macro final

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One party has more information than the other, giving them advantages over other agents in the market.

Adverse selection

a situation in which one side of an economic transaction has less information than the other side. This can lead to market failure, the inability of the market to maximize economic well-being.

Asymmetric information

Single-payer health care system: the government provides health insurance, funded through taxes. Private companies provide the care. No deductible or co-pays

Canada

If the government implements a binding price ceiling on insulin, this will A) increase the price consumers will pay for insulin. B) decrease the quantity of insulin the manufacturers will be willing to supply. C) have to be set above the market equilibrium price to be effective. D) encourage manufacturers to produce and sell more insulin to increase their profits.

Correct answer: B decrease the quantity of insulin the manufacturers will be willing to supply.

In the national income accounts, depreciation is called a. "consumption of fixed capital." b. "total tax depreciation." c. "consumption of circulating capital." d. "loss due to wear."

Correct answer: A "consumption of fixed capital."

Countries with high rates of economic growth tend to have A) a labor force that is more productive. B) a lower life expectancy at birth. C) low rates of technological advancement. D) a declining incidence of business cycle fluctuations.

Correct answer: A A labor force that is more productive.

Money is A) an asset that people are willing to accept in exchange for goods and services. B) the same as wealth. C) the income one earns over a period of time. D) one's assets net of one's liabilities at any point in time.

Correct answer: A An asset that people are willing to accept in exchange for goods and services.

The increase in government spending on unemployment insurance payments to workers who lose their jobs during a recession and the decrease in government spending on unemployment insurance payments to workers during an expansion is an example of A) automatic stabilizers. B) discretionary fiscal policy. C) discretionary monetary policy. D) automatic monetary policy.

Correct answer: A Automatic stabilizers.

When actual inflation is greater than expected inflation a. Borrowers gain. b. Lenders gain. c. Both borrowers and lenders gain. d. Neither borrowers nor lenders gain.

Correct answer: A Borrowers gain.

If the exchange rate changes from $1.45 = 1 euro to $1.37 = 1 euro, then A) both the euro and dollar have appreciated. B) both the euro and dollar have depreciated. C) the euro has appreciated and the dollar has depreciated. D) the euro has depreciated and the dollar has appreciated. Answer: D 28) An expansionary monetary policy in the United States should A) decrease the foreign currency price of U.S. exports. B) cause the dollar to appreciate. C) decrease the dollar price of imports. D) decrease net exports.

Correct answer: A Both the euro and dollar have appreciated.

Expansionary fiscal policy A) can be effective in the short run. B) causes complete crowding out in the short run. C) is never effective because of crowding out. D) can be effective in the long run.

Correct answer: A Can be effective in the short run.

Changes in the federal funds rate usually result in A) changes in both short-term and long-term interest rates with more of an effect on short-term interest rates. B) changes in both short-term and long-term interest rates with more of an effect on long-term interest rates. C) changes in both short-term and long-term interest rates with equal effect on both. D) no change in either short-term or long-term interest rates.

Correct answer: A Changes in both short-term and long-term interest rates with more of an effect on short-term interest rates.

An increase in financial capital outflows from the United States will A) decrease the balance on the financial account. B) increase the balance on the financial account. C) decrease the balance on the capital account. D) increase the balance on the current account.

Correct answer: A Decrease the balance on the financial account.

The size of the underground economy would tend to decrease if the government of a country A) decreased government regulations on businesses. B) made over-the-counter drugs illegal. C) increased income tax rates. D) increased business taxes.

Correct answer: A Decreased government regulations on businesses.

What would happen in the market for knee replacement surgery if insurance companies started to cover a smaller portion of the cost of the surgery? A) Demand will decrease, but this will not shift the supply curve. B) Supply will decrease, but this will not shift the demand curve. C) Demand and supply will both decrease. D) Demand will decrease and supply will increase.

Correct answer: A Demand will decrease, but this will not shift the supply curve.

Borrowers are ________ of loanable funds, and lenders are ________ of loanable funds. A) demanders; suppliers B) suppliers; demanders C) suppliers; suppliers D) demanders; demanders

Correct answer: A Demanders; suppliers

Using the money demand and money supply model, and assuming inflation expectations are constant, an open market sale of Treasury securities by the Federal Reserve would cause the interest rate to A) increase. B) decrease. C) not change. D) increase, then decrease.

Correct answer: A Increase.

Expansionary fiscal policy involves A) increasing government expenditures or decreasing taxes. B) increasing taxes or decreasing government expenditures C) increasing the money supply D) increasing the federal government budget surplus.

Correct answer: A Increasing government expenditures or decreasing taxes.

There is a federal budget deficit when A) the government spends less that it collects in taxes. B) the government spends more that it collects in taxes. C) the government spends the same amount it collects in taxes. D) taxes are too high.

Correct answer: B The government spends more than it collects in taxes.

Suppose there are two cities that have rent controlled apartments. In one city (Albany) all apartments are subject to rent control; in the other city (Halftrack) one-half of the apartments are rent controlled. Which of the following is most likely to be true? A) It will be difficult to find a rent-controlled apartment in Albany or Halftrack; rents for the Halftrack apartments not subject to controls will be higher than they would be without rent control. B) It will be easier to find an affordable apartment in Albany since rents will be low across the board. C) It will be easier to find an affordable apartment in Halftrack, either a rent-controlled apartment or another apartment, at a reasonable price. D) It will be impossible to rent an apartment in either city at any price.

Correct answer: A It will be difficult to find a rent-controlled apartment in Albany or Halftrack; rents for the Halftrack apartments not subject to controls will be higher than they would be without rent control.

Your roommate is having trouble grasping how monetary policy works in the New Keynesian theory. Which of the following explanations could you use to correctly describe the mechanism by which the Fed can affect the economy through monetary policy? Increasing the money supply A) lowers the interest rate, and firms increase investment spending, assuming inflation expectations are constant. B) causes people to spend more because they know prices will rise in the future. C) increases wealth which allows households to spend more. D) raises the value of the dollar and raises net exports.

Correct answer: A Lowers the interest rate, and firms can increase investment spending, assuming inflation expectations are constant.

A 'right-to-work' law a. Permits but does not require workers to join and pay dues to a union that has been organized at their place of employment b. Requires employers to negotiate with unions c. Requires workers to join or pay dues to a union that has been organized at their place of employment d. Prohibits employers from laying off workers.

Correct answer: A Permits but does not require workers to join and pay dues to a union that has been organized at their place of employment.

According to the text, there are three ways the government can help increase the accumulation of knowledge capital. What are they? A) protecting intellectual property rights, subsidizing research and development, and subsidizing education B) increasing taxes on firms, eliminating patents, and increasing the minimum wage C) encouraging the use of trade secrets, expanding student loan programs, and increasing the minimum wage D) reducing taxes on capital, increasing Social Security payments, and lowering the exchange rate

Correct answer: A Protecting intellectual property rights, subsidizing research and development, and subsidizing education.

President Trump's proposed increase in spending on infrastructure projects is an example of discretionary fiscal policy aimed at increasing A) real GDP and employment. B) tax revenues and the federal budget surplus. C) disposable income and interest rates. D) the money supply and money demand.

Correct answer: A Real GDP and employment.

A good measure of the standard of living is A) real GDP per capita. B) nominal GDP per capita. C) total real GDP. D) total nominal GDP.

Correct answer: A Real GDP per capita.

In 2005, Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico. This subsequently drove up natural gas, gasoline, and heating oil prices. As a result, this should A) shift the short-run aggregate supply curve to the left. B) shift the short-run aggregate supply curve to the right. C) move the economy up along a stationary short-run aggregate supply curve. D) move the economy down along a stationary short-run aggregate supply curve.

Correct answer: A Shift the short-run aggregate supply curve to the left.

In 2017, Boeing announced that it was laying off 1,800 employees in addition to the 7,000 workers it had cut the year before. The laid-off employees who were not able to find jobs at another aircraft manufacturer due to a permanent decline in employee demand in the aircraft industry would be considered A) structurally unemployed. B) frictionally unemployed. C) seasonally unemployed. D) cyclically unemployed.

Correct answer: A Structurally unemployed.

Hyperinflation can be caused by A) the government selling bonds to the central bank. B) the central bank selling bonds to the public. C) the government selling bonds to the public. D) the central bank selling bonds to the government.

Correct answer: A The government selling bonds to the central bank.

Which of the following is true? A) The money market model is essentially a model that determines the short-term nominal rate of interest. B) The money market model is essentially a model that determines the short-term real rate of interest. C) The loanable funds model is essentially a model that determines the short-term real rate of interest. D) The loanable funds model is essentially a model that determines the long-term nominal rate of interest.

Correct answer: A The money market model is essentially a model that determines the short-term nominal rate of interest.

Which of the following determines the amount of money the banking system as a whole can create? A) the quantity of bank reserves plus currency held by the public B) the quantity of vault cash held by banks C) the gold reserves held by the Federal Reserve D) the limit on profits by banks imposed by the U.S. Congress

Correct answer: A The quantity of bank reserves plus currency held by the public.

The only way the standard of living of the average person in a country can increase is if ________ increases faster than ________. A) production; population B) population; GDP per capita C) population; production D) population; income

Correct answer: A production; population

An advantage of the establishment survey over the household survey of the labor market is that the establishment survey A) is based on actual payrolls, rather than on unverified answers. B) includes the number of self-employed persons. C) includes persons employed at newly opened firms. D) provides an estimate of the number of persons unemployed.

Correct answer: A Is based on actual payrolls, rather than on unverified answers.

Which of the following is a consequence of minimum wage laws? A) Low-skilled workers benefit because minimum wage increases the number of jobs providing low-skilled workers with training. B) Some employers will be reluctant to hire as many workers as they would without a minimum wage. C) Producers have an incentive to offer workers non-wage benefits such as health care benefits and convenient working hours rather than a higher wage. D) All workers benefit when the minimum wage is increased.

Correct answer: B Some employers will be reluctant to hire as many workers as they would without a minimum wage.

Based on the following information from a balance of payments table, what is the balance on the financial account? Exports of goods and services = $5 billion Imports of goods and services = $3 billion Net income on investments = -$2 billion Net transfers = -$2 billion Increase in foreign holdings of assets in the United States = $4 billion Increase in U.S. holdings of assets in foreign countries = -$2 billion A) -$6 billion B) $2 billion C) 0 D) -$2 billion

Correct answer: B $2 billion

Refer to Table 9-1. The employment-population ratio for this simple economy equals A) (1,000/20,000) × 100. B) (1,000/15,000) × 100. C) (1,100/15,000) × 100. D) (1,000/1,100) × 100.

Correct answer: B (1,000/15,000) x 100

Refer to Table 9-1. The unemployment rate for this simple economy equals A) (100/1,000) × 100. B) (100/1,100) × 100. C) (100/15,000) × 100. D) (100/20,000) × 100.

Correct answer: B (100/1,100) x 100

As a component of national income, employee compensation is a. About one third. b. About two thirds. c. Less than one third . d. None of the above.

Correct answer: B About two thirds.

An increase in the money supply will A) increase the interest rate. B) decrease the interest rate. C) have no affect on the interest rate. D) decrease the equilibrium quantity of money in the economy.

Correct answer: B Decrease the interest rate.

If current account is negative, how must national saving and domestic investment be related? A) Domestic investment and national saving must also be negative. B) Domestic investment must be greater than national saving. C) Domestic investment must be less than national saving. D) Domestic investment can be greater than or less than national saving.

Correct answer: B Domestic investment must be greater than national saving.

Technological improvements are more likely to occur if A) the economy is centrally planned. B) entrepreneurs are compensated with higher profits for taking risks. C) economic decisions are made by politicians rather than entrepreneurs. D) companies face little competition in their markets.

Correct answer: B Entrepreneurs are compensated with higher profits for taking risks.

Fiscal policy refers to changes in A) state and local taxes and purchases that are intended to achieve macroeconomic policy objectives. B) federal taxes and purchases that are intended to achieve macroeconomic policy objectives. C) federal taxes and purchases that are intended to fund the war on terrorism. D) the money supply and interest rates that are intended to achieve macroeconomic policy objectives.

Correct answer: B Federal taxes and purchases that are intended to achieve macroeconomic policy objectives.

Which of the following is not an example of a transfer payment? A) unemployment insurance payments B) health insurance payments to an army private C) social security payments to retirees D) welfare payments to poor persons

Correct answer: B Health insurance payments to an army private.

An increase in the interest rate A) decreases the opportunity cost of holding money. B) increases the opportunity cost of holding money. C) decreases the percentage yield of holding money. D) increases the percentage yield of holding money.

Correct answer: B Increases the opportunity cost of holding money.

The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as A) technology. B) labor productivity. C) real GDP. D) human capital.

Correct answer: B Labor productivity.

If the United States has a net export surplus, which of the following must be true? A) The balance on the financial account must equal the balance on the current account. B) Net foreign investment must be positive as well. C) Domestic private saving must be greater than net foreign investment. D) Domestic public saving must be greater than net foreign investment.

Correct answer: B Net foreign investment must be positive as well.

M2 includes M1 plus A) currency in circulation, checking account deposits in banks, and holdings of traveler's checks. B) savings account balances, money market deposit accounts in banks, small-denomination time deposits, and noninstitutional money market fund shares. C) checking account deposits, large-denomination time deposits, and noninstitutional money market fund shares. D) currency in circulation, savings account balances, and small-denomination time deposits.

Correct answer: B Savings account balances, money market deposit accounts in banks, small-denomination time deposits, and noninstitutional money market fund shares.

The central bank's role is to act as a lender of last resort during a banking panic. This means banks can A) call in their loans to their customers to pay their depositors B) sell their securities holdings in the market to satisfy customer withdrawal needs. C) borrow reserves from the central bank, and satisfy customer withdrawal needs D) encourage the public to borrow directly from the central bank

Correct answer: B Sell their securities holdings in the market to satisfy their customer withdrawal needs.

In the short run, expansionary fiscal policy will A) shift the aggregate demand curve to the left. B) shift the aggregate demand curve to the right. C) shift the short-run aggregate supply curve to the right. D) shift the short-run aggregate supply curve to the left.

Correct answer: B Shift the aggregate demand curve to the right.

The key factors in raising standards of living have been increases in A) the money supply. B) technology and knowledge. C) foreign aid D) government ownership of resources.

Correct answer: B Technology and knowledge.

Assume that airline tickets are a normal good. Prices of commercial airline tickets have fallen in recent months. Over this same period, the price of jet fuel has risen and consumer incomes have fallen. Which of the following best explains the falling prices of airline tickets? A) The supply curve for airline tickets has shifted to the left while the demand curve for airline tickets has shifted to the right. B) The demand curve for airline tickets has shifted to the left more than the supply curve has shifted to the left. C) The demand curve and the supply curve for airline tickets have both shifted to the right. D) The supply curve for airline tickets has shifted to the left more than the demand curve has shifted to the left.

Correct answer: B The demand curve for airline tickets has shifted to the left more than the supply curve has shifted to the left.

According to the quantity theory of money, assuming velocity is constant on average, the inflation rate equals A) the money supply minus real output. B) the growth rate of the money supply minus the growth rate of real output. C) real output minus the money supply. D) the growth rate of real output minus the growth rate of the money supply.

Correct answer: B The growth rate of money supply minus the growth rate of real output.

Net investment includes a. gross investment. b. additions to capital stock in excess of replacement. c. replacement of depreciated equipment. d. all of the above.

Correct answer: B additions to capital stock in excess of replacement.

Health insurance markets have a problem with insuring people who are "poor health risks" while many people who are "good health risks" do not buy insurance. This problem is an example of A) moral hazard. B) adverse selection. C) market signaling. D) principal-agent problem

Correct answer: B adverse selection.

Economists who support market-based reforms for health care believe that increased competition among providers of health care would A) decrease costs but decrease economic efficiency. B) decrease costs and increase economic efficiency. C) increase costs but increase economic efficiency. D) increase costs and decrease economic efficiency.

Correct answer: B decrease costs and increase economic efficiency.

If a hospital knows that an insurance company will pay for most of a patient's bill, the hospital has more of an incentive to require additional medical procedures and tests, even if the patient may not require them. This is an example of A) moral hazard. B) the principal-agent problem. C) asymmetric information. D) adverse selection.

Correct answer: B the principal-agent problem.

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness? A) inflation B) discouraged workers C) people employed in the underground economy D) unemployed persons falsely report themselves to be actively looking for a job

Correct answer: B Discouraged workers.

The crowding out of private spending by government spending will be greater the A) less sensitive consumption, investment, and net exports are to changes in interest rates. B) more sensitive consumption, investment, and net exports are to changes in interest rates. C) less sensitive consumption, investment, and net exports are to changes in the price level. D) more sensitive consumption, investment, and net exports are to changes in the price level.

Correct answer: B More sensitive consumption, investment, and net exports are to changes in interest rates.

Which of the following is more likely to be effective in increasing the growth rate of real GDP? A) temporary cuts in income taxes B) permanent cuts in business taxes C) a one-time personal income tax rebate D) All cuts in taxes are equally likely to increase the growth rate of real GDP.

Correct answer: B Permanent cuts in income taxes.

Consider the following data for Tyrovia, a country that produces only two products: guns and butter. Refer to Table 8-11. Real GDP for Tyrovia for 2018 using 2009 as the base year equals A) $1,140. B) $880. C) $690. D) $560.

Correct answer: C

Refer to Table 9-1. The labor force participation rate for this simple economy equals A) (1,000/1,100) × 100. B) (1,000/15,000) × 100. C) (1,100/15,000) × 100. D) (1,100/20,000) × 100.

Correct answer: C (1,100/15,000) x 100

According to the table above, the real interest rate for savings deposits in 2009 was a. -1.7% b. 0.3% c. 1.7% d. None of the above.

Correct answer: C 1.7%

If the dollar appreciates, how will aggregate demand in the United States be affected? A) Aggregate demand will shift to the right as exports increase. B) Aggregate demand will shift to the right as imports increase. C) Aggregate demand will shift to the left as imports increase. D) Aggregate demand will shift to the left as exports increase.

Correct answer: C Aggregate demand will shift to the left as imports increase.

A drop in price level accompanied by an increase in GDP indicates A) a decrease in aggregate supply. B) a decrease in aggregate demand. C) an increase in aggregate supply. D) an increase in aggregate demand.

Correct answer: C An increase in aggregate supply.

An increase in the demand for loanable funds will occur if there is A) an increase in the real interest rate. B) a decrease in the real interest rate. C) an increase in expected profits from firm investment projects. D) an increase in the nominal interest rate accompanied by an equal increase in inflation.

Correct answer: C An increase in expected profits from firm investment projects.

Which of the following would increase the current account balance of the United States? A) an increase in imports B) an increase in the amount of money the U.S. government sends in foreign aid to other countries C) an increase in exports D) an increase in the amount of income U.S. companies pay out to foreigners who own investments in the United States.

Correct answer: C An increase in exports.

Refer to Figure 13-3. Suppose the economy is at point A. If investment spending increases in the economy, where will the eventual long-run equilibrium be? A) A B) B C) C D) D

Correct answer: C C

The response of investment spending to an increase in the government budget deficit is called A) expansionary investment. B) private dissaving. C) crowding out. D) income minus net taxes.

Correct answer: C Crowding out.

If you have trouble finding a job because of a slowdown in the overall economy, we would say that you are A) frictionally unemployed. B) structurally unemployed. C) cyclically unemployed. D) seasonally unemployed.

Correct answer: C Cyclically unemployed.

An increase in real interest rates A) decreases investment spending on machinery, equipment, and factories, but increases consumption spending on durable goods and net exports. B) decreases investment spending on machinery, equipment, and factories, and consumption spending on durable goods, but increases net exports. C) decreases investment spending on machinery, equipment, and factories, consumption spending on durable goods, and net exports. D) increases investment spending on machinery, equipment, and factories, consumption spending on durable goods, and net exports.

Correct answer: C Decreases investment spending on machinery, equipment, and factories, consumption spending on durable goods, and net exports.

Which of the following statements is true about the U.S. economy? A) Each year, many new jobs are created, but few existing jobs are destroyed, and the unemployed find jobs quickly. B) Each year, few new jobs are created, but few existing jobs are destroyed, keeping unemployment low. C) Each year, many new jobs are created and many existing jobs are destroyed. D) Each year few jobs are created, and therefore it takes the unemployed a long time to find a new job.

Correct answer: C Each year, many new jobs are created and many existing jobs are destroyed.

The labor force equals the number of people A) employed. B) unemployed. C) employed plus unemployed. D) in the working-age population.

Correct answer: C Employed plus unemployed.

In 2016 the value of the U.S. dollar increased relative to the currencies of most of its major trading partners. This rise in the price of the dollar against the other currencies was ________ for companies that exported to the United States and ________ for U.S. companies that exported to other countries. A) good; good B) bad; good C) good; bad D) bad; bad

Correct answer: C Good; bad

The purchase of Treasury securities by the Federal Reserve will, in general A) not change the money supply. B) not change the quantity of reserves held by banks. C) increase the quantity of reserves held by banks. D) decrease the quantity of reserves held by banks.

Correct answer: C Increase the quantity of reserves held by banks.

An increase in the interest rate should ________ the demand for dollars and the value of the dollar, and net exports should ________. A) decrease; decrease B) decrease; increase C) increase; decrease D) increase; increase E) increase; not change

Correct answer: C Increase; decrease

Which of the following increases labor productivity? A) an increase in the aggregate hours of work B) decreases in the availability of computers and factory buildings C) inventions of new machinery, equipment, or software D) a decline in the health of the population

Correct answer: C Inventions of new machinery, equipment, or software.

According to the quantity theory of money, deflation will occur if, over the long run, the A) money supply is less than real GDP. B) money supply is more than real GDP. C) money supply grows at a slower rate than real GDP. D) money supply grows at a faster rate than real GDP.

Correct answer: C Money supply grows at a slower rate than real GDP.

Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as A) employed. B) unemployed. C) not in the labor force. D) not in the working-age population.

Correct answer: C Not in the labor force.

The major assets on a bank's balance sheet are its A) checking and savings account deposits. B) loans, and checking and savings account deposits. C) reserves, loans, and holdings of securities. D) reserves, checking and savings account deposits. E) reserves, loans, and checking account deposits.

Correct answer: C Reserves, loans, and holdings of securities.

If labor productivity growth slows down in a country, this will A) accelerate the increase in real GDP per capita. B) accelerate the increase in nominal GDP. C) slow down the increase in real GDP per capita. D) slow down the increase in nominal GDP.

Correct answer: C Slow down the increase in real GDP per capita.

If the balance of the current account in the United States is -$900 billion, which of the following is most likely to be true? A) The balance on the financial account is positive and the US is experiencing net financial capital outflow. B) The balance on the financial account is negative and the US is experiencing net financial capital outflow C) The balance on the financial account is positive and the US is experiencing net financial capital inflow D) The balance on the financial account is negative and the US is experiencing net financial capital inflow

Correct answer: C The balance on the financial account is positive and the US is experiencing net financial capital inflow

The federal funds rate is A) the interest rate the Fed charges commercial banks. B) the interest rate a bank charges its best customers. C) the interest rate banks charge each other for overnight loans. D) the interest rate on a Treasury Bill.

Correct answer: C The interest rate banks charge each other for overnight loans.

What two factors are the keys to determining labor productivity? A) the business cycle and the growth rate of real GDP B) the growth rate of real GDP and the interest rate C) the level of technology and the quantity of capital per hour worked D) the average level of education of the workforce and the price level

Correct answer: C The level of technology and the quantity of capital per hour worked.

Reserves of a bank equal its A) vault cash. B) deposits with the Federal Reserve. C) vault cash plus deposits with the Federal Reserve. D) vault cash plus deposits of its customers.

Correct answer: C Vault cash plus deposits with the Federal Reserve.

A transfer payment is a. a payment for moving expenses a worker receives when he or she is transferred by an employer to a new location. b. a payment that is automatically transferred from your bank account to pay a bill or some other obligation. c. a form of government spending that is not made in exchange for a currently produced good or service. d. the benefit that a person receives from an expenditure by government minus the taxes that were collected by government to fund that expenditure.

Correct answer: C a form of government spending that is not made in exchange for a currently produced good or service.

Over time, people have come to rely more on market-produced goods and less on goods that they produce for themselves. For example, busy people with high incomes, rather than cleaning their own houses, hire people to clean their houses. By itself, this change has a. caused measured GDP to fall. b. not caused any change in measured GDP. c. caused measured GDP to rise. d. probably changed measured GDP, but in an uncertain direction; the direction of the change depends on the difference in the quality of the cleaning that has resulted.

Correct answer: C caused measured GDP to rise.

For an economy as a whole, a. wages must equal profit. b. consumption must equal saving. c. income must equal the value of output. d. household spending on goods must equal household spending on services.

Correct answer: C income must equal the value of output.

For the purpose of calculating GDP, investment is spending on a. stocks, bonds, and other financial assets. b. real estate and financial assets. c. new capital equipment, inventories, and structures, including new house construction. d. All of the above.

Correct answer: C new capital equipment, inventories, and structures, including new house construction.

The federal budget deficit can be reduced by A) raising taxes. B) reducing government purchases. C) reducing transfer payments. D) all of the above

Correct answer: D All of the above

According to Adam Smith, the recipe for a prosperous nation is: A) easy taxes. B) a tolerable administration of justice. C) peace. D) all of the above