ECON 2105E Lastrapes

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_______ is an example of a service.

A manicure

The ripple effects of an FOMC decision to fight recession, in order, are: The Fed lowers the federal funds rate target. The Fed buys securities in an open-market operation. Short-term interest rates fall and the exchange rate falls. The quantity of money and supply of loanable funds increase. The long-term real interest rate falls. Consumption, investment, and net exports increase. Aggregate demand increases. Real GDP growth and the inflation rate increase.

1,2,3,4,5,6,7,8

On January 1, 2017, Sophie's Sunlounge owned 4 tanning beds valued at $20,000. During 2017, Sophie's bought 3 new beds at a total cost of $10,000. At the end of the year, the market value of all of Sophie's beds was $25,000. Calculate Sophie's gross investment and depreciation during 2017. Sophie's gross investment during 2017 was $________. Sophie's depreciation during 2017 was $________.

10,000; 5,000

What is the present value of $10,000, four years in the future if the interest rate is 5 percent? The present value of $10,000, four years in the future if the interest rate is 5 percent is $_________.

8227.02

Cindy takes a summer job painting houses. During the summer, she earns an after-tax income of $,500 and she spends $2,000 on living expenses. What was Cindy's saving during the summer? Cindy's saving during the summer was $ __________.

2,500

Suppose the CPI in 2013 is 230 and the CPI in 2014 is 276.0. What is the inflation rate in 2014? The inflation rate in 2014 is ______ percent.

20.0

The people who live on Second Life Island consume only juice and cloth. Last year, which was the CPI base year, the price of juice was $2 a bottle, the price of cloth was $5 a length, and the average urban household spent $10 on juice and $45 on cloth. This year, the price of juice is $6 a bottle and the price of cloth is $9 a length. What is the CPI in the current year? The CPI in the current year is _______.

201.8

Suppose that potential GDP and the velocity of circulation are constant. What is the change in the price level in the long run if the quantity of money increases by 2 percent a year? If the quantity of money increases by _____ percent a year, in the long run the change in the price level is ______ percent a year.

2; 2

Esther owns an ice cream parlor. In an hour she can produce 23 milkshakes or 115 ice cream sundaes. Bob also owns an ice cream parlor. In an hour he can produce 5 milkshakes or 20 ice cream sundaes. Calculate Esther's and Bob's opportunity cost of producing a milkshake. Bob's opportunity cost of producing 1 milkshake is ______ ice cream sundaes.

Esther owns an ice cream parlor. In an hour she can produce 23 milkshakes or 115 ice cream sundaes. Bob also owns an ice cream parlor. In an hour he can produce 5 milkshakes or 20 ice cream sundaes. Calculate Esther's and Bob's opportunity cost of producing a milkshake. Esther's opportunity cost of producing 1 milkshake is ______ ice cream sundaes.

When the Fed buys securities from a bank, a sequence of events begins. The events are listed below. Number each event in the order in which it occurs. Some of the new money is a currency drain . Some of the new money remains on deposit. Banks lend unplanned reserves. New money is used to make payments. Banks have unplanned reserves. Unplanned reserves decrease. The quantity of money increases. Desired reserves increase because deposits have increased.

6,5,2,4,1,8,3,7

Choose the correct statement about an increase in the population. A. Potential GDP per hour of labor decreases. B. Potential GDP decreases. C. The production function shifts upward. D. The real wage rate rises.

The equilibrium quantity _______. A. and equilibrium price are determined at the intersection of the supply curve and the demand curve B. is the quantity demanded at the equilibrium price, but not necessarily the quantity sold C. is the quantity supplied at the equilibrium price, but not necessarily the quantity demanded D. is any quantity at which the quantity supplied is greater than or equal to the quantity demanded

Potential GDP increases when _______. A. the quantity of capital increases B. the government increases its expenditures C. exports increase D. the price level rises

________ is an example of a good.

A football

A country that is borrowing more from the rest of the world than it is lending to the rest of the world is a ______, and a country that during its entire history has borrowed more from the rest of the world than it has lent to it is a ______. A. net borrower; debtor nation B. net debtor; borrower nation C. borrower nation; net debtor D. debtor nation; net borrower

A mortgage is _______. A. a legal contract that gives ownership of a home to the lender in the event that the borrower fails to meet the agreed loan payments (repayments and interest) B. a short-term loan C. a legal contract that gives the lender claim to the homeowner's income until the home loan is paid in full D. any loan that is available at a sub-prime rate

A rational choice ______. A. achieves the greatest benefit over cost for the person making the choice B. will turn out to have been the best choice after the event C. is always the best choice for society D. has the lowest opportunity cost.

A shortage occurs at a given price when ______. The price _____ to reach equilibrium. A. the quantity demanded is greater than the quantity supplied; rises B. the quantity supplied is greater than the quantity demanded; falls C. supply is greater than demand; falls D. demand is greater than supply; rises

American to cut flights, charge for luggage American Airlines announced yesterday that it will begin charging passengers $15 for their first piece of checked luggage, in addition to raising other fees and cutting domestic flights as it grapples with record-high fuel prices. What is the influence on the supply of American Airlines flights? The news clip illustrates a change in the supply of flights when it reports that American Airlines is _______. A. cutting the number of flights with no mention of a change in the airfare B. charging $15 for a checked bag, which will cut the number of air travelers C. charging $15 to check a bag so that it can cut the number of flights D. paying more for fuel and charging people to check a bag

An economy at a full-employment equilibrium experiences an increase in aggregate demand. The unemployment rate ______ its natural rate, and to return to the long-run equilibrium, the money wage rate begins to ______. A. falls below; rise B. rises above; rise C. falls below; fall D. rises above; fall

An increase in the price level when the money wage rate remains unchanged increases ______. A. the quantity of real GDP supplied B. potential GDP C. aggregate supply D. factor prices by the same percentage as the increase in the price level

Are either or both of these newspaper headlines positive or normative? 1. Smoking causes lung cancer. 2. Gasoline powered vehicles should be replaced with a cleaner technology. Statement 2 is a ______ because it _____ be testes. A. normative; cannot B. normative; can C. positive; can D. positive; cannot

As we move up along the long-run aggregate supply curve, ______. A. the real wage rate remains constant B. the prices of goods and services remain constant C. the prices of goods and services increase and the money wage rate decreases D. the money wage rate remains constant

As we move up along the short-run aggregate supply curve, ______. A. the money wage rate, the prices of other resources, and potential GDP remain constant B. the money wage rate and the prices of other resources change by the same percentage C. potential GDP increases D. the real wage rate, the prices of other resources, and potential GDP remain constant

By remaining in school, you are paying an opportunity cost that includes A. the wages you could earn if you took a job B. the money you spend on late-night snacks C. the money you spend on iTunes D. the time you spend doing laundry

Choose the correct sentence. A. Influences of expectations and the constant arrival of news about the influences on supply and demand, make day-to-day and week-to-week changes in the exchange rate difficult to predict. B. Changes in the interest rate differential, which generally change the demand for U.S. dollars in the foreign exchange market by more than the supply, are difficult to predict because it requires predicting changes in foreign interest rates. C. A movement away from interest rate parity sometimes influences traders to act and sometimes does not, and it is difficult to know when traders will react. D. Changes in the expected future exchange rate generally change the supply of U.S. dollars in the foreign exchange market by more than the demand, but it is impossible to know by how much.

Choose the correct statement about the U.S. short-run Phillips curve. A. We can interpret U.S. inflation and unemployment data in terms of a shifting short-run Phillips curve, which sometimes shifts upward and sometimes shifts downward. B. U.S. inflation and unemployment data cannot be interpreted in terms of the short-run Phillips curve. C. The U.S. short-run Phillips curve has been shifting steadily upward since 2001. D. The U.S. short-run Phillips curve has been shifting steadily downward since 2001.

Choose the correct statement. A. A marginally attached worker is a person who currently is neither working nor looking for work but has indicated that he or she wants and is available for a job and has looked for work sometime in the recent past. B. U-3 includes discouraged workers. C. U-2 is the unemployment rate of those unemployed for 15 weeks or more. D. The unemployment rate includes all underutilized labor.

Choose the correct statement. A. Labor hours are not all equally productive. B. An increase in the quantity of labor and a corresponding decrease in leisure hours will have no effect on real GDP. C. An increase in the quantity of labor and a corresponding decrease in leisure hours shifts the production function upward. D. The aggregate production function is the relationship that tells us how real GDP changes as the real wage rate changes, when all other influences on production remain the same.

Choose the correct statement. A. Loans are funds committed for an agreed dash upon period of time. B. In 2017 about 700 commercial banks operated in the United States. C. Upper A benefit of a money market mutual fund is that shareholders can write checks on their accounts with no restrictions. D. The deposits of commercial banks represent 62 percent of Upper M 1 and 49 percent of Upper M 2.

Choose the statement about a crawling peg that is correct. A. When China abandoned its fixed exchange rate, it replaced it with a crawling peg. B. A crawling peg makes the exchange rate fluctuate wildly. C. A crawling peg is not influenced by actions of the central bank. D. The Fed operated a crawling peg in the decade following World War II.

Choose the statement about flexible exchange rates that is correct. A. A flexible exchange rate is influenced by central bank actions. B. A flexible exchange rate is unlike a fixed exchange rate because a flexible exchange rate follows a path determined by a decision of the government or central bank rather than taking a single value. C. Next to the United States, China is the largest country that follows a flexible exchange rate policy. D. Most countries in the world do not follow a flexible exchange rate policy.

Choose the statement that is incorrect. A. The demand-side effects of a tax cut are likely to be larger than an equivalent increase in government expenditure. B. The consensus is that the crowding-out effect is strong enough to make the government expenditure multiplier less than 1. C. The tax multiplier is the quantitative effect of a change in taxes on real GDP. D. The government expenditure multiplier is the quantitative effect of a change in government expenditure on real GDP.

Complete the following sentence. If, as Gustavo's income increases, his demand for TVs increases, then for Gustavo, TVs are _______. A. a normal good B. an inferior good C. a substitute D. a complement

Complete the following sentences. ______ good is an item that is bought by its final user during a specified time period. ______ good is an item that is produced by one firm, bought by another firm, and used as a component of a final good or service. A. A final; An intermediate B. A finished; An incomplete C. A specified; A component D. A specific; A nonspecific

Complete the sentence. If as the price of wheat bran increases, the quantity of bread that firms plan to sell increases, then wheat bran and bread are _______. A. complements in production B. normal goods C. substitutes in production D. inferior goods

Complete the sentence. Once a month, the Bureau of ______ Statistics calculates the Consumer Price Index, which is a measure of the ______ consumers for a fixed basket of consumer goods and services. A. Labor; average of the prices paid by urban B. Consumer; retail prices paid by all C. Labor; non dash discounted prices paid by urban D. Labor; prices paid by all

Depository institutions provide four benefits, which are ______. A. creating liquidity, lowering the cost of borrowing, lowering the cost of monitoring borrowers, and pooling risk B. creating liquidity, lowering the cost of borrowing, paying interest on investment funds, and introducing new technology into banking C. pooling risk, keeping inflation low and steady, lowering the cost of borrowing, and lowering the cost of monitoring borrowers D. minimizing interest rates on purchases of large ticket items, centralizing all household monetary needs in one location, introducing new technology into banking, and paying interest on investment funds

Economics explains the choices that end up determining ______ good and services get produced. A. what, how, and for whom B. why, where, and how C. where, when, and how D. what, how, and when

Esther owns an ice cream parlor. In an hour she can produce 23 milkshakes or 115 ice cream sundaes. Bob also owns an ice cream parlor. In an hour he can produce 5 milkshakes or 20 ice cream sundaes. Calculate Esther's and Bob's opportunity cost of producing a milkshake. ________ has a comparative advantage in milkshakes and _____ has an absolute advantage in both goods. A. Bob; Esther B. Bob; neither C. Esther; Esther D. Esther; Bob

Gerry and Jane grow blueberries and cherries. Gerry has a comparative advantage in producing blueberries if ____. A. Gerry's opportunity cost of producing blueberries is less than Jane's opportunity cost of producing blueberries B. Gerry's opportunity cost of producing blueberries is less than his opportunity cost of producing cherries C. Gerry can grow more blueberries than Jane can grow D. Gerry's marginal benefit from blueberries is greater than Jane's

Good and Services are ______. A. the objects that people value and produce to satisfy human wants. B. the gifts of nature C. the things that one person produces of performs purely for he benefit of other people D. any objects that get produced or tasks that get performs

How do the earnings of economics majors compare with other majors? Economics majors earn _______. A. less than chemical engineering majors and applied mathematics majors but more than most other majors. B. more than all other majors C. less than business majors and finance majors but more than most other majors D. less than most other majors

If in the long run, the U.S. dollar appreciates against the Japanese yen, then ______. A. Japan has created money at a faster pace than has the United States, and the price level in Japan has risen more rapidly than the U.S. price level B. it must be the case that the real exchange rate has also appreciated C. purchasing power parity does not exist between Japan and the United States D. the United States has created money at a faster pace than has Japan, and the price level in the United States has risen more rapidly than Japan's price level

If the U.S. exchange rate changes from $1.20 Canadian to $1.25 Canadian, then the U.S. dollar has _______ and the Canadian dollar has _______. A. appreciated; depreciated B. appreciated; devalued C. depreciated; appreciated D. devalued; appreciated

If the trend rate of change of velocity is 1 percent a year, potential GDP grows by 4 percent a year, and the money growth rate is 2 percent a year, what is the trend inflation rate? A. -1 percent a year B. -5 percent a year C. 7 percent a year D. 1 percent a year

In real business cycle theory, all of the following events can be sources of fluctuation in productivity except _______. A. changes in the growth rate of money B. natural disasters C. the pace of technological change D. climate fluctuations

Investment ______, and aggregate demand ______ with a multiplier effect. A. decreases; decreases B. decreases; increases C. increases; decreases D. increases; increases

Money is _______. A. any commodity or token that is generally acceptable as a means of payment. B. an economic unit that hires factors of production and organizes those factors to produce and sell goods and services C. a social arrangement that governs the ownership, use, and disposal or anything that people value D. any arrangement that enables buyers and sellers to get information and to do business with each other

Money serves as a ______. A. medium of exchange, which means that it is generally accepted in exchange for goods and services B. unit of account, which means that it can be held and exchanged later for goods and services C. store of value because even during a period of inflation its value does not change D. store of value, which is a function unique to money

Oil Price Soars to $135 The price of oil hit a record high above $135 a barrel in May 2008 ----more than twice what it cost the year before. OPEC has so far blamed price rises on speculators and says there is no shortage of oil. A shortage in the market for oil implies that ______. A. the price of oil is being prevented from influencing buying and selling plans B. more people are traveling C. the market for oil is a competitive market D. the market for oil needs government action

Prior to the Great Depression, the purpose of the federal budget was to ______. A. finance federal government programs and activities B. stabilize the economy C. decrease unemployment D. maintain low interest rates

Purchasing power parity is _______. A. equal value of money B. an easy method of determining whether a currency is overvalued or undervalued C. equal real GDP per person in all countries D. equal rates of return

Suppose that purchasing power parity does not hold. If all (or most) prices have increased in the United States and not increased in Japan, then people will generally expect that the foreign exchange value of the dollar will ______. The demand for dollars ______. A. fall; decreases and the supply of dollars increases B. fall; increases and the supply of dollars decreases C. rise; decreases and the supply of dollars increases D. rise; increases and the supply of dollars decreases

Suppose that when you study 4 hours for an exam comma your mark is 80 percent. If you study for an extra hour comma your mark is 85 percent. Choose the correct statement. A. The marginal benefit from studying one more hour is 5 percent. B. The marginal increase from studying one more hour is 15 percent. C. The marginal cost of studying one more hour is 85 percent. D. The marginal benefit from studying one more hour is 80 percent.

Suppose the CPI in 2013 is 230 and the CPI in 2014 is 276.0. The inflation rate in 2014 ______. A. might be higher, lower, or the same as in 2013 B. is lower than in 2013 because the 2014 price level is less than twice the 2013 price level C. is higher than in 2013 because the price level is greater than 200 D. is higher than in 2013 because the price level has increased

The business cycle is actually a continuous series of different ______. A. short-run macroeconomic equilibriums B. potential GDP values C. full-employment equilibriums D. nominal GDP values

The law of supply of foreign exchange states that other things remaining the same, the ______ the exchange rate, the ______ in the foreign exchange market. A. higher; greater is the quantity of U.S. dollars supplied B. higher; smaller is the quantity of U.S. dollars supplied C. lower; greater is the quantity of U.S. dollars supplied D. higher; greater is the supply of U.S. dollars

The liabilities of the Fed are ______, and these liabilities along with ______ make up the monetary base. A. Federal Reserve notes held by households and businesses and reserves of depository institutions; coins issued by the Treasury B. gold and foreign exchange and loans to banks; Federal Reserve notes and coins issued by the Treasury that are held by households and businesses C. U.S. government securities and reserves of depository institutions; Federal Reserve notes held by banks D. gold and foreign exchange; Federal Reserve notes held by banks

The main sources of bias in the CPI are ______. A. new goods bias, quality change bias, commodity substitution bias, and outlet substitution bias B. big box store bias, corner store bias, mall bias, and brand name bias C. designer name bias and generic product bias D. anti-fur bias, vegetarian bias, and lifestyle bias

The quantity of investment and borrowing that firms plan to undertake depends on ______. A. how productive capital is and what it costs B. potential GDP C. the Laffer curve D. the tax on interest income

The ______ account records receipts from exports of goods and services sold abroad, payments for imports of goods and services from abroad, and ______. A. current; net interest income paid abroad and net transfers B. trade; net income received from abroad and foreign investment in the United States C. capital and financial; net interest income paid abroad and net transfers D. current; net income received from abroad and foreign investment in the United States

The ______ is an amount of money that, if invested today, will grow to equal a given future amount when the interest that it earns is taken into account. A. present value B. social value C. generational value D. future value

What is a typical business cycle sequence? A typical business cycle can be described by the sequence ______. A. expansion, peak, recession, trough B. expansion, trough, recession, peak C. expansion, trough, peak, recession D. expansion, recession, peak, trough

When an economy is below full employment and the government has a budget deficit, that deficit ______. A. exceeds the structural deficit B. is equal to the structural deficit minus the cyclical deficit C. is equal to the cyclical deficit minus the structural deficit D. is equal to the structural deficit

When the nominal interest rate rises, the opportunity cost of holding money ______ and the quantity of real money demanded ______. A. rises; decreases B. falls; increases C. falls; decreases D. rises; increases

Which of the following topics is NOT a macroeconomic question? A. Would a higher tax on alcohol decrease the quantity of alcohol that people buy? B. Why is the economy of India growing? C. Can a tax cut lead to a government budget surplus D. Will a cut in the interest rate increase U.S. output?

Why is an unexpected burst of inflation a problem? An unexpected burst of inflation _______. A. makes workers worse off and makes employers better off B. makes workers and employers better off C. usually leads to hyperinflation D. borrowers lose and lenders win

With a rise in the money wage rate, ______. A. the quantity that firms are willing to supply at each price level decreases B. firms have an incentive to use more capital-intensive methods in production, which will increase potential GDP in the long run C. firms have an incentive to produce more because they can charge a higher price D. potential GDP decreases in the long run because the size of the labor force decreases

______ is an example of ______. A. a neurosurgeon; labor B. a sewing machine in a Levi's production plant; entrepreneurship C. Mark Zuckerberg, CEO of Facebook; land D. The redwood forests of California; capital

f most prices have decreased in the United States and not decreased in Japan and other countries, ______. A. then for purchasing power parity to hold, the value of the U.S. dollar in the foreign exchange market will rise B. the demand for U.S. dollars will decrease C. then for purchasing power parity to hold, the value of the U.S. dollar in the foreign exchange market will fall D. nothing can happen to make purchasing power parity hold

In the long-run macroeconomic equilibrium, ______. A. the AD and SAS curves determine the price level and technology advances so that the LAS curve intersects the AD curve at the equilibrium price level B. potential GDP and aggregate demand determine the price level, and the money wage rate adjusts so that the SAS curve intersects the LAS curve at the long-run equilibrium price level C. real GDP is always increasing D. potential GDP and short-run aggregate supply determine the price level

According to classical growth theory, when real GDP per person ______, the population grows. A. grows because of technological change B. rises above the subsistence level C. equals the subsistence level D. falls below the subsistence level

A rise in the expected future exchange rate ______ the supply of U.S. dollars. An increase in the world demand for U.S. exports ______ the supply of U.S. dollars. A. decreases; decreases B. decreases; does not change C. increases; increases D. increases; does not change

A central bank is ______. The central bank in the United States is the ______. A. a bank that provides banking services for the domestic government and foreign governments; United Nations B. a bank's bank and a public authority that regulates a nation's depository institutions and conducts monetary policy; Federal Reserve System C. a bank centrally located within a country that keeps the country's gold on deposit and prints money; Federal District System D. any bank that provides general banking services for businesses and individual citizens; Bank of America

A country has been in existence for only two years. In the first year, receipts were $1.0 million and outlays were $1.5 million. In the second year, receipts were $1.5 million and outlays were $2.0 million. At the end of the second year, the government had issued debt worth ______. A. -$0.5 million B. $1 million C. $0.5 million D. -$1 million

A fall in real GDP that results in a decrease in personal income tax receipts is an example of ______. A. structural spending B. automatic fiscal policy C. a recession D. discretionary fiscal policy

According to mainstream business cycle theory, ______ grows at a steady rate and ______ grows at a fluctuating rate. A. potential GDP; short-run aggregate supply B. potential GDP; aggregate demand C. short-run aggregate supply; long-run aggregate supply D. aggregate demand; long-run aggregate supply

Along the long-run Phillips curve, _______. A. a fall in the inflation rate brings a higher unemployment rate B. the unemployment rate is constant at the natural unemployment rate C. an increase in the unemployment rate brings a lower inflation rate D. the inflation rate is constant

An increase in expected future income _______. An increase in the expected future inflation rate _______. A. increases aggregate demand today; has no influence on aggregate demand today or in the future B. increases aggregate demand today; increases aggregate demand today C. increases aggregate demand in the future but has no influence on aggregate demand today; increases aggregate demand in the future but has no influence on aggregate demand today D. decreases aggregate demand today but increases aggregate demand in the future; decreases aggregate demand today but increases aggregate demand in the future

An increase in labor productivity increases potential GDP because ______. A. there is a movement along the existing production function B. employment increases and a given amount of employment produces more real GDP C. employment increases due to an increase in the supply of labor D. production becomes more labor intensive and less capital intensive

China fixes its exchange rate ______. A. to increase its U.S. reserves B. as a way of achieving a low inflation rate C. to maintain interest rate parity D. to keep its export prices low in the long run

China makes its choice of exchange rate regimes to _______. A. keep its export prices low and to make it easier to compete in world markets B. control its inflation C. keep import prices high and encourage its citizens to buy mostly goods produced in China D. create trade controversies with other countries

China operates a crawling peg by ______. A. increasing its exports and decreasing its imports B. buying and selling U.S. dollar reserves C. raising and lowering interest rates D. negotiation with the United States

China operates a crawling peg by ______. A. negotiation with the United States B. buying and selling U.S. dollar reserves C. increasing its exports and decreasing its imports D. raising and lowering interest rates

Choose the correct statement. A. Economic growth is illustrated as a movement along the PPF. B. A return to full employment in a business cycle expansion is shown as a movement from inside the PPF to a point on the PPF. C. Real GDP grows at a smoother rate than potential GDP grows. D. The return to full employment in an expansion phase of the business cycle is economic growth.

Choose the correct statement. A. Freddie Mac is a commercial bank. B. Commercial banks are financial institutions that accept deposits, provide payment services, and make loans to firms and households. C. The Federal Reserve is the U.S. central bank that also acts as a commercial bank. D. Fannie Mae is a commercial bank.

Choose the option that is an example of government expenditure. A. The income received by lobbyists from the interest groups that they represent B. The purchase of office supplies for the office of the junior senator from New York C. The payment of welfare benefits D. The amount spent on hotel accommodation when tourists visit Washington D.C.

Choose the statement about incentives that is incorrect. A. An incentive can be a penalty that discourages an action. B. Incentives create scarcity. C. If the price of soda falls, a child has an incentive to buy more soda. D. With stiffer penalties for fraud, company directors have an incentive to play by the rules.

Choose the statement that is incorrect. A. If the output gap is positive, the inflation rate will most likely accelerate, so a higher interest rate might be required. B. If the inflation rate is below or expected to move below the bottom of the comfort zone, the Fed considers raising the interest rate. C. The Fed's decision-making process begins with an intensive assessment of the current state of the economy, which is summarized in the Beige Book. D. If the unemployment rate is below the natural rate, a labor shortage might put upward pressure on wage rates, and a higher interest rate might be called for.

Choose the statements concerning neoclassical growth theory that are true. 1. Neoclassical growth theory is the proposition that real GDP per person grows because technological change induces a level of saving and investment that makes capital per hour of labor grow. 2. The rate of technological change influences the economic growth rate but economic growth does not influence the pace of technological change. 3. Technological change results from the choices people make in the pursuit of profit. nothing 4. Neoclassical growth theory implies that growth rates and income levels per person around the globe will diverge. A. Statements 2 and 4 are correct. B. Statements 1 and 2 are correct. C. Statements 1 and 3 are correct. D. Statements 3 and 4 are correct.

Complete the following sentence. Upper A decrease in the supply of ski trips brings a ______ of ski trips at the original price and a ______ in their price. A. surplus; fall B. shortage; rise C. shortage; fall D. surplus; rise

Complete the following. In the market for chocolate bars, the supply of chocolate bars will decrease if ______. A. the future expected price of a chocolate bar decreases B. the number of chocolate manufacturers decreases. C. the price of cocoa decreases D. price of a chocolate bar decreases

Complete the sentence. Real GDP ______. A. accurately measures underground economic activity comma but does not accurately measure leisure time B. does not include a measure of leisure time or environmental quality C. accurately measures household production comma but does not accurately measure catastrophic weather such as hurricanes and ice storms D. accurately measures inflation and environmental quality but does not accurately measure political freedom and social justice

Complete the sentence. The unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the location of jobs is ______ unemployment. A. frictional B. structural C. cyclical D. natural

During the 100 years from 1916 to 2016, what was the growth rate of real GDP per person in the United States? During the 100 years from 1916 to 2016, real GDP per person in the United States grew at ______. A. 2.0 percent each decade B. an average of 2 percent a year C. an average of 4 percent a year D. 3 percent a year in most decades

Entrepreneurship ______. A. is not a factor of production B. includes people who bear the risks that arise from the decisions about what and how to produce C. earns rent D. is the knowledge and skill that people obtain from education

Entrpreneurship ______. A. is not a factor of production B. earns profit C. is the knowledge and skill that people obtain from education D. earns rent

For the past year, Kim has played tennis twice a month. She now decides to play tennis three times a month. You infer that for Kim, _____. A. either the marginal cost of a game of tennis has increased or the marginal benefit has decreased B. either the marginal benefit from a game of tennis has increased or the marginal cost has decreased C. the marginal benefit from a game of tennis must have increased D. the marginal cost of a game of tennis must have decreased.

In ______ cycle theory, animal spirits are the main source of fluctuations in aggregate demand. In ______ cycle theory, fluctuations in both investment and consumption expenditure, driven by fluctuations in the growth rate of the quantity of money, are the main source of fluctuations in aggregate demand. A. new Keynesian; new classical B. Keynesian; monetarist C. monetarist; Keynesian D. new classical; new Keynesian

I = ______. A. S + (T + G) + (X-M) B. S + (T-G) + (M-X) C. S-(T + G)-(M + X) D. S-(T-G)minus(M-X)

Most of the jobs held by people with an economics major are as _____. A. budget analysts B. market research analysts C. economists D. financial analysts

Suppose the Fed buys $50 million of government securities from the Bank of America. The Fed's total assets ______ and its total liabilities ______. A. increase by $50 million; do not change B. increase by $50 million; increase by $50 million C. do not change; do not change D. decrease by $50 million; increase by $50 million

Suppose the Fed increases the quantity of money. Complete the sentences. In the long run, supply and demand in the ______ market determines the real interest rate. The ______ adjusts to make the quantity of real money supplied equal to the quantity demanded. A. money; bond price B. loanable funds; price level C. loanable funds; nominal interest rate D. money; inflation rate

The Fed conducts an open market ______ to hit the new ______ federal funds rate target. A. purchase; higher B. sale; higher C. purchase; lower D. sale; lower

The U.S. interest rate differential rises if ______, and the larger the U.S. interest rate differential, the ______ is the demand for U.S. dollars in the foreign exchange market. A. the U.S. interest rate falls; smaller B. the foreign interest rate falls; greater C. the foreign interest rate rises; greater D. the U.S. interest rate rises; smaller

The United States is experiencing low inflation and real GDP is less than potential GDP. Describe the Fed's actions that will restore full employment. The New York Fed conducts an open market ______ to hit the new ______ federal funds rate target. A. sale; lower B. purchase; lower C. purchase; higher D. sale; higher

The core inflation rate _______. A. is equal to the CPI inflation rate B. is the rate of increase in the core PCE deflator, which is the PCE deflator excluding food and fuel C. has greater fluctuations than the CPI inflation rate D. is the rate of increase in the core CPI, which the Fed attempts to keep at zero percent a year

The cyclical surplus or deficit ______. A. equals zero when the economy is in an expansion B. is the actual surplus or deficit minus the structural surplus or deficit C. is the actual budget balance D. is the budget balance that would occur if the economy were at full employment

The demand for U.S. dollars changes when a change occurs in the ______. A. U.S. demand for imports B. world demand for U.S. exports C. supply of U.S. dollars D. foreign exchange rate

The division of the fiscal imbalance between the current and future generations, assuming that the current generation will enjoy the existing levels of taxes and benefits, is the ______. A. accounting imbalance B. generational imbalance C. present imbalance D. monetary imbalance

The fundamental precondition for labor productivity growth is _______. A. education B. the incentive system created by firms, markets, property rights, and money C. controlled immigration D. a growing population

The goods and services that we sell to people in other countries are ______. The goods and services that we buy from people in other countries are ______. A. net imports; net exports B. exports; imports; C. net exports; net imports D. imports; exports;

The impulse in RBC theory is _______. A. the growth rate of the quantity of money B. the growth rate of productivity that results from technological change C. unanticipated changes in aggregate demand D. future sales and profits

The income earned by people who sell the services of the factor of production ______ is called ______. A. entrepreneurship; rent B. capital; interest C. labor; interest D. land; wages

The law of demand for foreign exchange states that other things remaining the same, the ______ the exchange rate, the smaller is the ______ in the foreign exchange market. A. lower; quantity of U.S. dollars demanded B. higher; quantity of U.S. dollars demanded C. higher; demand for U.S. dollars D. lower; demand for U.S. dollars

The marginal benefit curve illustrates ________. A. that cookies have decreasing opportunity cost B. the principle of decreasing marginal benefit C. that preferences for cups of coffee and cookies are always changing D. it is difficult to reduce the consumption of cookies

The natural unemployment rate _______. A. is less than the actual rate of unemployment B. is the unemployment rate at full employment C. is equal to the difference between the forecasted unemployment rate and the actual unemployment rate D. is equal to the number of people cyclically unemployed divided by the number in the labor force

The production possibilities frontier is the boundary between those combinations of goods and services that can be _____ and those that ______. A. consumed; cannot be consumed B. produced; cannot be produced C. purchased; can be consumed D. produced; can be consumed

The ratio of reserves to deposits that a bank plans to hold is its ______. If a bank has $10 million in actual reserves and $8 million in desired reserves, then it has ______. A. planned reserve ratio; a currency drain B. desired reserve ratio; unplanned reserves C. desired deposit ratio; a shortage of deposits D. planned deposit ratio; a shortage of currency

The relationship between the tax rate and the amount of tax revenue collected is called the ______ curve. This curve shows that ______. A. maximum tax rate; taxes can never be too low B. Laffer; tax cuts can increase tax revenue C. Reagan; tax cuts can increase tax revenue D. tax revenue; a higher tax rate brings greater tax revenue

The structural surplus or deficit ______. A. is a cyclical phenomenon B. is the budget balance that would occur if the economy were at full employment C. is the actual budget balance D. equals zero when the economy is in an expansion

The supply of U.S. dollars changes when a change occurs in the _______. A. world demand for U.S. exports B. U.S. interest rate relative to the foreign interest rate C. foreign exchange rate D. demand for U.S. dollars

The tax wedge is the gap between the before-tax and after-tax ______. A. potential GDP B. wage rates C. equilibrium quantity of labor D. investment

The ______ account records ______ U.S. investment abroad. A. current; foreign investment in the United States minus B. capital and financial; foreign investment in the United States minus C. international financial; foreign investment in U.S. bank accounts plus D. capital and financial; foreign investment in the United States plus

Veronica has three slices of pizza for lunch. The marginal benefit that Veronica receives from the third slice of pizza is ______. A. the opportunity cost of producing the third slice of pizza. B. the maximum amount that she is willing to pay for the third slice of pizza C. the opportunity cost of producing three slices of pizza D. the maximum amount that she is willing to pay for three slices of pizza.

We achieve production efficiency if we _______. A. do not face a tradeoff B. produce goods and services at the lowest possible cost C. have some unused resources D. produce at a point inside the PPF

What does interest rate parity mean? Interest rate parity means ______. A. equal value of money B. equal rates of return C. interest rates in Canada and the United States are the same D. that if interest rates are higher in a developing nation than in the United States, U.S. investors will move their assets from the United States into that developing nation

What information is given by the CPI? The CPI tells us ______. A. the inflation rate in a given period compared to the inflation rate in the base period, which is by definition equal to 100 B. the price level in a given period expressed as a percentage of the price level in the base period, which is by definition equal to 100 C. the inflation rate in a given period compared to the inflation rate in the base period, which is by definition equal to zero D. the price level in a given period expressed as a percentage of the price level in the base period, which is by definition equal to zero

What is U.S. gross domestic product? U.S. gross domestic product is the market value of all the ______ produced ______ in a given time period. A. final goods and services; by Americans anywhere in the world B. final goods and services; within the United States C. goods; within the United States D. goods; by American firms located anywhere in the world

When a shortage or a surplus arises in the loanable funds market _______. A. the demand for loanable funds changes to return the economy to its original real interest rate B. the real interest rate is pulled to the new equilibrium level C. the nominal interest rate is pulled to the new equilibrium level D. the supply of loanable funds changes to return the economy to its original real interest rate

When a tax is applied to labor income, the result is a ______ full-employment quantity of labor and a ______ potential GDP. A. smaller; higher B. smaller; lower C. greater; higher D. greater; lower

When the real interest rate falls, the ______ because the ______ is the opportunity cost of loanable funds. A. quantity of loanable funds demanded decreases; inflation rate B. quantity of loanable funds demanded increases; real interest rate C. demand for loanable funds increases; inflation rate D. demand for loanable funds decreases; real interest rate

When you make a choice in your self-interest, _______. A. that choice is a selfish choice if it requires production by someone else B. you don't think too much about how your choice affects others C. that choice is always the right choice D. that choice is the one you think is best for everyone including yourself

Which of the following are included in the income approach to calculating GDP? A. corporate profits; net income; investment B. indirect taxes less subsidies; corporate profits; net income C. indirect taxes less subsidies; corporate profits; government expenditure D. net income; government expenditure; consumption expenditure

Which of the following items is an example of a tradeoff? A. You spend the same amount on textbooks and movies B. You spend more on textbooks and less on movies C. You spend more on textbooks and more on movies D. You spend less on textbooks and less on movies

Which of the following statements about the monetarist view of the macroeconomy is incorrect? A. The money wage rate is sticky. B. Left alone, the economy rarely operates at full employment. C. All recessions result from inappropriate monetary policy. D. Taxes should be kept low to avoid disincentive effects that decrease potential GDP.

The supply of loanable funds ______ and the long-term interest rate ______. A. decreases; falls B. increases; rises C. increases; falls D. decreases; rises

C .

A country that is borrowing more from the rest of the world than it is lending to the rest of the world is a ______, and a country that during its entire history has borrowed more from the rest of the world than it has lent to it is a ______. A. borrower nation; net debtor B. debtor nation; net borrower C. net borrower; debtor nation D. net debtor; borrower nation

A depository institution takes deposits from ______ and earns most of its income by _______. A. households; providing Internet banking services B. firms; charging service fees C. households and firms; making loans and buying securities that earn a higher interest rate than that paid to depositors D. households and firms; providing Internet banking services and charging service fees

A fixed exchange rate is one that _______. A fixed exchange rate is achieved _______. A. follows a path determined by the government or the central bank by the central bank buying or selling domestic currency in the foreign exchange market B. is determined by demand and supply in the foreign exchange market; with no direct intervention by the central bank C. is set by the government or the central bank; by central bank intervention in the foreign exchange market D. is set by the government or the central bank; by the intervention of market traders in the foreign exchange market

A movement ______ along the short-run Phillips curve occurs when there is an ______ increase in aggregate demand. A. up; expected B. down; unexpected C. up; unexpected D. down; expected

Along the short-run Phillips curve, ______. A. the expected inflation rate varies and the natural unemployment rate is constant B. the expected inflation rate is constant and the natural unemployment rate varies C. the expected inflation rate and the natural unemployment rate are constant D. the expected inflation rate and the natural unemployment rate vary

An economy is at potential GDP when it experiences an increase in costs. The economy experiences _______. A. a rise in the price level and an increase in real GDP B. a fall in the price level and a decrease in real GDP C. stagflation D. a rise in the price level and a decrease in potential GDP

An increase in U.S. demand for imports ______ the supply of U.S. dollars. A fall in the U.S. interest rate differential ______ the supply of U.S. dollars. A. decreases; increases B. decreases; decreases C. increases; increases D. increases; decreases

An increase in the population ______ potential GDP and ______ potential GDP per hour of labor. A. decreases; increases B. increases; increases C. increases; decreases D. decreases; decreases

Are either or both of these newspaper headlines positive or normative? 1. Smoking causes lung cancer. 2. Gasoline powered vehicles should be replaced with a cleaner technology. Statement 1 is a ______ because it _____ be testes. A. normative; cannot B. normative; can C. positive; can D. positive; cannot

Assume that the preconditions for labor productivity growth are in place. What influences the pace of labor productivity growth? The pace of labor productivity growth is influenced in part by _______. A. international trade B. the rate of change of the U.S. dollar exchange rate in the foreign exchange market C. human capital growth D. population growth

A ______ macroeconomist believes that the economy is self-regulating and always at full employment. A ______ macroeconomist believes the economy requires active help from fiscal policy and monetary policy to maintain full employment. A. Keynesian; new Keynesian B. new classical; monetarist C. classical; Keynesian D. classical; monetarist

A cost-push rise in the price level can arise from an increase in _______. A. exports B. government expenditure C. the money wage rate or money prices of raw materials D. the quantity of money

Between 1997 and 2005, China operated a _______ exchange rate. Since 2005, China has operated a _________ exchange rate. A. crawling peg; fixed B. fixed; flexible C. fixed; crawling peg D. flexible; crawling peg

Choose the correct statement. A. A check is money because while it is in circulation the quantity of money increases by the amount of the check. B. Currency is money and credit cards are money because they are means of payment, but deposits are not money. C. Deposits are money, checks are not money, and credit cards are not money. D. A credit card is money because it allows you to take a loan at the instant you buy something.

Choose the correct statement. A. Governments can make better decisions by using the tools of economics, but businesses require the tools of business administration, not economics. B. Economics can help with the normative part of a policy goal. C. Policy questions involve a blend of positive and normative questions. This is the correct answer. D. For a given goal, economics compares the total benefit from achieving the goal with its total cost to find the best use of the available resources.

Choose the correct statement. A. Nominal GDP is just a more precise name for real GDP. nothing B. We measure the change in production by comparing nominal GDP in one year with nominal GDP in another year. C. Nominal GDP is just a more precise name for GDP. D. When nominal GDP increases comma real GDP decreases.

Choose the correct statement. A. The nominal interest rate is the opportunity cost of loanable funds. B. The nominal interest rate is approximately equal to the real interest rate minus the inflation rate. C. The real interest rate is the nominal interest rate adjusted to remove the effects of inflation on the buying power of money. D. The real interest rate is the number of dollars that a borrower pays and a lender receives in interest in a year expressed as a percentage of the number of dollars borrowed and lent.

Choose the correct statement. A. The quantity of real GDP demanded depends on the quantity of real GDP supplied. B. The aggregate demand curve slopes downward because of the wealth effect and the money wage rate. C. The quantity of real GDP demanded is the sum of the real consumption expenditure, investment, government expenditure, and exports minus imports. D. The higher the price level, the greater is the quantity of real GDP demanded.

Choose the correct statement. A. To get from factor cost to market price comma we add subsidies and subtract indirect taxes. B. The sum of factor incomes is called net domestic income at market prices. C. The sum of compensation of employees and other factor incomes is net domestic income at factor cost. D. The gap between the expenditure approach and the income approach is depreciation.

Choose the correct statement. A. We measure the change in production by comparing nominal GDP in one year with nominal GDP in another year. B. Real GDP is just a more precise name for GDP. C. To isolate the increase in production from the rise in prices comma we distinguish between real GDP and nominal GDP. D. Because GDP in 2017 is greater than GDP in 2016 comma it must be the case that we produced more goods and services in 2017 than we produced in 2016.

Choose the correct statement. A. You make choices based on what you think is best for society as a whole. B. Social interest and self-interest do not conflict. C. What we do in pursuit of out self-interest can further the social interest. D. Choices that are the best for more than one person are said to be in the social interest.

Choose the statement about a crawling peg that is correct. A. A crawling peg makes the exchange rate fluctuate wildly. B. A crawling peg is not influenced by actions of the central bank. C. When China abandoned its fixed exchange rate, it replaced it with a crawling peg. D. The Fed operated a crawling peg in the decade following World War II.

Choose the statement about inflation rate targeting that is incorrect. A. Canada and the European Union have been targeting inflation since the 1990s. B. An explicit inflation target that is taken seriously and toward which policy actions are aimed and explained is a sensible way to manage inflation expectations. C. Inflation rate targeting includes achieving an explicit inflation target and an explicit purchasing power parity value for the U.S. dollar. D. Inflation targeting focuses the public debate on what monetary policy can achieve and the best contribution it can make to attaining full employment and sustained growth.

Choose the statement about the Lucas wedge that is correct. A. The Lucas wedge equals real GDP minus potential GDP. B. The Lucas wedge in 2016 is smaller than the Lucas wedge in 2000. C. The Lucas wedge accumulated to $520,000 per person by 2016. D. The Lucas wedge is the dollar value of the accumulated gap between what real GDP per person would have been if the 1970s growth rate had persisted and what real GDP per person turned out to be.

Choose the statement that is incorrect. A. When the economy expands, needs-tested spending decreases. B. Tax revenues and needs-tested spending change automatically in response to the state of the economy. C. When real GDP decreases in a recession, the poor become poorer, but at the same time the rich become richer and tax revenues increase. D. The budget provides automatic stimulus in a recession to help shrink the recessionary gap.

Complete the following sentence. A firm is ______. A. any arrangement that enables buyers and sellers to get information and to do business with each other B. a social arrangement that governs the ownership comma use comma and disposal of anything that people value C. an economic unit that hires factors of production and organizes those factors to produce and sell goods and services D. any commodity or token that is generally acceptable as a means of payment

Complete the sentence. A relative price is _______. A. always greater than a money price B. what you get paid for babysitting your cousin C. an opportunity cost D. a price expressed in terms of money

Complete the sentence. When GDP per person in China in 2016 is valued at ______, GDP per person in the United States is _______ times that in China. A. purchasing power parity prices; 6.3 B. the market exchange rate; 3.8 C. the market exchange rate; 6.3 D. purchasing power parity prices; 5.3

Daisy loans Alfred $10,000 and a year later, Alfred pays Daisy $10,400. If the inflation rate during that year is 1.5 percent, what is the real interest rate that Alfred is paying to Daisy? The real interest rate that Alfred is paying to Daisy is _______. A. 5.5 percent a year B. 2.7 percent a year C. 2.5 percent a year D. unknown

Demand and supply in the market for _______ determine the long-term real interest rate. In the short run, a change in the _______ changes the equilibrium real interest rate. A. investment; saving rate B. bank reserves; supply of loanable funds C. loanable funds; federal funds rate D. Treasury bills; demand for loanable funds

Fiscal imbalance is the ______ value of the government's commitments to pay benefits minus the ______ value of its tax revenues. A. present; future B. future; present C. present; present D. future; future

Give an example of U.S. consumption expenditure. ______ is an example of U.S. consumption expenditure. A. The purchase of a new computer system by JFK Airport's air traffic control B. The purchase of a flight on Southwest Airlines by a resident of Canada C. Your purchase of a laptop D. The payment of unemployment benefits paid to households

Harry produces 9 balloon rides and 7 boat rides an hour. Harry could produce more balloon rides without producing fewer boat rides. Harry is _____ his production possibilities frontier. A. moving along B. producing on C. producing inside D. producing outside

Human capital _______. A. is a gift of nature B. is always used in the self-interest C. grows as people gain work experience D. is measured by the amount of income a person earns

If inflation is expected, _______. A. a cost-push inflation occurs B. either a cost-push inflation or a demand-pull inflation occurs C. neither a cost-push inflation nor a demand-pull inflation occur D. a demand-pull inflation occurs

If the interest rate on Treasury bills is lower than the federal funds rate, the quantity of overnight loans supplied ______ and the demand for Treasury bills ______. A. increases; increases B. decreases; increases C. increases; decreases D. decreases; decreases

In new growth theory ______. A. discoveries are a private capital good B. the pace of technological change influences the economic growth rate but economic growth does not influence the pace of technological change C. discoveries result from choices D. the forces of competition destroy incentives to make new discoveries

Interest rate parity means ______. A. interest rates in Canada and the United States are the same B. that if interest rates are higher in a developing nation than in the United States, U.S. investors will move their assets from the United States into that developing nation C. equal rates of return D. equal value of money

Investment ______, and aggregate demand ______ with a multiplier effect. A. decreases; increases B. decreases; decreases C. increases; increases D. increases; decreases

Kelsey has two sandwiches for lunch. The marginal benefit that Kelsey receives from the second sandwich is _______. A. the minimum amount that she is willing to pay to produce the second sandwich B. the opportunity cost of producing two sandwiches C. the benefit she receives from eating the second sandwich D. the total benefit she receives from producing two sandwiches

Oil soars to new record over $135 The price of oil hit a record high above $135 a barrel in May 2008---- more than twice what it cost the year before. OPEC has so far blamed price rises on speculators and says there is no shortage of oil. Complete the following sentence. If OPEC is correct, the price change could have occurred as a result of demand changing because of ______ in the expected price of oil and supply changing because of ______ in the expected price of oil. A. an increase; an increase B. a decrease; a decrease C. an increase; a decrease D. a decrease; an increase

On average in the United States, the inflation rate and the money growth rate minus the real GDP growth rate ______. A. move in opposite directions B. are not related C. rise and fall together D. are always rising

Suppose that the United States and Cuba decide to open up trade. If each country specializes in the good in which it has a comparative advantage, ______ will gain from that trade because ______. A. neither country; their consumption possibilities will not change B. only the United States; consumption possibilities in Cuba will lie outside its PPF and U.S. consumption possibilities will not change C. both countries; consumption possibilities in both Cuba and the United States will lie outside their PPFs D. only Cuba; consumption possibilities in Cuba will lie outside its PPF and U.S. consumption possibilities will not change

Suppose you always study 5 evenings for an exam, but this week you decide to study one more evening. The _____ of one more evening of studying it______. A. total cost; an evening not spent with your friends, and missing your favorite TV program B. marginal cost; an evening not spent with you with your friends, and missing your favorite TV program, and missing a game of pick-up basketball C. marginal cost; an evening not spent with your friends, if that is your best alternate use of the time D. total cost; 6 evenings spent studying

Taking a smartphone to the gym when you work out becomes more popular. What is the result of this event? As a result, ____. A. the quantity of smartphones demanded increases B. the quantity of smartphones demanded decreases C. the demand for smartphones increases D. The demand for smartphones decreases

The Federal Reserve Act makes _______ responsible for the conduct of monetary policy. A. Congress B. the President C. the Board of Governors of the Federal Reserve System and the Federal Open Market Committee D. the Presidents of the Federal Reserve Banks

The best forecast available, which is based on all the relevant information is called _______. A. a rational forecast B. a correct forecast C. a rational expectation D. a correct expectation

The bias in the CPI is a problem because ______ . A. it causes too much commodity substitution B. it discourages people from looking hard enough for a bargain C. it distorts wage agreements linked to the CPI D. it causes too little commodity substitution

The business cycle occurs because ______. A. the government is constantly trying to produce an inflationary gap, but expenditures in the economy cannot keep pace with the government's agenda B. the Fed is constantly increasing the quantity of money C. aggregate demand and short-run aggregate supply fluctuate, but the money wage rate does not adjust quickly enough to keep real GDP at potential GDP D. potential GDP is increasing, and increases in aggregate demand cannot keep pace with increases in long-run aggregate supply

The income earned by people who sell the services of the factor of production ______ is called ______. A. entrepreneurship; rent B. labor; interest C. land; rent D. capital; profit

The law of demand for foreign exchange states that other things remaining the same, the ______ the exchange rate, the smaller is the ______ in the foreign exchange market. A. lower; quantity of U.S. dollars demanded B. lower; demand for U.S. dollars C. higher; quantity of U.S. dollars demanded D. higher; demand for U.S. dollars

The law of demand states that ______, the ______ the price of a good, the smaller is the quantity demanded. A. even when other factors change; higher B. even when other factors change; lower C. other things remaining the same; higher D. other things remaining the same; lower

The law of supply states that other things remaining the same, the higher the price of a good, the _______; and the lower the price of a good, the _______. A. greater is the supply; smaller is the supply B. smaller is the supply; greater is the supply C. greater is the quantity supplied; smaller is the quantity supplied D. smaller is the quantity supplied; greater is the quantity supplied

The market in which the currency of one country is exchanged for the currency of another country is the ______. The price at which one currency exchanges for another currency is the ______. A. money market; exchange rate B. money market; currency rate C. foreign exchange market; exchange rate D. foreign exchange market; currency rate

The official settlements account records the change in U.S. official reserves, which are the government's holdings of ______. If U.S. official reserves increase, the official settlements account balance is ______. A. foreign currency; positive B. foreign loans; negative C. foreign currency; negative D. foreign government securities; positive

The Fed's monetary policy instrument is _______. A monetary policy instrument is _______. A. the exchange rate; a variable that the Fed can influence but not directly control B. the inflation rate; a variable that the Fed can influence but not directly control C. the federal funds rate; a variable that the Fed can directly control or closely target D. the monetary base; a variable that the Fed can directly control or closely target

Upper A decrease in the demand for chocolate chip cookies together with an increase in the supply of chocolate chip cookies brings a ______ of chocolate chip cookies at the original price and a ______ in their price. A. surplus; rise B. shortage; rise C. surplus; fall D. shortage; fall

What do we measure to verify that the economy of Singapore has caught up to and surpassed the economy of the United States, but that the economy of Mexico has not? By measuring ______, we can see that the economy of Singapore has caught up to and surpassed the economy of the United States, but that the economy of Mexico has not. A. real GDP B. the population C. real GDP per person D. inflation per person

When the federal fund rate ______ relative to the long-term bond rate, the real GDP growth rate usually ______. A. falls; slows about two years later B. falls; rises within two months C. rises; slows about two years later D. rises; slows within two months

When there is a surplus of dollars in the foreign exchange market, ______. A. prices in the United States will fall relative to prices in Japan B. the demand for Japanese yen will increase so the foreign exchange market can move into equilibrium C. the forces of supply and demand pull the foreign exchange market into equilibrium D. the supply of Japanese yen will increase so the foreign exchange market can move into equilibrium

When there is a surplus of dollars in the foreign exchange market, ______. A. the supply of Japanese yen will increase so the foreign exchange market can move into equilibrium B. the demand for Japanese yen will increase so the foreign exchange market can move into equilibrium C. the forces of supply and demand pull the foreign exchange market into equilibrium D. prices in the United States will fall relative to prices in Japan

Which of the following are included in the expenditure approach to calculating GDP? A. investment; net exports of goods and services; depreciation B. government expenditure; depreciation; compensation of employees C. investment; net exports of goods and services; government expenditure D. net exports of goods and services; government expenditure; net domestic income at factor cost

You must do your homework but you also want to check your emails. You think hard about how to allocate the next hour between problem sets and email and decide to study for the first 30 minutes and then spend 30 minutes dealing with your emails. You decision is an example of ______. A. Making a choice such that the marginal cost exceeds the marginal benefit. B. Making an all-or-nothing choice C. making a choice at the margin D. misallocating your time

A stagflation can turn into a cost-push inflation process when _______. A. taxes consistently increase B. the money wage rate decreases C. the quantity of money persistently decreases D. the quantity of money persistently increases

An economy is in a long-run equilibrium. An increase in aggregate demand creates ______ gap. A rise in the money wage rate decreases ______ and returns the economy to a full-employment equilibrium. A. a recessionary; short-run aggregate supply B. a positive; short-run aggregate supply C. an inflationary; short-run aggregate supply and long-run aggregate supply D. an inflationary; the quantity of real GDP demanded

An increase in expected future profits _______. A. decreases aggregate demand today but increases aggregate demand in the future B. increases aggregate demand in the future but has no influence on aggregate demand today C. has no influence on aggregate demand today or in the future D. increases aggregate demand today

An increase in real GDP ______ the demand for money and financial innovation ______. A. has no effect on; generally decreases B. increases; always increases the demand for money C. has no effect on; has no effect on the demand for money D. increases; generally decreases

Between 1980 and 2016, the gap between real GDP per person in the United States and real GDP per person in Japan ______. A. initially widened and then narrowed as Japan's economy experienced rapid growth B. reversed C. narrowed consistently and in 2016 real GDP per person is equal in both countries D. initially narrowed and then widened as Japan's economy stagnated

Between 2012 and 2015, the U.S. exchange rate ______ against the Japanese yen because the U.S. interest rate differential was expected to _______. A. fell; increase B. fell; decrease C. rose; decrease D. rose; increase

Bottled water and health club memberships are _______. A. complements in production B. substitutes C. substitutes in production D. complements

China fixes its exchange rate ______. A. to increase its U.S. reserves B. to maintain interest rate parity C. to keep its export prices low in the long run D. as a way of achieving a low inflation rate

Choose the correct statement about growth in labor productivity. A. The real wage rate falls and the equilibrium quantity of labor increases. B. The demand for labor increases, the production function does not change, but a movement occurs along the production function. C. Potential GDP remains unchanged. D. Potential GDP per hour of labor increases.

Choose the correct statement. A. Aggregate supply is the relationship between the quantity of real GDP supplied and potential GDP. B. At any given time, the quantity of capital and the state of technology are fixed because they depend on decisions made in the past, and the quantity of labor is fixed because it depends on the population. C. Aggregate supply and the quantity of real GDP supplied are two ways of expressing the same concept. D. The relationship between the quantity of real GDP supplied and the price level is different in the long run than in the short run.

Choose the correct statement. A. Real GDP never shrinks. B. Real GDP per person in the United States tripled between 1960 and 1988. C. Real GDP per person grows at a constant rate. D. We can compare the standard of living over time by calculating real GDP per person in different years.

Choose the correct statement. A. Social interest and Self-interest can come into conflict B. You make choices based on what you think is best for society as a whole C. What we do in pursuit of our self-interest is independent of the social interest D. Choices that are the best for more than one person are said to be in the social interest.

Choose the correct statement. A. The United States and Great Britain were the only countries who suffered the Great Depression. B. In 1933 comma 45 percent of the labor force was unemployed. C. During the Great Depression comma Ben Bernanke wrote his General Theory of Employment, Interest comma and Money. D. The Great Depression lasted until 1941, when the United States entered World War II.

Choose the correct statement. A. The quantity of labor demanded in the economy during a given period depends on the quantity of labor supplied. B. If there is a shortage of labor, the real wage rate falls to eliminate the shortage. C. The nominal wage influences the quantity of labor supplied because what matters to households is not the number of dollars they earn but what they can buy with those dollars. D. Each additional hour of labor increases real GDP by successively smaller amounts.

Choose the statement about flexible exchange rates that is correct. A. Most countries in the world do not follow a flexible exchange rate policy. B. A flexible exchange rate is unlike a fixed exchange rate because a flexible exchange rate follows a path determined by a decision of the government or central bank rather than taking a single value. C. Next to the United States, China is the largest country that follows a flexible exchange rate policy. D. A flexible exchange rate is influenced by central bank actions.

Choose the statement that is incorrect. A. According to the CBO, the U.S. economy had a cyclical deficit in 2012. B. According to the CBO, the U.S. economy had a structural deficit in 2012. C. The structural deficit was small in 2007, increased in 2008, and exploded in 2009. D. When full employment returns in 2018, the CBO says that the cyclical deficit will continue to be large.

Choose the statement that is incorrect. A. To gauge the state of output and employment relative to full employment, the Fed studies several indicators including the labor force participation rate, the unemployment rate, and regional information gathered by the regional Federal Reserve Banks. B. The Fed regards stable prices as the primary goal of monetary policy. C. Ben Bernanke, former Chairman of the Fed suggests that a core inflation rate of between 1 and 2 percent a year is the equivalent of price stability. D. The Fed tries to maximize the output gap, especially when that gap is positive.

Choose the statement that is incorrect. A. An economy experiences deflation when it has a persistently falling price level. B. During a period of deflation, the inflation rate is negative. C. A one-time fall in the price level is not deflation. D. The price level falls if aggregate supply increases at a persistently slower rate than aggregate demand.

Choose the statement that is incorrect. 'A. The higher the federal funds rate, the smaller is the quantity of reserves demanded. B. Banks hold reserves to meet the required reserve ratio and so that they can make payments. C. Bank reserves are costly to hold because they can be loaned in the federal funds market and earn the federal funds rate. D. The Fed's open market operations determine the demand for reserves.

Complete the following sentence. If, as the price of a hot dog decreases, the quantity of hamburgers that people buy decreases, then hot dogs and hamburgers are _______. A. normal goods B. inferior goods C. complements D. substitutes

Complete the following sentence. Microsoft's marginal cost of the 100th copy of Microsoft Windows 10 is _______. A. the maximum amount that someone is willing to pay Microsoft to obtain the coding that supports Windows 10 B. equal to the marginal benefit of the 100th copy of Windows 10 C. the maximum amount that Microsoft is willing to pay to produce the 100th copy of Windows 10 D. calculated as the slope of the PPF at the point where the 100th copy of Windows 10 is produced

Complete the following sentence.' Upper A decrease in the demand for burgers brings a ______ of burgers at the original price and the market price will ______ . A. surplus; rise B. shortage; fall C. shortage; rise D. surplus; fall

Complete the sentence. According to new growth theory, ______ experience diminishing returns. A. factors of production do not B. labor does not C. physical capital does not D. knowledge is capital that does not

Complete the sentence. Aggregate expenditure in the United States is equal to consumption expenditure plus investment ______. A. plus government expenditure plus exports B. plus government expenditure plus imports C. minus government expenditure minus imports D. plus government expenditure plus net exports

Complete the sentence. The market for gasoline is a competitive market _______. A. only if the buyers and sellers of gasoline are spread around the world and never meet B. if many people buy gasoline comma but only a few firms sell gasoline C. only if the market where gasoline is sold is a physical place D. if many people buy and many firms sell gasoline, so no single buyer or seller can influence the price

Complete the sentence. To make comparisons of real GDP between two countries we must ______. A. find two countries that have the same type of political system B. find two countries that have similar inflation rates comma otherwise the comparison will not be accurate nothing C. find two countries that do not have large underground economies nothing D. convert the real GDP of one country into the same currency units as the real GDP of the other country, and use the same prices to value the goods and services in the countries being compared

Complete the sentence. When the unemployment rate ______ the natural unemployment rate, real GDP ______ potential GDP. A. equals; is greater than B. is less than; equals C. is greater than; is greater than D. equals; equals

Currently, the United States is a _______. A. creditor nation and a net borrower B. creditor nation and a net lender C. debtor nation and a net lender D. debtor nation and a net borrower

Currently, the United States is a _______. A. creditor nation and a net lender B. creditor nation and a net borrower C. debtor nation and a net lender D. debtor nation and a net borrower

During a year, a firm's net investment is $6, 400 and depreciation is $1, 600. What is the firm's gross investment? The firm's gross investment is ______. A. $9,600 B. $1,600 C. $6,400 D. $8,000

Economic growth is the persistent increase in ______. Economic growth is accompanied by inflation when the ______. A. aggregate demand; LAS curve shifts rightward at a faster rate than the AD curve shifts rightward B. short-run aggregate supply; AD curve shifts rightward at a slower rate than the SAS curve shifts rightward C. aggregate demand and potential GDP; AD curve shifts rightward at a slower rate than the LAS curve shifts rightward D. potential GDP; AD curve shifts rightward at a faster rate than the LAS curve shifts rightward

Economics is ______. A. a subject that tells governments what they must do. B. a subject that tells countries what goods they must trade C. a subject that teaches us how to eliminate scarcity D. a subject that studies how individuals cope with scarcity

Every day, we make many choices We can't avoid having to make choices because ______. A. we have too much time on our hands B. there is too much available C. we can't find enough things to do to fill our day D. our wants exceed the resources available to satisfy them E. we keep changing our minds

Examples of fiscal policy that increase aggregate demand include ______. A. an increase in transfer payments and an increase in interest rates B. a decrease in taxes and an increase in the quantity of money C. a decrease in taxes and a decrease in interest rates D. an increase in government expenditure, a decrease in taxes, and an increase in transfer payments

French fries and baked potatoes are _______. A. substitutes but not substitutes in production B. complements but not complements in production C. complements or complements in production D. substitutes or substitutes in production

How do the Fed's monetary policy actions influence the exchange rate? A. The Fed can't influence the exchange rate because the Fed has no influence on foreign interest rates. B. The Fed influences the exchange rate by conducting transactions in the foreign exchange market. C. The Fed can influence the exchange rate only if it changes expectations. D. The Fed influences the exchange rate by changing the U.S. interest rate differential.

If Gerry also has an absolute advantage in growing blueberries and cherries, he will ______. A. that make him a better farmer than Jane B. that mean he is unable to trade with Jane C. have an equal opportunity cost in performing all activities D. have a comparative advantage in one activity but not both

If in the long run, the U.S. dollar appreciates against the Japanese yen, then ______. A. it must be the case that the real exchange rate has also appreciated B. purchasing power parity does not exist between Japan and the United States C. the United States has created money at a faster pace than has Japan, and the price level in the United States has risen more rapidly than Japan's price level D. Japan has created money at a faster pace than has the United States, and the price level in Japan has risen more rapidly than the U.S. price level

If most prices have increased in the United States and not increased in Japan and other countries, ______. A. nothing can happen to make purchasing power parity hold B. the demand for U.S. dollars will increase C. then for purchasing power parity to hold, the value of the U.S. dollar in the foreign exchange market will rise D. then for purchasing power parity to hold, the value of the U.S. dollar in the foreign exchange market will fall

If the U.S. exchange rate changes from $1.20 Canadian to $1.25 Canadian, then the U.S. dollar has _______ and the Canadian dollar has _______. A. appreciated; devalued B. depreciated; appreciated C. devalued; appreciated D. appreciated; depreciated

If the natural unemployment rate increases and the expected inflation rate remains constant, then ______. A. the long-run Phillips curve shifts rightward and the short-run Phillips curve does not shift B. neither the long-run Phillips curve nor the short-run Phillips curve shifts C. the short-run Phillips curve shifts rightward and the long-run Phillips curve does not shift D. the long-run Phillips curve shifts rightward and the short-run Phillips curve shifts rightward

In an economy, there is $125 million in currency held outside banks, $75 million in traveler's checks, $200 million in currency held inside the banks, $300 million in checking deposits, $600 million in savings deposits, $1,600 million in time deposits, and $1,000 million in money market mutual funds and other deposits. Calculate M1 and M2. The value of M1 is ______ and the value of M2 is ______. A. $1,300 million; $3,900 million B. $1,100 million; $3,700 million C. $700 million; $3,900 million D. $500 million; $3,700 million

In an expansion, an increase in the rate of technological change _______ investment demand. The real interest rate _______. A. increases; falls B. decreases; rises C. decreases; falls D. increases; rises

In the United States, the CPI basket consists of items that ______ . ______ has the greatest weight in the CPI basket. A. an average American household buys; Medical care B. an average urban household buys; Recreation C. a middle-income household buys; Food and beverages D. an average urban household buys; Housing

Mario's produces pizza and pasta and faces increasing opportunity costs. The production possibilities frontier is the boundary between those combinations of goods and services that can be _____ and those that ______. A. consumed; cannot be consumed B. purchased; can be consumed C. produced; can be consumed D. produced; cannot be produced

Oil Price Soars to $135 The price of oil hit a record high above $135 a barrel in May 2008-----more than twice what it cost the year before. OPEC has so far blamed price rises on speculators and says there is no shortage of oil. The price of oil rises if the demand for oil ______ and the supply of oil ______. A. decreases; increases B. decreases; decreases C. increases; increases D. increases; decreases

One of the Fed's main policy tools is ______. A. the open market purchase, which is the purchase of money from the government B. the open market sale, which is a means of increasing bank reserves and increasing stability in the banking system C. the discount ratio, which is the minimum percentage of deposits that depository institutions are required to hold as reserves D. the last resort loan, which means that if a bank is short of reserves, it can borrow from the Fed

Producers of e dash book readers expect the price of a factor of production used to produce an e dash book reader to rise and the number of firms producing and selling e dash book readers to decrease. You predict that the price of an e dash book reader will ______ and the quantity of e dash book readers bought will ______. A. fall; decrease B. either rise comma fall comma or remain the same; increase C. fall; increase comma decrease or remain the same D. rise; decrease

Resource use is efficient when _______. A. wealth is spread equally throughout society B. new resources are constantly being discovered and no resource depletion occurs C. workers receive an income equal to that made by their employers D. it is not possible to make someone better off without making someone else worse off

Suppose the Fed buys $50 million of government securities from the Bank of America. The Bank of America's total assets ______ and its total liabilities ______. A. increase by $50 million; decrease by $50 million B. decrease by $50 million; do not change C. decrease by $50 million; increase by $50 million D. do not change; do not change

The Taylor rule sets the federal funds rate (FFR) using the following formula, where INF is the inflation rate and GAP is the output gap. A. FFR = 0.5 + INF + 2(INF-0.5) + 2GAP B. FFR = 2 + INF + 0.5(INF + 2)-0.5GAP C. FFR = 0.5 + INF + 2(INF + 0.5)-2GAP D. FFR = 2 + INF + 0.5(INF-2) + 0.5GAP

The demand for money is the relationship between the quantity of real money demanded and the _______ when all other influences on the amount of money that people wish to hold remain the same. A. price level B. inflation rate C. real interest rate D. nominal interest rate

The deposits of the following three types of depository institutions make up the nation's money: ______. A. commercial banks, thrift institutions, and insurance companies B. savings and loan associations, savings banks, and credit unions C. commercial banks, savings and loan associations, and savings banks D. commercial banks, thrift institutions, and money market mutual funds

The effect of China's choice of exchange rate regime is _______. A. an unequal trade balance between China and all other countries in the world B. an unequal trade balance between China and the United States C. an increase in U.S. dollar reserves when China's target rate is below the equilibrium exchange rate and a decrease in U.S. dollar reserves when China's target rate is above the equilibrium exchange rate D. an increase in U.S. dollar reserves when China's target rate is above the equilibrium exchange rate and a decrease in U.S. dollar reserves when China's target rate is below the equilibrium exchange rate

The main events that can put a bank under stress include all of the following except ______. A. a significant currency drain B. a run on the bank C. a widespread fall in asset prices D. a rise in the federal funds rate

The private sector balance and the government sector balance tend to move in ______. Net exports respond ______. A. opposite directions; closely to the government sector balance B. the same direction; closely to the government sector balance C. the same direction; to the sum of the government sector and private sector balances D. opposite directions; to the sum of the government sector and private sector balances

The private sector balance and the government sector balance tend to move in ______. Net exports respond ______. A. the same direction; to the sum of the government sector and private sector balances B. the same direction; closely to the government sector balance C. opposite directions; closely to the government sector balance D. opposite directions; to the sum of the government sector and private sector balances

The supply of loanable funds ______ and the long-term interest rate ______. A. increases; rises B. increases; falls C. decreases; falls D. decreases; rises

The value of exports of goods and services minus the value of imports of goods and services is ______. A. called net imports B. always a positive value in the U.S. economy C. always a negative value in the U.S. economy D. called net exports

What influences work hours growth? Work hours growth is influenced by _______. A. physical capital growth B. real GDP growth C. changes in labor productivity D. changes in average hours per worker

What is the money multiplier? The money multiplier is the ratio of the change in the quantity of ______ to the change in the quantity of ______. A. M1; M2 B. currency; bank deposits C. money; bank deposits D. money; monetary base

What is the objective of U.S. monetary policy? A. To keep the interest rate below 4 percent a year B. To keep real GDP growth above 3 percent a year C. To keep the unemployment rate below 5 percent D. Maximum employment, stable prices, and moderate long-term interest rates

When firms use new and better ways of producing all goods and services, _______. A. the opportunity cost of most goods falls to zero B. scarcity is eliminated C. the opportunity cost of producing every good falls to zero D. our standard of living increases comma but we still face scarcity and opportunity cost

When is an economy at full employment? An economy is at full employment when ______. A. all unemployment is structural and cyclical B. all unemployment is cyclical C. the unemployment rate is zero D. there is no cyclical unemployment

When unwanted inventories pile up, _____. Prices _____. A. long-run aggregate supply is greater than short-run aggregate supply; fall B. short-run aggregate supply is greater than aggregate demand; fall C. the quantity of real GDP demanded is greater than the quantity of real GDP supplied; rise D. the quantity of real GDP supplied is greater than the quantity of real GDP demanded; fall

You want to play the piano and read a good book. You think hard about how to allocate the next hour between playing the piano and reading and decide to play the piano for the first 20 minutes and then spend 20 minutes reading. Your decision is an example of ____. A. wasting time B. making an al-or-nothing choice C. making the big tradeoff D. making a choice at the margin

_______ is an example of _______. A. Bill Gates; labor B. A university library; entrepreneurship C. Janet Yellen, chair of the Federal Reserve Board; capital D. Niagara Falls; land

The monetary base ____. The supply of money _________ and the interest rate ________.

decreases; decreases; rises

The Ricardo-Barro effect _________ crowding out.

eliminates

The price of Treasury bills _____ and the interest rate ______.

falls; rises

The United States is experiencing low inflation and real GDP is less than potential GDP. Describe the Fed's actions that will restore full employment. The monetary base _______. The supply of money ______ and the interest rate ______.

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