Macro Eco final

. The table below shows that a worker in Australia can produce 20 units of food or 10 units of electronics in a day, and a worker in Korea can produce 5 units of food or 15 units of electronics in a day. Which of the following statements about comparative advantage is true? Food A. Australia has a comparative advantage in the production of food while Korea has a comparative advantage in the production of electronics. B. Australia has a comparative advantage in the production of electronics while Korea has a comparative advantage in the production of food. C. Australia has a comparative advantage in the production of both food and electronics. D. Australia has a comparative advantage in the production of food but neither country has a comparative advantage in the production of electronics.E. Korea has a comparative advantage in the production of both food and electronics.

A. Australia has a comparative advantage in the production of food while Korea has a comparative advantage in the production of electronics.

The table below shows that a worker in Australia can produce 20 units of food or 10 units of electronics in a day, and a worker in Korea can produce 5 units of food or 15 units of electronics in a day. Which of the following statements about comparative advantage is true? A. Australia has a comparative advantage in the production of food while Korea has a comparative advantage in the production of electronics. B. Australia has a comparative advantage in the production of electronics while Korea has a comparative advantage in the production of food. C. Australia has a comparative advantage in the production of both food and electronics. D. Australia has a comparative advantage in the production of food but neither country has a comparative advantage in the production of electronics. E. Korea has a comparative advantage in the production of both food and electronics.

A. Australia has a comparative advantage in the production of food while Korea has a comparative advantage inthe production of electronics.

8. Assume the United States imposes a new tariff on wines imported from France. Who benefits from this action? A. French winemakers B. American consumers C. U. S. winemakers D. All of the above E. None of the above

A. French winemakers

Assume the United States imposes a new tariff on wines imported from France. Who benefits from this action? A. French winemakers B. American consumers C. U. S. winemakers D. All of the above E. None of the above

A. French winemakers

For a given technology and a given labor force, labor productivity will be ____ when the capital stock is ____. A. higher; larger B. lower; larger C. lower; unchanged D. higher; smaller E. unchanged, unchanged

A. higher; larger

4. Countries that trade on the basis of comparative advantage have __________ than countries that do not. A. more goods and services available to them B. higher production costs and transportation costs C. lower levels of product quality from which to choose D. lower levels of labor productivity E. a lower standard of living

A. more goods and services available to them

3. Assume the Mexican economy is initially at full-employment equilibrium. An economic expansion in the U.S.______ the demand for U.S. imports from Mexico. This will also result in an increase in Mexican aggregate demand in Mexico and a(n) ________ output gap in Mexico. A. reduces; inflationary B. increases; inflationary C. reduces; recessionary D. increases; inflationary E. reduces; autonomous

B. increases; inflationary

Suppose you buy a Big Mac in El Paso this morning for $4.00 and that the same Big Mac across the borderin Juarez, Mexico costs 40 pesos. What is the relative cost of a Big Mac between the countries if the nominalexchange rate is $1 = 10 pesos? A. Big Macs cost 5% more in Mexico than they do in the U.S. B. Big Macs cost 5% more in the U.S. than they do in Mexico. C. Big Macs cost the same in Mexico as they do in the U.S. D. Big Macs cost 10% more in Mexico than they do in the U.S. E. Big Macs cost 10% more in the U.S. than they do in Mexico.

C. Big Macs cost the same in Mexico as they do in the U.S.

2. The quantity equation, M•V = P•Y, where M is the quantity of money, V is the velocity of money, P is the price of output, and Y is the amount of real output/G.D.P. If V and Y are constant and M doubles, the quantity equation implies that the price level A. falls to half its original level. B. does not change. C. doubles. D. more than doubles.E. less than doubles

C. doubles.

(Ref 15-2 Table: Peanut Butter and Jelly Economy) Use Table: Peanut Butter and Jelly Economy. Between 2010 and 2011, nominal GDP _____ by _____%. A) increased; 12.5 B) decreased; 12.5 C) increased; 16.67 D) increased; 31.25

D) increased; 31.25

Which statement about GDP is false? a. GDP can be calculated by summing total market value of all final goods and services produced in a country in a given year. b. GDP can be calculated by summing all factor payments within a country's borders in a given year. c. GDP can be calculated by summing the value added for all goods and services. d. GDP can be calculated by summing government spending and tax revenues

GDP can be calculated by summing government spending and tax revenues

Consider the market for iPads. What happens if a fantastic new alternative tablet is developed by Samsung and, at the same time, a boat carrying a large shipment of iPads is attacked by pirates and sunk? a. Price decreases and quantity increases. b. Price increases and quantity increases. c. The change in price is indeterminate and quantity decreases. d. Price increases and the change in quantity is indeterminate

The change in price is indeterminate and quantity decreases.

(Ref 2-2 Figure: Guns and Butter) Use Figure: Guns and Butter. Suppose the economy produced 8 guns and 12 pounds of butter per period. Given that, which statement is true? a. This is a possible choice, but it is inefficient. b. This combination invalidates the notion of increasing opportunity cost. c. The economy is still efficient but does not buy as much as it could. d. Something must be done to reduce the amount of employment.

This is a possible choice, but it is inefficient.

What would likely happen if the amount of capital per worker grew? A. Wages would fall because capital would be more important in production. B. Wages would rise because workers would become more productive. C. Wages would be unchanged because wages are unaffected by the quality of capital D. Wages would fall because capital would replace human capital. E. Wages would remain same

Wages would rise because workers would become more productive.

When a country accumulates capital so that the quantity of capital per person increases, what do you expect to happen to wages? A. Wages would fall because capital would be more important in production. B. Wages would rise because workers would become more productive. C. Wages would be unchanged because wages are unaffected by the quality of capital D. Wages would fall because capital would replace human capital. E. Wages would remain the same

Wages would rise because workers would become more productive.

10. (Ref 21-3 Figure: Technological Progress and Productivity Growth) Use Figure: Technological Progress and Productivity Growth. If there is an increase in physical capital per worker (all other factors remaining unchanged), it is BEST indicated by a move from: a. A to B. b. B to A .c. C to B. d. B to C.

a. A to B.

Refer to Figure: AD-AS Model II. As the size of the labor force increases over time, the _____ curve will shift to the _____. a. LRAS; right b. LRAS; left c. AD; left d. AD; right

a. LRAS; right

An inward shift in the U.S. economy's production possibility frontier could represent: a. U.S. workers moving to Canada. b. workers moving from New Jersey to Massachusetts. c. U.S. economic growth. d. a movement from labor-intensive to capital-intensive industries in some states

a. U.S. workers moving to Canada.

Refer to Figure: Inflationary and Recessionary Gaps. The intersection of AD with SRAS in panel (b)indicates: a. a short-run equilibrium. b. a long-run equilibrium. c. that unemployment is too high. d. stagflation.

a. a short-run equilibrium.

6. Diminishing returns to physical capital implies that, when the human capital per worker and the state oftechnology remain fixed, each successive increase in physical capital leads to _____ productivity.a. a smaller increase inb. a larger increase inc. a decrease ind. negative

a. a smaller increase in

(Ref 2-8 Figure: Wine and Wheat) Use Figure: Wine and Wheat. If this economy is producing on theproduction possibility frontier, what would allow it to produce at point C? a. an improvement in technology b. a decrease in resources c. a decrease in production d. policies expanding social programs for seniors

a. an improvement in technology (not feasible, economic growth)

A laptop computer purchased by a private individual for personal use is considered to be: a. consumption spending. b. investment spending. c. private saving. d. a transfer of income

a. consumption spending

A decrease in demand and a decrease in supply will lead to a(n) _____ in equilibrium quantity and a(n)_____ in equilibrium price. a. decrease; indeterminate change b. indeterminate change; increase c. indeterminate change; decrease d. increase; indeterminate change

a. decrease; indeterminate change

Rice and potatoes are substitutes in consumption. If the price of rice rises and there is a bumper crop of potatoes, in the market for potatoes one would expect the equilibrium price to _____ and the equilibrium quantity to _____. a. fall, rise, or stay the same; rise b. rise; fall c. fall; fall d. rise; fall, rise, or stay the same

a. fall, rise, or stay the same; rise

Other things equal, rising interest rates lead to a _____ in investment spending and a _____ in _____spending. a. fall; fall; consumer b. rise; rise; consumer c. fall; rise; consumer d. fall; rise; investmen

a. fall; fall; consumer

Table: Production of Good Z and Good X in Urbanville Use Table: Production of Good Z and Good X in Urbanville. This table shows the production possibility frontier for Urbanville. Suppose Urbanville is producing 5 of Z and 50 of X; this combination is: a. feasible but inefficient. b. feasible and efficient. c. not feasible but efficient. d. neither feasible nor efficient

a. feasible but inefficient.

(Ref 2-9 Figure: Production Possibility Frontier) Use Figure: Production Possibility Frontier. A movementfrom point C producing 12 cars and 16 computers per period to point B means a _____of _____ cars and a_____ of _____ computers per period. a. gain; 4; loss; 4 b. gain; 2; loss; 4 c. gain; 4; loss; 6 d. loss; 2; gain; 4

a. gain; 4; loss; 4

The value of a euro goes from US$1.25 to US$1.50. In the United States, exports will _____ and imports will_____. a. increase; decrease b. increase; increase c. decrease; increase d. decrease; decrease

a. increase; decrease

If supply is upward sloping, an increase in demand, all other things unchanged, will result in a(n) _____ inequilibrium price and a(n) _____ in equilibrium quantity. a. increase; increase b. decrease; decrease c. decrease; increase d. increase; decrease

a. increase; increase

(Ref 2-2 Figure: Guns and Butter) Use Figure: Guns and Butter. On this figure, points A, B, E, and F: a. indicate combinations of guns and butter that society can produce using all of its factors efficiently. b. indicate increasing opportunity costs for guns but decreasing opportunity costs for butter. c. indicate that society wants butter more than it wants guns. d. indicate constant opportunity costs for guns and increasing costs for butter

a. indicate combinations of guns and butter that society can produce using all of its factors efficiently.

Investment spending is spending on: a. productive physical capital. b. stocks. c. mutual funds. d. corporate bonds

a. productive physical capital

40. Investment spending is spending on: a. productive physical capital. b. bonds. c. shares of stock. d. productive physical capital, bonds, and shares of stock

a. productive physical capital.

Real per capita GDP is: a. real GDP divided by the population. b. real GDP divided by the amount of capital available in the economy. c. not a useful measure of human welfare. d. rarely used as a tool to compare countries' possible resources

a. real GDP divided by the population

13. In an economy whose aggregate real output is growing faster than the total population: a. real GDP per capita is rising. b. standard of living is declining. c. national income is falling. d. nominal GDP per capita is decreasing.

a. real GDP per capita is rising

Which definition best describes GDP? a. the total value of all final goods and services produced in the economy during a given year b. the total value of all goods and services produced in the economy during a given year c. the total value of all primary, intermediate, and final goods and services produced in the economy during a given year d. the total value of all goods and services produced and sold in the economy during a given year

a. the total value of all final goods and services produced in the economy during a given year

Raising taxes shifts the _____ curve to the _____. a. aggregate demand; left b. long-run aggregate supply; left c. aggregate demand; right d. short-run aggregate supply; left

aggregate demand; left

12. If a country has a population of 1,000 people, an area of 100 square miles, and a GDP of $5 million, then its GDP per capita is: a. $500. b. $5,000. c. $50,000. d. $5 million.

b. $5,000.

A survey reveals that, on a small island, 40 people have jobs, 10 people are not working but are looking for jobs, and 30 people are neither working nor looking for work. The unemployment rate on the island is _____%. a. 12.5 b. 20 c. 25 d. 50

b. 20

(Ref 7-2 Figure: Four Markets for Online Movie Rentals) Use Figure: Four Markets for Online Movie Rentals. Which of the graphs shows what may happen if D1 or S1 is the original curve and D2 or S2 is the new curve and if some of the online stores that rent online movie rentals close? a. A b. B c. C d. D

b. B

A typical bowed-out production possibility frontier between two goods, guns and butter, shows that the opportunity cost of butter in terms of guns increases as more butter is produced. This implies that the opportunity cost of guns in terms of butter decreases as more guns are produced. a. True b. False

b. False

Which equation is correct? a. GDP = C + I + G + IM - X. b. GDP = C + I + G + X - IM. c. GDP = C + I + G + X + IM. d. GDP = C + I + G - T + TR

b. GDP = C + I + G + X - IM.

Suppose that supply increases and demand decreases. What is the most likely effect on price and quantity? a. The price will increase, but quantity may increase, decrease, or stay the same. b. The price will decrease, but quantity may increase, decrease, or stay the same. c. The price will decrease and quantity will decrease. d. The price will increase and quantity will increase

b. The price will decrease, but quantity may increase, decrease, or stay the same.

Which factor always results in an increase in price and quantity? a. an increase in supply and a decrease in demand b. an increase in demand with no change in supply c. an increase in supply with no change in demand d. a decrease in demand and supply

b. an increase in demand with no change in supply

Real GDP is nominal GDP adjusted for: a. double counting. b. changes in prices. c. population. d. imports

b. changes in prices.

When a currency depreciates, the prices of its exports to other countries will: a. increase. b. decrease. c. remain constant. d. fluctuate randomly.

b. decrease.

If we add up the consumer spending on goods and services, investment spending, government purchases of goods and services, and the value of exports, then subtract the value of imports, we have measured the nation's: a. disposable income. b. gross domestic product. c. trade deficit. d. budget deficit.

b. gross domestic product.

A decrease in demand and a decrease in supply will lead to a(n) _____ in equilibrium quantity and a(n)_____ in equilibrium price. a. decrease; indeterminate change b. indeterminate change; increase c. indeterminate change; decrease d. increase; indeterminate change

b. indeterminate change; increase

(Ref 2-7 Table: Trade-off of Study Time and Leisure Time) Use Table: Trade-off of Study Time and LeisureTime. Suppose a student sleeps 8 hours per day and divides the remaining time between study and leisure time.The table shows the combinations of study and leisure time that can be produced in the 16 waking hours of eachday. Suppose this student is studying 4 hours and spending 10 hours doing leisure activities. This point is: a. outside the production possibility frontier. b. inside the production possibility frontier. c. on the production possibility frontier. d. both efficient and feasible

b. inside the production possibility frontier

Many public utilities burn oil to generate electricity. If the price of oil increases, we expect a shift to the_____ in the _____ curve for _____ and a _____ price for electricity. a. right; supply; electricity; lower b. left; supply; electricity; higher c. right; demand; oil; higher d. left; demand; oil; lower

b. left; supply; electricity; higher

When actual output is above potential output, over time: a. nominal wages will increase, and the short-run supply curve will shift to the right. b. nominal wages will increase, and the short-run supply curve will shift to the left. c. the aggregate demand curve will shift to the right. d. the short-run aggregate supply curve will shift to the right

b. nominal wages will increase, and the short-run supply curve will shift to the left.

Spending on inputs is _____ of GDP, and investment spending is _____ of GDP. a. part; part b. not a part; part c. part; not a part d. not a part; not a par

b. not a part; part

An example of an intermediate good is: a. wages paid to an employee. b. steel purchased by aircraft manufacturers. c. vegetables purchased for your dinner. d. electric bills for your house.

b. steel purchased by aircraft manufacturers.

It is certain that the equilibrium price will fall when: a. the supply curve and the demand curve both shift to the right. b. the supply curve shifts to the right and the demand curve shifts to the left. c. supply and demand both increase. d. supply decreases and demand stays the same

b. the supply curve shifts to the right and the demand curve shifts to the left

Double counting would occur if: a. GDP were calculated by adding C, I, G, and NX. b. used goods were included in the GDP calculation. c. imports were subtracted from GDP.d. inventories were added to the GDP calculation.

b. used goods were included in the GDP calculation.

If the exchange rate is ¥200 per U.S. dollar, the U.S. price level is 120, and the Japanese price level is 600,then the real exchange rate is: a. ¥1 b. ¥40 c. ¥1,000. d. ¥2,400.

b. ¥40

1. Suppose the nominal interest rate on a savings account you hold at a bank is 5% and the rate of inflation is 2%. Now suppose inflation is greater than in the past and equals 4%. Which of the following statement is correct at the higher inflation rate? a) You are better off because savers gain from higher inflation b) You are indifferent because you still get your 5% interest on your savings c) You are worse off because your real interest rate is now lower d) The bank is worse off because they still pay the 5% even with higher inflatione) There is not enough information to make any of the statements above.

c) You are worse off because your real interest rate is now lower

If the labor force totals 100 million workers and 90 million are working, then the unemployment rate is_____%. a. 1 b. 5 c. 10 d. 90

c. 10

Suppose that a panel of economists predicts that a nation's real GDP per capita will double in approximately20 years. According to the rule of 70, what must be the predicted annual growth rate of real GDP per capita? a. 140% b. 3.5% c. 2.85% d. 14%

c. 2.85%

(Ref 2-13 Figure: Sugar and Freight Trains) Use Figure: Sugar and Freight Trains. Suppose the economy isoperating at point B. The opportunity cost of producing the third freight train would be _____ tons of sugar. a. 6 b. 19 c. 45 d. 80

c. 45

9. (Ref 21-2 Figure: Productivity) Use Figure: Productivity. An improvement in technology with everything else remaining unchanged is shown on the diagram as a movement from: a. B to A. b. A to B. c. B to C. d. A to C.

c. B to C.

An example of a government transfer is a(n): a. expenditure on an interstate highway. b. bequest from a deceased relative. c. Social Security payment. d. salary for a member of the armed forces.

c. Social Security payment.

Consider the market for corn. What happens if there is an increased demand for corn tortillas and, at the same time, a new corn seed becomes available that dramatically increases the yield per acre? . Price and quantity decrease. b. The change in price is indeterminate; quantity decreases. c. The change in price is indeterminate; quantity increases. d. Price increases; the change in quantity is indeterminate

c. The change in price is indeterminate; quantity increases.

Consider the market for corn. What happens if there is an increased demand for corn tortillas and, at the same time, a new corn seed becomes available that dramatically increases the yield per acre? a. Price and quantity decrease. b. The change in price is indeterminate; quantity decreases. c. The change in price is indeterminate; quantity increases. d. Price increases; the change in quantity is indeterminate

c. The change in price is indeterminate; quantity increases.

In the market for grass-fed beef, what would cause a price increase? a. The price of chicken decreases. b. Doctors tell patients that beef is full of saturated fat that causes heart attacks. c. The prices of grass and corn increase. d. There is a movement in the United States toward vegetarianism

c. The prices of grass and corn increase.

(Ref 42-1 Figure: Monetary Policy and the AD-SRAS Model) Refer to Figure: Monetary Policy and the AD-SRAS Model. If the economy is in an inflationary gap at point h, it can move to point i as a result of: a. an increase in the money supply. b. a reduction in the discount rate. c. a decrease in the money supply. d. purchases of government securities in the open market.

c. a decrease in the money supply.

Consider two competing motorcycle manufacturers, Harley-Davidson and Honda. If Harley-Davidson raises the price of its motorcycles, we can expect: a. a shift to the right in the supply curve of Hondas and lower prices for Hondas. b. a shift to the left in the supply curve of Hondas and higher prices for Hondas. c. a shift to the right in the demand curve for Hondas and higher prices for Hondas. d. a shift to the left in the demand curve for Hondas and lower prices for Hondas.

c. a shift to the right in the demand curve for Hondas and higher prices for Hondas.

If the economy is at potential output and the Fed decreases the money supply so that actual output is lessthan potential output, eventually nominal wages will_____ and short-run aggregate supply will _____. a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease

c. decrease; increase

The importance of an economic model is that it allows us to: a. build a complex and accurate model of how the economy should work. b. build an accurate mathematical model of every aspect of the economy. c. focus on the effects of only one change at a time. d. avoid opportunity costs

c. focus on the effects of only one change at a time.

Purchases of foreign-produced goods and services are: a. net exports. b. exports. c. imports. d. transfer payments.

c. imports

If tortilla chips are a normal good, when there is an increase in income, equilibrium price _____ and equilibrium quantity _____. a. decreases; increases b. decreases; decreases c. increases; increases d. increases; decreases

c. increases; increases

In movement along a production possibility frontier, the opportunity cost to society of getting more of one good: a. is always constant. b. is measured in dollar terms. c. is measured by the amount of the other good that must be given up. d. usually decreases.

c. is measured by the amount of the other good that must be given up.

Technological improvements will: a. leave the production possibility frontier unchanged. b. shift the production possibility frontier inward. c. shift the production possibility frontier outward. d. necessarily lead to increased unemployment.

c. shift the production possibility frontier outward.

Money is neutral in _____ since it cannot alter _____. a. the short run; real aggregate output b. both the short and long run; price levels c. the long run; real aggregate output d. the short run; price levels

c. the long run; real aggregate output

Use Table: Measuring GDP. Exports are: a. -$5 billion. b. zero. c. $5 billion. d. $10 billion.

d. $10 billion. (-5 - 15 = 10 billion)

If the pound sterling appreciates against the dollar: a. British imports and exports have become more expensive. b. U.S. imports and exports have become more expensive. c. British imports and exports have become less expensive. d. British exports have become more expensive but the price of U.S. exports to Britain has fallen

d. British exports have become more expensive but the price of U.S. exports to Britain has fallen

(Ref 7-4 Figure: Shifts in Demand and Supply II) Use Figure: Shifts in Demand and Supply II. The figureshows how supply and demand might shift in response to specific events. Suppose the technology for producingethanol fuel improves. Which panel BEST describes how this will affect the market for ethanol? a. Panel A b. Panel B c. Panel C d. Panel D

d. Panel D

7. An increase in capital stock would:a. shift the production function upward.b. cause a movement to the left along a stationary production function.c. shift the production function downward.d. cause a movement to the right along a stationary production function.

d. cause a movement to the right along a stationary production function.

Gross domestic product is defined as: a. consumer spending + government purchases of goods and services + financial spending + exports -imports. b. consumer spending + government transfers + investment spending + exports - imports. c. disposable income + taxes + investment spending + exports + imports. d. consumer spending + government purchases of goods and services + investment spending + exports- imports.

d. consumer spending + government purchases of goods and services + investment spending + exports- imports.

Discouraged workers: a. are getting paid too little. b. do not like their job. c. are working part-time but are looking for a full-time job. d. have given up looking for a job

d. have given up looking for a job

The slope of a typical production possibility frontier is: a. 0. b. vertical. c. positive. d. negative.

d. negative.

A person who is NOT working or looking for work is: a. included in the unemployment rate. b. underemployed. c. a member of the labor force who is not working. d. not counted in the unemployment rate

d. not counted in the unemployment rate

Refer to Figure: AD-AS Model I. If the economy is at point X, there is a(n) _____ gap with _____unemployment. a. inflationary; low b. inflationary; high c. recessionary; low d. recessionary; high

d. recessionary; high

One of the controversies surrounding the United States' energy markets is the trade-off between energy production and clean air. Assuming clean air has value, the United States will be on its production possibility frontier if and only if: a. resources used to produce clean air and energy are not being fully used.b. pollution is eliminated. c. the price of energy is relatively low. d. resources used to produce clean air and energy are being fully used

d. resources used to produce clean air and energy are being fully used

It is almost certain that the equilibrium quantity will fall when: a. the supply curve and the demand curve both shift to the right. b. the supply curve shifts to the right and the demand curve shifts to the left. c. the supply curve shifts to the left and demand shifts to the right. d. supply shifts to the left and demand stays the same

d. supply shifts to the left and demand stays the same

5. The aggregate production function does NOT depend on: a. the quantity of physical capital per worker. b. human capital per worker. c. the state of technology. d. the amount of natural resources.

d. the amount of natural resources.

The calculation of aggregate output does not include the value of: a. Firestone tires sold at your local auto shop. b. a new shower installed in a 1920s house. c. the six-CD player replacing the factory-mounted radio-cassette player in your car. d. the tires on brand-new Volvo station wagons

d. the tires on brand-new Volvo station wagons

Which example illustrates an intermediate good? a. stocks and bonds purchased by a business executive b. a cellular telephone purchased by a college student c. a wedding ring purchased by an engineer for his fiancée d. tires General Motors purchased from Goodyear for new electric cars

d. tires General Motors purchased from Goodyear for new electric cars

An inflationary gap will be eliminated because there is _____ pressure on wages, shifting the _____. a. downward; long-run aggregate supply curve to the right b. downward; long-run aggregate supply curve to the left c. downward; aggregate demand curve to the left d. upward; short-run aggregate supply curve to the left

d. upward; short-run aggregate supply curve to the left

A positive demand shock leads to: a. higher prices and higher employment. b. higher prices and higher unemployment. c. higher prices and lower output. d. lower prices and lower output

higher prices and higher employment.

The economy is in a recession. The desired FISCAL policy is a(n): a. decrease in government transfer payments. b. increase in government purchases of goods and services. c. increase in tax rates. d. decrease in interest rates.

increase in government purchases of goods and services.

Suppose the input costs associated with manufacturing hair replacement treatments decrease over time. This would lead to a(n): a. increase in the supply of such treatments, lower prices, and an increase in the equilibrium quantity. b. decrease in quantity supplied and lower prices. c. increase in demand and higher prices. d. decrease in the supply of such treatments, higher prices, and a decrease in the equilibrium quantity.

increase in the supply of such treatments, lower prices, and an increase in the equilibrium quantity.

If the U.S. dollar appreciates relative to currencies in other countries, then U.S. imports will _____ and exports will _____. a. increase; increase b. decrease; decrease c. decrease; increase d. increase; decrease

increase; decrease

Refer to Figure: Policy Alternatives. If the economy is in equilibrium at Y1 in panel (a) and governmentvspending increases, the result will likely be: a. an increase in unemployment. b. a decrease in interest rates. c. inflation. d. deflation

inflation.

Purchases of imported products are: a. subtracted from GDP. b. considered domestic spending, since the money is spent by a domestic consumer. c. double counting. d. not a part of the GDP calculation.

not a part of the GDP calculation.

Productivity is equal to: a. real GDP divided by the number of workers. .b. real GDP divided by the population. c. the number of workers per machine. d. the total output produced.

real GDP divided by the number of workers.

Examples of fiscal policy do NOT include: a. government spending on infrastructure to stimulate aggregate demand. b. reducing the interest rate by increasing the money supply. c. an economic stimulus package. d. a $1,500 per family tax rebate.

reducing the interest rate by increasing the money supply.

When building a model, economists: a. simplify reality to highlight what really matters. b. attempt to duplicate reality in all of its complexity. c. ignore the facts and instead try to determine what the facts should be. d. are careful to avoid the scientific method

simplify reality to highlight what really matters.

Which item would not be included in this year's GDP?a. the production of a television show b. the purchase of a new hybrid truck c. the hiring of a new schoolteacher d. the purchase of your neighbor's house, which was built in 1994

the purchase of your neighbor's house, which was built in 1994