Econ Test 4

Which of the following brings in the largest share of local taxes? a. property taxes. b. sales taxes. c. excise taxes. d. corporate income taxes.

property taxes

Which causes greater expansion of the economy? a. an increase in taxes only. b. an increase in government spending financed by an increase in taxes. c. an increase in government spending financed by government borrowing. d. the impact of all of these is equal.

an increase in government spending financed by government borrowing

When referring to GDP over time, we want to use: a. real GDP. b. nominal GDP. c. GDP calculated using actual (current) prices. d. none of the above.

real GDP

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.

real GDP is shown on the horizontal axis

Which of the following is a tool of (expansionary) supply-side policy? a. reduction in tax rates. b. increase in government regulations. c. increase in government transfers. d. all of the above.

reduction in tax rates

Gross national product (GNP) differs from gross domestic product (GDP) in that GNP: a. refers to production by the economy. b. refers to production in the economy. c. refers to production of goods only. d. refers to production of services only.

refers to production by the economy

Which of the following is included in GDP? a. homemakers' services. b. volunteer activities. c. services such as health care and education. d. productive work that you do for yourself without being paid.

services such as health care and education

Which of the following is not part of the developing world (as described in this text)? a. Eastern Europe. b. Latin America. c. Asia. d. Africa.

Eastern Europe

"Liberalism" means a philosophy of being an economic liberal.

False

Absolute advantage is defined as a situation whereby a country can produce a good with lower opportunity cost than another country.

False

Assuming two countries and two goods, a country that has an absolute advantage in production of both goods cannot possibly benefit from trade.

False

Countries with capitalist economic systems always have democratic political systems.

False

If our exports are greater than our imports, we have a trade deficit.

False

The United States savings rate is among the highest in the Western industrialized world.

False

The benefits of trade to a country include increased market power.

False

Under capitalism, economic decisions are primarily made by the government.

False

Under socialism, the means of production (land and capital) are owned by the private sector.

False

_______________________ 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

Full employment GDP

Which of the following is not a member of the North American Free Trade Agreement? a. Russia. b. Canada. c. United States. d. Mexico.

Russia

Examples of income transfers include: a. food stamps. b. housing assistance for the poor. c. Social Security cash benefits. d. all of the above.

Social Security cash benefits

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

Stagflation

A quota is a restriction on the quantity of an imported good.

True

An increase in the savings rate is expected in the United States in the twenty-first century as the baby boomer generation becomes older.

True

Capital gains refers to the income earned when an asset is bought at a particular price and sold at a higher price.

True

Declining terms of trade means that the prices of a country's exports decline relative to the prices of its imports.

True

Economic growth may occur if there is a sustained increase in the quantity of physical capital and other resources.

True

Improved technology can lead to economic growth.

True

Increased competition made possible through trade can reduce the likelihood of market power.

True

Technology can be thought of as ways of using available resources to produce output.

True

U.S. trade restrictions on imports may result in retaliation by other countries.

True

When considering labor costs to a firm, both wages and labor productivity must be considered.

True

With trade, a country may achieve a consumption possibilities curve that is superior to its production possibilities curve.

True

Government tax revenue of $100 billion and government spending of $80 billion in any given year results in: a. a budget deficit of $20 billion. b. a budget surplus of $20 billion. c. a national debt of $20 billion. d. a national surplus of $20 billion.

a budget surplus of $20 billion

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

a downward sloping AD curve

A tariff is: a. a tax on an imported good. b. a restriction on the quantity of an imported good. c. a requirement for quality of imported goods. d. all of the above.

a tax on an imported good

In macroeconomics, _____________________ denotes the relationship between the total quantity of goods and services and the price level for output. A. macroeconomic equilibrium B. aggregate supply (AS) C. aggregate demand (AD) D. potential GDP

aggregate demand (AD)

A movement toward free markets has been underway in: a. the Western industrialized world. b. the formerly socialist industrialized world. c. the developing world. d. all of the above.

all of the above

An increase in the demand for loanable funds will generally cause: a. an increase in the interest rate. b. an increase in the quantity demanded of loanable funds. c. an increase in the quantity supplied of loanable funds. d. all of the above.

all of the above

Business purchases include: a. purchases of machinery. b. purchases of factories. c. "purchases" of inventories. d. all of the above.

all of the above

Consumer purchases of GDP include consumer purchases of: a. durable goods. b. nondurable goods. c. services. d. all of the above.

all of the above

Economic reform in developing countries typically includes: a. price decontrol. b. privatization. c. cuts in government spending. d. all of the above.

all of the above

Economists generally believe that a law or constitutional amendment requiring a balanced budget would: a. be extremely difficult to implement. b. limit the government's use of fiscal policy. c. destabilize the economy. d. all of the above.

all of the above

Even if privatization proceeds well in Russia, the country will still face problems of: a. monopoly. b. defense conversion. c. outmoded technology. d. all of the above.

all of the above

Expansionary monetary policy involves: a. an increase in the money supply. b. a reduction in interest rates. c. an increase in business and consumer purchases. d. all of the above.

all of the above

Increased government spending financed by government borrowing will generally cause: a. an increase in interest rates. b. an expansion of the economy. c. some crowding out. d. all of the above

all of the above

Labor productivity depends on: a. investment in human capital. b. investment in physical capital used in conjunction with labor. c. training and education programs. d. all of the above.

all of the above

Positive impacts of globalization include all but the following: a. Decreases in poverty rates. b. Increases in foreign direct investment. c. Technology inflows. d. All of the above.

all of the above

Producers of U.S. exported products may suffer when the United States imposes trade restrictions on imports because: a. other countries may retaliate with their own trade restrictions. b. other countries may purchase fewer U.S. products because their incomes may fall. c. exchange rate changes may result in foreigners purchasing fewer U.S. exports. d. all of the above.

all of the above

Production possibilities: a. shows alternative combinations of the maximum amounts of output an economy can possibly produce. b. assumes resources are fully and efficiently used. c. assumes technology is fully and efficiently used. d. all of the above.

all of the above

The International Monetary Fund (IMF): a. imposes conditionality. b. lends to countries in financial need. c. requires economic reforms of borrowing countries. d. all of the above.

all of the above

The earned income tax credit: a. is available to low-income eligible working people. b. is refundable. c. has increased in recent years. d. all of the above.

all of the above

The transition from socialism to capitalism in the formerly socialist industrialized world has often resulted in: a. unemployment. b. inflation. c. inequality d. all of the above.

all of the above

U.S. trade restrictions on imports result in: a. a loss of gains from specialization for the United States as a whole. b. a greater opportunity for market power in the United States. c. losses to U.S. exporters. d. all of the above.

all of the above

Underground activity: a. includes illegal activity. b. includes activity not reported in order to evade taxes. c. is sizable for many countries. d. all of the above.

all of the above

Which of the following can be caused by government borrowing? a. increased interest rates. b. a less equal income redistribution. c. a transfer of interest payments outside of the United States. d. all of the above.

all of the above

Which of the following contributes to higher labor productivity? a. training. b. modern capital. c. modern technology. d. all of the above.

all of the above

Which of the following is an international trade problem for a developing country? a. lack of diversity in exports. b. reliance on exporting primary commodities. c. price instability. d. all of the above.

all of the above

Which of the following is true? Economic conservatives believe that the marketplace: a. is efficient. b. provides incentives. c. encourages economic growth. d. all of the above.

all of the above

Which of the following is true? Economic liberals believe that the marketplace: a. is imperfect. b. entails market failures. c. is not necessarily equitable. d. all of the above.

all of the above

A property tax on rental housing will generally cause: a. an increase in rent. b. an increase in the quantity of rental housing. c. an increase in profits to rental property owners. d. all of the above.

an increase in rent

A tax base is: a. always expressed as a percentage. b. always expressed as some form of income. c. an item that has a tax credit applied to it. d. an item that has a tax rate applied to it.

an item that has a tax rate applied to it

Economic growth is displayed in a production possibilities graph as: a. a movement along the curve. b. a movement to a point below the curve. c. an inward shift of the curve. d. an outward shift of the curve.

an outward shift of the curve

Which of the following is not true? Demand for developing country exports has declined: a. due to the development of synthetics. b. due to developed country trade restrictions. c. and contributed to declining terms of trade. d. and contributed to rising prices of exports of developing countries.

and contributed to rising prices of exports of developing countries

Demand-pull inflation is caused by: a. anything that increases aggregate demand. b. anything that increases costs of production. c. market power that increases profits. d. anything that pulls down aggregate demand.

anything that increases aggregate demand

Who will generally bear the burden of an excise tax? a. consumers only. b. suppliers only. c. both consumers and suppliers. d. the government.

both consumers and suppliers

Income earned when selling an asset at a higher price than when it was purchased refers to: a. research and development (R&D). b. capital flight. c. capital gains. d. liberalism.

capital gains

A situation whereby one country can produce a good with lower opportunity cost than another country defines: a. comparative advantage. b. absolute advantage. c. situational advantage. d. advantage by proxy.

comparative advantage

Which of the following represents the largest share of aggregate demand? a. consumer purchases. b. business purchases. c. government purchases. d. foreigner purchases.

consumer purchases

When the economy of a country is operating close to its full capacity: A. the unemployment rate is greater than the natural rate of unemployment. B. cyclical unemployment is close to zero. C. unemployment is close to zero. D. the unemployment rate is less than the natural rate of unemployment.

cyclical unemployment is close to zero

"A situation where the prices of a country's exports decline relative to the prices of its imports" is the definition for: a. comparative advantage. b. voluntary export restraint. c. declining terms of trade. d. retaliation.

declining terms of trade

One benefit of trade is the improved ______ achieved by specialization according to comparative advantage. a. equity. b. efficiency. c. political stability. d. government borrowing.

efficiency

An amount of money that can be deducted from household income before personal tax rates are applied is a(n): a. exemption. b. tax credit. c. tax rate. d. tax base.

exemption

Which tax brings in the greatest share of federal government tax revenue? a. federal personal income tax. b. social security tax. c. federal excise taxes. d. tariffs.

federal personal income tax

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

fixed cost of inputs combined with rising prices for outputs

Which is not a result of the current U.S. economic crisis? a. foreign companies hire more workers. b. a decline in world trade. c. Americans lose jobs. d. foreign companies cut production.

foreign companies hire more workers

Government securities consist of: a. the treasury building and the federal reserve system. b. government bonds and treasury bills. c. corporate bonds and stocks. d. all of the above.

government bonds and treasury bills

Which of the following is not correct? Government purchases of goods and services include: a. government purchases of food for nutrition programs. b. government purchases of police protection for citizens. c. government income transfers to low-income individuals. d. government purchases of the teaching services of public school teachers.

government income transfers to low-income individuals

In general, which of the following policies would conservatives be least likely to support? a. reduced taxes to increase private purchasing power. b. government purchases for social programs. c. government defense spending. d. lowered interest rates to increase private spending.

government purchases for social programs

Which of the following does not gain from free trade in imports of handbags? a. the country as a whole. b. handbag consumers in the country. c. handbag producers in the country. d. export producers in the country.

handbag producers in the country

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

hyper-intense production will be unsustainable in the long run

Which of the following is not an example of expansionary fiscal policy? a. reduction in taxes. b. increase in government purchases. c. increase in money supply. d. increase in government income transfers.

increase in money supply

Which of the following is not listed in the text as a means of achieving economic growth? a. increase in capital. b. improvement in technology. c. improvement in labor productivity. d. increase in monopoly.

increase in monoploy

Which of the following is true? Since 1960, as a share of GDP, both our imports and our exports have: a. increased. b. decreased. c. remained remarkably constant. d. this information is not provided in the text.

increased

Which of the following is a tool of expansionary fiscal policy? a. increased taxes. b. reduced transfers. c. reduced regulations. d. increased government purchases of goods and services.

increased government purchases of goods and services

Primary commodities generally have: a. inelastic demand. b. stable prices. c. supply that does not fluctuate. d. all of the above.

inelastic demand

Which of the following is true about gross domestic product? a. it includes output at all stages of production (that is, intermediate goods as well as final goods). b. it is expressed in terms of physical quantities, not values. c. it includes services as well as goods. d. all of the above.

it includes services as well as goods

The artificial prices traditionally set by socialist countries had created: a. low prices and shortages. b. high prices and shortages. c. low prices and plentiful supplies. d. high prices and plentiful supplies.

low prices and shortages

Which of the following can be a tool of (expansionary) supply-side policy? a. increased taxes. b. increased transfers. c. increased regulations. d. none of the above.

none of the above

Excise taxes: a. operate like sales taxes but are applied only to specific goods and services. b. bring in approximately 20% of federal tax revenue. c. bring in approximately 50% of state and local tax revenue. d. none of the above.

operate like sales taxes but are applied only to specific goods and services

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.

potential GDP

Business purchases of GDP include: a. purchases of stocks. b. purchases of bonds. c. purchases of factories. d. all of the above.

purchases of factories

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

short-term

Which of the following is not associated with trickle-down philosophy? a. economic growth and prosperity. b. benefits to all. c. special concern for the poor through government programs for them. d. conservative economics.

special concern for the poor through government programs for them

Which of the following is correct? A regressive tax: a. takes a larger amount of tax dollars from low-income people than high-income people. b. takes a larger percentage of income from low-income people than high-income people. c. takes a larger percentage of income from high-income people than low-income people. d. takes the same percentage of income from high-income people as low-income people.

takes a larger percentage of income from low-income people than high-income people

Monetary policy is under the direct control of: a. the President. b. the Congress. c. the Federal Reserve. d. the major city mayors.

the Federal Reserve

The difference between federal government spending and federal government tax revenue in a particular year is: a. the budget deficit. b. the national debt. c. crowding out. d. the trade deficit.

the budget deficit

Potential GDP in the U.S. will be unaffected by ____________________. A. technology B. the amount of capital available C. the unemployment rate D. government institutions

the unemployment rate

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

total quantity; price level for output

Exports minus imports is the: a. budget balance. b. trade balance. c. exchange rate for the dollar. d. international debt.

trade balance

Capital flight occurs when funds in developing countries are: a. used to purchase domestically produced luxury goods. b. used to invest in factories and equipment. c. used to invest in foreign countries. d. saved at home rather than in banks.

used to invest in foreign countries