Macro Final (Assignments & Quizzes 1-9)

Assume that the banks are required to hold bank reserves and the reserve ratio is 20%. If Sarah deposits $5,000 in cash in her checking account, the money supply can potentially increase by an additional: $1,000. $20,000. $25,000. $5,000.

$25,000.

Boeing buys $3 million worth of steel, $2.5 million worth of computer hardware and software, and $1 million worth of mechanical tools to manufacture a certain model of aircraft. Boeing sells this particular model at $10 million. The value added by Boeing is equal to: $13 million. $16.5 million. $3.5 million. $15.5 million.

$3.5 million.

Suppose that the reserve ratio is 20%. If Sam deposits $500 in his checking account, his bank can increase loans by: $500. $2,500. $100. $400.

$400.

A friend comes up to you and offers you a free ticket to a Yankees game that night, and you decide to attend the game. The game takes five hours and costs you $25 for transportation. If you had not attended the game, you would have worked at your part-time job for $12 an hour. What is the cost to you of attending the game? The cost is zero—the ticket is free. $85 $60 $55

$85

best way to compare two countries is to use:

- Real GDP per capita - Real GDP

If a farmer in Indiana can produce 200 pounds of beets and no corn or no beets and 100 pounds of corn, and he faces a linear production possibility frontier, the opportunity cost of producing an additional pound of corn is _____ pound(s) of beets. 100 0.5 2 200

2

A survey reveals that, on a small island, 100 people have jobs, 25 people are not working but are looking for jobs, and 45 people are neither working nor looking for work. The unemployment rate on the island is: 12.5% 20% 25% 50%

20%

Suppose that the reserve ratio is 25%; the money multiplier is: 5 4 0.04 0.25

4

Which statement is CORRECT? Automatic stabilizers arise from deliberate actions by policy makers. Discretionary fiscal policy arises from automatic adjustments without any specific effort by policy makers. Discretionary fiscal policy arises from deliberate action by policy makers. Automatic stabilizers are risky and can destabilize the economy. ​

Discretionary fiscal policy arises from deliberate action by policy makers.

which question is an example of marginal analysis? How many more houses can I build if I hire another building crew? How do tax cuts change investment opportunities to middle income Americans? What would be the impact of a trade embargo with China on labor costs? Should a commuter take the subway to work instead of driving.

How many more houses can I build if I hire another building crew?

Which factor would be classified as a tool of monetary policy used by the Federal Reserve? I. open market operations II. government purchases of goods and services I only II only I and II neither I nor II

I only

Which monetary policy would be destabilizing? I. an expansionary policy during an expansion II. an expansionary policy during a recession III. a contractionary policy during an expansion I only II only III only I, II, and III

I only

GDP overstates a country's well-being because: It does not account for pollution It overlooks the underground economy It does not account for the work done by stay-at home spouses It does not include the value of leisure time

It does not account for pollution

Which statement is NOT considered one of the three chief characteristics of money? It is a highly illiquid asset. It acts as a store of value. It is a unit of account. It serves as a medium of exchange.

It is a highly illiquid asset.

Do economists believe that the budget should be balanced each fiscal year? Yes, as the law states that both the federal and state budgets should always be balanced. No, a budget should be balanced only on average; it can be in a deficit during a recession and offset by surpluses when the economy is doing well. Yes, a budget should be balanced annually; otherwise persistent budget deficits can cause havoc in the economy. Yes, since the balanced budget multiplier is larger, so it makes the economy grow faster.

No, a budget should be balanced only on average; it can be in a deficit during a recession and offset by surpluses when the economy is doing well.

If productivity increases, the _____ curve will shift to the _____.

SRAS; right

Which transaction will be included in the official measurement of GDP? Stan sold his 2015 Honda to his sister. Monica illegally downloaded movies to her laptop. Ben bought a textbook from his friend who took the class last semester. . Sean bought a new truck.

Sean bought a new truck.

For which decision would marginal analysis be MOST relevant? Should Georgina accept a job with American Airlines or with the Humane Society? Should Martin go to graduate school after finishing university? Should Natalia emigrate to Canada or stay in Spain? Should Abby work an additional hour or take a short nap?

Should Abby work an additional hour or take a short nap?

For which decision would marginal analysis be MOST relevant? Should I go to university or get a job after finishing high school? Should I eat another waffle? Should I use my $200,000 inheritance as a down payment on a house or invest in the stock market? Should I get married?

Should I eat another waffle?

Which factor is a government transfer? wages paid to U.S. senators purchases of tanks for the army Social Security payments to retired auto workers payments to contractors for repairs on interstate highways

Social Security payments to retired auto workers

Changes in _____ will NOT shift the money demand curve. inflation The aggregate price level the real GDP The interest rate

The interest rate

Which statement is positive? Everyone in the country should have a job if they want it. A low unemployment rate is an important economic goal for the country. the low income cutoff for a family of four is $36,000. Professional athletes should not be paid more than the president.

The low income cutoff for a family of four is $36,000.

Which statement is normative? Twenty percent of Americans lack access to higher education. The rate of inflation is 3%. The federal government spends one-third of its budget on education. The price of gasoline should be less than $2 per gallon.

The price of gasoline should be less than $2 per gallon.

If you decide to go to Daytona with your friends during spring break, you cannot go to London with your brother in the summer. Which economic principle does this statement BEST represent? People usually respond to incentives, exploiting opportunities to make themselves better off. "How much" is a decision at the margin. The true cost of something is its opportunity cost. There are gains from trade.

The true cost of something is its opportunity cost.

Which statement is TRUE regarding an inferior good? When income decreases, demand remains unchanged. When income decreases, demand decreases. When income decreases, demand increases. Income and demand are unrelated.

When income decreases, demand increases.

The difference between a budget deficit and government debt is that: a deficit is the amount by which government spending exceeds tax revenues, whereas debt is the sum of money the government owes. debt is the amount by which government spending exceeds tax revenues, whereas a deficit is the sum of money the government owes. a deficit is measured as of a particular time, whereas debt is measured over time. a deficit harms the economy, whereas debt improves the economy.

a deficit is the amount by which government spending exceeds tax revenues, whereas debt is the sum of money the government owes.

Which example illustrates consumer spending (consumption)? a new computer purchased by Federal Express for one of its corporate executives a storage facility for a moving company a new car purchased for personal use a dump truck purchased by a demolition company

a new car purchased for personal use

If an economy is in short-run equilibrium and the level of actual real GDP is greater than potential output, in the long run nominal wages will _____ and the _____ curve will shift _____, bringing the economy back to its potential real GDP. a. rise; SRAS; left b. rise; AD; right c. fall; SRAS; right d. fall; AD; left

a. rise; SRAS; left

If real GDP falls while nominal GDP rises, then prices on average have: a. risen. b. fallen. c. stayed the same. d. Real GDP cannot rise when nominal GDP falls.

a. risen.

Which item would NOT be included in GDP? a. the dollar value of a repair job done by your cousin on her own car b. the dollar value of a lawyer's service c. new car sales by a local dealer d. production of new cars that were not sold in the current year

a. the dollar value of a repair job done by your cousin on her own car

What can the federal government do to finance a deficit? increase transfer payments cut taxes borrow funds increase purchases of goods and services

borrow funds

Colombia has an absolute advantage in the production of: Table: Matcha Tea and Coho Salmon Matcha Tea. Coho Salmon Colombia 40 20 Washington 10 10 neither matcha tea nor Coho salmon. Coho salmon only. both matcha tea and Coho salmon. matcha tea only.

both matcha tea and Coho salmon.

Suppose that there are 70 million people in the labor force, of whom 60 million are employed. The unemployment rate is: a. 7%. b. 10%. c. 14.29%. d. 4.2%.

c. 14.29%. Total people employed and unemployed 10 million unemployed divided by total

When the economy suffers a downturn and the incomes of many people decrease, vacationers are more likely to take car trips than to fly. Which statement provides one possible explanation for this phenomenon? a. Air travel and travel by car are complementary goods. b. Air travel and travel by car are both normal goods. c. Air travel is a normal good and travel by car is an inferior good. d. Air travel is an inferior good and travel by car is a normal good.

c. Air travel is a normal good and travel by car is an inferior good.

. A choice made _____ is a choice whether to do a little more or a little less of an activity. a. at the front end b. in the beginning c. at the margin d. ceteris paribus

c. at the margin

Suppose the Jamaican government sets coffee prices at $1 per pound when the market price is $10 per pound. The government's actions will: -improve efficiency since the low prices will force producers to find cheaper production methods. -result in coffee surpluses, even in a coffee-rich country. -cause coffee shortages, even in a coffee-rich country. -improve equality between rich and poor since the poor can now afford coffee.

cause coffee shortages, even in a coffee-rich country.

Real GDP is nominal GDP adjusted for: double counting. changes in prices population imports

changes in prices

cyclical unemployment

component of overall unemployment that results directly from cycles of economic upturn and downturn.

Because of trade, a country may: consume outside its production possibility frontier. consume inside its production possibility frontier. produce at a point outside its production possibility frontier. eliminate opportunity costs.

consume outside its production possibility frontier.

Menu costs of inflation are the: costs associated with money not being a reliable unit of measurement. costs of transactions associated with avoiding the inflation tax. costs associated with businesses changing prices. revenue the government gets from printing money.

costs associated with businesses changing prices.

The models that economists construct: a. usually make simplifying assumptions. b. often rely on physical constructs, such as those used by architects. c. rarely use mathematical equations or graphs. d. attempt to precisely replicate the real world.

d. attempt to precisely replicate the real world.

The money demand curve is _____ because a lower interest rate _____ the opportunity cost of holding money. a. upward sloping; increases b. downward sloping; increases c. upward sloping; decreases d. downward sloping; decreases

d. downward sloping; decreases

Researchers find a new strain of genetically modified seeds that result in a higher yield for corn producers. Holding all other things constant, this research will: a. shift the supply curve for corn left. b. increase the quantity supplied of corn. c. decrease the quantity supplied of corn. d. shift the supply curve for corn to the right.

d. shift the supply curve for corn to the right.

When we keep part of our wealth in a savings account, money is playing the role mainly of: a. medium of exchange. b. unit of account. c. barter. (exchange of goods without using money) d. store of value.

d. store of value.

GDP does NOT exclude: a. the value of leisure. b. damage to the environment. c. the value of housework. d. the value of owner-occupied housing.

d. the value of owner-occupied housing.

Alex expects the inflation rate to be 0%. If Alex borrows money at a nominal interest rate of 5%, his real interest rate is: greater than the nominal interest rate. less than the nominal interest rate. equal to the nominal interest rate. negative.

equal to the nominal interest rate.

Currency in the United States today is _____ money. fiat intrinsic commodity commodity-backed

fiat

Suppose that the reserve ratio is 20%. If Holly deposits $1,000 of cash in her checking account and her bank lends $600 to Freda, the money supply: remains the same. decreases by $1,000. decreases by $600. increases by $600.

increases by $600.

If the actual inflation rate is 2% and the expected inflation rate was 4%: lenders gain and borrowers lose. borrowers gain and lenders lose. everyone benefits. everyone is worse off.

lenders gain and borrowers lose.

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

not counted in the unemployment rate.

The Fed uses _____ to target the federal funds rate. government spending changes in the discount rate open market operations changes in deposit insurance maximums

open market operations

When the government removes a binding price floor: - quantity demanded will decrease and quantity supplied will increase. -quantity demanded will increase and quantity supplied will decrease. -excess demand will develop. -excess supply will develop.

quantity demanded will increase and quantity supplied will decrease.

Which item would NOT be included in GDP for 2019? the production of a television show the purchase of a new work truck the hiring of a new police officer your purchase of your neighbor's 2015 Toyota

your purchase of your neighbor's 2015 Toyota

Emma spends $40,000 for one year's tuition at university. The opportunity cost of one year at university for Emma is: whatever she would have purchased with the $40,000 had she not attended university. whatever she would have purchased with the $40,000 plus whatever she would have earned had she not attended university. $40,000. whatever she would have earned had she not attended university.

whatever she would have purchased with the $40,000 plus whatever she would have earned had she not attended university.

To be binding, a price ceiling must be set at a price _____ the equilibrium price. lower than higher than the same as any price ceiling is binding

lower than

discouraged workers

who have looked for a job sometime in the prior 12 months, but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey

Suppose that the real interest rate is 3.4% and the nominal interest rate is 6.5%. The inflation rate is _____%. 3.3 3.1 -3.3 -3.1

3.1

If the consumer price index increases from 125 to 130 in one year, the rate of inflation is: 5% 4% 6% 3%

4%

Marius and Jennifer are going to sell cupcakes and muffins at their third annual fundraiser bake sale. In one day, Marius can make 40 cupcakes or 20 muffins, and Jennifer can make 15 cupcakes or 15 muffins. With specialization, _____ cupcakes and _____ muffins will be made in one day. 40;15 55:35 40; 20 15; 20

40;15

Assume that the marginal propensity to consume is 0.8 and potential output is $800 billion. The government spending multiplier is: 5. 0.8. 4. 1.25.

5.

If the real interest rate is 5% and the inflation rate is 1%, then the nominal interest rate is... 5% 4% 6% 3%

6%

If a farmer in Indiana can produce 200 pounds of beets and no corn or no beets and 100 pounds of corn, and he faces a linear production possibility frontier, the opportunity cost of producing an additional pound of beets is _____ pound(s) of corn. 0.5 2 100 200

0.5

The multiplier effect of changes in government purchases of goods and services is equal to: MPS / (1 - MPC). MPC / (1 - MPS). 1 / (1 - MPS). 1 / (1 - MPC).

1 / (1 - MPC).

If the marginal propensity to consume is 0.9, then the government spending multiplier is: 0.1 1.11 9 10

10

If the cost of a market basket is $200 in year 1 and $230 in year 2, the price index for year 2 using year 1 as the base is: 100. 115. 130. 200.

115. CPI= 230/200 * 100

Which statement is CORRECT? - A change in demand is a movement along the demand curve, and a change in quantity demanded is a shift of the demand curve. - A change in quantity demanded and a change in demand are movements along the demand curve. - A change in quantity demanded and a change in demand are shifts of the demand curve. - A change in quantity demanded is a movement along the demand curve, and a change in demand is a shift of the demand curve.

A change in quantity demanded is a movement along the demand curve, and a change in demand is a shift of the demand curve.

Net exports are calculated by subtracting: imports from exports. exports from imports. out all intermediate goods. I , G , and value added from GDP.

imports from exports.

he basic equation of national income accounting is GDP = C + I + G + X - IM. When the government uses fiscal policy to make changes to taxes and transfers, this policy primarily affects: C X IM I

C

Which statement is normative? The minimum wage has not kept pace with economic growth. The minimum wage is necessary to help fight poverty. The minimum wage can cause lower employment for teens. As the minimum wages rises, so too does the price of fast-food.

The minimum wage is necessary to help fight poverty.

A competitive market is a market in which there are few buyers and sellers of the same good or service. a market in which there are few buyers and many sellers of the same good or service. a market in which there are many buyers and few sellers of the same good or service. a market in which there are many buyers and many sellers of the same good or service.

a market in which there are many buyers and many sellers of the same good or service.

For which decision would marginal analysis be MOST relevant? Should I invest my inheritance in real estate or put it all in the stock market? Should I get a dog? What is the right amount of hours to study for my exam? After I graduate from college, should I go to graduate school or go directly into the job market?

What is the right amount of hours to study for my exam?

Which statement is TRUE regarding a normal good? -When income increases, the demand for a complementary good remains unchanged. -When income increases, the demand for a substitute good decreases. -When income increases, the demand for the good increases. -Income and demand are unrelated.

When income increases, the demand for the good increases.

A movement along the demand curve for a good generally results from: changes in the prices of related goods. a change in the price of the good. a change in the population. both a change in the price of the good and a change in the population

a change in the price of the good.

Which factor would cause an INCREASE in the supply of a good? an increase in input prices expectations that the price of the good will rise an increase in the price of the good a decrease in the costs of resources used to produce the good

a decrease in the costs of resources used to produce the good

A price control is: -control of the price of a good by the firm that produces it. -a legal restriction on how high or low a price in a market may go. -an upper limit on the quantity of some good that can be bought or sold. -a tax on the sale of a good that controls the market price.

a legal restriction on how high or low a price in a market may go.

Which factor would cause a DECREASE in the supply of a good? a rise in input prices a fall in the price of the good an increase in the number of sellers expectations of a future price decline

a rise in input prices

In a situation in which there are technological improvements, we generally see: a shift in the production possibility frontier outward. a shift in the production possibility frontier inward. a transition to increased unemployment. the production possibility frontier unchanged.

a shift in the production possibility frontier outward.

An increase in the supply of coffee beans means: a shift to the right of the entire supply curve for coffee beans. a movement up the supply curve as the price of coffee beans rises. that fewer coffee beans will be demanded at every price. that fewer coffee beans will be supplied at every price.

a shift to the right of the entire supply curve for coffee beans.

Mark and Julie are going to sell brownies and cookies for their third annual fundraiser bake sale. In one day, Mark can make 40 brownies or 20 cookies, and Julie can make 15 brownies or 15 cookies. Based on this information, _____ has the comparative advantage in making brownies and _____ has the comparative advantage in making cookies. a. Mark; Julie b. Mark; Mark c. Julie; Mark d. Julie; Julie

a. Mark; Julie

Which statement is positive? a. The poverty rate is 14%. b. A high rate of inflation is the most important economic goal for the country. c. Everyone in the country should save money for retirement. d. Basketball players should not be paid higher salaries than are teachers.

a. The poverty rate is 14%.

If you decide to go to Cancún with your friends during spring break, you cannot go to Paris with your sister in the summer. Which economic principle does this statement BEST represent? a. The true cost of something is its opportunity cost. b. "How much" is a decision at the margin. c. People usually respond to incentives, exploiting opportunities to make themselves better off. d. There are gains from trade.

a. The true cost of something is its opportunity cost.

(#11 in Q's) The movement from curve 1 to curve 2 indicates: a. economic growth. b. a change from unemployment to full employment. c. a decrease in the level of technology. d. instability.

a. economic growth.

If the minimum wage is a binding price floor: a. those who want to work will outnumber the jobs available. b. the market-clearing equilibrium wage will increase. c. there will be a job for everyone who is willing to work. d. business owners will hire more workers.

a. those who want to work will outnumber the jobs available.

A decrease in inventories is: a. a fall in investment spending. b. an increase in investment spending that will lead to an increase in sales. c. thought to have no impact on investment, since it is not part of investment spending. d. part of government spending.

a. a fall in investment spending.

Coffee Salmon Brazil 40. 20 Alaska 20 20 . Brazil has an absolute advantage in producing: a. coffee only. b. salmon only. c. both coffee and salmon. d. neither coffee nor salmon.

a. coffee only.

Andre recently moved to Boston with his partner Deja, who has a new job as an economics professor at Harvard. Andre is an experienced surgeon who is interviewing with several hospitals in Boston. Andre is: a. frictionally unemployed. b. structurally unemployed. c. cyclically unemployed. d. counted as employed, since he is likely to receive a job offer soon.

a. frictionally unemployed. (unemployment which exists in any economy due to people being in the process of moving from one job to another)

A graphical representation of the relationship between the total quantity of goods and services demanded and the aggregate price level is the: aggregate demand curve. average price level circular-flow model GDP curve

aggregate demand curve.

A decrease in government spending on health care is likely to shift the _____ curve to the _____. short-run aggregate supply; right short-run aggregate supply; left aggregate demand; right aggregate demand; left

aggregate demand; left

An increase in government spending (G) on health care is likely to shift the _____ curve to the _____. aggregate demand; right aggregate demand; left short-run aggregate supply; left short-run aggregate supply; right

aggregate demand; right

The long-run aggregate supply curve is vertical because in the long run: technological progress outpaces raises in nominal wages. all factors of production increase. the price of labor is flexible, while the price of physical capital is fixed. all prices are flexible.

all prices are flexible.

Free trade between countries: allows for greater consumption than without trade. shifts a country's domestic production from a point below the production possibility frontier to a point on the production possibility frontier. always involves wealthy countries exploiting less developed nations. should be based on absolute advantage.

allows for greater consumption than without trade.

A decrease in the price of a good will result in: an increase in demand. an increase in supply. an increase in the quantity demanded. an increase in the quantity supplied.

an increase in the quantity demanded.

Economists in general agree that rent controls are: an inefficient but sometimes effective way to help low-income families. an efficient method of dealing with the shortages caused by price ceilings. the only way to solve the problem of poverty. an efficient and equitable way to help low-income families.

an inefficient but sometimes effective way to help low-income families.

Goods that are sold in 2020 but produced in 2018: count as consumption in 2020. are included in investment in 2018. are treated like exports. are classified as purely financial transactions

are included in investment in 2018.

Suppose that the average cost of a doctor visit is $100. If the government imposes a price ceiling of $50 on the cost of a doctor visit, there will be: a. an excess supply of doctor visits. b. an excess demand for doctor visits. c. an increase in the equilibrium number of doctor visits. d. no change in the number of doctor visits.

b. an excess demand for doctor visits.

If goods A and Z are complements, an increase in the price of good Z will: a. increase the demand for good A. b. decrease the demand for good A. c. decrease the demand for good Z. d. decrease the demand for both good A and good Z.

b. decrease the demand for good A IF SUBSITUTE: ANSWER WOULD BE A

1. The problem of determining what goods and services society should produce: a. exists because we can produce more than we need or want. b. exists because there are not enough resources to provide all of the goods and services that people want. c. would not exist if all goods and services were scarce. d. would not exist if government owned all of the resources.

b. exists because there are not enough resources to provide all of the goods and services that people want.

To be binding, a price floor must be set: a. lower than the equilibrium price. b. higher than the equilibrium price. c. so that quantity demanded exceeds quantity supplied. d. lower than the equilibrium price and so that quantity demanded exceeds quantity supplied.

b. higher than the equilibrium price.

An increase in the supply of money with no change in demand will lead to a(n) _____ in the equilibrium quantity of money and a _____ in the equilibrium interest rate. a. increase; rise b. increase; fall c. decrease; rise d. decrease; fall

b. increase; fall

Contractionary fiscal policy includes: a. decreasing taxes. b. increasing taxes. c. increasing the money supply. d. increasing government expenditures.

b. increasing taxes. ( so government spending can be lower)

An intermediate good would be: a. a new boat to be used for vacations. b. lumber used to build a house. c. payments to military personnel. d. a professor's salary.

b. lumber used to build a house.

Unemployment decreased to its lowest level in 10 years last month. This statement is a(n): a. example of an opportunity cost. b. positive economic statement. c. normative economic statement. d. value judgment.

b. positive economic statement. (can be tested; the way the economy actually works)

In periods of unexpected inflation: borrowers benefit since they repay their loans in dollars with lower real value. lenders benefit since they are repaid in dollars with a higher real value. neither borrowers nor lenders are affected by the inflation rate since their nominal interest rate stays the same. lenders benefit since the nominal interest rate does not change.

borrowers benefit since they repay their loans in dollars with lower real value.

n the circular-flow diagram, the factor market is where: households buy factors of production. households buy goods and services. businesses buy goods and services. businesses buy factors of production.

businesses buy factors of production.

The BEST example of making a choice at the margin is whether to: a. buy a new computer. b. quit your job. c. eat another slice of pizza. d. attend college.

c. eat another slice of pizza. (When we discuss making a choice at the margin, it refers to the added benefit that could be received by consuming one additional unit of the good. All the other options don't specify that it's one additional unit)

7. (Figure: AD-AS Model I) Refer to Figure: AD-AS Model I. If the economy is at point X, nominal wages _____, and the _____ curve shifts _____ until the economy reaches long-run equilibrium. a. fall; aggregate demand; left b. rise; aggregate demand; right c. fall; short-run aggregate supply; right d. fall; short-run aggregate supply; left

c. fall; short-run aggregate supply; right

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.

Which topic is studied in macroeconomics? a. the change in automobile sales due to a change in the price of automobiles b. the effect of a tax reduction on the profits of an individual business c. recessions d. the unemployment of workers displaced by technological change in the typesetting industry

c. recessions

. 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.

4. Khalil is offered a free ticket to the opera, which he cannot resell. His opportunity cost of going to the opera is: a. zero—the tickets were free. b. the price listed on the ticket. c. whatever Khalil would have done had he not gone to the opera. d. the price listed on the ticket and whatever Khalil would have done had he not gone to the opera.

c. whatever Khalil would have done had he not gone to the opera.

Which factor is NOT a tool of fiscal policy? changing tax rates government transfers government purchases of goods and services changes in the money supply

changes in the money supply

Which asset is considered to be money? stock bonds credit cards checkable bank deposits

checkable bank deposits

The money demand curve is _____ because a lower interest rate _____ the opportunity cost of holding money. upward sloping; increases downward sloping; increases upward sloping; decreases downward sloping; decreases

downward sloping; decreases

An economy is said to have a _____ in the production of a good if it can produce that good _____. comparative advantage; with more resources than another economy absolute advantage; at a higher opportunity cost than another economy absolute advantage; outside its production possibility frontier comparative advantage; at a lower opportunity cost than another economy

comparative advantage; at a lower opportunity cost than another economy

If people demand more Netflix subscriptions when the price of Hulu subscriptions falls, then Netflix and Hulu are: not related. substitutes. complements. inferior goods.

complements.

If the rate at which goods can be substituted in production is constant (say, each time you produce three more chairs, you have to produce two fewer tables), then the production possibility frontier exhibits: constant opportunity costs. increasing opportunity costs. decreasing opportunity costs. no trade-off between the two goods represented.

constant opportunity costs.

Which item is NOT a factor of production? a. labor b. machines and buildings c. land d. money

d. money

As long as people have different _____, everyone has a comparative advantage in something. a. direct costs b. benefits c. utility d. opportunity costs

d. opportunity costs

If the opportunity cost of manufacturing machinery is lower in the United States than in Britain and the opportunity cost of manufacturing sweaters is higher in the United States than in Britain, then the United States will: a. export both sweaters and machinery to Britain. b. import both sweaters and machinery from Britain. c. export sweaters to Britain and import machinery from Britain. d. import sweaters from Britain and export machinery to Britain.

d. import sweaters from Britain and export machinery to Britain.

Suppose that the economy is in an inflationary gap. To move equilibrium aggregate output closer to the level of potential output, the BEST fiscal policy option is to: lower tax rates. lower the real interest rate. increase the investment tax credit. decrease government purchases.

decrease government purchases.

A decrease in the demand for money would result from a(n): decrease in the price level Increase in income. increase in real GDP increase in nominal GDP

decrease in the price level

A decrease in the demand for money would result from a(n): increase in income. increase in real GDP. decrease in the price level. increase in nominal GDP.

decrease in the price level.

An increase in energy prices will: decrease aggregate demand. decrease the quantity of aggregate output supplied in the short run. increase short-run aggregate supply decrease short-run aggregate supply.

decrease short-run aggregate supply.

Suppose that the economy is in a recessionary gap. To move equilibrium aggregate output closer to the level of potential output, the BEST fiscal policy option is to: decrease government purchases. decrease taxes. decrease government transfers. increase real interest rates.

decrease taxes.

If the economy is at potential output, and the Fed decreases the money supply, in the short run, the price level will likely: fluctuate randomly. remain the same. decrease. increase

decrease.

if policy makers want to decrease real GDP by $100 billion and the marginal propensity to consume is 0.6, they should _____ government purchases of goods and services by _____. increase; $100 billion decrease; $100 billion decrease; $40 billion decrease; $60 billion

decrease; $40 billion

If the Federal Reserve wants to close an inflationary gap, it will _____ the money supply and _____ the interest rate, thus _____ investment spending and GDP. The AD curve will shift to the _____. increase; raise; increasing; right increase; lower; lowering; left decrease; raise; lowering; left decrease; lower; lowering; right

decrease; raise; lowering; left

The law of demand states that, other things equal, as the price: increases, the quantity demanded will increase. decreases, the demand curve will shift to the right. decreases, the demand curve will shift to the left. decreases, the quantity demanded will increase.

decreases, the quantity demanded will increase.

Expansionary fiscal policy includes: decreasing government expenditures. increasing the money supply. increasing taxes. decreasing taxes.

decreasing taxes.

Suppose that apples and pomegranates are substitutes in consumption. The _____ pomegranates will increase when apple prices rise. demand for quantity demanded of supply of quantity supplied of

demand for

The negative relationship between quantity demanded and price is called the law of: unintended consequences. increasing returns. demand. supply.

demand.

Economists frequently use GDP per capita to show: the impact of prices on GDP. differences in living standards across countries. people who are employed. both people who are employed and those who are unemployed.

differences in living standards across countries.

The official unemployment rate ignores: people with professional jobs. people who work on commission. discouraged workers. people with professional jobs, people who work on commission, and discouraged workers.

discouraged workers

A change in taxes or a change in government transfers affects consumption through its effect on: autonomous consumption. the marginal propensity to save. disposable income. government spending.

disposable income.

Intermediate goods are NOT counted in GDP because: doing so would result in double counting. these goods are not produced for the market. these goods are produced in the underground economy. these goods involve financial transactions.

doing so would result in double counting.

The natural rate of unemployment is: the rate during recessions. equal to the sum of frictional and cyclical unemployment. equal to the sum of frictional and structural unemployment cyclical unemployment less frictional unemployment.

equal to the sum of frictional and structural unemployment

If the economy is in a recessionary gap, the Federal Reserve should conduct _____ monetary policy by _____ the money supply. contractionary; decreasing expansionary; decreasing expansionary; increasing contractionary; increasing

expansionary; increasing

Refer to Figure: AD-AS Model I. If the economy is at point X, nominal wages _____, and the _____ curve shifts _____ until the economy reaches long-run equilibrium. rise; aggregate demand; right fall; short-run aggregate supply; left fall; short-run aggregate supply; right fall; aggregate demand; left

fall; short-run aggregate supply; right

Money that the government has ordered to be accepted as money is: convertible paper money. commodity money. not usable in international transactions. fiat money.

fiat money.

The importance of an economic model is that it allows us to: build an accurate model of how the economy should work. ensure that opportunity costs are maintained on a larger scale. focus on the effects of only one change at a time. build an accurate mathematical model to simulate the workings of the entire economy.

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

The reserve ratio is the: bank's holdings of gold. government's holdings of gold at Fort Knox. fraction of deposits that banks hold in their vaults plus their deposits at the Federal Reserve. ratio of gold to the paper money in the economy.

fraction of deposits that banks hold in their vaults plus their deposits at the Federal Reserve.

A recent college graduate with a major in economics attends a job fair but has not yet found a job. This graduate is counted as a _____ unemployed worker. structurally seasonally cyclically frictionally

frictionally

Social insurance programs are: government programs intended to protect families against economic hardships. private insurance policies to protect families from hardships caused by government actions. private insurance policies that cover gaps in government-provided health care. programs to help unemployed people have a social life.

government programs intended to protect families against economic hardships.

Consumer spending will likely rise if: government transfers rise. the government raises tax rates. the government raises tax rates or government transfers fall. government transfers fall.

government transfers rise.

The national debt: grows when the government runs a deficit. did not exist until 1998. grows when the government runs a surplus. is the sum of all past federal surpluses.

grows when the government runs a deficit.

An economy is said to have a comparative advantage if it: can produce fewer of all goods than another economy. has the highest opportunity cost of producing a particular good compared with other economies. has the lowest opportunity cost of producing a particular good compared with other economies. can produce more of all goods than another economy with the same amount of resources

has the lowest opportunity cost of producing a particular good compared with other economies.

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

have given up looking for a job.

Suppose the government sets a price floor below the current price of a good. This price floor will: increase the quantity supplied of the good. result in an excess demand for the good. result in an excess supply of the good. have no immediate effect on the price of the good.

have no immediate effect on the price of the good.

The short-run aggregate supply curve is positively sloped because: workers are willing to work for lower wages rather than be laid off. wages and other costs of production respond immediately to changes in prices. profit is lower when prices increase, so output decreases. higher prices lead to higher profit and higher output because of sticky wages.

higher prices lead to higher profit and higher output because of sticky wages.

The short-run aggregate supply curve slopes upward because a _____ aggregate price level leads to _____. higher; lower output as costs of production increase higher; higher output, since most production costs are fixed in the short run lower; higher output, since production costs tend to fall in the short run lower; higher profit and higher productivity

higher; higher output, since most production costs are fixed in the short run

A recent college graduate who decides to go back to school for an advanced degree (a doctorate, for example) adds to the existing stock of _________ in the economy. financial capital labor physical capital human capital.

human capital.

Unexpected inflation _____ lenders and _____ borrowers. benefits; hurts hurts; benefits does not affect; benefits benefits; does not affect

hurts; benefits

The short run in macroeconomic analysis is a period: in which many production costs (wages) can be taken as fixed. of two months, and the long run is more than 12 months. in which wages become fully flexible. in which interest rates are fixed.

in which many production costs (wages) can be taken as fixed.

The long run in macroeconomic analysis is a period: of less than one year. in which wages are sticky. in which nominal wages and other prices are flexible. of one to two years.

in which nominal wages and other prices are flexible.

If the government spends an extra $5 billion on goods and services, GDP will: go up by $5 billion. remain unchanged. increase by less than $5 billion. increase by more than $5 billion.

increase by more than $5 billion.

When the Federal Reserve buys Treasury bills, this leads to a(n): decrease in the money supply. increase in the money supply. increase in short-term interest rates. increase in the Federal Reserve funds rate

increase in the money supply.

When the Federal Reserve buys Treasury bills, this leads to a(n): increase in the money supply. increase in the Federal Reserve funds rate. decrease in the money supply. increase in short-term interest rates.

increase in the money supply.

An increase in the demand for money would result from a(n): increase in the price level. decrease in real GDP. decrease in the price level. decrease in nominal GDP.

increase in the price level.

A decrease in the price of milk will cause an ___________ increase in the demand for milk. increase in the supply of milk. increase in the quantity of milk supplied. increase in the quantity of milk demanded.

increase in the quantity of milk demanded.

A decrease in energy prices will: increase short-run aggregate supply. decrease the quantity of aggregate output supplied in the short run. decrease aggregate demand. decrease short-run aggregate supply

increase short-run aggregate supply.

If the economy is at potential output, and the Fed increases the money supply, in the short run, real GDP will likely: increase. decrease. fluctuate randomly. remain the same.

increase.

If policy makers want to increase real GDP by $100 billion and the marginal propensity to consume is 0.75, they should _____ government purchases of goods and services by _____. increase; $25 billion increase; $33 billion increase; $100 billion decrease; $100 billion

increase; $25 billion

An increase in the supply of money with no change in demand will lead to a(n) _____ in the equilibrium quantity of money and a ____ in the equilibrium interest rate. decrease; rise increase; fall increase; rise decrease; fall

increase; fall

According to the interest rate effect, an increase in the price level causes people to _____ their money holdings, which _____ interest rates and _____ investment spending. increase; increases; decreases decrease; increases; decreases increase; decreases; decreases decrease; decreases; increases

increase; increases; decreases

According to the wealth effect, when prices decrease, the purchasing power of assets _____ and consumer spending _____. decreases; decreases decreases; increases increases; decreases increases; increases

increases; increases

In the short run, a positive demand shock _____ aggregate output and _____ the aggregate price level. increases; increases reduces; reduces reduces; increases increases; reduces

increases; increases

In the circular-flow diagram, a household is a(n): member of a group that is prohibited from buying imported goods and services. entity that purchases factors of production. individual or group of people who share their income. entity that sells goods and services.

individual or group of people who share their income.

All points inside the production possibility frontier represent: inefficient production points that are attainable without added opportunity costs. infeasible production points that can, however, be attained through economic growth. production points that the economy will eventually reach through economic growth. efficient production points that economies strive to reach.

inefficient production points that are attainable without added opportunity costs.

All points outside the production possibility frontier are:

infeasible.

Besides consumption, the component(s) of aggregate demand is/are: investment expenditures. investment expenditures and government expenditures. investment expenditures and net exports. investment expenditures, government expenditures, and net exports.

investment expenditures, government expenditures, and net exports.

If the quantity of parking spaces supplied in a community exceeds the quantity of parking spaces demanded, the existing price: is above the market equilibrium price. will rise to clear the market. will remain unchanged. is below the market equilibrium price.

is above the market equilibrium price.

Marginal analysis: is used primarily when deciding how much of an activity to undertake. is primarily used when making an either-or choice. does not help when making a "how much" choice. refers to decisions about whether or not to engage in a particular activity.

is used primarily when deciding how much of an activity to undertake.

If the price level and nominal GDP both doubled, then real GDP would: also double. increase by half. remain unchanged. decrease by half.

remain unchanged.

A simultaneous rise in productivity and nominal wages would shift the short-run aggregate supply curve to the: right if the rise in nominal wages is larger than the rise in productivity. right if the cost per unit of output rises. left if the cost per unit of output falls. left if the rise in nominal wages is larger than the rise in productivity

left if the rise in nominal wages is larger than the rise in productivity

Suppose that the stock market crashes, which causes a large decrease in the value of many households' financial assets. The most likely outcome is a __________ the aggregate demand curve. rightward shift of leftward shift of movement up movement down

leftward shift of

Which example is a quota? -rent controls in New York City -property taxes on beachfront property in Florida -limits on the number of bushels of clams that can be caught in New Jersey -the maximum reimbursement that insurance will pay for a medical procedure

limits on the number of bushels of clams that can be caught in New Jersey

The aggregate demand curve would NOT shift to the left as a result of: more pessimistic consumer expectations. a fall in consumers' wealth. a decrease in the existing stock of physical capital. lower labor productivity.

lower labor productivity.

To expand the money supply, the Federal Reserve would have to: make an open purchase of Treasury bills. have an open sale of Treasury bills. raise interest rates. get approval from Congress.

make an open purchase of Treasury bills.

A bank run occurs when: too many people are trying to borrow more at one time. many bank depositors are trying to withdraw their funds from the bank. interest rates start to increase. interest rates are higher than inflation rates.

many bank depositors are trying to withdraw their funds from the bank.

the market for wheat in North Dakota is considered to be competitive. This means there are _____ buyers and _____ sellers of corn in North Dakota. many, few few, many many, many few, few

many, many

Colombia has a comparative advantage in the production of: Table: Matcha Tea and Coho Salmon Matcha Tea. Coho Salmon Colombia 40 20 Washington 10 10 both matcha tea and Coho salmon. neither matcha tea nor Coho salmon matcha tea only. Coho salmon only.

matcha tea only.

Money used to buy groceries is a: medium of exchange. reserve of wealth. unit of account. store of value.

medium of exchange.

If the aggregate price level doubles: the money supply will also double. neither money demand nor the money supply will rise. both money demand and the money supply will rise proportionally. money demand at any given interest rate will also double.

money demand at any given interest rate will also double.

The circular-flow diagram shows how: banks receive money from households and lend it to firms. money, goods and services, and factors of production flow through the economy. the government redistributes taxes to individuals and other levels of government to meet the needs of society. education and training of the work forces raises labor productivity.

money, goods and services, and factors of production flow through the economy.

The circular-flow diagram shows the flow of _____, the flow of _____, and the flow of _____. goods and services; firms; money money; goods and services; factors of production factors of production; money; households goods and services; factors of production; markets

money; goods and services; factors of production

Holding everything else constant, the government's budget balance during an expansion will: remain the same. move toward a larger surplus or reduced deficit. be equal to 100. move toward a reduced deficit or a smaller surplus.

move toward a larger surplus or reduced deficit.

Which factor would be classified as a tool of monetary policy used by the Federal Reserve? I. tax rates II. government purchases of goods and services I only neither I nor II II only I and II

neither I nor II

Table: Comparative Advantage I, Japan and Norway produce only two goods, tuna and computers, and this table shows the maximum amount that each nation can produce of the two goods. Japan Norway Tuna. 100,000 boxes. 50,000 boxes Computers10,000. 10,000 Japan has a comparative advantage in the production of: computers only. tuna only. both computers and tuna. neither computers nor tuna.

neither computers nor tuna.

Table: Comparative Advantage I, Japan and Norway produce only two goods, tuna and computers, and this table shows the maximum amount that each nation can produce of the two goods. Japan Norway Tuna. 100,000 boxes. 50,000 boxes Computers10,000. 10,000 Norway has an absolute advantage in the production of: computers only. tuna only. both computers and tuna. Correct! neither computers nor tuna.

neither computers nor tuna.

If the economy is in a recessionary gap: it will remain in a recession forever without any kind of government intervention. nominal wages will fall and SRAS will shift to the right until the economy is at full employment. AD will shift to the right and prices of goods will rise until the economy goes back to producing potential output. nominal wages will rise, SRAS will shift to the left, and the economy will eventually restore itself.

nominal wages will fall and SRAS will shift to the right until the economy is at full employment.

If an economy is in short-run equilibrium, with aggregate output above potential output: nominal wages will start to rise. the economy is in long-run equilibrium. the SRAS curve will shift to the right over time. unemployment is above the natural rate of unemployment. ​

nominal wages will start to rise.

The intersection of the aggregate demand curve and long-run aggregate supply curve: determines the equilibrium price level in both the long run and the short run. occurs at potential output. determines equilibrium real GDP in both the long run and the short run. occurs at high levels of cyclical unemployment. ​

occurs at potential output.

As long as people have different _____, everyone has a comparative advantage in something. direct costs benefits levels of utility opportunity costs

opportunity costs

If the production possibility frontier is a straight line: there is no trade-off between the two goods represented. opportunity costs are constant. firms face decreasing costs. firms face increasing costs.

opportunity costs are constant.

The aggregate price level is the: average price of shares on the stock market. average price of commodities. overall level of prices. same as the average price of gasoline.

overall level of prices.

The inflation rate is the: price level in the current year minus the price level in the previous year. price level in the current year plus the price level in the previous year. percentage change in the price level from one year to the next. price level in the current year multiplied by the price level in the previous year.

percentage change in the price level from one year to the next.

If the Federal Open Market Committee decides to decrease the federal funds target rate, it will: perform an open market purchase. perform an open market sale. increase the demand for money. offer tax breaks to specific businesses.

perform an open market purchase.

The federal government's LARGEST source of revenue is: property taxes. personal income and corporate profit taxes. sales taxes. social insurance taxes.

personal income and corporate profit taxes.

The LARGEST source of federal tax revenues is: sales taxes. corporate income taxes. property taxes. personal income taxes.

personal income taxes.

"Unemployment decreased to its lowest level in 10 years last month." This statement is a(n): example of an opportunity cost. positive economic statement. normative economic statement. value judgment.

positive economic statement.

The dictator of a small country restricts the price of cars to an amount less than or equal to $1,200 (a price below the equilibrium price for cars). Such a policy would set a: price floor price ceiling quota tariff

price ceiling

If the price of beef decreases, you can usually expect the: supply of beef to increase. quantity of beef supplied to increase. quantity of beef supplied to decrease. supply curve for beef to shift to the right.

quantity of beef supplied to decrease.

When the price of lamps increases, the: supply increases. quantity supplied increases. supply decreases. quantity supplied decreases.

quantity supplied increases.

When the government policy is to regulate the quantity of a good that can be bought and sold rather than the price at which it is transacted, it uses a: price control. quota. price floor. price ceiling.

quota.

Which of the following is a microeconomic topic? reasons why a consumer buys more cheese reasons why inflation is rising what the government will do to address unemployment the effect of the budget deficit on the rate of interest

reasons why a consumer buys more cheese

When short-run aggregate supply increases, the short-run aggregate supply curve shifts to the _____, and the quantity of aggregate output that producers are willing to supply _____. right; decreases right; increases left; decreases left; increases

right; increases

In a competitive market, if the quantity demanded exceeds the quantity supplied, we expect prices to: stay the same. rise. fall. rise first, then fall when demand decreases.

rise.

If real GDP falls while nominal GDP rises, then prices on average have: risen. fallen. stayed the same. Real GDP cannot rise when nominal GDP falls.

risen.

Cyclical unemployment: rises during a recession. falls during a recession. rises during an expansion. is a part of natural unemployment.

rises during a recession.

Cyclical unemployment: rises during recessions. falls during recessions. rises during expansions. contributes to the natural rate of unemployment.

rises during recessions.

The national debt _____ when the federal government runs a _____. falls; deficit rises; surplus stays the same; surplus rises; deficit

rises; deficit

Period of recessions are likely to be marked by: rising unemployment. constant unemployment increasing employment constant employment

rising unemployment.

Economists generally believe that during an expansion, an economy should: balance its budget. run a budget deficit. run a budget surplus. be able to pay off all of its debt.

run a budget surplus.

In our interactions with other consumers (or individuals), we are forced to make choices because of: utility and demand exploitation. efficiency considerations. scarcity. decisions made at the margin.

scarcity

Refer to Figure: An Increase in Aggregate Demand. Assume that the economy is initially in long-run equilibrium at YP and P1. Now suppose consumers and firms become more optimistic. This will:

shift the aggregate demand curve from AD1 to AD2.

If there is an inflationary gap, discretionary fiscal policy will likely include action to: shift the aggregate demand curve to the right. prevent the aggregate demand curve from shifting. shift the aggregate demand curve to the left. shift both the aggregate demand curve and the short-run aggregate supply curve to the left.

shift the aggregate demand curve to the left.

Suppose that consumer expectations improve. The aggregate demand curve will undergo a: shift to the left. movement upward. shift to the right. movement downward.

shift to the right.

In building an economic model, economists: simplify reality to highlight important relationships between variables. attempt to replicate reality in as much detail is possible. ignore empirical facts, instead basing their assumptions on theory. shun the scientific method.

simplify reality to highlight important relationships between variables.

When we keep part of our wealth in a savings account, money is playing the role mainly of: medium of exchange. unit of account. barter. store of value.

store of value.

If people demand fewer Netflix subscriptions when the price of Hulu subscriptions falls, then Netflix and Hulu are: not related. substitutes. complements. inferior goods.

substitutes.

Bank reserves are: the money in bank vaults only. the amount of cash that a bank must hold to pay FDIC insurance premiums. the currency held at bank vaults plus bank deposits at the Federal Reserve. the entire amount of checkable bank deposits.

the currency held at bank vaults plus bank deposits at the Federal Reserve.

The point where the long-run aggregate supply curve intersects the horizontal axis is: the point that reflects the economy's actual output. the economy's potential output. the level of real GDP the economy would produce if all prices were flexible and wages were fixed. impossible to attain.

the economy's potential output.

The market for apples is in equilibrium at a price of $0.50 per pound. If the government imposes a price ceiling in the market at $0.40 per pound: quantity supplied will increase. there will be a shortage of the good. the price ceiling will not affect the market price or output. quantity demanded will decrease.

there will be a shortage of the good.

Bank reserves are: gold kept in the bank's vault. the fraction of deposits kept in gold with the Federal Reserve. the fraction of deposits kept in the form of very liquid assets. the deposits lent to finance illiquid investments.

the fraction of deposits kept in the form of very liquid assets.

Every year more and more purchases are made with credit cards on the Internet. Given this trend, all else equal, we would expect: the money demand curve to shift outward. the money demand curve to shift inward. a downward movement along a fixed money demand curve. an upward movement along a fixed money demand curve.

the money demand curve to shift inward.

Suppose that, in a given year, fewer purchases are made online with credit cards. Given this trend, all else equal, we would expect: the money demand curve to shift outward. the money demand curve to shift inward. a downward movement along a fixed money demand curve. an upward movement along a fixed money demand curve.

the money demand curve to shift outward.

The rate of unemployment when the economy is at full employment is: zero the natural rate. the structural rate. less than the full employment rate of unemployment.

the natural rate.

The rate of unemployment when the economy is at full employment is: zero. the natural rate. the structural rate. less than the full employment rate of unemployment.

the natural rate.

unemployment rate is:

the number of area residents without a job and looking for work divided by the total number of area residents in the labor force.

A shift of the demand curve for fried chicken would NOT be caused by a change in: income. the price of fried chicken. the price of pizza. the popularity of fried chicken.

the price of fried chicken.

a shift of the demand curve for fried chicken would NOT be caused by a change in: income. the price of fried chicken. the price of pizza. the popularity of fried chicken.

the price of fried chicken.

Aggregate demand will increase if: the public becomes more optimistic about future income. government spending falls. the aggregate price level falls. household wealth decreases.

the public becomes more optimistic about future income.

An increase in the aggregate price level will increase: (pay attention to movement vs shift) aggregate demand. the quantity of aggregate output demanded. short-run aggregate supply. the quantity of aggregate output supplied in the short run.

the quantity of aggregate output supplied in the short run.

We have to make choices because: the resources available to us are scarce. the resources we would like to use in production are infinite. we have unlimited income and must decide what to purchase. with good planning, trade-offs can be avoided.

the resources available to us are scarce.

The full-time labor force is

the sum of the full-time employed and unemployed. (Full-time employed,Not working but looking for work, Part-time employed)

You decide to join the football team, but this means you can't join the basketball team, as the practices for the two teams occur at the same time. Which economic principle does this statement BEST represent? The true cost of something is its opportunity cost. "How much" is a decision at the margin. People usually respond to incentives, exploiting opportunities to make themselves better off. There are gains from trade.

the true cost of something is its opportunity cost.

Opportunity cost is: a payment not made for a product. the amount you pay to take advantage of a lucrative opportunity. the value of the best alternative forgone in making a choice between alternatives. the benefit derived from a product.

the value of the best alternative forgone in making a choice between alternatives..

The aggregate demand curve is negatively sloped in part because of the impact of: the wealth effect on consumption. the interest rate effect on government spending. the stickiness of nominal wages and salaries. the flexibility of nominal wages and salaries.

the wealth effect on consumption.

the natural rate of employment is achieved when: the actual rate of unemployment is zero. it is above the actual rate of unemployment. the quantity of labor supplied is equal to the quantity of labor demanded. there is no cyclical unemployment.

there is no cyclical unemployment.

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

tires General Motors purchased from Goodyear for new electric cars

Medicaid, Medicare, and Social Security are examples of: monetary policy. unilateral payments. taxes. transfer payments.

transfer payments.

For a student who owns his or her own apartment near the university campus and so does not need to live in a dorm, the cost of going to university is: tuition, the cost of school supplies, and forgone income. tuition, the cost of housing, and the cost of school supplies. tuition and the cost of housing. forgone income only.

tuition, the cost of school supplies, and forgone income.

point to the right side of PPF that is not on line is:

unattainable, all other things unchanged

Suppose that Allison has an accounting degree, but she lost her job two months ago when her company merged with another firm. Allison hasn't been able to find another accounting job, so she has taken a part-time job as a sales clerk at a clothing store. The Bureau of Labor Statistics classifies Allison as: a marginally attached worker. a discouraged worker. underemployed. unemployed.

underemployed.

When we put a price on a meal, money is playing the role primarily of: barter token. store of value. unit of account. medium of exchange.

unit of account.

The costs that arise from the way inflation makes money a less reliable unit of measurement are: shoe-leather costs. menu costs. unit-of-account costs. medium of exchange costs.

unit-of-account costs.

Because the aggregate price level has no effect on aggregate output in the long run, the long-run aggregate supply curve is: vertical. upward sloping. horizontal. downward sloping.

vertical.

Nominal wages are sticky because: wages are slow to rise when there are labor shortages and slow to fall even when the level of unemployment is significant. wages remain fixed in the long run, increasing the profitability of the firms. wages are slow to fall when there are labor shortages and slow to rise even when the level of unemployment is significant. in the long run all wages are adjusted for inflation.

wages are slow to rise when there are labor shortages and slow to fall even when the level of unemployment is significant.

For an economist, the cost of a good is: the dollar amount of money you paid to get it. the quantity of resources used to produce it. always equal to the true market value of the good. what you gave up to get it.

what you gave up to get it.

Ralph is offered a free ticket to a Yankees game—a ticket he cannot resell. His opportunity cost of going to the baseball game is: zero—the ticket was free. the price listed on the ticket. whatever Ralph would have done had he not gone to the game. the price listed on the ticket and whatever Ralph would have done had he not gone to the game.

whatever Ralph would have done had he not gone to the game.

in Europe, the minimum wage has led to: widespread evasion of the minimum wage law in the black market for labor. a proliferation of large companies in Italy. lower unemployment, especially among young workers. European governments hiring the surplus of workers.

widespread evasion of the minimum wage law in the black market for labor.

One of the consequences of the minimum wage has been: -decreased unemployment for low-skill workers. -workers offering to work off the books for less than the minimum wage. -lower production costs for small businesses. -increased employment for high-skill workers.

workers offering to work off the books for less than the minimum wage.

Economists claim that the unemployment rate can understate the true level of unemployment because the ONLY group that is included is: discouraged workers. marginally attached workers underemployed workers. workers without jobs who have looked for work in the past four weeks.

workers without jobs who have looked for work in the past four weeks.

You can spend $300 on either a pair of new Air Jordan sneakers or a new skateboard. If you choose to buy the Air Jordans, the opportunity cost is: $300. your enjoyment of the new skateboard. both the $300 and your enjoyment of the new skateboard. impossible to determine.

your enjoyment of the new skateboard.