Econ 102 Final

The fact that people with higher incomes get to consume more goods and services addresses the ________ part of one of the two big economic questions. A) "where" B) "how" C) "for whom" D) "when"

C) "for whom"

Due to the recession in 2008, firms decreased their profit expectations. As a result, there was a ________ shift in the ________ loanable funds curve. A) rightward; demand for B) rightward, supply of C) leftward; demand for D) rightward; supply of

C) leftward; demand for

The study of the decisions of individual units in the economy is known as A) macroeconomics. B) the study of incentives. C) microeconomics. D) ceteris paribus study.

C) microeconomics.

Suppose the economy was initially in a long-run equilibrium. Then the world economy expands so that foreign incomes rise. U.S. aggregate demand ________ and eventually the money wage rate ________. A) decreases; falls B) increases; falls C) decreases; rises D) increases; rises

D) increases; rises

The quantity of real money demanded is A) proportional to the price level B) negatively related to the price level. C) positively related to the price level. D) independent of the price level.

D) independent of the price level.

Two reasons why valuing goods at their market prices is different than valuing them at their factor costs include A) exports and imports. B) depreciation and investment. C) personal taxes and corporate taxes. D) indirect taxes and subsidies.

D) indirect taxes and subsidies.

In the figure above, if the interest rate is 8 percent, people demand $0.1 trillion A) less money than the quantity supplied and bond prices will fall. B) more money than the quantity supplied and bond prices will fall. C) more money than the quantity supplied and bond prices will rise. D) less money than the quantity supplied and bond prices will rise.

D) less money than the quantity supplied and bond prices will rise.

Macroeconomics differs from microeconomics in that A) microeconomics looks at the economy as a whole. B) macroeconomics studies the decisions of individuals. C) macroeconomics studies the behavior of government while microeconomics looks at private corporations. D) macroeconomics focuses on the national economy and the global economy.

D) macroeconomics focuses on the national economy and the global economy.

The branch of economics that deals with the analysis of the whole economy is called A) microeconomics. B) metroanalysis. C) marginal analysis. D) macroeconomics.

D) macroeconomics.

Which of the following is NOT a factor of production? A) 100 shares of Microsoft stock B) mineral resources C) a university professor D) an apartment building

A) 100 shares of Microsoft stock

In an economy, 40 million people are employed, 2 million are unemployed, and 8 million are not in the labor force. What is the labor force participation rate? A) 84 percent B) 87.5 percent C) 80 percent D) 83 percent

A) 84 percent

Misty has the option of purchasing one of three products: Brand A, Brand B, or Brand C. Each costs ten dollars. If she decides that Brand A meets her needs best, then the opportunity cost of this decision is A) Brand B or Brand C, depending on which is considered the highest-value alternative forgone. B) Brand B plus Brand C. C) Brand A. D) twenty dollars.

A) Brand B or Brand C, depending on which is considered the highest-value alternative forgone.

Which of the following are included in the supply of loanable funds? I. private saving II. government budget surplus III. international borrowing A) I, II and III B) I and III C) II and III D) I and II

A) I, II and III

Macroeconomic topics include A) studying the determination of wages and production costs in the software industry. B) the impact of government regulation of markets. C) studying what factors influence the price and quantity of automobiles. D) total, nationwide employment.

D) total, nationwide employment.

In the figure above, negative saving occurs A) at all levels of disposable income. B) when disposable income is $15 trillion. C) when disposable income is $20 trillion. D) when disposable income is $10 trillion.

D) when disposable income is $10 trillion.

In the above figure, autonomous expenditure is equal to A) $12 trillion. B) $14 trillion. C) $0. D) $16 trillion

B) $14 trillion.

The quantity of money in an economy is $9 million, and the velocity of circulation is 3. Nominal GDP in this economy is ________. A) $9 million B) $3 million C) $6 million D) $27 million

D) $27 million

The AD curve shows the sum of A) consumption expenditure, investment, the price level, and real GDP. B) consumption expenditure, investment, and real GDP. C) consumption expenditure, investment, government expenditures on goods and services, and net exports. D) the price level, employment, and real GDP.

C) consumption expenditure, investment, government expenditures on goods and services, and net exports.

In the computation of GDP, Social Security payments count as A) government expenditure on goods and services and are included in GDP. B) transfer payments and are included in GDP. C) transfer payments and are not included in GDP. D) government expenditure on goods and services and are not included in GDP.

C) transfer payments and are not included in GDP.

If you lend a dollar for a year and at the end of the year the price level has risen by 10 percent A) the purchasing power of your loan has remained constant over the year regardless of the interest rate at which you lent it. B) the purchasing power of your loan has risen over the year regardless of the interest rate at which you lent it. C) you must have earned a nominal interest rate of 10 percent to maintain the purchasing power of your loan. D) you must have earned a nominal interest rate of 5 percent to maintain the purchasing power of your loan.

C) you must have earned a nominal interest rate of 10 percent to maintain the purchasing power of your loan.

When a country decides to produce fewer bombers and more public housing projects, it is answering the ________ part of one of the two big economic questions. A) "defense" B) "how" C) "for whom" D) "what"

D) "what"

Which of the following always lowers the equilibrium price? A) an increase in demand combined with a decrease in supply B) an increase in both demand and supply C) a decrease in both demand and supply D) a decrease in demand combined with an increase in supply

D) a decrease in demand combined with an increase in supply

The curvature of the production function shows that as employment increases, the productivity of labor A) remains constant. B) decreases and becomes negative. C) remains positive and increases. D) remains positive but decreases.

D) remains positive but decreases.

Suppose the country of Tiny Town decided to open its borders to free trade. As a result, a number of its workers lost their jobs to international competition and can't find new jobs because their skills don't match what is required for job openings. The workers who lost their jobs and searched for new ones are best be considered part of A) discouraged workers. B) frictional unemployment. C) structural unemployment D) cyclical unemployment.

C) structural unemployment

Airbus is a European jet airline producer. Indian Airlines wants to buy 23 Airbus planes from Airbus, due to increased demand for world travel. As a result A) only the demand curve for Indian rupees shifts rightward. B) only the demand curve for European euros shifts rightward. C) the demand curve for European euros and the supply curve for Indian rupees both shift rightward. D) the demand curve for European euros shifts rightward and the supply curve for Indian rupees shifts leftward.

C) the demand curve for European euros and the supply curve for Indian rupees both shift rightward.

When the price of a pizza decreases from $14 to $12 A) the income effect means that the demand for pizza will not change. B) the income effect means people buy less pizza. C) the income effect points out that the total purchasing power of people who buy pizza increases. D) None of the above answers is correct.

C) the income effect points out that the total purchasing power of people who buy pizza increases.

Potential GDP is A) the level of GDP achieved during periods when 100 percent of the labor force is employed. B) a goal that can never be achieved by the economy. C) the maximum amount of GDP that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation. D) the maximum GDP that an economy actually achieves throughout its entire history.

C) the maximum amount of GDP that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation.

According to the quantity theory of money, in the long run, an increase in the quantity of money results in an equal percentage increase in ________. A) the growth rate of real GDP B) the growth rate of potential GDP C) the price level D) the inflation level

C) the price level

Apples are a normal good, so if the price of an apple increases from 50¢ to 60¢, the quantity of apples demanded decrease because A) the income effect only. B) the substitution effect only. C) the substitution and income effects. D) a change in income.

C) the substitution and income effects.

Intermediate goods are excluded from GDP because A) their inclusion would understate GDP. B) the premise of the question is incorrect because intermediate goods are directly included in calculating GDP. C) their inclusion would involve double counting. D) they represent goods that have never been purchased so they cannot be counted.

C) their inclusion would involve double counting.

Which of the following is NOT an autonomous expenditure in the aggregate expenditures model? A) investment B) government expenditures C) exports D) imports

D) imports

An increase in the demand for computers and a decrease in the number of sellers of computers will definitely ________. A) increase the number of computers bought B) increase the price of a computer and the number of computers bought C) not change the price of a computer and increase the number of computers bought D) increase the price of a computer

D) increase the price of a computer

Which of the following does NOT increase labor productivity? A) technological advances B) physical capital growth C) human capital growth D) increases in aggregate hours

D) increases in aggregate hours

If both the demand and supply increase, the equilibrium quantity ________ and the equilibrium price ________. A) decreases; rises B) increases; falls C) decreases; might rise, fall, or not change D) increases; might rise, fall, or not change

D) increases; might rise, fall, or not change

Because of changes in the ________, the long-run effect of a $10 increase in investment on real GDP equals ________. A) interest rate; zero B) interest rate; $10 C) money wage rate and price level; $10 D) money wage rate and price level; zero

D) money wage rate and price level; zero

In the short-run, real GDP can be greater than or less than potential GDP because in the short run the A) full-employment level of employment is fixed. B) price level is fixed. C) quantity of capital is fixed. D) money wage rate is fixed.

D) money wage rate is fixed.

The country of Kemper is on its aggregate production function at point W in the above figure. If the population increases with no change in capital or technology, the economy will A) remain at point W. B) move to point such as Y. C) move to point such as Z. D) move to point such as X.

D) move to point such as X.

A shift in the aggregate expenditure curve as a result of an increase in the price level results in a A) rightward shift in the aggregate demand curve. B) movement down along the aggregate demand curve. C) leftward shift in the aggregate demand curve. D) movement up along the aggregate demand curve

D) movement up along the aggregate demand curve

If the economy's capital stock increases over time A) depreciation is less than zero. B) depreciation exceeds gross investment. C) gross investment equals depreciation. D) net investment is positive.

D) net investment is positive.

The data in the table above are the U.S. balance of payments. The current account balance is A) $140 billion. B) -$45 billion. C) $155 billion. D) $170 billion.

A) $140 billion.

In the above figure, equilibrium expenditure is A) $16 trillion. B) more than $16 trillion. C) less than $16 trillion. D) some amount that cannot be determined without more information.

A) $16 trillion.

In the above figure, equilibrium real GDP is equal to A) $16 trillion. B) $12 trillion. C) $14 trillion. D) $18 trillion.

A) $16 trillion.

When disposable income equals $800 billion, planned consumption expenditure equals $600 billion, and when disposable income equals $1,000 billion, planned consumption expenditure equals $640 billion. What is planned saving when disposable income is $800 billion? A) $200 billion B) $1,400 billion C) $360 billion D) $560 billion

A) $200 billion

Component Amount Currency 235 Checking deposits 570 Savings deposits 416 Traveler's checks 8 Time deposits 1,144 Money market mutual funds 930 Available credit on credit cards 675 According to the table above, the value of M1 is ________ and the value of M2 is ________. A) $813 billion; $3303 billion B) $813 billion; $2490 billion C) $1,488 billion; $3978 billion D) $805 billion; $2490 billion

A) $813 billion; $3303 billion

At the beginning of the year, Tom's Tubes had a capital stock of 5 tube inflating machines. During the year, Tom scrapped 2 old machines and purchased 3 new machines. Tom's net investment for the year totaled A) 1 machine. B) 2 machines. C) 3 machines. D) 6 machines.

A) 1 machine.

Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour. The opportunity cost of producing a unit of Y is A) 1 unit of X per unit of Y for Agnes and 1/2 unit of X per unit of Y for Brenda. B) 1 hour for Agnes and 2 hours for Brenda. C) 1 hour for Agnes and 1/2 hour for Brenda. D) 1 unit of X per unit of Y for Agnes and 2 units of X per unit of Y for Brenda.

A) 1 unit of X per unit of Y for Agnes and 1/2 unit of X per unit of Y for Brenda.

In the above figure, at point a what is the opportunity cost of producing one more audio tape? A) 1 video tape per audio tape B) 14 video tapes per audio tape C) 2 video tapes per audio tape D) There is no opportunity cost.

A) 1 video tape per audio tape

Based on the following data for the country of Tiny Town, the unemployment rate equals Population = 100 Labor force = 80 Number of employed persons = 70 Number of discouraged workers = 5 A) 10/80 × 100. B) 5/70 × 100. C) 10/100 × 100. D) 15/80 × 100.

A) 10/80 × 100.

In the figure above, the marginal cost of the second computer is A) 3 television sets per computer. B) 2 television sets per computer. C) 5 television sets per computer. D) 30 television sets per computer.

A) 3 television sets per computer.

During 2013, the country of Economia had a real GDP of $115 billion and the population was 0.9 billion. In 2012, real GDP was 105 billion and the population was 0.85 billion. Economia's growth rate of real GDP per person is A) 3.44 percent. B) 5.88 percent. C) 5 percent. D) 9.52 percent.

A) 3.44 percent.

If the marginal propensity to consume is 0.8 and there no income taxes or imports, the multiplier for a change in autonomous expenditure equals A) 5.0. B) 0.8. C) 4.0. D) 1.0

A) 5.0.

If the price level in the U.S. is 120, the price level in South Africa is 140, and the nominal exchange rate is 7 South African rands per dollar, then the real exchange rate is A) 6 South African goods per U.S. good. B) 8.4 South African goods per U.S. good. C) 1.4 South African goods per U.S. good. D) 9.8 South African goods per U.S. good.

A) 6 South African goods per U.S. good.

Which of the following statements about the comparison between GDP in China and in the United States is CORRECT? A) China's GDP per person is higher using purchasing power parity prices rather than the exchange rate when valuing China's GDP in dollars. B) Using purchasing power parity prices to value China's GDP in dollars shows that China's GDP per person exceeds the GDP per person in the United States. C) Using the exchange rate to value China's GDP in dollars shows that China's GDP per person exceeds the GDP per person in the United States. D) None of the above answers are correct because they are all false statements.

A) China's GDP per person is higher using purchasing power parity prices rather than the exchange rate when valuing China's GDP in dollars.

________ economists believe that the economy is self-regulating and always at full employment. A) Classical B) All C) Keynesian D) Monetarist

A) Classical

Which of the following expenditures is for an intermediate good? A) General Motors buys new tires to put on the cars it's building. B) A U.S. tire firm sells new tires to Canada. C) You buy new tires for your used car. D) The government buys new tires for its military vehicles.

A) General Motors buys new tires to put on the cars it's building.

Who of the following is counted as unemployed? A) Glenn, a student who just graduated from college last week and is currently looking for a job B) Rene, a retired chemist C) Homer, a full-time student at a vocational school D) Kim, a worker on strike from her company for a week

A) Glenn, a student who just graduated from college last week and is currently looking for a job

The components of aggregate expenditure include I. imports. II. consumption. III. government transfer payments. A) I and II B) II only C) II and III D) I, II and III

A) I and II

Which of the following are major influences on the expected profit from an investment? I. technology advances II. stock market behavior III. accounting practices A) I only B) I and II C) I and III D) II and III

A) I only

In 2009, just after taking office, President Obama approved an $800 billion stimulus package of tax cuts and increased government spending to combat the recession brought on by the financial crisis of 2007. Which group of economists most approved of President Obama's actions? A) Keynesian economists B) monetarists C) classical economists D) free market economists

A) Keynesian economists

Which school of thought believes that recessions are the result of inappropriate monetary policy? A) Monetarist B) only classical C) only Keynesian D) both Keynesian and classical

A) Monetarist

Which of the following situations best describes an individual who is cyclically unemployed? A) Nicholas was laid-off when orders for General Motors cars fell during a recession. B) Catherine is a ski instructor who is not working because it is summer. C) Susan quit her job as a preschool teacher to try to find a better paying job. D) Matthew was an artillery man, but he has been unable to find work since he left the army.

A) Nicholas was laid-off when orders for General Motors cars fell during a recession.

Which of the following is a normative statement? A) The main reason why the United States has a trade deficit with China is because China's trade practices are unfair. B) The United States has a comparative advantage compared to the European Union in the production of wheat. C) Both these statements are normative. D) Neither of these statements is normative.

A) The main reason why the United States has a trade deficit with China is because China's trade practices are unfair.

Which of the following occurs while moving along a short-run aggregate supply curve? A) The price level changes and the money wage rate is constant. B) Neither the price level nor the money wage rate changes. C) The money wage rate and the price level change by the same percentage. D) The money wage rate changes and the price level is constant.

A) The price level changes and the money wage rate is constant.

Suppose a deposit in New York earns 6 percent a year and a deposit in London earns 4 percent a year. Interest rate parity holds if the A) U.S. dollar depreciates by 2 percent a year. B) U.K. pound depreciates by 2 percent a year. C) U.S. dollar appreciates by 2 percent a year. D) None of the above answers is correct because interest rate parity requires that the interest rates be the same in both countries.

A) U.S. dollar depreciates by 2 percent a year.

Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. Which of the following statements is TRUE? A) Washington has an absolute advantage in the production of both pecans and pears. B) Washington has a comparative advantage in producing pecans and Missouri has a comparative advantage in producing pears. C) Washington has a comparative advantage in the production of both pecans and pears. D) Both answers A and C are correct.

A) Washington has an absolute advantage in the production of both pecans and pears.

The MPC is the fraction of A) a change in disposable income that is consumed. B) a change in disposable income that is saved. C) total disposable income that is consumed. D) total disposable income that is not consumed

A) a change in disposable income that is consumed.

Which of the following will shift the supply of loanable funds curve leftward? A) a decrease in disposable income B) a decrease in the real interest rate C) a decrease in expected future income D) a decrease in real wealth

A) a decrease in disposable income

A common definition of a recession is a time with A) a decrease in real GDP for two or more successive quarters. B) a decrease in real GDP for two or more successive years. C) a decline in the price level. D) a decline in interest rates.

A) a decrease in real GDP for two or more successive quarters.

If the quantity supplied exceeds the quantity demanded, then there is A) a surplus and the price is above the equilibrium price. B) a shortage and the price is below the equilibrium price. C) a surplus and the price is below the equilibrium price. D) a shortage and the price is above the equilibrium price.

A) a surplus and the price is above the equilibrium price.

According to purchasing power parity, a rise in inflation in the United States. relative to the rest of the world will lead to A) an exchange rate depreciation. B) an exchange rate appreciation. C) a balance of payments deficit. D) a balance of payments surplus.

A) an exchange rate depreciation.

Which of the following shifts the aggregate demand curve rightward? A) an increase in government expenditure B) an increase in the income tax rate C) an increase in the price level D) a decrease in investment

A) an increase in government expenditure

Which of the following changes does NOT shift the short-run aggregate supply curve? A) an increase in the price level B) an increase in the money wage rate C) an increase in technology D) an increase in the quantity of capital

A) an increase in the price level

The study of economics A) arises from the fact that our wants exceed available resources. B) deals mainly with microeconomics. C) focuses mainly on individual consumers. D) recognizes that scarcity does not affect rich nations.

A) arises from the fact that our wants exceed available resources.

Moving along the aggregate production function, all of the following are held constant EXCEPT A) labor. B) technology. C) human capital. D) capital.

A) labor.

Goods that are produced this year, stored in inventories, and then sold to consumers next year A) count in this year's GDP. B) count in next year's GDP. C) are not counted as a part of GDP. D) count in both this year's and next year's GDP.

A) count in this year's GDP.

Which of the following exchange rate policies uses a target exchange rate, but allows the target to change? A) crawling peg B) fixed exchange rate C) flexible exchange rate D) moving target

A) crawling peg

A decrease in the demand for loanable funds and a leftward shift of the demand for loanable funds curve results from A) decreases in the expected profit. B) tax cuts. C) an increase in the real interest rate. D) technological improvements.

A) decreases in the expected profit.

Suppose that the government is trying to decide between allocating its resources to build more dams or to build more freeways. In terms of forgone dams, as more freeways are constructed, the marginal benefit of additional freeways ________ and the marginal cost of additional freeways ________. A) decreases; increases B) decreases; decreases C) increases; increases D) increases; decreases

A) decreases; increases

When a good is imported into the United States, a ________is created. A) demand for foreign currencies and a supply of dollars B) supply of foreign currency with no effect on the market for the dollar C) supply of foreign currencies and a demand for dollars D) demand for dollars with no effect on markets for foreign currencies

A) demand for foreign currencies and a supply of dollars

Suppose a British bank offers a 3 percent interest rate while a U.S. bank offers a 7 percent interest rate. People must expect the U.S. dollar will A) depreciate 4 percent. B) depreciate 10 percent. C) appreciate 10 percent. D) appreciate 4 percent.

A) depreciate 4 percent.

Marginal benefit curves slope A) downward, but not because of increasing opportunity cost. B) downward because of increasing opportunity cost. C) upward because of increasing opportunity cost. D) upward, but not because of increasing opportunity cost.

A) downward, but not because of increasing opportunity cost.

Net investment equals A) gross investment - depreciation. B) depreciation + addition to inventories. C) savings - depreciation. D) gross investment + depreciation.

A) gross investment - depreciation.

A key factor that leads to economic growth is A) human capital accumulation. B) avoiding the opportunity cost of investment. C) increasing current consumption. D) Both answers A and B are correct.

A) human capital accumulation.

An increase in government expenditure on goods and services A) increases aggregate demand. B) increases the aggregate quantity demanded. C) decreases the aggregate quantity demanded. D) decreases aggregate demand.

A) increases aggregate demand.

Potential GDP per labor hour can increase due to A) increases in labor productivity. B) increases in population. C) increases in the quantity of money. D) decreases in the quantity of capital.

A) increases in labor productivity.

If Frito Lay, an American snack company, opens a new manufacturing facility in Mexico and produces snacks which are distributed in South America, then Mexico's GDP ________ and U.S. GDP ________. A) increases; does not change B) does not change; increases C) increases; increases D) increases; decreases

A) increases; does not change

When aggregate planned expenditure is less than real GDP, unplanned A) investment occurs. B) consumption expenditure occurs. C) government expenditures are made. D) exports are made.

A) investment occurs.

The intertemporal substitution effect of the price level on aggregate demand A) is one reason that the aggregate demand curve has a negative slope. B) is one reason that the aggregate demand curve has a positive slope. C) is the same as the real wealth effect. D) explains why aggregate demand increases when the amount of money increases.

A) is one reason that the aggregate demand curve has a negative slope.

The multiplier effect exists because a change in autonomous expenditure A) leads to changes in income, which generate further spending. B) will undergo its complete effect in one round. C) leaves the economy in the form of imports. D) prompts further exports.

A) leads to changes in income, which generate further

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a A) medium of exchange. B) store of value. C) standard of deferred payment. D) unit of account.

A) medium of exchange.

The figure above shows the U.S. production function. From 1986 to 2008 the United States experienced major advances in technology as well as an increase in the working-age population. The combined effect can best be shown by a A) movement from point W to point Z. B) movement from point Y to point X. C) movement from point Y to point Z. D) movement from point W to point X.

A) movement from point W to point Z.

If the marginal propensity to import increases, then the A) multiplier will decrease in value. B) effect on the multiplier will depend on what happens to exports. C) multiplier will increase in value. D) multiplier will not change in value.

A) multiplier will decrease in value.

A nation's investment must be financed by A) national saving plus borrowing from the rest of the world. B) borrowing from the rest of the world only. C) the government's budget deficit. D) national saving only.

A) national saving plus borrowing from the rest of the world.

The bias in the CPI typically A) overstates inflation. B) about half the time overstates and about half the time understates the inflation rate. C) understates inflation. D) cannot be measured or estimated.

A) overstates inflation.

In the above figure, which point represents a situation with significant shortages of labor, capital, and other resources? A) point F B) point K C) point G D) point I

A) point F

In the figure above, an increase in the quantity of oil supplied but NOT an increase in the supply of oil is shown by a movement from A) point a to point e. B) point a to point b. C) point a to point c. D) point a to point d.

A) point a to point e.

Use the figure above to answer this question. Suppose the economy is operating at point a. A move to ________ could be explained by ________. A) point c; an increase in the use of credit cards B) point e; an increase in U.S. exports C) point b; an increase in real GDP D) point b; an increase in the nominal interest rate

A) point c; an increase in the use of credit cards

The social arrangement that gives John Grisham, the writer of best-selling novels, the ownership of his novels is A) property rights. B) dynamic comparative advantage. C) a market. D) absolute advantage.

A) property rights.

Arbitrage in the foreign exchange market, international loans markets, and goods markets results in A) purchasing power parity, interest rate parity and law of one price. B) purchasing power parity, price parity and no round-trip profit. C) purchasing power parity, interest rate parity and round-trip profit. D) purchasing power parity, interest rate parity and price parity.

A) purchasing power parity, interest rate parity and law of one price.

In the short run, an increase in aggregate demand A) raises the price level and increases real GDP. B) lowers the price level and decreases real GDP. C) lowers the price level and increases real GDP. D) raises the price level and decreases real GDP.

A) raises the price level and increases real GDP.

In the labor market, an increase in labor productivity ________ the real wage rate and ________ the level of employment A) raises; increases B) lowers; decreases C) raises; decreases D) lowers; increases

A) raises; increases

If the economy is at full employment A) real GDP equals potential GDP. B) the only unemployment is frictional unemployment plus discouraged workers. C) the entire population is employed. D) the entire labor force is employed.

A) real GDP equals potential GDP.

Which of the following is used to calculate the standard of living? A) real GDP/population B) real GDP/aggregate hours C) ((real GDP in the current year - real GDP in previous year)/real GDP in previous year) × 100 D) the one-third rule

A) real GDP/population

An increase in the working-age population results in a A) rightward shift of the supply of labor curve and an increase in potential GDP. B) rightward shift of the demand for labor curve and no change in potential GDP. C) leftward shift of the supply of labor curve and a decrease in potential GDP. D) rightward shift of demand for labor curve and an increase in potential GDP.

A) rightward shift of the supply of labor curve and an increase in potential GDP.

When the nominal interest rate rises, the opportunity cost of holding money A) rises and people hold less money. B) falls and people hold more money. C) rises and people hold more money. D) falls and people hold less money.

A) rises and people hold less money.

When disposable income equals consumption expenditure, then A) saving is zero. B) the MPS = zero. C) the MPC = zero. D) None of the above is correct.

A) saving is zero.

Wages for workers producing iPods and similar products will rise next year. Walkman Watch asks you to predict the effect of this change in next year's market for iPods. You predict that the major effect will be that the A) supply curve for an iPod will shift leftward. B) supply curve for an iPod will shift rightward. C) demand curve for an iPod will shift leftward. D) demand curve for an iPod will shift rightward.

A) supply curve for an iPod will shift leftward.

The demand for Mexican tomatoes by an American food grocery chain creates a A) supply of U.S. dollars. B) demand for the U.S. dollar. C) supply of Mexican pesos. D) demand for an interest rate differential.

A) supply of U.S. dollars.

Substitution bias in the CPI refers to the fact that the CPI A) takes no account of the substitution of goods by consumers when relative prices change. B) substitutes relative prices for absolute prices of goods. C) substitutes quality changes whenever they occur without taking account of the cost of the quality changes. D) takes into account the substitution of goods by consumers when relative prices change.

A) takes no account of the substitution of goods by consumers when relative prices change.

In the above figure the economy is initially at point A on the aggregate expenditure curve AE0. Suppose firms expect profits to increase and decide to increase investment. As a result A) the AE curve shifts upward to a curve such as AE2. B) there is a movement along AE1 to a point such as B. C) the AE curve shifts downward to a curve such as AE1. D) there is a movement along AE1 to a point such as C.

A) the AE curve shifts upward to a curve such as AE2.

An increase in the quantity of capital increases ________ and increase in the full-employment quantity of labor increases ________. A) the SAS and the LAS; the SAS and the LAS B) the SAS and the LAS; only the SAS C) only the LAS; the SAS and the LAS D) the SAS and the LAS; only the LAS

A) the SAS and the LAS; the SAS and the LAS

For a commercial bank, the term "reserves" refers to A) the cash in its vaults and its deposits at the Federal Reserve. B) the net interest that it earns on loans. C) a banker's concern ("reservation") in making loans to an individual without a job. D) the profit that the bank retains at the end of the year.

A) the cash in its vaults and its deposits at the Federal Reserve.

A classical economist believes that A) the economy is self-regulating and always at full employment. B) the economy is self-regulating and will normally, though not always, operate at full employment if monetary policy is not erratic. C) if the economy was left alone, it would rarely operate at full employment. D) the economy is self-regulating and will normally, though not always, operate at full employment if fiscal policy is not erratic.

A) the economy is self-regulating and always at full employment.

When an increase in aggregate demand exceeds the increase in aggregate supply A) the economy will experience inflation as the price level rises. B) nominal GDP decreases and real GDP decreases. C) real GDP decreases while nominal GDP increases. D) the price level falls while real GDP increases.

A) the economy will experience inflation as the price level rises.

In the figure above, the shift in the supply curve for U.S. dollars from S0 to S1 could occur when A) the expected future exchange rate rises. B) the current exchange rate falls. C) the expected future exchange rate falls. D) the U.S. interest rate differential decreases.

A) the expected future exchange rate rises.

A country's balance of payments accounts records A) the international trading, borrowing, and lending positions of a country over a period of time. B) only the goods and services purchases among countries over a period of time. C) the flow of human and non-human capital among countries over a period of time. D) only official transactions between governments over a period of time.

A) the international trading, borrowing, and lending positions of a country over a period of time.

The statement that ________ is a positive statement. A) the price of sugar in the United States is higher than the price in Australia B) the price of gasoline is too high C) more students should study economics D) too many people in the United States have no health care insurance

A) the price of sugar in the United States is higher than the price in Australia

Intertemporal substitution means changes in purchases A) through time. B) across different stores. C) between imports and exports. D) across different goods and services.

A) through time.

Full employment occurs when the A) unemployment rate equals the natural unemployment rate. B) natural unemployment rate equals the frictional unemployment rate. C) cyclical unemployment rate equals the natural unemployment rate. D) structural unemployment rate equals the frictional unemployment rate.

A) unemployment rate equals the natural unemployment rate.

Last year in the country of Nerf imports equaled exports. Nerf's GDP was $500 million, its consumer expenditure was $380 million, and its investment was $20 million. Nerf's government expenditure on goods and services were ________. A) $900 million B) $100 million C) zero D) $500 million

B) $100 million

In the above figure, the economy is currently at point A. Suppose that the money wage rate and the price level both fall by 10 percent. Firms will be willing to supply output equal to A) less than $16.0 trillion. B) $16.0 trillion. C) more than $16.0 trillion. D) Without more information, it is impossible to determine which of the above answers is correct.

B) $16.0 trillion.

In the above figure, the aggregate demand curve is AD2, so the short-run equilibrium level of real GDP is A) $16 trillion. B) $16.5 trillion. C) more than $16 and less than $16.5 trillion. D) None of the above answers is correct.

B) $16.5 trillion.

Item Dollars Personal consumption expenditure 1500 Gross private domestic investment 355 Government expenditure on goods and services 590 Exports of goods and services 70 Imports of goods and services 50 Depreciation 200 Indirect business taxes 75 Based on the data in the above table, as calculated by the expenditure approach, gross domestic product equals A) $2,750. B) $2,465. C) $2,190. D) $2,840.

B) $2,465.

If real GDP is $13,000 billion and aggregate hours are 270 billion, labor productivity equals A) $6.50 per hour. B) $48 per hour. C) $45 per hour. D) $650 per hour.

B) $48 per hour.

In the above figure, at the equilibrium, induced expenditure is A) $10 trillion. B) $5 trillion. C) $15 trillion. D) some amount not given in the above answers.

B) $5 trillion.

Assets Liabilities Reserves $500 Deposits $3,000 Loans $2,500 Total assets $1,000 Total $3,000 The table above shows the balance sheet for Ralph's Bank. If the desired reserve ratio is 15 percent, Ralph's Bank has excess reserves of ________. A) $2,500 B) $50 C) $500 D) $450

B) $50

In the above table, there are no taxes (so that that real GDP equals disposable income) and no imports or exports. If real GDP decreases from $6,000 to $5,000, the marginal propensity to consume is A) -0.75. B) 0.75. C) 0.80. D) -750

B) 0.75.

In the table above, the marginal benefit of the 4 millionth television set is A) 0.25 computers per television set. B) 1.0 computer per television set. C) negative 0.5 computers per television set. D) 0.5 computers per television set.

B) 1.0 computer per television set.

In the above table, suppose investment decreases by $0.1 trillion. The multiplier equals A) 9.0. B) 10.0. C) 5.0. D) None of the above answers are correct.

B) 10.0.

Suppose a country is producing $20 million of real GDP. If the economy grows at 10 percent per year, approximately how many years will to take for real GDP to grow to $80 million? A) 7 B) 14 C) 30 D) 4

B) 14

If the basket of goods and services used to calculate the CPI cost $200 in the reference base period and $450 in a later year, the CPI for the latter year equals A) 325. B) 225. C) 200. D) 450

B) 225.

The above table shows the demand schedule and supply schedule for chocolate chip cookies. What is the equilibrium quantity and equilibrium price for chocolate chip cookies? A) 2 pounds, $6.00 per pound B) 4 pounds, $5.00 per pound C) 7 pounds, $3.00 per pound D) 2 pounds, $3.00 per pound

B) 4 pounds, $5.00 per pound

The table above shows the marginal benefit from pizza and the marginal cost of pizza in cans of soda forgone. The allocatively efficient quantity of pizza is ________ pizzas per day. A) 10 B) 40 C) more than 70 D) 70

B) 40

Which of the following is CORRECT? A) Aggregate income is greater than aggregate expenditure but equal to GDP. B) Aggregate income, aggregate expenditure and GDP are all equal. C) Aggregate expenditure equals GDP but is less than aggregate income. D) Aggregate income is greater than GDP but equal to aggregate expenditure.

B) Aggregate income, aggregate expenditure and GDP are all equal.

Which part of the Federal Reserve System meets every 6 weeks to determine the nation's monetary policy? A) the Federal Reserve Banks B) Federal Open Market Committee C) Board of Governors D) depository institutions such as commercial banks

B) Federal Open Market Committee

Which of the following are TRUE regarding "positive" statements? I. They describe what "ought to be." II. They describe what is believed about how the world appears. III. They can be tested as to their accuracy. A) I and II B) II and III C) I and III D) I, II and III

B) II and III

Which of the following best defines capital as a factor of production? A) Financial assets used by businesses. B) Instruments, machines, and buildings used in production. C) The gifts of nature that businesses use to produce goods and services. D) The knowledge and skills that people obtain from education and use in production of goods and services.

B) Instruments, machines, and buildings used in production.

In the figure above, what can be said about point B? A) It can be attained only if some resources are left unused. B) It can be reached only after economic growth occurs. C) It represents all resources being devoted to the production of apples. D) It represents all resources being devoted to the production of oranges.

B) It can be reached only after economic growth occurs.

In the above figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of an increase in financial innovation such as the introduction of ATMs? A) The demand for money curve would shift rightward to MD2. B) The demand for money curve would shift leftward to MD0. C) There would be a movement upward along the demand for money curve MD1. D) There would be a movement downward along the demand for money curve MD1.

B) The demand for money curve would shift leftward to MD0.

In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF0. What happens if real wealth decreases? A) The supply of loanable funds curve would shift leftward to a curve such as SLF1. B) The supply of loanable funds curve would shift rightward to a curve such as SLF2. C) Nothing; the economy would remain at point a. D) There would be a movement to a point such as b on supply of loanable funds curve SLF0.

B) The supply of loanable funds curve would shift rightward to a curve such as SLF2.

In the above figure, if the economy is at point A, which of the following is TRUE? A) Point A is the long-run equilibrium point. B) There is an inflationary gap. C) There is a recessionary gap. D) None of the above answers are correct.

B) There is an inflationary gap.

A change in imports caused by rising U.S. incomes is A) a decrease in autonomous expenditure. B) a change in induced expenditure. C) an increase in induced exports. D) an increase in autonomous expenditure.

B) a change in induced expenditure.

Which of the following does NOT shift the short-run aggregate supply curve? A) a change in the money wage rate B) a change in the price level C) technological progress D) a reduction in the price of a raw material

B) a change in the price level

When part of the quantity of money is held in currency, then A) the Fed will find it beneficial to increase the discount rate. B) a currency drain occurs. C) there is a higher level of excess reserves. D) the money multiplier will increase in value.

B) a currency drain occurs.

If a nation's central bank increased domestic interest rates, the nation's exchange rate would change if the country's exchange rate was a A) a crawling peg. B) a flexible exchange rate. C) a fixed exchange rate. D) a nominally fixed exchange rate.

B) a flexible exchange rate.

An increase in a nation's population results in A) an upward shift of the nation's production function. B) a movement along the nation's production function. C) a decrease in the full-employment quantity of labor. D) a rightward shift in the labor demand curve.

B) a movement along the nation's production function.

An advance in technology that increases productivity and an increase in the working-age population results in A) a rightward shift of the labor demand curve. B) a rightward shift of the labor demand curve and of the labor supply curve. C) a rightward shift of the labor supply curve. D) no change to the production function.

B) a rightward shift of the labor demand curve and of the labor supply curve.

In the above figure, if real GDP is greater than $15 trillion, inventories will be A) below target levels so firms will decrease production. B) above target levels so firms will decrease production. C) below target levels so firms will increase production. D) above target levels so firms will increase production.

B) above target levels so firms will decrease production.

When the Fed is ________ it is ________. A) regulating the nation's financial institutions; conducting monetary policy B) adjusting the amount of money in circulation; conducting monetary policy C) issuing government bonds; conducting monetary policy D) adjusting the amount of money in circulation; issuing government bonds

B) adjusting the amount of money in circulation; conducting monetary policy

Neoclassical growth theory predicts that A) advances in technology are a result of discoveries motivated by the pursuit of profits. B) advances in technology increase the productivity of capital, which leads to an increase in investment and rising real GDP perperson. C) growth in real GDP can continue indefinitely. D) growth in real GDP can increase without any increase in investment.

B) advances in technology increase the productivity of capital, which leads to an increase in investment and rising real GDP perperson.

Using the table above, if the current market value of the dollar is 70 francs A) investor A holds dollars, but B and C hold francs. B) all three investors hold dollars. C) investor A holds francs, but B and C hold dollars. D) all three investors hold francs.

B) all three investors hold dollars.

An increase in U.S. exports because of increasing foreign incomes represents ________ in the United States. A) an increase in induced expenditure B) an increase in autonomous expenditure C) a decrease in autonomous expenditure D) a decrease in induced expenditure

B) an increase in autonomous expenditure

Suppose the peso-dollar foreign exchange rate changes from 50 pesos per dollar to 30 pesos per dollar. Then the peso has ________ against the dollar and the dollar has ________ against the peso. A) depreciated; appreciated B) appreciated; depreciated C) appreciated; appreciated D) depreciated; depreciated

B) appreciated; depreciated

Suppose Mitsubishi Bank (a Japanese bank) expects the exchange rate to be 125 yen per U.S. dollar at the end of the year. If today's exchange rate is 120 yen per U.S. dollar, Mitsubishi bank A) sells U.S. dollars today because it expects losses from buying U.S. dollars and holding them. B) buys U.S. dollars today because it expects profit from buying U.S. dollars and holding them. C) does not buy or sell any U.S. dollars today because it expects zero profit from buying U.S. dollars and holding them. D) None of the above answers is correct because a foreign commercial bank cannot buy or sell U.S. dollars.

B) buys U.S. dollars today because it expects profit from buying U.S. dollars and holding them.

In the figure above, suppose the demand for dollars temporarily decreases so that the demand curve shifts to D2. To maintain the target exchange rate, the Fed A) must violate both interest rate parity and purchasing power parity. B) can buy dollars. C) can sell dollars. D) cannot maintain the target exchange rate.

B) can buy dollars.

In the above figure, suppose the demand for dollars temporarily increases so that the demand curve shifts to D1. To maintain the target exchange rate, the Fed A) can buy dollars. B) can sell dollars. C) must violate interest rate parity but not purchasing power parity. D) cannot maintain the target exchange rate.

B) can sell dollars.

The size of the multiplier A) increases in the long run. B) decreases in the long run. C) is constant in the long run. D) is unaffected by the amount of time that elapses

B) decreases in the long run.

The law of demand concludes that a rise in the price of a golf ball ________ the quantity demanded and ________. A) increases; shifts the demand curve for golf balls rightward B) decreases; creates a movement up along the demand curve for golf balls C) increases; creates a movement down along the demand curve for golf balls D) decreases; shifts the demand curve for golf balls leftward

B) decreases; creates a movement up along the demand curve for golf balls

In the figure above, moving from production at point d to production at point a requires A) technological change. B) decreasing the output of consumer goods in order to boost the output of capital goods. C) a decrease in unemployment. D) both capital accumulation and a decrease in unemployment.

B) decreasing the output of consumer goods in order to boost the output of capital goods.

When people who are holding the money of some other country want to exchange it for U.S. dollars, they ________ U.S. dollars and ________ that other country's money. A) demand; demand B) demand; supply C) supply; demand D) supply; supply

B) demand; supply

The equilibrium price is the price at which the quantity A) demanded equals the quantity sold. B) demanded equals the quantity supplied. C) sold equals the quantity bought. D) supplied equals the quantity bought.

B) demanded equals the quantity supplied.

A small country is an international borrower and its domestic supply of loanable funds increases. Consequently, the equilibrium quantity of loanable funds used in the country ________ and the country's international borrowing ________. A) does not change; does not change B) does not change; decreases C) does not change; increases D) increases; does not change

B) does not change; decreases

If investment decreases, the AE curve shifts A) downward and there is a movement along the AD curve. B) downward and the AD curve shifts leftward. C) upward and the AD curve shifts rightward. D) upward and there is a movement along the AD curve

B) downward and the AD curve shifts leftward.

The AD curve slopes A) upward due to the wealth and substitution effects. B) downward due to the wealth and substitution effects. C) downward due to the wealth and price effects. D) upward due to the price and substitution effects.

B) downward due to the wealth and substitution effects.

If the inflation rate is negative, the price level in an economy is A) rising rapidly. B) falling. C) constant. D) rising slowly.

B) falling.

Suppose that a bond promises to pay its holder $100 a year forever. If the price of the bond increases from $1,000 to $1,250, then the interest rate on the bond A) rises from 8 percent to 10 percent. B) falls from 10 percent to 8 percent. C) does not change because it is not affected by the price of the bond. D) falls from 10 percent to 6 percent.

B) falls from 10 percent to 8 percent.

If foreigners spend more on U.S.-made goods and services than we spend on theirs A) all U.S. national saving remains in the United States. B) foreigners must borrow from the United States or sell U.S. assets to make up the difference. C) we must borrow from foreigners because of low imports. D) funds flow in from abroad to help finance U.S. investment.

B) foreigners must borrow from the United States or sell U.S. assets to make up the difference.

In developing nations, microloans A) are primarily used to finance consumption expenditure, thereby leading to economic growth. B) have enabled small businesses with limited access to credit to purchase capital and expand, thus allowing greater economic growth. C) are far too small to have any discernible effect. D) have increased the indebtedness of impoverished people, thereby slowing economic growth.

B) have enabled small businesses with limited access to credit to purchase capital and expand, thus allowing greater economic growth.

If an economy has a velocity of circulation of 3, then A) the quantity of money is 3 times real GDP. B) in a year the average dollar is exchanged 3 times to purchase goods and services in GDP. C) the quantity of money is $3 for every dollar of GDP. D) nominal GDP is 1/3 the size of the quantity of money.

B) in a year the average dollar is exchanged 3 times to purchase goods and services in GDP.

In the figure above, suppose the economy is initially at point B. Then the interest rate in Japan rises relative to the interest rate in the United States. This change ________ the supply of dollars and the market moves to a point such as ________. A) decreases; A B) increases; C C) decreases; E D) increases; D

B) increases; C

The presence of ________ creates a difference in the value between the market price and the factor cost of a product. A) indirect taxes and consumption B) indirect taxes and subsidies C) corporate profits and subsidies D) subsidies and direct taxes

B) indirect taxes and subsidies

The SAS curve and the LAS curve A) are perpendicular to one another at potential GDP. B) intersect at potential GDP. C) are parallel at potential GDP. D) None of the above answers is correct.

B) intersect at potential GDP.

Real GDP A) is always greater then aggregate income. B) is equal to aggregate income. C) is always less than aggregate income. D) might be less than or more than aggregate income depending on consumption.

B) is equal to aggregate income.

The required reserve ratio A) is higher for banks that make riskier loans. B) is the fraction of a bank's total deposits that is required to be held in reserves. C) is the amount of money that banks require borrowers to reserve in their accounts. D) increases when withdrawals from a bank are made.

B) is the fraction of a bank's total deposits that is required to be held in reserves.

The natural unemployment rate A) is the unemployment rate when there is no structural unemployment. B) is the unemployment rate at full employment. C) is the unemployment rate when there is only cyclical unemployment. D) occurs when the unemployment rate is 0 percent.

B) is the unemployment rate at full employment.

In the long run, the multiplier A) is twice the short-run multiplier. B) is zero. C) depends on the slope of the AD curve. D) is greater than 1 because of the position and slope of the SAS curve.

B) is zero.

In the above figure, point d represents the point where planned expenditures are ________ real GDP. A) greater than B) less than C) equal to D) There is not enough information to answer the question.

B) less than

The quantity of real GDP demanded equals $16.2 trillion when the price level is 90. If the price level rises to 95, the quantity of real GDP demanded equals A) $16.2 trillion. B) less than $16.2 trillion. C) more than $16.2 trillion. D) more information is needed to determine if the quantity of real GDP demanded increases, decreases, or does not change.

B) less than $16.2 trillion.

If you have $1,000 of money in the bank and the price level rises by 5 percent, your A) money is worth the same in terms of what it can purchase. B) money is worth less in terms of what it can purchase. C) purchasing power has increased. D) money is worth more in terms of what it can purchase.

B) money is worth less in terms of what it can purchase.

In a market, at the equilibrium price A) buyers are paying the minimum price they are willing to pay for any amount of output and sellers are charging the maximum price they are willing to charge for any amount of production. B) neither buyers nor sellers can do business at a better price. C) buyers are willing to pay a higher price, but sellers do not ask for a higher price. D) None of the above is true.

B) neither buyers nor sellers can do business at a better price.

Full-time students and prisoners are ________. A) counted as unemployed B) not in the labor force C) in the labor force D) counted as discouraged workers

B) not in the labor force

The short-run multiplier is equal to 3, real GDP equals potential GDP of $8,000, and the price level is equal to 100. Suppose that government expenditure decreases by $200. The long-run effect of the decrease in government expenditure changes real GDP by A) an increase of 600. B) nothing; that is, in the long run real GDP equals $8,000. C) a decrease of 600. D) a decrease of $200 because in the long-run, the multiplier is 1.

B) nothing; that is, in the long run real GDP equals $8,000.

Which school of thought believes that real GDP always equals potential GDP? A) Monetarist B) only classical C) only Keynesian D) both Keynesian and classical

B) only classical

When the government hires people to serve in the army, these people are no longer available to do other work. This choice illustrates the concept of A) a social interest/private interest conflict. B) opportunity cost. C) an incentive. D) marginal benefit.

B) opportunity cost.

The table above gives the quantity of money and money demand schedules. Suppose that the interest rate is equal to 6 percent. The effect of this interest rate in the money market is that A) bond prices fall and so the interest rate falls. B) people buy bonds and the interest rate falls. C) the money market is in equilibrium. D) people sell bonds and the interest rate falls.

B) people buy bonds and the interest rate falls.

In the figure above, the shift in the demand curve for U.S. dollars from D0 to D2 could occur when A) the expected future exchange rate increases. B) people expect that the dollar will depreciate. C) the U.S. interest rate rises. D) foreign interest rates fall.

B) people expect that the dollar will depreciate.

In the above figure, the increase in autonomous expenditure moves the economy from point E to A) point F. B) point G. C) point H. D) point I.

B) point G.

Aggregate demand is the relationship between the quantity of real GDP demanded and the ________. A) money wage rate B) price level C) real wage rate D) nominal GDP demanded

B) price level

If the CPI is 120, this means that A) prices are 0.12 times higher than in the reference base period. B) prices are 20 percent higher than in the reference base period. C) prices are 120 percent higher than in the reference base period. D) the inflation rate must be positive

B) prices are 20 percent higher than in the reference base period.

The quantity supplied of a good or service is the amount that A) producers wish they could sell at a higher price. B) producers plan to sell during a given time period at a given price. C) people are willing to buy during a given time period at a given price. D) is actually bought during a given time period at a given price.

B) producers plan to sell during a given time period at a given price.

In the short-run macroeconomic equilibrium A) real GDP equals potential GDP and aggregate demand determines the price level. B) real GDP and the price level are determined by short-run aggregate supply and aggregate demand. C) the price level is fixed and short-run aggregate supply determines real GDP. D) real GDP is always less than potential GDP.

B) real GDP and the price level are determined by short-run aggregate supply and aggregate demand.

If the price of a hot dog is $2 and the price of a hamburger is $4, then the A) money price of a hamburger is 2 hot dogs per hamburger. B) relative price of a hot dog is 1/2 of a hamburger per hot dog. C) relative price of a hamburger is 1/2 of a hot dog per hamburger. D) money price of a hot dog is 2 hamburgers per hot dog.

B) relative price of a hot dog is 1/2 of a hamburger per hot dog.

In the figure above, an increase in the monetary base would create a change such as a A) movement from point a to point b along the supply of money curve MS0. B) shift from the supply of money curve MS0 to the supply of money curve MS1. C) movement from point b to point a along the supply of money curve MS0. D) shift from the supply of money curve MS1 to the supply of money curve MS0.

B) shift from the supply of money curve MS0 to the supply of money curve MS1.

In the above figure, new expectations of booming business conditions and a higher expected profit will A) make the demand for loanable funds curve become horizontal. B) shift the demand for loanable funds curve rightward. C) shift the demand for loanable funds curve leftward. D) have no effect on the demand for loanable funds curve.

B) shift the demand for loanable funds curve rightward.

After Hurricane Katrina devastated parts of Mississippi and New Orleans in 2005, we can be sure that the production possibilities frontier for that area temporarily A) became steeper. B) shifted inward, toward the origin. C) shifted outward, away from the origin. D) became flatter.

B) shifted inward, toward the origin.

The table above gives some of the entries in the national income and product accounts. The government sector has a ________, and the private sector has a ________. A) surplus of $50 billion; deficit of $25 billion B) surplus of $50 billion; surplus of $25 billion C) deficit of $50 billion; deficit of $25 billion D) deficit of $50 billion; surplus of $25 billion

B) surplus of $50 billion; surplus of $25 billion

The slope of the saving function is equal to A) 1- MPS. B) the MPS. C) the MPC. D) None of the above answers is correct

B) the MPS.

A monetarist economist believes that A) the economy is self-regulating and always at full employment. B) the economy is self-regulating and will normally, though not always, operate at full employment if monetary policy is not erratic. C) if the economy was left alone, it would rarely operate at full employment. D) the economy is self-regulating and will normally, though not always, operate at full employment if fiscal policy is not erratic.

B) the economy is self-regulating and will normally, though not always, operate at full employment if monetary policy is not erratic.

Suppose that the unemployment rate equals 4.5 percent and that the natural unemployment rate is 5.5 percent. We can conclude that A) the output gap is negative. B) the output gap is positive. C) we have mismeasured the natural unemployment rate. D) the output gap equals zero.

B) the output gap is positive.

The supply of real GDP is a function of A) only the state of technology. B) the quantities of labor, capital and the state of technology. C) the total expenditures of consumers, investors and government. D) the sum of wages, salaries, corporate profits, rents and interest.

B) the quantities of labor, capital and the state of technology.

Suppose the money wage rate and the price level both fall by 5 percent. As a result A) the quantity of labor demanded increases. B) the quantity of labor demanded does not change because there is no change in the real wage. C) the quantity of labor demanded decreases. D) people are worse off and there is more unemployment.

B) the quantity of labor demanded does not change because there is no change in the real wage.

The Consumer Price Index is a measure of the average of the prices paid by ________ for a fixed basket of consumer goods and services. A) consumers living in cities with a population greater than 100,000 B) urban consumers C) all consumers D) urban wage earners and clerical workers

B) urban consumers

Real GDP measures the A) general upward drift in prices. B) value of total production linked to prices of a single year. C) changes in the prices of output measured in dollars. D) total profits earned by all businesses valued using prices from a single year.

B) value of total production linked to prices of a single year.

The aggregate demand curve slopes downward because of A) the MPC. B) wealth and substitution effects. C) import and taxation effects. D) the multiplier.

B) wealth and substitution effects.

This year Pizza Hut makes a total investment of $1.3 billion in new stores. Its depreciation in this year is $300 million. Pizza Hut's gross investment is ________ and its net investment is ________. A) $1.0 billion; $0.7 billion B) $1.0 billion; $1.3 billion C) $1.3 billion; $1.0 billion D) $1.3 billion; $1.6 billion

C) $1.3 billion; $1.0 billion

During 2014, the country of Economia had a real GDP of $115 billion and the population was 0.9 billion. In 2013, real GDP was 105 billion and the population was 0.85 billion. In 2014, real GDP per person was A) $135. B) $124. C) $128. D) $117.

C) $128.

The tables above show the labor market and the production function schedule for the country of Pickett. Potential GDP is ________. A) $9 trillion B) $40 trillion C) $14 trillion D) $25 trillion

C) $14 trillion

In the above table, C is consumption expenditure, I is investment, G is government expenditure, and X - M is net exports. All entries are in dollars. The equilibrium level of real GDP is A) $2,200. B) $2,500. C) $2,400. D) $2,300

C) $2,400.

Net interest 239 Government expenditure on goods and services 136 Compensation of employees 1,735 Rental income 37 Proprietors' income 128 Indirect taxes minus subsidies 259 Corporate profits 194 Exports of goods and services 249 Imports of goods and services 289 Depreciation 333 Using the data in the above table, gross domestic product as calculated by the income approach equals ________. A) $2,592 B) $2,205 C) $2,925 D) $2,333

C) $2,925

In January 2015, Tim's Gyms, Inc. owned machines valued at $1 million. During the year, the market value of the equipment fell by 30 percent. During 2015, Tim spent $200,000 on new machines. During 2015, Tim's gross investment totaled A) $1 million. B) $900,000. C) $200,000 D) $300,000.

C) $200,000

Suppose the price level is fixed. If investment increases by $1 trillion and the aggregate expenditure curve is shown in the figure above, in response equilibrium expenditure increases by ________. A) $1 trillion B) less than $1 trillion C) $3 trillion D) indeterminate from the information given

C) $3 trillion

In the above figure, autonomous consumption equals A) $12 trillion. B) 0. C) $4 trillion. D) -$4 trillion.

C) $4 trillion.

If the price level is constant and the slope of the AE curve is 0.75, a decrease in government expenditures of $100 leads to a decrease in real GDP of A) $800. B) $100. C) $400. D) $25.

C) $400.

The table above lists six points on the production possibilities frontier for grain and cars. What is the opportunity cost of producing the 26th car? A) 2 tons of grain per car B) 4 tons of grain per car C) 0.5 tons of grain per car D) 0.25 tons of grain per car

C) 0.5 tons of grain per car

Suppose that in an hour Joe can prepare 10 sandwiches or 5 pizzas. The opportunity cost of Joe producing one sandwich is A) 2 pizzas. B) 1 pizza. C) 1/2 pizza. D) 5 pizzas.

C) 1/2 pizza.

If investment increases by $300 and, in response, equilibrium aggregate expenditure increases by $600, then the multiplier must be A) 0.5. B) 0.2. C) 2. D) 5.

C) 2

Assets Liabilities Reserves $100 Deposits $400 Loans $600 Net Worth $300 Total $700 Total $700 The above table gives the initial balance sheet for Mini Bank. Mini Bank's actual reserve ratio equals ________. A) 33.3 percent B) 20 percent C) 25 percent D) 12.5 percent

C) 25 percent

In a diagram with the consumption function, the ________ shows all points where disposable income equals consumption expenditures. A) saving function B) aggregate demand curve C) 45-degree line D) consumption function

C) 45-degree line

If the nominal interest rate is 7 percent and the inflation rate is 1 percent, the real interest rate is approximately A) -6 percent. B) 7 percent. C) 6 percent. D) 8 percent.

C) 6 percent.

In an economy, 43 million people are employed, 3 million are unemployed, and 4 million are not in the labor force. What is the employment-to-population ratio? A) 6.5 percent B) 92 percent C) 86 percent D) 93 percent

C) 86 percent

Suppose China Airlines wants to purchase a French Airbus. The price of the Airbus is 95 million Euro. If the exchange rate is 1 euro per 10 yuan, the price of this airplane to China Airlines is A) 10.52 million yuan. B) 10 million yuan. C) 950 million yuan. D) 9.5 million yuan.

C) 950 million yuan.

Which of the following statements is INCORRECT? A) A new classical macroeconomist believes the business cycle is the efficient response to the uneven pace of technological change. B) A monetarist believes that recessions are the result of erratic monetary policy. C) A classical macroeconomist believes that the money wage rate adjusts slowly. D) A Keynesian believes the business cycle is mainly influenced by changes in people's expectations.

C) A classical macroeconomist believes that the money wage rate adjusts slowly.

Person A: Now that the kids are in school for a full day, this person is looking for work and has interviewed for three jobs during the past two weeks. Person B: This person has been laid off from a job but expects to be called back as soon as the economy improves. Person C: This person has just graduated from college and will start a new job in three weeks. In the meantime this person will tour the great American beaches. Person D: This person was laid off last year when new equipment was installed at the plant, reducing the number of workers needed. Shortly after being laid off, this person looked for a new job, was unable to find one and then stopped looking, even though this person still wants a job and is available for work. The above table shows answers given by people interviewed in a government survey of households. Which individuals are considered to be a part of the labor force? A) A, C, and D B) C and D C) A, B, and C D) B, C, and D

C) A, B, and C

If higher inflation is expected in the future, then the A) SAS curve shifts rightward. B) LAS curve shifts rightward. C) AD curve shifts rightward. D) None of the above answers is correct.

C) AD curve shifts rightward.

When real GDP exceeds aggregate planned expenditure A) actual inventories decrease below their target. B) a higher level of equilibrium income will prevail. C) GDP will decrease. D) the circular flow will increase.

C) GDP will decrease.

What could Keynes have meant by his now famous statement, "in the long run we are all dead?" A) Government intervention in the economy is useless because it takes too long to take effect. B) Government intervention is destabilizing, will lead to slower growth in the long run, and will prevent an economy from self regulating. C) Government intervention in the economy is necessary in times of recession because an economy rarely restores itself to full employment. D) Government intervention in the economy is only effective if it is not erratic.

C) Government intervention in the economy is necessary in times of recession because an economy rarely restores itself to full employment.

Which of the following is TRUE? I. As the real interest rate increases, people increase the quantity they save. II. The supply of loanable funds curve is downward sloping. III. As disposable income increases, the supply of loanable funds curve becomes steeper. A) I and III B) II and III C) I only D) III only

C) I only

Suppose the economy is at point B. If firms expect profits will be higher in the future, to what point might the economy's move in the short run? A) It shifts to a point such as A. B) It stays at point B. C) It shifts to a point such as C. D) None of the above answers are correct because it is the SAS curve that shifts, not the AD curve.

C) It shifts to a point such as C.

________ economists believe that active help from fiscal and monetary policy is needed to insure that the economy is operating at full employment. A) Monetarist B) All C) Keynesian D) Classical

C) Keynesian

If the money wage rate rises, then the A) SAS curve shifts rightward. B) LAS curve shifts rightward. C) SAS curve shifts leftward. D) LAS curve shifts leftward.

C) SAS curve shifts leftward.

If the full-employment quantity of labor increases, then the A) LAS curve shifts rightward and the SAS curve does not shift. B) SAS curve shifts rightward and the LAS curve does shifts leftward. C) SAS curve shifts rightward and the LAS curve shifts rightward. D) SAS curve shifts rightward and the LAS curve does not shift.

C) SAS curve shifts rightward and the LAS curve shifts rightward.

The Fed buys $100 million of government securities from Bank A. What is the effect on the Federal Reserve's balance sheet? A) Securities increase by $100 million and reserves of Bank A decrease by $100 million. B) Securities decrease by $100 million and reserves of Bank A increase by $100 million. C) Securities increase by $100 million and reserves of Bank A increase by $100 million. D) Securities increase by $100 million and Federal Reserve notes (currency) decrease by $100 million.

C) Securities increase by $100 million and reserves of Bank A increase by $100 million.

Which of the following items is not a component of the expenditure approach to measuring U.S. GDP? A) purchases of food made by families B) purchases of U.S.-made movies by Europeans C) Social Security payments made by the government D) purchases of new homes made by families

C) Social Security payments made by the government

Which of the following does NOT occur as the economy moves from an expansion to a recession? A) An initial decrease in autonomous spending is the trigger that creates the business cycle turning point. B) Incomes fall during recessions as firms cut production in response to unplanned increases in inventories. C) The change in planned spending exceeds the change in real GDP. D) The multiplier process reinforces any decrease in spending and pushes the economy into recession.

C) The change in planned spending exceeds the change in real GDP.

Which of the following describes comparative advantage? A) Firm A can produce a good at a cost of $3 and Firm B can produce the good at a cost of $4. B) Jane can type 50 words per minute and Joe can type 60 words per minute. C) To produce a bushel of wheat Farmer John must give up 2 bushels of corn whereas Farmer Ben must give up 3 bushels of corn. D) Company A can produce 4 boxes of cereal in a day whereas Company B can produce 5 boxes of cereal in a day.

C) To produce a bushel of wheat Farmer John must give up 2 bushels of corn whereas Farmer Ben must give up 3 bushels of corn.

All of the following shift the short-run aggregate supply curve EXCEPT A) a change in the price of a raw material. B) technological progress. C) a change in the price level. D) a change in the money wage rate.

C) a change in the price level.

One of the largest categories of exports from the United States is now pop culture: movies, music, TV programming, and videos.A direct conclusion from this information is that, compared to other countries, the United States has A) higher wages for producers of pop culture. B) lower wages for producers of pop culture. C) a comparative advantage in producing pop culture. D) an absolute advantage in producing pop culture.

C) a comparative advantage in producing pop culture.

You observe that unplanned inventories are increasing. You predict that there will be ________. A) a business cycle B) a trough C) a recession D) an expansion

C) a recession

In the above figure, the economy is initially at point B. If taxes increase, there is A) a movement to point C. B) a movement to point A. C) a shift to AD2. D) a shift to AD1.

C) a shift to AD2.

In the above figure, the short-run aggregate supply curve is SAS1. If the money wage rate increases, there is A) an upward movement along SAS1. B) a downward movement along SAS1. C) a shift to SAS0. D) a shift to SAS2.

C) a shift to SAS0.

The consumption function shows how much A) all households plan to consume at each level of savings. B) all households plan to consume at each possible real interest rate. C) all households plan to consume at each level of real disposable income. D) real disposable income people will earn at each income tax bracket.

C) all households plan to consume at each level of real disposable income.

Joe likes to sleep late in the mornings and play tennis in the afternoons. The opportunity cost of Joe attending his morning class for one hour is A) nothing because he is paying for his class. B) both the tennis given up and the sleep given up. C) an hour of sleep given up. D) an hour of tennis given up.

C) an hour of sleep given up.

When the Fed lowers the federal funds rate, it can lead to A) a decrease in demand deposits. B) the Fed selling government securities. C) an increase in lending by banks. D) a decrease in the quantity of money.

C) an increase in lending by banks.

Which of the following increases aggregate demand? A) an increase in the exchange rate B) a decrease in government expenditures C) an increase in the quantity of money D) an increase in taxes

C) an increase in the quantity of money

When real GDP exceeds potential GDP, then the economy has A) a recessionary gap. B) a below-full-employment equilibrium. C) an inflationary gap. D) None of the above answers are correct.

C) an inflationary gap.

Which of the following are examples of the gross private domestic investment component of GDP? A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

Suppose the Fed wants to fix the U.S. dollar/Mexican peso rate at 11 pesos per dollar under a fixed exchange rate policy. If the exchange rate falls to 10 pesos per dollar, the Fed can A) sell dollars. B) attempt to freeze all sales of dollars. C) buy dollars. D) any of the above actions could take place.

C) buy dollars.

The multiplier is the ratio of the A) change in autonomous expenditures to the change in real GDP. B) equilibrium level of real GDP to the change in induced expenditures. C) change in real GDP to the change in autonomous expenditures. D) change in induced expenditures to the change in autonomous expenditures.

C) change in real GDP to the change in autonomous expenditures.

If the marginal propensity to consume is 0.8, every $10 increase in disposable income increases A) consumption expenditure by $80.00. B) saving by $0.20. C) consumption expenditure by $8.00. D) consumption expenditure by $0.80.

C) consumption expenditure by $8.00.

An increase in the price level decreases planned expenditures because A) real wealth increases, decreasing expenditure. B) domestic prices rise relative to foreign prices, increasing net exports. C) current prices rise relative to future prices, decreasing expenditure. D) the real interest rate rises, increasing expenditure.

C) current prices rise relative to future prices, decreasing expenditure.

If the world real interest rate falls, then a country that is an international lender A) does not change the amount of its lending. B) increases the amount of its lending. C) decreases the amount of its lending. D) None of the above answers is correct because lending might increase, decrease, or not change.

C) decreases the amount of its lending.

An increase in the currency drain A) results in an increase in deposits. B) results in an increase in required reserves. C) decreases the size of the money multiplier. D) leads to an increase in excess reserves.

C) decreases the size of the money multiplier.

A recession occurs and people's incomes decrease. Knowing that an iPad is a normal good, you predict that the demand for an iPad A) increases. B) remains unchanged. C) decreases. D) might increase or decrease.

C) decreases.

If both the demand and supply decrease, the equilibrium quantity ______________ and the equilibrium price _____________. A) decreases; rises B) increases; falls C) decreases; might rise, fall, or not change D) increases; might rise, fall, or not change

C) decreases; might rise, fall, or not change

According to the Keynesian theory, the typical firm A) lowers its prices if sales exceed production. B) lowers its prices when inventories are decreasing. C) does not change its prices immediately when aggregate demand fluctuates. D) changes its prices frequently in response to fluctuations in aggregate demand.

C) does not change its prices immediately when aggregate demand fluctuates.

In the very short term, planned investment ________ when GDP changes and planned consumption expenditure ________ when GDP changes. A) does not change; does not change B) changes; does not change C) does not change; changes D) changes; changes.

C) does not change; changes

Human resources that perform the functions of organizing, managing, and assembling the other resources are called A) venture capital. B) physical capital. C) entrepreneurship. D) productive capital.

C) entrepreneurship.

The circular flow shows that the household sector earns its income by A) selling financial assets. B) buying factors of production. C) selling factors of production. D) selling goods and services.

C) selling factors of production.

The Ricardo-Barro effect says that A) government budget deficits resulting from an increase in government expenditure have no effect on investment but government deficits resulting from a decrease in taxes crowd out investment. B) government budget deficits crowd out private investment and thereby lower the real interest rate. C) government budget deficits have no crowding out effect because taxpayers increase their savings to match the quantity of loanable funds demanded by the government. D) government budget deficits cause households to save more in anticipation of higher taxes, which causes higher real interest rates.

C) government budget deficits have no crowding out effect because taxpayers increase their savings to match the quantity of loanable funds demanded by the government.

The crowding-out effect refers to A) private investment crowding out government saving. B) government spending crowding out private spending. C) government investment crowding out private investment. D) private saving crowding out government saving.

C) government investment crowding out private investment.

The multiplier measures the A) vertical shift in the aggregate demand curve from an increase in autonomous spending. B) horizontal difference between two points on the same aggregate demand curve. C) horizontal shift in the aggregate demand curve from an increase in autonomous spending. D) vertical difference between two points on the same aggregate demand curve.

C) horizontal shift in the aggregate demand curve from an increase in autonomous spending.

In the above table, C is consumption expenditure, I is investment, G is government expenditure, X is exports, and M is imports. All entries are in dollars. If investment increased by $26 to $51 then equilibrium expenditure will A) decrease by $100. B) decrease by $50. C) increase by $100. D) increase by $25.

C) increase by $100.

If the Fed wants to depreciate the dollar against the yen, the Fed will A) increase the demand for dollars by selling yen. B) increase the supply of dollars by selling yen. C) increase the supply of dollars by buying yen. D) decrease the supply of dollars by selling yen.

C) increase the supply of dollars by buying yen.

As a country that has a bowed-out production possibilities frontier produces more of one good, the opportunity cost of a unit of that good ________. A) decreases B) might increase or decrease C) increases D) remains the same

C) increases

A higher savings rate that leads to an increase in the capital stock A) is associated with a decrease in the rate of growth of the population. B) leads to higher interest rates. C) leads to increases in labor productivity. D) immediately decreases investment.

C) leads to increases in labor productivity.

The multiplier is larger if the A) marginal propensity to import is larger. B) marginal propensity to save is larger. C) marginal propensity to consume is larger. D) income tax rate is higher.

C) marginal propensity to consume is larger.

In the above figure, the economy initially is at point B. Then price level rises by 10. The wealth effect will help A) move the economy to point A. B) move the economy to point D. C) move the economy to point C. D) keep the economy to point B.

C) move the economy to point C.

The multiplier is 5.0 and autonomous expenditure increases by $30 billion. If potential real GDP is unaffected, in the long run, equilibrium real GDP will A) increase by more than $50 billion. B) increase by less than $50 billion. C) not change. D) increase by $50 billion

C) not change.

In the above figure, the initial supply of loanable funds curve is SLF0 and the initial demand for loanable funds curve is DLF0. An increase in the expected profit would A) have no effect on either the demand for loanable funds curve or the supply of loanable funds curve. B) shift the supply of loanable funds curve rightward to a curve such as SLF1, and shift the demand for loanable funds curve rightward to a curve such as DLF1. C) only shift the demand for loanable funds curve rightward to a curve such as DLF1. D) only shift the supply of loanable funds curve rightward to a curve such as SLF1.

C) only shift the demand for loanable funds curve rightward to a curve such as DLF1.

If the money price of wheat increases and no other prices change, the A) demand for wheat increases. B) relative price of wheat falls. C) opportunity cost of wheat rises. D) relative price of wheat is unaffected.

C) opportunity cost of wheat rises.

The unemployment rate is the ________ who are unemployed. A) percentage of the working-age population B) number of people in the labor force C) percentage of people in the labor force D) percentage of people in the country

C) percentage of people in the labor force

In the figure above, a decrease in the quantity of oil supplied but NOT a decrease in the supply of oil is shown by a movement from A) point a to point e. B) point a to point b. C) point a to point c. D) point a to point d.

C) point a to point c.

The SAS curve shifts if there is a change in A) real GDP. B) the price level. C) potential GDP. D) nominal GDP.

C) potential GDP.

In the figure above, point D is A) not production efficient and point B is production efficient. B) less production efficient than point C. C) production efficient and point A is not production efficient. D) production efficient and point B is not production efficient.

C) production efficient and point A is not production efficient.

If the price level falls by 5 percent and workers' money wage rates remain constant, firms' A) quantity of labor demanded will increase. B) supply of jobs will increase. C) quantity of labor demanded will decrease. D) None of the above answers are correct.

C) quantity of labor demanded will decrease.

One of the opportunity costs of economic growth is A) technological change. B) capital accumulation. C) reduced current consumption. D) the gain in future consumption.

C) reduced current consumption.

At a price of $4 in the above figure A) there is a surplus of 200 units. B) the quantity supplied is 400 units. C) there is a shortage of 200 units. D) the equilibrium quantity is 400 units.

C) there is a shortage of 200 units.

Full employment means that A) there is no cyclical or frictional unemployment. B) there is no structural or frictional unemployment. C) there is no cyclical unemployment. D) no one is unemployed.

C) there is no cyclical unemployment.

Item Millions of dollars Personal consumption expenditure 80 Government expenditure on goods and services 30 Net taxes 35 Gross private domestic investment 20 Imports of goods and services 10 Exports of goods and services 20 Use the information in the table above to calculate the value of government saving. A) $15 million B) -$5 million C) $45 million D) $5 million

D) $5 million

Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 15 percent. How many loans can Bank A create at Bank A? A) zero, because Bank A has no excess reserves B) $850 C) $200 D) $50

D) $50

If the number of people unemployed is 100, the number of people employed is 1000, and the working-age population is 1400, then the labor force is A) 1500. B) 1000. C) 1400. D) 1100.

D) 1100.

The table above gives the aggregate demand and aggregate supply schedules in Lotus Land. The short-run macroeconomic equilibrium is a price level of ________ and a real GDP of ________. A) 120; $400 B) 90; $400 C) 100; $400 D) 110; $500

D) 110; $500

In the above figure, when the economy is in a long-run equilibrium, the price level will be A) 110. B) 90. C) 100. D) 120.

D) 120.

Component Number of people Total population 2600 Working-age population 2000 Not in labor force 500 Employed 1300 Using the information in the table above, calculate the number of people in the labor force A) 2100 B) 2500 C) 800 D) 1500

D) 1500

Jed had an exam score of 50 percentage points. There is an extra credit assignment that Jed can complete that will raise his exam score by 20 percentage points. Jed has determined that the extra credit assignment will take 10 hours of his time. Jed will complete the assignment if he values the A) 70 percentage points more than the 10 hours of his time. B) 10 hours of his time more than the 70 percentage points. C) 10 hours of his time more than the 20 percentage points. D) 20 percentage points more than the 10 hours of his time.

D) 20 percentage points more than the 10 hours of his time.

The price of a bag of corn chips is $3, and the price of a bottle of soda is $1. What is the relative price of a bag of corn chips? A) 1/3 bottle of soda per bag of corn chips B) 33¢ C) $3 D) 3 bottles of soda per bag of corn chips

D) 3 bottles of soda per bag of corn chips

Markets A) facilitate trade. B) coordinate price information between buyers and sellers. C) allow traders to enjoy gains from trade. D) All of the above answers are correct.

D) All of the above answers are correct.

Which of the following is a positive statement? A) My economics class should last for two terms because it is my favorite class. B) The government must lower the price of a pizza so that more students can afford to buy it. C) The best level of taxation is zero percent because then people get to keep everything they earn. D) An increase in tuition means fewer students will apply to college.

D) An increase in tuition means fewer students will apply to college.

The above figures show the market for hamburger meat. Which figure shows the effect when more farmers decide to raise cows that are processed into hamburger meat? A) Figure A B) Figure B C) Figure C D) Figure D

D) Figure D

The above figures show the market for oranges. Which figure shows the effect of great growing conditions that produce an above-average sized crop? A) Figure A B) Figure B C) Figure C D) Figure D

D) Figure D

Read the two statements below and indicate if they are true or false. I. Autonomous expenditures change when GDP changes. II. Aggregate planned expenditure is the sum of planned consumption expenditure, investment, government expenditure, and net exports. A) I and II are both true. B) I and II are both false. C) I is true and II is false D) I is false and II is true.

D) I is false and II is true.

Changes in which of the following will affect the size of the multiplier? I. marginal propensity to import II. marginal propensity to consume III. marginal income tax rate A) I only B) II only C) I and II only D) I, II, and III

D) I, II, and III

Which of the following policy actions could speed productivity growth? I. Tax incentives to encourage savings II. Encouraging international trade III. Directing public funds toward financing basic research A) II only B) I and III C) I only D) I, II, and III

D) I, II, and III

Investment is financed by which of the following? I. Government spending II. National saving III. Borrowing from the rest of the world A) I, II, and III B) I and II only C) I and III only D) II and III only

D) II and III only

The MPS equals the ratio of A) saving to real GDP. B) saving to consumption expenditure. C) the change in saving to the change in consumption expenditure. D) None of the above answers is correct

D) None of the above answers is correct

In the above figure, as the economy adjusts toward equilibrium, the A) AD curve will shift rightward. B) AD curve will shift leftward. C) SAS curve will shift rightward. D) SAS curve will shift leftward.

D) SAS curve will shift leftward.

In the above figure, if the economy is at point A, which of the following is TRUE? A) The economy is in a recession. B) Money wages can be expected to fall. C) Point A is the long-run equilibrium point. D) The economy might be at point A as a result of a recent cut in the tax rate.

D) The economy might be at point A as a result of a recent cut in the tax rate.

If Ford sells 200 Explorers for a total of $400,000 to Germany, while the United States imports 100 BMWs for a total of $500,000 from Germany A) U.S. GDP increases because it sells more Explorers. B) U.S. net exports is positive. C) Germany's GDP decreases. D) U.S. GDP decreases because net exports are negative.

D) U.S. GDP decreases because net exports are negative.

Which of the following events shifts the aggregate demand curve leftward? A) an increase in net exports of goods and services B) an increase in consumption expenditures C) a decrease in taxes D) a decrease in government expenditures on goods and services

D) a decrease in government expenditures on goods and services

In the above figure, the distance between points T and U represents A) a trough. B) a peak. C) a recession. D) an expansion.

D) an expansion.

Which of the following will lead to an appreciation of the U.S. dollar against the British pound? A) an increase in U.S. demand for imports from Britain B) an increase in British interest rates C) a decrease in British demand for U.S. assets D) an increase in British demand for imports from the U.S.

D) an increase in British demand for imports from the U.S.

In 2015, the price of peanuts was rising, which led peanut butter buyers to expect the price of peanut butter would rise in the future. Consequently, in the current market for peanut butter there was ________ which resulted in ________ in the price of peanut butter and ________ in the quantity of peanut butter. A) a decrease in supply of peanut butter; an increase; a decrease B) a decrease in demand for peanut butter; a decrease; a decrease C) an increase in supply of peanut butter; a decrease; an increase D) an increase in demand for peanut butter; an increase; an increase

D) an increase in demand for peanut butter; an increase; an increase

Last year the exchange rate between U.S. dollars and Mexican pesos was 10 pesos per dollar. Today is it 11 pesos per dollar. Here, the dollar ________ against the peso, and the peso ________ against the dollar A) depreciated; appreciated B) depreciated; depreciated C) appreciated; appreciated D) appreciated; depreciated

D) appreciated; depreciated

The demand curve for U.S. dollars slopes downward because as the dollar ________ U.S. goods become ________ expensive to foreign residents, so they purchase fewer U.S. goods, and the quantity of dollars demanded decreases. A) depreciates; more B) appreciates; less C) depreciates; less D) appreciates; more

D) appreciates; more

Checks are NOT money because they A) are not backed by either gold or silver. B) have value in exchange but little intrinsic value. C) are issued by banks, not by the government. D) are merely instructions to transfer money.

D) are merely instructions to transfer money.

Discouraged workers ________ counted as officially unemployed because they ________. A) are not; are not qualified to work B) are; are still in the labor force C) are; are not working D) are not; are not actively seeking work

D) are not; are not actively seeking work

In the short run, when the Fed increases the quantity of money A) the demand for money increases. B) bond prices fall and the interest rate rises. C) the supply of money curve shifts leftward. D) bond prices rise and the interest rate falls.

D) bond prices rise and the interest rate falls.

Reported GDP increases when, in fact, total production is unchanged when A) I only B) II only C) neither I nor II D) both I and II

D) both I and II

Making a choice at the margin means ________. A) letting someone else choose for you B) making a choice by comparing the total benefit and the total cost C) waiting until the last minute to make a choice D) deciding to do a little bit more or a little bit less of an activity

D) deciding to do a little bit more or a little bit less of an activity

According to the intertemporal substitution effect, a higher price level A) makes it less costly for people to buy houses and cars. B) increases the quantity of real GDP demanded. C) lowers the costs of building new plants and equipment. D) decreases the quantity of real GDP demanded.

D) decreases the quantity of real GDP demanded.

All else being constant, autonomous expenditure A) increases as real GDP increases. B) is assumed to be zero. C) increases as real GDP decreases. D) does not change with changes in real GDP.

D) does not change with changes in real GDP.

A small country is an international lender and its domestic supply of loanable funds increases. Consequently, the equilibrium quantity of loanable funds used in the country ________ and the country's international lending ________. A) increases; does not change B) increases; decreases C) does not change; does not change D) does not change; increases

D) does not change; increases

An increase in the price level results in a A) downward shift in both the AE and AD curves. B) downward shift in the AD curve and a movement down along the AE curve. C) leftward movement along both the AE and AD curves. D) downward shift in the AE curve and a movement up along the AD curve.

D) downward shift in the AE curve and a movement up along the AD curve.

GDP is defined as the market value of all ________ in a given time period A) final goods and services produced in a country by only the citizens of the country B) final goods produced in a country C) final goods and services produced by citizens of a particular country regardless of where in the world they are located D) final goods and services produced in a country

D) final goods and services produced in a country

Because the short-run aggregate expenditure model assumes that the price level is ________, its predicted effect of changes in autonomous expenditure on equilibrium output is ________ than the prediction of the AD/SAS model. A) flexible; greater B) fixed; less C) flexible; less D) fixed; greater

D) fixed; greater

A recent accounting graduate from a major business school is searching for a place to begin his career as an accountant. This individual is best considered as A) seasonally unemployed. B) cyclically unemployed. C) structurally unemployed. D) frictionally unemployed.

D) frictionally unemployed.

The figure above shows the demand for fruit snacks. Which movement reflects how consumers would react to an increase in the price of a fruit snack that is expected to occur in the future? A) from point a to point e B) from point a to point b C) from point a to point c D) from point a to point d

D) from point a to point d

The U.S. fiscal policy implemented in 2008 was an attempt to A) decrease the exchange rate in order to boost net exports, and thereby increasing AD. B) give billions of dollars to businesses and low- and middle-income Americans in order to stimulate business investment and consumption expenditure, and thereby increasing SAS. C) decrease interest rates in order to stimulate business investment and consumption expenditure, and thereby increasing AD. D) give billions of dollars to businesses and low- and middle-income Americans in order to stimulate business investment and consumption expenditure, and thereby increasing AD.

D) give billions of dollars to businesses and low- and middle-income Americans in order to stimulate business investment and consumption expenditure, and thereby increasing AD.

The lower the exchange rate today, ceteris paribus, the A) smaller the quantity of U.S. dollars demanded in the foreign exchange market today. B) smaller is the expected profit from buying U.S. dollars today and holding them. C) greater is the expected profit from buying foreign currency today and holding it. D) greater is the expected profit from buying U.S. dollars today and holding them.

D) greater is the expected profit from buying U.S. dollars today and holding them.

The data in the above table show that when the price level is 120, the economy A) will have falling money wage rates sometime in the future. B) is in a long-run macroeconomic equilibrium. C) has an inflationary gap. D) has a recessionary gap

D) has a recessionary gap

The figure above illustrates that if this country wishes to have F2 - F1 additional food by moving from point A to point B, it will A) have to find additional workers, because the country already is operating on its production possibilities frontier. B) require that all the unemployed resources in the country be put to work. C) be unable to do so until additional technological progress is made. D) have to sacrifice C1 - C2 clothing in order to free the resources necessary to produce the additional food.

D) have to sacrifice C1 - C2 clothing in order to free the resources necessary to produce the additional food.

When a government has a budget surplus, the surplus A) must be subtracted from private saving to get total saving. B) crowds-out private saving. C) increases the world real interest rate. D) helps finance investment.

D) helps finance investment.

The aggregate demand curve shows that, if other factors are held constant, a A) lower price level results in a higher interest rate. B) higher price level results in an increase in the quantity of real GDP demanded. C) higher price level results in a lower interest rate. D) higher price level results in a decrease in the quantity of real GDP demanded.

D) higher price level results in a decrease in the quantity of real GDP demanded.

In the absence of the Ricardo-Barro effect, an increase in the government deficit results in a ________ real interest rate and a ________ equilibrium quantity of investment. A) lower; lower B) lower; higher C) higher; higher D) higher; lower

D) higher; lower

The circular flow diagram indicates that A) firms buy the services of factors of production from the government. B) households sell goods and services to the government. C) firms buy goods and services from households. D) households sell the services of factors of production to firms.

D) households sell the services of factors of production to firms.

A Keynesian economist believes that A) the economy is self-regulating and always at full employment. B) the economy is self-regulating and will normally, though not always, operate at full employment if monetary policy is not erratic. C) the economy is self-regulating and will normally, though not always, operate at full employment if fiscal policy is not erratic. D) if the economy was left alone, it would rarely operate at full employment.

D) if the economy was left alone, it would rarely operate at full employment.

Factors that influence labor productivity include ________. A) physical capital, the real wage rate, and technology B) the inflation rate, the real wage rate, and the exchange rate C) the labor demand curve D) physical capital, human capital, and technology

D) physical capital, human capital, and technology

Classical growth theory argues that when real GDP per person rises above the subsistence level A) people don't want to work as much, decreasing labor supply. B) technological change slows down, stagnating the economy. C) the economy enjoys a period of permanent growth. D) population growth increases, driving real GDP per person back to subsistence level.

D) population growth increases, driving real GDP per person back to subsistence level.

In July 2014, the CPI inflation rate was 0.3 percent while the core CPI inflation rate was 0.1 percent. The difference between these two measurements of inflation indicates A) prices for food and fuel were increasing less rapidly than prices for other goods. B) a negative underlying inflation rate. C) the underlying inflation rate was higher than the overall inflation rate. D) prices for food and fuel were increasing more rapidly than prices for other goods.

D) prices for food and fuel were increasing more rapidly than prices for other goods.

The opportunity cost of good A in terms of good B is equal to the A) ratio of the money price of good B to the money price of good A. B) money price of good A minus the money price of good B. C) money price of good B minus the money price of good A. D) ratio of the money price of good A to the money price of good B.

D) ratio of the money price of good A to the money price of good B.

Any change in the price level will result in a A) shift in the AE and AD curves in the same direction. B) shift in the AE and AD curves in opposite directions. C) movement along the AE curve and a shift of the AD curve. D) shift in the AE curve and a movement along the AD curve.

D) shift in the AE curve and a movement along the AD curve.

In a short-run macroeconomic equilibrium, potential GDP exceeds real GDP. If aggregate demand does not change, then the A) long-run aggregate supply curve will shift leftward as the money wage rate falls. B) long-run aggregate supply curve will shift leftward as the money wage rate rises. C) short-run aggregate supply curve will shift leftward as the money wage rate rises. D) short-run aggregate supply curve will shift rightward as the money wage rate falls.

D) short-run aggregate supply curve will shift rightward as the money wage rate falls.

The short-run aggregate supply curve A) becomes vertical if there is excess production capacity within the economy. B) shows what each producer is willing and able to produce at each level of income holding constant potential GDP and all resource prices. C) shows a negative relationship between the price level and real national income holding constant potential GDP and all resource prices. D) shows the relationship between aggregate production and the price level holding constant potential GDP and all resource prices.

D) shows the relationship between aggregate production and the price level holding constant potential GDP and all resource prices.

If new capital increases labor productivity, the supply of labor ________ and the demand for labor ________. A) decreases; stays the same B) increases; decreases C) increases; increases D) stays the same; increases

D) stays the same; increases

After you graduate, you have decided to accept a position working at the Bureau of Labor Statistics for $45,000.00 a year. The two other offers you received were working for Wal-Mart for $38,000 and working for Ernst and Young consulting for $42,000. Of these two offers, you would have preferred the job at Ernst and Young. What is the opportunity cost of accepting the position at the Bureau of Labor Statistics? A) the $38,000 you would have been paid working for Wal-Mart B) the $45,000 you are paid for working at the Bureau of Labor Statistics C) the $42,000 you would have been paid working for Ernst and Young and the $38,000 you would have been paid working for Wal- Mart D) the $42,000 you would have been paid working for Ernst and Young

D) the $42,000 you would have been paid working for Ernst and Young

If the money prices of resources changes A) the macroeconomic equilibrium is unaffected. B) the AD curve shifts. C) the LAS curve shifts. D) the SAS curve shifts.

D) the SAS curve shifts.

If the People's Bank of China adopted a flexible exchange rate policy A) the yuan would depreciate. B) the U.S. dollar would appreciate. C) the yuan-U.S. dollar exchange rate would rise. D) the U.S. dollar would depreciate.

D) the U.S. dollar would depreciate.

If firms set prices and then keep them fixed for a period of time, their fixed prices imply that A) the aggregate price level adjusts continuously. B) the aggregate price level is fixed and that aggregate supply determines the quantity of goods and services sold. C) prices are set by aggregate demand and supply. D) the aggregate price level is fixed and that aggregate demand determines the quantity of goods and services sold.

D) the aggregate price level is fixed and that aggregate demand determines the quantity of goods and services sold.

If the Federal Reserve increases interest rates A) the demand curve for U.S. dollars and the demand curve for European euros both shift rightward. B) the demand curve for U.S dollars shifts leftward and the demand curve for European euros shifts rightward. C) the demand curve for U.S. dollars shifts leftward and the supply curve of U.S. dollars shifts rightward. D) the demand curve for U.S. dollars shifts rightward and the supply curve of U.S. dollars shifts leftward.

D) the demand curve for U.S. dollars shifts rightward and the supply curve of U.S. dollars shifts leftward.

An aggregate supply curve depicts the relationship between A) household expenditures and household income. B) the price level and the quantity of nominal GDP supplied. C) the money wage rate and the quantity of real GDP supplied. D) the price level and the quantity of real GDP supplied.

D) the price level and the quantity of real GDP supplied.

If the real interest rate increases from 3 percent to 5 percent A) the supply of loanable funds curve will shift rightward. B) the nominal interest rate will also increase. C) the demand for loanable funds curve will shift rightward. D) there will be a movement up along the demand for loanable funds curve.

D) there will be a movement up along the demand for loanable funds curve.