Macroeconomics Exam 4
A government budget deficit ________ the ________ interest rate and crowds out private investment, which ________ real GDP growth. A. raises; real; slows This is the correct answer.B. lowers; nominal; slows C. raises; nominal; slows D. lowers; real; slows E. raises; real; accelerates
A
A nation that has invested more in the rest of the world than other countries have invested in it is called a A. creditor nation. This is the correct answer.B. saver nation. C. net borrower. D. debtor nation. E. net lender.
A
As a result of U.S. tariffs imposed on wool from New Zealand, the quantity of this wool that is imported has A. decreased. This is the correct answer.B. not changed. C. increased a little. D. increased a lot. E. changed but whether it has increased or decreased is ambiguous.
A
As the U.S. exchange rate ________, the price of U.S. imports increases and the quantity supplied of dollars ________. A. falls; decreases This is the correct answer.B. rises; increases C. falls; increases D. falls; does not change E. rises; decreases
A
Automatic stabilizers are defined as A. policy that stabilizes without the need for action by the government. This is the correct answer.B. discretionary policy taken to stabilize the economy. C. actions taken by an act of Congress to stabilize the economy. D. policy that has no multiplier effects. E. actions taken by the President without Congressional consent to stabilize the economy.
A
If government expenditure on goods and services increase by $100 billion, then aggregate demand A. increases by more than $100 billion. This is the correct answer.B. increases by $100 billion. C. remains unchanged. D. decreases by more than $100 billion. E. increases by less than $100 billion.
A
If the exchange rate ________, the quantity of dollars demanded ________ and there is a movement up along the ________ curve for dollars. A. rises; decreases; demand This is the correct answer.B. rises; increases; demand C. falls; decreases; demand D. falls; increases; supply E. rises; decreases; supply
A
If we look at the federal government budget over the past 40 years we see that A. most years the budget has been in deficit. This is the correct answer.B. the government has been running a budget deficit since 1997. C. most years the government budget has been balanced. D. only occasionally has the budget been in deficit. E. most years the budget balance has not been calculated.
A
In the 1980s, the U.S. government forced Japanese automakers to limit their exports to the United States. The union representing the autoworkers (UAW), argued that otherwise the U.S. auto industry would have contracted. The UAW's argument is the ________ argument for protection. A. save domestic jobs This is the correct answer.B. infantminusindustry C. bringing diversity and stability D. antiminusdumping E. national security
A
In 2002, President Bush imposed a tariff on imported steel. He did so in response to rent seeking by A. domestic steel producers. This is the correct answer.B. foreign steel consumers. C. foreign politicians. D. domestic steel consumers. E. foreign steel producers.
A
The typical relationship between a worker's productivity and the worker's wage rate is A. low productivity workers receive low wage rates. This is the correct answer.B. no link between productivity and wages earned. C. that workers with high productivity need to have their high wages protected by tariffs. D. high productivity workers receive low wage rates. E. high productivity workers find that their jobs are often outsourced.
A
To appreciate the U.S. dollar against the Mexican peso, in the foreign exchange market the Fed could ________ dollars and ________ pesos. A. buy; sell This is the correct answer.B. buy; buy C. sell; buy D. sell; sell E. None of the above answers are correct because the Fed cannot affect the U.S. exchange rate.
A
When an economy experiences a recession there is A. a downward movement along the shortminusrun Phillips curve. This is the correct answer.B. a rightward shift of the shortminusrun Phillips curve. C. an upward movement along the shortminusrun Phillips curve. D. a leftward shift of the shortminusrun Phillips curve. E. no change in the shortminusrun Phillips curve.
A
Which of the following is an example of an automatic fiscal policy action? A. increased unemployment payments resulting from higher unemployment This is the correct answer.B. a decrease in the tax rate resulting from an effort to increase aggregate demand to combat a recession C. an increase in spending on defense goods resulting from increased world tensions D. an increase in the tax rate resulting from a desire to shrink the budget deficit E. None of the above answers are correct.
A
A fall in the federal funds rate leads to A. a rise in the price level. This is the correct answer.B. a rise in the real interest rate. C. a decrease in the quantity of money. D. a decrease in real GDP. E. a decrease in investment.
A. a rise in the price level.
When the Fed ________, the U.S. foreign exchange rate falls. A. buys government securities This is the correct answer.B. increases the size of the multiplier C. raises the interest rate D. sells government securities E. raises taxes on interest income
A. buys government securities
The figure shows the market for bank reserves in Futureland. If the Bank of Futureland undertakes an open market purchase of government securities that changes the quantity of reserves by $25 billion, then the federal funds rate will ________. A. fall to 4 percent a year This is the correct answer.B. remain at 6 percent a year C. rise to 8 percent a year D. change but more information is needed to determine by how much E. None of the above answers is correct.
A. fall to 4 percent a year
A cyclical deficit is the budget deficit that occurs when i. actual output is at potential output. ii. the economy is at full-employment output. iii. tax revenues and outlays are not at their full-employment levels. A. iii only. This is the correct answer.B. i and iii only. C. ii only. D. i and ii only. E. i only.
A. iii only.
If government expenditure on goods and services increase by $10 billion, then aggregate demand A. increases by $10 billion multiplied by the government expenditure multiplier. This is the correct answer.B. increases by $10 billion multiplied by the tax multiplier. C. decreases by $10 billion. D. decreases by $10 billion multiplied by the government expenditure multiplier. E. increases by $10 billion.
A. increases by $10 billion multiplied by the government expenditure multiplier.
A nation has a comparative advantage in a good when it has a A. lower opportunity cost of producing the good. This is the correct answer.B. higher opportunity cost of producing the good. C. higher absolute cost of producing the good. D. tariff in place protecting the producers of the good. E. lower absolute cost of producing the good.
A. lower opportunity cost of producing the good.
A nation that currently has a surplus in its current account is called a A. net lender. This is the correct answer.B. creditor nation. C. capital account surplus nation. D. net borrower. E. debtor nation.
A. net lender.
The trade between countries is recorded in accounts called the balance of A. payments accounts. This is the correct answer.B. U.S. official trade account. C. international trade accounts. D. currency accounts. E. export and import accounts.
A. payments accounts.
After a tariff is imposed on a good, the price of the good A. rises. This is the correct answer.B. rises only if the domestic demand for the good does not change. C. falls. D. might rise, fall, or not change depending on whether the government did or did not simultaneously impose a quota. E. does not change.
A. rises.
In the long run, the real interest rate is determined by A. saving supply and investment demand. This is the correct answer.B. Fed actions. C. the nominal interest rate. D. the multiplier effect. E. the expected inflation rate.
A. saving supply and investment demand.
nduced taxes are defined as taxes A. that vary with real GDP. B. enacted by Congress that explicitly state the amount to be paid. C. that rise in recessions and fall in expansions. D. that are avoided with the use of legal tax shelters. E. we are forced to pay for services from the government.
A. that vary with real GDP.
Government expenditure ________ change potential GDP and taxes ________ change potential GDP. A. can; can This is the correct answer.B. cannot; can C. can; cannot D. cannot; cannot E. None of the above answers is correct.
A. can; can
After a nation starts importing a good from overseas, the domestic price of the good A. rises. B. falls. This is the correct answer.C. might change, but more information about what the country exports is needed to determine if the price rises, falls, or does not change. D. might change, but more information about what else the country imports is needed to determine if the price rises, falls, or does not change. E. stays the same.
B
Along a shortminusrun Phillips curve, the A. longminusrun cost of lower inflation is higher unemployment. B. shortminusrun cost of lower unemployment is higher inflation. This is the correct answer.C. shortminusrun benefit of lower unemployment is lower inflation. D. shortminusrun cost of higher inflation is a higher real interest rate. E. shortminusrun cost of lower inflation is higher interest rates.
B
An increase in the U.K. interest rate ____ the demand for U.S. dollars and ____ the exchange rate. A. increases; depreciates B. decreases; depreciates This is the correct answer.C. does not change; does not change D. increases; appreciates E. decreases; appreciates
B
Comparing the aggregate supply curve and the shortminusrun Phillips curve, we see that they A. both exist because real wage rates are fixed in the short run. B. both exist because money wage rates are fixed in the short run. This is the correct answer.C. each describe different parts of the economy. D. describe the same phenomena but contradict each other. E. both exist since money wages are flexible.
B
In the capital account, the most largest category of international transactions is A. statistical discrepancy. B. foreign investment in the United States. This is the correct answer.C. exports and imports. D. net interest. E. net transfers.
B
The United States switched from being a ________ to being a ________ in the early 1980s, when it started to run large current account ________. A. net borrower; net lender; surpluses B. net lender; net borrower; deficits This is the correct answer.C. net borrower; net lender; deficits D. net lender; net borrower; surpluses E. debtor nation; creditor nation; deficits
B
The expected inflation rate is the inflation rate that people forecast and use to help set A. the natural rate of unemployment. B. the money wage rate. This is the correct answer.C. the real wage rate. D. real GDP. E. the price level.
B
When a nation starts importing a good or service, domestic employment in that industry A. might change, but more information about what the country exports is needed to determine if employment increases, decreases, or does not change. B. decreases. This is the correct answer.C. increases. D. stays the same. E. might change, but more information about what else the country imports is needed to determine if employment increases, decreases, or does not change.
B
When the expected inflation rate ________, the shortminusrun Phillips curve ________. A. rises; shifts downward B. rises; shifts upward This is the correct answer.C. falls; shifts upward D. falls; does not shift E. rises; might shift upward or downward depending on how the longminusrun Phillips curve shifts
B
The United States imports tminusshirts from Asia. As a result, U.S. consumers pay ________ otherwise and Asian producers receive ________ otherwise. A. the same price as; the same price as B. a lower price than; a higher price than This is the correct answer.C. a higher price than; a higher price than D. a higher price than; a lower price than E. a lower price than; a lower price than
B. a lower price than; a higher price than
Which of the following is the Fed's monetary policy instrument? A. the demand for reserves B. the federal funds rate This is the correct answer.C. the core inflation rate D. the supply of reserves E. the output gap
B. the federal funds rate
The figure to the right shows the U.S. market for flipminusflops. With international trade, the equilibrium price in the United States is ________ and the United States ________ flipminusflops. A. $12; exports B. $12; imports This is the correct answer.C. $14; imports D. $14; does not trade E. $12; does not trade
B. $12; imports
If the exchange rate rises, then the quantity of dollars demanded ________ because with the higher U.S. exchange rate, U.S. exports ________. A. increases; decrease B. decreases; decrease This is the correct answer.C. increases; increase D. does not change; do not change E. decreases; increase
B. decreases; decrease
If the dollar falls from 1.25 euros to 1.00 euro, then the dollar has ________ and the euro has ________. A. appreciated; appreciated B. depreciated; appreciated This is the correct answer.C. shrunk; grown D. depreciated; depreciated E. appreciated; depreciated
B. depreciated; appreciated
A rational expectation of the inflation rate is A. an expected inflation rate between 5 percent and 10 percent. B. a forecast based only on the historical evolution of inflation over the last 100 years. C. a forecast based on the forecasted actions of the Fed and other relevant determinant factors. This is the correct answer.D. always correct. E. an expected inflation rate between 1 percent and 5 percent.
C
Because money growth is a major component determining the inflation rate, in order to forecast inflation we should forecast actions by the A. U.S. Mint. B. Congress. C. Fed. This is the correct answer.D. President. E. Office of the Treasury.
C
Discretionary fiscal policy is handicapped by A. automatic stabilizers and induced taxes. B. induced taxes and automatic stabilizers. C. lawminusmaking time lags, estimation of potential GDP, and economic forecasting. This is the correct answer.D. economic forecasting, lawminusmaking time lags, and induced taxes. E. automatic stabilizers, lawminusmaking time lags, and potential GDP estimation.
C
Fluctuations in the current account balance are mainly the result of fluctuations in A. net transfers. B. foreign reserves. C. net exports. This is the correct answer.D. imports of capital. E. net interest.
C
If the Fed tries to lower the unemployment rate so it is lower than the natural unemployment rate, in the long run the SRPC ________ and the LRPC ________. A. shifts downward; does not change B. does not change; shifts rightward C. shifts upward; does not change This is the correct answer.D. shifts downward; shifts leftward E. does not change; does not change
C
If the U.S. dollars depreciates against the euro, what can the Fed do to keep the dollar's exchange rate stable? A. sell dollars in the foreign exchange market B. nothing C. buy dollars in the foreign exchange market This is the correct answer.D. buy euros in the foreign exchange market E. decrease U.S. imports by increasing tariffs
C
If the exchange rate is constant and U.S. imports increase, then in the foreign exchange market the A. demand for U.S. dollars increases. B. quantity of U.S. dollars supplied increases. C. supply of U.S. dollars increases. This is the correct answer.D. supply of U.S. dollars decreases. E. quantity of U.S. dollars supplied decreases.
C
If the prices for the same goods and services are different in two nations, the exchange rate adjusts over the long run to achieve A. a zero current account balance between the two nations. B. zero net exports for each nation. C. purchasing power parity between the two currencies. This is the correct answer.D. balance of payments account between the two nations equal to zero. E. interest rate parity.
C
If the world price of a good is below the nominustrade domestic price, a country A. has a comparative advantage in the production of that good. B. will not engage in trade for that good. C. will benefit from importing the good. This is the correct answer.D. will benefit from exporting the good. E. cannot benefit from trade.
C
Ignoring any supplyminusside effects, when taxes are hiked, real GDP ________ and the price level ________. A. decreases; rises B. increases; falls C. decreases; falls This is the correct answer.D. decreases; does not change E. increases; rises
C
In order to reduce inflationary pressure on the economy, what fiscal policy can the government use? A. cut taxes B. cut interest rates C. raise taxes This is the correct answer.D. increase the quantity of money E. increase government expenditure on goods and services
C
Of the following, which group is hurt by a tariff? A. domestic producers of the good B. foreign consumers of the good C. domestic consumers of the good This is the correct answer.D. foreign government E. domestic government
C
On the longminusrun Phillips curve, the unemployment rate A. and inflation rate can take any value. B. decreases when the inflation rate increases. C. equals the natural unemployment rate but the inflation rate can be any value. This is the correct answer.D. can be any value but the inflation rate equals the expected inflation rate. E. equals the natural unemployment rate and the inflation rate equals the expected inflation rate.
C
One of the major reasons why the United States exports jet airplanes is because Boeing faces ________ opportunity cost than firms in other nations in the production of such aircraft. A. an identical B. a nonexistent C. a lower This is the correct answer.D. an unrelated E. a higher
C
The two main reasons why international trade is restricted is because restricting trade means that governments can ________ and because domestic businesses ________. A. prevent dumping; want to dump B. rent seek; want to dump C. obtain revenue; rent seek This is the correct answer.D. rent seek; obtain revenue E. create jobs; earn profits
C
The government's holdings of foreign currency is recorded in the A. capital account. B. current account. C. official settlements account. This is the correct answer.D. currency account. E. money account.
C
The supply-side effects show that a tax cut on labor income ________ the supply of labor and ________ employment. A. decreases; decreases B. increases; does not change C. increases; increases This is the correct answer.D. increases; decreases E. decreases; increases
C
When a nation exports a good or service in which it has a comparative advantage, employment in that industry A. stays the same. B. decreases. C. increases. This is the correct answer.D. might change, but more information about what else the country exports is needed to determine if employment increases, decreases, or does not change. E. might change, but more information about what the country imports is needed to determine if employment increases, decreases, or does not change.
C
When a nation exports a good or service in which it has a comparative advantage, production of the good or service A. decreases. B. stays the same. C. increases. This is the correct answer.D. might change, but more information about what the country imports is needed to determine if production increases, decreases, or does not change. E. might change, but more information about what else the country exports is needed to determine if production increases, decreases, or does not change.
C
When the U.S. interest rate differential ________, the demand for dollars ________ and the demand curve for dollars shifts rightward. A. rises; decreases B. rises; does not change C. rises; increases This is the correct answer.D. falls; decreases E. falls; increases
C
When the economy is in a recession, ________ taxes decrease while ________ spending increases and, as a result of this automatic fiscal policy, aggregate demand ________. A. induced; discretionary; is not changed B. needsminustested; induced; decreases C. induced; needsminustested; increases This is the correct answer.D. discretionary; induced; is not changed E. discretionary; needsminustested; increases
C
When the government's outlays exceed its tax revenue, the national debt A. does not change because it has nothing to do with government outlays and tax revenue. B. shrinks thanks to the budget surplus. C. grows to finance the budget deficit. This is the correct answer.D. shrinks thanks to the budget deficit. E. grows to finance the budget surplus.
C
Which of the following is an example of a fiscal stimulus? A. decrease in transfer payments B. increase in taxes C. decrease in taxes This is the correct answer.D. decrease in government expenditure on goods and services E. none of the above
C. decrease in taxes
An income tax hike A. increases potential GDP. B. increases employment. C. decreases potential GDP. This is the correct answer.D. Both answers B and C are correct. E. Both answers A and B are correct.
C. decreases potential GDP.
The interest rate banks charge each other on loans of reserves is called the A. required reserve rate. B. coupon rate. C. federal funds rate. This is the correct answer.D. discount rate. E. real interest rate.
C. federal funds rate
President Reagan often stated he preferred supply side policies. Which of the following federal government policies would be considered supply side? i. decrease the quantity of money ii. lower taxes iii. lower the interest rate. A. iii only B. i only C. ii only This is the correct answer.D. i, ii, and iii E. i and iii
C. ii only
The infantminusindustry argument for protection is based on the idea of A. saving jobs in the U.S. economy. B. absolute advantage. C. learningminusbyminusdoing. This is the correct answer.D. quotas are the least harmful method of protecting domestic firms. E. dumping.
C. learningminusbyminusdoing.
The official settlements account contains data on A. official governmental complaints between countries. B. capital imports and exports. C. official reserves. This is the correct answer.D. trade complaints that are officially settled. E. officials' expenses.
C. official reserves.
The ________ always equals zero. A. sum of current account plus official settlements account B. sum of current account plus capital account C. sum of current account plus capital account plus official settlements account This is the correct answer.D. sum of capital account plus official settlements account E. official settlements account
C. sum of current account plus capital account plus official settlements account
One problem with the ripple effect from the Fed's monetary policy is A. the frequent misalignment of the spread between the Federal funds rate and the Federal funds rate target. B. that changing the Federal funds target rate seldom has an effect on the markets for reserves and loanable funds. C. the fact that the monetary policy transmission process is long and drawn out. This is the correct answer.D. that the Fed's policy sometimes has a large impact on potential GDP as well as its usual impact on aggregate demand. E. the tight relationship between that the Federal funds rate has to aggregate spending.
C. the fact that the monetary policy transmission process is long and drawn out.
The exchange rate between the United States and Japan A. does not exist. B. consistently decreases over time. C. fluctuates, sometimes rising and sometimes falling. This is the correct answer.D. consistently increases over time. E. is fixed so it does not change.
C. fluctuates, sometimes rising and sometimes falling.
A country reports that its inflation rate and unemployment rate have both increased. These changes could be the result of A. a movement upward along the shortminusrun Phillips curve. B. a downward shift of the shortminusrun Phillips curve. C. a leftward shift of the longminusrun Phillips curve. D. an upward shift of the shortminusrun Phillips curve. This is the correct answer.E. a movement downward along the shortminusrun Phillips curve.
D
Discretionary fiscal policy is defined as fiscal policy A. left to the discretion of military authorities. B. initiated by a Presidential proclamation. C. triggered by the state of the economy. D. initiated by an act of Congress. This is the correct answer.E. with multiplier effects.
D
For most of the years since 1981, the United States has had A. balanced trade. B. a capital account deficit. C. an official settlements account deficit. D. a current account deficit. This is the correct answer.E. a large official settlements balance.
D
If the economy is in an equilibrium with real GDP less than potential GDP, a fiscal stimulus could move the economy toward potential GDP by simultaneously ________ taxes and ________ government expenditures on goods and services. A. raising; decreasing B. raising; increasing C. cutting; decreasing D. cutting; increasing This is the correct answer.E. raising; not changing
D
In the current account, the most largest category of international transactions is A. net interest. B. statistical discrepancy. C. international investment. D. imports. This is the correct answer.E. net transfers.
D
International trade decreases the demand for workers in domestic industries that A. service imported goods. B. produce the goods in which the nation has a comparative advantage. C. help businesses import and export. D. produce goods that also are imported into the country. This is the correct answer.E. produce goods that are exported from the country.
D
The U.S. interest rate has ________ on the supply of dollars and has ________ on the demand for dollars. A. no effect; no effect B. an effect sometimes; an effect sometimes C. an effect; no effect D. an effect; an effect This is the correct answer.E. no effect; an effect
D
The imposition of a tariff will typically ________ government revenue and ________ domestic production of the good. A. decrease; decrease B. increase; decrease C. decrease; increase D. increase; increase This is the correct answer.E. increase; not change
D
The use of the federal budget to achieve macroeconomic objectives of full employment and sustainable economic growth is A. done only when there is a budget deficit B. called government GDP policy C. called monetary policy D. called fiscal policy This is the correct answer.E. done only when there is a budget surplus
D
Toyota purchases a truck factory in San Antonio, Texas. This purchase is entered into which of the balance of payment accounts? A. trade account B. foreign account C. official settlements account D. capital account This is the correct answer.E. current account
D
Transfer payments include i. Social Security benefits ii. Medicare and Medicaid benefits iii. Unemployment benefits A. iii only. B. i only. C. i and iii only. D. i, ii, and iii. This is the correct answer.E. ii only.
D
Why do governments in lessminusdeveloped nations impose tariffs? A. The national security of the country definitely is improved. B. The nation's total income will be increased. C. The government's lowminuspaid workers are protected from highminuspaid foreign workers. D. The government gains revenue from the tariff. This is the correct answer.E. The government diversify its economy.
D
In the foreign exchange market, the demand for dollars increases and the demand curve shifts if the A. U.S. exchange rate rises. B. U.S. interest rate differential decreases. C. expected future exchange rate falls. D. U.S. interest rate differential increases. This is the correct answer.E. U.S. exchange rate falls.
D. U.S. interest rate differential increases.
Discretionary fiscal policy is a fiscal policy action, such as A. a decrease in tax receipts, initiated by the state of the economy. B. an increase in payments to the unemployed, initiated by the state of the economy. C. an increase in the quantity of money. D. a tax cut, initiated by an act of Congress. This is the correct answer.E. an interest rate cut, initiated by an act of Congress.
D. a tax cut, initiated by an act of Congress.
The figure shows the U.S. market for wheat. When there no international trade, the U.S. price of wheat is ________ per ton and the U.S. equilibrium quantity is ________ tons. A. $16; 300,000 B. $16; 700,000 C. $16; 500,000 D. $14; 500,000 This is the correct answer.E. $14; 300,000
D. $14; 500,000
Which of the following is a monetary policy goal? i. keeping the inflation rate low ii. attaining maximum employment iii. keeping the longminusterm interest rate at a moderate level A. iii only B. ii only C. i only D. i, ii, and iii This is the correct answer.E. i and iii
D. i, ii, and iii
An increase in the supply of bank loans ________ the supply of loanable funds so the real interest rate ________ and investment ________. A. increases; falls; decreases B. increases; rises; increases C. decreases; falls; increases D. increases; falls; increases This is the correct answer.E. decreases; rises; increases
D. increases; falls; increases
When tax revenue ________ outlays is negative, then the government has a budget ________. A. divided by; surplus B. minus; surplus C. plus; surplus D. minus; deficit E. plus; deficit
D. minus; deficit
A country with a comparative advantage in the production of a good will ________ production of the good and ________. A. not change; import the good B. increase; import the good C. decrease; export the good D. decrease; import the good E. increase; export the good
E
A decrease in taxes should be applied in a situation with A. low unemployment. B. high demand for goods and services. C. a inflationary gap. D. no tax multiplier. E. a recessionary gap.
E
An increase in aggregate demand results in A. a higher unemployment rate and a lower price level. B. a decrease in real GDP and a decrease in the price level. C. an increase in real GDP and a decrease in the price level. D. a lower unemployment rate and a lower price level. E. a lower unemployment rate and a higher price level.
E
Assume the federal government raises taxes (a contractionary fiscal policy). If the tax increase affects AS and AD equally, then real GDP will ________ and the price level will ________. A. decrease; decrease B. increase; decrease C. increase; increase D. increase; be unchanged E. decrease; be unchanged
E
Automatic stabilizers include A. changes in discretionary spending and changes in needsminustested spending. B. changes in induced taxes and changes in discretionary spending. C. changes in the federal funds interest rate brought about by Fed policy. D. increases or decreases of tax rates and changes in needsminustested spending. E. changes in induced taxes and changes in needsminustested spending.
E
Foreign investment in the United States and U.S. investment abroad is recorded in the A. official settlements account. B. current account. C. investment account. D. creditor/debtor account. E. capital account.
E
If the economy has been producing at a point where real GDP is less than potential GDP, what fiscal policy can the federal government use to restore real GDP to potential GDP? A. cut government expenditure on goods and services B. increase taxes C. decrease the quantity of money D. raise the interest rate E. cut taxes
E
If the exchange rate changes from 1.00 euro per dollar to 1.10 euro per dollar, the dollar has A. fallen inversely in value. B. depreciated against the euro. C. depreciated against the dollar. D. appreciated against the dollar. E. appreciated against the euro.
E
If the exchange rate appreciates, then the A. supply of dollars decreases. B. quantity of dollars demanded increases. C. demand for dollars increases. D. demand for dollars decreases. E. quantity of dollars demanded decreases.
E
Moving along a shortminusrun Phillips curve, a reduction in the unemployment rate is achieved by A. reducing the size of the labor force. B. running a federal budget deficit. C. shifting the aggregate supply curve leftward. D. increasing potential GDP. E. increasing the inflation rate.
E
Needsminustested spending A. decreases as unemployment increases. B. decreases in recession. C. increases as real GDP increases. D. makes recessions more severe. E. increases as unemployment increases.
E
The longminusrun Phillips curve represents the relationship between the inflation rate and the unemployment rate when there is no ________ unemployment. A. natural B. seasonal C. frictional D. structural E. cyclical
E
The shortminusrun Phillips curve is A. upward sloping. B. vertical at a constant rate of unemployment. C. horizontal at a constant rate of inflation. D. Uminusshaped. E. downward sloping.
E
The long-run Phillips curve is a vertical line because A. real GDP does not depend on the unemployment rate. B. in the long run, the natural unemployment rate increases when inflation increases. C. the natural unemployment rate only depends on the inflation rate. D. the unemployment rate decreases when the inflation rate increases. E. there is no relationship between the natural unemployment rate and the inflation rate.
E
What is rent seeking with respect to restricting international trade? A. The government avoids paying rent on buildings when importers pay the tariff. B. The rent on factory buildings increases if trade is restricted. C. The government's efforts to capture tariff rents. D. The attempt by importers to avoid paying a tariff. E. An attempt to capture the gains from trade by imposing a tariff.
E
When the United States imports goods from the rest of the world, which of the following parties is harmed? i. domestic producers of the good ii. domestic consumers of the good iii. foreign producers of the good A. ii only B. i and iii C. iii only D. i, ii, and iii E. i only
E
________ occurs when a foreign firm sells its exports at a lower price than its cost of production. A. Tariff avoidance B. Rent seeking C. Nontariff barrier protection D. The trickleminusdown effect E. Dumping
E. Dumping
If supporters of restrictions on imports argue that protection is needed to preserve a strategic industry; which of the following is being used? A. Protecting national culture argument. B. Save domestic jobs argument. C. Infantminusindustry argument. D. Dumping argument. E. National security argument.
E. National security argument.
Who gains from international trade? A. neither the importing nor the exporting nations B. The gains depends on which nation gets to keep the total revenue from the sale C. only the exporting nation D. only the importing nation E. both the importing and the exporting nations
E. both the importing and the exporting nations
Suppose IBM purchases a factory in Japan. This purchase is entered into which of the balance of payments accounts? A. trade account B. official settlements account C. purchases account D. current account E. capital account
E. capital account
Needsminustested spending A. cannot be changed without changes in the laws. B. is giving tax cuts to wealthy people so they will increase their spending. C. is directing government spending and taxes to states that need the most help. D. includes homeland defense spending. E. includes transfer payments such as food stamps and unemployment benefits.
E. includes transfer payments such as food stamps and unemployment benefits.
During the Great Depression, real GDP decreased, unemployment soared, and the inflation rate was negative. Which would have been the appropriate federal government policy combination to improve economic performance? A. decrease government expenditures, increase taxes, do not change the quantity of money B. do not change government expenditures or taxes , increase the quantity of money C. decrease government expenditure, increase taxes, decrease the quantity of money D. increase government expenditure, decrease taxes, decrease the quantity of money E. increase government expenditure, decrease taxes, increase the quantity of money
E. increase government expenditure, decrease taxes, increase the quantity of money
The quantity of U.S. dollars supplied in the foreign exchange market is A. fixed at any given exchange rate. B. unrelated to the exchange rate. C. negatively related to the exchange rate. D. the same as the quantity of for U.S. dollars demanded. E. positively related to the exchange rate.
E. positively related to the exchange rate.
When an import quota is imposed on tomatoes, the price of tomatoes ________ and the quantity bought ________, so domestic consumers ________. A. rises; increases; lose B. rises; decreases; gain C. falls; decreases; lose D. falls; increases; lose E. rises; decreases; lose
E. rises; decreases; lose
Control of monetary policy rests with A. the President. B. the Comptroller of the Currency. C. the Federal Reserve. D. Congress. E. the U.S. Treasury.
c
The Federal Reserve monetary policy goals of maximum employment means A. cyclical unemployment should not necessarily be minimized. B. a zero percent natural unemployment rate. C. aiming for an amount of employment that exceeds full employment. D. a zero percent unemployment rate. E. keeping the unemployment rate close to the natural unemployment rate.
e