taxes c. household savings d. interest rates

interest rates

Which of the following best describes a monetary policy tool? a. interest rates b. household savings c. taxes d. government spending

interest rates

As the aggregate price level in an economy rises, ____________________. a. interest rates increase b. consumer demand increases c. exports decrease d. investment increases

interest rates increase

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.

interest rates increase.

Expansionary monetary policy lowers ______________, and increases demand for investment and consumer borrowing, which shifts aggregate demand to the ________________. a. interest rates; right b. rates of return; left c. rates of return; right d. exchange rates; left

interest rates; right

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

investment in physical capital; fiscal policy

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.

investment will decrease if savings also remains constant.

When government policy moves from a budget deficit to a budget surplus and the trade deficit remains constant: a. savings will increase if investment remains constant. b. investment will increase if savings remain constant. c. savings will decrease, no matter what happens to investment. d. investment will decrease if savings remain constant.

investment will increase if savings remain constant.

Investment in human capital: a. is of minor importance to economic growth. b. can be acquired through on-the-job training. c. is an important source of economic growth. d. is characterized by both b) and c).

is characterized by both b) and c).

If a Phillip curve shows that unemployment is low and inflation is high 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.

is producing at a point where output is more than potential GDP.

A typical neoclassical aggregate supply (AS) curve ______________ and a typical neoclassical Phillips curve __________________. a. slopes upward; slopes downward b. is vertical; is vertical c. is vertical; slopes downward d. slopes upward; is vertical

is vertical; is vertical

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.

it can still gain from international trade in that commodity, by getting it at a lower opportunity cost than if it produced it domestically.

Why is productivity growth considered to be the most important factor in the AD/ASAD/AS model? a. it shifts the AD curve in the long-term b. it shifts the AD curve in the short-term c. it shifts the AS curve in the short-term d. it shifts the AS curve in the long-term

it shifts the AS curve in the long-term

Under what conditions would a nation be viewed as being neither a net borrower nor a net lender in the international economy? a. it has a low level of trade and a large trade surplus b. it has a medium to high level of trade and a moderate trade surplus c. it has a high level of trade and a moderate trade deficit d. its trade balance is zero

its trade balance is zero

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.

labor demand shifts to the right, if wages are flexible.

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,

labor supply shifts to the right, if wages are flexible,

Other things being equal, a __________ supply of workers tends to __________ real wages. a. smaller; not change b. larger; increase c. smaller; decrease d. larger; decrease

larger; decrease

Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________. a. income gap b. market equilibrium c. law of demand d. price model

law of demand

Economists refer to this pattern, the ___________________________________, which means that as a person receives more of a good, the additional or marginal utility from each additional unit of the good declines. a. law of trade-offs b. law of diminishing marginal utility c. production possibilities frontier d. law of increasing marginal utility

law of diminishing marginal utility

In most high-income economies, including the United States, goods currently make up ___________, while services currently compose ____________. a. more than half of total production; less than half of total production b. less than half of total production; more than half of total production c. the merchandise trade balance; the capital trade balance d. the merchandise trade balance; the retail trade balance

less than half of total production; more than half of total production

Since Baltimore passed the first _______________ in 1994, several dozen cities enacted similar laws in the late 1990s and into the 2000s. a. living wage law b. price ceiling c. price floor d. minimum wage

living wage law

If a firm faces ________________________, while the prices for the output the firm produces remain unchanged, a firm's profits will increase. a. higher demand b. lower costs of production c. equilibrium d. a shift in demand

lower costs of production

Most real-world choices aren't about getting all of one thing or another, instead, most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good. a. utility b. opportunity cost c. benefit analysis d. marginal analysis

marginal analysis

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

menu costs

The basic difference between macroeconomics and microeconomics is: a. microeconomics concentrates on the behavior of individual consumers while macroeconomics focuses on the behavior of firms. b. microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. c. microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy. d. microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.

microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

Which of the following would most likely be included in the positive side of the U.S. current account balance? a. U.S. foreign aid sent to as disaster relief to Haiti b. interest payments to foreign investors invested in the U.S. c. money spent by U.S. tourists in Europe d. money earned by U.S. firms in Europe

money earned by U.S. firms in Europe

The demand curve for a typical good has a(n): a. negative slope because some consumers switch to other goods as the price rises b. negative slope because consumer incomes fall as the price of the good rises. c. negative slope because the good has less "snob appeal" as its price falls. d. inverse slope because as the price goes up, the good has more profitability.

negative slope because some consumers switch to other goods as the price rises.

The demand curve for a typical good has a(n): a. negative slope because some consumers switch to other goods as the price rises. b. negative slope because consumer incomes fall as the price of the good rises. c. negative slope because the good has less "snob appeal" as its price falls. d. inverse slope because as the price goes up, the good has more profitability.

negative slope because some consumers switch to other goods as the price rises.

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

neoclassical

Many economists believe that the trend toward greater wage inequality across the U.S. economy was primarily caused by _____________. a. the recession b. new technologies c. the rise of global markets d. inflation

new technologies

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be. a. budget constraint b. opportunity cost c. normative statement d. trade-off

normative statement

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be. a. budget constraint b. trade-off c. opportunity cost d. normative statement

normative statement

Country Alpha and Country Beta initially have the same real GDP per capita. Country Alpha experiences no economic growth, while Country Beta grows at a sustained rate of 5 percent. In 14 years, Country Alpha's GDP will be approximately _________ that of Country Beta. a. one-fourth b. one-half c. double d. triple

one-half

Which of the following is a traditional tool used by the Fed during recessions? a. quantitative easing b. higher interest rates c. open market operations d. coins and paper currency

open market operations

Attending college is a case where the ________________ exceeds the monetary cost. a. budget constraint b. marginal analysis c. marginal utility d. opportunity cost

opportunity cost

Attending college is a case where the ________________ exceeds the monetary cost. a. marginal utility b. opportunity cost c. budget constraint d. marginal analysis

opportunity cost

Attending college is a case where the ________________ exceeds the monetary cost. a. opportunity cost b. marginal utility c. marginal analysis d. budget constraint

opportunity cost

In many cases, it is reasonable to refer to the ________________ as the price. a. budget constraint b. sunk cost c. opportunity cost d. budget constraint

opportunity cost

A university student who is enrolled in school fulltime and not seeking employment is considered: a. out of the labor force. b. unemployable, and not counted in official statistics. c. employed in leisure. d. underemployed.

out of the labor force.

Reginald looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment he is considered: a. out of the labor force. b. unemployed. c. employed in the underground economy. d. underemployed.

out of the labor force.

In uncertain economic times, ____________________ serves as a way of preserving economic value that can be spent or consumed in the future. a. buying a new car b. owning gold c. refinancing your home mortgage d. obtaining a credit card

owning gold

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

policy prescription

The term "full employment GDP" is synonymous with which of the following? a. aggregate GDP b. Keynesian zone c. macroeconomic equilibrium d. potential GDP

potential GDP

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

potential GDP and aggregate supply

The "law of supply" functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied. a. price b. demand c. supply d. quantity

price

The "law of supply" functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied. a. price c. supply d. quantity

price

The downward slope of the demand curve again illustrates the pattern that as _____________ rises, _________________ decreases. a. price, quantity supplied b. quantity supplied, quantity demanded c. price, quantity demanded d. quantity demanded, price

price, quantity demanded

The downward slope of the demand curve again illustrates the pattern that as _____________ rises, _________________ decreases. a. quantity supplied, quantity demanded b. price, quantity demanded c. price, quantity supplied d. quantity demanded, price

price, quantity demanded

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.

primary loan market.

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

private savings decrease while everything else holds constant

The U.S. economy has two main sources for financial capital; _______________________ and ____________________________. a. private savings from U.S. households and firms; inflows of foreign financial investment. b. private sector investment; government borrowing c. private savings from U.S. households and firms; government borrowing d. private sector investment; inflows of foreign financial investment from abroad

private savings from U.S. households and firms; inflows of foreign financial investment.

Over the long run, ____________ per hour is the most important determinant of the average wage level in any economy. a. demand b. dollars c. productivity d. supply

productivity

The value of what is produced per worker, or per hour worked, is called ____________. a. economic growth b. human capital c. productivity d. GDP per capita

productivity

An additional investment in human capital, especially for the low-income nations of the world, will likely directly increase which of the following? a. productivity and economic growth b. increased levels of R&D spending c. consumer orientated spin-offs d. highly qualified teachers

productivity and economic growth

A __________________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes. a. proportional tax b. regressive tax c. progressive tax d. excise tax

progressive tax

A ________________________________ is calculated as a flat percentage of income earned, regardless of level of income. a. progressive tax b. regressive tax c. proportional tax d. estate and gift tax

proportional tax

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.

proportional.

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.This answer is correct c. proportional. d. optional.

proportional.

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.

protectionism forces them to pay higher prices for basic necessities like clothing and food.

A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and ____________, shown on the horizontal axis. a. demand b. quantity c. quantity supplied d. quantity demanded

quantity

_________________ refers to the total number of units that are purchased at that price. a. quantity b. quantity demanded d. market quantity

quantity demanded

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

quantity of credit for loans

A central bank that desires to reduce the quantity of money in the economy can: a. raise the reserve requirement. b. buy bonds in open market operations. c. lower the discount rate. d. engage in quantitative easing.

raise the reserve requirement.

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

rational expectations

Economists typically measure economic growth by tracking: a. the employment rate. b. the unemployment rate. c. averaged GDP growth d. real GDP per capita.

real GDP per capita.

The __________________ is the nominal interest rate minus the rate of inflation. a. real GDP b. real interest rate c. nominally adjusted d. annualized interest rate

real interest rate

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.

received more in taxes than it spent in that year.

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)

recessionary gap

When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is ____________________. a. optional b. proportional c. progressive d. regressive

regressive

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.

regressive.

The term ___________________ describes the proportion of deposits that the bank must hold in the form of reserves that are not loaned out or invested in bonds. a. reserve ratio b. reserve funds c. term deposits d. bond reserves

reserve ratio

Which of the following represents a financial inflow to the U.S. economy? a. returns paid on U.S. financial investments in Switzerland b. computer chip imports from Israel c. oil imports from Canada d. foreign aid from the U.S. to Ethiopia

returns paid on U.S. financial investments in Switzerland

In the neoclassical view, the economy has a ___________________________ to move back to potential GDP. a. rational tendency b. tendency to be unable c. self-correcting tendency d. immediate tendency

self-correcting tendency

A more efficient means of processing algae to produce an anticancer drug is discovered. As a result, the supply curve for the drug will: a. shift to the right, increasing the price of the drug. b. shift to the left, increasing the price of the drug. c. shift to the right, decreasing the price of the drug d. shift to the left, decreasing the price of the drug

shift to the right, decreasing the price of the drug

Economic production has fallen to less than full potential due to inadequate incentives for firms to produce. The duration of this economic condition will likely be: a. indefinite b. unknown c. long-term d. short-term

short-term

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

shorter than

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

slopes upward; slopes downward

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.

some industries are too small to be efficient if restricted to their domestic markets alone.

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

standard of living is ultimately determined by long-term growth

In any economy functioning at potential GDP, there are occasions when the short-term aggregate supply curve unexpectedly shifts, causing inflationary pressures. Which of the following is considered to be a common cause of this type of shift? a. overoptimistic lending by banks b. sudden rise in input prices c. a surge of export sales d. a wave of government spending

sudden rise in input prices

A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the __________________. a. demand curve to the right b. supply curve to the left c. supply curve to the right d. demand curve to the left

supply curve to the right

Foreign direct investment is the term used to describe purchases of firms in another country that involve ______________________. a. internationally traded goods across countries b. using another currency c. taking a management responsibility d. the exchange rate market

taking a management responsibility

As the __________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left. a. high-skill labor b. lower wage c. technology d. market

technology

As the _____________ complement for high-skill labor becomes cheaper, the demand curve for high-skill labor will shift to the right. a. technology b. low-skill labor c. market d. lower wage

technology

If $1.00 U.S. bought $1.40 Canadian dollars in 2006 and in 2010 it bought $1.00 Canadian dollar, then; a. the U.S. dollar appreciated against the Canadian dollar. b. the Canadian dollar weakened against the Canadian dollar. c. the U.S. dollar strengthened against the Canadian dollar. d. the Canadian dollar appreciated against the U.S. dollar.

the Canadian dollar appreciated against the U.S. dollar.

If $1.00 U.S. bought $1.40 Canadian dollars in 2006 and in 2010 it bought $1.00 Canadian dollar, then; a. the U.S. dollar appreciated against the Canadian dollar. b. the Canadian dollar weakened against the Canadian dollar. d. the Canadian dollar appreciated against the U.S. dollar.

the Canadian dollar appreciated against the U.S. dollar.

The Canadian dollar will most likely strengthen against the U.S. dollar if: a. U.S. interest rates rise due to exchange rate policies. b. interest rates in Canada fall due to exchange rate policies. c. the Canadian inflation rate becomes extremely low. d. the Canadian dollar is below the PPP exchange rate.

the Canadian inflation rate becomes extremely low.

Why do banks use a T-account? a. if a bank has become bankrupt, net worth will be shown as a zero on the balance sheet b. the T-account separates the liabilities on the left from assets on the right c. the T-account separates assets on the left from liabilities on the right d. the T-account ensures the final entry made under the assets column is bank reserves

the T-account separates assets on the left from liabilities on the right

Investment (I) includes: a. the amount spent on new factories and machinery. b. the amount spent on stocks and bonds. c. the amount spent on consumer goods that last more than one year. d. the amount spent on purchases of art.

the amount spent on new factories and machinery.

Inflation can be calculated in terms of how the overall cost of ___________________ changes over time. a. all goods b. the basket of goods c. all goods and services d. all services

the basket of goods

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is: a. nothing, because he enjoys playing basketball more than studying. b. the increase in skill he obtains from playing basketball for that hour. c. the benefit to his grades from studying for an hour. d. nothing, because he had a free pass into the sports complex to play basketball.

the benefit to his grades from studying for an hour.

The opportunity cost of attending university is likely to include all except which of the following? a. the cost of haircuts received during the school term b. the income you forgo in order to attend classes c. tuition fees d. the cost of required textbooks

the cost of haircuts received during the school term

The opportunity cost of attending university is likely to include all except which of the following? a. the cost of haircuts received during the school term b. the income you forgo in order to attend classes c. tuition fees d. the cost of required textbooks

the cost of haircuts received during the school term

If 112 Japanese yen purchased $1.00 U.S. in 2008 and 83 Japanese yen purchased $1.00 U.S. in 2009, then: a. the dollar depreciated against the yen. c. the yen depreciated against the dollar. d. the yen weakened against the dollar.

the dollar depreciated against the yen.

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.

the exchange rate and the trade deficit to increase

Because China and the East Asian tigers are _________________________, their economies have all experienced rapid economic growth rates. a. rely on using technology developed by technological leaders b. overly reliant on a legacy of government economic controls c. the highest savers in the world, often saving one-third or more of GDP d. technologically disconnected, they encourage their firms to participate in world markets

the highest savers in the world, often saving one-third or more of GDP

Which of the following is unlikely to affect the rate of economic growth? a. the quality of available resources b. the quantity of available resources c. the level of government spending d. technological change

the level of government spending

In a discussion of economics, which of the following would exert the most influence on an individual firm's decision to hire workers? a. household income b. wage levels c. the firm's income d. the macroeconomy

the macroeconomy

When the central bank lowers the reserve requirement on deposits: a. the money supply increases and interest rates decrease. b. the money supply and interest rates decrease. c. the money supply and interest rates increase. d. the money supply decreases and interest rates increase.

the money supply increases and interest rates decrease.

The most significant real economic cost of high unemployment is: a. the potential goods and services that might have been produced but weren't. b. the money cost of retraining persons to obtain new jobs. c. the lost tax revenue that might have been paid by persons if they had worked. d. the money cost of unemployment insurance payments to the unemployed.

the potential goods and services that might have been produced but weren't.

Macroeconomic topics do not usually include: a. the rate of inflation. b. the profit-maximizing decisions of an individual manufacturer. c. economic growth d. the rate of unemployment.

the profit-maximizing decisions of an individual manufacturer.

Whenever there is a surplus at a particular price, the quantity sold at that price will equal: a. (quantity demanded plus quantity supplied)/2. b. the quantity supplied at that price. c. the quantity supplied minus the quantity demanded. d. the quantity demanded at that price.

the quantity demanded at that price.

When consumers and businesses have greater confidence that they will be able to repay in the future, _______________________. a. the quantity demanded of financial capital at any given interest rate will remain unchanged. b. the quantity demanded of financial capital at any given interest rate will shift to the left. c. the quantity demanded of financial capital at any given interest rate will shift to the right. d. the quantity demanded of financial capital at any given interest rate will achieve equilibrium.

the quantity demanded of financial capital at any given interest rate will shift to the right

When consumers and businesses have greater confidence that they will be able to repay in the future, _______________________. a. the quantity demanded of financial capital at any given interest rate will remain unchanged. b. the quantity demanded of financial capital at any given interest rate will shift to the left. :c. the quantity demanded of financial capital at any given interest rate will shift to the right. d. the quantity demanded of financial capital at any given interest rate will achieve equilibrium.

the quantity demanded of financial capital at any given interest rate will shift to the right.

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.

the quantity of money will fall

Whenever there is a shortage at a particular price, the quantity sold at that price will equal: a. the quantity demanded at that price. b. the quantity supplied minus the quantity demanded. c. the quantity supplied at that price. d. (quantity demanded plus quantity supplied)/2.

the quantity supplied at that price

A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of: a. the supply curve. b. the demand curve, as consumers try to economize because of the shortage. c. both the supply and demand curves. d. the supply curve and a rightward shift of the demand curve, resulting in a higher equilibrium price.

the supply curve

If new manufacturers enter the computer industry, then (ceteris paribus): a. the supply curve shifts to the left. b. the supply curve shifts to the right. c. the demand curve shifts to the left. d. some established manufacturers must exit the industry.

the supply curve shifts to the right

In the national savings and investment identity framework, an inflow of savings from abroad is, by definition, equal to: a. private sector investment. b. the trade surplus. c. the trade deficit. d. domestic household savings.

the trade deficit.

Potential GDP in the U.S. will be unaffected by ____________________. a. technology b. the amount of capital available c. the unemployment rate d. government institutions

the unemployment rate

GDP is: a. the sum of all currency and coins in circulation. b. the value of all final goods and services produced by a government. c. the value of all final good and services produced anywhere in the world by a nation's firms. d. the value of all final goods and services produced domestically.

the value of all final goods and services produced domestically.

GDP does not directly include: a. the value of goods produced domestically and sold abroad. b. the value of intermediate goods sold during a period. c. the value of services rendered during a period. d. the value of final goods and services produced, but not sold, during a period.

the value of intermediate goods sold during a period.

When quantity demanded decreases in response to a change in price: a. the demand curve shifts to the right. b. the demand curve shifts to the left. c. there is a movement down along the demand curve. d. there is a movement up along the demand curve.

there is a movement up along the demand curve.

A ______________________ monetary policy can be used to decrease aggregate demand because it _____________ exports and _________________ imports . a. tight; stimulates; reduces b. loose; stimulates; reduces c. expansionary; reduces; stimulates d. contractionary; reduces; stimulates

tight; stimulates; reduces

The money multiplier is equal to the _______________ in the economy divided by the original _________________. a. total money; quantity of money b. original quantity of reserves; reserve ratio c. quantity of money; total money d. reserve ratio; original quantity of reserves

total money; quantity of money

Aggregate supply (AS) denotes the relationship between the __________________ that firms choose to produce and sell and the _________________, holding the price of inputs fixed. a. total quantity; price level for output b. type of goods; input price of raw materials c. price of goods; number of employees d. total inputs; types of goods

total quantity; price level for output

From a macroeconomic perspective, an economic transaction in the form of a financial investment is synonymous with which of the following? a. a productive economic asset b. trade resulting from unilateral transfers c. trade in the financial capital market d. a stream of payments leaving the country

trade in the financial capital market

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

trade surplus

Gomer loses his job as a road construction worker and cannot find another position with equivalent pay and benefits. As a result, he is still checking the want ads and reporting to the unemployment office on a weekly basis. He is considered to be: a. laid off. b. underemployed. c. out of the labor force. d. unemployed.

underemployed.

If macroeconomics looks at the economy as a whole, it focuses on which of the following? a. households b. business firms c. the division of labor d. unemployed people

unemployed people

If macroeconomics looks at the economy as a whole, it focuses on which of the following? a. the division of labor b. business firms c. households d. unemployed people

unemployed people

The unemployment rate measures: a. the number of people unemployed divided by the number of people employed. b. unemployed workers as a percentage of the labor force. c. unemployed workers as a percentage of the population age over-sixteen. d. unemployed workers as a percentage of the population.

unemployed workers as a percentage of the labor force

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.

unemployment and inflation increase.

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

unit of account

A depreciating U.S. dollar is ________________ because it is worth ___________ in terms of other currencies. a. strengthening; more b. weakening; less c. a problem for exporters; less d. beneficial to importers; more

weakening; less

The _________________ means that a higher price level leads to lower real wealth. a. employment effect b. interest rate effect c. wealth effect d. foreign price effect

wealth effect

Under what circumstances would it most likely be considered beneficial for a government to be a large borrower of foreign investment capital? a. never as there is no economic merit in a policy of running trade deficits b. if the inflow of capital is absorbed by greater government borrowing c. when borrowing larger amounts is based on unconventional macroeconomic wisdom d. when those funds are invested in a way that sustains economic growth over time

when those funds are invested in a way that sustains economic growth over time

Which of the following institutions oversees the safety and stability of the U.S. banking system? a. Office of the Comptroller of the Currency b. Federal Financial Institutions Examination Council c. Federal Open Market Committee d. The Federal Reserve

The Federal Reserve

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.

The USA has an absolute advantage in the production of cars.

If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if: a. The USA specializes in potatoes because of its comparative advantage in producing potatoes. b. The USA specializes in wheat because of its absolute advantage in producing wheat. c. The USA specializes in wheat because of its comparative advantage in producing wheat. d. There can be no mutual gains from trade.

The USA specializes in potatoes because of its comparative advantage in producing potatoes.

Which of the following is true? a. A depression is a recession that is mild and relatively brief. b. The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude. c. The timing of business fluctuations is regular and therefore easily predictable. d. During the contractionary phase of the business cycle, the rate of unemployment is generally quite low.

The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude

________________________ is theoretically possible, even sensible: give an industry a short-term indirect subsidy through protection, and then reap the long-term economic benefits of having a vibrant healthy industry. a. Protectionism b. The infant industry argument c. Dumping d. Import quotas

The infant industry argument

Interpret the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market." a. The statement is correct. b. The statement would be correct if "quantity of wheat demanded" were substituted for "quantity of wheat supplied." c. The statement is incorrect because it confuses a change in quantity supplied with a change in supply. d. The statement would be correct if it read that a "decrease in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."

The statement is correct.

Aggregate demand curves slope downwards for each of the following reasons EXCEPT a. The wealth effect: As the price level falls, the buying power of people's savings increases and induces them to spend more. b. The substitution effect: As the price level falls, people buy more of the cheaper goods and less of other goods. c. The interest rate effect: As prices for outputs rise, it costs more to make the same purchases, driving up the demand for money, raising interest rates and reducing investment spending. d. The foreign price effect: As the price level falls, U.S. become more attractive to foreigners and domestic residents, increasing net export spending.

The substitution effect: As the price level falls, people buy more of the cheaper goods and less of other goods.

Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel? a. There is an increase in the cost of producing steel, which shifts the supply curve of steel to the right, thereby increasing the price of steel. b. There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel c. There is a decrease in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel. d. The increase in wage costs will shift the demand curve for steel to the left, increasing the cost of steel.

There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel.

Increased investment alone will guarantee economic growth. a. This is a true statement, because growth occurs only with savings. b. This is a true statement, because money is the only resource needed for growth. c. This is a false statement, because an economy must rely on capital injections from abroad. d. This is a false statement, because economic growth hinges on the quality and type of investment as well as the human capital and improvements in technology.

This is a false statement, because economic growth hinges on the quality and type of investment as well as the human capital and improvements in technology.

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

a $1000-per-car fee imposed on all small cars imported

If the government for the state of Washington collects $65.8 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be: a. an increase in payroll tax. b. an increase in excise tax. c. a budget surplus. d. a budget deficit.

a budget deficit.

If government policy allows a country's currency to be determined in the exchange rate market, then that currency will be subject to: a. a hard peg policy. b. purchasing power parity. d. a floating exchange rate.

a floating exchange rate.

Which of the following events would cause interest rates to increase? a. lower tax rates b. a higher discount rate c. lower reserve requirements d. an open market operation to buy bonds

a higher discount rate

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

a rise in unemployment

Short run speculation in currencies can create ________________________, at least for a time, where an expected appreciation leads to a stronger currency and vice versa. a. low inflation rates b. high inflation rates c. a self-fulfilling prophecy d. a decrease in the supply side

a self-fulfilling prophecy

Question 8 The supply curve of textbooks (which are produced using paper made from trees) will shift to the left in response to: a. a decline in college tuition. b. a sharp increase in the demand for and construction of wood-frame homes. c. an increase in the supply of lumberjacks. d. an end to government regulations that limit timber harvesting in national forests.

a sharp increase in the demand for and construction of wood-frame homes.

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 tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

A tariff differs from a quota in that a tariff is: a. levied on imports, whereas a quota is imposed on exports. b. levied on exports, whereas a quota is imposed on imports. c. a tax levied on exports, whereas a quota is a limit on the number of units of a good that can be exported. d. a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

Frictional unemployment occurs when: a. there is friction between an employer and employee. b. a worker decides to quit one job to seek a different job. c. a large corporation transfers a worker to another city. d. college students go back to school at the end of the summer.

a worker decides to quit one job to seek a different job.

Policies that provide governments with economic controls should be evaluated on their __________________________________, not on the basis of the promises of their supporters or the theories of economists. a. ability to be dismantled quickly over time b. acceptance by market-oriented economists c. actual effects, which can be positive or negative d. ability to act as a critical ingredient for faster growth

actual effects, which can be positive or negative

In macroeconomics, _____________________ denotes the relationship between the total quantity of goods and services and the price level for output. a. macroeconomic equilibrium b. aggregate supply (AS) c. aggregate demand (AD) d. potential GDP

aggregate demand (AD)

At a macroeconomic level, the theory of rational expectations points out that if the ______________________ is vertical over time, then people should rationally expect this pattern. a. GDP b. Phillips curve c. aggregate demand curve d. aggregate supply curve

aggregate supply curve

The labor force consists of: a. discouraged workers, employed workers, plus those actively seeking work. b. all adults who are working or actively seeking work. c. all adults who are able to work. d. all adults who are working, plus those not working.

all adults who are working or actively seeking work.

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.

all components of aggregate demand.

Any given demand or supply curve is based on the ceteris paribus assumption that ___________________. a. everything is variable. b. all else is held equal c. no one knows which variables will change and which will remain constant. d. what is true for the individual is not necessarily true for the whole.

all else is held equal

The term "ceteris paribus" means that: a. everything is variable. b. all variables except those specified are constant. c. no one knows which variables will change and which will remain constant. d. what is true for the individual is not necessarily true for the whole.

all variables except those specified are constant

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________. a. allocative efficiency b. the production possibilities frontier c. trade-offs d. scarcity

allocative efficiency

One of the following groups is not participating in the foreign exchange markets. Which one? a. Boston business firms trading goods and services with firms in France b. international investors buying bonds issued by a German car manufacturing firm c. an Iowa travel firm that arranges vacation tours for local seniors to Hawaii d. international investors buying part-ownership of a mining operation in Afghanistan

an Iowa travel firm that arranges vacation tours for local seniors to Hawaii

The government can use _____________ in the form of ____________________ to increase the level of aggregate demand in the economy. a. an expansionary fiscal policy; an increase in government spending b. a contractionary fiscal policy; a reduction in taxes c. a contractionary fiscal policy; an increase in taxes d. an expansionary fiscal policy; an increase in corporate taxes

an expansionary fiscal policy; an increase in government spending

Which of the following results in a rightward shift of the market demand curve for labor? a. a decrease in labor productivity b. a decrease in the firm's product price c. an increase in the wage rate d. an increase in demand for the firm's product

an increase in demand for the firm's product

Which of the following will not result in a rightward shift of the market supply curve for labor? a. a decrease in non-wage income b. an increase in the working-age population c. an increase in labor productivity d. an increase in immigration

an increase in labor productivity

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.

an increase in price level.

Which of the following factors contribute to economic growth? a. an increase in the average wage rate paid to workers b. an increase in the standard of living c. a decrease in the productivity of labor d. an increase in the proportion of the population that is college educated

an increase in the proportion of the population that is college educated

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible. The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible. a. consumption set b. budget constraint c. original budget d. income cap

budget constraint

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good. a. Opportunity cost b. productive efficiency c. budget constraint d. production possibilities frontier

budget constraint

Cyclical unemployment arises when: a. the agriculture sector completes the cycle of planting, cultivating, and harvesting the nation's food supply. b. labor unions strike for higher wages. c. the business cycle enters an expansionary phase. d. business activity in the macroeconomy declines.

business activity in the macroeconomy declines.

The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the ______________. a. natural rate of unemployment b. business cycle c. supply curve d. labor supply

business cycle

In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of: a. buyers and sellers. b. all consumers. c. producers and input suppliers. d. producers and government planning committees.

buyers and sellers

The nature of demand indicates that as the price of a good increases: a. buyers desire to purchase less of it. b. suppliers wish to sell less of it. c. more of it is desired. d. more of it is produced.

buyers desire to purchase less of it

Atlantic Bank is required to hold 10% of deposits as reserves. If the central bank increases the discount rate, how would Atlantic Bank respond? a. by noting a decrease in net worth b. by increasing its reserves c. its balance sheet will be unchanged d. it can make more loans with increased loan assets

by increasing its reserves

Marginal thinking is best demonstrated by: a. choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time. b. deciding to never purchase a coat made with animal skins or furs c. acquiring the information relevant to a choice before making that choice d. measuring all of the costs of a meal against all of the benefits when deciding whether to order a second milkshake

choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.

Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories. a. financial capital market b. financial investment market c. circular flow diagram d. Specialization Model

circular flow diagram

Along with the general growth-oriented agenda, some central Asian nations need an improved infrastructure of _________________, along with research into ___________ focused on their particular economic realities. a. market-oriented institutions; economic and legal stability b. communication and transportation; technology c. foreign aid; foreign investment d. health and medical research; foreign aid

communication and transportation; technology

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.

creation of money.

The two main sources for the supply of capital in the U.S. economy are: a. private sector investment and government borrowing when spending is higher than tax revenues. b. domestic savings from individuals and firms and inflows of financial capital from foreign investors. c. domestic savings from individuals and firms and government borrowing to make up a tax shortfall. d. domestic private sector borrowing and inflows of financial capital from foreign investors.

domestic savings from individuals and firms and inflows of financial capital from foreign investors.

Country Able and Country Baker initially have the same real GDP per capita. Country Able experiences no economic growth, while Country Baker grows at a sustained rate of 7 percent. In 12 years, Country Baker's GDP will be approximately ___________ that of Country Able. a. triple b. double c. one-half d. one-fourth

double

The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if: a. the economy moves along the production possibilities in the direction of a greater quantity of defense. b. the economy moves from a point inside the production possibilities curve toward a point on the production possibilities curve. c. the production possibilities frontier shifts outward due to an improvement in technology. d. either b) or c) occurs, but not as a result of a)

either b) or c) occurs, but not as a result of a)

Which of the following is generally accepted as a valid criticism of the production of useful goods and services? a. government involvement b. environmental pollution c. the black market d. economic freedom

environmental pollution

Whether the economy is in a recession is illustrated in the AD/AS model by how close the _____________________ is to the potential GDP line. a. AS curve b. AD curve c. equilibrium d. AS and AD curve

equilibrium

The ____________ is the quantity where quantity demanded and quantity supplied are equal at a certain price. a. quantity demanded :b. equilibrium quantity c. demand schedule d. supply schedule

equilibrium quantity

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

expansionary fiscal policy; lead to a budget deficit

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

government tax revenues increase

In an AD/AS diagram, an increase in structural unemployment will: a. shift AS to the right. b. have no effect on AS or AD c. shift AS to the left. d. shift AD to the left.

have no effect on AS or AD

In an AD/AS diagram, an increase in structural unemployment will: a. shift AS to the right. b. have no effect on AS or AD. c. shift AS to the left. d. shift AD to the left.

have no effect on AS or AD.

According to the law of supply: a. there is a direct relationship between price and the quantity supplied. b. there is an inverse relationship between price and the quantity supplied. c. there is a direct relationship between price and quantity demanded. d. there is an inverse relationship between price and quantity demanded.

here is a direct relationship between price and the quantity supplied

In the long run, the most important source of increase in a nation's standard of living is a: a. zero rate of population growth b. high rate of economic growth. c. high rate of consumption. d. high rate of labor force growth.

high rate of economic growth

Which of the government policies below is most unlikely to encourage per capita economic growth? a. high taxes on companies that spend a lot on capital formation b. the use of tax revenues for investment and capital formation c. special subsidies for capital-intensive forms of production d. promotion of education and training programs for workers

high taxes on companies that spend a lot on capital formationvvv

Unemployment rates in the nations of Europe have typically been ____________ than in the United States. a. higher b. lower c. the same d. better

higher

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

higher interest rate

If the price level of what firms produce is rising across an economy, but the costs of production are constant, then: a. the maximum potential GDP will be exceeded. b. increase in quantity produced won't be large. c. a majority of industries will start running into limits. d. higher profits will induce expanded production.

higher profits will induce expanded production.

Which of the following would reduce the supply of microcomputers? a. a technological improvement that lowers the cost of producing the computers b. higher wage rates for the workers that assemble the computers c. a reduction in the price of computer chips used to produce the computers d. a reduction in the price of computers.

higher wage rates for the workers that assemble the computers

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.

is producing at a point where output is less than potential GDP.

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers. a. microeconomy b. command economy c. market-oriented economy d. macroeconomy

market-oriented economy

The marginal benefit of a slice of pizza is the: a. total amount that a consumer is willing to pay for a whole pizza, divided by the number of slices b. difference between the value of the slice to the consumer and the price of the slice. c. maximum amount that a consumer is willing to pay for the slice. d. price of the slice of pizza

maximum amount that a consumer is willing to pay for the slice.

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.

may be able to produce something at a lower opportunity cost than another party.

An economy with a larger involvement in foreign trade: a. is more likely to suffer a larger trade imbalance. b. may measure its exports as a share of GDP. c. has a substantial trade imbalance. d. has an underlying trade imbalance.

may measure its exports as a share of GDP.

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.

no one country produces all of what citizens within the country want.

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

opportunity cost

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the budget constraint, sometimes also called the _______________, a diagram which shows what choices are possible. a. opportunity set b. consumption choice c. time vale of money d. risk premium

opportunity set

Since the late 1950s, economists have performed "growth accounting" studies in the United States. These have determined that ________________ is typically the most important contributor to U.S. economic growth. a. human capital b. physical capital c. technology d. a market orientation

technology

Since the late 1950s, economists have performed "growth accounting" studies in the United States. These have determined that ________________ is typically the most important contributor to U.S. economic growth. a. human capital b. physical capital c. technology d. a market orientation

technology

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.

temporary emergency measures.

If 1000 Mexican pesos could buy $1.00 U.S. dollar in 2006 and 87 U.S. dollars in 2010, then: a. the dollar depreciated against the peso. b. the peso appreciated against the dollar. c. the dollar strengthened against the peso. d. the peso strengthened against the peso.

the dollar strengthened against the peso.

A government began 2013 with a budget deficit and a trade deficit. During the year, the government changed its policy and is now running a budget surplus. If all other factors hold constant, this change in policy will cause: a. the exchange rate to decrease and the trade deficit to increase. b. the exchange rate to increase and the trade deficit to decrease. c. the exchange rate and the trade deficit to decrease. d. the exchange rate and the trade deficit to increase.

the exchange rate and the trade deficit to decrease.

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.

there are no incentives for Alpha to specialize and trade with Beta.

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.

there can be mutual gains from trade to the two countries if the USA exports wheat to China in exchange for pants.

Why do smaller economies around the world typically face more volatile inflation? a. they can be unsettled by international movements of capital and goods b. they address inflation concerns without restricting trade and thus lose benefits c. businesses are distracted from focusing on real productivity gains d. the fundamentals of growth are the same in every country

they can be unsettled by international movements of capital and goods

Frictional unemployment is: a. unemployment that is due to the friction of competing ideological systems. b. unemployment caused by lack of training and education. c. unemployment caused by automation in the workplace. d. unemployment that is due to normal turnover in the labor market.

unemployment that is due to normal turnover in the labor market.

But nearly all supply curves share a basic similarity: they slope _______________. a. down from left to right b. up from left to right c. up from right to left d. down from right to left

up from left to right

In deciding how many hours to work, Beulah will make a choice that maximizes her _______; that is, she will choose according to her preferences for leisure time and income. a. budget constraint b. opportunity set c. utility d. production possibilities frontier

utility

The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern. a. utility b. marginal benefit c. opportunity cost d. sunk costs

utility

If labor demand is downward sloping and labor supply is upward sloping, then when labor demand rises faster than labor supply, it is expected that real wages __________. a. will stay the same b. will decrease c. will increase d. may increase, decrease or stay the same depending on the relative slopes.

will increase

In a number of middle to low-income economies around the world, governments may run an expansionary policy of huge and sustained budget deficits. This policy a. uses the central bank as a mechanism for making loans to politically favored firms. b. will begin a cycle of heavy reliance on economic growth from a few exported products. c. counters inflation without regard to the shift to the left in aggregate demand. d. will shift aggregate demand to the right, so that output is beyond the potential GDP level.

will shift aggregate demand to the right, so that output is beyond the potential GDP level.

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

contractionary

It is sometimes necessary for a _________________ economy to live with a degree of uncertainty over _______________ that would be politically unacceptable in the high-income economies. a. developing; unemployment b. converging; inflation c. disconnected; fundamentals of growth d. converging; trade imbalances

converging; inflation

While governments will play a different role across countries, all the ________________ economies have found that increasing ____________________ for firms and workers has been a critical ingredient in the recipe for faster growth. a. technologically disconnected; focus on raising human capital b. converging; market-oriented incentives c. technologically disconnected; focus on increasing technology d. high-income; retained revenue and wages

converging; market-oriented incentives

An economy's rate of productivity growth is closely linked to the growth rate of its ______________, although the two aren't identical. a. GNP b. output c. GDP per capita d. technology

GDP per capita

_____________________ 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

Automatic stabilizers

Which of the following best characterizes the circular flow of income? a. Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses. b. Businesses buy resources from the government, and households buy goods and services from businesses. c. The government purchases resources from businesses and households and then sells goods and services to businesses and households. d. Households buy factors of production from businesses, and businesses buy goods and services from households.

Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

Which of the following best characterizes the circular flow of income? a. Households buy factors of production from businesses, and businesses buy goods and services from households. b. The government purchases resources from businesses and households and then sells goods and services to businesses and households. c. Businesses buy resources from the government, and households buy goods and services from businesses. d. Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

Ethiopia has a GDP of $8 billion (measured in U.S. dollars) and a population of 55 million. Costa Rica has a GDP of $9 billion (measured in U.S. dollars) and a population of 4 million. Calculate per capita GDP for each country. a. Ethiopia = $14.50 Costa Rica = $2250.00 b. Ethiopia = $14.50 Costa Rica = $225.00 c. Ethiopia = $145.00 Costa Rica = $2250.00 d. Ethiopia = $1450.00 Costa Rica = $22,500.00

Ethiopia = $145.00 Costa Rica = $2250.00

Which of the following statements is true? a. GDP includes spending on recreation and travel, but it does not cover leisure time. b. GDP does not include production that is exchanged in the market, but it does cover production that is not exchanged in the market. c. GDP does not include newly produced goods and services, but counts the buying and selling of previously existing assets d. GDP includes production that is not exchanged in the market

GDP includes spending on recreation and travel, but it does not cover leisure time.

Dr. Colgate is a dentist who employs an assistant, Ms. Crest. If Dr. Colgate worked all day at the front desk, she could answer 40 phone calls. If she worked all day with patients, she could clean the teeth of 40 patients. If Ms. Crest worked all day at the front desk, she could answer 60 phone calls. If she worked all day with patients, she could clean the teeth of 20 patients. Which of the following is true? a. Dr. Colgate has an absolute advantage in answering phones. b. Ms. Crest has a comparative advantage in answering phones. c. Ms. Crest has an absolute advantage in cleaning patients' teeth. d. Dr. Colgate has a comparative advantage in answering phones. e. Dr. Colgate has an absolute advantage in answering phones and an absolute advantage in cleaning patients' teeth.

Ms. Crest has a comparative advantage in answering phones.

___________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

Reserves

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

comparative; comparative

What is the most common method of measuring flows of trade? a. amount of physical items transported between countries b. amount of manufactured items transported by truck c. comparing annual amounts of goods and services exchanged between countries d. comparing exports of goods, services, and financial capital between countries

comparing exports of goods, services, and financial capital between countries

Say's Law argues that a given ____________________ must create an equivalent ________________________ somewhere else in the economy. a. potential GDP; value of supply b. total quantity of goods; price level for output c. natural rate of unemployment; full employment GDP d. value of supply; value of demand

value of supply; value of demand

When other factors such as health and illiteracy rates are added to global comparisons of GDP and population, which of the following is likely to be revealed? a. rough comparisons between regions as data are not available b. very wide differences in the standard of living c. 2% of the world's GDP comes from agriculture in low-income countries d. the similarity in the low degree of urbanization

very wide differences in the standard of living