Economics Review

In the market for a foreign currency, a "weakening" of the dollar corresponds to a

higher dollar price of foreign currency (foreign currency more expensive than dollar)

The creation and deflation of economic bubbles impacts the sale of homes, cars and other expensive goods because

higher stock prices make people feel richer so they buy more of these things.

In the years immediately prior to 2005 in the U.S.,

home prices were rising briskly

A country's Real GDP can increase for brief periods of time

if either its aggregate demand or its aggregate supply increases

The difference between imports and exports of merchandise goods and services is reported

in the current account.

Among the most important demand side factors explaining homes prices would be the

income of potential homebuyers.

Other things equal, increasing home prices tend to

increase homeowners' equity in their homes.

Increases in worker productivity usually reflect policies that encourage

investment in physical and human capital

The fact that the poverty line does not account for day-care costs suggests that it

is set too low and the poverty rate is therefore understated.

If not corrected, the financial sector crisis of late 2008 would have tended to

lower both Real GDP and the general price level

The mathematics of amortization for mortgage loans must utilize the

period of time over which the debt will be repaid.

A Balanced Budget Amendment would be

procyclical.

Among countries with Per Capita GDP less than $2,000

rates of basic literacy tend to be low , central banks tend not to be independent , the government tends to be relatively corrupt

A factor tending to slow the U.S. economy early in the recession of 2007 - 2009 was

sharply rising crude oil prices

An exchange rate is usually expressed as the

strength of a currency in terms of some other currency.

An increase in the desire to have U.S. dollars rather than yuan would

strengthen the U.S. dollar relative to the yuan

If a tax is placed on one good and not another, the effect that causes you to buy less of the taxed good because it has become relatively more expensive is called the

substitution effect.

The poverty line is

that level of income just sufficient to provide a family with a minimally adequate standard of living.

Which of the following is considered a "hard currency"

the U.S. Dollar

A budget deficit is

the amount by which revenues exceed expenditures.

Hedging could have helped forestall the Asian financial crisis because

the banks would have at least had a guaranteed exchange rate at which they could pay back their foreign loans.

The solvency of Social Security can be extended if

the retirement age is increased.

Retirees have their benefits adjusted annually by the ____ to compensate them for inflation.

wage inflation rate

Crowding out is the idea that

when government spending is increased private spending must decrease.

Using marginal analysis, an economist would judge the proper size of government by comparing

whether the last dollar spent would have been better left in private hands.

If the expected future price of a stock is revised upward and all else is equal, today's price of the stock

will rise.

An increasing portion of the U.S. national debt is held by

government trust funds.

A fully-funded system

has a sufficient amount of money on hand currently to pay out all future obligations.

If a person were given the choice of a $500 credit or a $2500 deduction

he would take the deduction if he were in the 25% tax bracket, the credit if he were in the 15% tax bracket.

If a household has a single woman and three kids, has a standard deduction of $5,450, its itemized deductions are $5,650 and personal exemptions of $10,500 (3*$3,500) then the first _____ of income is federal income tax free.

$16,150

International comparisons of Gross National Income using the concept of purchasing power parity are based upon the

Relative cost of purchasing a similar market basket of goods

Which of the following programs is on-budget?

Student loans.

Which of the following is a goal of a welfare system?

To provide an adequate standard of living.

A mortgage loan that would allow a borrower to pay less than the full interest accrued on the debt over the first few (typically five or ten) years of the mortgage could be called

a "negative-amortization" mortgage.

A tax structure is progressive as long as a person who has more income pays A. more tax than someone who has less income.

a higher rate of tax than someone who has less income.

The United States Constitution states that

a law must be passed to approve spending for a government activity.

the creation of bubbles lowers the prices of these things and their deflation stimulates purchases.

abrupt stock price changes reflect abrupt changes in the public's perception of fundamentals and risk.

If a company is expected to earn $1 per share this year and 2% more per share each subsequent year, the stock price in an efficient market will reflect

both of these pieces of information.

The Induced Retirement Effect

causes an increase in savings because people retire earlier.

In the market for yen, an increase in U.S. real interest rates tends to

decrease demand

If a fiscal policy program requires new legislation to make it happen, it is necessarily

discretionary

Spending on programs for which there is no existing legal obligation to continue is called

discretionary.

Continuous government intervention in markets for foreign currency is typical of a

fixed exchange rate system