Economics

Suppose that Jane's income increases from $30,000 per year to $35,000. At the same time, her consumption changes from $26,000 per year to $29,000. What is Jane's marginal prosperity to save?

.4

If all income in a country was equally distributed, what would its Gini ratio be?

0

Suppose that the marginal propensity to consume 0.9. What is the multiplier for a lump sum tax in this case?

0.9

About what percentage of the United States workers are employed in manufacturing industries?

10%

Suppose nominal GDP in an economy is $11 trillion and real GDP is $10 trillion. What would be the implicit price deflate?

110

Suppose the U.S. Bureau of Labor Statistics classifies 135 million people as employed and the unemployment rate is 10%. How many people are in the labor force in this example?

150 million

About what percentage of all workers are full-time homemakers in the United States?

16%

About what percentage of value added in the United States economy is attributed to secondary sector?

17%

Health care expenditures are about what percentage of GDP in the United States?

17%

Suppose that an economy is growing at a real rate of 3% per year. How long will it take for this economy to double in size?

24 years

About what percentage of value added in the United States economy is attributed to primary sector?

3%

About what percentage of value added in the United States economy is attributed to tertiary sector?

64%

About what percentage of the employment in the United States is attributed to the tertiary sector?

83%

Which one of the following transactions best meets the classical view of a market? A. A buyer and a seller reach a price agreement for the sale of a stock on the New York Stock Exchange. B. A college student agrees to a year-long apartment rental. C. A college student buys a copy of Microsoft Office. D. Customers buy their electricity from the single utility company that supplies their region. E. A high school teacher wins the lottery.

A buyer and a seller reach a price agreement for the sale of a stock on the New York Stock Exchange

According to the text what is the difference between a closed economy and an open economy?

A closed economy has no foreign sector while an open economy has a foreign sector

Which one of the following would NOT be classified as part of the public purpose sphere? A. A nonprofit organization providing health care to poor households B. The United Nations C. A farmer cooperative selling milk. D. The Securities and Exchange Commission E. The United States Congress

A farmer cooperative selling milk

What is the difference between a stock and a flow

A flow is measured over time while a stock is measured at a point in time

The time it takes Congress to debate and agree upon a tax policy change is referred to as

A legislative lag

Which of the following businesses would be classified in the primary sector? A. A public university B. A small market selling organic produce C. A mining company D. An automobile manufacturer E. A shipping company transporting frozen foods

A mining company

Who was the most famous Classical economist

Adam Smith

The U.S. Bureau of Labor Statistics bases its unemployment statistics on what population?

All civilians, non institutionalized over age 16

The term laissez-faire would be applied to which type of economy?

An economy with limited government regulation

The time it takes for active fiscal policies to result in actual changes in the economy is referred to as

An outside lag

As discussed in the text, what is the Fed Reaction Rule?

As inflation rises, the Fed will continue to increase interest rates, and vise versa

According to the Keynesian macroeconomic model, consumption is a function of which three variables?

Autonomous consumption, the marginal prosperity to consume, and income

A means-tested program is

Available only to those with limited resources

A secondary sector industry in the United States that is particularly sensitive to the business cycle is

Construction and Housing

What is the equation for the money multiplier?

ERROR

The United States Congress is an example of a core sphere organization

False

Which one of the following statements is NOT associated with classical economics A. Governments should generally take a laissez-faire approach to economic policy. B. Supply creates its own demand. C. Markets are generally smoothly-functioning. D. Technological progress is one factor explaining the wealth of nations. E. Fiscal Policy should be used to influence the feel of aggregate demand.

Fiscal policy should be used to influence the feel of aggregate demand

The common term for someone who enjoys a benefit of a public good without paying for it is

Free Rider

Net national product is defined as

GDP minus depreciation

Which of the following is the best example of commodity money? A. Gold Coins B. Business stocks C. A valuable painting D. Dollar bills E. Real estate

Gold Coins

According to the text, the three major macroeconomic goals are

Good Living Standards, Stability, and Security and Sustainability

The most likely economic situation in which a government would implement contra dictionary fiscal policy is

High inflation

According to John Maynard Keynes, the keys to reducing high levels of unemployment was to

Increase aggregate demand

A spot market is defined as a market that

Involves the immediate delivery of something

On which measured used to calculate the Human Development Index does the United States rank relatively poor?

Life Expectancy

What is the main difference between M1 and M2 as measures of money?

M2 includes the value of savings accounts while M1 does not.

Which one of the following is a positive statement? A. Economic growth is more important than environmental protection. B. Reducing unemployment should be the main goal of the government. C. The government should keep the inflation rate below 4%. D. Most economists believe the unemployment rate will increase next year. E. The benefits of economic growth should be equally distributed.

Most economists believe the unemployment rate will increase next year

How would the U.S. Bureau of Labor Statistics classify a 15 year old individual working 10 hours per week at a restaurant?

Not surveyed

What are the two main sources of inflows of funds to federal government in the United States?

Personal income taxes and social security taxes

What is the largest source of energy in the United States?

Petroleum

In the above supply and demand diagram for wind turbines, the initial supply curve is S0, the initial demand curve is D0, and the initial equilibrium curve is E0. Then assume a technology is invented, which decreases the production cost for wind turbines. Which point is most likely to be the new equilibrium for wind turbines

Point D

Suppose there is a decrease in the supply of lumber. What would we expect to happen to the equilibrium price and quantity of lumber?

Price will rise, quantity will fall

The four essential economic activities are

Production, Consumption, Distribution, and Resource Maintenance

Which of the following is a normative statement? A. The capital of Kansas is Topeka. B. My roommate's name is Kristen. C. Reducing unemployment should be the main goal of the government. D. I'm planning to go to the movies tonight. E. Most economists believe the unemployment rate will increase next year.

Reducing unemployment should be the main goal of the government

In the macroeconomic model presented in the circular flow diagram in the text, what are the three leakages?

Savings, Taxes, and Imports

Suppose the Fed changes its target rate of inflation. Holding everything else constant, how would this, immediately, change the position of the aggregate supply response (ARS) curve?

The ARS curve would not shift immediately

Which of the following approaches seeks to directly provide an overall estimate of well-being? A. Satellite accounts B. The American Time Use Survey C. The opportunity cost approach D. Genuine Saving E. The Genuine Progress Indicator

The Genuine Progress Indicator

Keynesian economics originated during what period?

The Great Depression

Which country is the world's largest manufacturer of goods?

The United States

Suppose peoples expectations of inflation goes down over time. Holding everything else constant, how would this change the position of the aggregate supply response (ASR) curve?

The curve will shift down, but not right or left

According to the Keynesian view of macroeconomics, what should be the role of the government as far as economic policy?

The government should try to stabilize the ADE curve

In multiplier in the Keynesian macroeconomic model is a function of which variable?

The marginal propensity to consume

Which variable determines the slope of aggregate demand (AD) curve in the Keynesian model of the macroeconomy?

The marginal prosperity to consume

What tends to be the relationship between the prime rate and the Federal funds rate in the United States?

The prime rate tends to be three percentage points higher than the federal funds rate

The approach used to value household production based on what it would cost someone else to do the same job is called

The replacement method

The harvesting of trees by a timber company is an example of what environmental function?

The resource function

For about how long has the tertiary sector been the largest sector in the United States?

The tertiary sector has always been the largest sector of the United States

Which one of the following would, in principle, be counted in an estimate of the gross domestic product of the United States?" A. The value of the steel Ford Motor Company buys to make cars. B. The value of a new CD you buy from a store. C. The value of a CD you give a friend in exchange for having helped you study. D. The value of a book you buy from a used bookstore. E. The value of work you do as an intern in Europe.

The value of a new CD you buy from a store

Consumer durable good are those goods that are expected to last longer than

Three years

The significant decline of stock prices in the United States in the early 2000s is an example of the bursting of a spectacular bubble.

True

Keynesian economics argues that the main way to get an economy out of a slump is to

Use fiscal policy to increase aggregate demand

Which one of the following is an example of human capital A. A playground B. A factory C. Your knowledge of economics D. The trust you have in other people E. The oil reserves in Alaska

Your knowledge of economics

A defensive expenditure is defined as

an expenditure that maintains the status quo

The common term for a side effect of a market transaction that affects those not involved in the transaction is

an externality

The efficiency wage theory states that

employers can motivate employees by paying them more than the prevailing wage

Over the last several decades in the United States labor force participation rates

have generally decreased for men but increased for women

The conversion of resources into goods and services is know as

production

According to the classical macroeconomic model discussed in the text, the key variable with adjusts to keep the economy in equilibrium when leakage occurs are not equal to injections is

the interest rate

About what percentage of value added in the United States economy is attributed to governments?

13%

Assume the price elasticity of demand for bottled water is 0.4. If the price of bottled water increases by 20%, how much would you expect the the quantity of bottled water demand to decrease?

8%

Which of the following statements is TRUE? A. Economists agree that the federal government should always try to balance its budget. B. Economists agree that the federal government should always try to maintain a budget surplus. C. Economists agree that the federal government should always try to maintain a budget deficit. D. A growing percentage of the U.S. Federal government debt is owed to foreign bond holders. E. A growing government debt would be expected to decrease economic inequality.

A growing percentage of the U.S. Federal government debt is owed to foreign bond holders

Which one of the following statements is TRUE? A. Net investment is normally larger thn gross investment B. The final use of a good or service is referred to as production. C. A sustainable socioeconomic system seeks to maintain capital stocks D. One of the ways production is accomplished is through in-kind transfers E. A flow will always increase the value of stock

A sustainable socioeconomic system seeks to maintain capital stocks

Which of the following statements is FALSE? A. The United States spends a greater share of its GDP on health care than any other developed nation. B. About 40% of individuals in the United States have no health insurance. C. In recent years health care costs in the United States are growing faster than the rate of inflation D. "Using measures such as life expectancy and child mortality, the United States ranks lower than most" E. The United States does not have publicly-funded universal health care coverage.

About 40% of individuals in the United States have no health insurance

Which of the following businesses would be classified in the secondary sector? A. A public university B. A small market selling organic produce C. A mining company D. An automobile manufacturer E. A shipping company transporting frozen foods

An automobile manufacturer

Suppose an economy is currently at the full employment level of output. Assume the government then undertakes expansionary fiscal policy. Based on the ADE/ASR model, what would we expect to be the most likely outcome?

An increase in inflation but little change in output

Suppose the economy is in a recession. Assume the government then undertakes expansionary fiscal policy, but not enough to move the economy to full employment level of output. What would we expect to be the most likely outcome?

An increase in output but little change in inflation

Suppose that people lower their expectation about inflation in an economy in a recession. Based on the ADE/ASR model, what would we expect to be the most likely outcome?

An increase in output, decrease in inflation

Suppose the ADE curve remains stable but technology increases the product capacity of an economy at full employment. Based on the ADE/ASR model, what would we expect to be the most likely outcome?

An increase in output, decrease in inflation

According to the classical labor market model, a minimum wage above the equilibrium wage will result in

An increase in unemployment

What is the main reason that currency in the United States has value?

Because the federal government declares currency to have value

In the tradition macroeconomic model investment is assumed to be done by what sector?

Business sector

Which one of the following variables is NOT included in the calculations for Human Development Index? A. Economic Inequality B. Life Expectancy C. School Enrollment D. GDP per capita E. Literacy Rates

Economic Inequality

Which of the following industries is NOT part of the primary sector? A. Forestry B. Mining C. Farming D. Oil extraction E. Electric Utilities

Electric Utilities

How would the U.S. Bureau of Labor Statistics classify a 20 year old individual enrolled in college full time and working 5 hours per week in the campus bookstore?

Employed

A car would be considered a highly liquid asset?

False

A country that depletes its natural capital will actually display a higher value of Genuine saving.

False

A model is an analytical tool that seeks to capture all aspects of reality

False

A motor vehicle manufactured in Europe but sold in the U.S. would represent an addition to the gross domestic product of the U.S.

False

A tax system that varies the overall percentage tax rate based on a household's income level is called proportional

False

A transmission lag refers to the time it takes the government to collect economic data on variables such as inflation and unemployment.

False

A wage-price spiral is most likely to occur when an economy moves into a recession.

False

According to the Keynesian economists, the key variable that determines household saving rates is the interest rate.

False

According to the Keynesian macroeconomic model, the level of intended business investment depends upon the inflation rate.

False

According to the Keynesian model, injections will be kept equal to leakages through adjustment in the market for loanable funds.

False

According to the classical macroeconomic model discussed in the text, whenever injections are not equal to leakages the wages rate will adjust to keep the macroeconomy in equilibrium.

False

According to the text, a shortage occurs whenever a demand curve shifts but the supply curve stays the same

False

According to the text, the largest source of federal outlays in the United States is national defense.

False

All economist believe that sustainability goals conflict with macroeconomic goals.

False

All production is an example of investment

False

An advantage of free markets is that basic human needs will always be met

False

An example of a menu cost would be the cost of paying for optional equipment on an new automobile

False

If the Fed increases the reserve requirements of banks, the money supply would tend to increase.

False

If the government increases taxes by $3 billion but also increasing spending by $3 billion according to the Keynesian macroeconomic model the equilibrium level of output will remain the same.

False

If the supply of federal funds decreases and the Fed does nothing in response, the federal funds rate would tend to decrease.

False

In recent years per capita Genuine Progress Indicator for the Unites States has grown at a faster rate than per capita GDP

False

In the Keynesian macroeconomic model aggregate demand is equal to the sum of consumption and income

False

In the traditional macro model government spending is assumed to be primarily investment expenditures

False

It is generally expected that an economic downturn will lead to an increase in inflation.

False

John Maynard Keynes argues that Say s Law was incorrect

False

Nearly all economist agree that keeping unemployment low is more important than keeping inflation low.

False

Net national product is defined as GDP minus net exports

False

Open market operations involve the Federal Reserve changing the reserve requirements of private banks.

False

Shirts and pants are examples of substitute goods

False

Stagflation is a situation of both increasing prices and increasing unemployment.

False

Suppose that the price elasticity of demand for pizza is 1.5. If the price of pizza goes up 15%, we would then expect the demand for pizza to decrease by 10%."

False

The ASR curve is vertical in full employment range.

False

The Classical Period in economics occurred after the Great Depression

False

The Human Development Index adjusts GDP per capita for the level of economic inequality

False

The Securities and Exchange Commission, which regulates the sale of stocks and bonds, is an example of a business sphere organization

False

The U.S. Bureau Economic Analysis has successfully introduced estimates of the value of household production into the system of national accounts for the United States

False

The United States has the lowest Gini ratio of any industrialized nation

False

The aggregate demand equilibrium (ADE) curve plots the relationship between interest rates and aggregate demand.

False

The efficiency wage theory states that wages should be set with short-termed contracts to allow for flexibility as market conditions vary.

False

The existence of market power helps free markets achieve efficient outcomes

False

The gasoline tax should be increased is an example of a positive statement

False

The largest component of GDP attributed to the government sector is sending on Social security

False

The per capita value of the Genuine Progress Indicator has been steadily decreasing in the United States since the mid-1970s

False

The three injections in the macroeconomic model presented in the text are intended investments, savings, and exports.

False

Suppose the Federal Reserve purchases $5 million in government bonds from First Liquidity Bank. Which one of following statements is NOT true? A. The reserves of First Liquidity Bank at the Federal Reserve will increase by $5 million. B. The value of the money supply will be expected to ultimately increase by more than $5 million. C. The value of government bonds held by the Federal Reserve will increase by $5 million. D. First Liquidity Bank will now be able to make more than $5 million in new loans. E. The holdings of government bonds held by First Liquidity Bank will decrease by $5 million.

First LiquidityBank will now be able to make more than $5 million in new loans

Consider the various types of unemployment discussed in the text, which type of unemployment is LEAST likely to be affected by government policies?

Frictional unemployment

What type of unemployment would prevent the unemployment from falling to zero, even in a good job market?

Frictional unemployment

Which of the following identities defines GDP using the product approach? A. GDP = Business production + Household and institution production B. GDP = Business production + Government production C. GDP = Business production + Household and institution production + Government production D. GDP = Business production + Household and institution production + Government production + Foreign E. GDP = Business production + Household and institution production + Government production + Depreciation

GDP = Business production + Household and institution production + Government production

Which of the following identities defines GDP using the income approach? A. GDP = National income Net income payments from the foreign sector + Depreciation B.GDP = Business production + Household and institution production C. GDP = Business production + Government production D. GDP = Business production + Household and institution production + Government production

GDP = National income Net income payments from the foreign sector + Depreciation

The automatic stabilization effect of fiscal policy refers to the fact that

Government spending tends to go down during economic expansion

Which one of the following statements BEST describes the relationship between interest rates and savings in the Keynesian macroeconomic model? A. Higher interest rates will always encourage higher savings because saving becomes relatively more a B. Higher interest rates will always encourage higher savings because savings is a normal good that be C. Higher interest rates will always encourage lower savings because people can reach their financial D. Higher interest rates will always encourage lower savings because people will anticipate higher inf E. Higher interest rates may lead to higher or lower savings the effect is ambiguous

Higher interest rates may lead to higher or lower savings the effect is ambiguous

The two main economic actors in the basic neoclassical model are

Households and firms

In the case of insufficient aggregate demand, household savings is greater than

Intended Investment

Which of the following variables is classified as an injection in the output-input-spending flow model presented in the text? A. Household saving B. Household consumption C. Income D. Intended Investment E.Aggregate Demand

Intended Investment

In the macroeconomic model presented in the circular flow diagram in the text, what are the three injections?

Intended investments, Government spending, and exports

When the price of a good rises, the quantity demanded tends to decrease. This is an example of what type of relationship

Inverse

Which of the following statements is true about the macroeconomic model? A. It assumes that government expenditures are generally used for consumption rather than investment. B. It assumes that the majority of production is done by households. C. It simplifies by excluding the foreign sector. D. It assumes that investment in is done primarily by governments. E. "In the model, the most important function of the household sector is savings."

It assumes that government expenditures are generally used for consumption rather than investments

The Human Development Index is based upon which three measures

Life expectancy, an education and literacy index, and GDP per capita

Which one of the following activities is least likely to occur in the core sphere? A. Care of elderly people B. Planting a garden C. Decisions about personal investments D. Manufacturing automobiles E. Driving automobiles

Manufacturing automobiles

Which of the following statements is FALSE? A. Most of the activity of the government is classified in the primary sector. B. The secondary sector includes utility companies that generate electricity. C. The tertiary sector is also called the service sector. D. "The primary, secondary, and tertiary sectors may all include private business firms." E. The outputs of the primary sectors are normally sold to manufacturers as inputs.

Most of the activity of the government is classified in the primary sector

Which one of the following statements is FALSE A. More than one point along the production-possibilities frontier can be considered efficient. B. Movement along a production-possibilities frontier illustrates the concept of opportunity costs. C. Movement along a production-possibilities frontier implies a change in technology. D. Efficiency can be defined as using inputs to yield the highest possible value of output.

Movement along a production-possibilities frontier implies a change in technology

The value of the next best alternative that is foregone when a choice is made is called

Opportunity cost

Suppose that people lower their expectations about inflation in an economy in a recession. At the same time the government undertakes expansionary fiscal policy. Based on the ADE/ASR model, what would we expect to be the most likely outcome?

Output will increase but inflation could go up or down

Which one of the following variables is the starting point for calculating the Genuine Progress Indicator? A. Life Expectancy B. Gross Domestic Product C. Personal Consumption Expenditures D. Gross Domestic Saving E. Economic Inequality

Personal Consumption Expenditures

Suppose there is an increase in the supply of cell phones. What would we expect to happen to the equilibrium price of cell phones?

Price will fall, quantity will rise

Which of the following is NOT true about the U.S. Federal debt? A. Interest payments must be made on debt held by foreigners. B. The debt creates an obligation on future taxpayers. C. Someday the debt will all have to be paid off. D. The U.S. makes payment on its debt using its own currency. E. Interest payments on government borrowing tend to go to the wealthy.

Someday the debt will all have to be paid off

Which one of the following statements is FALSE? A. Cyclical unemployment results from economic recessions. B. Frictional unemployment is a result of people being in transition between jobs. C. Someone not currently working who has just entered the labor force after graduating college and is actively seeking his or her first job would not be classified as unemployed by the U.S. Bureau of Labor Statistics D. According to the U.S. Bureau of Labor Statistics, a person who does any work for pay or profit is classified as employed regardless of how many hours they work. E. Discouraged workers are a subset of people classified by the U.S. Bureau of Labor Statistics as not in the labor force.

Someone not currently working who has just entered the labor force after graduating college and is actively seeking his or her first job would not be classified as unemployed by the U.S. Bureau of Labor Statistics

Which one of the following is an example of an externality A. Someone visits a national park without paying the entrance fee. B. Someone suffers from an automobile pollution even though they do not drive. C. The price of a shirt is reduced from $30 to $20. D. The price of a shirt is increased from $30 to $40. E. A fee of $500 is paid to a lawyer for writing a business contract.

Someone suffers from an automobile pollution even though they do not drive

An analysis which does not take the passage of time into account is called

Static

The introduction of compact discs made vinyl records obsolete. To an extent this caused higher unemployment among workers who had manufactured records, which type of unemployment was created?

Structural unemployment

What is Say s law?

Supply creates its own demand

Classical economics is best characterized with which statement below A. The business cycle is a function of animal spirits. B. Taking advantage of the division of labor through specialization leads to economic growth. C. Stable monetary policy is the key to steady economic growth. D. Government intervention is required to fine tune the economy. E. Government policy should be used to ensure that economic growth is distributed evenly throughout.

Taking advantage of the division of labor through specialization leads to economic growth

Which country is the world's largest producer of energy?

The United States

How is the value-added approach to measuring GDP calculated?

The difference between the selling price and the cost of intermediate inputs

Supposes the demand for gasoline increases AND the supply of gasoline decreases. Which of the following is NOT a possible outcome of these chances in the market for gasoline? A. The equilibrium price of gasoline rises. B. The equilibrium price of gasoline stays the same. C. The equilibrium quantity of gasoline falls. D. The equilibrium quantity of gasoline rises. E. The equilibrium quantity of gasoline stays the same.

The equilibrium price of gasoline stays the same

What is the main policy implication of applying the Classical model to the labor market?

The government should limit regulations and social programs in order to increase the efficiency of the market

Which of the following will NOT result in a shift in supply curve for clothing? A. The number of clothing manufacturers increases. B. A change in the technology used to make clothing. C. A union representing clothing workers successfully obtains a wage increase. D. The cost of cotton increases as a result of a draught. E. The incomes of people purchasing clothes increase.

The incomes of people purchasing clothes increase

According to the Keynesian macroeconomic model, the level of intended investment depends upon

The level of optimism and pessimism among investors

What term do economists use to describe a situation of pure exchange

The market

In the above supply and demand diagram for wind turbines, the initial supply curve is S0, the initial demand curve is D0, and the initial equilibrium curve id E0. Then assume an energy tax on fossil fuels increases the demand for electricity generated using wind turbines, and at the same time the government announces it will offer a tax break for wind turbine producers. Which point is most likely to be a new equilibrium for wind turbines

The new equilibrium will not occur at any of the above four points

Which one of the following is an example of natural capital A. A playground B. A factory C. Your knowledge of economics D. The trust you have in other people E. The oil reserves in Alaska

The oil reserves in Alaska

The approach used to value household production based on the money an individual could have earned at a paid job is called

The opportunity cost method

The price elasticity of supply is calculated as

The percent change in quantity supplied divided by the percent change in price

Suppose the demand for loanable funds increases. According to the classical macroeconomic model, what would happen to the quantity of funds loaned and the interest rate?

The quantity of funds loaned would increase and the interest rate would increase

Empirical investigation is analysis based on

The recording of specific phenomena

Which of the following statements is FALSE about the relative shares of each sector to the total value added in the United States economy? A. The relative share of the primary sector has steadily declined throughout the 20th century. B. The relative share of the secondary sector has steadily declined throughout the 20th century. C. Over the last 50 years the relative share of the tertiary sector has steadily increased. D. Throughout the 20th century the primary sector has been the smallest of the three major sectors as E. Throughout the 20th century the majority of value added in the economy has been attributed to the t

The relative share of the secondary sector has steadily declined throughout the 20th century

The three methods for calculating GDP are

The spending approach, the income approach, and the production approach

Which of the following statements is TRUE? A. "On average, jobs in the tertiary sector pay higher than jobs in the other sectors." B. "While global trade in goods is increasing, global trade in services is decreasing." C. The tertiary sector employs the majority of all workers in the United States. D. The United States is a net importer of services. E. "For a period around World War II, the majority of GDP in the United States was attributed to the se"

The tertiary sector employs the majority of all workers in the United States

Which of the following statements is FALSE? A. The total number of farms in the United States stayed relatively constant during the 20th century. B. Currently less than 1% of the United States labor force works directly in agriculture. C. Up until the late 19th century the majority of Americans working in agriculture. D. The U.S. Department of Agriculture classifies the vast majority of farms in the United States as s E. The total land area in the United States used for agriculture is about the same now as it was in th

The total number of farms in the United States stayed relatively constant during the 20th century

Which one of the following is an example of social capital A. A playground B. A factory C. your knowledge of economics D. The trust you have in other people E. The oil reserves in Alaska

The trust you have in other people

Which of the following is NOT included in the M2 measure of money? A. The value of coins in circulation B. The value of checking accounts C. The value of savings accounts D. The value of travelers checks E. The value of credit card balances

The value of credit card balances

A change in demand occurs whenever a demand curve shifts for some reason other than a change in price.

True

A rise in unemployment associated with a recession would be classified as cylindrical unemployment

True

A supply stock can increase or decrease the maximum capacity output in an economy.

True

According to the Keynesian macroeconomic model, massive unemployment is possible when an economy is in a state of equilibrium.

True

Aggregate Demand (in an economy with no government or foreign sector) is defined as consumption plus investment.

True

An example of a stock is the quantity of money you have in your pockets

True

An example of a transaction cost would be the cost of listing an item for sale on eBay

True

Analyzing time series data is a type of empirical investigation

True

Another name for nominal GDP is current-dollar GDP

True

At the market-clearing equilibrium the quantity demanded equals the quantity supplied

True

Based on the classical ASR curve, we would expect that the economy will normally be at the full level of output.

True

Based on the classical ASR curve, we would expect that the expansionary fiscal policy would lead to an increase in inflation, but no change in output.

True

Classical economics is based upon the notion of smoothly functioning markets

True

Classical economists tend to believe that an economy will achieve full employment in the long run

True

Contractionary monetary policy would most likely be implemented when the inflation rate is considered to be too hight.

True

Currently about 16 out of every 100 workers in the United States are full-time homemakers

True

Data lags and recognition lags were discussed in the text as two types of inside lags.

True

Discouraged workers are a subset of those workers classified as not in the labor force by the U.S. Bureau of Labor Statistics.

True

During the 1990s in the United States, federal government receipts generally increased while government outlays generally decreased.

True

During the 1990s, unemployment and inflation generally fell.

True

During the Great Depression, unemployment rates in the United States at times exceeded 20%.

True

Expansionary monetary policy has a tendency to lower interest rates.

True

Fringe benefits, such as employer-paid health care, are considered a type of labor income

True

GDP growth in recent decades attributed to the movement of women into the labor force fails to account for the loss value of household production.

True

Gold coins would be considered a type of commodity money.

True

Gross domestic product is defined as the value of all final and intermediate goods newly produced in an economy in a given period of time

True

If intended business investment declines by $100 the Keynesian multiplier effect implies that total income will decrease by more than $100.

True

If the Fed makes an open market purchase of government bonds, the federal fund rate will tend to fall.

True

If the demand for federal funds increases and the Fed does nothing in response, the federal funds rates would tend to increase.

True

If the demand for ice cream increases we would expect the equilibrium price and quantity of ice cream to increase

True

In an open economy, the foreign sector must be included when GDP is calculated using the spending approach

True

In the Classical model of the labor market, enacting a minimum wage above the equilibrium wage would lead to an increase in unemployment.

True

John Maynard Keynes believed that the key to increasing aggregate demand is to have the government take a more active role in investment

True

Keynesian economists tend to believe that unemployment can be persistent in an economy

True

Laptop computers and computer software are examples of complementary goods

True

Monetarists generally believe in laissez-faire economic policies

True

Money has three roles: as a medium of exchange, as a store of value, and as a unit of account.

True

Most of the people in the United States the labor force participation rate for men decreased while the rate for women has increased.

True

Most of the people in the United States who work more than 50 hours per week would prefer to work fewer hours.

True

Net investment can be positive or negative

True

One criticism of GDP as a measure of welfare is that it does not consider the distribution of income.

True

One reason that private banks hold government bonds is that such bonds are more liquid than other types of loans such as business bonds and mortgages.

True

Private property is generally considered an institutional requirement for markets to operate effectively

True

Production points along a possibilities frontier are considered efficient

True

Scarcity means that resources are not sufficient to allow all goals to be accomplished at once

True

Social security checks are an example of a transfer payment.

True

Suppose that an individual making $100,000 per year pays $30,000 in total taxes while a person making $30,000 per year pays $5,000 in total taxes. This is an example of a progressive tax system

True

Suppose the price of gasoline increases. We would expect that this will result in a shift in the demand curve for automobiles.

True

Suppose we know that the regular income/spending multiplier is 4.0. The tax multiplier must be -3.0.

True

Tax cuts are an example of discretionary fiscal policy.

True

The Genuine Progress Indicator uses personal consumption expenditures as a starting point rather than GDP.

True

The ability of the atmosphere to dissipate the sulfur dioxide emissions from a coal power plant is an example of the sink function

True

The basic neoclassical model assumes that firms maximize profits and households maximize utility

True

The ceteris paribus assumption means to hold all other factors constant

True

The fact that many workers have given up actively looking for jobs implies that the actual unemployment rate is higher than the rate officially published by the U.S. Bureau of Labor Statistics.

True

The stagflation of the 1970s most likely occurred because of contractionary fiscal policy combined with increasing expectations about inflation.

True

The three leakages in the macroeconomic model presented in the text are savings, taxes, and imports.

True

Wealth in the United States is distributed more unequally than income

True

When the Federal Reserve buys government bonds from a private bank, the private bank reserves at the Federal Reserve will increase.

True

According to the text, the term for the broad goal of promoting the sustenance and flourishing of life is

Well Being

Under what conditions is a wage-price spiral most likely to occur?

When the economy is near the maximum capacity output.

The identity used to represent the economy in the traditional macro model is

Y=C+I+G+NX