AP Macroeconomics Semester 2 FINALS

Which of the following would cause a movement from point S to point R on the short-run Phillips Curve? A. An unanticipated increase in government spending B. An unanticipated adverse supply shock C. A decrease in net investment D. An increase in real interest rates E. An increase in the labor force participation rate

A

A continuous increase in the consumer price index (CPI) is A. deflation B. stagflation C. inflation D. recession E. disinflation

C

A decrease in taxes will necessarily result in an increase in which of the following? A. Nominal gross domestic product B. Unemployment C. Exports D. Marginal Propensity to Save E. Money supply

A

An increase in inventories will increase which component of gross domestic product? A. Personal consumption expenditures B. Investment expenditures C. Government purchases D. Exports E. Imports

B

A nation's unemployment rate is the ratio of the number of unemployed seeking employment to the nation's A. labor force B. potential gross domestic product C. number of employed D. working-age population E. total population

A

60. Which of the following policy actions will directly increase the money supply? A. The central bank purchases government bonds on the open market B. The central bank sells government bonds on the open market C. The government increases taxes without changing its spending D. The government decreases taxes without changing its spending E. The government decreases taxes while simultaneously decreasing its spending

A

An economy is currently operating at the full-employment level of output. Which of the following would result in a recessionary gap in the short run? A. An increase in the costs of production B. An improvement in the productivity of labor C. An increase in money supply D. A positive supply shock E. A decrease in income tax rates

A

An increase in the number of discouraged workers causes the unemployment rate to (A) decrease along with the labor-force participation rate (B) increase while the labor-force participation rate decreases (C) stay the same because the workers are still unemployed (D) decrease while the labor-force participation rate stays the same (E) increase along with the labor-force participation rate

A

Assume that the United States central bank sells government bonds on the open market. How will the sale affect the value of the United States dollar on the foreign exchange market and the United States exports? A. Value of $: Inc; Exports: Dec B. Value of $: No change; Exports: Dec C. Value of $: Dec; Exports: Dec D. Value of $: Dec; Exports: Inc E. Value of $: Inc; Exports: Inc

A

Banks create money when A. they make loans B. the loans they make are repaid C. they keep all excess reserves D. customers increase their cash withdrawals from their savings accounts E. the money multiplier is less than one

A

Economic growth is best measured by a sustained increase in which of the following? A. Per capita real gross domestic product B. Government budget deficits C. Unemployment in unskilled labor markets D. Production of public goods E. Nominal gross domestic product

A

Government investment in human capital is likely to shift A. the aggregate demand curve to the right in the short run and the aggregate supply curve to the right in the long run B. the aggregate demand curve to the left in the short run and the aggregate supply curve to the left in the long run C. the aggregate demand curve to the right in the short run and the long-run Phillips Curve to the right D. the aggregate demand curve to the left in the long run E. the aggregate demand curve to the left in the short run and the long-run Phillips Curve to the left

A

If investment demand becomes less responsive to changes in interest rates, which of the following is true? A. An expansionary fiscal policy results in less crowding out. B. An expansionary fiscal policy results in more crowding out. C. An expansionary monetary policy is more effective. D. A contractionary monetary policy is more effective. E. An expansionary monetary policy results in more crowding out.

A

If the United States government increases deficit spending, which of the following will occur as a result of the change in the interest rate? A. The United States dollar will appreciate in foreign exchange markets. B. Household savings in the United States will decrease. C. The United States exports will increase. D. The demand for United States dollars will decrease. E. Private investment in plant and equipment in the United States will increase.

A

If the marginal propensity to save is 0.25, a $15 billion increase in government spending will lead to an increase in national income by a maximum of A. $60 billion B? $45 billion C. $15 billion D. $11.25 billion E. $3.75 billion

A

In the foreign exchange market, the exchange rate is defined as A. the price of one currency in terms of another currency B. the price of goods around the world C. the price of a good in terms of another good D. the discount that companies take when goods are returned E. the quantity of a good to be traded for a unit of another good

A

Increases in government subsidies to encourage investment in research and development will affect aggregate demand (AD) and long-run aggregate supply (LRAS) in which of the following ways? A. AD: increase LRAS: increase B. AD: increase LRAS: decrease C. AD: increase LRAS: no change D. AD: decrease LRAS: increase E. AD: decrease LRAS: no change

A

The consumer price index (CPI) does not measure the true cost of inflation because A. improvements in the quality of goods or services are not fully reflected B. lenders are better off when actual inflation is less than anticipated inflation C. borrowers are better off when actual inflation is greater than anticipated inflation D. changes in consumers' real income are not accounted for E. consumers may substitute toward more expensive goods without being significantly worse off

A

The crowding out effect of government spending will be large if A. investment is highly sensitive to changes in the interest rate B. consumption is highly sensitive to changes in wealth C. money demand is highly insensitive to changes in income D. it takes a long time for changes in government spending to cause a change in equilibrium income E. the long-run aggregate supply curve is horizontal

A

The economy is currently in long-run equilibrium. If the central bank increases the money supply, in the long run the price level will A. increase, and output will remain at the full-employment level B. increase, and output will be above the full-employment level C. increase, and output will be below the full-employment level D. remain unchanged, and output will remain at the full-employment level E. remain unchanged, and output will be above the full-employment level

A

To decrease the money supply, a country's central bank can do which of the following? A. Sell government bonds. B. Decrease the discount rate. C. Decrease the required reserve ratio. D. Increase taxes. E. Increase government spending.

A

Which of the following is an example of fiscal policy? A. Decreasing income tax rates B. Increasing the money supply C. Decreasing the discount rate D. Selling government bonds E. Decreasing the required reserve ratio

A

Which of the following is true about the Phillips curve? A. A change in aggregate demand does not shift the long-run Phillips curve (LRPC). B. A change in aggregate demand does not cause a movement along the short-run Phillips curve (SRPC). C. The LRPC shows the trade-off between unemployment and inflation but the SRPC does not. D. Changes in expected inflation affect the LRPC only. E. Negative supply shocks affect the LRPC only.

A

Which of the following shifts the money demand curve to the right? A. An increase in the price level B. A decrease in the price level C. An increase in interest rates D. A decrease in interest rates E. A decrease in the nominal gross domestic product

A

Which of the following statements about inflation is true? A. The expected inflation rate is the difference between nominal and real interest rates. B. Low expected inflation rates lead to high inflation rates. C. Lenders lose from expected inflation. D. Lenders gain from unexpected inflation. E. Workers lose from expected inflation.

A

Which of the following transactions would increase the current account surplus in Japan's balance of payments accounts? (A) A Japan-based company sells roasted coffee to Canada. (B) Mari, a Japanese investor, buys stocks in a Japanese company. (C) Bob, a Canadian, buys stocks in a Japanese company. (D) A Japan-based company buys a piece of equipment from Germany. (E) Artois, a French citizen, works at a Japanese company in Paris

A

Which of the following will cause an increase in the equilibrium real interest rate? A. An increase in investment demand B. An increase in national saving C. An increase in the government budget surplus D. A decrease in the government budget deficit E. The purchase of government bonds by the central bank

A

Which of the following will most likely cause a depreciation in a country's currency? A. An increase in the country's price level B. An increase in the country's real interest rate C. A decrease in the country's expected inflation D. A decrease in the country's real gross domestic product E. A decrease in the country's money supply

A

Which of the following would decrease the United States net exports to South Korea? A. South Korean computer companies sell more computers to the United States. B. South Korean insurance companies provide fewer services to the United States. C. South Koreans spend more vacations in the United States. D. United States banks provide more banking services to South Korea. E. United States smartphone companies sell more smartphones to South Korea.

A

Which of the following would most likely benefit from unexpected deflation? A. Lenders B. Borrowers C. Retail shop owners D. Governments in debt E. Automobile manufacturing firms

A

Which of the following would most likely lead to cost-push inflation in the short run? A. A decrease in labor productivity B. A decrease in income tax rates C. A decrease in consumers' and businesses' optimism about future economic activity D. An increase in government deficit spending to stimulate a weak economic recovery E. Discovery of new sources of energy

A

An increase in both the inflation rate and the unemployment rate can be illustrated by A. a movement along the short-run Phillips Curve B. a rightward shift of the short-run Phillips Curve C. a leftward shift of the short-run Phillips Curve D. a rightward shift of the aggregate demand curve E. a leftward shift of the aggregate demand curve

B

A country can have an increased surplus in its balance of trade as a result of A. an increase in domestic inflation B. declining imports and rising exports C. higher tariffs imposed by its trading partners D. an increase in financial capital inflow E. an appreciating currency

B

An increase in the expected inflation rate will cause the A. short-run Phillips curve to shift to the left B. short-run Phillips curve to shift to the right C. long-run Phillips curve to shift to the left D. long-run Phillips curve to shift to the right E. actual inflation rate to fall below the expected inflation rate

B

An increase in the price of oil, an important input to production, will result in which of the following in the short run? A. A decrease in the price level B. A decrease in short-run aggregate supply C. A decrease in unemployment D. An increase in real wages E. An increase in aggregate demand

B

An increase in the purchases of newly constructed houses will result in which of the following? A. Aggregate demand will decrease as a result of a decrease in the price level. B. Aggregate demand will increase as a result of an increase in investment spending. C. Aggregate demand will increase as a result of an increase in exports. D. Aggregate demand will not change, since consumer spending has not changed. E. Aggregate demand will not change, since investment spending has not changed.

B

An ongoing increase in the price of oil will result in A. demand-pull inflation B. cost-push inflation C. expansionary fiscal policy D. a decrease in the prices of substitute forms of energy E. deflation

B

As an indicator of an impending recession, inventories will most likely A. decrease as a result of a decrease in consumption B. increase as a result of a decrease in consumption C. increase as a result of a decrease in aggregate demand D. decrease as a result of an increase in aggregate supply E. remain constant as a result of economic uncertainty

B

Assume that Country X and Country Y are trading partners. If the average income in Country X increases, which of the following will occur in the foreign exchange market? A. The demand for Country X's currency will increase, and Country X's currency will appreciate. B. The demand for Country Y's currency will increase, and Country X's currency will depreciate. C. The demand for Country Y's currency will increase, and Country X's currency will appreciate. D. The supply of Country X's currency will decrease, and Country X's currency will appreciate. E. The supply of Country Y's currency will increase, and Country Y's currency will depreciate.

B

Assume the government reduces its spending and raises income taxes in an effort to reduce the budget deficit. The most likely short-run result will be an increase in A. interest rates B. unemployment C. the money supply D. the price level E. Personal savings

B

Country X's government increases its spending without raising taxes. Which of the following is true about the effect on Country X's real interest rates and its subsequent effect on Country X's net exports? A. Real interest rates increase and net exports increase. B. Real interest rates increase and net exports decrease. C. Real interest rates increase with no change in net exports. D. Real interest rates decrease and net exports increase. E. Real interest rates decrease and net exports decrease.

B

Fred Jones withdraws $1,000 in cash from his savings account. What immediate effect does this transaction have on the monetary aggregate measures of M1 and M2? A. M1: increase M2: decrease B. M1: increase M2: no change C. M1: decrease M2: no change D. M1: no change M2: decrease E. M1: no change M2: no change

B

How will an increase in demand and a simultaneous decrease in supply affect the equilibrium price and quantity of a good in a market? A. Price: Increase Quantity: Increase B. Price: Increase Quantity: indeterminate C. Price: decrease Quantity: Increase D. Price: decrease Quantity: indeterminate E. Price: indeterminate Quantity: indeterminate

B

If foreign financial investors no longer see country A as a safe haven, which of the following will most likely occur in the short run? (A) Country A's currency will appreciate. (B) Country A's currency will depreciate. (C) Country A's current account will move toward deficit. (D) Country A's financial account will move toward surplus. (E) Tariff revenues received by country A will decrease as investors seek investment elsewhere.

B

If government spending increases and at the same time a country's central bank sells bonds in the open market, the interest rate and private investment in plant and equipment (P&E) will most likely change in which of the following ways? A. Int Rate: Increase; Private Investment: Increase B. Int Rate: Increase; Private Investment: Decrease C. Int Rate: Increase; Private Investment: No change D. Int Rate: No change; Private Investment: Decrease E. Int Rate: Decrease; Private Investment: Decrease

B

If policy makers use fiscal policy to reduce inflation, which of the following will most likely happen in the short run? A. The unemployment rate will decrease B. The unemployment rate will increase C. The real interest rate will increase D. The nominal interest rate will increase E. The economy will remain at the natural rate of unemployment

B

If the consumer price index increases from 200 to 240 in a one-year period, then the inflation rate is A. 16.67 percent B. 20 percent C. 25 percent D. 40 percent E. 140 percent

B

In the short run, a reduction in the money supply will cause A. a rightward shift in the aggregate demand curve B. a leftward shift in the aggregate demand curve C. a rightward shift in the aggregate supply curve D. a leftward shift in the aggregate supply curve E. a movement along the aggregate demand curve

B

Olivia volunteers full time at an animal shelter and will not accept any offers for a paid job for the next six months. Olivia is A. cyclically unemployed B. not in the labor force C. employed D. structurally unemployed E. a seasonal worker

B

Production Point Shirts. Chairs A 20 0 B. 16. 1 C. 12. 2 D. 8. 3 E. 4. 4 F. 0. 5 The table shows the production possibilities for Country X in producing shirts and chairs when it uses all its available resources. The opportunity cost of producing one additional chair is A. zero B. constant C. increasing D. decreasing E. indeterminate

B

Suppose countries Alphania and Betania produce electronics and apparel using identical resources. Which of the following is true if Alphania exports electronics to and imports apparel from Betania within a free-trade system ? (A) The opportunity cost of producing electronics is higher in Alphania than in Betania. (B) Betania has a comparative advantage in producing apparel, and Alphania has a comparative advantage in producing electronics. (C) Alphania must be specializing in apparel, while Betania is specializing in electronics. (D) Workers in Alphania can produce more apparel per hour than workers in Betania. (E) Consumers in Betania buy more electronics than consumers in Alphania

B

Suppose that a country's nominal gross domestic product (GDP) was $1,000 in year 1 and $2,000 in year 2. If year 1 is the base year and real (GDP) in year 2 was $1,000, which of the following is true? A. Prices fell by 50% between year 1 and year 2. B. Prices doubled between year 1 and year 2. C. Prices remained the same between year 1 and year 2. D. More goods and services were produced in year 2 than in year 1. E. Fewer goods and services were produced in year 2 than in year 1.

B

Thailand and Malaysia are trading partners. If the price level in Thailand decreases relative to the price level in Malaysia, what will happen to Thailand's exports to Malaysia and Thailand's aggregate demand? A. Thailand's Export: Decrease Thailand's Aggregate Demand: Decrease B. Thailand's Export: increase Thailand's Aggregate Demand: increase C. Thailand's Export: increase Thailand's Aggregate Demand: indeterminate D. Thailand's Export: decrease Thailand's Aggregate Demand: decrease E. Thailand's Export: Decrease Thailand's Aggregate Demand: increase

B

The demand curve for money shifts to the right when A. the nominal interest rate decreases B. the nominal gross domestic product increases C. the real gross domestic product decreases D. inflation decreases E. the velocity of money increases

B

Using 2010 as the base year, the gross domestic product (GDP) deflator in 2011 was 97. Which of the following must be true? A. The inflation rate in 2011 was positive. B. The inflation rate in 2011 was negative. C. The inflation rate in 2011 was zero. D. The purchasing power of a dollar decreased by 3 percent. E. The real output increased by 3 percent.

B

When the total amount the government spends equals tax revenues in any given year, which of the following must remain constant? A. The real interest rate B. The national debt C. Real gross domestic product D. The price level E. The money supply

B

Which of the following is a fiscal policy action aimed at reducing unemployment? A. Decreasing government expenditures B. Decreasing income taxes C. Decreasing tax credits D. Increasing nominal interest rates E. Increasing required reserves

B

Which of the following is true about inflation and interest rates? A. The higher the inflation rate, the higher the real interest rate. B. If there is no actual or expected inflation, the nominal and real interest rates are equal. C. If the economy is experiencing deflation, the nominal interest rate exceeds the real interest rate. D. The higher the inflation rate, the lower the nominal interest rate. E. The nominal interest rate is the difference between the real interest rate and the expected inflation rate.

B

Which of the following is true about inflationary expectations? A. The actual unemployment rate equals the natural rate of unemployment if the actual inflation rate exceeds the expected inflation rate. B. The actual unemployment rate equals the natural rate of unemployment when wages fully adjust to expected inflation. C. Expectations are always correct in the short run. D. The actual inflation rate is always equal to the expected inflation rate because of labor contracts. E. The natural rate of unemployment equals the inflation rate when the actual inflation rate equals the expected inflation rate.

B

Which of the following is true when interest rates rise? A. The opportunity cost of holding cash decreases. B. The opportunity cost of holding cash increases. C. The opportunity cost of holding cash stays the same. D. The money demand curve shifts to the right. E. The money supply curve shifts to the right.

B

Which of the following monetary and fiscal policy mixes will reduce unemployment? A. Buying government bonds in the open market and increasing taxes B. Buying government bonds in the open market and decreasing taxes C. Selling government bonds in the open market and increasing government spending D. Selling government bonds in the open market and decreasing government spending E. Selling government bonds in the open market and increasing taxes

B

Which of the following results when the Federal Reserve sells bonds to commercial banks? A. The total assets held by the commercial banks will eventually increase B. The money supply decreases C. The discount rate increases D. The public increases its cash holdings E. The required reserve ratio increases because of decreasing excess reserves

B

Which of the following will cause aggregate supply to increase in Country X? A. An increase in personal income taxes B. The discovery of low-cost alternative sources of energy C. A decrease in labor productivity with no change in nominal wages D. Depreciation of country X's currency on the foreign exchange market E. An increase in the price level

B

Which of the following will happen if a country's government reduces business taxes? A. The short-run Phillips curve will shift to the right B. The short-run aggregate supply curve will shift to the right C. The long-run aggregate supply curve will shift the left D. The aggregate demand curve will shift to the left E. The demand curve for loanable funds will shift to the left

B

With an expansionary fiscal policy, what will most likely happen to the real gross domestic product (GDP) and the nominal interest rate in the short run? A. RGDP: Increase; Nominal Interest Rate: Decrease B. RGDP: Increase; Nominal Interest Rate: Increase C. RGDP: No change; Nominal Interest Rate: No change D. RGDP: Decrease; Nominal Interest Rate: Increase E. RGDP: Decrease; Nominal Interest Rate: Decrease

B

Ying has just graduated from college and is now interviewing for jobs. Ying would best be described as A. cyclically unemployed B. frictionally unemployed C. structurally unemployed D. not in the labor force E. a discouraged worker

B

If real output is $9,000, and the price level is 2, and the velocity of money is 3, then the money supply is A. $3,000 B. $4,500 C. $6,000 D. $18,000 E. $27,000

C

A bank has $200 million in demand deposits and $150 million in reserves. The reserve ratio is 20 percent. What is the maximum amount of loans the bank can make from its reserves? A. $750 million B. $150 million C. $110 million D. $50 million E. $40 million

C

An economy is at full employment equilibrium. If consumers and firms become more optimistic about future income and profits, which of the following will occur in the short-run? A. Aggregate demand will shift rightward, increasing real output and decreasing the price level B. Aggregate demand will shift rightward, decreasing real output and increasing the price level C. Aggregate demand will shift rightward, increasing real output and the price level D. Short-run aggregate supply will shift rightward, increasing real output and the price level E. Short-run aggregate supply will shift rightward, decreasing real output and the price level

C

An increase in government spending that is financed by an equal increase in taxes results in which of the following changes in aggregate demand (AD) and short-run aggregate supply (SRAS) curves? A. AD curve: shifts to the right SRAS Curve: shifts to the right B. AD curve: shifts to the left SRAS Curve: shifts to the left C. AD curve: shifts it the right SRAS Curve: no change D. AD curve: shifts to the left SRAS Curve: no change E. AD curve: no change SRAS Curve: no change

C

An increase in the money supply will result in an increase in A. output in the short run and in the long run B. inflation in the short run and an increase in output in the long run C. inflation in the short run and no change in output in the long run D. output in the long run but not in the short run E. output in the long run and no change in inflation in the short run

C

An increase in which of the following will most likely promote economic growth? A. Taxes on investment B. The price level C. Human capital D. Consumption of nondurable goods E. Interest rates

C

Assume that a nation's real gross domestic product (GDP) grows at a higher rate than its population over a given period of time. It can be concluded that A. the population will grow at a faster rate in the future B. the price level has decreased C. real GDP per capita has increased D. real GDP will rise at a slower rate in the future E. real GDP will rise at a faster rate in the future

C

Assume that the United States current account balance is zero. If the United States dollar appreciates against the Japanese yen, then demand for United States exports will A. increase and result in a deficit in the United States financial account B. increase and result in a surplus in the United States financial account C. decrease and result in a surplus in the United States financial account D. decrease and result in a deficit in the United States financial account E. remain unchanged because the surplus in the current account will be offset by the deficit in the financial account

C

Assume that the marginal propensity to consume is 0.75, net exports decline by $10 billion, and government spending increases by $20 billion. Given that there is no crowding out, the equilibrium gross domestic product can increase by a maximum of A. $7.5 billion B. $15 billion C. $40 billion D. $80 billion E. $120 billion

C

Assuming no government policies, which of the following will occur in the long run if the actual unemployment rate exceeds the natural rate of unemployment? A. Prices will increase. B. Unemployment will increase. C. Wages will fall. D. Aggregate demand will increase. E. Long-run aggregate supply will decrease.

C

Based on the graph above, demand-pull inflation is caused by a movement from A. SRAS1 to SRAS2 B. SRAS2 to SRAS1 C. AD1 to AD2 D. AD2 to AD1 E. YF to Y1

C

Country X produces only apples and bananas. The following table shows prices and quantities of both products in two years. Year 1: Year 2: Price: Quantity: Price: Quantity: Apples: $1. 100. $2. 80 Bananas: $2 50. $2. 60 Assuming year 1 is the base year, what is the nominal and real gross domestic product (GDP) for year 2? A. Nominal GDP: $200 Real GDP: $280 B. Nominal GDP: $200 Real GDP: $200 C. Nominal GDP: 280 Real GDP: 200 D. Nominal GDP: $280 Real GDP: $560 E. Nominal GDP: $560 Real GDP: $280

C

Economic growth is shown by a rightward shift in A. the aggregate demand curve B. the long-run Phillips curve C. the production possibilities curve D. the short-run aggregate supply curve E. the money supply curve

C

Factory X: Bikes 40, Skateboards 60 Factory Y: Bikes 80, Skateboards 60 The graph above shows the production possibilities curve for Factory X and Factory Y. If Factory X uses the same amount of resources to produce skateboards and bikes as Factory Y uses, which of the following is true? A. Factory X has an absolute advantage in producing bikes. B. Factory X has an absolute advantage in producing skateboards. C. Factory X has a comparative advantage in producing skateboards. D. Factory Y has a comparative advantage in producing skateboards. E. Factory Y has an absolute advantage in producing skateboards.

C

For Arthur's graduation gift, Arthur's grandmother gives him a choice: he can receive $1,000 today or $1,050 one year from today. At what annual interest rate would Arthur be indifferent to choosing between the two options? (A) 50% (B) 10% (C) 5% (D) 2.5% (E) 0.5%

C

If an automobile was manufactured in 2006 and sold to a consumer in 2007, what was the effect on gross domestic product in 2006 and 2007? A. 2006: no change 2007: increase B. 2006: decrease 2007: increase C. 2006: increase 2007: no change D. 2006: increase 2007: decrease E. 2006: no change 2007: no change

C

If the government has increased the budget deficit and interest rates have remained constant, which of the following is true? (A) Government spending is less than tax revenue, and the central bank increases the money supply. (B) Government spending is greater than tax revenue, and the central bank keeps the money supply constant. (C) Government spending is greater than tax revenue, and the central bank increases the money supply. (D) Government spending is greater than tax revenue, and the central bank decreases the money supply. (E) Government spending is less than tax revenue, and the central bank keeps the money supply constant

C

If the short-run aggregate supply curve is upward sloping, which of the following will cause inflation? A. An increase in long-run aggregate supply B. An increase in short-run aggregate supply C. An increase in aggregate demand D. A decrease in aggregate demand E. A decrease in aggregate demand and an increase in aggregate supply

C

In the long run, government subsidies that promote the development of technology with widespread business applications will have which of the following effects? A. A negative supply shock and lower price level B. A negative supply shock and lower economic growth rate C. A positive supply shock and lower price level D. A positive supply shock and lower economic growth rate E. A lower aggregate demand and lower price level

C

In the short run, how would a government's budget deficit, national debt, and real output change if government spending increases with no change in taxes? A. Deficit: increase Debt: increase Real output: decrease B. Deficit: increase Debt: decrease Real output: increase C. Deficit: increase Debt: increase Real output: increase D. Deficit: decrease Debt: decrease Real output: increase E. Deficit: decrease Debt: increase Real output: decrease

C

Increased spending on which of the following contributes most to long-term economic growth? A. Social security and other transfer payments B. New automobiles and homes C. Education and infrastructure D. Imported consumer goods E. Interest payments on national debt

C

Increases in human capital can be achieved by which of the following? A. Building more factories B. Reducing immigration of skilled workers C. Improving the quality of job-training programs D. Increasing the physical capital per worker E. Increasing government spending on infrastructure

C

Investment in physical capital is most likely to occur as a result of an increase in A. interest rates B. inflation rates C. business confidence D. money demand E. personal consumption

C

Pat deposits a portion of her wages into a personal savings account every week. The saved money can be considered to be primarily a A. means of payment B. unit of account C. store of value D. measure of value E. medium of exchange

C

The graph above shows the foreign exchange market for the United States dollars in terms of Japanese yen. Assume that there is an increase in United States consumers' preference for Japanese automobiles. Which of the following changes will most likely take place in the market for dollars? A. It will take more yen to purchase the same amount in dollars B. The demand for dollars will increase C. The supply of dollars will increase D. Both the demand for and supply of dollars will decrease E. There will be no change in the foreign exchange market

C

The graph above shows the production possibilities curves (PPC) for an economy. The concept of opportunity cost is best represented by which of the following? A. A shift from PPC1 to PPC2 B. A movement from point A to point D C. A movement from point B to point C D. A movement from point C to point E E. A movement from point D to point B

C

The opportunity cost of an activity is A. the amount of time spent on the activity B. the value of the benefit received from performing the activity C. the value of the forgone benefit of the next best alternative D. zero if the activity offered no benefits E. the sum of benefits from all the sacrificed alternatives

C

The short-run Phillips curve implies there is a trade-off between A. rule making and discretionary policies B. monetary and fiscal policies C. inflation and unemployment D. budget deficits and interest rates E. interest rates and investment

C

Total population: 300 Working age Population: 200 Unemployed: 10 Employed: 90 The table above gives population and labor-market data for an economy. The unemployment rate in this economy is A. 3.3% B. 5% C. 10% D. 33.3% E. 50%

C

When the United States dollar appreciates against the euro, which of the following will most likely happen? A. European firms will pay fewer euros for equipment purchased from the United States. B. European products will become more expensive for United States consumers. C. United States tourists will pay fewer dollars for trips to Europe. D. The European trade deficit will increase. E. The United States trade deficit will decrease.

C

When there is excess demand in the loanable funds market, which of the following will occur? A. National savings will exceed investment spending. B. The economy will remain at full employment. C. Real interest rates will increase. D. An inflationary gap will exist. E. The money supply will increase.

C

Which of the following is a defining characteristic of a fractional reserve banking system? A. The existence of a central bank with a monopoly on money creation B. The use of paper money backed by a commodity such as gold or silver C. The fact that banks retain an amount of bank reserves that is less than the amount of customer demand deposits D. The requirement that banks maintain a certain percentage of their reserves as a deposit in an account at the central bank E. The regulations that separate investment banking from commercial banking

C

Which of the following is correct according to the circular flow model of an economy? A. Taxes received from the public equal government spending. B. Imports equal exports. C. Total spending equals total income. D. Consumption plus saving equals investment. E. Saving plus investment equals imports plus exports.

C

Which of the following is likely to result in an inflow of financial capital to Country Z? A. A decrease in Country Z's government budget deficit B. An increase in personal income tax rates in Country Z C. Increased sales of government bonds by the central bank of Country Z D. An increase in country Z's trade surplus E. Increased political instability in Country Z

C

Which of the following is most likely included in gross domestic product? A. Matt gives his secondhand bicycle to his brother. B. Sal paints his own bicycle. C. Ali buys a new bicycle. D. Mike buys a share of stock in a bicycle firm. E. Daniel bikes to school every day.

C

Which of the following is true about a country's national debt? A. It is the sum of the country's trade deficit and government budget deficit. B. It increases when gross domestic product increases. C. It increases when the country's government has a budget deficit. D. It decreases when the country's exports exceed its imports. E. It decreases when national savings decrease.

C

Which of the following measures the opportunity cost of holding currency? A. The nominal wage rate B. The increase in the demand for money C. The forgone interest on alternative assets D. The ability to access currency to meet unexpected expenses E. The average income tax rates

C

Which of the following will most likely contribute to long-run economic growth? A. High levels of household spending B. High levels of government spending C. High levels of investment in plant and equipment D. Low levels of immigration to the country E. Low levels of foreign investment in the country

C

Which of the following will most likely promote long-run economic growth? A. Increasing taxes on interest earned from savings B. Increasing consumption spending on food and entertainment C. Increasing funding for research and development D. Decreasing funding for law enforcement and judicial systems E. Rapidly harvesting timber and mineral resources

C

Which of the following will most likely result from deflation? A. Increased nominal interest rates B. Increased business profits C. Increased real value of fixed incomes D. Decreased purchasing power of cash E. Decreased real wealth

C

Which of the following will most likely result in an increase in aggregate demand? (A) An increase in the interest rates charged on credit card balances (B) A disruption in global oil supply (C) An open-market purchase of government bonds by the central bank (D) A reduction of pay and benefits for government employees (E) A decrease in the wealth of households

C

Which of the following will occur in the money market when the aggregate price level increases? A. The money supply will increase and nominal interest rates will decrease. B. The demand for money will increase and nominal interest rates will decrease. C. The demand for money will increase and nominal interest rates will increase. D. The demand for money will decrease and nominal interest rates will decrease. E. The opportunity cost of holding money will decrease.

C

A production possibilities curve that is concave to the origin (bowed out) implies that as more of a good is produced, the opportunity cost A. remains constant B. decreases C. decreases at first then increases D. increases E. increases at first then decreases

D

According to the data above, in which year was real gross domestic product (GDP) the largest? A. 1980 B. 1990 C. 2000 D. 2010 E. 2015

D

A country's economy is currently in equilibrium at point R. Which of the following policy actions could the country's government take to achieve potential output (Yp)? A. Decreasing the money supply B. Decreasing investment tax credits C. Increasing interest rates D. Increasing government expenditures E. Increasing the minimum wage

D

A contractionary monetary policy combined with an expansionary fiscal policy will A. decrease both income and consumption B? increase both income and consumption C. have uncertain effects on the interest rate and investment D. increase the interest rate and decrease investment E. increase both the interest rate and investment

D

All of the following explain why prices and wages are sticky EXCEPT A. menu costs experienced by firms B. efficiency wages paid to labor C. misperceptions about relative prices by suppliers D. competition in the business sector E. labor contracts covering multiple years

D

An economy experiences a sharp increase in energy prices, and policy makers adopt a stabilization policy to increase aggregate demand. Compared with the initial short-run equilibrium, which of the following will definitely occur? A. Lower level of output B. Higher level of output C. Lower price level D. Higher price level E. Higher aggregate supply

D

An economy is in short-run equilibrium at a level of output that is greater than potential output. If there were no active fiscal or monetary policy intervention, which of the following changes in output and the price level would occur in the long run? A. Output: increase Price level: decrease B. Output: increase Price level: increase C. Output: decrease Price level: decrease D. Output: decrease Price level: increase E. Output: no change Price level: no change

D

An economy is operating at a point inside its production possibilities curve (PPC). Which of the following will most likely cause the economy to move toward the current PPC in the short run? A. decrease in government spending B. A decrease in inflation C. An increase in human capital D. An increase in employment E. An increase in imports

D

An increase in a country's current account surplus will result in which of the following in the short run? A. A decrease in the country's government budget surplus B. A decrease in the country's national savings C. A decrease in the country's financial account deficit D. An increase in the country's net financial capital outflows E. An increase in the country's national debt

D

An increase in government spending financed by increased borrowing will most likely change the real interest rate and the gross private domestic investment in which of the following ways? A. Real Interest Rate: No change Gross Private Domestic Investment: No change B. Real Interest Rate: decrease Gross Private Domestic Investment: increase C. Real Interest Rate: decrease Gross Private Domestic Investment: decrease D. Real Interest Rate: increase Gross Private Domestic Investment: decrease E. Real Interest Rate: increase Gross Private Domestic Investment: increase

D

Assume Country X has the following international transactions, in billions of dollars, during a given period of time. What is the balance on the current account, in billions of dollars, for that period? A. -140 B. -70 C. 0 D. 70 E. 140

D

Assume a country's economy is currently in long-run equilibrium. What is the long-run effect of an increase in aggregate demand? (A) A decrease in the unemployment rate (B) A decrease in the inflation rate (C) A decrease in the long-run aggregate supply (D) An increase in the price level (E) An increase in the money supply

D

Assume a country's government increases taxes and its central bank decreases the money supply. The actions will result in an increase in which of the following in the short run? A. Aggregate demand B. Aggregate supply C. Investment spending D. Unemployment E. Inflation

D

Assume that a country's government increases borrowing. What will most likely happen to the prices of previously issued bonds and the price level in the short run? A. Bond Prices: Increase; Price Level: Increase B. Bond Prices: Increase; Price Level: Decrease C. Bond Prices: Increase; Price Level: No change D. Bond Prices: Decrease; Price Level: Increase E. Bond Prices: Decrease; Price Level: Decrease

D

Assume that the marginal propensity to consume is 0.8. If the government increases its purchases of goods and services by $200 and exports decline by $50, at most the equilibrium level of income will A. decrease by $250 B. decrease by $1,000 C. increase by $150 D. increase by $750 E. increase by $1,250

D

Country X has a budget deficit. Which of the following changes in government budget outlays and tax revenues will result in a decrease in Country X's government budget deficit? A. Government Outlays: fall by $100 million Tax Revenues: fall by $600 million B. Government Outlays: fall by $200 million Tax Revenues: fall by $200 million C. Government Outlays: rise by $300 million Tax Revenues: fall by $300 million D. Government Outlays: rise by $400 million Tax Revenues: rise by $600 million E. Government Outlays: rise by $500 million Tax Revenues: rise by $500 million

D

Crowding out occurs when investment spending by the private sector decreases as a result of A. decreasing interest rates caused by an increase in the supply of government bonds B. decreasing interest rates caused by a decrease in the demand for loanable funds C. decreasing interest rates caused by an increase in government spending D. increasing interest rates caused by an increase in government spending E. increasing interest rates caused by a decrease in government borrowing

D

During a period of stagflation, a nation is most likely experiencing A. high unemployment and low inflation B. low unemployment and high inflation C. low inflationary expectations D. a decrease in short-run aggregate supply E. an increase in taxes and government spending

D

Economic growth refers to an increase in which of the following? A. Government spending B. Consumption spending C. Nominal gross domestic product D. Potential real gross domestic product E. Household wealth

D

Good X Good Y Price Quantity Price Quantity Year 1: $2. 2. $1. 4 Year 2: $3. 2. $2. 4 Assume that an economy produces just two goods, X and Y, as shown in the table above. If year 1 is the base year, the consumer price index for year 2 in this economy is A. 57.1 B. 66.7 C. 100 D. 175 E. 250

D

If a country has a balanced budget and then the country's government increases transfer payments without increasing taxes, which of the following will most likely occur? A. The government's budget will move into surplus, and the national debt will fall B. The government's budget will move into surplus, and the national debt will rise C. The government's budget will move into deficit, and the national debt will fall D. The government's budget will move into deficit, and the national debt will rise E. The government's budget will move into surplus, and the national debt will remain unchanged

D

If businesses become optimistic about the profitability of investments in an economy, which of the following will happen in the loanable funds market in the short run? A. The supply and demand for loanable funds will increase. B. The supply and demand for loanable funds will decrease. C. The demand for loanable funds by the private sector will decrease. D. The real interest rate will increase. E. The real interest rate will decrease.

D

If consumers in Canada increase their demand for products that are manufactured in India, which of the following will occur? A. The Indian rupee will depreciate. B. The Canadian dollar will appreciate. C. India's financial capital inflow will increase. D. Canada's financial capital inflow will increase. E. The supply of Canadian dollars will decrease.

D

If the central bank of Country Z wishes to increase the value of its currency on foreign exchange markets, it can do which of the following? A. Buy the currencies of other countries B. Increase the domestic money supply in Country Z C. Increase the income tax in Country Z D. Raise interest rates in Country Z E. Increase tariffs in Country Z

D

If the government decreases spending while the country's central bank buys bonds on the open market, which of the following will definitely occur? A. The aggregate demand curve will shift to the right. B. The aggregate demand curve will shift to the left. C. The short-run aggregate supply curve will shift to the right. D. Interest rates will fall. E. Interest rates will rise.

D

If the government implements an expansionary fiscal policy, how will real gross domestic product (GDP) and the price level be affected in the short run? A. Real GDP: increase Price Level: decrease B. Real GDP: decrease Price Level: no change C. Real GDP: no change Price Level: increase D. Real GDP: increase Price Level: increase E. Real GDP: decrease Price Level: decrease

D

If the required reserve ratio is 10%, what is the maximum change in the money supply from John's deposit of $50,000 cash into his checking account? A. $5,000 B. $45,000 C. $55,000 D. $450,000 E. $500,000

D

In the long run, a fully anticipated expansion of the money supply will (A) increase both the price level and real gross domestic product (B) increase the price level and decrease the real wage (C) increase both the price level and the real wage (D) increase both the nominal gross domestic product and the price level (E) increase both the nominal and real gross domestic product

D

Ms. Smith withdraws $1,000 from her safe and deposits the money in a bank. If the bank holds no excess reserves and the reserve requirement is 10 percent, how will this deposit increase the bank's required reserves and the bank's loans? A. Required Reserves: $1100 Loans: $9000 B. Required Reserves: $1000 Loans: $10000 C. Required Reserves: $900 Loans: $10. D. Required Reserves: $100 Loans: $900 E. Required Reserves: $100 Loans: $1000

D

People who have given up looking for jobs are classified as A. cyclically unemployed B. frictionally unemployed C. structurally unemployed D? discouraged workers E. underemployed workers

D

Recession can be caused by A. an increase in the price level B. an increase in exports C. a decrease in interest rates D. a decrease in aggregate demand E. a decrease in wages

D

Sam and Bill run a leaf raking and lawn mowing business. In one day, Sam can rake 3 lawns or mow 5 lawns whereas Bill can rake 2 lawns or mow 6 lawns. Which of the following correctly describes Sam's and Bill's absolute and comparative advantages? A. Sam has a comparative advantage in raking and an absolute advantage in mowing. B. Sam has a comparative advantage in mowing and an absolute advantage in raking. C. Sam has a comparative advantage in mowing and an absolute advantage in mowing. D. Bill has a comparative advantage in mowing and an absolute advantage in mowing. E. Bill has a comparative advantage in raking and an absolute advantage in mowing.

D

Suppose that the real interest rate is equal to seven percent and the expected inflation rate is currently three percent. If an oil crisis in the Middle East increases the expected inflation rate to four percent, the new nominal interest rate is equal to (A) 3% (B) 4% (C) 7% (D) 11% (E) 14%

D

The measured unemployment rate is often criticized for understating the level of joblessness because A. individuals working in the underground economy are counted as employed B. individuals working more than one job are counted more than once C. discouraged workers are counted as unemployed D. discouraged workers are not counted in the labor force E. part-time workers are counted as unemployed

D

The nominal gross domestic product of China in 2010 is a measure of the total value of which of the following in 2010 ? A. Financial assets, including stocks, in China B. Firms located within the borders of China C. Final goods and services consumed in China D. Final goods and services produced within the borders of China E. Final goods and services exported by China to the rest of the world

D

The term "value added" for a firm is best defined as which of the following? A. The firm's sales B. The firm's sales minus depreciation C. The firm's sales minus its losses D. The firm's sales minus the cost of inputs purchased from other firms E. The firm's profits from its sales

D

When Stephanie took out a one-year fixed-rate loan, she expected to pay a real interest rate of 3 percent. At the end of the year, the real interest rate had fallen to 2 percent. Which of the following could have caused the decrease in the real interest rate? A. There was an increase in the nominal interest rate. B. There was a decrease in the nominal interest rate. C. There was a decrease in the money supply. D. The actual inflation rate was greater than the expected inflation rate. E. The actual inflation rate was less than the expected inflation rate.

D

Which of the following best illustrates rising productivity? A. An expansion of the labor force B. An increase in the value of financial capital C. A decrease in the amount of physical capital per worker D. A decrease in the amount of labor needed to produce a unit of output E. An increase in the amount of resources required to produce a certain level of output

D

Which of the following combinations of fiscal and monetary policies will correct a severe recession? A. Increasing income tax rates and decreasing the money supply B. Increasing both the income tax rates and the money supply C. Decreasing both the income tax rates and the money supply D. Decreasing income tax rates and increasing the money supply E. Decreasing income tax rates and increasing the federal funds rate

D

Which of the following combinations of fiscal and monetary policy will reduce the price level? A. Fiscal: Inc Gov Spending; Monetary: Buying Gov Bonds B. Fiscal: Inc Gov Spending; Monetary: Selling Gov Bonds C. Fiscal: Dec Gov Spending; Monetary: Buying Gov Bonds D. Fiscal: Dec Gov Spending; Monetary: Selling Gov Bonds E. Fiscal: Dec Gov Spending; Monetary: Decreasing the discount rate

D

Which of the following is LEAST likely to affect the long-run growth of an economy? A. Investment in physical capital B. Research and development C. Education and training D. A specific tax on luxury goods E. Stable and efficient institutions

D

Which of the following is a monetary policy aimed at increasing the equilibrium interest rate in the money market? A. Raising taxes B. Lowering the discount rate C. Lowering the federal funds rate D. Selling bonds on the open market E. Lowering the required reserve ratio

D

Which of the following is an assumption underlying an upward-sloping short-run aggregate supply curve? A. The economy is experiencing high inflation. B. The economy is at full employment. C. National income is fixed. D. Wages are sticky. E. The velocity of money is constant.

D

Which of the following is an example of frictional unemployment? A. A former mayor doing volunteer work B. A factory worker who loses her job because of recession C. A college student working part-time at the campus bookstore D. A college graduate interviewing for two available positions E. An architect whose job is replaced by computer software that designs buildings

D

Which of the following is an example of how the consumer price index (CPI) exhibits bias in its estimates of changes in the cost of living? A. Energy prices have a higher impact on inflation than other input costs do. B. New products are always overrepresented in the CPI C? The CPI assigns greater weight to measures of welfare than it does to economic activity. D. Product improvements are not always fully reflected in the calculation of the CPI E. The CPI adjusts for the substitution of less expensive goods by consumers.

D

Which of the following policy actions will promote long-run economic growth? (A) Decreasing the investment tax credit (B) Decreasing the money supply (C) Increasing unemployment compensation (D) Increasing investment in human capital (E) Increasing tax rates on savings income

D

Which of the following statements about inflation is true in the short run? A. During a period of cost-push inflation, the economy's output will rise rapidly, along with the price level B. The basic difference between cost-push and demand-pull inflation lies in the rate at which the price level is rising C. During a period of demand-pull inflation, the economy's output will be stagnant when the price level is rising D. The economy's real output increases during demand-pull inflation and decreases during cost-push inflation E. Most instances of inflation start out being cost-push, and then return to being demand-pull

D

Which of the following statements is true about an expansionary fiscal policy? A. It decreases demand for loanable funds. B. It decreases the equilibrium price level. C. It decreases the equilibrium real interest rate. D. It increases aggregate demand. E. It increases the money supply.

D

In the short run, a tight monetary policy tends to cause A. a decrease in the interest rate and a decrease in prices B. a decrease in the interest rate and an increase in private investment C. a decrease in prices and an increase in private investment D. an increase in the interest rate and an increase in private investment E. an increase in the interest rate and a decrease in private investment

E

A fiscal policy action to reduce inflationary pressure would be to increase which of the following? A. The required reserve ratio B. The discount rate C. Transfer payments D. Government spending E. Income tax rates

E

A negative aggregate supply shock will result in which of the following in the short run? A. An increase in the price level and a decrease in the unemployment rate B. A decrease in the price level and an increase in the unemployment rate C. A decrease in both the price level and real output D. An increase in both the price level and real output E. An increase in both the price level and the unemployment rate

E

According to the business cycle represented in the diagram above, the actual rate of unemployment equals the natural rate of unemployment when the economy is A. in expansion B. in contraction C. at the peak D. at the trough E. on the potential line

E

An increase in the number of which of the following will lead to an increase in the unemployment rate? A. Discouraged workers B. Business start-ups C. Self-employed persons D. Persons working 30 instead of 40 hours per week E. Persons quitting part-time jobs to look for full-time ones

E

An increase in which of the following will most likely cause an increase in aggregate demand and inflation in the short run? A. Income tax rates B. Input prices C. Government spending D. Real interest rates E. Savings

E

An open market operation by a country's central bank to reduce the unemployment rate would be to A. sell bonds to decrease the interest rate and to increase aggregate demand B. sell bonds to increase the interest rate and to decrease aggregate demand C. sell bonds to increase the interest rate and to increase investment D. buy bonds to decrease the interest rate and to decrease the aggregate demand E. buy bonds to decrease the interest rate and to increase the aggregate demand

E

Assume that banks hold no excess reserves. A decrease in the required reserve ratio will cause total reserves in banks, the money multiplier, and the money supply to change in which of the following ways? A. Total Reserves: Inc; Money Mult: Inc; Money Supply: Inc B. Total Reserves: Inc; Money Mult: No change; Money Supply: Inc C. Total Reserves: No change; Money Mult: Inc; Money Supply: Dec D. Total Reserves: Dec; Money Mult: Dec; Money Supply: Dec E. Total Reserves: No change; Money Mult: Inc; Money Supply: Inc

E

Assume that the market for bottled water is in equilibrium. If both the supply of and the demand for bottled water decrease, what will be the effect on equilibrium price and quantity? A. price: Decrease Quantity: decreases B. price: Decrease Quantity: increase C. price: increase Quantity: decreases D. price: increase Quantity: indeterminate E. price: indeterminate Quantity: decreases

E

Assume the economy is currently in long-run equilibrium. An increase in the money supply will affect unemployment in the short run and in the long run in which of the following ways? A. Short Run: Falls Long Run: Falls B. Short Run: Rises Long Run: Rises C. Short Run: no change Long Run: remains at the natural rate D. Short Run: rises above the natural rate Long Run: falls back to the natural rate E. Short Run: falls below the natural rate Long Run: rises back to the natural rate

E

How does the automatic adjustment mechanism move the economy to potential real gross domestic product (GDP) in the long run when current real GDP is above potential GDP? A. Nominal wages fall, shifting the short-run aggregate supply curve to the right. B. Nominal wages fall, shifting the short-run aggregate supply curve to the left. C. Nominal wages do not change, shifting the short-run aggregate supply curve to the right. D. Nominal wages rise, shifting the short-run aggregate supply curve to the right. E. Nominal wages rise, shifting the short-run aggregate supply curve to the left.

E

If both the nominal interest rate and the expected inflation rate increase, what will happen to the real interest rate? A. It will increase because the expected inflation rate has increased. B. It will increase because the nominal interest rate has increased. C. It will increase if the expected inflation rate increases by more than the nominal interest rate. D. It will decrease because the nominal interest rate has increased. E. It will decrease if the expected inflation rate increases by more than the nominal interest rate.

E

If real interest rates in the United States fall relative to real interest rates in Great Britain, which of the following will occur? A. British investors will buy more United States securities. B. British exports to the United States will increase. C. The supply of dollars will decrease. D. United States investors' demand for British pounds will decrease. E. The British pound will appreciate relative to the dollar.

E

If the central bank of a country wishes to maintain a stable nominal interest rate after a decrease in consumers' spending, taking which of the following actions will achieve the goal? A. Increasing government spending B. Increasing income tax rates C. Decreasing the required reserve ratio D. Decreasing the discount rate E. Selling government bonds

E

In the coffee market, which of the following changes will increase the price and decrease the quantity of coffee? A. Supply: Increase; Demand: Increase B. Supply: Increase; Demand: Decrease C. Supply: Decrease; Demand: Increase D. Supply: No change; Demand: Increase E. Supply: Decrease; Demand: No change

E

Motorcycles Automobiles Country X: 50 OR 80 Country Y: 75. OR. 40 The table above shows the quantity of motorcycles and automobiles produced by two countries that use the same amount of resources. Which of the following is true? A. Country X has an absolute and comparative advantage in the production of motorcycles. B. Country X has an absolute and comparative advantage in the production of both goods. C. Neither country has a comparative advantage in the production of motorcycles. D. Country Y has an absolute and comparative advantage in the production of automobiles. E. Country Y has an absolute and comparative advantage in the production of motorcycles.

E

The long-run Phillips curve indicates that there are no trade-offs between A. aggregate demand and aggregate supply B. imports and exports C. consumption and investment D. consumption and saving E. inflation and unemployment

E

Which of the following combinations of changes in income taxes, real interest rate, and investment spending is most likely to promote economic growth? A. Income Taxes: Inc; Real Int Rate: Inc; Investment: Inc B. Income Taxes: Inc; Real Int Rate: Inc; Investment: Dec C. Income Taxes: Inc; Real Int Rate: Dec; Investment: Dec D. Income Taxes: Dec; Real Int Rate: Dec; Investment: Dec E. Income Taxes: Dec; Real Int Rate: Dec; Investment: Inc

E

Which of the following is true of a current account deficit? A. It is caused by a trade surplus B. It must be financed with an equally large surplus of exports C. It is caused by a deficit in the financial (capital) account D. It will self-correct in the following year E. It is financed by a surplus in the financial (capital) account

E

Which of the following transactions is included in the financial account of Country X's balance of payments accounts? A. A firm in Country X sells robots to a firm in Country A. B. Country X sends financial aid to Country B. C. An individual in Country X receives dividend payments from a firm in Country C. D. An individual in Country X sends money monthly to family members in Country D. E. An individual in Country X buys new government bonds issued by Country E.

E

Which of the following types of unemployment is caused by a recession? A. Hidden B. Frictional C. Seasonal D. Structural E. Cyclical

E

Which of the following typically occurs during an expansionary phase of a business cycle? A. Nominal interest rates decrease. B. Income taxes decrease. C. The price level decreases. D. Government transfer payments increase. E. Employment increases.

E

all of the following may result in increases in real gross domestic product in the long run except A. Technical progress B. Investment in human capital C. Discovery of new natural resources D. Decrease in corporate taxes E. Decrease in factor productivity

E