econ compiled 1-19, weeks 1-14

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By measuring and comparing per capita GDP data, economists can determine the extent that per capita GDP differs between the nations of the World. While this is useful information, which of the following is a valid criticism of comparing per capita GDP for this purpose? A. national economies within the global economy are diverse B. most comparisons between regions are admittedly rough C. fails to capture diversity across the regions D. fails to capture the precise standard of living

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.

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.

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.

During the past year a country's government ran a budget surplus. How will this be represented as a component of in the country's national savings and investment identity? A. (T - G); demand side B. (G - T); right side C. (G - T); left side D. (T - G); saving side

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

Economists typically measure economic growth by tracking: A. the employment rate. B. the unemployment rate. C. averaged GDP growth D. real GDP per capita.

Exchange rates are an effective way to analyze the price of one currency in terms of another currency with _________________________. A. distinctive trade-offs and risks B. exchange rate policy C. monetary policy D. the tools of demand and supply

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.

From a neoclassical view, which of the following is a true statement? A. Lower wages will cause an economy-wide increase in the price of a key input. B. Because wages are flexible, they are unaffected by high rates of unemployment. C. A surge in aggregate demand ends up as a rise in output, but does not increase price levels. D. The economy cannot sustain production above its potential GDP in the long run.

From a neoclassical viewpoint, government should focus less on: A. long-term growth. B. controlling inflation. C. aggregate supply. D. cyclical unemployment.

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.

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.

If Evelyn uses her debit card to buy an iPod, then the money to pay the retailer will come from: the debit card company's M1 funds. the debit card company's M2 funds. her M2 funds. her M1 funds.

If GDP is 1800 and the money supply is 300, then what is the velocity? A. 18.3 B. 8 C. 4.57 D. 6

If GDP is 3600 and the money supply is 300, what is the velocity? A. 18 B. 8 C. 4.57 D. 12

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

If an economy has a high level of trade in goods and services relative to GDP and its exports and imports are balanced, what value will the net flow of foreign investment be? A. unchanged B. lower C. higher D. zero

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.

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. C. depreciation. D. a floating exchange rate.

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.

If mollusk shells were accepted as a method of payment in modern-day markets, what economic role would they play in the financial system? capital exchange currency exchange unit of exchange medium of exchange

If the Canadian dollar is strengthening, then: A. it has been unpegged from other currencies. B. Canada has adopted a hard peg policy. C. Canada has purchasing power parity. D. it has appreciated in terms of other currencies.

If the central bank increases the amount of reserves banks are required to hold to 20%, then: A. the money multiplier will increase and the supply of money in the economy will decrease. B. both the money multiplier and the supply of money in the economy will increase. C. the money multiplier will decrease and the supply of money in the economy will increase. D. both the money multiplier and supply of money in the economy will decrease.

If the central bank increases the amount of reserves banks are required to hold to 20%, then: the money multiplier will increase and the supply of money in the economy will decrease. both the money multiplier and the supply of money in the economy will increase. the money multiplier will decrease and the supply of money in the economy will increase. both the money multiplier and supply of money in the economy will decrease.

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.

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

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.

In 2009, 1 U.S. dollar purchased 1400 Korean won and in 2013 it purchased 900 Korean won. How much did 1000 Korean won cost in U.S. dollars in 2009 and 2013? A. 2009: .84 dollars, 2013: 1.09 dollars B. 2009: .72 dollars, 2013: 1 dollar C. 2009: .83 dollars, 2013: 1.12 dollars D. 2009: .71 dollars, 2013: 1.11 dollars

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 growthfrom 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.

In an AD/AS model: A. the GDP deflator always slopes upwards. B. the potential GDP always slopes downwards. C. the CPI is shown on the vertical axis. D. real GDP is shown on the horizontal axis.

In low and middle-income countries, workers who are not connected to a labor market are often unable to: A. collect old-age payments. B. receive social benefits. C. be "officially" employed. D. specialize very much.

In modern economies, _____________________ receive money from savers and provide funds to borrowers. A. governments B. credit unions C. banks D. financial intermediaries

In modern economies, credit cards are a _________________ because of their wide acceptance as a method of payment for both goods and services. unit of exchange store of value unit of account medium of exchange

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.

In what way are the factors used to calculate the current account balance similar to each other? A. each is like a stream, though some flow in different directions B. all refer to ways governments invest their tax resources C. all reflect workers' unilateral payments to home countries D. each involves a flow of financial payments between countries

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.

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).

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

Macroeconomics: A. is concerned with the expansion of a small business into a large corporation. B. is narrower in scope than microeconomics. C. analyzes mergers and acquisitions between firms. D. is concerned with the expansion and contraction of the overall economy.

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

North American and the European Union have about _________% of the world's population and their combined economic statistics show that they produce and consume about _________% of the world's GDP. A. 70, 16 B. 80, 70 C. 16, 16 D. 9, 70

Only one of the following statements about the trade surplus is correct. Which one is it? A. the government should always strive for a trade surplus and a healthy inflow of foreign capital B. the government generating a trade surplus is better than increasing foreign capital inflows C. increasing foreign capital investment is better than generating a trade surplus D. generating a trade surplus and an overall net inflow of capital is impossible

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

Refer to Figure 2-1. Along the production possibilities frontier, the most efficient point of production depicted is: A. Point B B. Point C C. Point D D. All points on the production possibilities frontier are equally efficient.

Refer to Figure 2-1. The most inefficient point depicted is: A. Point A B. Point C C. Point D D. Point G

Refer to Figure 2-2. When the economy moves from Point A to Point B in the diagram above: A. the economy begins using its resources efficiently to produce both food and clothing. B. the economy operates at its productive capacity once it reaches Point B. C. the economy increases production of both clothing and food. D. All of the above occur.

Refer to Figure 4-3. A change from Point A to Point D represents a(n): A. decrease in quantity supplied. B. increase in quantity supplied. C. decrease in supply. D. increase in supply.

Refer to Table 5-1. Suppose that D1 and S1 are the prevailing demand and supply curves for a product. If the demand schedule changes from D1 to D2, then: A. equilibrium price decreases from $6 to $4. B. equilibrium quantity decreases from 15 to 13. C. equilibrium quantity increases from 13 to 18. D. equilibrium price increases from $6 to $8

Refer to Table 5-1. Suppose that D1 and S2 are the demand and supply schedules for Product A. If the government imposes a price ceiling of $4, then: A. a 5 unit shortage will result. B. a 5 unit surplus will result. C. a 10 unit surplus will result. D. a 10 unit shortage will result.

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.

Scarcity implies that: A. the market mechanism. B. specialization and division of labor. C. the allocation of goods by prices D. unlimited wants and limited resources.

Suppose that out of the original 100 increase in government spending, 60 will be recycled back into purchases of domestically produced goods and services. Following this multiplier effect, what value will be recycled in the next round in the cycle? A. 42 B. 3.6 C. 16.66 D. 36

Suppose that productivity growth in an economy over a two-year period has fallen to less than 2% per year, causing a severe recession. From the neoclassical view, which of the following will be more important in these circumstances? A. an increase in the annual unemployment rate B. supply and demand in the labor market C. the problem of cyclical unemployment D. the growth rate of long-term productivity

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.

The United States has approximately ___________ credit card holders. A. 1.8 million B. 18 million C. 80 million D. 180 million

The central bank uses a ____________________ monetary policy to offset business related economic contractions and expansions? A. laissez faire B. loose C. contractionary D. countercyclical

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.

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

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,

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).

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

The market where loans are made to borrowers is called the: secondary loan market. money market. loan market. primary loan market.

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.

The national saving and investment identity teaches that the rest of the economy can absorb an inflow of foreign financial capital by: A. reduced private savings, leaving domestic investment and public saving unchanged. B. higher domestic investment, leaving private and public savings unchanged. C. greater government borrowing, leaving domestic saving and investment unchanged. D. leaving domestic saving and investment unchanged using any of the above.

The nature of demand indicates that as the price of a good increases: A. suppliers wish to sell less of it. B. more of it is produced. C. more of it is desired. D. buyers desire to purchase less of it.

The opportunity cost of an action: A. can be determined by considering both the benefits that flow from as well as the monetary costs incurred as a result of the action. B. can be determined by adding up the bills incurred as a result of the action. C. can be objectively determined only by economists. D. is a subjective valuation that can be determined only by the individual who chooses the action.

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

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

What do Africa, southern Mexico, and tropical areas of Central America and Brazil all share in common? A. high per capita GDPs B. rapid growth rates C. command economies D. technological exclusion

When an economy is experiencing higher real interest rates, business firms will most likely be discouraged from investing in: A. mechanical devices. B. specialized services. C. computer or other technologies. D. tangible and/or intangible capital.

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.

When the Central Bank acts in a way that causes the money supply to increase while aggregate demand remains unchanged, it is: A. following a contractionary monetary policy. B. following quantitative easing policy. C. following a tight monetary policy. D. following an expansionary monetary policy.

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

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.

When the consumption function ordinates MPT 0.2, MPS 0.3, MPI 0.5, and MPC 0.7 are plotted on a graph, what will their values reflect? A. flatter consumption function due to low marginal propensity to tax B. steeper consumption function due to low marginal propensity to save C. flatter consumption function due to high marginal propensity to invest D. steeper consumption function due to high marginal propensity to consume

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.

Which of the following denotes a common misunderstanding about exchange rates? A. an appreciating currency must be better than a stronger currency B. a depreciating currency must be better than an appreciating currency C. a weaker currency must be better than a stronger currency D. an appreciating currency must be better than a depreciating currency

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.

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

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

Which of the following is a building block of neoclassical economics? A. the size of the economy is determined by real GDP B. sticky wages and prices C. aggregate demand model D. wages and prices will adjust in a flexible manner

Which of the following is a distinguishing characteristic of the neoclassical view? A. increasing price levels will increase the unemployment rate B. wages and real GDP are sticky over time C. wages are maintained at original equilibrium D. flexibility of wages and prices over time

Which of the following is an example of a pegged currency? A. U.S. dollar B. British pound C. Euro D. Chinese yuan

Which of the following is described as an innovative and nontraditional method used by the Federal Reserve to expand the quantity of money and credit during the recent U.S. recession? A. increased discount rate B. increased reserves requirements C. open market operations D. quantitative easing

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 production of DVD players by a consumer electronics company C. an increase in the wage rate paid to automobile workers D. a decrease in the unemployment rate

Which of the following is no longer one of the most commonly traded currencies in foreign exchange markets? A. U.S. dollar B. British pound C. Japanese yen D. French franc

Which of the following is omitted in a barter transaction? trade medium of exchange store of value money

Which of the following most likely contributed to the early economic development for the Netherlands? A. higher proportion of youth and young adults B. only about 2% of GDP comes from agriculture C. 30-40% of the population lives in urban areas D. geographically located in Europe with coastlines

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

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

Which of the following terms is considered to be a narrow definition of the money supply that includes, among other things, currency? savings money M2 M1

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

_________________________ are a form of deposits held in banks that are available by making a cash withdrawal or writing a check. Direct deposits Savings deposits Time deposits Demand deposits

1. 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.

D Reference: Explanation:

Multiple Choice 17. 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

D Reference: Explanation:

Multiple Choice 19. Which of the following is included in GDP calculations? A. sales revenue received from a yard sale B. cash income received by a self-employed landscaper that is not reported to the IRS C. a crisp $50 bill received on your birthday D. the university tuition paid to enroll in a course

D Reference: Explanation:

Multiple Choice 22. 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

D Reference: Explanation:

Multiple Choice 23. The GDP deflator is a price index that includes the following components of GDP: A. Consumption B. Consumption plus Investment but not Exports C. Consumption, Investment plus Exports minus Imports D. Consumption, Investment, Government plus Exports minus Imports

D Reference: Explanation:

Multiple Choice 25. A business cycle reflects changes in economic activity, particularly real GDP. The stages of a business cycle are: A. trough, expansion, recession, peak B. contraction, recession, expansion, boom C. expansion, trough, recession, peak D. expansion, peak, recession, trough

D Reference: Explanation:

Multiple Choice 26. Alex wants to measure the nominal 1998 GDP of $993 billion in 2008 dollars. From the data he gathered, he knows the deflator for 1998 is 30 and for 2008, it is 74, and that real interest in those years was 6.23% and 3.21% respectively. If he avoids making a misleading calculation, what will the value be? A. $430 billion B. $835 billion C. $2,063 billion D. $2,449 billion

D Reference: Explanation:

Multiple Choice 3. 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

D Reference: Explanation:

Multiple Choice 30. In 1980 Denmark had a GDP of $70 billion (measured in U.S. dollars) and a population of 5.1 million. In 2000, Denmark had a GDP of $160 billion (measured in U.S. dollars) s and a population of 5.3 million. By what percentage did Denmark's GDP per capita rise between 1980 and 2000? A. 45.4% B. 219% C. 128% D. 120%

D Reference: Explanation:

Multiple Choice 34. 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

D Reference: Explanation:

Multiple Choice 36. _______________, which can be approximated by the growth of gross domestic product, ultimately determines the prevailing standard of living in a country. A. Trade balance B. Inflation C. Education D. Economic growth

D Reference: Explanation:

Multiple Choice 39. The change in inventories, a component of aggregate supply, comprises roughly __________ of GDP. A. 20% B. 10% C. 1% D. 0.5%

D Reference: Explanation:

Multiple Choice 5. 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%

D Reference: Explanation:

Multiple Choice 7. If the price index moves from 107 to 110, the rate of inflation is: A. 3% B. 30% C. 28% D. 2.8%

D Reference: Explanation:

If a country's economic data shows that private savings equal $300 million, government spending equals $400 million, taxes equal $300, and the trade surplus equals $100 million, then what does investment equal? A. $150 million B. $175 million C. $200 million D. $100 million

D. $100 million

If a country's economic data shows private savings of $400 million, government spending of $250 million, tax revenue of $400 million, and a trade surplus of $175 million, then what does investment equal? A. $550 million B. $425 million C. $800 million D. $375 million

D. $375 million

A government deficit has increased from 30 to 50. The country's trade deficit is 100 and private savings equal 65 and investment equal 90. If Ricardian neutrality holds true, after this change in the government's budget, private savings will equal: A. 40. B. 105. C. 95. D. 85.

D. 85.

An increase in the government's budget surplus will cause the interest rate to: A. either increase or decrease. B. remain the same. C. increase. D. decrease.

D. decrease.

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

D. especially large and sustained government borrowing

A reduction in government borrowing can: A. decrease the incentive to invest. B. increase the interest rate. C. crowd out private investment in human capital. D. give private investment an opportunity to expand.

D. give private investment an opportunity to expand.

From a macroeconomic point of view, which of the following is a source of demand for financial capital? A. savings by households and firms B. foreign financial investment C. domestic household private savings D. government borrowing

D. government borrowing

A ____________________________ is one economic mechanism by which government borrowing can crowd out private investment. A. deficit decrease B. smaller trade surplus C. larger trade surplus D. higher interest rate

D. higher interest rate

A government will likely ____________________________ to encourage investment in technology R&D by private firms? A. reduce R&D grants to nonprofit organizations B. reduce R&D grants to universities C. spend more on R&D in government laboratories D. implement fiscal policy establishing tax incentives

D. implement fiscal policy establishing tax incentives

In a market-oriented economy, private firms will undertake most of the _____________________________, and ________________ should seek to avoid a long series of large budget deficits that might crowd out such investment. A. economic growth activities; monetary policy B. economic growth activities; fiscal policy C. investment in human capital; monetary policy D. investment in physical capital; fiscal policy

D. 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.

D. investment will decrease if savings also remains constant.

If a government experiences an increase in its budget surplus, which of the following possible outcomes will likely result? A. investment falls while everything else holds constant B. exports decrease while imports and all other variables are held constant C. imports increase while exports and all other variables are held constant D. private savings decrease while everything else holds constant

D. private savings decrease while everything else holds constant

Suppose you are analyzing data for an economy in which Ricardian neutrality holds true. If the budget deficit increases by 50, then: A. investment will increase by 50 B. investment will decrease by 50 C. private savings will decrease by 50 D. private savings will increase by 50

D. private savings will increase by 50

If an economy has a budget deficit of 600, private savings of 2,000, and investment of 800. What is the balance of trade in this economy? A. deficit of 600 B. deficit of 2000 C. surplus of 2000 D. surplus of 600

D. surplus of 600

A ___________________________________ can lead to disruptive economic patterns and heavy strains on a country's banking and financial system. A. prolonged period of trade surpluses B. sustained pattern of large trade deficits C. prolonged period of budget surpluses D. sustained pattern of large budget deficits

D. sustained pattern of large budget deficits

If the U.S. government's budget deficits are increasing aggregate demand, and the economy is producing at a level that is substantially less than potential GDP, then: A. higher interest rates will crowd out private investment. B. government borrowing is likely to crowd out private investment. C. an inflationary increase in the price level is a real danger. D. the central bank might react with an expansionary monetary policy.

D. the central bank might react with an expansionary monetary policy.

When a business firm makes an investment in physical capital, what is that investment subject to? A. state and local government incentives B. economic output and productivity C. political orientated incentives D. the discipline of the market

D. the discipline of the market

In 2010, a country imported goods worth $500 billion and exported goods worth $443 billion. It exported services worth $248 billion and imported services worth $330 billion. Payments on investments abroad totaled $199 billion, while returns paid on foreign investments were $125 billion. Unilateral transfers from the country to other nations amounted to $94 billion. What was the country's current account deficit for 2010? A. $70 billion B. $159 billion C. $142 billion D. $65 billion

$159 billion

In 2010, the country of Vesey exported goods worth $312 billion and services worth $198 billion. It imported goods worth $525 billion and services worth $255 billion. It sent $1.2 billion in famine relief to Africa, and received $3 billion to support its first democratic election efforts. What was the merchandise trade deficit in Vesey in 2010? A. $213 billion B. $270 billion C. $57 billion D. $1.8 billion

$213 billion

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

10%

Through good economic years and bad, many European economies had unemployment rates hovering near _________ since the 1970s. 20% 1% 5% 10%

10%

The unemployment rate in a town in which 65,400 persons are employed and 11,000 are unemployed equals: 14.4%. 16.8%. 11%. 20.2 %.

14.4%.

During the Great Depression of the 1930s, the unemployment rate reached more than _________ of the labor force. 45% 85% 25% 65%

25%

f the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals: 20%. 25%. 8%. 32%.

25%

In 2010, the country of Vesey exported goods worth $312 billion and services worth $198 billion. It imported goods worth $525 billion and services worth $255 billion. It sent $3 billion in famine relief to Africa, and received $1.2 billion to support its first democratic election efforts. What was the current account deficit in Vesey for 2010? A. $251.2 billion B. $270.6 billion C. $213.3 billion D. $271.8 billion

271.8 billion

In 2010, a small country imported goods worth $500 billion and exported goods worth $443 billion. It exported services worth $248 billion and imported services worth $330 billion. Payments on investments abroad totaled $199 billion, while returns paid on foreign investments were $125 billion. Unilateral transfers from the country to other nations amounted to $94 billion. What was the country's merchandise trade deficit for 2010? $70 billion . $65 billion . $154 billion . $57 billion

57 billion

Each month the Census Bureau carries out the Current Population Survey (CPS) (which has been carried out every month since 1940). A total of __________ households are contacted every month. 600,000 60,000 600 6000

60,000

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

8 percent of the labor force is unemployed.

37. Refer to the graph shown below. At point B: A. economic growth it low or even negative. B. output is expanding. C. unemployment is very low. D. businesses may raise prices.

41. Referring to the diagram above, complete the following sentence: Any increase in aggregate demand in the short-run will lead to: A. an increase in output (Q1 to Q2), but it will also lead to prices increasing. B. an increase in output (Q1 to Q2), but it will also lead to a recession. C. a 45 degree supply curve, which will lead to increasing unemployment. D. a 45 degree supply curve, which will lead to recession.

43. If the economy is at equilibrium as shown in the diagram above, then a contractionary monetary policy will A. increase unemployment, but have little effect on inflation. B. increase unemployment and decrease inflation. C. increase output and increase inflation. D. have no effect on output, but increase inflation.

A ______________________ 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

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.

A country finds itself in the following situation: a government budget surplus 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 surplus 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

A country's current national savings and investment identity is expressed in algebraic terms as (M - X) = I - S - (T - G). In this instance: A. domestic investment is higher than domestic savings. B. domestic savings exceed domestic investment. C. the country is experiencing a trade surplus. D. government savings are excluded.

A country's trade in manufactured goods diminished substantially, causing it to lose tax revenue and become a net borrower of foreign funds. For the next two decades, its government used the borrowed funds to upgrade the nation's waste-water treatment plants and to develop efficient rapid transit systems, creating substantial gainful employment for its workforce. Thereafter, the country began to quickly repay its past borrowing debt. Which of the following most strongly supported this country's successful economic recovery? A. ensuring borrowed funds were invested in long-term productive economic assets B. ensuring that larger borrowing reduced the need for more private savings C. the creation of a trade deficit through more aggressive buying of imports D. global policies of low interest rates charged on funds borrowed by governments

A demand curve shows the relationship between price and _________________ on a graph. A. quantity demanded B. quantity produced C. economies of scale D. costs

A nation can achieve higher economic growth if: A. it devotes more resources to research and development. B. the productivity of labor declines C. taxes are imposed on investment in capital. D. more resources are allocated to consumption goods.

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.

A soft peg exchange rate may create additional _______________ as exchange rate markets try to anticipate when and how the government will intervene. A. volatility B. trade-offs C. demand side effects D. exchange rate zones

A welder who quits his job and moves from Pittsburgh to Madison to try to get a better welding job is said to be: A. frictionally unemployed. B. underemployed. C. cyclically unemployed. D. structurally unemployed.

According to the Keynesian framework, ________________________ may cause a recession, but not inflation. A. a major trading partner's economic slowdown B. a decrease in interest rates C. an increase in domestic investment D. a decrease in a major trading partners export prices

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

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.

According to the quantity theory, if constant growth in the money supply is combined with fluctuating velocity, which of the following is most likely to result? A. unpredictable rises and falls in nominal GDP B. monetary policy will become inevitably imprecise C. quantity of credit rises above where it otherwise be D. innovations relating to banking and finance

Aggregate demand is more likely to _________________ than aggregate supply in the short run. A. shift substantially B. remain unchanged C. decrease substantially D. increase slightly

As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good. A. the production possibilities frontier B. allocative efficiency C. scarcity D. utility

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

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

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

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

During the deep recessions of the early 1980s and of 2007-2009... unemployment reached roughly __________. A. 10% B. 20% C. 30% D. 40%

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%

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

For firms engaged in international lending and borrowing, ____________________ can have an enormous effect on profits. A. swings in exchange rates B. trade-offs and risks C. foreign portfolio investment D. foreign direct investment

Freelife New Hampshire has a labor force of 78567 persons and employment of 74382. The unemployment rate for the city is: A. 5.3%. B. 5.6%. C. 6.0%. D. 7.1%

From a neoclassical view, which of the following is less important? A. fighting unemployment B. encouraging long-term growth C. fighting inflation D. level of potential GDP

Governments that attempt to intervene in exchange rate markets through soft pegs or hard pegs: A. risk causing even greater fluctuations in foreign exchange markets. B. will save an economy that consistently fails at achieving the main economic goals. C. gain the power to use monetary policy to focus on domestic inflations. D. gain the power to use monetary policy to focus on domestic recessions.

Growth policies that mainly focus on both finding appropriate technology and on getting connected through communications and transport infrastructure are generally associated with: A. technologically disconnected nations. B. nations that are technology leaders. C. neoclassical economic theory D. Keynesian economic theory

High income countries are classified as having a GDP per capita that is greater than A. $12,475 B. $14,970 C. $17,964 D. $21,556

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. B. the dollar appreciated against the yen. C. the yen depreciated against the dollar. D. the yen weakened against the dollar.

If Australia's exchange rate is stronger than the PPP rate for several years, which of the following will likely result? A. its imports will increase B. its exports will increase C. aggregate demand will increase D. trade deficit will decrease

If Sarah uses her smart card to purchase movies over the internet, then the money to pay the retailer will come from: Sarah's M1 funds. the smart card company's M1 funds. the smart card company's M2 funds. Sarah's M2 funds.

If a Keynesian expenditure-output model shows that aggregate demand for both goods and labor has shifted to the left to D1, while wages remained at w0 and prices remained at P0, what will be the result? A. excess supply B. natural rate of unemployment C. coordinated wage reductions D. depression

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

If a nation's labor force receives a significant influx of young workers: A. the natural rate of unemployment is likely to increase. B. the natural rate of unemployment is likely to decrease. C. the natural rate of unemployment is unlikely to change D. frictional unemployment will likely decrease to zero.

If aggregate supply is vertical, then which of the following statements must be true? A. Aggregate demand does not affect the quantity of output. B. Aggregate demand does not cause inflationary changes in price level. C. Inflation will accompany any rise in output. D. Inflation creates greater social benefits.

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.

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. depend on borrowed money typically generate extraordinary gains make loans to financial capital markets failed to diversify risk

If the original level of aggregate demand is AD0, then an expansionary monetary policy that shifts aggregate demand to AD1 will only: A. create an inflationary increase in price level. B. create an increase in GDP. C. create an increase in unemployment. D. create a deflationary loss in price level.

In 2010, $1.00 U.S. bought 8.24 Chinese yuan and in 2012 it bought 6.64 Chinese yuan. How many U.S. dollars could 1 Chinese yuan purchase in 2010 and 2012? A. 2010: .12 U.S. dollars; 2012: .15 U.S. dollars B. 2010: 1.2 U.S. dollars; 2012: 1.5 U.S. dollars C. 2010: .82 U.S. dollars; 2012: .66 U.S. dollars D. 2010: .15 U.S. dollars; 2012: .11 U.S. dollars

In 2010, 1 Swiss franc cost .56 British pounds and in 2012 it cost .51 British pounds. How much would 1 British pound purchase in Swiss francs in 2010 and 2012? A. 2010: 1.79 francs, 2012: 1.96 francs B. 2010: 1.78 francs, 2012: 1.98 francs C. 2010: 1.71 francs, 2012: 2.00 francs D. 2010: 1.73 francs, 2012: 1.97 francs

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

In 2010, many high-income countries will be focused on the short-term economic horizon due to aggressive and often controversial steps governments took to jump-start these economies out of severe recession. Considering the economic challenges that result from these policies, which of the following actions would be most advisable? A. extricate themselves from the recession and the policies adopted in fighting that recession B. to continue to temporarily disregard the foundations for future long-term growth C. find niches that they are well-suited to fill in the global networks of economic production D. build upon or copy technologies and industries developed by other technology leaders

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. market-oriented economy B. macroeconomy C. microeconomy D. command economy

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made. A. government B. market C. firm D. business sector

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

In macroeconomics, a _________________ is used to show the relationship between output and the input price level. A. Phillips curve B. microeconomic model C. expenditure-output model D. Keynesian framework

In the early 2000s, the illiteracy rate for girls between the ages of 15 and 24 was __________ and the illiteracy rate for males in this age group was ______________. A. 78%; 75% B. 80%; 83% C. 67%; 70% D. 72%; 69%

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. division of labor B. interconnected economy C. task economy D. modern economy

In the global economy, some nations are open to international trade, while others use tariffs and import quotas to limit the impact of trade. Which of the following is a reasonable conclusion that you can draw from this statement? A. differences in economic institutions exist among nations B. no nation intentionally aims for an unsustainable trade imbalance C. nations have similar priorities and similar economic situations D. economic growth is built on a foundation of trade improvements

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

In the neoclassic model, economic growth over time shifts potential GDP and the ______________ gradually to the right. A. vertical AS curve B. vertical AD curve C. vertical Phillips curve D. 45 degree AD curve

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."

Karen chooses to go to university fulltime rather than to work. Karen: A. is not part of the labor force. B. is part of the labor force and what economists call a discouraged worker. C. is part of the labor force but not actively seeking work. D. is considered employed.

Macroeconomic topics do not usually include: A. the profit maximizing decisions of an individual manufacturer. B. the rate of inflation. C. the rate of unemployment. D. economic growth.

Many _____________ countries have a legacy of government economic controls. A. converging B. technologically disconnected C. Sub-Saharan D. high-income

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

On April 1, 2009, in the middle of a recession, the government of the province of Ontario, Canada increased the provincial minimum wage from $8.75 to $9.50. What will the likely effect of this policy be? A. Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate. B. Low income workers will be better able to survive the recession at the new, higher wage rate. C. More people will be hired at the higher wage rate offsetting the effects of the recession. D. The higher wage will increase the supply of labor offsetting the effects of the recession.

One of the questions on Anders' economics exam provided him with the algebraic term: I + (G - T) = S + (M - X) and asked him to choose its matching written identity. Of the following possible answers presented on the exam, which one is the correct choice? A. Demand for financial capital = Supply of financial capital B. Investment + government savings = Supply + trade surplus C. Trade surplus + government savings = Supply + trade deficit D. Domestic investment + public savings = Domestic savings + trade deficit

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

Refer to Figure 2-2. At Point A in the production possibilities graph shown above, the economy: A. is not using its resources efficiently. B. is using its resources efficiently while producing clothing but no food. C. is using its resources efficiently while producing food but no clothing. D. is using its resources efficiently to produce both food and clothing.

Refer to Figure 5-1. The movement from __________ to __________ is consistent with a decrease in the price of cotton (a substitute). A. Point A; Point H B. Point A; Point D C. Point A; Point F D. Point A; Point B

Refer to Table 5-1. If D2 and S1 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are __________ and __________, respectively. A. $8; 15 B. $10; 17 C. $12; 9 D. $12; 10

Regardless of the outcome in the long run, ______________________ always has the effect of stimulating the economy in the short run. A. expansionary monetary policy B. contractionary monetary policy C. reverse quantitative easing policy D. tight monetary policy

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.

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

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? $600 million $110 million $200 million $90 million

Suppose that a rise in business confidence has led to more investment in the economy and higher levels of output. In the short-run Keynesian analysis, the rise in aggregate demand will: A. lower unemployment. B. cause government to lower taxes. C. cause government to increase spending. D. exports will drop.

Suppose that out of the original 100 increase in government spending, 33 will be recycled back into purchases of domestically produced goods and services in the second round and 10.89 is spent in the third round. Following this multiplier effect, what value would be recycled in the fourth round of this cycle? A. 3.59 B. 9.89 C. 3.37 D. 5.23

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

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

The _____________ is an example of a large-scale common currency. A. euro B. dollar C. pound D. franc

The central bank requires Southern to hold 10% of deposits as reserves. Southern Bank's policy prohibits it from holding excess reserves. If the central bank sells $25 million in bonds to Southern Bank which of the following will result? A. the money supply in the economy decreases B. Southern's net worth increases by $25 million C. decrease in Southern's bond assets by $25 million D. increase in Southern's loan assets of $25 million

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

The circular flow diagram of economic activity is a model of the: A. flow of goods, services, and payments between households and firms. B. influence of government on business behaviour. C. role of unions and government in the economy. D. interaction among taxes, prices, and profits.

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.

The equilibrium quantity of labor decreases and the equilibrium wage increases when: A. labor supply shifts to the left, if wages are flexible. B. labor demand shifts to the left, if wages are flexible. C. labor demand shifts to the right, if wages are flexible. D. labor supply shifts to the right, if wages are flexible,

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

The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options. A. sunk costs B. opportunity costs C. marginal analysis D. budget constraints

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 value of money D. risk premium

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

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 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

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 sum of all the income received for contributing resources to GDP is called ___________________. A. national income (Y) B. national revenue (Y) C. marginal income (X) D. marginal revenue (X)

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. reserve ratio reserve funds term deposits bond reserves

The type of unemployment that occurs because of a recession is called: A. cyclical unemployment. B. the natural rate of unemployment. C. seasonal unemployment. D. frictional unemployment.

Unemployment rates in the nations of Europe have typically been ____________ than in the United States. A. higher B. lower C. the same D. better

Using a neoclassical model, what will the level of cyclical unemployment be when an economy is producing at potential GDP? A. zero B. never 0% C. 1% - 3% D. 3% - 5%

What do growth in standard of living, low unemployment, low inflation, and a sustainable balance of trade all share in common? A. main universal goals of macroeconomic policy B. lack of diversity in undeveloped countries in the World C. microeconomic policy goals of developed countries D. microeconomic policy goals of undeveloped countries

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

When GDP per capita is used as a rough measure to compare the economic regions of the World, Latin America and the Caribbean are better off than _________________, but worse off than ___________________. A. Sub-Saharan Africa; South Asia, Eastern Europe and Central Asia B. Eastern Europe and Central Asia; East Asia and the Pacific C. East Asia and the Pacific; the Middle East and North Africa D. South Asia; Eastern Europe and Central Asia

When Mataeo buys Euros through _________________________, he will use his U.S. dollars to pay for them. A. the foreign exchange market B. the currency exchange market C. a floating exchange market D. foreign currency market

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.

When a shift in ________________ occurs, rational expectations hold that its impact on output and employment will only be temporary. A. aggregate demand B. aggregate supply C. wage levels D. price levels

When did the U.S. current account balance experience the largest surplus? A. before the 1980s B. 1980s and 1990s C. 1990s and 2000s D. after the 2000s

When some countries increase their imports as a result of worldwide economic growth, other countries must be increasing their: A. exports as demand in all countries substantially rises. B. trade deficits since all of their imports significantly rise. C. trade surplus since all of their exports gradually rise. D. imports, but their trade deficits gradually decrease.

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.

Which category of the money supply would you be contributing to if you invest in money market funds? M2 M1 time deposits savings deposits

Which of the following best describes a fiscal policy tool? A. government spending B. bank lending C. financial capital markets D. household spending

Which of the following best describes a monetary policy tool? A. interest rates B. taxes C. household savings D. government spending

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

Which of the following is a valid criticism of the use of money as a store of value in modern economies? annual inflationary loss of buying power money supply is too narrowly defined storing money is wasteful imperfect as a unit of account

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

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

Which of the following will cause the multiplier to be smaller and cause changes in investor confidence to have a smaller effect in an economy? A. bigger leakages B. smaller leakages C. increased trade D. decreased trade

Which of the following will strongly influence a nation's level of trade? A. size of its economy, its geographic location, and its history of trade B. size of its government, its history of trade, and its geographic location C. government trade policy, its history of trade, and the size of its economy D. ratio of exports to GDP, balance of trade, and government trade policy

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

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

__________________ pool the deposits of many investors together and invest them in a safe way like short-term government bonds. Money market funds Savings deposits Time deposits Certificates of deposit

__________________ 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

______________________ argues that the productivity of workers will increase if they are paid more...and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate. A. Efficiency wage theory B. Equilibrium wage theory C. Employee wage theory D. Employer wage theory

__________________________ address the problem of economic growth by continually striving for a more educated workforce that can create, invest in and apply new technologies. A. Technological leaders B. Technologically disconnected nations C. Converging economies D. Command economies

Multiple Choice 10. The percentage change in the price level from one time period to the next, whether the price level is measured in terms of money or as a price index, will be the _____________. A. inflation rate B. price index rate C. consumer price index D. producer price Index

A Reference: Explanation:

Multiple Choice 12. Two factors that complicate the calculation of the inflation rate are: A. substitution and quality/new product bias B. preferential bias C. complimentary product bias D. consumer behavior bias

A Reference: Explanation:

Multiple Choice 12. Which of the following is not counted as a part of GDP? A. the purchase of 100 shares of AT&T stock by your grandfather. B. the purchase of a snow plough by the city of Minneapolis. C. the unsold additions to inventory at an appliances store D. the purchase of a loaf of bread by a consumer

A Reference: Explanation:

Multiple Choice 15. 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

A Reference: Explanation:

Multiple Choice 15. To compare the GDP of two different countries with different currencies, it is necessary to use _________________________. A. an exchange rate B. foreign currency C. currency rates D. per capita GDP

A Reference: Explanation:

Multiple Choice 19. The situation where the buying power of money in terms of goods and services increases is called: A. deflation. B. inflation. C. stationary pricing. D. hyperinflation.

A Reference: Explanation:

Multiple Choice 20. Which of the following is the name used to describe the price index that consists of intermediate goods and finished goods? A. Producer Price Index B. Consumer Price Index C. Employment Cost Index D. Processing Price Index

A Reference: Explanation:

Multiple Choice 23. 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.

A Reference: Explanation:

Multiple Choice 25. 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%

A Reference: Explanation:

Multiple Choice 29. When a price, wage, or interest rate is adjusted automatically with inflation, it is said to be __________. A. indexed B. COLAed C. nominally adjusted D. semi-indexed

A Reference: Explanation:

Multiple Choice 30. 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

A Reference: Explanation:

Multiple Choice 38. On the supply side of the GDP, Structures account for around __________ of U.S. GDP. A. 7% B. 17% C. 37% D. 57%

A Reference: Explanation:

Multiple Choice 40. 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

A Reference: Explanation:

Multiple Choice 5. Consumption is the purchase of goods and services by: A. households. B. government. C. business firms. D. foreign buyers.

A Reference: Explanation:

Multiple Choice 7. 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.

A Reference: Explanation:

Multiple Choice 8. The most commonly cited measure of inflation in the United States is: A. the Consumer Price Index (CPI). B. the Deflationary Price Index (DPI) C. the Cumulative Price Index (CPI) D. the Inflationary Price Index (IPI)

A Reference: Explanation:

Multiple Choice 9. One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer's true cost of living, is: A. substitution bias B. attribution bias C. complimentary bias D. preference bias

A Reference: Explanation:

Multiple Choice 9. ___________ is a small category that refers to the goods produced by one business that have yet to be sold to consumers, and are either still sitting in warehouses and on store shelves. A. Inventories B. Services C. Structures D. Durable goods

A Reference: Explanation:

If a country's economic data shows that private savings equal $250 million, government spending equals $400 million, taxes equal $350, and the trade surplus equals $150 million, then what does investment equal? A. $50 million B. $75 million C. $450 million D. $350 million

A. $50 million

If an economy has a budget surplus of 400, private savings of 1,200, and investment of 1,600, what will the balance of trade in this economy equal? A. 0 B. deficit of 1,600 C. deficit of 1,200 D. deficit of 400

A. 0

2. During the Great Depression of the 1930s, the unemployment rate reached more than _________ of the labor force. A. 25% B. 45% C. 65% D. 85%

A. 25%

11. ______________________ argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate. A. Efficiency wage theory B. Equilibrium wage theory C. Employee wage theory D. Employer wage theory

A. Efficiency wage theory

_______________________________ can set the stage for international financial investors first to send their funds to a country and cause an appreciation of its exchange rate and then to pull their funds out and cause a depreciation of the exchange rate and a financial crisis as well. A. Trade balance B. Twin deficits C. Trade deficits D. Crowding out

A. Trade balance

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. a contractionary monetary policy.

When the interest rate in an economy increases, it is likely the result of either: A. a decrease in the government's budget surplus or an increase in its budget deficit. B. a decrease in the government budget surplus or its budget deficit. C. an increase in the government budget surplus or a decrease in its budget deficit. D. an increase in the government budget surplus or its budget deficit.

A. a decrease in the government's budget surplus or an increase in its budget deficit.

When governments are borrowers in financial capital markets, which of the following is least likely to be a possible source of the funds from a macroeconomic point of view? A. central bank prints more money B. increase in household savings C. decrease in borrowing by private firms D. foreign financial investors

A. central bank prints more money

Ricardian equivalence means that: A. changes in private savings offset any changes in the government deficit. B. changes in exports offset any changes in the government deficit. C. changes in imports offset any changes in the government deficit. D. changes in investment offset any changes in the government deficit.

A. changes in private savings offset any changes in the government deficit.

7. The type of unemployment that occurs because of a recession is called: A. cyclical unemployment. B. the natural rate of unemployment. C. seasonal unemployment. D. frictional unemployment.

A. cyclical unemployment.

20. The extent of _______________________ will depend on how easy it is for workers to learn about alternative jobs, which may reflect the ease of communications about job prospects in the economy. A. frictional unemployment B. cyclical unemployment C. seasonal unemployment D. cyclical employment

A. frictional unemployment

6. A welder who quits his job and moves from Pittsburgh to Madison to try to get a better welding job is said to be: A. frictionally unemployed. B. underemployed. C. cyclically unemployed. D. structurally unemployed.

A. frictionally unemployed.

If the government's budget deficit increases while the economy is producing substantially less then potential GDP and expansionary monetary policy is implemented, then any ________________ from government borrowing would be _____________________________ from that monetary policy. A. higher interest rates; largely offset by the lower interest rates B. lower interest rates; largely offset by the higher interest rates C. increase in interest rates; reduced by private sector investment D. inflationary increase in price level; crowding out private investment

A. higher interest rates; largely offset by the lower interest rates

10. Karen chooses to go to university fulltime rather than to work. Karen: A. is not part of the labor force. B. is part of the labor force and what economists call a discouraged worker. C. is part of the labor force, but not actively seeking work. D. is considered employed.

A. is not part of the labor force.

17. The unemployment rate may underestimate the true extent of unemployment if: A. many part-time employees would like to work fulltime, but are unable to get the additional work. B. employees increase the number of hours they work overtime. C. there are a large number of people working in the underground economy. D. people are pretending to look for work so that they can continue receiving unemployment benefits.

A. many part-time employees would like to work fulltime, but are unable to get the additional work.

In the U.S. economy, the offsetting effects of private saving compared to government borrowing are typically noted as being represented by which of the following ratios? A. much less than one-to-one B. slightly less than one-to-one C. slightly more than two-to-one D. much more than two-to-one

A. much less than one-to-one

3. 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.

A. out of the labor force.

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

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

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

A. productivity and economic growth

A government began 2013 with a budget surplus and a trade deficit. Due to the onset of recession, the government changed its policy and is now running a budget deficit. If all other factors hold constant, this change in policy will cause: A. the exchange rate and the trade deficit to increase. B. the exchange rate and the trade deficit to decrease. C. the exchange rate to decrease and the trade deficit to increase. D. the exchange rate to increase and the trade deficit to decrease.

A. the exchange rate and the trade deficit to increase.

9. 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.

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

16. Insofar as government public policy is concerned, the best way to battle unemployment would be __________________. A. to minimize recessions B. to maximize unemployment payments C. to maximize unemployment insurance duration D. to minimize labor unions

A. to minimize recessions

A __________________ often results in an outflow of financial capital leaving the domestic economy and being invested in the global economy? A. trade surplus B. trade deficit C. fiscal deficit D. twin surplus

A. trade surplus

12. The graph above reflects a significant increase in world oil prices. What will the impact on aggregate supply most likely lead to? A. an increase in economic growth B. an increase in input prices C. a decrease in the natural unemployment rate D. less inflationary pressures

17. The following table shows the aggregate supply and demand data for a country. What is the equilibrium price level? A. 200 B. 400 C. 500 D. 800

39. Refer to the graph shown below. At point A: A. economic growth is declining. B. the economy has full employment. C. inflation tends to be declining. D. wages can be lowered due to worker surplus.

42. Referring to the diagram above, which of the following is a true statement? A. The increase in supply (Q1 to Q2) may come about because of increased money supply. B. The increase in output (Q1 to Q2) may come about because of lower levels of taxation. C. The increase in supply (Q1 to Q2) may result from decreased government spending. D. The increase in output (Q1 to Q2) may result from increased levels of taxation.

42. The chart below gives the data necessary to make a Keynesian cross diagram. Assume that the tax rate is 0.4 of national income, the MPC out of after-tax income is 0.9, investment is 58, government spending is 60, exports are 40, and imports are 0.1 of after-tax income. What is the equilibrium level of national income for this economy? a. Y=200 b. Y=300 c. Y=400 d. Y=500

45. The diagram above refers to a private closed economy. In this instance, the equilibrium GDP is: A. $60 billion. B. $180 billion. C. between $60 and $180 billion. D. $60 billion at all levels of GDP.

A change in price of a good or service typically causes ___________________________ for that specific good or service. A. a new equilibrium price B. a change along the supply curve C. the supply curve to shift D. a decreased demand

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 private savings fall to zero, what will happen to this country's current account balance? A. deficit increases from 2% to 32% of GDP B. deficit increases from 1% to 31% of GDP C. surplus of 1% drops to deficit of 29% of GDP D. surplus of 2% drops to deficit of 28% of GDP

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

A recession tends to make a _____________________. A. trade surplus smaller B. trade deficit smaller C. trade deficit larger D. both a and b above

A stronger euro is less favorable for: A. German tourists traveling abroad. B. American tourists traveling in France. C. Canadian firms selling in Germany. D. Canadian investors with money investments in Germany.

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

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

According to the Keynesian framework, ________________ in __________________ may cause inflation, but not a recession. A. decrease; interest rates B. an increase; domestic investment C. a decrease; a major trading partner's economy D. a decrease; a major trading partner's export prices

According to the Keynesian framework, which of the following will not help a country to get out of a recession, but may help that country reduce inflation? A. an increase in military spending B. a decrease in military spending C. increase in spending by the government on health care D. decrease in spending by government on health care

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.

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.

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

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

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.

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

Banks typically come under financial stress because of: A. the money multiplier effect. B. a widespread decline in the value of their assets. C. diversification of loan assets. D. risks associated with extraordinary economic gains.

Banks typically come under financial stress because of: the money multiplier effect. a widespread decline in the value of their assets. diversification of loan assets. risks associated with extraordinary economic gains.

Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization? A. division of labour B. international trade C. economies of scale D. command economy

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

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

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

Craigburg has a working age population of 20 million. Of those...11 million are employed and 1 million are unemployed. The unemployment rate is ________ and the participation rate is __________. A. 5%; 55%. B. 8.3%; 60%. C. 8.3%; 55%. D. 5%; 60%.

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. circular flow diagram C. financial investment market D. Specialization Model

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

Factors like health, education, human rights, crime, personal safety, and cleanliness of environment all: A. fail to capture the standard of living in a precise manner. B. have a large impact on the standard of living of a country. C. have a slight impact on the standard of living of a country. D. fail to capture diversities that make up the global economy.

How are the specific interest rates for the lending and borrowing markets determined? A. U.S. Treasury Department Board policy B. by the forces of supply and demand C. through open market operations D. by altering the discount rate

How do apple growers react to the news of medical research findings that suggest that eating apples leads to greater health benefits than were previously known? A. They increase the supply of apples. B. They increase the quantity of apples supplied. C. They decrease the supply of apples. D. They decrease the quantity of apples supplied.

If American Airlines were to purchase Malaysian Airlines, it would likely have ______________________________ in mind. A. beliefs about how exchange rates will move in the near future B. a longer-term horizon C. beliefs about how rates of return will move in the near future D. a shorter-term horizon

If Bill performs plumbing upgrades for Alice in exchange for her incorporating his business, then their _________________________ will be satisfied. balance of trade double coincidence of wants convenience of exchange division of labor

If GDP is 2400 and the money supply is 600, then what is the velocity? A. 18.3 B. 4 C. 4.57 D. 12

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.

If a central bank focuses on preventing either high inflation or deep recession by using low and reasonably steady interest rate policy, then: A. foreign investment will increase significantly. B. exchange rates will have less reason to vary. C. domestic investments in foreign businesses will decrease. D. government will intervene to peg the nation's currency.

If a country's economy records a surplus, how will the X and M components be represented in its national savings and investment identity? A. (X - M); right side B. (X - M); left side C. (M - X); demand side D. (M - X); supply side

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

If a nation merges its currency with another nation to create a single currency, what must it give up? A. the ability to purchase currency in foreign exchange markets B. the ability to determine its own nationally-oriented monetary policy C. the ability to fight recessions and control inflations D. the ability to sell currency in foreign exchange markets

If a technological leader's economy produces per capita growth rates of about 2% per year, multiplying per capita GDP by a factor of five would take about: A. 50 years. B. 80 years. C. 30 years. D. 70 years.

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.

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.

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.

If the number of employed persons in a country equals 24 million...the number of unemployed persons equals 8 million...and the number of persons over age 16 in the population equals 40 million... the unemployment rate equals: A. 32%. B. 25%. C. 20%. D. 8%.

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

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.

In 2010, 1 Canadian dollar cost .56 British pounds and in 2012 it cost .63 British pounds. How much would 1 British pound purchase in Canadian dollars in 2010 and 2012? A. 2010: 1.78 dollars, 2012: 1.57 dollars B. 2010: 1.79 dollars, 2012: 1.59 dollars C. 2010: 1.87 dollars, 2012: 1.65 dollars D. 2010: 1.97 dollars, 2012: 1.75 dollars

In 2010, Tara used $50,000.00 from funds she had invested in certificates of deposit as a down payment to buy a house. What function did this portion of her investments serve when she made the down payment? A. unit of exchange. B. medium of exchange. C. store of value. D. unit of account.

In November 2010 the labor force in Siouxtown was 14800. There were 14483 persons employed. The local unemployment rate: A. was 1.2%. B. was 2.1%. C. was 5.6%. D. was 7.1%.

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

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

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

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

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

In countries like _____________ the command economy predominates. A. China and Vietnam B. Cuba and North Korea C. South Africa and Kenya D. Germany and France

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.

In good economic times, a surge in lending exaggerates the episode of economic growth. Which of the following adaptations of monetary policy can moderate these exaggerated effects? A. price stability to reinforce effect of deposit insurance B. monitoring asset prices and leverage C. quantitative easing when banks are under stress D. inflation-targeting lender of last resort policies

In macroeconomics, ___________________________ describes a situation in which two people each want to exchange some good or service that the other can provide. a medium of exchange a double coincidence of wants interrelated banking the usefulness of money

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

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

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.

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.

In the neoclassical model, the AS curve shifts to the right over time as_______________________ and potential GDP expands. A. the macroeconomy adjusts back to real GDP B. productivity increases C. the level of real output drops D. aggregate demand increases

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

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

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

Many cooks view butter and margarine to be substitutes. If the price of butter rises, then in the market for margarine: A. the equilibrium price will fall and the equilibrium quantity will fall. B. both the equilibrium price and quantity will rise. C. the equilibrium price will rise and the equilibrium quantity will decrease. D. the equilibrium price will rise, while the change to equilibrium quantity is indeterminate

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

Many high-income nations are approaching a situation in which: A. they will intentionally aim for a low standard of living. B. the elderly will soon form a much larger share of the population. C. the demands of the elderly will cause an unsustainable trade imbalance. D. they will intentionally aim for high rates of unemployment and inflation.

Many states do have ____________, which impose an upper limit on the interest rate that lenders can charge. A. price ceiling laws B. usury laws C. price floor laws D. minimum interest rate

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. marginal analysis C. the budget constraint D. consumption

Most contracts, wage levels, and interest rates are either indexed to inflation, or involve using the currency of another country to sidestep the problem of inflation in some converging economies. Following these policies caused A. the net flow of foreign investment in and out of the economy reached zero B. solid levels of economic growth for sustained periods of time with 10-30% inflation C. a moderate but substantial current account trade imbalance to control inflation D. indexed inflation policy trade-offs that led to substantial restrictions on trade

Movements in exchange rates can have a powerful effect on incentives to export and import, and thus on ________________ in the economy as a whole. A. aggregate supply B. aggregate demand C. direct investments D. portfolio investments

One insight that can be obtained from the national saving and investment identity is that a nation's balance of trade is determined by: A. foreign investment as a part of supply of financial capital. B. each nation's own levels of domestic saving and domestic investment. C. foreign investment as part of the demand for financial capital. D. all of the world government budgets and the overall global trade balance.

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.

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

Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be. A. negative statements B. positive statements C. tradeoffs D. utilitarianism

Refer to Figure 4-3. A change from Point A to Point E represents a(n): A. increase in supply. B. decrease in supply. C. increase in quantity supplied. D. decrease in quantity supplied.

Refer to Figure 5-1. The movement from __________ to __________ is consistent with a successful advertising campaign that claims wool keeps you warm. A. Point A; Point B B. Point A; Point F C. Point A; Point D D. Point A; Point H

Refer to Table 5-1. If D1 and S1 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are __________ and __________, respectively. A. $4; 11 B. $4; 16 C. $6; 13 D. $8; 15

Refer to Table 5-1. If D2 and S2 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are __________ and __________, respectively. A. $12; 12 B. $10; 12 C. $8; 15 D. $6; 18

Referring to Table 2-1: A student has only a few hours to prepare for two different exams this afternoon. The above table shows alternative possible exam scores with three alternative uses of the student's time. The opportunity cost of scoring a 94 on the economics exam rather than a 77 is: A. 8 points on the history exam. B. 15 points on the history exam. C. 14 points on the history exam. D. 17 points on the history exam.

Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected __________ doesn't change. A. market B. economy C. production D. firm

Some prominent members of the slow-economic growth country club include a high-income country like _________. A. Somalia B. Germany C. Bolivia D. Nigeria

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

Specialization: A. leads to greater self-sufficiency. B. can lead to an increase in overall production. 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

Stealth bank has deposits of $300 million. It holds reserves of $20 million and has purchased government bonds worth $300 million. The bank's loans, if sold at current market value, would be worth $600 million. What does Stealth bank's net worth equal? $20 million $620 million $1.22 billion $920 million

Stealth bank has deposits of $700 million. It holds reserves of $20 million and has purchased government bonds worth $350 million. The bank's loans, if sold at current market value, would be worth $600 million. What does Stealth bank's net worth equal? $120 million $270 million $1.02 billion $970 million

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.

Suppose that out of the original 100 of government spending, 33 will be recycled back into purchases of domestically produced goods and services in the second round and 10.89 is spent in the third round. Following this multiplier effect, what will the value of the total aggregate expenditures be after the fourth round in the cycle is completed? A. 141.70 B. 147.48 C. 147.62 D. 144.41

The Keynesian economic framework is based on an assumption that: A. an increase in government spending will cause the aggregate demand curve to shift to the left. B. prices and wages are sticky and do not adjust rapidly. C. an increase in government spending will cause the aggregate demand curve to shift to the left. D. people can afford a high level of government services.

The Keynesian view of economics assumes that: A. the Keynesian Phillips curve is vertical. B. wages are sticky. C. the economy must focus is on long-term growth. D. economic output is primarily determined by aggregate supply.

The U.S. trade deficit can disappear without raising legitimate concerns over disruption to the economy if: A. the U.S. immediately ceases trade with all foreign countries. B. domestic savings rates increases and foreign investment gradually decreases. C. all tariffs are doubled and import quotas are reduced by half. D. foreign investors sell their U.S. dollar investments and stop investing in the U.S. economy.

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

The ___________________ is the institution designed to control the quantity of money in the economy and also to oversee the: A. FOMC; passing of tax and spending bills. B. Central Bank; safety and stability of the banking system. C. FFIEC; day-to-day democratic control of policy. D. FDIC; responsibility for deposit insurance.

The _____________________________ is the largest market in the world economy. A. international exchange market B. foreign exchange market C. foreign currency market D. international currency market

The definition of market equilibrium states that at the _______________... the quantity of labor demanded by employers will equal the quantity supplied. A. efficiency wage B. equilibrium wage C. sticky wage D. natural rate of unemployment

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.

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%

The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options. A. marginal utility B. sunk costs C. marginal analysis D. budget constraints

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

The most commonly traded currency in foreign exchange markets is the: A. euro. B. U.S. dollar. C. Chinese yuan. D. British pound.

The neoclassical perspective on macroeconomics emphasizes that in the long run, the economy seems to rebound back to its _____________ and its ____________________. A. long term growth; cyclical unemployment B. potential GDP; natural rate of unemployment C. natural level of output; cyclical unemployment rate D. real GDP; natural rate of unemployment

The onset of a trade deficit is most likely supported by a country's: A. existing trade surplus. B. strong economic growth. C. reduction in the balance of trade. D. increased consumption function.

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? 5 10 20 1

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.

The quantity of money in an economy and the _____________________ are inextricably intertwined. value of assets for loans quantity of credit for loans financial stress in the banking system extraordinary gains that can be made with money

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

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

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.

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.

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

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.

The two main tools of macroeconomic policy include monetary policy, and fiscal policy, which involves __________ spending. A. business B. government C. household D. capital market

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

To achieve a high standard of living, a nation should: A. increase the tax deduction for child dependents. B. promote economic growth. C. use less capital and more labor in the production process. D. increase welfare payments to the poor.

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.

When a government uses a ______________ exchange rate policy, it usually allows the exchange rate to be set by the market. A. PPP B. soft peg C. hard peg D. currency

When banks hold excess reserves because they don't see good lending opportunities: A. it negatively affects contractionary monetary policy. B. it negatively affects expansionary monetary policy. C. expansionary monetary policy is unaffected. D. contractionary monetary policy is unaffected.

When discussing economic growth, it is often useful to focus on ____________, to avoid studying changes in the size of GDP that represent only having more people in the economy, and focus on those increases in GDP which represent an actual rise in the standard of living on a per person basis. A. economic growth B. GDP per capita C. living standards D. consumption and expenditures

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

Which of the following best characterizes the circular flow of income? A. Businesses buy resources from the government, and households buy goods and services from businesses. B. Businesses buy resources from households, and households use their income from the sale of resources to 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.

Which of the following best denotes the reason for the existence of substantial black markets? A. a market-oriented economy B. a command economy C. government laws and rules D. the microeconomy

Which of the following data would be analyzed to determine whether any shift in the MPI has occurred over the course of the past 5 year period? A. interest rates B. exchange rates C. foreign income D. MPS

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

Which of the following is a valid criticism of the rational expectations theory? A. prices do not wait on events B. the assumption seems too strong C. people form the most accurate possible expectations D. adjustment of wages and prices might be quite rapid

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

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.

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

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

Which of the following represents the national savings and investment identity - Supply of financial capital = Demand for financial capital - expressed in algebraic terms? A. (M - X) = I - S - (T - G) B. S + (M - X) = I + (G - T) C. X - M = S + (G - T) - I D. I - S - (T - G) = (M - X)

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

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.

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

With regard to the major issues involving trade imbalances, which of the following explains why smaller countries around the world should take some steps to limit flows of international capital? A. to counter cyclical unemployment B. to reduce susceptibility to economic whiplash C. to maintain the natural rate of unemployment D. to achieve real productivity gains

_________ is output per hour in the business sector. A. Net exports B. Productivity C. Investment D. GDP per capita

_____________ are a form of financial instrument through which corporations and governments borrow money from financial investors and promise to repay with interest. Certificates of deposit Bonds Money market funds Time deposits

_____________ 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

_________________ refers to the total number of units that are purchased at that price. A. quantity B. quantity demanded C. supply D. market quantity

_____________________ is a term which refers to the widespread use of power-driven machinery and the economic and social changes that resulted in the first half of the 1800s. A. GDP per capita B. The Industrial Revolution C. The living standard D. Investment and inventions

_______________________ 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 ________________. Demand deposits; certificates of deposit Certificates of deposit; time deposits Money market funds; time deposits Bonds; term deposits

_______________________ 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

________________________ 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

_________________________ are included in the aggregate amount of MI money currently in circulation. Savings deposits Traveler's checks Short-term bonds Foreign currency deposits

_________________________ are included in the aggregate amount of MI money currently in circulation. A. Savings deposits B. Traveler's checks C. Short-term bonds D. Foreign currency deposits

Multiple Choice 10. In order to avoid double counting, statisticians just count the __________________. A. final inventories B. final goods and services C. intermediate goods and services D. durable goods and nondurable goods

B Reference: Explanation:

Multiple Choice 13. Which of the following is not included in GDP? A. the payments for a chiropractor's services B. cash income paid to a day laborer that is not reported to the tax authorities C. the replacement of brake pads on your six-year-old vehicle D. the fees for legal services rendered by your lawyer

B Reference: Explanation:

Multiple Choice 14. The Producer Price Index is based on prices paid for supplies and inputs by: A. consumers B. producers of goods and services C. government D. the small business sector

B Reference: Explanation:

Multiple Choice 14. _________ are now the largest single component of the supply side of GDP, representing over half of GDP. A. Durable goods B. Services C. Nondurable goods D. Structures

B Reference: Explanation:

Multiple Choice 16. Another term used to describe negative inflation is: A. counter inflation B. deflation C. hyperinflation D. GDP deflator

B Reference: Explanation:

Multiple Choice 16. ___________ 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

B Reference: Explanation:

Multiple Choice 18. _________ 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

B Reference: Explanation:

Multiple Choice 2. While one occasionally sees references to inflation over short time periods, the term typically implies a(n)_____________ in prices. A. ongoing decrease B. ongoing rise C. short term rise D. short term decrease

B Reference: Explanation:

Multiple Choice 20. Which of the following is included in GDP? A. revenue from the sale of a three-year old car B. the fees charged for a stock broker's services C. the receipts from a sale of land D. the value of lawn care service provided by a sixteen-year-old as part of his weekly chores

B Reference: Explanation:

Multiple Choice 21. 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.

B Reference: Explanation:

Multiple Choice 26. 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.

B Reference: Explanation:

Multiple Choice 27. 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

B Reference: Explanation:

Multiple Choice 27. What distinguishes the real value of a statistic from the nominal value of a statistic? A. timing of announcement B. adjusting for inflation C. adjusting for GDP deflator D. real interest rate

B Reference: Explanation:

Multiple Choice 28. If imports exceed exports, as in recent years, then __________ exists. A. a trade surplus B. a trade deficit C. a trade imbalance D. trade disequilibrium

B Reference: Explanation:

Multiple Choice 32. 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

B Reference: Explanation:

Multiple Choice 33. A payment is said to be ________________ if it is automatically adjusted for inflation. A. cross referenced B. indexed C. matched D. maintained

B Reference: Explanation:

Multiple Choice 33. In 1990, the GDP of Canada was $680 billion as measured in Canadian dollars, and the exchange rate was that $1 Canadian was worth 85 U.S. cents. In 2000, the GDP of Canada was $1000 billion as measured in Canadian dollars, and the exchange rate was that $1 Canadian was worth 69 U.S. cents. By what percentage did the GDP of Canada increase from 1990 to 2000 in Canadian dollars? A. 19.4% B. 47% C. 68% D. 147%

B Reference: Explanation:

Multiple Choice 34. A lender demands an interest rate in part to compensate for any expected ___________, so that the money that is repaid in the future will have at least as much buying power as the money that was originally loaned. A. risk premium B. inflation C. compound interest D. opportunity costs

B Reference: Explanation:

Multiple Choice 35. The gap between exports and imports in a nation's economy is called the ___________. A. trade surplus B. trade balance C. trade deficit D. trade inventory

B Reference: Explanation:

Multiple Choice 4. 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.

B Reference: Explanation:

Multiple Choice 6. 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

B Reference: Explanation:

If a country's economic data shows that private savings equal $350 million, government spending equals $375 million, taxes equal $300, and the trade surplus equals $125 million, then what does investment equal? A. $50 million B. $150 million C. $425 million D. $600 million

B. $150 million

If a country's economic data shows private savings of $500 million, government spending of $300 million, tax revenue of $400 million, and a trade surplus of $100 million, then what does investment equal? A. $600 million B. $500 million C. $700 million D. $900 million

B. $500 million

5. If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals: A. 32%. B. 25%. C. 20%. D. 8%.

B. 25%.

4. 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%

B. 4%-6%

13. Craigburg has a working age population of 20 million. Of those, 11 million are employed and 1 million are unemployed. The unemployment rate is ________ and the participation rate is __________. A. 5%; 55%. B. 8.3%; 60%. C. 8.3%; 55%. D. 5%; 60%.

B. 8.3%; 60%.

12. Which of the following statements is incorrect? A. Employment insurance compensation encourages longer job searches, which may lead to a better match between jobs and employees. B. Employment insurance compensation increases the opportunity cost of being unemployed. C. The typical employment insurance compensation is roughly one third of one's latest salary for up to 26 weeks. D. Demand and supply curves for labor are constantly shifting.

B. Employment insurance compensation increases the opportunity cost of being unemployed.

19. Suppose that everyone who has looked for a job for more than six months gave up in despair and stopped looking. What would happen to the unemployment rate? A. It would increase. B. It would fall. C. It would not change. D. It would change, but the effect cannot be predicted.

B. It would fall.

Which of the following is least likely to benefit the civilian economy? A. R&D carried out in government laboratories B. R&D aimed at producing new weapons C. direct private sector R&D spending D. tax policy promoting civilian R&D spending

B. R&D aimed at producing new weapons

When a government records a budget surplus, the national savings and investment identity is written as: A. S = I + (G - T) + (X - M) B. S + (M - X) + (T - G) = I C. S - (G - T) = I - (X - M) D. S + (T - G) = 1 + (X - M)

B. S + (M - X) + (T - G) = I

If the quantity of financial capital supplied is equal to the quantity of financial capital demanded then, the national savings and investment identity is written as: A. (M - X) - S = (G + T) - I B. S + (M - X) = I + (G - T) C. S + (G - T) = I - (X - M) D. S = (X - M) - (G - T)

B. S + (M - X) = I + (G - T)

14. The _________________ argument points out that if an employer reacts to poor business conditions by reducing pay for all workers, then the best workers, with the best employment alternatives at other firms, are the most likely to leave and the least-attractive workers, with fewer employment alternatives, are more likely to stay. A. efficiency wage theory B. adverse selection of wage cuts C. equilibrium wage theory D. employer wage theory

B. adverse selection of wage cuts

If the U.S. economy is producing at a level that is substantially less than potential GDP and the government's budget deficits are increasing aggregate demand, then ____________________________ is not much of a danger. A. a tight monetary policy B. an inflationary increase in the price level C. international financial investment D. the central bank's contractionary monetary policy

B. an inflationary increase in the price level

An increase in government borrowing can: A. allow private investment to expand. B. crowd out private investment in physical capital. C. increase the incentive to invest in technology. D. cause a substantial decrease in interest rates.

B. crowd out private investment in physical capital.

Because of the difference between the discipline imposed by market competition and the discipline imposed by political decisions, which of the following is most likely? A. reduced government borrowing to avoid crowding out private investment B. difficulty managing public investment so it's done in a cost effective way C. government budgets will exactly shadow the rate of private investment D. tax budgets increase without a corresponding drop in private investment

B. difficulty managing public investment so it's done in a cost effective way

If the government initiates an expansionary monetary policy at the same time that its budget deficit increases, then the interest rate will __________________. A. remain unchanged B. either increase or decrease C. increase D. decrease

B. either increase or decrease

8. The definition of market equilibrium states that at the _______________, the quantity of labor demanded by employers will equal the quantity supplied. A. efficiency wage B. equilibrium wage C. sticky wage D. natural rate of unemployment

B. equilibrium wage

Which of the following is not a consequence of an increase in the government's budget deficit? A. private savings increases while holding everything else constant B. exports increase while imports and all other variables are held constant C. imports increase while exports and all other variables are held constant D. investment falls while holding everything else constant

B. exports increase while imports and all other variables are held constant

A decrease in the government's budget surplus will cause the interest rate to: A. decrease. B. increase. C. either increase or decrease. D. remain the same.

B. increase.

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.

B. investment will increase if savings remain constant.

A moderate increase in a budget deficit that leads to a _____________________ is not necessarily a cause for concern. A. combination of less foreign capital and banks that are bankrupt B. moderate increase in a trade deficit and a moderate appreciation of the exchange rate C. a series of large budget deficits D. shift in aggregate demand so far to the right that it causes high inflation

B. moderate increase in a trade deficit and a moderate appreciation of the exchange rate

Suppose you are analyzing data for an economy in which Ricardian neutrality holds true. If the budget surplus increases by 100, then: A. private savings will increase by 100. B. private savings will decrease by 100. C. investment will increase by 100. D. investment will decrease by 100.

B. private savings will decrease by 100.

If an economy has a budget surplus of 1,500, private savings of 3,000, and investment of 5,000, what will the balance of trade in this economy equal? A. deficit of 500 B. surplus of 500 C. surplus of 1,500 D. deficit of 1,500

B. surplus of 500

In most developed countries, the government plays a large role in society's investment in human capital through _________________________. A. direct spending B. the education system C. tax incentives D. private sector R&D

B. the education system

1. 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.

B. unemployed workers as a percentage of the labor force.

38. Refer to the graph shown below. This graph illustrates a: A. Keneyesian Curve. B. Neoclassical Curve. C. Phillips Curve. D. Labor Demand Curve.

41. The chart below gives the data necessary to make a Keynesian cross diagram. Assume that the tax rate is 0.4 of national income, the MPC out of after-tax income is 0.9, investment is 58, government spending is 60, exports are 40, and imports are 0.1 of after-tax income. What does consumption equal when income equals 600? a. 104 b. 324 c. 374 d. 540

43. Referring to the diagram above, which of the following is a true statement? A. Short-run increased output will lower output costs, but demand for higher profits will increase prices. B. Higher cost levels will result because government will increase taxes as output rises. C. Higher cost levels of increased output will force an increase in price for the product. D. Short-run lower output costs will result because government will decrease taxes as output rises.

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

A country finds itself in the following situation: a government budget deficit of $800; total domestic savings of $1800, and total domestic physical capital investment of $1300. According to the national saving and investment identity, what is the current account balance? A. deficit of $1300 B. surplus of $300 C. deficit of $300 D. surplus of $1300

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, what is this country's current account balance? A. deficit of 2% of GDP B. surplus of 1% of GDP C. deficit of 1% of GDP D. deficit of 3% of GDP

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.

A country's current national savings and investment identity is expressed in algebraic terms as I - S - (T - G) = (M - X). Assume that the level of domestic investment in a country rises, while the level of private and public saving remains unchanged. In this instance, the rise in domestic: investment will mean A. a higher trade surplus. B. a lower trade surplus. C. a higher trade deficit. D. trade will be perfectly balanced.

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

A government collects $700 billion annually in tax revenue. Each year it allocates $130 billion to interest payments that it must pay on its accumulated debt. What percentage of annual tax revenue is allocated to make these interest payments? A. 17.15% B. 28.75% C. 18.57% D. 27.58%

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.

A nation's prosperity is sometimes measured in terms of ___________. A. GNP B. GDP C. GDP per capita D. economic output

A period of strong economic growth tends to make a __________________. A. trade surplus larger B. a trade surplus C. trade deficit larger D. both a and b above

A straightforward example of a _______________, often used for simplicity, is the interest rate. A. price ceiling B. financial investment C. rate of return D. price floor

A trade balance can be quickly defined as the gap between _____________, which are also included in the current account balance along with _______________________. A. supply and demand; investment income and unilateral transfers B. supply and demand; stocks and bonds C. exports and imports; investment income and unilateral transfers D. exports and imports; stocks and bonds

A vertical AS curve means that the level of aggregate supply (or potential GDP) will determine the real GDP of the economy, regardless of the level of: A. cyclical unemployment. B. real unemployment. C. aggregate demand. D. inflationary pressures.

According to macroeconomic theory, evidence that high unemployment may be accompanied by low inflation, and low unemployment may be accompanied by high inflation is supported by the: A. neoclassical expenditure-output model. B. Keynesian cross diagram. C. Keynesian Phillips curve tradeoff. D. Keynesian Inflation trade-off model.

After reports of the subprime mortgage crisis began to appear in the media, which of the following most likely caused housing prices to fall? A. neoclassical theory B. cyclical expectations C. rational expectations D. Keynesian theory

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

Antonio tries to limit his risk of overexposure to debt by using a ________________ to store a certain amount of value that he then uses to make purchases. debit card credit card smart card chip card

Antonio tries to limit his risk of overexposure to debt by using a ________________ to store a certain amount of value that he then uses to make purchases. A. debit card B. credit card C. smart card D. chip card

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

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

Attending college is a case where the ________________ exceeds the monetary cost. A. budget constraint B. marginal analysis C. opportunity cost D. marginal utility

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

Central bank policy requires all banks to hold 10% of deposits as reserves. Pacific Bank policy prevents it from holding excess reserves. Suppose banks cannot trade any of the bonds they already have. If the central bank decides to lower the reserve requirement to 9%, which of the following will result? A. the money supply in the economy decreases B. decrease of $1 million in Pacific's net worth C. increase of $1 million in Pacific's loan assets D. increase of Pacific's bond assets by $1million

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.

Countries have strong differences in economic institutions: the U.S. is extremely _________________, Cuba has a ________________ and Canada is a mixture of both. A. high-income; low-income B. technological; shortage of technology C. market-oriented; command economy D. regulated; lack of regulation

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

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

From a macroeconomic perspective, a payment made by a foreign firm to a U.S. investor looks just like an: A. import of a service. B. import of a good. C. export of a service. D. export of a good.

From a macroeconomic point of view, increases in ____________ are an addition to aggregate demand, while increases in ___________ are a subtraction from aggregate demand. A. rates of return; exchange rates B. exchange rates; rates of return C. exports; imports D. imports; exports

From a neoclassical perspective, which of the following would most likely be viewed as an element that underpins long-run productivity growth in the economy? A. flexible price levels B. flexible market forces C. investments in human capital D. higher unemployment

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.

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.

If Brent uses his credit card to purchase a new television, then the money to pay the retailer is taken from: A. his M1 funds. B. his M2 funds. C. the credit card company's M1 funds. D. the credit card company's M2 funds.

If a Central Bank decides it needs to decrease both the aggregate demand and the money supply, then it will: A. follow expansionary monetary policy. B. follow loose monetary policy. C. follow tight monetary policy. D. follow quantitative easing policy.

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.

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

If aggregate supply is vertical, then aggregate demand does not affect: A. either wages or prices. B. the causes of inflationary changes in price level. C. the quantity of output. D. inflationary pressures that accompanies any rise in output.

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

If macroeconomics looks at the economy as a whole, it focuses on which of the following? A. households B. business firms C. unemployed people D. the division of labor

If nominal GDP is 1800 and the money supply is 450, then what is velocity? A. 25 B. 4.5 C. 4 D. 22

If nominal GDP is 2700 and the money supply is 900, what is velocity? A. 25 B. 13.5 C. 3 D. .33

If the U.S. dollar weakens, which of the following parties will benefit? A. countries exporting to the U.S. B. Australian firms selling in the U.S. C. U.S firms selling in Europe D. Japanese investors who have money in the U.S.

If the central bank decreases the amount of reserves banks are required to hold from 20% to 10%, then: the money multiplier will increase and the supply of money in the economy will decrease. both the money multiplier and the supply of money in the economy will decrease. both the money multiplier and the supply of money in the economy will increase. the money multiplier will decrease and the supply of money in the economy will increase.

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

If the economy is in recession with high unemployment and output below potential GDP, then __________________ would cause the economy to return to its potential GDP? A. a tight monetary policy B. fewer loanable funds C. a loose monetary policy D. higher interest rates

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.

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

Improvements in the productivity of labor will tend to: A. decrease wages. B. decrease the supply of labor. C. increase wages. D. increase the supply of labor.

In 2010, 100 Japanese yen purchased .88 U.S. dollars and in 2013, it purchased .93 U.S. dollars. How much was 1 U.S. dollar worth in Japanese yen, in 2010 and 2013? A. 2010: 88 yen, 2013: 93 yen B. 2010: 100 yen, 2013: 114 yen C. 2010: 113.6 yen, 2013: 107.5 yen D. 2010: 112.4 yen, 2013: 105.3 yen

In Sub-Saharan Africa, the population is 910 million, and the average GDP per capita is: A. $5,399. B. $2,733. C. $1,415. D. $7,308.

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)

In contrast to goods and services markets, _____________ are rare in labor markets, because rules that prevent people from earning income are not politically popular. A. minimum wages B. price floors C. price ceilings D. living wage laws

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

In macroeconomics, _____________________________ describes a situation where a bankâ s liabilities can be withdrawn in the short-term while its assets are being repaid in the long-term. diversification reserve ratio an asset-liability time mismatch a negative net worth

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

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

In the U.S., international trade raises many _______________ that are the same as issues raised by ________________________ in the domestic economy. A. monetary policy issues; real productivity gains B. fiscal policy issues; trade-offs that control inflation C. public policy issues; competitive market forces D. public policy issues; workers' demands for long-term benefits

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%

In the ____________, households work and receive payment from firms. A. financial investment market B. financial capital market C. labor market D. savings market

In the ______________, households receive goods and services and pay firms for them. A. labor market B. financial capital market C. goods and services market D. savings market

In the neoclassical version of the AD/AS model, which of the following should you use to represent the AS curve? A. the AS curve shifting as productivity increases B. an upward sloping curve with a vertical top C. a vertical line drawn at the level of potential GDP D. the AS curve shifting as potential GDP expands

In the neoclassical view, changes in ____________________ can only have a short-run impact on output and on unemployment. A. wage levels B. aggregate supply C. aggregate demand D. tax levels

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

In what way is each and every one of the economies of the more than 200 countries of the world similar? A. all use the same macroeconomic policies B. each focuses on a Keynesian perspective C. all have their own distinctive characteristics D. each focuses on a neoclassical perspective

Lance paid $175,000 for his house in 2003 and sold it for $325,000 in 2006. What function did the house serve during the time Lance owned it? medium of exchange unit of account store of value unit of exchange

Macroeconomics primarily examines: A. the behaviour of individual households and firms. B. how prices are determined within individual markets. C. broad issues such as national output, employment and inflation. D. the output levels that maximize the profits of business firms

Of all the arguments for placing limitations on trade, which of the following would most likely be characterized as being the most controversial among economists? A. bank/financial sector regulation argument B. floating currency argument C. the infant industry argument D. quantitative easing argument

Of the world's population of 6.7 billion people, _________ are scraping by on incomes that average less than $2 per day. A. 260 million B. 2.6 billion C. 5 billion D. 6.2 billion

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

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

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

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

Refer to Figure 2-1. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from: A. A to B B. B to E C. C to F D. G to F

Refer to Figure 4-1. Using the graph above and beginning on D1, a shift to D2 would indicate a(n): A. increase in quantity demanded. B. decrease in quantity demanded. C. increase in demand. D. decrease in demand.

Refer to Figure 4-2. A change from Point A to Point B represents a(n): A. increase in demand. B. decrease in demand. C. decrease in quantity demanded. D. increase in quantity demanded.

Refer to Figure 4-3. A change from Point A to Point B represents a(n): A. increase in supply. B. decrease in supply. C. increase in quantity supplied. D. decrease in quantity supplied.

Refer to Table 2-1. A student has only a few hours to prepare for two different exams tomorrow morning. The above table shows alternative possible exam outcomes with three alternative uses of the student's time. The opportunity cost of scoring an 84 on the history exam rather than 76 is: A. 10 points on the economics exam B. 8 points on the history exam C. 7 points on the economics exam D. 12 points on the economics exam

Refer to Table 5-1. Suppose that D2 and S1 are the prevailing demand and supply curves for a product. If the demand schedule changes from D2 to D1, then: A. equilibrium price increases from $6 to $8. B. equilibrium quantity increases from 13 to 18 C. equilibrium quantity decreases from 15 to 13. D. equilibrium price decreases from $6 to $4.

Scarcity exists because of: 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.

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

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

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? $1.3 billion $1.7 billion $970 million $470 million

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 ___________________ 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

The basic difference between macroeconomics and microeconomics is that: A. microeconomics looks at the forest (aggregate markets) while macroeconomics looks at the trees (individual markets). B. macroeconomics is concerned with groups of individuals while microeconomics is concerned with single countries. C. microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets). D. macroeconomics is concerned with generalization while microeconomics is concerned with specialization.

The basic difference between macroeconomics and microeconomics is: A. microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. B. microeconomics concentrates on the behaviour of individual consumers while macroeconomics focuses on the behaviour of firms. C. microeconomics concentrates on the behaviour 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.

The downward slope of the demand curve again illustrates the pattern that as _____________ rises, _________________ decreases. A. quantity demanded, price B. quantity supplied, quantity demanded C. price, quantity demanded D. price, quantity supplied

The equilibrium quantity of labor and the equilibrium wage level decrease when: A. labor supply shifts to the right, if wages are flexible. B. labor demand shifts to the right, if wages are flexible. C. labor demand shifts to the left, if wages are flexible. D. labor supply shifts to the left, if wages are flexible.

The imposition of a price ceiling on a market often results in: A. an increase in investment in the industry. B. a surplus C. a shortage D. a decrease in discrimination on the part of sellers.

The labor ____________ curve(s) will shift _______________ if there is an increase in productivity or an increase in the demand for the final product. A. demand; left B. supply; left C. demand; right D. supply; right

The law of ____________________________ explains why people and societies rarely make all-or-nothing choices. A. consumption B. marginal analysis C. diminishing marginal utility D. utility

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

The market in which loans are bought and sold is called the: loan market. money market. secondary loan market. primary loan market.

The market in which loans are bought and sold is called the: A. loan market. B. money market. C. secondary loan market. D. primary loan market.

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? 5 1 20 10

The process of banks making loans in financial capital markets is intimately tied to the: redistribution of wealth. financial stress levels of banks. creation of money. home construction industry.

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.

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

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

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. personal preference B. utility level C. budget constraint D. opportunity set

The statement that GDP = C + I + G + X - M is an identity, because ____________. A. trade surpluses can be either good or bad B. trade deficits can be either good or bad C. it is true according to the definition of GDP D. each trade is conducted on a voluntary basis

The unemployment rate in a town in which 65400 persons are employed and 11000 are unemployed equals: A. 20.2 %. B. 16.8%. C. 14.4%. D. 11%.

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

To a macroeconomist, a trade deficit is synonymous with which of the following? A. outflow of financial capital B. outflow of goods and services C. inflow of financial capital D. inflow of goods and services

To achieve a high standard of living, a nation should: A. increase welfare payments to the poor. B. use less capital and more labor in the production process. C. promote economic growth. D. increase the tax deduction for child dependents.

What do the economies of Greece, Ireland and Germany all share? A. they pegged their various currencies B. they unpegged their various currencies C. a common currency D. floating rate currencies

What is the name given to the macroeconomic equation MV = PQ? A. basic velocity of money equation B. basic quantity equation of output C. basic quantity equation of money D. basic velocity of price equation

What name was given to South Korea, Thailand, Malaysia, Indonesia, Singapore, Hong Kong and Taiwan because of their economic success? A. Asian tigers B. West Asian tigers C. East Asian tigers D. Tigers

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

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.

When economists talk about supply, they are referring to a relationship between price received for each unit sold and the _________________. A. demand schedule B. market price C. quantity supplied D. demand curve

When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being: A. balanced budget B. prudent monetary policy C. low inflation D. assuring competition between firms

When per capita GDP is used as a rough measure to compare the economic regions of the World, the richest region is _________________ and the poorest region is ________________. A. East Asia and the Pacific; South Asia B. the United States, Western Europe and Japan; South Asia C. the United States, Western Europe and Japan; Sub-Saharan Africa D. East Asia and the Pacific; Sub-Saharan Africa

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

When the central bank decides it will sell bonds using open market operations: A. interest rates decrease. B. the money supply increases. C. the money supply decreases. D. the money supply is unaffected.

When the economy is in a recession, the government will want to increase output. If the multiplier equals 2.5 and the government increases spending by 200, how much will output increase by? A. 100 B. 300 C. 500 D. 900

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.

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.

Which of the following factors contribute to economic growth? A. a decrease in the quantity of labor due to emigration B. a decrease in the productivity of labor C. the discovery of new oil reserves D. a decline in the stock of physical capital

Which of the following institutions determines the quantity of money in the economy as its most important task? A. U.S. Department of the Treasury B. Federal Open Market Committee C. Central Bank D. Federal Reserve Board of Governors

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

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

Which of the following is generally accepted as a valid criticism of the production of useful goods and services? A. government involvement B. the black market C. environmental pollution D. economic freedom

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

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

Which of the following represents a financial outflow from the U.S. economy? A. U.S. computer exports to Poland B. returns paid on U.S. financial investment in Hong Kong C. U.S. investors buying foreign assets in Germany D. British investors buying real estate in Kentucky

Which of the following statements most likely lies within the realm of macroeconomics? A. An increase in the price of automobiles will lead to a decrease in the quantity of automobiles demanded. B. Due to process innovations in computer chip manufacturing, the market supply of computers increased. C. Due to an economic recession, manufacturing firms began implementing layoffs of their workforces. D. Anticipating that the benefits would outweigh costs involved, an undergraduate student purchases the course textbook.

Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank? A. discount requirements B. deposit requirements C. reserve requirements D. monetary requirements

Which of the following will not result in a leftward shift of the market demand curve for labor? A. a decrease in labor productivity B. a decrease in demand for the firm's product C. an increase in the wage rate D. a decrease in the firm's product price

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

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

Which of the following would function as a store of value, and also provide a medium of exchange, and unit of account? A. a new car B. an iPod C. an estate D. gym membership

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

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

Why would an expansionary monetary policy no longer be available to combat recession for a country that has pegged its exchange rate? A. inflation or recession must be ignored in order to focus on its soft peg B. it would appreciate the country's currency and break its hard peg C. it would depreciate the country's exchange rate and break its hard peg D. it will use up all its reserves of international currency to buy its own currency

____________ is a completely inadequate mechanism ____________________ in a modern advanced economy. Currency; for providing a medium of exchange Money; for providing a store of value Barter; for trying to coordinate trades Money; to use as a unit of account

____________ is a term which refers to the widespread use of power-driven machinery and the economic and social changes that resulted in the first half of the 1800s. A. Technology B. Living standard C. Industrial Revolution D. Capital deepening

_____________ - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines. A. Skill B. Specialization C. Economies of scale D. Division of labor

______________ 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

________________ economists place an emphasis on __________ run economic performance. A. Phillips; short B. Keynesian; long C. Neoclassical; long D. Says; short

____________________ will not cause a shift of the AS curve in a Keynesian framework. A. Prices of inputs B. Changes in input prices C. Changes in output prices D. Changes in inputs

________________________ 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

___________________________ in high-income countries is caused by the economy being in a recession. A. A cyclical standard of living B. The natural rate of unemployment C. Cyclical unemployment D. A natural literacy rate

____________________________ will often cause monetary policy to be considered counterproductive because it makes it hard for the central bank to know when the policy will take effect? A. Altering the discount rate B. Reserve requirements C. Long and variable time lags D. Quantitative easing

the benefit to his grades from studying for an hour 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.

1. __________ implies that pressure for price increases reaches across _______________markets, not just one. A. inflation; all B. deflation; most C. inflation; most D. deflation; all

C Reference: Explanation:

Multiple Choice 11. 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

C Reference: Explanation:

Multiple Choice 11. Which of the following is included in the calculated Gross Domestic Product? A. Farmer Freddie sells his second tractor to his son. B. Suzanne buys a love seat and chair for $85 at the yard sale on the corner. C. A local ice cream store sells $17,000 worth of cones and sundaes on July 1. D. Mr. Farkle buys a used lawn mower from his neighbor, Mr. Sparkle.

C Reference: Explanation:

Multiple Choice 13. When we want to measure wage inflation in the labor market, we use the: A. Consumer Price Index B. Product Price Index C. Employment Cost Index D. Employment Price Index

C Reference: Explanation:

Multiple Choice 17. Durable goods and non-durable goods comprise approximately ________ of the supply side of the GDP. A. 1% B. 20% C. 45% D. 80%

C Reference: Explanation:

Multiple Choice 18. Which of the following is an example of one of the major categories in the overall CPI? A. apparel and accessories B. entertainment C. recreation D. transportation and insurance

C Reference: Explanation:

Multiple Choice 2. Final goods or services used to compute GDP refer to: A. the sum of all wages paid to laborers. B. the factors of production used to produce output. C. goods and services purchased by the ultimate users. D. the value of outstanding shares of stock of manufacturing firms.

C Reference: Explanation:

Multiple Choice 21. 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

C Reference: Explanation:

Multiple Choice 22. GDP in the United States in 2012 was about __________. A. $162 billion B. $1.62 trillion C. $16.2 trillion D. $162 trillion

C Reference: Explanation:

Multiple Choice 24. Middle-income countries, which include much of Latin America, Eastern Europe, and some countries in East Asia, have per capita GDP in the range of ___________. A. $60 to $120 B. $600 to $1200 C. $6,000 to $12,000 D. $60,000 to $120,000

C Reference: Explanation:

Multiple Choice 24. With regard to the economy, the term negative inflation is synonymous with which of the following? A. recession B. depression C. deflation D. hyperinflation

C Reference: Explanation:

Multiple Choice 28. 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%

C Reference: Explanation:

Multiple Choice 29. On the demand side of GDP, consumption by _____________ is the largest component of GDP, accounting for about two-thirds of the GDP in any year. A. services B. businesses C. households D. government

C Reference: Explanation:

Multiple Choice 3. Consumption in the United States is about ____________ of GDP, and it moves relatively little over time. A. 10% B. 33% C. 68% D. 90%

C Reference: Explanation:

Multiple Choice 31. India has a GDP of 23,000 billion Indian rupees, and a population of 1.1 billion. The exchange rate is 50 rupees per U.S. dollar. Calculate the GDP per capita of India as measured in U.S. dollars. A. $20.90 B. $20,909 C. $418 D. $4.18

C Reference: Explanation:

Multiple Choice 31. The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___________________ the rise in a consumer's true cost of living, because it doesn't take into account that the person can substitute between goods according to changes in their relative prices. A. stabilize B. understate C. overstate D. reduce

C Reference: Explanation:

Multiple Choice 32. 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

C Reference: Explanation:

Multiple Choice 37. 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

C Reference: Explanation:

Multiple Choice 4. Inflation implies that the level of all prices _____________________. A. decrease B. stay the same C. increase D. none of the above

C Reference: Explanation:

Multiple Choice 41. The difference between nominal GDP and real GDP is: A. nominal GDP measures actual productivity B. nominal GDP adjusts for inflation C. real GDP adjusts for inflation D. real GDP excludes imports and exports

C Reference: Explanation:

Multiple Choice 42. The nominal value of any economic statistic refers to the number that is actually announced at that time, while the ________________ refers to the statistic after it has been adjusted for inflation. A. empirical value B. adjusted value C. real value D. net value

C Reference: Explanation:

Multiple Choice 6. Which of the following are most likely classified by economists as consumer durable goods? A. food, clothing B. drugs, toys, magazines, books C. automobiles, furniture D. stocks, bonds

C Reference: Explanation:

If a country's economic data shows private savings of $300 million, government spending of $350 million, tax revenue of $400 million, and a trade surplus of $75 million, then what does investment equal? A. $775 million B. $475 million C. $275 million D. $700 million

C. $275 million

A government deficit has decreased from 100 to 60. The country's trade deficit is 120 and private savings equal 80 and investment equals 100. If Ricardian neutrality holds true, after this change in the government's budget, private savings will equal: A. 120. B. 70. C. 40. D. 140.

C. 40.

15. Each month the Census Bureau carries out the Current Population Survey (CPS) (which has been carried out every month since 1940). A total of __________ households are contacted every month. A. 600 B. 6000 C. 60,000 D. 600,000

C. 60,000

When a government records a trade surplus, the national savings and investment identity is written as: A. S = (G - T) + (X - M) - I B. S - (G - T) = I - (X - M) C. S = I + (G - T) + (X - M) D. S + (G - T) = I - (X - M)

C. S = I + (G - T) + (X - M)

If David Ricardo's theory holds completely true, then any change in budget deficits or budget surpluses would be completely offset by which of the following? A. a change in currency exchange rates B. a sustained pattern of trade imbalances C. a corresponding change in private saving D. a dependence on inflows of capital

C. a corresponding change in private saving

When the interest rate in an economy decreases, it is most likely as a result of: A. an increase in the government budget surplus or its budget deficit. B. a decrease in the government budget surplus or its budget deficit. C. an increase in the government budget surplus or a decrease in its budget deficit. D. a decrease in the government budget surplus or an increase in its budget deficit.

C. an increase in the government budget surplus or a decrease in its budget deficit.

If the government initiates an expansionary monetary policy at the same time that its budget deficit decreases, then the interest rate will ______________________. A. increase B. either increase or decrease C. decrease D. remain unchanged

C. decrease

Which of the following is least likely to be the result of economic disruptive patterns caused by a prolonged period of government budget deficits? A. high inflation B. substantial inflows of foreign financial capital C. increasing exchange rates D. strains on a country's financial system

C. increasing exchange rates

A prolonged period of budget deficits may lead to ___________________. A. outflows of financial capital abroad B. lower inflation C. lower economic growth D. increasing exchange rates

C. lower economic growth

18. 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.

C. many people become discouraged and cease looking for work.

If a government decides to finance an investment in ________________ with higher taxes or ____________________ in other areas, it need not worry that it is crowding out private investment. A. roads and bridges; increased borrowing B. water supply and sewers; by raising capital spending C. public physical capital; lower government spending D. hydroelectric dams and windmills; government R&D

C. public physical capital; lower government spending

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.

C. the exchange rate and the trade deficit to decrease.

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.

C. the trade deficit.

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is: A. $0 B. $4 C. $40 D. $44

34. Referring to the diagram above, which of the following statements is true? A. Monetary policy that increases the money supply also increases the level of potential GDP. B. Tight monetary policy expands the economy by increasing the level of potential GDP. C. This contractionary monetary policy shift will also affect exchange rates for both imports and exports. D. This expansionary monetary policy shift also includes the effect of exchange rates on exports and imports.

35. Suppose the diagram above refers to a situation where investors in the US are looking to Japan as a place where they should invest for a future high rate of return, while Japanese investors are looking to lower their investments in the US. The combined effect will A. shift the demand curve out, the supply curve shifts in and the value of the dollar decreases. B. shift the supply curve out, the demand curve shifts in and the value of the dollar increases. C. shift the demand curve out, the supply curve shifts in and the value of the dollar increases. D. shift the supply curve out, the demand curve shifts in and the value of the dollar decreases.

40. Refer to the graph shown below. Point C in the graph represents: A. the level Keynesian macroeconomic policy strives for. B. a moderate growth level in the economy. C. a moderate level of unemployment in the economy. D. moderate inflation and all of the above.

44. If the economy is at equilibrium as shown in the diagram above, then an expansionary monetary policy will: A. have no effect on both unemployment and inflation. B. reduce unemployment, but increase inflation. C. reduce both unemployment and inflation. D. reduce unemployment, but have little effect on inflation.

A __________________________ policy in which the government almost never acts to intervene in the exchange rate market will look a great deal like a floating exchange rate. A. pegged exchange rate B. loose exchange rate C. hard peg exchange rate D. soft peg exchange rate

A central bank that wants to increase the quantity of money in the economy will: A. raise the discount rate. B. sell bonds in open market operations. C. reverse quantitative easing. D. buy bonds in open market operations.

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

A country's current national savings and investment identity is expressed in algebraic terms as I - S - (T - G) = (M - X). Assume that the level of domestic savings rises, while the level of domestic investment and private saving remains unchanged. In this instance: A. less foreign financial capital is required to meet investment needs. B. government policy will involve increasing private savings. C. the country's trade deficit will decline. D. all of the above

A country's current national savings and investment identity is expressed in algebraic terms as X - M = S + (T - G) - I. In this instance: A. there is an inflow of capital investment from the rest of the world economy. B. there is no connection from domestic savings and investment to the trade balance. C. the trade balance is determined by performance of certain sectors of the economy. D. private and public domestic savings are higher than domestic investment.

A foreign aid donor has provided technology to help farmers in an undeveloped country to be more productive. If that country's government reacts to political pressure by urban food consumers by imposing price ceilings on farm products, A. foreign investors will be more likely to provide funds for profitable activities. B. it will create a reasonably stable market-oriented macroeconomic climate. C. it will prove technologically disconnected countries need a full economic growth agenda. D. the farmers receiving the technology will still be unable to make a living.

A nation can achieve higher economic growth if: A. more resources are allocated to consumption goods. B. taxes are imposed on investment in capital. C. the productivity of labor declines. D. it devotes more resources to research and development.

A soft peg policy typically allows the exchange rate to move up and down by relatively small amounts in _________________, but seeks to avoid extreme short-term fluctuations. A. the market exchange B. the medium run C. the long run D. the short run

A stronger British pound is beneficial for: A. U.S. exchange students studying in Britain with a U.S. scholarship. B. British firms selling goods and services in Canada. C. British investors who have invested money in Australia. D. exchange students with a British scholarship studying in Canada.

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

A vertical aggregate supply curve, where the quantity of output is consistent with many different price levels, also implies: A. an upward sloping Phillips curve. B. a downward sloping aggregate demand curve. C. a vertical aggregate demand curve. D. a vertical Phillips curve

According to the Keynesian framework, which of the following may help a country reduce inflation, but will not help that country to get out of a recession? A. increased spending by the government on health care B. an increase in taxes on business investments C. an increase in military spending D. a decrease in the tax rate on consumer income

According to the _____________________ argument, a market-oriented economy has no obvious way to implement a plan of systematic wage reductions. A. sticky wage and price B. sticky wage C. Keynesian D. coordination

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.

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

Banks can protect themselves against an unexpectedly high rate of loan defaults and against the risk of ____________________ by adopting a strategy that will ______________. A. rising interest rates; diversify its loans B. rising interest rates; provide loans to a variety of customers C. an increased reserve requirement; provide loans to a variety of customers D. an asset-liability time mismatch; diversify its loans

By about 2050, the ___________ populations in _____________ are expected to boom. A. elderly; high income countries B. youth; high income countries C. youth; low income countries D. elderly; low-income countries

______________________ argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate. Efficiency wage theory Employer wage theory Employee wage theory Equilibrium wage theory

Efficiency wage theory

Goods and services produced in one country that are then sold in other countries are called ____________. A. exports B. tradeable items C. surplus items D. economic stimulants

Exports

Suppose that everyone who has looked for a job for more than six months gave up in despair and stopped looking. What would happen to the unemployment rate? It would fall. It would change, but the effect cannot be predicted. It would increase. It would not change.

It would fall.

substitute goods

Products or services that can be used in place of each other. When the price of one falls, the demand for the other product falls; conversely, when the price of one product rises, the demand for the other product rises.

demand function equation

QD=D(P, PC, PS, M, Ta, Ex)

supply function equation

QS=S(P, PI, T, G, Ex)

Which of the following countries suffered deep recessions as a result of pessimistic foreign investors moving their money to other countries? A. Russia, and Indonesia B. Thailand, Argentina and Malaysia C. North Korea and Malaysia D. South Korea and a and b

South korea and a and b

complementary goods

Two goods that provide more utility when consumed together than when consumed separately. A decrease in the price of one leads to an increase in the demand for the other, and vice versa.

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

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

ceteris paribus

a Latin phrase that means "all other things held constant"

change in demand

a change in a variable previously held constant causes a new demand curve and demand schedule.

demand curve

a graph of the relationship between the price of a good and the quantity demanded.

supply curve

a graph of the relationship between the price of a good and the quantity supplied

supply function

a mathematical relationship that predicts the quantity of a good supplied as a function of each of the factors that influence supplier behavior.

demand schedule

a table that shows the relationship between the price of a good and the quantity demanded.

supply schedule

a table that shows the relationship between the price of a good and the quantity supplied

Only one of the following statements about trade surplus and capital flow is correct. Which one is it? a trade surplus exists if there is a net outflow of capital excluding foreign borrowing and lending . a trade surplus means that there is a net inflow of capital . a trade surplus exists if there is a net inflow of capital excluding foreign borrowing and lending . a trade surplus means that there is a net outflow of capital

a trade surplus means that there is a net outflow of capital

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

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

The _________________ argument points out that if an employer reacts to poor business conditions by reducing pay for all workers, then the best workers, with the best employment alternatives at other firms, are the most likely to leave and the least-attractive workers, with fewer employment alternatives, are more likely to stay. equilibrium wage theory adverse selection of wage cuts efficiency wage theory employer wage theory

adverse selection of wage cuts

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

all adults who are working or actively seeking work.

income effect

any increase or decrease in consumers' purchasing power caused by a change in price

From an economic perspective, returns on foreign investment are included in the overall measure of trade because financial investments: can also be thought of as payments made by the government. . have expanded substantially in the U.S. over the last few decades. . are made by parties in the U.S. economy and foreign investors. . are a form of trade that takes place in the financial capital market.

are a form of trade that takes place in the financial capital market.

If exports and imports: are equal, then the economy is unhealthy. . are equal, then trade is balanced. are imbalanced, then a trade surplus exists. . are imbalanced, then a trade deficit exits.

are equal, then trade is balanced.

law of demand

as price increases, quantity demanded decreases

reaching equilibrium

as the bidding mechanism takes place, buyers and sellers adjust quantities demanded and supplied until market equilibrium is reached.

Which of the following terms is sometimes used to describe the balance of trade? balance of financial investment . balance of payments . balance of investment capital . balance of capital flows

balance of payments

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

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 ______________. supply curve business cycle labor supply natural rate of unemployment

business cycle

Which of the following represents a financial inflow into the U.S. economy? foreign aid from the U.S. to Haiti . oil imports from Iraq . Canadian investors buying real estate in Arizona . South Korean car imports

canadian investors buying real estate in arizona

In the United States, which of the following government institutions would most likely provide economists with the basic data for merchandise trade? A. Census Bureau B. Department of Commerce C. Bureau of Economic Analysis D. Department of the Treasury

census bureau

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

comparing exports of goods, services and financial capital between countries

Economists typically rely on a broader measure of international trade known as the ____________, which includes ____________. current trade balance; foreign aid announced by the government. . current account balance; telecommunications, computers, finance, law, and advertising. . current account balance; goods, services, international income flows, and foreign aid. . current trade balance; finance, law, and software product design.

current account balance; goods, services, international income flows, and foreign aid

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

cyclically unemployed.

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 government finds itself in the following situation: a government budget deficit of $900; total domestic savings of $2000, and total domestic physical capital investment of $1300. According to the national saving and investment identity, if investment increases by $200 while the government budget deficit decreases by $100 and savings remain the same, what will happen to the current account balance? current account becomes 0 . deficit decreases from $200 to $100 . deficit increases from $200 to $300 . deficit increases from $200 to $400

deficit increases from 200 to 300

One of the following must be used as a starting point in order to perform an analysis that will determine what the connections between imbalances of trade in goods and services and the flows of international financial capital are. Which one is it? A. sketch patterns of trade deficits B. sketch patterns of trade surpluses C. define the level of trade D. define the balance of trade

define the balance of trade

inferior good

demand decreases as income increases

normal good

demand increases as income increases

In the U.S., all companies involved in international flows of capital must file reports, which are ultimately compiled by the: A. Census Bureau. B. Department of the Treasury. C. Bureau of Economic Analysis. D. Department of Commerce.

department of the tresury

The unemployment rate may overestimate the true extent of unemployment if: -people falsely claim that they are actively seeking work in order to receive unemployment benefits. -many part-time employees would like to work fulltime, but are unable to get the additional work. -many people who claim to be unemployed actually work in the underground economy. -either B) or C) occurs.

either B) or C) occurs.

Trade surpluses and trade deficits can be _______ for an economy in certain circumstances. A. beneficial B. harmful C. either a or b D. neither a or b

either a or b

If imports ______________, then the economy is said to have a trade deficit. A. precede exports B. follow exports C. equal exports D. exceed exports

exceed exports

If exports ______________, then the economy is said to have a trade surplus. A. equal imports B. exceed imports C. precede imports D. follow imports

exceed imports

expectations of future prices

expected future price changes and current demand move together

The extent of _______________________ will depend on how easy it is for workers to learn about alternative jobs, which may reflect the ease of communications about job prospects in the economy. cyclical employment seasonal unemployment cyclical unemployment frictional unemployment

frictional unemployment

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

frictional unemployment.

A welder who quits his job and moves from Pittsburgh to Madison to try to get a better welding job is said to be: frictionally unemployed. cyclically unemployed. underemployed. structurally unemployed.

frictionally unemployed.

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

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

At the outset of the 21st century, most global trade took the form of: A. services, rather than goods. B. goods, rather than services. C. equal trade in goods and services. D. trade surpluses in the service sector.

goods, rather than services

In 2009, because U.S. imports were $2,535 billion while exports were $2,116 billion: exports exceeded imports by a sizeable $419 billion. . there was a huge influx of foreign capital into the U.S. economy. . imports exceeded exports by a sizeable $419 billion. . government policy caused a lessening of foreign aid.

imports exceeded exports by a sizeable 419 billion

comparative static exercises

increase in demand, decrease in demand, increase in supply, decrease in supply.

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

is more likely to suffer a larger trade imbalance.

Karen chooses to go to university fulltime rather than to work. Karen: is part of the labor force and what economists call a discouraged worker. is considered employed. is part of the labor force, but not actively seeking work. is not part of the labor force.

is not part of the labor force.

The extent to which a national economy is involved in global trade: A. is not very strongly related to the issue of whether the economy has a substantial trade imbalance. B. is not very strongly related to the underlying economic meaning of trade imbalances. C. is not very strongly related to either a or b above. D. is very strongly related to both a and b above.

is not very strongly related to either a or b above

shift of a supply curve

is the result of a change in a variable previously held constant

movement along the supply curve

is the result of a change in price

If a country's current account balance is zero and the financial payments flowing in and out of the country's economy are equal, then which of the following must be a true statement? it has an overall or net outflow of financial investment . its government is not indebted to other governments . it has an overall or net inflow of financial investment . it is not an overall or a net investor in other countries

it is not an overall or a net investor in other countries

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

The unemployment rate may underestimate the true extent of unemployment if: -many part-time employees would like to work fulltime, but are unable to get the additional work. -people are pretending to look for work so that they can continue receiving unemployment benefits. -there are a large number of people working in the underground economy. -employees increase the number of hours they work overtime

many part-time employees would like to work fulltime, but are unable to get the additional work.

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

many people become discouraged and cease looking for work.

demand function

mathematical relationship where quantity demanded is a function of each of the factors that influence consumer behavior.

An economics professor is discussing a measure of trade that involves a comparison of exports and imports of goods for the year just ended. What name is given to this measurement? A. export trade balance B. merchandise trade balance C. import trade balance D. current account balance

merchandise trade balance

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

money earned by U.S firms in Europe

Which of the following would most likely be included in the negative side of the current account balance? A. money earned by Canadian firms in the U.S. B. money spent by Canadian tourists in the U.S. C. returns paid to U.S. investors in Southeast Asia D. European aid sent to the U.S. to fund the Iraq war

money earned by canadian firms in the U.S

change in quantity demanded

movement along the demand curve showing that a different quantity is purchased in response to a change in price

a supply curve slopes upward because

of increasing opportunity costs

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

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: unemployed. underemployed. out of the labor force.

out of the labor force.

determinants of demand

price, price of complementary goods, price of substitute goods, income, tastes and preferences, expectations

determinants of supply

price, price of input goods, technology, government taxes and subsidies, and expectations of future prices.

The surge in international trade related to services to be performed in one country and sold in another that began in the 1990s has been powered by which of the following? A. technological advances B. telecommunications C. computers D. customer service, finance, law

technological advances

law of supply

tendency of suppliers to offer more of a good at a higher price

The term "merchandise trade balance" is used to describe: the balance of trade in services. . the level of trade in goods. . the balance of trade in goods. . the level of trade in services.

the balance of trade in goods

market demand

the horizontal sum of individual demand curves.

If a nation's labor force receives a significant influx of young workers: the natural rate of unemployment is likely to increase. the natural rate of unemployment is unlikely to change frictional unemployment will likely decrease to zero. the natural rate of unemployment is likely to decrease.

the natural rate of unemployment is likely to increase.

equilibrium

the point at which quantity demanded and quantity supplied are equal

competitive equilibrium

the point at which quantity demanded equals quantity supplied by the price takers.

supply

the quantity of a good or service that businesses are willing and able to provide

demand

the quantity of a good or service that consumers are willing and able to buy

Assume that the level of domestic investment in a country rises, while the level of private and public saving remains unchanged. In these circumstances: the rise in domestic investment will mean a higher trade surplus. . the trade deficit will decline sharply. . the rise in domestic investment will mean a higher trade deficit. . government borrowing will increase sharply.

the rise in domestic investment will mean a higher trade deficit

comparative statics

the study of the change in competitive equilibrium when one of the variables affecting demand or supply changes.

market demand curve

the sum of all the individual demand curves in a market

market supply curve

the sum of all the individual supply curves in a market

agents

those who make decisions of selling goods and services, and are interested in receiving a profit.

Which of the following accurately reflects the pattern of the U.S. current account balance during the periods: 1991; the late 1990s through to the mid-2000s; and 2009 following the onset of recession? larger deficit; tiny surplus; surplus declined . larger deficit; surplus declined; tiny deficit . tiny surplus; larger deficit; deficit declined . surplus declined; larger deficit; tiny surplus

tiny surplus; larger deficit; deficit declined

Why would an analyst include, among other things, airplane parts, legal services and software, in an analysis of international economic trade? A. to determine the merchandise trade balance B. to determine the balance of trade in services C. to determine the current account balance D. to determine the international flow of income

to determine the current account balance

Insofar as government public policy is concerned, the best way to battle unemployment would be __________________. to minimize recessions to maximize unemployment insurance duration to maximize unemployment payments to minimize labor unions

to minimize recessions

The term ______ describes circumstances where a country's imports exceed its exports. A. trade imbalance B. trade balance C. trade surplus D. trade deficit

trade deficit

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

The term ______ describes circumstances where a country's exports exceed its imports. trade surplus . trade balance . trade deficit . trade imbalance

trade surplus

A series of macroeconomic events has led an economy into a deep recession. Which of the following factors is most likely to have initiated this series of events? A. level of trade B. unbalanced trade C. deficit level of trade D. merchandize trade imbalance

unbalanced trade

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

unemployed workers as a percentage of the labor force.

The final category of the current account balance is _________, which can be thought of as payments made by individuals in which money is sent abroad ______________. exports of goods; can cause a merchandise trade deficit . trade in services; by domestic financial firms are treated like imports . unilateral transfers; without any direct good or service being received . income payments; and the returns are received from abroad

unilateral transfers; without any direct good or service being received

In November 2010 the labor force in Siouxtown, was 14,800. There were 14,483 persons employed. The local unemployment rate: was 1.2%. was 5.6%. was 2.1%. was 7.1%.

was 2.1%.

substitution effect

when consumers react to an increase in a good's price by consuming less of that good and more of other goods

excess demand

when quantity demanded is more than quantity supplied

excess supply

when quantity supplied is more than quantity demanded

finding new equilibrium

who cares; buyers or sellers? Does the curve shift inward or outward? how will the equilibrium change; will the bidding go up or down?

If government tax policy requires Jane to pay $25,000 in taxes on annual income of $200,000 and Mary to pay $10,000 in tax on annual income of $100,000, then the tax policy is: A. regressive. B. progressive. C. proportional. D. optional.

A government annually collects $320 billion in tax revenue and allocates $42 billion to education spending. What percentage of this government's budget is spent on education? A. 24.50% B. 12.31% C. 30.13% D. 13.12%

The term "full employment GDP" is synonymous with which of the following? A. aggregate GDP B. Keynesian zone C. macroeconomic equilibrium D. potential GDP

_____________________ 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

10. Refer to the graph above. A government creating economic policy in these circumstances should be most concerned about: A. unemployment but not inflation. B. inflation but not unemployment. C. inflation and unemployment. D. neither inflation nor unemployment.

15. The graph above refers to a significant increase in individual income taxes, taking them to their highest level in 50 years. Which of the following is likely to result? A. unemployment is likely to rise B. natural rate of unemployment is likely to fall C. lower inflationary pressures D. short run increase in economic growth

19. The following table shows the aggregate supply and demand data for a country. If input prices decrease and AS shifts to the right by 3,000 units at each price level. What will the new price equal? A. 600 B. 800 C. 300 D. 400

A ______________________ is created each time the federal government spends more than it collects in taxes in a given year. A. budget deficit B. budget surplus C. corporate tax D. regressive tax

A consensus estimate based on a number of studies suggests that if there is an increase in budget deficits (or a fall in budget surplus) by 1% of GDP, it will most likely cause which of the following? A. an increase of 0.5-1.0% in the long-term interest rate B. long and variable time lags in enacting the fiscal policy C. smaller impact due to temporary fiscal policy D. output above the potential GDP output level

A government annually collects $230 billion in tax revenue and allocates $29 billion to its universal healthcare spending. What percentage of this government's budget is spent on healthcare? A. 12.60% B. 26.63% C. 16.43% D. 21.90%

A government collects $70 billion quarterly in tax revenue. Each year it allocates $15 billion to the justice system and $29 billion for the administrative costs. What percentage of its total annual tax revenue is left for allocation to the remaining categories of government spending? A. 84.29% B. 15.71% C. 62.85% D. 37.15%

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

As the aggregate price level in an economy rises, ____________________. A. interest rates increase B. consumer demand increases C. exports decrease D. investment increases

Currently, the US government accumulated debt to GDP ratio: A. is lower than its historical high point. B. is higher than it has ever been. C. is lower than it has ever been. D. has remained relatively steady for the past decade.

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.

If a country's GDP increases, but its debt decreases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes. A. increase or decrease B. decrease because its debt decreased C. increase because GDP increased D. decrease

In an AD/AS model, the point where the economy has excess capacity is called the: A. Keynesian zone of the AS curve B. intermediate zone of the AS curve C. neoclassical zone of the AS curve D. crossing point of the potential GDP line

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

The ____________________ in an AD/AS diagram is most relevant to Say's Law. A. steep portion of the AS curve B. AS curve C. AD curve D. flat portion of the AS curve

The federal government levies _____________________________ on people who pass assets ____________________________, either after death or during life. A. an estate and gift tax; to the next generation B. a regressive tax; to non-family members C. an excise tax; to their children D. a progressive tax; to non-family members

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

When inflation begins to climb to unacceptable levels in the economy, the government should: A. use contractionary fiscal policy to shift aggregate demand to the right. B. use contractionary fiscal policy to shift aggregate demand to the left. C. use expansionary fiscal policy to shift aggregate demand to the right. D. use expansionary fiscal policy to shift aggregate demand to the left.

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.

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.

_________________ results when an economy experiences high unemployment and high inflation at the same time. A. Stagflation B. Deflation C. Reflation D. Recession

A ______________________ means that government spending and taxes are equal. A. fiscal budget B. balanced budget C. contractionary fiscal policy D. discretionary fiscal policy

A government collects $600 billion annually in tax revenue. Each year it allocates $35 billion to healthcare and $50 billion for education. What percentage of annual tax revenue is allocated to these two categories of government spending? A. 21.37% B. 14.16% C. 17.51% D. 26.41%

A government collects $700 billion annually in tax revenue. Each year it allocates $70 billion to the justice system and $130 billion for its own administrative costs. What percentage of annual tax revenue is allocated to these two categories of government spending? A. 37.15% B. 28.57% C. 17.51% D. 27.58%

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

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.

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

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

If Keynes' law applies during economic contractions and Say's law applies during economic expansion, how will the three goals of macroeconomics be affected? A. determinates of total supply for the economy will be traded-off B. trade-offs and connections may differ in the short run and the long run C. the economy will face genuine limits to how much can be produced D. institutional and market structures will connect factors of production

If individual income tax accounts for more total revenue than the payroll tax in the U.S., why would over half the households in the country pay more in payroll taxes than in income taxes? A. income tax is a proportional tax B. income tax is a progressive tax C. payroll tax is a regressive tax D. payroll tax is a progressive tax

If the state of Washington's government collects $75 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be a: A. budget deficit. B. budget surplus. C. decrease in payroll tax. D. decrease in proportional taxes.

In 2010, Microsoft will pay corporate income tax to the federal government based on the company's __________________. A. proportional tax rate B. corporate profits C. optional tax rate D. excise profits

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.

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

The __________________ in an AD/AS diagram is most relevant to Keynes's Law. A. AS curve B. flat portion of the AS curve C. AD curve D. steep portion of the AS curve

The current level of US government accumulated debt, when measured in nominal dollars: A. has reached higher levels in the past. B. is higher than it has ever been. C. is lower than it has ever been. D. has remained steady for the past decade.

The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called: A. real GDP. B. potential GDP. C. aggregate supply. D. aggregate demand.

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

When a country's economy is producing at a level that exceeds its potential GDP, the standardized employment budget will show a __________________ than the actual budget. A. smaller surplus B. smaller deficit C. larger deficit D. surplus

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.

Which of the following must be present in order for the aggregate supply curve to form an upward slope? A. the lure of higher profits to induce continued production B. fixed cost of inputs combined with rising prices for outputs C. rise in aggregate quantity of supplied goods and services D. constant price level for intermediate goods and services

Which of the following will have the greatest influence on the slope of the demand curve in a single market model? A. wealth effects B. substitute goods C. full employment D. higher wages

13. The graph above refers to a significant increase in individual income taxes, taking them to their highest level in 50 years. Which of the following is likely to result? A. cyclical unemployment will decrease B. inflationary pressures will be greater C. the economy will experience lower economic growth D. input prices will rise in the short run

16. The following table shows the aggregate supply and demand data for a country. What is the equilibrium output? A. 8,000 B. 4,000 C. 7,000 D. 9,000

Which of the following is the percentage of annual US government spending allocated to foreign aid? A. 21% B. 10% C. 1% D. 17%

Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing? A. financial policies B. monetary policies C. fiscal policies D. economic policies

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

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

A government annually collects $230 billion in tax revenue and allocates $70 billion to military spending. What percentage of this government's budget is spent on its military? A. 27.50% B. 36.63% C. 30.43% D. 41.90%

Aggregate supply curves are ________________________ for low levels of output, and ____________________________ for high levels of output. A. relatively flat; remain flat B. relatively steep; remain steep C. relatively flat; relatively steep D. relatively steep; relatively flat

By June, 2010, the U.S. government owed $13.6 trillion dollars ________________ that, over time, has remained unpaid. A. from decreases in excise tax B. from decreases in income tax C. in accumulated government debt D. from decreases in corporate tax

Changes in the price level of the different components of aggregate demand are reflected in the AD/AS AD/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

Due to inflationary pressures, the national income of households has been spread across a higher overall price base for goods and services. How will this affect be shown in an AD/ASAD/AS model? A. nearly vertical AS slope at the far right B. nearly horizontal AD curve at the far left C. a downward sloping AD curve D. a downward sloping AS curve

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

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.

If the economy is producing less than its potential GDP, _____________________ will show a larger deficit than the actual budget. A. discretionary fiscal policy B. the automatic stabilizers C. the standardized employment budget D. expansionary fiscal policy

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

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

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 _________________ 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

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.

What term is used to describe the maximum quantity that an economy can produce, in the context of its existing inputs, market and legal institutions? A. GDP deflator B. AS curve C. potential GDP D. aggregate supply

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.

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

_______________________ 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

_______________________ happens when the economy is producing at its potential and unemployment is at the natural rate of unemployment. A. The foreign price effect B. Stagflation C. Full employment GDP D. The interest rate effect

11. Referring to the above diagram, which of the following is a true statement? A. Macroeconomic policy will be needed to address rising inflation. B. There is sufficient aggregate demand to cause inflationary pressures. C. The equilibrium in the economy is at a level of output above full employment. D. There is insufficient aggregate demand to reach full employment.

14. The graph above refers to a significant increase in oil prices. Which of the following is likely to result? A. long run economic gains B. short run economic gains C. natural rate of unemployment remains constant D. a rise in inflation from 2.0% to 3.0%

18. The following table shows the initial aggregate supply and demand data for a country. If input prices rise and AS shifts to the left by 2,000 units at each price level, what output level will equal the new equilibrium price? A. 6000 B. 2000 C. 8000 D. 7000

A government annually allocates $5 billion of its total tax revenue to weather related disaster relief, $21 billion to healthcare and $11 billion to education. If the government's quarterly tax revenue is $33 billion, what percentage of its budget is allocated annually to healthcare? A. 17.50% B. 63.63% C. 25.00% D. 15.90%

As the aggregate price level in an economy decreases, A. investment decreases. B. consumer demand decreases. C. interest rates decrease. D. imports decrease.

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

If a country's GDP increases, but its debt also increases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes. A. decrease because GDP increased B. increase because its debt increased C. increase D. increase or decrease

If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used? A. discretionary B. contractionary C. standardized D. expansionary

In 2009, the U.S. government spent $1.4 trillion more than it collected in taxes. This deficit was about: A. 22% of the size of the U.S. GDP in 2009. B. 26% of the size of the U.S. GDP in 2009. C. 18 % of the size of the U.S. GDP in 2009. D. 10% of the size of the U.S. GDP in 2009.

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

The _____________ holds that a rise in price level will make domestic goods relatively more expensive, ____________ exports and _______________ imports. A. interest rate effect; encouraging; discouraging B. employment effect; discouraging; encouraging C. wealth effect; encouraging; discouraging D. foreign price effect; discouraging; encouraging

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

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

Why is productivity growth considered to be the most important factor in the AD/AS AD/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

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

With respect to the national saving and investment identity for any country, the quantity of ________ at any given time by savings must _______ for purposes of making investments. A. foreign aid supplied; be lower than the quantity of domestic aid demanded B. foreign financial capital imports; equal to supply of domestic capital available C. foreign capital imports; less than the supply of domestic capital available D. financial capital supplied; equal the quantity of capital financial demanded

financial capital supplied; equal the quantity of capital financial demanded

The term __________ is used to describe what those in one country buy from those in other countries. A. exports B. imports C. trade D. surplus

econ compiled 1-19, weeks 1-14

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