Macroeconomic 2105

P10. ​Long-run macroeconomic equilibrium occurs when real GDP​ _____ potential GDP​ - equivalently, when the economy is on its​ _____ curve.

​equals; LAS

PQ13. A budget deficit that needs government action to remove it is a​ ______ deficit. A​ ______ deficit will disappear when the economy moves back to full employment.

​structural; cyclical

pt4. Gross domestic product is​ ______. A bakery uses flour to produce bread. When calculating​ GDP, we include​ ______, because when we add the value of the flour to the value of the loaf of bread to calculate​ GDP, the result is​ ______.

the market value of all the final goods and services produced within a country in a given time period only the value of the bread sold in a​ store; double counting

T111, The marginal propensity to consume is​ 0.8, the marginal tax rate is​ 0.25, and the marginal propensity to import is 0.2. The autonomous tax multiplier is​ _______.

-1.33

P101. Potential GDP increases for all of the following reasons except​ ______.

the money wage rate decreases

T112. The marginal propensity to consume is​ 0.8, the marginal tax rate is​ 0.20, and the marginal propensity to import is 0.14. The autonomous tax multiplier is​ _______.

-1.6

12. A​ cost-push rise in the price level can arise from an increase in​ _______.

the money wage rate or money prices of raw materials

P121. A​ cost-push rise in the price level can arise from an increase in​ _______.

the money wage rate or money prices of raw materials

T91. Government expenditures 750 Net taxes 500 Investment 500 Saving 200 The table gives some items from the national income and product accounts. Calculate the government sector​ balance, the private sector​ balance, and net exports

-250 -300 -550

PT5. The CPI tells us​ ______.

the price level in a given period expressed as percentage of the price level in the base period, which is by definition equal to 100.

DSM3. All of the following scenarios depict the characteristics of substitutes except:

the price of bacon increases and the demand for eggs decreases.

P9. At the equilibrium exchange rate​ _______.

the quantity of dollars demanded equals the quantity of dollars supplied

10. Everything else remaining the​ same, an increase in aggregate demand increases​ ______.

the quantity of real GDP supplied

T92. Item Billions of dollars Government expenditures 400 Net taxes 150 Investment 200 Saving 150 The table gives some items from the national income and product accounts. Calculate the government sector​ balance, the private sector​ balance, and net exports.

-250 -50 -300

pt3. Demand is​ _____, when all other influences on buying plans remain the same.

the relationship between the quantity demanded of a good and the price of the good

pt3. Supply is​ _____, when all other influences on buying plans remain the same.

the relationship between the quantity supplied of a good and the price of the good

PT5. All of the following statements are correct except​ _______.

the return of full employment in an expansion phase of the business cycle is economic growth

10. According to the graph, an increase in the quantity of money is best described by:

the shift in the AD curve

P9. If saving is​ $850 billion, investment is​ $500 billion, government expenditure on goods and services is​ $700 billion, net exports is​ $50 billion, and net taxes is​ $800 billion, then calculate government sector balance.

​$100 billion

P12. The U.S.​ short-run Phillips curve​ ______ when the expected inflation rate rises. The U.S.​ short-run Phillips curve​ ______ when the natural unemployment rate increases. The U.S.​ long-run Phillips curve​ ______ when the expected inflation rate rises. The U.S.​ long-run Phillips curve​ ______ when the natural unemployment rate increases.

shifts​ upward; shifts rightward does not​ shift; shifts rightward

10. An unexpected change in the price of oil would cause a shift of the _______ curve.

short-run aggregate supply

10. The aggregate demand and aggregate supply model explains:

short-run fluctuations in real GDP and the price level

An economy is at potential GDP when it experiences an increase in costs. The economy experiences​ _______.

stagflation

10. Keynes maintained that the economy could remain long-term at levels of output below the full-employment level of output due to:

sticky wages.

DSM5. Unemployment arising from a persistent mismatch between the skills and characteristics of workers and job requirements is called __________.

structural unemployment

10. When the price level rises but the money wage rate and other factor prices remain the​ same, there is a movement along​ ______. The quantity of real GDP supplied​ ______.

the SAS​ curve; increases

T92. The U.S. interest rate differential falls when​ ______.

the US interest rate falls and the foreign interest rate rises

DSM7. In the long run, the amount of investment a firm can make is dependent on:

the amount of household savings

pt3. The quantity supplied of a good or service is​ ______.

the amount producers plan to sell during a given time period at a particular price

9. The part of the balance of payments that records a country's exports and imports of goods and services is __________.

the current account

P9. The quantity of U.S. dollars supplied in the foreign exchange market depends on many​ factors, the main ones being​ ______.

the exchange​ rate, U.S. demand for​ imports, interest rates in the United States and other​ countries, and the expected future exchange rate

9. The quantity of U.S. dollars demanded in the foreign exchange market depends on many​ factors, the main ones being​ ______.

the exchange​ rate, world demand for U.S.​ exports, interest rates in the United States and other​ countries, and the expected future exchange rate

PT5. The CPI in 2013 is 120 and the CPI in 2014 is 138.0. The inflation rate in 2014 is ____. The inflation rate in 2014 ​______.

15.0 percent might be higher, lower, or the same as 2013.

DSM5. If the cost of a market basket of goods in 1992, the base year, is $200, and the cost of the same market basket is $300 in 2008, what is the CPI in 2008?

150

PT5. The people who live on Second Life Island consume only juice and cloth. Last​ year, which was the CPI base​ year, the price of juice was ​$3 a​ bottle, the price of cloth was ​$6 a​ length, and the average urban household spent ​$27 on juice and ​$42 on cloth. This​ year, the price of juice is ​$9 a bottle and the price of cloth is ​$7 a length. What is the CPI in the current​ year? The CPI in the current year is ____.

188.4

hw8. Suppose an increase in the monetary base of ​$100,000 increases the quantity of money by ​$300,000. Calculate the money multiplier. The money multiplier is ___

3

P111. The table gives the elements of planned expenditure. Real GDP Consumption expenditure Investment Government expenditure Exports Imports ​(trillions of 2009​ dollars) 0 0.30.3 0.40.4 0.30.3 0.60.6 0 55 2.12.1 0.40.4 0.30.3 0.60.6 0.40.4 When real GDP is ​$5 ​trillion, what are aggregate planned​ expenditure, autonomous​ expenditure, and induced​ expenditure?

3.0 1.6 1.4

pt3. The money price of a pound of bananasa pound of bananas is ​$0.50 and the money price of a can of shave gela can of shave gel is ​$1.50. The opportunity cost of a can of shave gela can of shave gel is​ _______. The relative price of a can of shave gel is an opportunity cost because​ ______.

3.00 pounds of bananas​, which is the relative price of a can of shave gela can of shave gel the relative price tells us how many pounds of bananas we must give up to get a can of shave gel

P12. An economy is at potential GDP and the price level is 100 in the figure. If aggregate demand unexpectedly​ increases, the inflation rate is​ ______.

33 percent a year

P112. Disposable income Consumption expenditure ​(millions of 2009​ dollars) 0 40 100 100 200 160 300 220 The table gives you information about the economy of Bluejay Island. What is the marginal propensity to​ save?

0.40

P9. If the US interest rate is 1.5​ percent, Canada's interest rate is 1​ percent, the US inflation rate is 1.2​ percent, and​ Canada's inflation rate is 0.70​ percent, then calculate the US interest rate differential.

0.5

P9. The price level in the Eurozone is 111.2​, the price level in the United States is 109.1​, and the nominal exchange rate is 0.85 euros per U.S. dollar. What is the real exchange rate expressed as Eurozone real GDP per unit of U.S. real​ GDP?

0.83

hw8. In Canada​, the currency drain ratio is 11 percent of deposits and the reserve ratio is 0.03 percent of deposits. The Canadian money multiplier is ____. In​ Australia, the quantity of M1 is​ $150 billion, the currency drain ratio is 33 percent of deposits and the reserve ratio is 8 percent. The monetary base in Australia is $_____ million

10.06 46.24

T92. Item Billions of dollars Imports of goods and services 950 Foreign investment in Plutonia 1,200 Exports of goods and services 1,500 Plutonian investments abroad 350 Net interest income 11 Net transfers −60 Statistical discrepancy −10 The table gives some information about international transactions in the country of Plutonia. What is the capital and financial account​ balance?

840

PT5. 2013 2014 Item Price Quantity Price Quantity Books ​$4 5 ​$5 8 Pens ​$6 6 ​$4 9 In 2013 and in​ 2014, consumers in Dexter consumed only books and pens. The prices and quantities for 2013 and 2014 are listed in the table. The reference base period for​ Dexter's CPI is 2013 and 2013 is also the year of the Consumer Expenditure Survey. The CPI in 2014 is​ ______.

87.5

9. If the exchange rate between the U.S. dollar and the Japanese yen is $1 = 100 yen, the price level in the United States is 90 and the price level in Japan is 100, what is the real exchange rate?

90

P9. The U.S. price level is 120​, the Japanese price level is 97.4​, and the real exchange rate is 103.6 Japanese real GDP per unit of U.S. real GDP. What is the nominal exchange​ rate?

84.09 yen per dollar

DSM5. Which of these persons is officially unemployed?

A non-working individual who has looked for a job in the past week

DSM8. The __________ links the quantity of money, velocity of circulation, price level, and real GDP.

equation of exchange

T92. Choose the statement that is incorrect.

Against the Chinese Yuan, the dollar appreciated between 2005 and 2014.

DSM8. Which of these will shift the money demand curve to the right?

An increase in real GDP

DSM3. Which of the following is consistent with the law of supply?

An increase in the market price of MP3 players causes an increase in the production of MP3 players.

pt1. Which of the following news headlines does not deal with​ scarcity?

Apple is earning a record profit

DSM13 When the economy is in a recession, the government can:

increase government purchases or decrease taxes in order to increase aggregate demand.

10. According to Keynesian theory, fiscal policymakers can combat the impact of recessions by:

increasing government spending.

pt3. Aqua Springs makes the following four statements about bottled spring water. Which statement best describes the​ firm's quantity supplied in the bottled water​ market?

At a price of​ $1 bottle, we plan to sell​ 2,000 bottles per day.

pt1. Which of the following illustrates an efficient​ outcome?

Ted cuts the price of his sausages and his profit increases.

T91. Choose the statement about a crawling peg that is incorrect.

A crawling peg makes the exchange rate fluctuate wildly.

P112. An increase in investment shifts the AE curve​ _______ and the AD curve​ _______.

​upward; rightward

P132. Potential GDP is​ $10 trillion and actual real GDP is​ $8 trillion. The economy has a structural deficit of​ $1.5 trillion and an actual deficit of​ $2 trillion. The cyclical deficit is​ ______.

$0.5 trillion

DSM8. Suppose that velocity of circulation is 3 and the quantity of money is $500 million. According to the quantity theory of money, GDP equals __________.

$1.5 billion

P121. If the trend rate of change of velocity is 1 percent a​ year, potential GDP grows by 4 percent a​ year, and the money growth rate is 2 percent a​ year, what is the trend inflation​ rate?

-1 percent a year

pt4. Gross domestic product ​(GDP​) is the market value of all the​ _____ goods and services produced​ _____ a country in a given time period.

. ​final; within

pt1. Which of the following statements are normative? 1. Greece is the best place to vacation 2. If the price of antiretroviral drugs increases, HIV/AIDS sufferers will decrease their consumption of the drugs 3. The greatest number of accidents are caused by drunk drivers 4. The United States should do more to stop global warming

1 and 4

pt3. In April​ 2014, the money price of a carton of milk was​ $2.01 and the money price of a gallon of gasoline was​ $3.63. The relative price of a gallon of gasoline in terms of milk was​ _______.

1.81 cartons of milk

DSM8. How many Federal Reserve districts are there?

12

T111. An economy has a consumption function of C​ = 15​ + 0.7Y​, investment of​ 8, government expenditure of​ 12, exports of​ 20, and an import function of M​ = 0.2Y. What is the multiplier for this​ economy?

2

hw4. The Bureau of Labor Statistics reported the following data for August 2017August 2017. Labor force 160,571 Employed 153,439 Working-age population 255,357 Use the above data to calculate for August 2017August 2017​: ​>>> Answer each to one decimal place. Unemployment rate Labor force participation rate Employment to population ratio

4.4 Percent 62.9 Percent 60.1 Percent

DSM7. What is the relationship between real interest rates and investment, other things being equal?

A negative relationship

DSM4. Which of the following goods and services would be excluded from personal consumption expenditures in the Bureau of Economic Analysis (BEA) statistics?

A new house

DMS6. Which of these will cause the quantity of goods and services that can be produced by one worker, or in one hour of work, to increase?

A technological change

DSM3. Which of the following will cause an outward (rightward) shift in supply?

A technological improvement.

hw5. Choose the statement that is incorrect.

A wage contract linked to the CPI gives the workers less real income than the firm intended.

T112. An economy has a consumption function of C​ = 10​ + 0.8Y​, investment of​ 6, government expenditure of​ 10, exports of​ 10, and an import function of M​ = 0.1Y. What is the equation of the aggregate expenditure​ curve?

AE= 36 + 0.7Y

pt1. Which of the following is an example of an incentive​?

All conference volunteers would be offered free lunch on all three days.

hw1. ​______ earns​ ______.

An economist; wages

hw8. When the Fed buys securities from a​ bank, a sequence of events begins. The events are listed below. Number each event in the order in which it occurs.

Banks have excess reserves. Banks lend excess reserves. The quantity of money increases. New money is used to make payments. Some of the new money remains on deposit. Some of the new money is a currency drain. Desired reserves increase because deposits have increased. Excess reserves decrease.

DSM7. Which of these are financial instruments that represent promises to repay a fixed amount of funds?

Bonds

DSM4. How does the Bureau of Economic Analysis of the U.S. Department of Commerce measure GDP?

By adding the value in dollar terms of all the final goods and services produced domestically.

P12. The figure shows the aggregate​ demand, short-run aggregate​ supply, and​ long-run aggregate supply curves for the economy of Tomorrowland. The economy is currently at point A. A​ cost-push rise in the price level will initially move the economy to point​ ______ and to point​ ______.

C when the money prices of raw materials​ rise; D when aggregate demand increases

E. Capital and Financial Account

Capital and Financial Account= Foreign Investment in the US - US Investment Abroad + Statistical Discrepancy

P9. Imports of goods and services 1,250 Foreign investment in NordlandNordland 1,300 Exports of goods and services 1,250 Nordland's investment abroad 550 Net interest income 88 Net transfers −20 Statistical discrepancy −10 The table gives some information about Nordland's international transactions. Calculate the current account​ balance, the capital and financial account​ balance, and the official settlements account balance. Nordland's Official Reserves are ____ This nation is a _____

Current Account Balance: -12billion Capital and Financial Account Balance: 740 billion Official Settlements: -728 bilion Increasing Net borrower

E. Current Account

Current Account= (Exports-Imports) + Net Interest Income + Net Transfers

DSM8. The sum of all currency in the hands of the public, checkable deposits and traveler's checks is the official definition of __________.

M1

9. b. Did the events​ you've described change the demand for U.S.​ dollars, the supply of U.S.​ dollars, or both demand and supply in the foreign exchange​ market? Answer by typing D for​ demand, S for​ supply, or B for both demand and supply Change in world demand for U.S.exports Upper DD Change in U.S.import demand Upper SS Change in U.S. interest rate differential Upper BB Change in expected future exchange rate Upper BB

DD for Demand SS for Supply BB for Both

pt4. Which of the following is an example of a final good or service​?

Dan bought a Toyota Camry.

DSM5. Which of these factors can cause the natural rate of unemployment to change?

Demographic changes

pt1. Which one of the following news headlines definitely concerns the social​ interest?

E Coli Test Results Must be Posted on Beaches Your answer is correct.

pt1. Which of the following news headlines does not illustrate the potential for conflict between​ self-interest and the social​ interest?

Ford employees are offered a retirement incentive

DSM5. When the economy is at full employment, which types of unemployment remain?

Frictional and structural

hw6. U.S. Workers​ World's Most Productive-The article defines productivity as​ ______. Real GDP per person is​ ______.

GDP divided by the number of people​ employed; real GDP divided by the population

PT7. Choose the statement that is incorrect.

If a financial​ institution's net worth is​ positive, the institution must be solvent and liquid.

10. According to the graph, an increase in government spending, all else equal, will shift the AD curve from the initial AD curve to the curve labeled:

Increased AD

P11. The multiplier increases when the marginal propensity to consume ____. The multiplier increases when the marginal propensity to import​ ______ or the income tax rate​ ______.

Increases decreases; decreases

P132. Expansionary fiscal policy when the economy is below full employment​ ______ aggregate demand and real​ GDP, and the price level​ ______.

Increases; rises

P9. Choose the correct statement about interest rate parity

Interest rate parity means equal rates of return.

hw1. Who is Chairman of the Board of Governors of the Federal​ Reserve?

Janet Yellen

P10. Based on this news​ clip, Barack Obama most likely follows the​ ______ school of thought and John McCain most likely follows the​ ______ school of thought.

Keynesian or new​ Keynesian; classical or new classical

P111. Which of the following equations is incorrect​?

MPC + MPS = change in YD

pt1. Which of the following illustrates scarcity​?

Megan wants to buy a CD that costs​ $25 but has only​ $10 to spend.

DSM8. The actions the Federal Reserve takes to manage the money supply and interest rates in order to pursue economic objectives are called __________.

Monetary policy

PT7. Choose the statement that is incorrect.

Most economists believe that the Ricardo-Barro Effect holds in the loanable funds market

E. Official Settlements

Official Settlements= -1* (Capital and Financial + Current Accounts)

DSM2. What is the name given to the highest-valued alternative that must be given up to engage in any activity?

Opportunity cost

pt1. Which of the following examples describes microeconomics​?

People prefer buying iPhones over Nokia phones.

DSM6. The role of technological progress in determining economic growth can be described by which statement?

Per capita output will rise when we discover new and more effective uses of capital and labor.

DSM3. In a market system, which of the following provides the information that individuals need to make decisions about resource allocation?

Prices

DSM6. Which of these government policies can help economic growth?

Promoting higher rates of saving

pt1. Which of the following is an example of entrepreneurship​?

Sam Walton created the multinational retail corporation brand Walmart in 1962.

pt4. Which of the following is an example of an intermediate good or service​?

Samsung buys compressors for manufacturing refrigerators.

hw4. Choose the option that is an example of government expenditure.

Secret service protection for the President

DSM8. The Board of Governors of the Federal Reserve has _________ members that are appointed for staggered _________ by the __________ and confirmed by the Senate.

Seven, 14-year terms, President

pt1. ​_____ are examples of goods and​ _____ are examples of services.

Shoes; haircuts

P10. The table shows the aggregate demand and​ short-run aggregate supply schedules of a country in which potential GDP is​ $1,050 billion. What is the​ short-run equilibrium real GDP and price​ level? The country has _____ gap. The magnitude of the _____ gap is _____ billion.

Short-run equal real GDP: 1000 Price level: 130 a recessionary recessionary; 50

P132. Choose the correct statements. 1. A government budget deficit increases government debt. 2. In 2014, the Euro area had the largest deficit in the world, expressed as a percentage of GDP. 3. Since 2002, U.S. government debt has been decreasing. 4. Upper A persistent budget deficit feeds itself.

Statements 1 and 4 are correct.

PT5. Choose the statements concerning neoclassical growth theory that are true. 1. As incomes increase both the birth rate and the death rate decrease. 2. Technological change results from the choices people make in the pursuit of profit. 3. Neoclassical growth theory implies that growth rates and income levels per person around the globe will diverge. 4. Neoclassical growth theory is the proposition that real GDP per person grows because technological change induces a level of saving and investment that makes capital per hour of labor grow.

Statements 1 and 4 are correct.

DSM13. __________ maintains that tax policy can either create or destroy incentives to work, save, and invest.

Supply-side theory

PT7. I​ = ______.

S​ + ​(T​ - G​) ​+ ​(M - X​)

PT5. Choose the statement that is incorrect.

The unemployment rate includes all underutilized labor.

DSM13 According to supply-side theory, fiscal policymakers can combat the impact of recessions by:

lowering tax rates.

PT6. Choose the statement that is incorrect.

The demand for labor is the relationship between the quantity of labor demanded and the money wage rate.

DSM7. If technological change increases the profitability of new investment to firms, which of these will occur?

The demand for loanable funds will increase.

T91. Choose the statement about flexible exchange rates that is incorrect

The world economy has operated a flexible exchange rate since WWII

P9. Choose the statement that is incorrect.

Trends around which the exchange rate fluctuates are impossible to predict.

DSM2. You and your neighbor pick apples and cherries. If you can pick apples at a lower opportunity cost than your neighbor can, which of the following is true?

You have a comparative advantage in picking apples.

10. A higher exchange rate will result in:

a decrease in net exports and a decrease in aggregate demand

P9. The United States is​ ______.

a net borrower and a debtor nation

hw2. The figure shows the production possibilities frontier for a firm that produces pet food. Point A is​ ______ and point B is​ ______. This PPF​ ______ illustrate scarcity because​ ______.

attainable; unattainable ​does; the firm cannot produce points outside the frontier and as the firm moves along the PPF​, it cannot produce more dog biscuits without producing less cat food

DSM8. To increase the money supply, the Fed __________.

buys securities from the public

pt3. A substitute is a good that is​ _____ another​ good, and a complement is a good that is​ _____ another good.

consumed in place​ of; consumed together with

hw1. Making a choice at the margin means​ ________.

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

DSM13 In 2008, spending on Social Security, Medicare and Medicaid was less than 10% of the GDP. By 2030 this amount is expected to be around 17% of GDP. One government option to solve this problem is to:

decrease benefits.

13. Economy Needs Treatment- A​ "credible business​ plan" for the government to adopt is a plan to​ ______.

decrease government expenditure

10. In the short run, an unexpected decrease in oil prices will:

decrease the price level but increase real GDP

pt4. Depreciation is the​ _____ in the value of​ _____ that results from its use and from obsolescence.

decrease; capital

11. The multiplier increases when the marginal propensity to import​ ______ or the income tax rate​ ______.

decreases; decreases

P10. The​ "average overall increase across the​ board" wage increase​ _______.

decreases​ short-run aggregate supply

P11. The government expenditure multiplier equals the change in​ _____ that results from a change in government expenditure divided by the change in government expenditure.

equilibrium expenditure and real GDP

PQ13. The tax multiplier is the effect of a change in taxes on​ _____.

equilibrium real GDP

DSM5. The unemployment that occurs with the normal workings of the economy, such as workers taking time to search for suitable jobs and firms taking time to search for qualified employees, is called:

frictional unemployment

DSM13 One of the primary goals of most governments with regard to the economy is:

full employment

DSM5. The "normal or natural" underlying level of unemployment in the economy is the __________.

full employment rate of unemployment

12. According to real business cycle theory, shifts in aggregate demand:

have no impact on real GDP.

DSM5. A firm that pays an efficiency wage is paying a wage that is __________ the current market wage.

higher than

hw4. In the​ figure, flow B represents​ ________

household purchases of goods and services

pt4. Imports of goods and services are items that​ _____ in the United States​ _____ the rest of the world.

households, firms, and​ governments; buy from

P131. The quantity of investment and borrowing that firms plan to undertake depends on​ ______.

how productive capital is and what it costs

hw6. The aggregate production function is the relationship that tells us​ ______, when all other influences on production remain the same.

how real GDP changes as the quantity of labor changes

DSM5. A sustained increase in the overall level of prices is known as:

inflation

P12. In monetarist cycle theory​, fluctuations in both​ _____, driven by fluctuations in the growth rate of the quantity of​ money, are the main source of fluctuation in aggregate demand.

investment and consumption expenditure

P12. In Keynesian cycle theory​, fluctuations in​ _____ driven by fluctuations in business confidence​ - summarized by the phrase​ "animal spirits"​ - are the main source of fluctuations in​ _____.

investment; aggregate demand

P112. A decrease in the marginal propensity to import​ _______, everything else remaining the same.

makes the multiplier larger

13. Which of the following is not a role played by the Budget Committees of the House of Representatives and the Senate in creating fiscal​ policy?

making the initial budget proposal in February

pt3. A decrease in the demand for pasta together with a a decrease in the supply of pasta ​______ create a surplus or a shortage of pasta at the original price. The price of pasta ​______.

might; might​ fall, rise, or not change

10. The classical view assumes:

money wage rates adjust quickly.

hw4. Shares in Ford Motor Company is an example of​ ______ good. A diamond purchased by Harry to give to Sally is an example of​ ______ good. Biscotti bought by Delta Airlines and served to passengers is an example of​ ______ good. The waste basket you bought when you moved into residence is an example of​ ______ good.

neither a final nor an intermediate; a final an intermediate; a final

12. If inflation is​ expected, _______.

neither a​ cost-push inflation nor a​ demand-pull inflation occur

hw2. The table shows​ Brazil's production possibilities for ethanol and food crops. Marginal benefit from a good or service is the benefit received from consuming​ ______. It is measured by the most that people are willing to pay for​ ______. Marginal benefit from food crops​ _______.

one more unit of​ it; an additional unit of it cannot be calculated from the table

pt1. A rational choice is​ _______. Choose the statement that is incorrect.

one that compares costs and benefits and achieves the greatest benefit over cost for the person making the choice It is never a rational choice to decide to enter the labor force immediately following high school.

pt3. A supply curve shows the relationship between the​ ______ and​ _____ when all other influences on selling plans remain the same.

quantity supplied of a​ good; its price

hw4. In the United​ States, GDP is typically measured

quarterly.

T91. Between 2012 and​ 2014, the U.S. exchange rate​ ______ against the Japanese yen because the U.S. interest rate differential was expected to​ _______.

rose; increase

P9. 1. What happened to the​ yuan-dollar exchange rate in recent​ days? The​ yuan-dollar exchange rate has decreased in recent days. 2. What might have changed the demand for​ yuan? A fall in the yuan interest rate differential has decreased the demand for yuan. 3. What might have changed the supply of​ yuan? Market intervention by the​ People's Bank of China has increased the supply of yuan.

see term side

pt3. Coal and oil are​ ______. A skateboard and an iPod are​ ______. A cellphone and a phone call are​ ______. A text message and an email are​ ______. Pasta and pizza are​ ______. A video game and a laptop are​ ______. Pizza and sausage are​ ______. Wheat and rye are​ ______

substitutes; complements complements; substitutes substitutes; complements complements; substitutes

DSM4. If Americans still worked sixty hour weeks, as they did in 1890, __________.

the GDP would be much higher than it is but the well-being of the typical person would not necessarily be higher

P10. Aggregate demand will increase if​ ______.

the effect of the tax rebates and the change in the foreign exchange rate outweigh the effect of the​ housing, credit, and financial crises

DSM3. Given linear demand curves, if demand and supply both increase but demand increases by a greater amount than supply, then:

the equilibrium price and quantity both increase.

DSM3. Given linear demand curves, if demand and supply increase by identical amounts, then:

the equilibrium price stays the same and the equilibrium quantity rises.

10. As we move up along the​ long-run aggregate supply​ curve, ______.

the real wage rate remains constant

P9. What does the Treasury Department say about​ China's currency? The Treasury Department says that​ China's currency is ________. What type of exchange rate policy does China​ practice? China practices a _____ exchange rate policy. How might it be determined whether the yuan is​ "significantly undervalued"? It might be determined whether the yuan is​ "significantly undervalued" from​ _____ and​ _____.

undervalued crawling peg PPP Prices; change in foreign exchange reserves

P9. The yuan was​ ______ relative to purchasing power parity and the Swiss franc was​ ______ relative to purchasing power parity. The price of a Big Mac in different countries​ _______ provide a valid test of purchasing power parity because​ _______.

undervalued; overvalued does​ not; purchasing power parity is determined by the price level not by individual prices

DSM5. The natural rate of unemployment is the __________.

unemployment rate an economy will experience when real GDP equals potential GDP

12. A movement​ ______ along the​ short-run Phillips curve occurs when there is an​ ______ increase in aggregate demand.

up; unexpected

P131. The tax wedge is the gap between the​ before-tax and​ after-tax ______.

wage rates

hw2. Allocative efficiency occurs when​ ______.

we are producing at a point on the PPF such that marginal benefit at the quantity produced equals marginal cost

10. How can government policies shift the aggregate demand curve to the right?

By increasing government purchases

PT7. Choose the correct statement.

Commercial banks are financial institutions that accept​ deposits, provide payment​ services, and make loans to firms and households.

hw7. Choose the correct statement.

Commercial banks are financial institutions that accept​ deposits, provide payment​ services, and make loans to firms and households.

DSM6. Which of these terms refers to the accumulated knowledge and skills workers acquire from education and training, or with life experiences?

Human capital

hw4. Which of the following is TRUE regarding real​ GDP? I. Real GDP is the value of the total production of the​ country's farms,​ factories, shops, and offices. II. Real GDP rises whenever inflation occurs. III. Real GDP does not measure all that is produced.

I and III

pt1. ​_____, is an example of a choice in the ​self-interest. ​_____, is an example of a choice in the social interest.

I buy pizza for​ lunch; I am collecting funds to help the flood victims

pt3. Which of the following statements about the market for chicken describes a change in the quantity demanded and which describes a change in demand​? I People are buying less chicken because the price of beef has fallen. II People are buying less chicken because the price of chicken has increased. III People are buying more chicken because the price of chicken has fallen. IV The cost of chicken feed has increased.

I is a change in demand and II and III are changes in the quantity demanded.

pt1. Which of the following illustrates a tradeoff​?

I will study for my exam instead of going to the movie tonight.

hw7. Choose the statement that is incorrect.

If a financial​ institution's net worth is​ positive, the institution must be solvent and liquid.

P9. Choose the correct statement about purchasing power parity.

If purchasing power parity does not​ prevail, the demand for U.S. dollars changes and the supply of U.S. dollars changes.

DSM8. Which of these predictions can be made using the growth rates associated with the equation of exchange?

If the money supply grows at a faster rate than real GDP, there will be inflation.

pt3. Which of the following statements by Aqua Springs demonstrates that the​ firm's selling plans obey the law of supply​?

If the price of bottled water falls and all the other influences on our selling plans remain the​ same, we will cut back on production and lay off some workers

DSM6. Which of these government policies can help economic growth?

Improving the quality of education

P12. Choose the statement that is incorrect.

In a​ deflation, the inflation rate is positive but decreasing in consequent years.

T122. The figure shows the aggregate​ demand, short-run aggregate​ supply, and​ long-run aggregate supply curves for the economy of Tomorrowland. The economy is currently at point A. A​ demand-pull rise in the price level will initially move the economy to point​ _______ and to point​ _______.

E when aggregate demand increases; D when the money wage rate rises.

PT5. Choose the statement that is incorrect.

In the United States in​ 2009, 22 million fewer people had jobs than in 1989.

DSM13 Which of these would be a fiscal policy the government might want to use if the economy is operating at too high a level of output?

Increasing income tax rates

DSM5. Government policies can help to reduce the levels of frictional and structural unemployment, but they can also help to increase them. Which of these policies can cause an increase in the levels of frictional and structural unemployment?

Increasing the minimum wage

DSM4. Which of the following are not counted as final goods and used in the GDP calculation?

Intermediate goods

pt3. Which of the following is an example of money price​?

Joe paid​ $15 to buy a pizza box from​ McDonald's.

10. Shoppers Stimulate Discount Stores- The​ ______ macroeconomic school of thought justifies the policy discussed in this news clip.

Keynesian

10. __________ advocates active government intervention via fiscal policy when the economy is in recession.

Keynesian theory

10. Which of these shifts the aggregate demand curve to the right?

Lower interest rates

DSM7. What is the relationship between investment and real interest rates, all other things being equal?

Lower interest rates stimulate investment.

DSM8. The equation of exchange is:

M x V = P x Q

hw2. Kelly is an​ architect, and she is trying to decide whether to hire​ Mike, a​ draftsman, to assist with her work. Kelly could hire Mike at​ $20 per​ hour, but it would take him three times as long to complete a task as it takes Kelly. Kelly is able to earn​ $90 per hour and has more architectural jobs than she is able to handle. Which of the following is​ true?

Mike should be hired at the​ $20 per hour wage rate.

hw6. Choose the statement that is incorrect

Real GDP per person grows whenever real GDP grows.

P12. Debate on Causes of Joblessness Grows- ​______ cycle theory would say that the rise in unemployment is not cyclical but is a change in the natural unemployment rate.

Real business

DSM4. Which phase of the business cycle is characterized by decreasing levels of real GDP?

Recession

P11. An economy has a fixed price​ level, no​ imports, and no income taxes. An increase in autonomous expenditure of ​$2 trillion increases equilibrium expenditure by ​$20 trillion. Calculate the multiplier and the marginal propensity to consume. The marginal propensity to consume is ____. If an income tax is introduced in this​ economy, the multiplier​ _______.

Multiplier: 10 0.90 decreases

10. Choose the statement that is incorrect.

Over the business​ cycle, aggregate supply fluctuates around potential GDP.

hw3. A change in _____ ​(one word) causes movement along a demand curve and a change in _____ ​(two words). Changes in what six things cause a shift of the demand​ curve? (Look at the PP slide with the​ bubbles.)

Price; Quantity demanded preferences,related goods,future prices,income,future income,population

DSM8. When we say that money serves as a unit of account, we mean that:

Prices are quoted in terms of money.

E. Real Exchange Rate

Real Exchange Rate= (Exchange Rate x U.S. Price Level) / Foreign Price Level

DSM4. Which measure of GDP represents changes in the quantity of goods and services produced in the economy, holding prices constant?

Real GDP

DSM2. Which of the following is critical to the success of the market system?

To allow individuals or firms to have exclusive use of their property

P132. Choose the correct statement.

Tax cuts can increase tax revenue.

P102. Which of the following statements about the Keynesian view of the macroeconomy is ​incorrect?

Technological change is the most significant influence on both aggregate demand and aggregate supply.

P10. Which of the following statements illustrate fiscal policy​?

The US government has proposed a hike in the corporate tax rate.

PT5. Choose the statement that is incorrect.

The United States and Great Britain were the only countries who suffered the Great Depression.

P131. Choose the statement that is incorrect.

When full employment returns in 2018, the CBO says that that cyclical deficit will continue to be large

DSM8. When is the opportunity cost of holding money higher?

When interest rates are high

hw7. How can the change in U.S. wealth differ from U.S.​ saving?

The change in wealth includes changes in the prices of assets owned and saving excludes these items.

PT5. Choose the statement about growth in labor productivity that is incorrect.

The demand for labor​ increases, the production function does not​ change, but a movement occurs along the production function.

P131. Choose the statement that is incorrect.

The demand-side effect of a tax cut are likely to be larger than an equivalent increase in government expenditure.

P10. Labor productivity is rising at a rapid rate in China and wages are rising at a similar rate. Choose the statement that is incorrect.

The increase in labor productivity has no effect on​ short-run aggregate supply.

hw5. Choose the correct statement. The CPI in 2006 was 201.6. The CPI in 2007 was 207.3. The inflation rate in 2007 was ___ percent.

The inflation rate is the annual percentage change in the price level. 2.8

T122. Choose the correct statement.

The long-run Phillips curve shifts rightward when the natural unemployment rises and leftward when natural employment falls

hw2. When most economists wake up in the​ morning, their first decision is whether or not to hit the snooze alarm. What statement best represents their thought process as a rational decision​ maker? ​ (How does an economist approach analyzing a situation like​ this?)

The marginal benefit of sleeping 10 more minutes is greater than the marginal benefit of 10 more minutes of work

pt1. Every​ week, Kate plays guitar for one hour​, and her grade on each math test is 85 percent. Last​ week, after playing guitar for one hour​, Kate considered playing for another hour. She decided to play for another hour and cut her study time by one hour. But last​ week, her math grade fell to 70 percent. Given that Kate spent a second hour playing guitar, what can you conclude about the marginal benefit and marginal cost of the first hour of playing guitar​?

The marginal benefit of the first hour of playing guitarr exceeded its marginal cost.

hw1. Every​ week, Ben runs for one hour​, and his grade on each math test is 90 percent. Last​ week, after running for one hour​, Ben considered running for another hour. He decided to run for another hour and cut his study time by one hour. But last​ week, his mathmath grade fell to 75 percent. Given that Ben spent a second hour running​, what can you conclude about the marginal benefit and marginal cost of the first hour of running​?

The marginal benefit of the first hour of running exceeded its marginal cost.

10. The aggregate demand curve shows the relationship between:

The price level and the quantity of real GDP demanded

P121. Choose the statement that is incorrect.

The price level falls if aggregate supply increases at a persistently slower rate than aggregate demand.

PT6.Choose the statement that is incorrect.

The return of full employment in an expansion phase of the business cycle is economic growth.

pt1. Which of the following is the opportunity cost of attending a ball​ game?

The things you would have bought with what you spent on the ticket and bus fare getting to the game plus the things you would alternatively have done with your time.

DSM13 What happens when government spending is greater than government tax revenues?

There is borrowing by the government and the government debt rises.

10. At arrow 1 in the​ graph, the economy is in​ ______ full- employment equilibrium and the intersection of the AD and SAS curves is to the​ ______ of the LAS curve.

a​ below; left

pt1. Rational choice is a choice that uses the available resources to​ _____ of the person making the choice.

best achieve the objective

P9. A debtor nation is a country that during its entire history has​ _____ the rest of the world than it has​ _____ the rest of the world.

borrowed more​ from; lent to

10. A​ ______ macroeconomist believes that the economy is​ self-regulating and always at full employment. A​ ______ macroeconomist believes the economy requires active help from fiscal policy and monetary policy to maintain full employment.

classical; Keynesian

10. Stagflation is a:

combination of inflation and recession

10. Changes in consumption spending play a large role in the business cycle because​ _______ accounts for approximately​ ______ percent of GDP.

consumption​ expenditure; 70

P12. An inflation that is kicked off by an increase in​ _____ is called ​cost-push inflation.

costs

hw4. In August 2016​, the U.S. unemployment rate was 4.9 percent. In August 2017​, the unemployment rate was 4.4 percent. Assuming that the labor force remained constant between August 2016 and August 2017​, then unemployment​ _______.

decreased

PT6. The gap between real GDP per person in the United States and Hong Kong has​ ______ since 1960. During this​ period, the growth rate of real GDP per person in the United States has been​ ______ than in Hong Kong.

decreased; slower

P10. The following events have occurred at times in the history of the United States. 1. A deep recession hits the world economy 2. The world oil price rises sharply 3. U.S. businesses expect future profits to fall Event 1​ ______. Event 2​ ______. Event 3​ ______.

decreases aggregate​ demand; decreases​ short-run aggregate supply decreases aggregate demand

P9. A fixed exchange rate is an exchange rate that is determined by​ ______ and is achieved by central bank intervention in the foreign exchange market to block​ _____.

a decision of the government or the central​ bank; the unregulated forces of demand and supply

pt1. ​______ earns​ ______.

a delivery truck driver; wages

DSM5. Suppose you are available for work but have not looked for a job for at least the last four weeks because you believe that no jobs are available. You would then be counted as __________.

a discouraged worker

PT7. A mortgage is​ _______.

a legal contract that gives ownership of a home to the lender in the event that the borrower fails to meet the agreed loan payments​ (repayments and​ interest)

P132.Fiscal policy attempts to achieve all of the following objectives except​ ______.

a stable money supply

hw8. The ratio of reserves to deposits that a bank plans to hold is its​ ______. If a bank has​ $10 million in actual reserves and​ $8 million in desired​ reserves, then it has​ ______.

desired reserve​ ratio; excess reserves

PQ13. A tax on labor income​ ______. The equilibrium quantity of labor​ ______. At the new equilibrium quantity of​ labor, the​ before-tax wage rate ______ and the​ after-tax wage rate _____

decreases the supply of​ labor; decreases rises; falls

P10. If the price level and the money wage rate rise by the same​ percentage, the quantity of real GDP supplied​ ______ and there is a movement up along the​ ______ aggregate supply curve.

does not​ change; long-run

10. Aggregate demand decreases if expected future​ income, inflation, or profits​ ______. And aggregate demand decreasesdecreases if fiscal policy​ ______ government expenditure.

decreases; decrease​;

P9. Could the change in the exchange rate on June 2 have resulted from the two announcements or must some other influence have changed​ too? If​ so, what might that influence have​ been? On June​ 2, the U.S. dollar depreciated rather than appreciated because a fall in U.S.​ _____ decreased the demand for U.S. dollars or an increase in U.S.​ _____ increased the supply of U.S. dollars

exports; imports

P12. The consequences of deflation include all of the following except​ _______.

falling real wage rates for workers with​ long-term wage contracts

PT7. The supply of loanable funds is influenced by all of the following except ​______.

expected profit

pt4. Gross domestic product can be measured in two​ ways: By the total​ ______ or the total​ ______. Aggregate income earned is equal to the total amount paid for​ ______ to produce final goods and services. Aggregate expenditure is equal to​ ______. And because firms pay out as incomes everything they receive from the sale of their​ output, aggregate income equals aggregate expenditure.

expenditure on goods and​ services; income earned producing goods and services the factors of production​ used; C​ + I​ + G​ + ​(X−​M) True

P12. According to RBC​ theory, the source of the business cycle is​ _______, which result mainly from​ _______.

fluctuations in​ productivity; fluctuations in the pace of technological change

10. A monetary growth rule that might be supported by a monetarist would be a plan:

for the Federal Reserve to increase the quantity of money at a fixed rate and not respond to economic fluctuations.

P131. The division of the fiscal imbalance between the current and future​ generations, assuming that the current generation will enjoy the existing levels of taxes and​ benefits, is the​ ______.

generational imbalance

PQ13. A tax on interest income has a _______ impact than the same percentage tax on labor income. Suppose the real interest rate is 3 percent a year and the tax rate is 60 percent. The inflation rate is 2 percent a year. What is the real​ after-tax interest​ rate? The real​ after-tax interest rate is ___ percent a​ year, and the true tax rate is ____ percent. A tax on interest income ____ the​ after-tax interest​ rate, _____ ​saving, and ____ investment.

greater 0, 100 lowers, decreases, decreases

hw3. ​"As fewer people buy gym memberships​, the demand for running shoes will decrease and the price of a pair of running shoes will increase. The rise in the price of a pair of running shoes will increase the supply of running shoes​." This statement is​ ______ because​ ______.

false; a decrease in demand for running shoes does not increase the price of a pair of running shoes and an increase in the price of a pair of running shoes does not increase the supply of running shoes

P131. Prior to the Great​ Depression, the purpose of the federal budget was to​ ______.

finance federal government programs and activities

hw4. The factor market can best be described as where

firms buy the services of​ labor, land and capital.

P9. In the 1950s and​ 1960s, the United States operated a​ ______. Now the United States operates a​ ______ .

fixed exchange​ rate; flexible exchange rate

DSM13 When the economy is at full employment, a cut in household taxes will __________.

increase consumption

9. If consumers in the United States decrease their demand for imports, the result will be to __________.

increase the exchange rate of the U.S. dollar

pt1. Which of the following examples describes macroeconomics​?

The U.S. unemployment rate has increased by 0.4 percent.

PT5. Choose the statement about an increase in the population that is incorrect.

The production function shifts upward.

PT7. A government budget deficit​ occurs, which​ ______. The real interest rate​ ______. Private saving ______ and investment ______

increases the demand for loanable funds; rises increases, decreases

PQ13. Fiscal stimulus that increases an existing government budget deficit​ ______ loanable funds and​ ______ investment.

increases the demand​ for; decreases

DSM4. Which of the following is included in the economist's definition of investment?

The purchase of new machines, factories, or houses

P102. Examples of monetary policy that decrease aggregate demand include​ ______.

a decrease in the quantity of money and an increase in interest rates

hw7. A mortgage is​ _______.

a legal contract that gives ownership of a home to the lender in the event that the borrower fails to meet the agreed loan payments​ (repayments and​ interest)

12. Cost-push inflation might start with:

a rise in money wage rates

DSM3. All of the following will decrease the supply of airline flights except:

a technological change that makes airplanes safer and more fuel-efficient.

P12. An inflation that starts because​ _____ is called ​demand-pull inflation.

aggregate demand increases

hw2. What kind of efficiency are we achieving when we are producing at a point of the PPF that we prefer above all other​ points:

allocative

P9. Mexican goods might become more expensive to U.S. consumers because​ ______.

an appreciation of the Mexican peso against the U.S. dollar means that the U.S. dollar depreciates against the Mexican peso

hw2. When most economists wake up in the​ morning, their first decision is whether or not to hit the snooze alarm. What statement best represents their thought process as a rational decision​ maker? ​ (How does an economist approach analyzing a situation like​ this?)

The marginal benefit of sleeping 10 more minutes is greater than the marginal benefit of 10 more minutes of work.

pt2. The marginal benefit of a good or service is the​ _____.

benefit received from consuming one more unit of it.

pt2. A market is an arrangement that brings​ _____ together and enables them to get information and do business with each other.

buyers and sellers

P10. Economic growth results when there are increases in​ ______.

capital accumulation

DSM5. At full employment, __________.

cyclical unemployment is zero

DSM7. The decline in capital's value over a period of time is known as __________.

depreciation

10. Which of these policies affects the economy through intended changes in the quantity of money and interest rates?

Monetary policy

T 122 In real business cycle​ theory, _______ are the main source of economic fluctuations.

random fluctuations in productivity

DSM4. The GDP per capita is computed by dividing a country's:

real GDP by its population

P132. If a structural surplus exists but the​ government's budget is​ balanced, then​ ______.

real GDP is less than potential GDP.

DSM7. If the government is attempting to spur investment spending it should adopt policies that are designed to:

lower interest rates

hw3. The quantity demanded of a good or service is​ ______.

measured as an amount per unit of time

P9. A net borrower is a country that is borrowing​ _____ from the rest of the world​ _____ it is lending to the rest of the world.

more; than

P9. A net lender is a country that is lending​ _____ to the rest of the world​ _____ it is borrowing to the rest of the world.

more; than

12. Monetary stimulus designed to increase aggregate demand would have __________ on real output according to real business cycle theory.

no impact

9. When the dollar appreciates against the yen, __________.

one dollar will buy more yen

PQ13. The federal budget is an annual statement of the​ _____ of the government of the United States together with the laws and regulations that approve and support them.

outlays and receipts

hw2. Unattainable points are​ ______.

outside the PPF

DSM2. Absolute advantage is the ability of an individual, firm, or country to:

produce more of a good or service than competitors using the same amount of resources

hw2. Harry produces 9 balloon rides and 4 boat rides an hour. Harry could not produce more balloon rides without producing fewer boat rides. Harry is​ ______ his production possibilities frontier.

producing on

PQ13. Fiscal Stimulus is the use of fiscal policy to increase​ _____.

production and employment

P12. The newest theory of the business​ cycle, known as real business cycle theory ​(or RBC​ theory), regards random fluctuations in​ _____ as the main source of economic fluctuations.

productivity

9. When the real exchange rate decreases, a country's net exports will __________.

rise

PT8. On average in the United​ States, the inflation rate and the money growth rate minus the real GDP growth rate​ ______.

rise and fall together

P10. Canada trades with the United States. Explain the effect of each of the following events on​ Canada's aggregate demand. The government of Canada cuts income taxes. ​Canada's aggregate demand _____ The United States experiences strong economic growth. ​Canada's aggregate demand ______ Canada sets new environmental standards that require power utilities to upgrade their production facilities. ​Canada's aggregate demand ______.

increases increases increases

P9. An increase in U.S. demand for imports​ ______ the supply of U.S. dollars. A rise in the U.S. interest rate differential​ ______ the supply of U.S. dollars.

increases; decreases

P9. An increase in world demand for U.S. exports​ ______ the demand for U.S. dollars. A fall in the U.S. interest rate differential​ ______ the demand for U.S. dollars.

increases; decreases

PT5. An increase in the population​ ______ potential GDP and​ ______ potential GDP per hour of labor.

increases; decreases

PT8. An increase in real GDP​ ______ the demand for money and financial innovation​ ______.

increases; might increase the demand for some types of deposits and decrease the demand for others

P121. In an​ expansion, an increase in the rate of technological change​ _______ investment demand. The real interest rate​ _______.

increases; rises

pt3. The price of a PC, a substitute for an MP3 player, rises. As a​ result, you predict that the equilibrium quantity of MP3 players​ _______ and the equilibrium price​ _______.

increases; rises

10. Aggregate demand decreases if fiscal policy​ ______ taxes or​ ______ transfer payments.

increases​; decreases

hw7. A decrease in current income taxes​ ______ the supply of loanable funds today because it​ ______. A decrease in expected future income​ ______.

increases​; increases disposable​ income, which encourages greate saving increases the supply of loanable funds today because households with smaller expected future income will save more today

PT6. According to new growth​ theory, ______.

growth can persist indefinitely

pt2. Capital accumulation is the​ _____, including​ _____ capital.

growth of capital​ resources; human

PT6. In neoclassical growth​ theory, ______.

growth will stop if technology stops advancing

pt1. For each news item​ below, indicate whether it involves a what​, how​, or for whom question. ​"Consultants replacing high school counselors" involves a​ ______ question. ​"Health dash care professionals and drug companies say Medicaid drug rebates should be available to everyone in need" involves a​ ______ question. ​"Wal dash Mart to carry 'morning dash after' contraceptionWal-Mart to carry 'morning-after' contraception​" involves a _____ question.

how​; for whom what

hw1. Scarcity​ - be it in​ time, talent, or money​ - forces all of us to make choices. But according to​ economists, those choices can be influenced. What do choices respond​ to?

incentives

pt3. As the average income in China continues to​ increase, we would expect the demand for beef to​ _______ and the demand for rice to​ _______.

increase if beef is a normal​ good; decrease if rice is an inferior good

11. The multiplier matters because we can use it to determine by how much we should change autonomous expenditure to​ ______.

increase real GDP by a given amount

DSM7. A federal government budget deficit will __________.

increase the demand for loanable funds and increase the equilibrium interest rate

10. Stagflation​ ______.

is a combination of recession and inflation

pt3. A demand curve​ _______.

is a marginal benefit curve

9. A flexible exchange rate is one that​ _______.

is determined by demand and supply in the foreign exchange market with no direct intervention by the central bank

pt2. The opportunity cost of economic growth​ _______.

is greater the faster we make our production grow

DSM13 The structural budget deficit or surplus:

is measured as if the economy were at full employment.

pt2. Marginal benefit​ ______.

is measured by the most that people are willing to pay for an additional unit of a good

P12. From the​ Fed's Minutes- Read the news​ clip, then answer the following question. FOMC members are predicting that the U.S. economy​ ______.

is on a​ short-run Phillips curve to the right of the LRPC and will move leftward up along the SRPC

9. A fixed exchange rate is one that​ _______.

is set by the government or the central bank and is achieved by central bank intervention in the foreign exchange market

P9. A fixed exchange rate is one that​ _______.

is set by the government or the central bank and is achieved by central bank intervention in the foreign exchange market

P131. The cyclical surplus or deficit​ ______.

is the actual surplus or deficit minus the structural surplus or deficit

P131. The structural surplus or deficit​ ______.

is the budget balance that would occur if the economy were at full employment

pt1. Human capital​ _____ that people obtain from​ education, on-the-job​ training, and work experience. ​_____ that have been produced in the past and that businesses now use to produce goods and services is capital.

is the knowledge and​ skill; ​Tools, instruments,​ machines, buildings, and other items

10. If the economy moves into a recession, monetarists argue that the Fed should:

keep the money supply growing at a constant rate.

DSM8. When we say that one of the functions of the Fed is to be a lender of last resort, we mean that the Fed __________.

lends to banks that are short of reserves and cannot find any other source of funds

hw4. A​ Half-Year of Job Losses- According to the news​ clip, the main source of increased unemployment might be​ ______, and the main type of increased unemployment is​ ______.

losses in manufacturing and construction​ jobs; cyclical

DSM8. When interest rates on Treasury bills and other financial assets are low, the opportunity cost of holding money is __________ , so the quantity of money demanded will be __________.

low, high

9. The exports effect is the result that the lower the exchange​ rate, other things remaining the​ same, the​ ______.

lower are the prices of​ U.S.-produced goods and services to foreigners and the greater is the volume of U.S. exports

DSM5. In calculating the CPI, the __________.

market basket does not include large equipment purchased by firms

DSM4. Gross domestic product (GDP) is best defined as the __________.

market value of the final goods and services produced within a country in a given time period

pt3. The quantity demanded of a good or service is​ ______.

measured as an amount per unit of time

hw1. Factors of production include all of the following EXCEPT​ ________.

money

hw3. If the price of a taco falls​, a​ ______ the demand curve occurs. If any factor that influences buying plans other than the price​ changes, then a​ ______ the demand curve occurs.

movement down ​along; shift of

PT6. Between 1960 and​ 2010, the gap between real GDP per person in the United States and real GDP per person in Japan​ ______.

narrowed

pt1. To disentangle cause and​ effect, economists use economic models and use​ _______ to test the predictions of those models.

natural​ experiments, statistical​ investigations, and economic experiments

PT5. The main sources of bias in the CPI are​ ______. The bias in the CPI is a problem because​ ______ .

new goods​ bias, quality change​ bias, commodity substitution​ bias, and outlet substitution bias it distorts wage agreements linked to the CPI

DSM7. The stated rate of interest on a loan is the __________.

nominal interest rate

DSM8. Credit cards are:

not part of the money supply.

P9. Foreign currency is the money​ _____ regardless of whether that money is in the form of​ notes, coins, or bank deposits.

of other countries

P9. The official settlements account is the record of the change in U.S.​ _____.

official reserves

hw4. In​ 2011, Ozzie purchased a 2008 Ford Escort from his neighbor for his​ son, purchased a 2007​ "one owner" Camry from Larchmont Toyota for his​ wife, bought a 2011 new Ford for​ himself, and sold his 2000 Dodge Caravan to his teenage nephew.​ Which, if​ any, of these transactions will be included in GDP in​ 2011?

only the purchase of the Ford

T91. The private sector balance and the government sector balance tend to move in​ ______. Net exports respond​ ______.

opposite​ directions; to the sum of the government sector and private sector balances

hw3. The equilibrium price is the best deal available for both buyers and sellers because buyers​ ______ and sellers​ ______.

pay the highest price they are willing to​ pay; receive the lowest price at which they are willing to sell

pt3. The equilibrium price is the best deal available for both buyers and sellers because buyers​ ______ and sellers​ ______.

pay the highest price they are willing to​ pay; receive the lowest price at which they are willing to sell

hw5. Unemployment arises for all of the following reasons except​ ______. Some unemployment is unavoidable because​ ______.

people leave the labor force people are making transitions through the stages of life and businesses are making transitions

pt2. Preferences are​ _____.

people's likes and dislikes and the intensity of those feelings

DSM5. The output gap is the difference between __________.

potential GDP and actual GDP

P12. The mainstream business cycle theory is that​ ______ grows at a steady rate while​ ______ grows at a fluctuating rate. In mainstream business cycle​ theory, the money wage rate is ____. If aggregate demand grows faster than potential​ GDP, ______ gap emerges and if it grows more slowly than potential​ GDP, ______ gap emerges.

potential​ GDP; aggregate demand sticky an​ inflationary; a recessionary

P131. The​ ______ is an amount of money​ that, if invested​ today, will grow to equal a given future amount when the interest that it earns is taken into account.

present value

P131. Fiscal imbalance is the​ ______ value of the​ government's commitments to pay benefits minus the​ ______ value of its tax revenues.

present; present

hw3. Oil soars to new record over​ $135- A shortage in the market for oil implies that​ ______.

price adjustments are being prevented from playing their role as the regulator of buying and selling plans

pt3. Oil soars to new record over​ $135-A shortage in the market for oil implies that​ ______.

price adjustments are being prevented from playing their role as the regulator of buying and selling plans

pt3. A demand curve shows the relation between the​ _____ and​ _____ when all other influences on buying plans remain the same.

quantity demanded of a​ good; its price

hw7. When the real interest rate risesrises​, the​ ______ because the​ ______ is the opportunity cost of loanable funds.

quantity of loanable funds demanded decreases; real interest rate

PT7. When the real interest rate rises​, the​ ______ because the​ ______ is the opportunity cost of loanable funds.

quantity of loanable funds demanded decreasesdecreases​; real interest rate

P101. An increase in the price level when the money wage rate remains unchanged increases​ ______.

quantity of real GDP supplied

DSM8. The theory concerning the link between the money supply and the price level that assumes the velocity of money is constant is called the __________.

quantity theory of money

P132. Four alternative fiscal policy changes that could be made to help the federal government meet its Social Security obligations are ______ income​ taxes, ______ Social Security​ taxes, ____ Social Security​ benefits, and _____ federal government discretionary spending.

raise raise cut cut

P10. The defining feature of the Keynesian view of macroeconomics is that the economy is​ ______. Keynesian macroeconomists recommend​ ______.

rarely at full employment policies that actively offset changes in aggregate demand that bring recession

P10. The gap between​ ______ is the output gap. When​ _____, the output gap is called an inflationary gap.

real GDP and potential​ GDP; real GDP exceeds potential GDP

PT6. Real GDP per person grows when​ ______.

real GDP grows at a faster rate than the population grows

DSM3. In a price system:

relative prices change constantly to reflect changes in supply and demand.

DSM8. The name given to the fraction of deposits that a bank is legally required to hold in its vault, or as deposits at the Fed, is __________.

required reserves

12. In a demand-pull inflation, the AD curve shifts ____ and the SAS curve shifts ____.

rightward; leftward

P12. Stagflation is a combination of a​ ______ in the price level and​ ______ in real GDP. Stagflation occurs when​ _______.

rise; a decrease costs increase

P9. In June 2011​, the exchange rate was 0.69 euros per U.S. dollar. By June 2012​, the exchange rate had risenrisen to 0.79 euros per U.S. dollar. As the exchange rate rises​, prices of​ U.S.-produced goods and services to foreigners​ ______ and the volume of U.S. exports​ ______.

rise; decreases

P12. The government of Shell Island announces an increase in spending of​ $50 billion a year and the central bank will increase the quantity of money to pay for the spending. Does the economy go into a​ boom? Will there be​ inflation? The economy​ _____ into a​ boom, real GDP​ _____ billion, and​ _____ arises.

rises to​ 130; increases to​ $625; a​ one-time change in the price level and has an inflationary gap

hw6. An increase in labor productivity​ ______.

shifts the demand for labor curve rightward and the production function upward

P12. If the natural unemployment rate​ increases, the​ long-run Phillips curve​ _______ and the​ short-run Phillips curve​ ______. The expected inflation rate _____.

shifts​ rightward; shifts rightward does not change

P9. The quantity of U.S. dollars demanded is​ ______ in June 2012 than in June 2011. And the quantity of U.S. dollars supplied is​ ______ in June 2011 than in June 2012.

smaller; smaller

pt1. Economics is the​ _____ the choices that​ individuals, businesses,​ governments, and entire societies make as they​ _____, and the influences on those​ choices, and the arrangements that coordinate them.

social science that​ studies; cope with scarcity

PT7. A government budget surplus​ occurs, which increases the ________ loanable funds. The real interest rate​ ______, household saving​ ______,

supply of falls; decreases and investment increases

P112. The marginal propensity to import is equal to​ _______.

the change in imports divided by the change in real GDP, other things remaining the same

T91. When there is a surplus of dollars in the foreign exchange​ market, ______.

the forces of supply and demand pull the foreign exchange market into equilibrium

hw1. Which of the following is​ correct? Factors of production are

the inputs used to produce goods and services.

PT7. When the price of an asset​ rises, ______.

the interest rate falls

PT5. When cyclical unemployment increases and other things remain the​ same, ______.

the natural unemployment rate does not change

12. A stagflation can turn into a​ cost-push inflation process when​ _______.

the quantity of money persistently increases

P9. The current account is the record of receipts from​ _____ other​ countries, minus​ _____ other​ countries, plus the net amount of​ _____ received from and paid to other countries.

the sale of goods and services to other​ countries; payments for goods and services bought​ from; interest and transfers

PQ13. An automatic fiscal policy is a fiscal policy action that is triggered by​ _____. A discretionary fiscal policy is a fiscal policy action that is initiated by​ _____.

the state of the​ economy; an act of Congress

T92. The quantity of U.S. dollars demanded in the foreign exchange market depends on all of the following except​ ______.

the supply of US dollars in the foreign exchange market

DSM4. The point where economic activity bottoms out in a full business cycle is known as:

the trough

P121. Along the​ long-run Phillips​ curve, _______.

the unemployment rate is constant at the natural unemployment rate

pt4. The amount by which​ _____ is called net investment.

the value of capital increases

hw4. Nominal GDP is​ ______. Real GDP is​ ______.

the value of the final goods and services produced in a given year valued at the prices of that year​; the value of final goods and services produced in a given year when valued at the prices of a reference base year

T91. If most prices have decreased in the United States and not decreased in Japan and other​ countries, ______.

then for purchasing power parity to​ hold, the value of the U.S. dollar in the foreign exchange market will riserise

PT5. An economy is at full employment when​ ______.

there is no cyclical unemployment

hw5. The price index with the greatest bias is​ ______ because​ ______.

the​ CPI; it​ isn't based on current period actual expenditure weights

P101. An economy is in a​ long-run equilibrium. An increase in aggregate demand creates​ ______ gap. A rise in the money wage rate decreases​ ______ and returns the economy to a​ full-employment equilibrium.

inflationary; quantity of real GDP demanded.

pt3. In one​ hour, Sue can produce 70 caps or 21 jackets and Tessa can produce 50 caps or 25 jackets. Suppose that Tessa buys a new machine for making jackets that enables her to make 125 jackets per hour.​ (She can still make only 50 caps per​ hour.) Now​ ______ has a comparative advantage in producing jackets. ​______ from trade. Sue and Tessa are _______ to trade 1 jacket for 44 caps.

Tessa; both Sue and Tessa gain no longer willing

P10. Which of the following statements illustrate monetary policy​?

The Fed has raised the federal funds rate by 0.3 percent.

pt1. Choose the correct statement. Pam, Pru, and Pat are deciding how they will celebrate the New Year. Pam prefers to go on a​ cruise, is happy to go to​ Hawaii, but does not want to go skiing. Pru prefers to go​ skiing, is happy to go to​ Hawaii, but does not want to go on a cruise. Pat prefers to go to Hawaii or to take a​ cruise, but does not want to go skiing. Their decision is to go to Hawaii. What is the opportunity cost of the trip to Hawaii for each of​ them?

The opportunity cost of something is the​ highest-valued alternative that must be given up to get it. The opportunity cost for Pam and Pat is a cruise and for Pru it is skiing.

PT6. Choose the statement that is incorrect.

The presence of a banking system in Britain in the middle 1700s started the Industrial Revolution.

DSM3. Washington state had a bumper apple crop this year, significantly increasing the supply of apples in the U.S. Given this information, choose the statement that correctly describes the effect on the U.S. apple market.

The quantity of apples demanded will increase as the price of apples falls.

10. Choose the correct statement.

The quantity of real GDP demanded is the sum of the real consumption​ expenditure, investment, government​ expenditure, and exports minus imports.

P101. Choose the correct statement.

The quantity of real GDP demanded is the sum of the real consumption​ expenditure, investment, government​ expenditure, and exports minus imports.

DSM7. If the government begins running a budget surplus, what impact will the surplus have on the loanable funds market?

The supply of loanable funds will increase.

DSM7. How would a reduction in income tax rates affect the loanable funds market?

The supply of loanable funds would increase.

P132. Choose the statement that is incorrect.

The true tax rate on interest income is lower than that on labor income because of the way in which inflation and taxes on interest income interact.

10. Monetarism is a school of economic thought that favors:

a monetary growth rule.

DSM6. The defining characteristic of long-run economic growth is:

rising productivity

PT5. The personal consumption expenditure deflator is calculated as​ _______.

​(Nominal C divided by Real C​) times ×100

hw7. Physical capital is​ ______. Financial capital is​ ______. Examples of physical capital are​ ______. Examples of financial capital are​ ______.

the​ tools, instruments,​ machines, buildings, and other items that have been produced in the past and that are used today to produce goods and​ services; the funds that firms use to buy physical capital ovens used by Pizza Hut and lawn mowers used by​ Larry's Mowing; bonds issued by​ Wal-Mart and stocks issued by Boeing

DSM5. If the consumer price index was 73 in 1979 and 225 in 2011, then prices in 2011 were on average:

three times as high as 1979

DSM13. Many economists believe that increases in government debt are not necessarily problematic if the funds are used:

to build infrastructure.

pt1. The decision​ _________ is not made using economics as a policy tool.

to vacuum your car first and then wash it or to wash your car first and then vacuum it

DSM13The largest and fastest growing category of federal expenditures is __________.

transfer payments

T122 A rational expectation​ _______.

will often turn out to be wrong, but no other forecast that could have been made could do it better

pt1. The​ _____ that people devote to produce goods and services is labor.

work​ time, and work effort

pt1. A choice on the margin is a choice that is made by comparing all the relevant​ _____ systematically and​ _____. Marginal cost is the​ _____ that arises from one unit​ _____ in an activity. Marginal benefit is the​ _____ that arises from one unit​ _____ in an activity.

​alternatives; incrementally; opportunity​ cost; increase; ​benefit; increase

P9. The U.S. dollar exchange rate increased from ​$0.96 Canadian in June 2011 to ​$1.03 Canadian in June 2012, and it decreased from 81 Japanese yenJapanese yen in June 2011 to 7878 Japanese yen in June 2012. Between June 2011 and June 2012​, the U.S. dollar​ ______ against the Canadian dollar. Between June 2011 and June 2012, the U.S. dollar​ ______ against the Japanese yenJapanese yen.

​appreciated; depreciated

T91. If the U.S. exchange rate changes from​ $1.00 Canadian to​ $1.05 Canadian, then the U.S. dollar has​ _______ and the Canadian dollar has​ _______.

​appreciated; depreciated

pt1. Apple Computer Inc. decides to make iTunes freely available in unlimited quantities. This statement means that the incentive to listen to songs ​______. Apple's decision is a​ _______ decision.

​changes; microeconomic

hw4. A typical business cycle can be described by the sequence​ ______.

​expansion, peak,​ recession, trough

pt4. Net exports of goods and services is the value of​ _____ of goods and services​ _____ the value of​ _____ of goods and services.

​exports; minus; imports

P9. If all​ (or most) prices have increased in the United States and not increased in​ Japan, then people will generally expect that the foreign exchange value of the dollar will​ ______. The demand for dollars​ ______.

​fall; decreases and the supply of dollars increases

PQ13. Taxes and​ needs-tested spending work as automatic fiscal policy to dampen the business cycle because taxes​ ______ during an​ expansion, and​ needs-tested spending​ ______ during a recession.

​increase; increases

P10. Starting from a​ full-employment equilibrium, an increase in aggregate demand​ ______ real​ GDP, and creates​ ______ gap. In the long​ run, the money wage rate​ ______, short-run aggregate supply​ ______, and the economy returns to a​ full-employment equilibrium. Starting from a​ full-employment equilibrium, a decrease in​ short-run aggregate supply​ ______ the price level and​ ______ real GDP. ______ is increased

​increases; an inflationary rises; decreases ​increases; decreases Stagflation

hw2. As we move from point A to point B to point C​, the opportunity cost of producing a pair of cargo pants ​______ because resources​ ______

​increases; are not all equally productive in all activities

hw1. You plan to travel in Europe this summer. If you​ do, you​ won't be able to take your usual summer job that pays ​$9,000 for the​ summer, and you​ won't be able to live at home for free. The cost of transportation is ​$2,000​, visas cost ​$300​, and living expenses are ​$1,500. What is the opportunity cost of your plan to travel in​ Europe? Your opportunity cost is ​

$12,800

DSM4. The U.S. GDP per capita in 2013 was approximately __________.

$50,000

hw3. Price ​(dollars per​ download) Quantity demanded Quantity supplied ​(movie downloads per​ day) 1.50 750 450 3.00 700 550 4.50 650 650 6.00 600 750 7.50 550 850 9.00 500 950 Suppose that demand increases by 100 downloads a day and supply decreases by 50 downloads a day. What is the new equilibrium price of a movie download and what is the new equilibrium quantity of movie​ downloads?

$6 700

PQ13. The estimated U.S. fiscal imbalance in 2014 was​ ______. The current generation will pay​ ______ percent and future generations will pay​ ______ percent of the fiscal imbalance.

$68 trillion 83; 17

P10. The aggregate demand curve shows the relationship between the quantity of real GDP demanded and​ ______, when everything else remains the same. A movement along the aggregate demand curve occurs if​ _______.

the price level the price level changes and all other factors remain unchanged

DSM3. All of the following scenarios depict the characteristics of complements except:

the price of coffee increases and the demand for cream increases.

T92. The quantity of U.S. dollars supplied in the foreign exchange market depends on all of the following except​ ______.

the price of gold

pt2. Firms are institutions that organise​ _____ of goods and services.

the production

P101. As we move up along the​ long-run aggregate supply​ curve, ______.

the real wage rate remains constant

T122. If the expected inflation rate increases and the natural rate of unemployment remains​ constant, then​ _______.

the short-run Phillips curve shifts upward and the long-run Phillips curve does not change

T92. If most prices increase in Japan and other countries but remain constant in the United​ States, ______.

then for purchasing power parity to​ hold, the demand for U.S. dollars increases and the supply of U.S. dollars decreases

pt2. People specialize and trade for all of the following reasons except​ _______.

they can obtain an absolute advantage

P10. ​Short-run macroeconomic equilibrium occurs when the quantity of​ _____ demanded equals the quantity of​ _____ supplied at the point of intersection of the​ _____ curve and the​ _____ curve.

real​ GDP; real​ GDP; AD​; SAS

P102. The table gives the aggregate demand​ schedule, the​ short-run aggregate supply​ schedule, and the​ long-run aggregate supply schedule for an economy. What is the quantity of real GDP at the​ short-run macroeconomic​ equilibrium? The quantity of real GDP at the​ short-run macroeconomic equilibrium is ​$450 billion. The economy has​ ______.

recessionary gap of $50 billion

12. A Phillips curve is a curve showing the __________.

relationship between the unemployment rate and the inflation rate

P9. In January 2010​, the exchange rate was 91 yen per U.S. dollar. By September 2010​, the exchange rate had fallenfallen to 84 yen per U.S. dollar. As the exchange rate falls​, the prices of​ foreign-produced goods and services to Americans​ ______ and the volume of U.S. imports​ ______.

ride; decreases

hw8. The bank plans to hold ​$8 for every​ $100 in deposits. The bank holds desired reserves of ​$5,000 and actual reserves of ​$11,000. What is the​ bank's desired reserve ratio and its excess reserves​? The​ bank's desired reserve ratio is ____ percent. The banks excess reservesexcess reserves are ​$_____.

8.0 6000

P132. Potential GDP is​ $12 trillion and if real GDP equaled potential​ GDP, the budget deficit would be​ $1 trillion. Real GDP actually equals​ $14 trillion and the budget surplus is​ $3 trillion. The economy has a structural​ ______ and a cyclical​ ______.

deficit of $1 trillion; surplus of $4 trillion

P12. In new classical cycle theory​, the rational expectation of the price​ level, which is determined by potential GDP and expected aggregate​ _____, determines the​ _____ and the position of the SAS curve.

demand; money wage rate

pt1. An economic model​ ______. An example of a model is​ ______.

describes some aspect of the economic world and includes only those features needed for the purpose at hand; a blueprint

DSM4. In measuring changes in the standard of living of a country, economists rely heavily on comparisons over time of real GDP per capita because:

despite its well-known flaws, it is the best means we have of comparing the performance of an economy over time

P9. Arbitrage in the foreign exchange market and international loans market achieves all of the following except​ _______.

equal real exchange rate across the major currencies

PT5. When the unemployment rate​ ______ the natural unemployment​ rate, real GDP​ ______ potential GDP.

equals; equals

P9. Could the change in the exchange rate on June 2 have resulted from the two announcements or must some other influence have changed​ too? If​ so, what might that influence have​ been? On June​ 2, the U.S. dollar depreciated rather than appreciated because a fall in U.S.​ _____ decreased the demand for U.S. dollars or an increase in U.S.​ _____ increased the supply of U.S. dollars.

exports; imports

12. The consequences of deflation include all of the following except​ _______.

falling real wage rates for workers with​ long-term wage contracts

T92. Choose the correct statements. 1. Foreign currency is always in the form of notes or coins. 2. The foreign exchange market is made up of thousands of people comma including international tourists and foreignThe foreign exchange market is made up of thousands of people, including international tourists and foreign exchange brokers.exchange brokers. 3. The foreign exchange market is the market in which the currencyThe foreign exchange market is the market in which the currency of one country is exchanged for the currency another.of one country is exchanged for the currency another. 4. The foreign exchange market is a place.

2 and 3

10. Which of these factors will shift the short-run aggregate supply to the left?

A decrease in the size of the labor force

P102. Choose the statement that is incorrect.

Along the LAS curve the money wage rate is constant and the real wage rate rise as the profit rises

P102. Choose the statement that is incorrect.

Along the SAS​ curve, the real wage rate and the price level change by the same percentage.

DSM13 Which of these is an example of an automatic fiscal policy?

An unemployment benefit program

pt4. The firm that printed your textbook bought the paper from XYZ Paper Mills. This purchase of paper​ ______ part of GDP because the paper is​ ______ good. The value of the paper is counted in GDP as​ ______.

is​ not; an intermediate part of the value of the textbook

hw8. The money multiplier is the ratio of the change in the quantity of​ ______ to the change in the quantity of​ ______.

money; monetary base

P9. Purchasing power parity is equal value of​ _____ - a situation in which​ _____ buys the same amount of goods and services in different currencies.

money; money

DSM4. Which is the largest component of GDP?

Consumption

pt4. Which of the following is an example of investment​?

Continental buying Airbus planes

PT5. If we count marginally attached workers as unemployed​ ______.

no change occurs in employment-to-population ratio

DSM8. The Fed conducts monetary policy primarily through __________.

open market operations

DSM5. Many economists believe the CPI __________ inflation because it fails to consider quality improvements in products.

overstates

9. Read the news​ clip, then answer the following question. Mr. Reddy is investing in the U.S. real estate market because​ ______.

the U.S. dollar depreciated and the price of U.S. investment properties to foreign investors like Mr. Reddy decreased

hw4. GDP Expands 11.4​ percent, Fastest in 13 Years- According to the expenditure approach for calculating​ China's GDP,​ "each one percent drop in the U.S. economy will shave 1.3 percent off​ China's growth" because as the U.S. economy​ shrinks, ______. ​China's ______ and​ China's real GDP decreases.

the United States imports less from​ China; exports decrease

T122. When inflation is correctly​ anticipated, _______.

the economy remains at full employment

P121. The impulse in RBC theory is​ _______.

the growth rate of productivity that results from technological change

P112. Planned saving​ + Planned consumption expenditure​ = ______.

Disposable income

P102. The quantity of real GDP supplied depends on all of the following except the​ _______.

quantity of real GDP demanded

PT6. Choose the statement that is incorrect.

Each additional hour of labor increases real GDP by successively larger amounts.

T122. Choose the statement about real business cycle theory that is incorrect.

Economists have not been able to isolate RBC impulse

pt1. Choose the correct statement.

Entrepreneurs come up with new ideas about what and how to produce.

DSM2. In the circular flow model, which of the following refers to markets where goods such as computers or services such as medical treatment are offered?

Goods markets

E. Government Sector Balance

Gov Sector Balance= taxes - gov expenditure

12. Which of the following shifts the aggregate demand curve rightward year after year?

Growth in the quantity of money

pt2. Big Lobster sells lobster and​ fish, and so too does H Salt. If H Salt​'s opportunity cost of preparing lobster exceeds Big Lobster​'s opportunity cost of preparing​ lobster, then all the following are true except​ ______. If H Salt and Big Lobster decide to specialize and​ trade, then the source of the gains from the trade between H Salt and Big Lobster is​ _______.

H Salt has a comparative advantage in lobster divergent opportunity cost

P102. Choose the statement about the business cycle that is incorrect.

In a business​ cycle, real GDP shows steady growth and steady inflation.

10. An increase in expected future income ---- aggregate demand. An increase in the expected future inflation rate ----- aggregate demand. An increase in expected future profits ----- aggregate demand.

Increases for all blanks

DSM6. Which of these is most likely to increase productivity?

Investments in research and development

DSM4. Which of these is not a shortcoming of GDP as a measure of standard of living?

It only counts final goods and services and not intermediate goods.

10. Draw the​ long-run aggregate supply curve when potential GDP is ​$13.5 trillion. Label it.

LAS completely horizontal at 13.5 trillion

DSM6. Which of these factors does not contribute to economic growth?

Nationalization of foreign investments

PT6. ​______ sees the economy as a perpetual motion machine.

New Growth Theory

DSM6. The process by which competition for profits leads to technological progress and perpetual economic growth best fits which growth theory?

New growth theory

10. The 1974-1975 recession was a result of a:

a leftward shift of the short-run aggregate supply curve

10. If firms reduce investment spending and the economy enters a recession, which of these contributes to the adjustment that causes the economy to return to its long-run equilibrium?

The eventual agreement by workers to accept lower wages

P10. Geithner Urges Action on Economy- Choose the statement that is incorrect.

Treasury Secretary Timothy Geithner most likely follows the monetarist school of thought if he thinks that a falling money wage rate will respond quickly to changes in government tax policy.

hw4. ​______ is an example of U.S. consumption expenditure.

Your purchase of a tire for your car

9. During the 1990s, the flow of foreign investment in the United States __________.

increased dramatically

P10. As the price level​ rises, interest rates _____ and real wealth _______ People substitute goods in the ______ for goods in the ____ So, as the price level​ rises, there is​ ______.

rises; decreases future; present decrease in quantity of real GDP demanded

pt3. A demand curve that illustrates the law of demand​ ______.

shows that the quantity demanded increases as the price falls

pt2. Which of the following is money​?

​Charlie's checking account deposit at the Bank of America.

P12. Tight Money​ Won't Slay​ Food, Energy Inflation- Read the news​ clip, then answer the following question. Choose the correct statement.

"Slowing growth" can reduce inflationary pressure if aggregate demand growth slows.

P9. You can purchase a laptop in Tokyo for 88,000 Japanese yen If the exchange rate is 80.00 Japanese yen per U.S. dollar and if purchasing power parity​ prevails, at what price can you buy an identical computer in​ Dallas, Texas?

$1,100

hw1. Your employer has asked you to start working overtime and has offered to pay​ $18 per hour for every hour you work beyond forty hours a week. The wage rate for each of the first forty hours will continue to be the usual​ $15 per hour. In terms of​ dollars, what is the marginal benefit of working each hour of​ overtime?

$18.00

PT7. Rob takes a summer job with a landscaping firm. During the​ summer, he earns an​ after-tax income of ​$4,500 and he spends ​$2,500 on living expenses. Everything else remaining the​ same, what was the change in​ Rob's wealth during the​ summer?

$2000

P111. Y C I G X M ​(trillions of 2009​ dollars) 1.0 1.00 0.40.4 0.60.6 0.300.30 0.300.30 2.0 1.65 0.40.4 0.60.6 0.300.30 0.450.45 3.0 2.30 0.40.4 0.60.6 0.300.30 0.600.60 4.0 2.95 0.40.4 0.60.6 0.300.30 0.750.75 5.0 3.60 0.40.4 0.60.6 0.300.30 0.900.90 6.0 4.25 0.40.4 0.60.6 0.300.30 1.05 The table gives the aggregate expenditure schedule. Equilibrium expenditure is equal to​ _______.

$3 trillion

hw1. Rowan, a medical student, buys two cups of coffee a​ day, which costs her ​$6.00. She decides to buy one more cup each day and her expenditure on coffee increases to ​$9.00. The marginal cost to Rowan of a cup of coffee is​ _______.

$3.00

hw4. An economy produces only digital​ cameras, chocolate​ bars, and watches The table gives the quantities produced and prices in 2013 and 2014. The base year is 2013. What is real GDP in 2014 in terms of the​ base-year prices? Real GDP in 2014 in terms of​ base-year prices is ___

$30

PQ13. If tax revenues are​ $3,500 billion and the​ government's budget balance is a​ $720 billion​ deficit, calculate the​ government's outlays.

$4,220

DSM5. If the CPI was 207 in 2007 and 225 in 2011, what pay raise would someone who earned $50,000 in income in 2007 have to receive in order to keep her purchasing power constant in 2011?

$4,348

PQ13. In June​ 2014, ______ of U.S. government debt was held by the rest of the world.

$5.8 trillion

PT7. On January​ 1, 2014,​ Sophie's Sunlounge owned 4 tanning beds valued at​ $20,000. During​ 2014, Sophie's bought 3 new beds at a total cost of ​$8,000. At the end of the​ year, the market value of all of​ Sophie's beds was ​$26,000. Calculate​ Sophie's gross investment and depreciation during 2014. ​Sophie's gross investment during 2014 was ​_____. ​Sophie's depreciation during 2014 was ​_____.

$8,000 $2,000

P9. Net exports equals​ ______. If the government sector deficit​ increases, with no change in the private sector​ surplus, net exports​ ______.

(T − G​) ​+ ​(S − I​) decrease

DSM5. Suppose the CPI in 2008 was 215.3 and the CPI in 2009 was 214.6, what was the inflation rate between 2008 and 2009?

-0.3 percent

P10. Read the news​ clip, then answer the following question. Based on this news​ clip, Paul Krugman most likely follows the​ ______ school of thought and Ben Bernanke most likely follows the​ ______ school of thought.

. Keynesian or new​ Keynesian; Keynesian or new Keynesian

pt4. Which of the following is an example of government expenditure on goods and services​?

. The White House buying internet services.

Dairies make​ low-fat milk from​ full-cream milk. In the process of making​ low-fat milk, the dairies produce​ cream, which is made into ice cream. A rise in the wage rate of dairy workers​ ______ the supply of​ low-fat milk. A rise in the price of cream​ ______ the supply of​ low-fat milk. A rise in the price of​ low-fat milk ______ the supply of​ low-fat milk.

. ​decreases; increases does not change

P111. An economy with no income taxes or imports has a marginal propensity to consume of 0.75. The multiplier in the long run is​ _______.

0

pt1. ​Amber, a computer science​ student, has noticed that for every problem she​ works, her grade increases by a half a percent. She decides to work 200 problems before her next exam and try for a perfect 100. The marginal benefit to Amber of working a problem is​ ________.

0.5 percent

P11. If equilibrium expenditure changes by​ $50 billion that results from an increase in autonomous taxes by​ $80 billion, find the autonomous tax multiplier.

0.625

P111. Disposable income Consumption expenditure ​(millions of 2009​ dollars) 0 60 100 140 200 220 300 300 The table gives you information about the economy of Bluebird Island. What is the marginal propensity to​ consume?

0.8

9. If the dollar price of a euro is $1.25, then the euro price of the dollar is __________.

0.80 euros

hw6. 1. The news article reports that China is the second largest economy in the world based on​ ______. 2. Choose the statement that is incorrect. 3. In a standard of living​ comparison, China ranks​ ______ in the world. This rank is​ ______. 4. Choose the statement that is incorrect. 5. Using PPP​ prices, China's ranks as the​ world's number ___ economy in 2010. 6. Using PPP​ prices, China's standard of living in 2010 is _____. 7. Choose the statement that is incorrect.

1. GDP converted to U.S. dollars at the current exchange rate 2. A country with a large population cannot have a high standard of living. 3. ​105th; rising because physical capital and human capital growth and technological change are proceeding rapidly and​ China's real GDP is growing 4. Comparisons of real GDP between countries are most accurate when we use market prices. 5. 1 6. 11000 7. The size of an economy is irrelevant.

hw5. 2015-237.8 2016-240.4 2017-245.0 Calculate the inflation rates for the years ended August 2016 and August 2017. The inflation rate in the year ended August 2016 was ___ percent per year. The inflation rate in the year ended August 2017 was ___ percent per year. How did the inflation rate change in the year ended August 2017August 2017​? The inflation rate​ _____ .

1.1 1.9 increased

hw8. Money and the Monetary Base in August 2017 Amount August 2017 ​(billions of​ dollars) M1- 3,564.2 M2-13,649.7 Monetary base-3,115.6 What are the values of the M1 money multiplier and the M2 money multiplier in August 2017​? The M1 money multiplier is ____ The M2 money multiplier is ____

1.1 4.4

P9. The U.S. dollar exchange rate increased from ​$0.89 Canadian in June 2009 to ​$0.96 Canadian in June 2010, and it decreased from 83.8 euro centseuro cents in January 2009 to 76.9 euro cents in January 2010. In January 2009, the value of 100 Euro cents was In January 2010 the value of 100 Euro cents was The Euro ____ the US dollar January 2009 to January 2010

1.19 1.30 Appreciated

T111. An economy has a consumption function of C​ = 15​ + 0.7Y​, investment of​ 8, government expenditure of​ 12, exports of​ 20, and an import function of M​ = 0.2Y. What is equilibrium real​ GDP?

110

T112.An economy has a consumption function of C​ = 10​ + 0.8Y​, investment of​ 6, government expenditure of​ 10, exports of​ 10, and an import function of M​ = 0.1Y. What is equilibrium real​ GDP?

120

hw5. In 2013 and in​ 2014, consumers in Dexter consumed only books and pens. The prices and quantities for 2013 and 2014 are listed in the table. The reference base period for​ Dexter's CPI is 2013 and 2013 is also the year of the Consumer Expenditure Survey. The CPI in 2014 is​ ______.

131.1

hw2. The graph shows​ Brazil's PPF for ethanol and food crops. If Brazil increases production of food crops from 2 tons per day to 3 tons per​ day, the opportunity cost of the additional ton of food crops is _____ barrels of ethanol. If Brazil increases production of ethanol from 40 barrels per day to 54 barrels per​ day, the opportunity cost of the additional 14 barrels of ethanol is ______ of food crops. The opportunity cost of producing an additional ton of food crops is equal to​ ______.

14 1 ton the inverse of the opportunity cost of producing an additional barrel of ethanol

DSM6. If a country's real GDP is growing at a rate of 5 percent per year, how long will it take for the real GDP to double?

14 years

T112. An economy has a consumption function of C​ = 10​ + 0.8Y​, investment of​ 6, government expenditure of​ 10, exports of​ 10, and an import function of M​ = 0.1Y. If government expenditure increases to​ 15, what is the increase in equilibrium​ expenditure?

16.65

hw5. Jobless Rate Soars to​ 6.1%-The unemployment rate peaked​ ______ after the 2001 recession. During the​ 2002-2008 recession, the unemployment rate reached its lowest point at the beginning of​ ______. The expansion of​ 2002-2008 created jobs at​ ______ rate. The first two years of the expansion created few jobs because​ ______. The slow job growth and rise in unemployment after​ mid-2007 is most likely​ ______. Choose the statement that is incorrect.

18​ months; 2007 an unusually​ slow; the expansion was very​ weak, so employment growth was weak cyclical The U.S. government cannot create jobs. Jobs are created by the private sector.

PT7. Year Wealth Saving ​(billions of​ dollars) 1995 27,700 308 1996 29,713 272 1997 32,854 248 The table provides official estimates of U.S. wealth and U.S. saving in three years. The change in U.S. wealth exceeds U.S. saving in​ ______. U.S. saving exceeds the change in U.S. wealth in​ ______.

1996 and 1997​; none of the years in the table

PT7. Cindy takes a summer job painting houses. During the​ summer, she earns an​ after-tax income of ​$3,000 and she spends $1,000 on living expenses. What was​ Cindy's saving during the​ summer? ​Cindy's saving during the summer was ​$_____.

2000

hw6. Suppose that in 2014​ China's real GDP is growing at 10 percent a year and its population is growing at 3.0 percent a year. If these growth rates​ continue, then​ China's real GDP per person in​ ______ will be twice what it is in 2014.

2024

P111. An economy has no imports and no taxes. The marginal propensity to save is 0.4. A​ ______ increase in autonomous expenditure increases equilibrium expenditure by​ $60 billion. The multiplier is​ ______.

24 billion; 2.50

T92. Item Billions of dollars Imports of goods and services 437 Foreign investment in CanadaCanada 62 Exports of goods and services 491 CanadianCanadian investment abroad 88 Net interest income −50 Net transfers 25 Statistical discrepancy −6 The table shows the balance of payments accounts in CanadaCanada in2004. What is CanadaCanada​'s current account​ balance, capital and financial account​ balance, and official settlements account​ balance?

29 -32 3

T112. An economy has a consumption function of C​ = 10​ + 0.8Y​, investment of​ 6, government expenditure of​ 10, exports of​ 10, and an import function of M​ = 0.1Y. What is the multiplier for this​ economy?

3.33

T111. The marginal propensity to consume is​ 0.8, the marginal tax rate is​ 0.25, and the marginal propensity to import is 0.2. The government raises autonomous taxes and government expenditure by​ $100 million each. The resulting change in equilibrium expenditure is​ _______.

33.3

11. The graph shows an economy that has no taxes or imports. AD0 is the aggregate demand curve when investment is​ $1.0 ​ trillion, and AD1 is the aggregate demand curve when investment is​ $1.5 trillion. What is the size of the multiplier in the short​ run? The size of the multiplier in the short run is

4

P111. The graph shows an economy that has no taxes or imports. AD0 is the aggregate demand curve when investment is​ $1.0 ​ trillion, and AD1 is the aggregate demand curve when investment is​ $1.5 trillion. What is the size of the multiplier in the short​ run?

4

P12. Suppose that the velocity of circulation of money is constant and real GDP is growing at a constant 3 percent a year. To achieve an inflation target of 1 percent a​ year, the central bank grows the quantity of money at ____ percent a year. Deflation will be created if the growth rate of the quantity of money is ​ _______.

4 less than 3 percent a year

PT7. On January​ 1, 2014,​ Sophie's Sunlounge owned 4 tanning beds valued at​ $20,000. During​ 2014, Sophie's bought 3 new beds at a total cost of ​$10,000​, and at the end of the year the market value of all of​ Sophie's beds was ​$25,000. What was​ Sophie's net​ investment? ​Sophie's net investment during 2014 was ​$_____.

5,000

PT5. 1. 34 million people had​ full-time jobs 2. 13 million people had​ part-time jobs 3. 8 million people were without work but were available for work and had made specific efforts to find a job within the past four weeks or were waiting to be recalled from a layoff or had a new job to start within the next 30 days 4. 6 million​ part-time workers were looking for​ full-time jobs 5. 34 million people of working age did not have jobs and did not want jobs The Population Survey in Blogsville for the past month is given in the​ table: In Blogsville last​ month, ______ million people were in the labor force and​ ______ million people were in the​ working-age population.

55; 89

PT5. Labor Market Data Working-age population 243.3 million Labor force 155.0 million Unemployed 12.5 million The table gives information about the U.S. labor market in 2012. What is the​ employment-to-population ratio? The​ employment-to-population ratio is ___ percent.

58.6

hw2. The graph shows the marginal cost of producing cookies and the marginal benefit from cookies in Oakdale. Oakdale achieves allocative efficiency if​ _______.

6 batches of cookies an hour are produced

PT5. Labor force 155 Unemployment 10 Not in labor force 80 The table gives information reported by the Bureau of Labor Statistics for October​, 2008. What is the​ employment-to-population ratio? The​ employment-to-population ratio is ___.

61.7 percent

PT5. Item Millions Employment 143 Unemployment 12 Not in the labor force 89 The table gives information reported by the Bureau of Labor Statistics for September​, 2012. What is the labor force participation​ rate? The labor force participation rate is ____ percent.

63.5

PT5. Labor Market Data Not in labor force 70.0 million Labor force 142.6 million Employed 136.9 million The table gives information about the U.S. labor market in 2000. What is the labor force participation​ rate? The labor force participation rate is ____ percent.

67.1

PT5. Year Real GDP ​ (trillions of dollarstrillions of dollars​) Population ​(billions) 2007 20,000 100 2008 21,424 103 The table provides some data on real GDP and the population of Atlantis in 2007 and 2008. What was the growth rate of real GDP in Atlantis in 2008​? What was the growth rate of real GDP per person in Atlantis in 2008​? The growth rate of real GDP in AtlantisAtlantis in 2008 is ___ percent. The growth rate of real GDP per person in AtlantisAtlantis in2008 was ___ percent.

7 4

DSM6. According to the rule of 70, if a nation's per capita real GDP doubled during the past 10 years, then its average annual rate of economic growth over that period was approximately __________.

7 percent

PT5. Item Millions Labor force 155 Employment 142 ​Working-age population 243 The table gives information reported by the Bureau of Labor Statistics for May, 2012. What is the unemployment​ rate? The unemployment rate is ____ percent.

8.4

PT5. Labor Market Data ​Working-age population 239.6 million Labor force 153.6 million UnemployedUnemployed 13.7 million The table gives information about the U.S. labor market in 2011. What is the unemployment​ rate? The unemployment rate is ____ percent.

8.9

PQ13. At the end of 2008​, the government of Greece's debt was €199.0 billion. In 2009​, the government spent €120.0 billion and ended the year with a debt of €230.0 billion. How much did the government receive in tax revenue in 2009​?

89.0

hw1. You plan to go to school this summer. If you​ do, you​ won't be able to take your usual summer job that pays ​$7,000 for the summer. The cost of tuition is ​$2,000 and textbooks cost ​$300. You live with your​ family, which covers your living expenses of ​$1,700. What is your opportunity cost of going to school this​ summer? Your opportunity cost of going to summer school is ​$

9,300

10. Which of these factors will cause the aggregate demand curve to shift?

A change in the expectations of households and firms

P10. Consider the following events. Event​ 1: Growth in the world economy slows. Event​ 2: The world price of oil rises. Event​ 3: U.S. labor productivity declines. Choose the statement that is correct.

A classical macroeconomist and a monetarist recommend that taxes be kept low to avoid disincentive effects for all of the events and a Keynesian recommends active fiscal policy and monetary policy to offset all events.

DSM7. Which of these is a financial institution?

A commercial bank

PT7. Choose the statement that is incorrect.

A government budget surplus competes with investments for funds.

DSM3. When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of?

A market

T111. The equation of the aggregate expenditure curve is given by​ _______.

AE= A + [b(1-t)-m]Y

hw2. Two​ countries, Alpha and​ Beta, have identical production possibilities frontiers. If Alpha produces at point A and Beta produces at point B​, then​ _______.

Alpha consumes less than Beta​ today, but it will grow faster than Beta

P132. Choose the statement that is incorrect.

An increase in government expenditure increases government borrowing (or decrease government lending if there is a budget surplus) and lowers the real interest rate.

P12. The table shows the aggregate demand and​ short-run aggregate supply schedules of Shell Island in which potential GDP is​ $600 billion. The economy is at​ full-employment. The price of oil falls unexpectedly and aggregate supply increases by​ $50 billion. What type of output gap​ appears? If the central bank responds to close the output​ gap, does Shell Island experience inflation or​ deflation? ​_____ gap appears and the central bank closes the output​ gap, aggregate demand​ _____ and a​ _____ is created.

An​ inflationary; decreases;​ cost-push deflation

pt3. Jeb makes the following four statements about peanuts. Which statement best describes his quantity demanded in the peanut​ market?

At a price of​ $1 per​ pack, I plan to buy 2 packs of peanuts per week.

PT6.Choose the statement that is incorrect.

Classical growth theory tells us that technological change induces a level of saving and investment that makes capital per hour of labor grow indefinitely.

DSM13 Which of these is the main reason for the long-run funding problems of Social Security?

Demographic changes.

hw8. Choose the statement that is incorrect.

Deposits are not money because you cannot settle a debt with a deposit.

PT8. Choose the correct statement.

Deposits are​ money, checks are not​ money, and credit cards are not money.

9. The U.S. dollar exchange rate decreased from$1.33 Canadian in October, 2016 to 1.25 Canadian in October, 2017​, and it increased from 103.91 Japanese yen in October, 2016 to 112.50 yen in October, 2017. Did the U.S. dollar appreciate or depreciate against the Canadian​ dollar? Did the U.S. dollar appreciate or depreciate against the Japanese​ yen?

Depreciated; Appreciated

DSM6. Which of these factors inhibit economic growth?

Discouraging international trade

E. Exchange Rate

Exchange Rate= Real Exchange Rate x Foreign Price Level/ US Price Level

9. Which of the following is a determinant of exchange rates?

Expected future exchange rate

PQ13. Senate Approves Obama Tax Cut Plan- Choose the statement that is incorrect. A​ same-sized decrease in taxes and increase in government expenditure​ ______ real GDP.

Extending the​ Bush-era tax cuts to everyone decreases the demand for loanable funds may​ increase, decrease, or not change

PQ13. True or False Congress can pass budget laws only once a year. For the United States budget, the fiscal year runs from January 1 to December 31. The President has veto power to eliminate specific items in a budget bill and approve others. The President proposes a budget to Congress each February.

False False False True

13. Categorize the following statements as either true or false. Congress can pass budget laws only once a year. The President has veto power to eliminate specific items in a budget bill and approve others. Congress attempted to grant the President a line dash item veto but the Supreme declared this unconstitutional. For the United States budget comma the fiscal year runs from January 1 to December 31.

False False True False

DSM13 Which of the following statements about U.S. government receipts is correct?

Federal receipts have ranged between 15 and 20 percent of gross domestic product for the past few decades.

PQ13. ______—the use of the federal budget to achieve macroeconomic objectives such as full​ employment, sustained economic​ growth, and price level stabilitylong dash—is made by​ ______ on an annual timeline.

Fiscal policy​ is; the President and Congress

DSM2. In the circular flow model, who supplies factors of production in exchange for income?

Households

DSM5. Of the eight categories in the CPI market basket, which three categories make up more than 70% of the basket?

Housing, transportation, and food

T92. Choose the statement about fixed exchange rates that is incorrect.

If the Fed wanted to fix the US dollar exchange rate with the Japanese Yen, the Fed would have to buy US dollars to prevent the exchange rate from rising above the target value.

T92. Choose the statement that is incorrect.

In the long run, the change in nominal exchange rate brings an equivalent change in the real exchange rate.

P9. Choose the statement that is incorrect.

In the long​ run, China manages its exchange rate to keep its export prices low and to make it easier to compete in world markets.

T91. If in the long​ run, the U.S. dollar appreciates against the Japanese​ yen, then​ ______.

Japan has created money at a faster pace than has the United​ States, and the price level in Japan has risen more rapidly than the U.S. price level

T122. Deflation in Japan arose because​ _______.

Japan's money stock did not grow fast enough to accommodate the growth of potential GDP and a trend rise in velocity.

pt4. Boeing Bets the House-The components of the 787 Dreamliner that Boeing produces in Japan are part of​ ______ GDP. The aircraft that are assembled in the United States and sold to All Nippon Airways are part of​ ______ GDP. The purchase of the 787 Dreamliner by ANA is recorded as an​ ______ in​ Japan's GDP and as an​ ______ in U.S. GDP.

Japan's; U.S. ​import; export

12. According to _______ cycle theory, fluctuations in aggregate demand are primarily caused by fluctuations in confidence.

Keynesian

P12. In​ ______ cycle​ theory, fluctuations in investment driven by fluctuations in business confidence are the main source of fluctuations in aggregate demand. In​ ______ cycle​ theory, fluctuations in both investment and consumption​ expenditure, driven by fluctuations in the growth rate of the quantity of​ money, are the main source of fluctuations in aggregate demand. In​ ______ cycle​ theory, the rational expectation of the price​ level, which is determined by potential GDP and expected aggregate​ demand, determines the money wage rate and the position of the SAS curve. In​ ______ cycle​ theory, past rational expectations of the current price level influence the money wage rate and the position of the SAS curve.

Keynesian; monetarist new Classical; new Keynesian

PT6. Choose the statement that is incorrect.

Labor hours are all equally productive.

hw6. Choose the statement that is incorrect.

Labor hours are all equally productive.

PT5. Once a​ month, the Bureau of​ ______ Statistics calculates the Consumer Price​ Index, which is a measure of the​ ______ consumers for a fixed basket of consumer goods and services.

Labor; average of the prices paid by urban

P131. The relationship between the tax rate and the amount of tax revenue collected is called the​ ______ curve. This curve shows that​ ______.

Laffer curve; tax cuts increase tax revenue

P101. Which of the following statements about the monetarist view of the macroeconomy is ​incorrect?

Left alone, the economy rarely operates at full employment

10. Which of the following statements about the monetarist view of the macroeconomy is ​incorrect?

Left​ alone, the economy rarely operates at full employment.

hw8. Choose the statement that is incorrect.

Liquid assets have a higher interest rate than securities.

hw2. Martha can produce 60 quilts or 180 batches of chocolate chip cookies in a month. Jane can produce 9 quilts or 18 batches of chocolate chip cookies in a month. ________ has an absolute advantage in both goods. ​______ has a comparative advantage in quilts. ​______ has a comparative advantage in chocolate chip cookies.

Martha Jane; Martha

pt2. Martha can produce 9090 quilts or 180180 batches of chocolate chip cookies in a month. Jane can produce 66 quilts or 1818 batches of chocolate chip cookies in a month. _____has an absolute advantage in both goods. ​______ has a comparative advantage in quilts. ​______ has a comparative advantage in chocolate chip cookies.

Martha Martha; Jane

P11. An economy has a fixed price​ level, no​ imports, and no income taxes. MPC is 0.5​, and real GDP is ​$150 billion. Businesses increase investment by ​$10 billion. Calculate the new level of real GDP and explain why real GDP increases by more than ​$10 billion. Real GDP increases by more than ​$10 billion because the increase in investment​ _______.

New level of Real GDP: 170 induces an increase in consumption expenditure

P101. Choose the statement that is incorrect.

Over the business cycle, aggregate supply fluctuates around potential GDP.

PQ13. Fiscal imbalance is the ______ value of the​ government's commitments to pay benefits minus the ______ value of its tax revenues. The division of the fiscal imbalance between the current and future​ generations, assuming that the current generation will enjoy the existing levels of taxes and​ benefits, is called​ ______ imbalance.

Present, Present generational

PQ13. The Council of Economic Advisers monitors the economy and keeps the​ _____ informed about the current state of the economy and the best available forecasts of where it is heading.

President and the public

E. Private Sector Balance

Priv Sector Balance= savings - investment

DSM2. What are copyrights designed to accomplish?

Protect intellectual property rights

hw3. Choose the correct statements about competitive markets. 1. A competitive market has many buyers. 2. All competitive markets are physical places where buyers and sellers meet. 3. A competitive market is a market for services but not for goods. 4. A competitive market has many sellers.

Statements 1 and 4 are correct

hw5. Choose the correct statements. 1. The unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the locations of jobs is frictional unemployment. 2. The unemployment that arises from normal labor turnover is structural unemployment. 3. When a steel plant becomes more automated and workers lose their jobs comma the workers are structurally unemployed. 4. The unemployment that arises from normal labor turnover is frictional unemployment.

Statements 3 and 4 are correct

P11. ​______ bring business cycle turning points. ​______ is triggered by a decrease in autonomous expenditure and​ ______ is triggered by an increase in autonomous expenditure.

Swings in autonomous expenditure A​ recession; an expansion

DSM6. Which of these will ensure that an economy experiences labor productivity growth?

Technological change

hw5. Choose the statement about the Consumer Price Index that is incorrect. CPI​ = ______.

The CPI is defined to equal 1.00 for a period called the reference base period. ​(Cost of CPI basket at​ current-period prices ÷Cost of CPI basket at​ base-period ​prices) ×100

P10. Which of the following economies is facing a stagflation​?

The European economy is experiencing a decrease in real GDP for three quarters and a rise in the price level.

DSM8. Which body of the Federal Reserve System sets the majority of U.S. monetary policy?

The Federal Open Market Committee

PQ13. Which of the following statements illustrates fiscal policy​?

The US government has proposed a hike in the corporate tax rate.

10. Which of these factors will cause the long-run aggregate supply curve to shift to the right?

The accumulation of more machinery and equipment

PT5. Choose the statement that is incorrect.

The bias in the CPI decreases government outlays

PT7. How can the change in U.S. wealth differ from U.S.​ saving?

The change in wealth includes changes in the prices of assets owned and saving excludes these items.

PT8. Choose the statement that is incorrect.

The deposits of commercial banks represent 69 percent of M1 and 45 percent of M2.

P111. The multiplier is greater than 1 because the change in autonomous expenditure leads to​ _______.

The multiplier is greater than 1 because the change in autonomous expenditure leads to​ _______.

PT7. Choose the statement that is incorrect.

The nominal interest rate is the real interest rate adjusted to remove the effects of inflation on the buying power of money.

pt3. Which of the following statements by Tom demonstrates that his buying plans obey the law of demand​?

The only thing​ that's changed is the price of​ textbooks: they've become more expensive and now​ I'm not buying as many.

hw8. Choose the statement about the Fed that is incorrect.

The policy decisions of the Federal Open Market Committee are implemented each month by a different Federal Reserve Bank.

DSM3. The market for corn is initially in equilibrium. Suppose that the production of biofuels, which use corn as an input, increase, and at the same time, increases in the price of oil cause farm production costs to rise. Which of the following explains the effect on equilibrium price and quantity in the corn market?

The price of corn will rise, but the effect on equilibrium quantity cannot be determined without more information.

DSM5. Which of these groups is included in the labor force?

The unemployed

pt4. Mitsubishi Heavy Industries makes the wings of the new Boeing 787 Dreamliner in Japan. Toyota assembles cars for the U.S. market in Kentucky. Choose the correct statement. Choose the statement that is incorrect. Choose the correct statement.

The wings appear as imports in U.S. GDP. If any parts for the cars come from​ Japan, they are recorded as a positive entry in calculating U.S. GDP. When the wings are sent to the United​ States, their value appears as Japanese exports in calculating​ Japan's GDP.

P9. Choose the statement that is incorrect.

The​ "Mexican peso is gaining on the​ greenback" because the demand for pesos is increasing at a slower pace than the supply of pesos is increasing.

P9. The United States is a debtor​ nation, and since 1980 it has piled up trade deficits that total​ $9 trillion. At its peak in​ 2006, the current account deficit was almost 6 percent of GDP. To pay for the​ $9 trillion of goods and services​ we've imported in excess of our​ exports, we have borrowed from the rest of the world. Foreigners have purchased large amounts of U.S. assets. A current account deficit means we must borrow more from abroad than we lend abroad or use our official reserves to cover the shortfall. The debtor nation status of the United States would be a concern if the borrowed funds were used to finance​ ______.

True Consumption

PQ13. Summers Calls for Infrastructure Spending-This infrastructure spending is fiscal stimulus. Such spending is​ _______ fiscal policy. Choose the statement that is incorrect.

True discretionary Government spending on​ roads, bridges, and airports decreases the government budget deficit.

E.U.S. Interest Rate Differential

U.S. Interest Rate Differential= US Interest Rate - Foreign Interest Rate

P9. The real exchange rate is the relative price of​ _____ to​ _____.

U.S.-produced goods and​ services; foreign-produced goods and services

DSM5. What is the impact of unanticipated inflation?

Unanticipated inflation creates arbitrary redistributions of income.

P121. Choose the correct statement about the U.S.​ short-run Phillips curve.

We can interpret US inflation and unemployment data in terms of a shifting short-run Phillips curve, which sometimes shifts upward and sometimes shifts downward.

DSM3. Which of the following represents an inferior good?

When consumer income increases, the demand for bologna decreases.

P131. Choose the statement that is incorrect.

When real GDP decreases in a​ recession, the poor become​ poorer, but at the same time the rich become richer and tax revenues increase.

9. What events in the foreign exchange market could have brought this rise in the value of the U.S.​ dollar? 1. World demand for U.S. exports increases Upper YY 2. World demand for U.S. exports decreases Upper NN 3. U.S. import demand increases Upper NN 4. U.S. import demand decreases Upper YY 5. The U.S. interest rate differential rises Upper YY 6. The U.S. interest rate differential falls Upper NN 7. The expected future exchange rate rises Upper YY 8. The expected future exchange rate falls Upper NN

YY is Yes NN is No

PQ13. The tax wedge is the gap created by a tax between what​ _____ and what​ _____.

a buyer​ pays; a seller receives

DSM7. A share of stock is __________.

a certificate of ownership and claim to the firm's profits

P12. The quantity theory of money tells us that​ _______.

a change in the money growth rate brings an equal change in the inflation rate

hw3. All of the following will change the demand for DVD players except​ _______. An increase in the price of a DVD player ​_______.

a change in the price of a DVD player decreases the quantity of DVD players demanded and results in a movement up along the demand curve for a DVD player

pt3. All of the following will change the demand for onions except​ _______. An increase in the price of onions ​_______.

a change in the price of onions decreases the quantity of onionsonions demanded and results in a movement up along the demand curve for onions

hw8. U.S. Bank Earnings up​ 21% as Loan Losses​ Decline, FDIC Says- A​ bank's attempts to pursue profit can sometimes lead to bank failure because​ _______. FDIC insurance helps to minimize bank failures and bring more stability to the banking system because​ _______.

a combination of all of the above depositors know that money they have deposited with a bank will be repaid

PT6. An increase in labor productivity results in all of the following except ​______.

a decrease in potential GDP per hour labor because of diminishing returns.

hw3. We know that there have been shifts of both the demand curve for and the supply curve of a good. We also know that one end result of the changes in this market was that the equilibrium price of the good fell. Given this​ information, which combination of supply and demand changes could NOT have possibly​ occurred?

a decrease in supply and an increase in demand

PQ13. Fiscal Stimulus for Growth- Increased government spending on infrastructure results in all of the following except ​_______. Increased government spending on infrastructure​ ______. If the government of China froze its current spending and instead cut​ taxes, investment would​ ______ and jobs would​ ______.

a decrease in the real interest rate increases or decreases the number of jobs but we​ don't know for sure ​increase; increase

P12. A​ cost-push inflation begins with​ ______ as the result of an increase in the money wage rate or an increase in the money prices of raw materials.

a decrease in​ short-run aggregate supply

P9. With the strengthening of the yen against the U.S. dollar in​ 2012, Japan's central bank did not take any action. A Japanese politician called on the central bank to take actions to weaken the​ yen, saying it will help exporters in the short run and have no​ long-run effects. ​Japan's current exchange rate policy is​ ______. The politician wants a​ ______ in the short run. This policy would have no effect on the exchange rate in the long run because in the long run​ ______.

a flexible exchange rate crawling​ peg; the price level and the nominal exchange rate are determined together

9. If a country has a deficit in its net exports, it means that this country imports __________.

a greater value of goods and services than it exports

P132. When the government imposes a tax on labor​ income, ______ the production function occurs and potential GDP​ ______.

a leftward movement​ along; decreases

P10. A rise in the money wage rate with no change in potential GDP creates​ ______.

a leftward shift of the SAS curve and no change in the LAS curve

P12. Eurozone Unemployment Hits Record High As Inflation Rises Unexpectedly Eurozone unemployment rose to 10.7 percent. At the same​ time, Eurozone inflation unexpectedly rose to 2.7 percent a​ year, up from the previous​ month's 2.6 percent a year. A very high unemployment rate can be accounted for by the Phillips curve model by all of the following except​_______. Choose the statement that is incorrect about the Eurozone economy.

a movement up along the​ long-run Phillips curve if the natural unemployment rate increases A rise in the expected inflation rate shifts the​ short-run Phillips curve rightward.

12. Deflation is​ _______.

a persistently falling price level

P12. Deflation is​ _______.

a persistently falling price level

hw4. All of the following are examples of investment except​ ______.

a person money adding money to his retirement fund

12. The best forecast​ available, which is based on all the relevant information is called​ _______.

a rational expectation

P111. You observe that unplanned inventories are increasing. You predict that there will be​ _______.

a recession

P101. Draw an aggregate demand curve in an economy with a below​ full-employment equilibrium. Label it AD. Draw a point at the below​ full-employment equilibrium. Draw a horizontal arrow at the equilibrium price level that shows the output gap. The output gap in the graph is​ ______ because​ ______.

a recessionary​ gap; potential GDP exceeds real GDP

DSM13 The time between when an economic problem begins and policymakers determine there is a need for fiscal policy is known as:

a recognition lag.

hw3. The graph illustrates the market for tea. The market equilibrium is at point A. After one or more​ changes, the market equilibrium moves to point B (to the right of equilibrium). You predict that the market for tea was most likely influenced by​ _______.

a rise in household income and a rise in the number of plantations

hw3. Which of the following​ --- by itself​ --- causes a decrease in demand for a certain​ good?

a rise in the price of some item that is a complement of the good

DSM3. Other things remaining equal, the law of demand says that higher prices will lead to:

a smaller quantity demanded and lower prices to a larger quantity demanded.

DSM3. The condition that exists when quantity supplied exceeds quantity demanded at the current price is known as __________.

a surplus or excess supply

hw5. If inflation is anticipated to be 5 percent per year and actual inflation for that year turns out to be 7​ percent, identify whether each of the following groups would be helped or hurt by​ this, or if the effort is indeterminate. a. People who are living on fixed incomes. b. Banks that have made​ long-term fixed rate loans. c. People who have purchased bonds. d. A person who has purchased real estate with a bank loan. e. A recent college graduate with many loans to pay back. f. People who have purchased stock. g. Governments that have sold bonds. h. Savers with open passbook accounts. i. People who have purchased precious metals. j. Wage earners who are members of a strong union.

a. hurt b. hurt c. hurt d. helped e. helped f. helped g. helped h. hurt i. helped j. indeterminate

hw4. The use of purchasing power parity prices

accounts for differences in the prices of the same goods in different countries when measuring real GDP.

hw4. Potential GDP is

achieved when all factors of production are fully employed.

hw4. If​ Nike, an American​ corporation, produces sneakers in Thailand this would

add to​ Thailand's GDP but not to U.S. GDP.

PQ13. A tax on consumption​ ______.

adds to the tax wedge in the labor market because it raises the prices paid for consumption goods and services and is equivalent to a cut in the real wage rate

DSM3. Economists assume that when there is a change in demand and/or supply, that prices reach a new equilibrium:

after an adjustment period that varies.

12. The mainstream business cycle theories all assert that the main factor leading to business cycles is fluctuations in the growth of

aggregate demand

PQ13. The tax multiplier is the effect of a change in taxes on​ _____.

aggregate demand

P101. The business cycle occurs because​ ______.

aggregate demand and​ short-run aggregate supply​ fluctuate, but the money wage rate does not adjust quickly enough to keep real GDP at potential GDP

12. Deflation occurs when​ _______.

aggregate demand increases at a persistently slower rate than aggregate supply

P12. Deflation occurs when​ _______.

aggregate demand increases at a persistently slower rate than aggregate supply

P112. Equilibrium expenditure is the level of aggregate expenditure that occurs when​ ______. Choose the correct statement

aggregate planned expenditure equals real GDP The level of aggregate expenditure that occurs the AE curve intersects the 45 degree line is equilibrium expenditure.

DSM2. Ms. Boulware is the best lawyer and the best secretary in town. She has:

an absolute advantage in both jobs

PT6. During the 100 years from 1914 to​ 2014, real GDP per person in the United States grew at​ ______.

an average of 2 percent a year

hw5. In the United​ States, the CPI basket consists of items that​ ______ . ​______ has the greatest weight in the CPI basket.

an average urban household​ buys; Housing

P112. You observe that unplanned inventories are decreasing. You predict that there will be​ _______.

an expansion

P12. The economy starts out on the curves AD0 and SAS0. Some events then occur that generate an expected inflation. Which of the following events would not cause an expected​ inflation? Starting at point A​, the initial effects of an expected inflation is a movement to point​ ______. As an expected inflation​ proceeds, it follows the path​ ______.

an expected increase in taxes ​E; I

P12. A​ demand-pull inflation begins with​ _______.

an increase in aggregate demand

PQ13. The economy is in a recession and the recessionary gap is large. Discretionary fiscal policy that might occur is​ ______. Automatic fiscal policy that might occur is​ ______. A discretionary fiscal stimulation package that would avoid a budget deficit is a simultaneous and equal​ ______. Discretionary fiscal policy is risky because it is hampered by all of the following lags except​ ______.

an increase in government expenditure and a cut in taxes by a decision of​ Congress; an increase in transfer payments and a fall in taxes increase in government expenditure and an increase in taxes business cycle lag

P101. Examples of fiscal policy that increase aggregate demand include​ ______.

an increase in government​ expenditure, a decrease in​ taxes, and an increase in transfer payments

P9. The events in the foreign exchange​ market, everything else remaining the same that could have resulted in this change in the value of the U.S. dollar include​ _______.

an increase in the Japanese interest rate and a decrease in the US interest rate.

P12. The economy starts out on the curves AD0 and SAS0. Some events then occur that generate a​ cost-push inflation. Which of the following events might cause a​ cost-push inflation? Starting at point A​, the initial effect of a​ cost-push inflation is a move to point​ ______. As a​ cost-push inflation spiral​ proceeds, it follows the path​ ______.

an increase in the money wage rate or an increase in the money prices of raw materials ​B; E,​ G, I

hw6. When labor productivity​ increases, there is​ _____ the production function and​ _____ in potential GDP.

an upward shift​ of; an increase

PT7. Over​ time, on average the demand for loanable funds​ ______, so the real interest rate​ ______.

and the supply of loanable funds increase at a similar pace; has no trend.

hw7. Over​ time, on average the demand for loanable funds​ ______, so the real interest rate​ ______.

and the supply of loanable funds increase at a similar​ pace; has no trend

P9. Explain the effect of the two announcements on the U.S. dollardash-yen exchange​ rate: Would the U.S. dollar appreciate or​ depreciate? The two announcements on the U.S.​ dollar-yen exchange rate would​ _____ the U.S. dollar.

appreciate

9. The theory of purchasing power parity states that __________.

arbitrage equalizes the value of monies

pt2. Social institutions such as​ firms, markets, property​ rights, and money​ _______.

are required for society to enjoy the benefits of specialization and trade

P10. A Classical macroeconomist believes that the economy is​ self-regulating and always​ _____.

at full employment

PQ13. The structural surplus or deficit is the budget balance that would occur if the economy were​ _____.

at full employment

P10. A monetarist is a macroeconomist who believes that the economy is​ self-regulating and that it will normally operate​ _____, provided that monetary policy is not erratic and that the pace of​ _____ is kept steady.

at full​ employment; money growth

PQ13. The economy is in a​ recession, the recessionary gap is​ large, and there is a budget deficit. The budget deficit is​ ______. Automatic fiscal policy is​ ______ the output gap. If a discretionary increase in government expenditure​ occurs, the structural deficit​ ______ or the structural surplus​ ______.

at least partly composed of a cyclical​ deficit; decreasing increases; decreases

DSM13 Taxes and transfer payments that stabilize GDP without requiring explicit actions by policymakers are called __________.

automatic fiscal policy

P131. A fall in real GDP that results in a decrease in personal income tax receipts is an example of​ ______.

automatic fiscal policy

P112. The multiplier is the amount by which a change in​ ______ expenditure is magnified or multiplied to determine​ ______. To calculate the​ multiplier, we divide​ ______ by​ ______.

autonomous expenditure; change in equilibrium expenditure and real GDP the change in equilibrium expenditure; change in autonomous expenditure

hw8. A central bank is​ ______. The central bank in the United States is the​ ______.

a​ bank's bank and a public authority that regulates a​ nation's depository institutions and conducts monetary​ policy; Federal Reserve System

P102. The graph shows a business cycle. Draw a vertical arrow that​ shows: ​1) a recessionary gap. Label it 1. ​2) an inflationary gap. Label it 2. Draw a point that shows the economy at full employment. At arrow 1 in the​ graph, the economy is in​ ______ full- employment equilibrium and the intersection of the AD and SAS curves is to the​ ______ of the LAS curve. At arrow​ 2, the economy is in​ ______ full-employment equilibrium and the intersection of the AD and SAS curves is to the​ ______ of the LAS curve.

a​ below; left an​ above; right

12. If the government increases its expenditure on goods and services and as a​ result, the money wage rate​ increases, the economy has experienced​ _______.

a​ demand-pull rise in the price level

12. A rise in the price of oil creates​ _______.

a​ one-time cost-push rise in the price level

P101. In the​ graph, the vertical distance between the horizontal line and point 2 is​ _____ gap. At point​ 2, the intersection of the AD and SAS curves is to the​ _____ of the LAS curve. The vertical distance between the horizontal line and point 3 is​ _____ gap. At point​ 3, the intersection of the AD and SAS curves is to the​ _____ of the LAS curve.

a​ recessionary; left; an​ inflationary; right

pt4. Gross domestic product and gross investment are measured​ ______. Net domestic product and net investment are measured​ ______. Domestic product is​ _______. National product is​ _______.

before the depreciation of​ capital; after the depreciation of capital production within a​ country; the value of goods and services produced anywhere in the world by the residents of a nation

hw4. An U.S. firm buys a new industrial sewing machine from a company located in France. Which of the following is​ true? I. U.S. net exports decrease. II. U.S. investment increases.

both I and II

pt3. The price of food increased during the past year. The law of demand applies to food because when the price of food​ rises, there is​ ______. The substitution effect influences food purchases because when the price of a certain food​ rises, other things remaining the​ same, ______. Consumers​ ______. The income effect influences food purchases because when the price of a certain food​ rises, other things remaining the​ same, ______. Consumers​ ______.

both a substitution effect and an income effect its relative price​ rises; purchase more of a different food that is less expensive the price rises relative to​ income; cannot afford to buy all the things they previously​ bought, so they normally buy less of the food that has experienced the price rise

DSM13 Changes in tax rates impact the economy through:

both aggregate demand and aggregate supply.

pt4. The total amount spent​ _____ is called gross investment.

both buying new capital and replacing depreciated capital

hw2. Suppose that the United States and Cuba decide to open up trade. If each country specializes in the good in which it has a comparative​ advantage, ______ will gain from that trade because ​ ______.

both​ countries; consumption possibilities in both Cuba and the United States will lie outside their PPFs

10. An increase in potential GDP increases​ ______.

both​ long-run aggregate supply and​ short-run aggregate supply

P102. An increase in potential GDP increases​ ______.

both​ long-run aggregate supply and​ short-run aggregate supply

DSM13 A government that spends more than it collects in taxes experiences a:

budget deficit

DSM13. A government that collects more in taxes than it spends experiences a:

budget surplus

DSM13. If the federal government's expenditures are less than its revenue, there is a __________.

budget surplus

12. If workers and firms have rational expectations and wages and prices adjust quickly, an expansionary monetary policy will result in higher inflation;

but no change in the unemployment rate

10. Inflation expectations​ "become self-fulfilling" because consumers decide to​ _____, which​ ______.

buy more goods and services at​ today's lower​ prices; increases aggregate demand

hw8. If the interest rate is 5​ percent, people will​ ______.

buy​ bonds, bid up their​ price, and the interest rate will fall

DSM5. A sustained decrease in the average level of prices in the economy is __________.

called deflation

pt2. The production possibilities frontier is the boundary between the combinations of goods and services that​ _____, given the available factors of production and the state of technology.

can be produced and the combinations that cannot be produced

DSM13. Supply-side economists point to the Laffer curve as evidence that higher taxes:

can lead to lower overall government revenues.

pt1. A power generating plant is an example of the factor of production​ _______.

capital

pt2. Economic growth comes from​ _______.

capital accumulation and technological advance

P9. The​ ______ account records​ ______ U.S. investment abroad.

capital and​ financial; foreign investment in the United States minus

P111. An increase in investment shifts the AE curve upward by an amount equal to the​ ______, and shifts the AD curve rightward by an amount equal to the​ ______.

change in investment; change in investment times the multiplier

P121. In real business cycle​ theory, all of the following events can be sources of fluctuation in productivity except​ _______.

changes in growth rate of money

PT5. Labor supply growth is influenced by all of the following except​_______.

changes in labor productivity

12. According to real business cycle theory, a major source of fluctuations in economic activity is __________.

changes to technology

P101. A​ ______ macroeconomist believes that the economy is​ self-regulating and always at full employment. A​ ______ macroeconomist believes the economy requires active help from fiscal policy and monetary policy to maintain full employment.

classical; Keynesian

hw4. The expenditure approach to measuring GDP sums together​ ______, and the largest component is​ ______.

consumption​ expenditure, investment, government expenditure on goods and​ services, and net​ exports; consumption expenditure

P12. ​Pakistan: Is it​ Cost-Push Inflation?- Read the news​ clip, then answer the following question. Pakistan is experiencing​ ______ inflation.

cost-push

P12. Tight Money​ Won't Slay​ Food, Energy Inflation- Read the news​ clip, then answer the following questions. The news clip refers to​ ______ inflation when it discusses rising production costs. ​"Rising labor​ productivity" can neutralize the effect on the inflation rate of​ "higher input​ costs" because​ ______.

cost-push; it increases​ short-run aggregate supply and​ long-run aggregate supply with no slowdown in aggregate demand growth

DSM7. A decline in investment spending as a result of an increase in government spending and borrowing is known as:

crowding out

DSM7. If increases in government budget deficits cause investment spending to fall it is known as __________.

crowding out

DSM13. The decline in private expenditures that results from an increase in government borrowing is known as:

crowding out.

9. In the balance of payment accounts, the sum of exports minus imports, net interest income, and net transfers is called the __________.

current account balance

9. If the sum of net exports, net interest income received from abroad, and net transfer payments from abroad yields a negative number, we say that a country's __________.

current account is in deficit

hw3. American to cut​ flights, charge for luggage- Read the news​ clip, then answer the following question. The news clip illustrates a change in the supply of flights when it reports that American Airlines is​ _______.

cutting the number of flights with no mention of a change in the airfare

T92. The expectations about the exchange rate​ ______ the demand for U.S. dollars and​ ______ the supply of U.S. dollars.

decreased; increased

PQ13. When the government taxes the nominal interest rate minus the inflation rate instead of the nominal interest​ rate, the true tax rate _____

decreases

P10. 1. A deep recession hits the world economy 2. The world oil price rises sharply. 3. U.S. businesses expect future profits to fall. Starting from a position of​ long-run equilibrium, a deep recession​ ______, and a decrease in expected future profits​ ______. Starting from a position of​ long-run equilibrium, a sharp increase in the world oil price​ ______.

decreases real GDP and lowers the price​ level; decreases real GDP and lowers the price level decreases real GPD and raises price level

pt3. The following events occur one at a​ time: ​(i) The price of crude oil rises. ​(ii) The price of a car rises. ​(iii) All speed limits on highways are abolished. ​(iv) Robots cut car production costs. The demand for gasoline​ _______. The supply of gasoline​ _______. The quantity of gasoline demanded​ _______.

decreases when the price of a car rises decreases when the price of crude oil rises decreases when the price of crude oil rises increases when the speed limits are abolished

P132. Tax revenues​ ______ during a recession. ​Needs-tested spending​ ______ during an expansion.

decreases; decreases

P9. A fall in the expected future exchange rate​ ______ the demand for U.S. dollars. A decrease in the U.S. demand for imports​ _______ the demand for U.S. dollars.

decreases; does not change

10. Aggregate demand decreases if monetary policy​ ______ the quantity of money and​ ______ interest rates.

decreases; increases

PQ13. A decrease in the tax on capital income​ ______ the real interest rate and​ ______ investment and economic growth.

decreases; increases

hw6. An increase in the population​ ______ the real wage rate and​ ______ the equilibrium quantity of labor. Potential GDP​ ______ and potential GDP per hour of labor​ ______.

decreases; increases ​increases; decreases

P9. In the long​ run, the real exchange rate is determined by​ ______ and the nominal exchange rate is determined by​ ______.

demand and supply in the markets for goods and​ services; the quantities of money in two countries

P9. A flexible exchange rate is an exchange rate that is determined by​ ______ in the foreign exchange market with no direct intervention by the​ _____.

demand and​ supply; central bank

P12. Getting a​ Raise: Why​ It's Not Happening- Read the news​ clip, then answer the following questions. An economy experiences​ _______ inflation when​ "wages tend to feed​ inflation."

demand-pull

P12. ​Official: China May Face Heavy Inflation Pressure- Read the news​ clip, then answer the following question. China is experiencing a​ ______ inflation caused by​ ______.

demand-pull; loose monetary​ policy, which increases aggregate demand

T92. Suppose a Canadian dollar bank deposit in Toronto earns 3 percent a year and a U.S. dollar bank deposit in Chicago earns 4 percent a year. What expectations do people hold if interest rate parity is to​ hold? For interest rate parity to​ hold, people expect that the U.S. dollar will ____ by ____ percent.

depreciate; 1

P9. If a euro deposit in a bank in​ Paris, France, earns interest of 0.7 percent a year and a yen deposit in​ Tokyo, Japan, earns 4.4 percent a​ year, other things remaining the same and adjusted for​ risk, what is the exchange rate expectation of the Japanese​ yen? The Japanese yen exchange rate is expected to ____ against the Euro by ____ percent.

depreciate; 3.7

hw6. Potential GDP is​ ______.

determined by the​ full-employment quantity of labor

DSM4. As the value of a country's real GDP increases, the country is likely to:

devote more resources to pollution reduction

P132. An increase in the income tax rate is an example of​ ______.

discretionary fiscal policy

DSM13 The American Recovery and Reinvestment Act of 2009 is a clear example of:

discretionary fiscal stimulus.

DSM7. The best measure of the income households actually have available to spend is:

disposable personal income

pt1. Economics​ _______.

divides into two main parts—microeconomics and macroeconomics

P102. A rise in the money wage rate​ ______.

does not change the LAS curve because along the LAS curve a rise in money wage rate is accompanied by an equal percentage change in the price level.

hw3. With the period of low rainfall​ extending, dairies raise their expected price of​ low-fat milk next year. The supply of​ low-fat milk​ ______ today. With advice from​ health-care experts, dairy farmers decide to switch from producing​ full-cream milk to growing vegetables. The supply of​ low-fat milk​ ______. A new technology lowers the cost of producing ice cream. The supply of​ low-fat milk ______.

does not change; decreases increases

pt2. Economic growth​ ______ overcome scarcity because​ ______.

does​ not; we can produce more goods and services but it is still impossible to satisfy all our wants

PT6. Year Real GDP ​ (trillions of yen​) Population ​(billions) 2009 455,000 650 2010 511,567 683 The table provides some data on real GDP and the population of Eastiana in 2009 and 2010. If the growth rates of 2010 are maintained in future​ years, real GDP per person in Eastiana will​ ______.

double by 2020

PT6. Year Real GDP ​ (trillions of yen​) Population ​(billions) 2011 280,000 400 2012 288,456 404 The table provides some data on real GDP and the population of Asiana in 2011 and 2012. If the growth rates of 2012 are maintained in future​ years, real GDP per person in Asiana will​ ______.

double by 2047

DSM8. Assuming there are no leakages out of the banking system, a money multiplier equal to 5 means that:

each additional dollar of reserves creates $5 of deposits.

P12. A rational expectation is a forecast that results from the use of all the relevant data and​ _____.

economic science

hw1. What are the four goals of any economic​ system? (Order does not matter but spelling​ does! Separate them with a​ comma.)

efficiency,equity,stability,growth

PT7. The​ Ricardo-Barro effect _____ crowding out.

eliminates

PT5. An increase in labor productivity increases potential GDP because​ ______.

employment increases and a given amount of employment produces more real GDP

9. Interest rate parity means​ ______.

equal rates of return

P9. Interest rate parity​, which means​ _____ across​ currencies, means that for risk free​ transactions, there is​ _____ gain from choosing one currency over another.

equal rates of​ return; no

PQ13. The government expenditure multiplier is the effect of a change in government expenditure on goods and services on​ _____.

equilibrium real GDP

P10. A below​ full-employment equilibrium is an equilibrium in which potential GDP​ _____ real GDP.

exceeds

P10. When potential GDP​ _____ real​ GDP, the output gap is called a recessionary gap.

exceeds

P10. An above​ full-employment equilibrium is an equilibrium when real GDP​ _____.

exceeds potential GDP

P131. When an economy is below full employment and the government has a budget​ deficit, that deficit​ ______.

exceeds the structural deficit

hw4. I calculated real GDP by summing the components of aggregate​ _____, so I used the​ _____ approach.

expenditure; expenditure

P9. Net exports is​ _____ of goods and services minus​ _____ of goods and services.

exports; imports

pt1. The night before an economics ​test, you decide to go to a club with friends instead of working your working your MyEconLab study plan. You get 85 percent on your test compared with the 90 percent that you normally score. You​ ______ a tradeoff​ ______, and the opportunity cost of your evening at the club was​ ______.

faced; between a higher test score and an evening at the clubat the club​; the 55 percent fall in your grade

pt2. The main functions of markets include​ _______.

facilitating trade

pt2. Property rights are legally established titles to the​ ownership, use and disposal of​ _____ and goods and services that are enforceable in the courts.

factors of production

10. When aggregate demand increases, unemployment will usually __________ and inflation will __________.

fall, rise

P121. An economy at a​ full-employment equilibrium experiences an increase in aggregate demand. The unemployment rate​ ______ its natural​ rate, and to return to the​ long-run equilibrium, the money wage rate begins to​ ______.

falls below; rise

P9. A country has a higher inflation rate than all other​ countries, and it has slower economic growth. The central bank does not intervene in the foreign exchange market. To preserve purchasing power​ parity, the exchange rate​ ______. If investment from foreigners decreases due to the slow economic​ growth, the current account balance is becoming more​ ______. It is expected that in the future the exchange rate will​ ______. The interest rate differential is​ ______.

falls; positive fall; positive

12. An economy at a​ full-employment equilibrium experiences an increase in aggregate demand. The unemployment rate​ ______ its natural​ rate, and to return to the​ long-run equilibrium, the money wage rate begins to​ ______.

falls​ below; rise

T92. Between 2007 and​ 2012, the U.S. exchange rate​ ______ against the Japanese yen because the U.S. interest differential​ _______ ​ ______ against the yen.

fell; decreased and because currency traders expected the dollar to depreciate

PQ13. Generational Imbalance is the division of​ _____ between the current and future​ generations, assuming that the current generation will enjoy the existing levels of taxes and benefits.

fiscal imbalance

DSM13 Government policies that increase aggregate demand are called __________.

fiscal stimulus

DSM5. The consumer price index is an index computed using prices of a __________.

fixed basket of goods and services purchased by the typical consumer

9. A country that allows demand and supply to determine the value of its currency is said to have a __________.

flexible exchange rate

hw4. Which of the following is a final​ good?

flour purchased at the store to bake cookies

9. A crawling peg exchange rate policy is one that​ _______.

follows a path determined by a decision of the government or the central bank and is achieved by central bank intervention in the foreign exchange market

P9. A crawling peg exchange rate policy is one that​ _______.

follows a path determined by a decision of the government or the central bank and is achieved by central bank intervention in the foreign exchange market

hw1. For each news item​ below, indicate whether it involves a what​, how​, or for whom question. ​"Health dash care professionals and drug companies say Medicaid drug rebates should be available to everyone in need" involves a​ ______ question. ​"Asteroid mission canceled​" involves a​ ______ question. ​"Fiber replaces aluminum in airplanes​" involves a _____ question.

for whom; what how

P9. U.S. official reserves are the​ government's holding of​ _____.

foreign currency

9. The market in which the currency of one country is exchanged for the currency of another country is the​ ______. The price at which one currency exchanges for another currency is the​ ______.

foreign exchange​ market; exchange rate

T91. The market in which the currency of one country is exchanged for the currency of another country is the​ ______. The price at which one currency exchanges for another currency is the​ ______.

foreign exchange​ market; exchange rate

P9. The capital and financial account is the record of​ _____ minus U.S. investment abroad.

foreign investment in the United States

PT5. The unemployment that arises from normal labor turnover—from people entering and leaving the labor force— and from the ongoing creation and destruction of jobs isand from the ongoing creation and destruction of jobs is ​______ unemployment.

frictional

pt1. Land is the​ _____ that we use to produce goods and services.

gifts of nature or natural resources

pt1. A tradeoff is​ _______. Pam, Pru, and Pat are deciding how they will celebrate the New Year. Pam prefers to go on a​ cruise, is happy to go to​ Hawaii, but does not want to go skiing. Pru prefers to go​ skiing, is happy to go to​ Hawaii, but does not want to go on a cruise. Pat prefers to go to Hawaii or to take a cruise but does not want to go skiing. Who faces a tradeoff?

giving up one thing to get something else ​Pam, Pat, and Pru face a tradeoff.

13. 2012​ Deficit: Smaller, But Still Big- The components of government outlays and receipts which have changed most to contribute to the huge budget deficits in 2011 and 2012 are​ ______.

government expenditure and transfer payments

P11. The balanced budget multiplier equals the change in equilibrium expenditure and real GDP that results from equal changes in​ _____ divided by the change in government expenditure.

government expenditure and​ lump-sum taxes

PT5. When the unemployment rate is less than the natural unemployment​ rate, real GDP is​ ______ than potential GDP and the output gap is​ ______.

greater; positive

DSM8. In the long run, the rate of inflation is determined by the __________.

growth of the money supply

PQ13. Government debt is the total amount that government​ _____.

has borrowed

hw5. A typical family on Sandy Island consumes only juice and cloth. Last​ year, which was the base​ year, the family spent ​$18 on juice and ​$25 on cloth. In the base​ year, juice was ​$6 a bottle and cloth was ​$5 a length. This​ year, juice is ​$8 a bottle and cloth is ​$8 a length. What is the CPI​ basket? What is the CPI and the inflation rate in the current​ year?

he CPI basket is 3 bottles of juice and 5 lengths of cloth. The CPI in the current year is 148.8. ​>>> Answer to 1 decimal place. The inflation rate in the current year is 48.8 percent.

DSM5. If the minimum wage is set above the market-determined equilibrium wage, the natural unemployment rate will be __________.

higher than it would be without a minimum wage

T91. The law of supply of foreign exchange states that other things remaining the​ same, the​ ______ the exchange​ rate, the​ ______ in the foreign exchange market.

higher; greater quantity of US dollars supplied

P12. Suppose that the business cycle in the United States is best described by RBC theory. An advance in technology increases productivity. The​ when-to-work decision depends on the real interest rate. The​ _____ the real interest​ rate, other things remaining the​ same, the​ _____ is the supply of labor today. RBC theorists believe the​ when-to-work effect is ____.

higher; larger large

hw4. If we compare the four sources of spending in the economy we see that

household consumption is the largest.

hw7. What are the three sources of global investment​ funds? (Separate with a​ comma, no plurals or​ abbreviations.)

household saving,government budget surplus,borrowing from rest of world

DSM7. The flow of funds from __________ into the financial system makes it possible for government and firms to borrow.

households

PT8. A depository institution takes deposits from​ ______ and earns most of its income by​ _______. The deposits of the following three types of depository institutions make up the​ nation's money:​ ______.

households and​ firms; making loans and buying securities that earn a higher interest rate than that paid to depositors commercial banks, thrift institutions, and money market mutual funds

P12. Getting a​ Raise: Why​ It's Not Happening- Read the news​ clip, then answer the following questions. Choose the statement that is incorrect. Starting from a​ long-run equilibrium,​ _______. ​"Wages typically track​ inflation, soaring higher when prices take​ off." In this​ situation, the economy is experiencing​ _______ inflation.

if the percentage change in the money wage rate equals the percentage change in the unemployment​ rate, the economy remains at full employment. demand-pull

P9. Read the news​ clip, then answer the following question. The news clip states that huge trade deficits​ "seem like a pretty good indication that the dollar was overvalued in global currency markets and needed to come​ down". This statement is​ ______ because​ ______.

inaccurate; the current account balance is determined by the private sector balance and the government sector balance

PT8. Suppose the Fed buys​ $50 million of government securities from the Bank of America. The​ Fed's total assets​ ______ and its total liabilities​ ______. The Bank of​ America's total assets​ ______ and its total liabilities​ ______.

increase by​ $50 million; increase by​ $50 million do not change; do not change

PQ13. An economy is experiencing a recessionary gap. The government can​ ______.

increase expenditure or cut taxes to increase aggregate demand

P9. Explain the effect of the​ Fed's announcement on the demand for and supply of U.S. dollars. The demand for U.S. dollars would​ _____ and the supply of U.S. dollars would​ _____ on June 2.

increase; decrease

11. The multiplier increases when the marginal propensity to consume

increases

P10. The Fed increases the quantity of money and all other things remain the same. In the short​ run, aggregate demand​ _______.

increases

hw2. Ann currently produces at point A in the figure. If Ann moves from point A to point C​, her opportunity cost of a modem ​_______.

increases

10. Starting from a position of​ long-run equilibrium, an increase in government expenditures​ ______ real GDP and​ ______ the price level.

increases real GDP and raises the price level

10. Starting from a position of​ long-run equilibrium, a world expansion​ ______, and an increase in expected future profits​ ______.

increases real GDP and raises the price​ level; increases real GDP and raises the price level

hw7. A government budget deficit​ occurs, which​ ______. The real interest rate​ ______. Private saving _____ and investment _____ .

increases the demand for loanable​ funds; rises increases; decreases

10. Aggregate demand decreases if the exchange rate​ ______ or foreign income ​______.

increases; decreases

P12. Real Wages Fail to Match a Rise in Productivity- In real business cycle​ theory, an increase in productivity​ ______ the demand for labor by more than it​ ______ the supply of labor. In the news​ clip, productivity gains exceed pay increases because the demand for labor​ ______ than the​ ______ in the supply of labor.

increases; increases increases by​ less; increase

PT7. A decrease in current income taxes​ ______ the supply of loanable funds today because it​ ______. A decrease in expected future income​ ______.

increases; increases disposable income, which encourages greater saving increases the supply of loanable funds today because households with smaller expected future income will save more today

hw1. Before starring as Tony Stark in Iron Man​, Robert Downey Jr. had played in 45 movies that had average​ first-weekend box office revenues of a bit less than​ $5 million. Iron Man grossed​ $102 million in its first weekend. The success of Iron Man​ ______ the opportunity cost of hiring Robert Downey Jr. Movie producers now have​ ______ incentive to hire Robert Downey Jr.

increases; more

P102. Aggregate demand increases if expected future​ income, inflation, or profits​ ______. And aggregate demand increases if fiscal policy​ ______ government expenditure. Aggregate demand increases if fiscal policy​ ______ taxes or​ ______ transfer payments. Aggregate demand increases if monetary policy​ ______ the quantity of money and​ ______ interest rates. ggregate demand increases if the exchange rate​ ______ or foreign income ​______.

increase​; increases decrease; increase increases; decreases decreases; increases

P112. Consumption expenditure minus​ imports, which varies with real​ GDP, is called​ _______.

induced expenditure

DSM5. If the inflation rate is low, steady, and anticipated, __________.

inflation may not be a major problem

DSM5. The percentage rate of change in the price level is the definition of the:

inflation rate

P12. The ​long-run Phillips curve is the relationship between​ _____ and​ _____ when the economy is at full employment. The​ long-run Phillips curve is a​ _____ line at the​ _____ unemployment rate.

inflation; unemployment;​ vertical; natural

P101. Draw an aggregate demand curve in an economy with an above​ full-employment equilibrium. Label it AD. Draw a point at the above​ full-employment equilibrium. Draw a horizontal arrow at the equilibrium price level that shows the output gap. The output gap in the graph is​ ______ because​ ______.

inflationary gap; potential GDP is less than real GDP

P9. Balance of payments accounts are the accounts in which a nation records its​ _____.

international​ trading, borrowing, and lending

P111. If aggregate planned expenditure exceeds real​ GDP, then​ _______.

inventories decrease, and as real GDP increases, a movement up along the AE curve occurs

P112. If aggregate planned expenditure is less than real​ GDP, then​ _______.

inventories increase, and as real GDP decrease a movement down the AE curve.

P9. A creditor nation is a country that during its entire history has​ _____ the rest of the world than other countries have​ _____ it.

invested more​ in; invested in

hw3. A demand curve​ _______.

is a willingness-and-ability-to-pay curve

T91. One consequence of China operating a crawling peg is that China​ ______. China fixes its exchange rate​ ______.

is accumulating US dollars as a way of achieving a low inflation rate

P9. A flexible exchange rate is one that​ _______.

is determined by demand and supply in the foreign exchange market with no direct intervention by the central bank

P9. Arbitrage​ _______.

is the practice of seeking to profit by buying in one market and selling for a higher price in another related market

PT5. The natural unemployment rate​ _______.

is the unemployment rate at full employment

12. The long-run Phillips curve __________.

is vertical at the natural rate of unemployment

hw8. From​ Paper-Clip to​ House, in 14 Trades- Barter​ ______ a means of payment. When trading on​ e-Bay, barter​ _______.

is; is not as efficient as money because barter requires a double coincidence of wants

DSM5. If inflation is anticipated, __________.

it costs less to society than if unanticipated

PT6. According to new growth​ theory, ______ experience diminishing returns.

knowledge is capital that does not

hw1. A dog trainer is an example of the factor of production​ _______.

labor

DSM5. The ratio of the labor force to the adult population is known as the:

labor force participation rate

P132. The​ _______ lag is the time it takes Congress to pass the laws needed to change taxes or spending.

law-making

hw8. Suppose the Fed increases the quantity of money. In the long​ run, supply and demand in the​ ______ market determines the real interest rate. The​ ______ adjusts to make the quantity of real money supplied equal to the quantity demanded.

loanable​ funds; price level

DSM8. On the balance sheet of commercials banks __________.

loans are the largest asset

hw7. The three main types of markets for financial capital are​ _______.

loan​ markets, bond​ markets, and stock markets

P9. The exports effect is the result that the lower the exchange​ rate, other things remaining the​ same, the​ ______.

lower are the prices of​ U.S.-produced goods and services to foreigners and the greater is the volume of U.S. exports

9. The imports effect is the result that the higher the exchange​ rate, other things remaining the​ same, the​ ______.

lower are the prices of​ foreign-produced goods and services to Americans and the greater is the volume of U.S. imports

P9. The imports effect is the result that the higher the exchange​ rate, other things remaining the​ same, the​ ______.

lower are the prices of​ foreign-produced goods and services to Americans and the greater is the volume of U.S. imports

DSM7. The __________ the interest rate, the more investment projects firms can profitably undertake, and the __________ the quantity of loanable funds they will demand.

lower, greater

DSM5. The unemployment rate in the United States is usually __________ than the unemployment rates in most European countries, partly because the United States has __________ generous benefits for the unemployed.

lower, less

pt1. Think about the following news items. Which items involve a microeconomic issue and which involve a macroeconomic​ issue? A. Why are production and incomes stagnating in Japan question mark B. It would be better if the United States spent more on the environment and less on space exploration D. Why are Americans borrowing more than $ 2 billion a day from the rest of the world question mark Statement A involves a​ ______ issue. Statement B involves a​ ______ issue. Statement C involves a​ ______ issue. Statement D involves a​ ______ issue.

macro; micro macro; macro

PQ13. Which of the following is not a role played by the Budget Committees of the House of Representatives and the Senate in creating fiscal​ policy?

making the initial budget proposal in February

pt3. A competitive market is a market that has​ _____, so​ _____ can influence the price.

many buyers and​ sellers; no single buyer or seller

pt2. The marginal benefit curve is a curve that shows the relationship between the​ _____.

marginal benefit from a good and the quantity consumed of that good

DSM4. The GDP is a measure of the __________.

market value of the final goods and services produced within a country in a given time period

DSM5. The consumer price index __________.

measures the average of prices paid by urban consumers for a fixed basket of consumer goods and services

hw8. Money serves as a​ ______.

medium of​ exchange, which means that it is generally accepted in exchange for goods and services

12. A rise in the price of oil:

might trigger a cost-push inflation

12. The school of thought that believes the activist policies of the Federal Reserve exacerbate economic fluctuations is __________

monetarist cycle theory

hw1. Several things are necessary to make a​ decentralized, market economy work efficiently. Identify what is needed based on the following​ descriptions: Anything accepted as a means of payment Makes trading efficient Facilitate trade Enable​ buyers/sellers to get info and do business with each other Hire factors of production Organize factors of production to produce and sell goods and services Govern ownership​ & use of things people value Provide incentive to​ specialize/produce

money markets firms property rights

P10. ​Long-run aggregate supply is the relationship between the quantity of real GDP supplied and the price level when the ​ _____ changes in step with the price level to maintain full employment.

money wage rate

hw2. The figure shows the circular flows in the market economy. When Apple Inc. pays the designers of the iPad​, the flows are a​ ______ from firms to households and a​ ______ from households to firms. When you buy a new e dash book from Amazon​, the flows are a​ ______ from households to firms and a​ ______ from firms to households.

money​ flow; real flow money​ flow; real flow

p2. Monday Island produces only cabbages and lemons. The marginal cost of a cabbage is the number of lemons that​ ______ to get one more​ ______.

must be​ forgone; cabbage

pt1. When you choose to spend more on DVDs and less on music CDs​, you ​_______. When a bakery decides to produce its bread by automated production line rather than in a traditional kitchen, it faces ​______.

must tradeoff music CDs for DVDs​, and you are facing a what tradeoff a how tradeoff

T91. A country that is borrowing more from the rest of the world than it is lending to the rest of the world is a​ ______, and a country that during its entire history has borrowed more from the rest of the world than it has lent to it is a​ ______. ​Currently, the United States is a

net borrower; debtor nation debtor nation

T92. A country that is lending more to the rest of the world than it is borrowing from the rest of the world is a​ ______. A country that during its entire history has invested more in the rest of the world than other countries have invested in it is a​ ______. China, Japan, and Saudi Arabia are ______. The US is

net​ lender; creditor nation net lenders; net borrower

P102. A​ ______ macroeconomist believes that business cycle fluctuations are the efficient responses of a​ well-functioning market economy that is bombarded by shocks that arise from the uneven pace of technological change. A​ ______ macroeconomist believes that the​ short-run aggregate supply curve is horizontal at a fixed price level.

new classical; new Keynesian

hw5. June 02- 179.9 June 03-183.7 June 04-189.7 The table shows three years of CPI data. The bias in these CPI numbers might arise from​ ______. Choose the statement that is incorrect.

new goods​ bias, quality change​ bias, commodity substitution​ bias, and outlet substitution bias The core PCE is a broader measure than the CPI that attempts to overcome biases by placing extra emphasis on food and​ fuel, two goods which are large components of household expenditure.

T122. In​ ______ cycle​ theory, the rational expectation of the price​ level, which is determined by potential GDP and expected aggregate​ demand, determines the money wage rate and the position of the SAS curve. In​ ______ cycle​ theory, past rational expectations of the current price level influence the money wage rate and the position of the SAS curve.

new​ classical; new Keynesian

DSM13 Most economists would __________ a balanced federal budget mandate.

not be in favor of

P102. ​Long-run macroeconomic equilibrium​ ______.

occurs when real GDP equals potential​ GDP, and the LAS​, SAS​, and AD curves intersect

10. The economy is in long-run equilibrium when the short-run aggregate supply and the aggregate demand curve intersect at a point:

on the long-run aggregate supply curve

pt1. An economic model is a description of some features of the economic world that includes​ _____ features assumed necessary to explain the​ _____facts.

only​ those; observed

PT5. If the CPI rises from 120 to​ 126, then​ ______.

on​ average, the price paid by urban consumers for a fixed basket of consumer goods and services rises by 5 percent

pt2. The marginal cost of a good or service is the​ _____.

opportunity cost of producing one more unit of it

P9. The U.S. dollar exchange rate fluctuates in part because a change in the U.S. interest rate differential changes the demand for U.S. dollars and the supply of U.S. dollars in​ ______ and a change in the expected future exchange rate changes the demand for U.S. dollars and the supply of U.S. dollars in​ ______.

opposite​ directions; opposite directions

hw8. Rapid inflation in Brazil in the early 1990s caused the cruzerio to lose its ability to function as money. Which of the following commodities do you think would most likely have taken the place of the cruzeiro in the Brazilian​ economy?

packs of cigarettes because they are a good medium of exchange

PT5. Assume that the preconditions for labor productivity growth are in place. The pace of labor productivity growth is influenced by all of the following except​ ______.

population growth

P101.In the​ long-run macroeconomic​ equilibrium, ______.

potential GDP and aggregate demand determine the price level, and the money wage rate adjusts so that the SAS curve intersects the LAS curve at the long-run equilibrium price level.

P10. A recessionary gap eventually emerges even if aggregate demand remains constant because over time​ ______.

potential GDP increases

P101. Economic growth is the persistent increase in​ ______. Economic growth is accompanied by inflation when the​ ______.

potential​ GDP; AD curve shifts rightward at a faster rate than the LAS curve shifts rightward

P9. An exchange rate is the​ _____ at which one currency exchanges for another in the foreign exchange market.

price

pt2. For 50​ years, Cuba has had a centrally planned economy in which government makes the big decisions on how resources will be allocated. We would expect​ Cuba's production possibilities​ (per person) to be smaller than those of the United States because Cuba​ _______. ​_______ is the social institution that helps the U.S. economy achieve allocative efficiency that Cuba might lack.

produces a greater proportion of consumption goods than capital​ goods, so its PPF does not shift outward as quickly as the PPF in the United States Property rights

hw2. Harry produces 9 balloon rides and 2 boat rides an hour. Harry could not produce more balloon rides without producing fewer boat rides. Harry is​ ______ his production possibilities frontier.

producing on

hw2. What kind of efficiency do we achieve when we produce goods and services at the lowest possible​ cost?

production

P12. According to RBC​ theory, the main source of economic fluctuations is a decrease in​ ______ The effect of this decrease is ______ in investment demand, ______ in the demand for loanable​ funds, and ______ in the real interest rate. The effect of this decrease is ______ in the demand for labor, ______ in the supply of labor, _____ in employment, and ______ in the real wage rate.

productivity growth decrease; decrease; decrease decrease; decrease; decrease; decrease

DSM3. At the market equilibrium price:

quantity demanded equals quantity supplied.

PT6. Convergence between real GDP per person in the United States and Japan was relatively​ ______ during the​ 1960s; convergence has recently been​ ______.

rapid; decreasing

P10. When​ _____ there is a​ full-employment equilibrium

real GDP equals potential GDP

hw4. The relationship between real GDP and potential GDP is that

real GDP fluctuates about potential GDP.

PT5. By measuring​ ______, we can see that the economy of Singapore has caught up to and surpassed the economy of the United​ States, but that the economies of Central and South America have not.

real GDP per person

P10. The table shows the aggregate demand and​ short-run aggregate supply schedules of Lizard Island in which potential GDP is​ $600 billion. Calculate the​ short-run equilibrium real GDP and price level. Does the country have an inflationary gap or a recessionary gap and what is its​ magnitude? The country has​ _____ gap and its magnitude is​ $ _____ billion. If aggregate demand increases by​ $50 billion, what is the new​ short-run macroeconomic equilibrium and the output​ gap? The economy has _______ gap.

real GDP: 575 price level: 110 recessionary; 25 real GDP: 600 price level: 120 no

P12. The main criticisms of RBC theory include all of the following except​ ______. Defenders of RBC theory claim all of the following except ​_______.

real business cycle theory relies too heavily the role of money in the economy to make its predictions RBC theory is consistent with a negligible intertemporal substitution effect

hw6. The demand for labor is the relationship between the quantity of labor demanded and the​ ______. The supply of labor is the relationship between the quantity of labor supplied and the​ ______. The quantity of labor demanded is the number of labor hours ___ during a given period. The quantity of labor supplied is the number of labor hours _____ during a given period. The ____ wage rate adjusts to bring the labor market to equilibrium.

real wage​ rate; real wage rate hired by all the firms in the economy that all the households in the economy plan to work real

P10. Aggregate demand is the relationship between the quantity of​ _____ demanded and the​ _____ when all other influences on expenditure plans remain the same.

real​ GDP; price level

P10. Short-run aggregate supply is the relationship between the quantity of​ _____ supplied and the​ _____ when the money wage​ rate, the prices of other​ resources, and potential GDP remain constant.

real​ GDP; price level

PT6. Between 1914 and​ 2014, the average growth rate of real GDP per person in the United States was 2 percent a year. During this​ period, ______ grew at a faster rate than​ ______.

real​ GDP; the population

DSM5. The history of hyperinflations includes __________.

recent events. Hyperinflations have occurred in recent times as well as the past

PT5. According to classical growth​ theory, when real GDP per person​ ______, the population grows.

rises above the subsistence level

P12. The table shows the aggregate demand and​ short-run aggregate supply schedules of Shell Island in which potential GDP is​ $600 billion. The economy is at​ full-employment. 1. An unexpected increase in exports increases aggregate demand by​ $50 billion. What happens to the price level and real​ GDP? Has Shell Island experienced inflation or deflation and what type of output gap does it now​ have? The price level​ _____ and real GDP​ _____ billion. Shell island has experienced​ _____ . 2. The price of oil falls unexpectedly and aggregate supply increases by​ $50 billion. What type of output gap​ appears? If the central bank responds to close the output​ gap, does Shell Island experience inflation or​ deflation? ​_____ gap appears and the central bank closes the output​ gap, aggregate demand​ _____ and a​ _____ is created. 3. The government of Shell Island announces an increase in spending of​ $50 billion a year and the central bank will increase the quantity of money to pay for the spending. Does the economy go into a​ boom? Will there be​ inflation? The economy​ _____ into a​ boom, real GDP​ _____ billion, and​ _____ arises.

rises to​ 130; increases to​ $625; a​ one-time change in the price level and has an inflationary gap An​ inflationary; decreases;​ cost-push deflation does not go; remains at $600; inflation

hw3. When a shortage​ arises, the price​ ______ to its​ equilibrium, which​ _______.

rises; decreases the quantity demanded and increases the quantity supplied

hw3. When the increase in demand is greater than the decrease in​ supply, the equilibrium price​ _____ and the equilibrium quantity​ _____. When the increase in demand is less than the decrease in​ supply, the equilibrium price​ _____ and the equilibrium quantity​ _____. When the increase in demand equals the decrease in​ supply, the equilibrium price​ _____ and the equilibrium quantity​ _____.

rises; increases rises; decreases ​rises; remains unchanged

pt3. A substitute in production is a good that is​ _____ another​ good, and a complement in production is a good that is​ _____ another good.

roduced in place​ of; produced together with

pt3. In​ 1998, the price of a barrel of oil was​ $20. In​ 2012, the price of a barrel of oil was​ $106. In​ 1998, the price of a loaf of bread was​ $0.86. In​ 2012, the price of a loaf of bread was​ $2.32. Between 1998 and​ 2012, the relative price of a barrel of oil with respect to a loaf of bread​ _______ and the relative price of a loaf of bread with respect to a barrel of oil​ _______.

rose; fell

T92. Suppose a country has a crawling peg exchange rate policy against the U.S. dollar and the equilibrium exchange rate in units of foreign currency per U.S. dollar is above the target rate. To keep the exchange rate pegged at its target​ level, the​ country's central bank must​ ______ U.S. dollars and​ ______ its foreign currency reserves.

sell; decrease

P9. The Fed​ "counters disorderly conditions in exchange​ markets" by doing all of the following except​ ______.

selling foreign​ reserves, which raises the U.S. exchange rate when the supply of dollars dramatically decreases

hw3. Each of the following cause either a shift of the supply curve left or right or a movement along the supply curve up or down. Identify the proper​ change, using the words​ "shift left,"​ "shift right,"​ "movement up," or​ "movement down."​ (No apostrophes in your​ answers.) A decrease in the price of a raw material of production. The price of a complement in production falls. The price of a good rises and other influences stay the same. The price of a good is expected to rise in the future. The number of suppliers of a good increases. Advances in technology lower the cost of producing existing products. The weather that year is particularly perfect for agriculture

shift right, shift left movement up shift left shift right shift right shift right

9. A recession in the United States will __________.

shift the supply curve of dollars to the left

PT6. An increase in labor productivity​ ______.

shifts the demand for labor curve rightward and the production function upward

PT6. An increase in the population​ ______.

shifts the supply of labor curve rightward and create a movement along the production function

hw6. An increase in the population​ ______.

shifts the supply of labor curve rightward and creates a movement along the production function

10. The long-run aggregate supply curve:

shifts to the right as technological change occurs

pt3. A supply curve that illustrates the law of supply​ _______.

shows that the quantity supplied increases as the price rises

PQ13. Senate Approves Obama Tax Cut Plan- A stimulus package centred around a​ one-time consumer tax rebate is likely to have a​ ______ supply-side effect because​ ______.

small; it does not change the tax wedge

DSM13 We would expect the tax multiplier to be __________ in absolute value than the government purchases multiplier.

smaller

DSM2. The principle of increasing opportunity cost states that the more resources devoted to any activity, the __________ the payoff to devoting additional resources to that activity.

smaller

P9. In June 2011​, the exchange rate was 0.69 euros per U.S. dollar. By June 2012​, the exchange rate had risen to 0.79 euros per U.S. dollar. Given the information​ above, for a given expected future exchange​ rate, the expected profit from holding U.S. dollars is ______ in June 2012 than June 2011

smaller

T122 In RBC​ theory, the lower the real interest​ rate, other things remaining the​ same, the​ ______ today.

smaller the supply of labor

PT5. Suppose that the number of jobs in the fishing industry decreases but the number of jobs in the travel industry increases.Suppose that the number of jobs in the fishing industry decreases but the number of jobs in the travel industry increases. Initially, ​______.

structural unemployment increases

hw4. Out of a Job and Out of Luck at 54- Older workers are more prone to experience​ ______ unemployment. During a​ recession, the unemployment rate of older workers​ ______. Choose the statement that is incorrect. Older unemployed workers might become marginally attached workers or discouraged workers during a recession because​ _______.

structural; increases given their long employment​ history, they are eligible for longer periods of unemployment benefits

hw3. ​If, as the price of a hot dog increases​, the quantity of hamburgers that people buy increases, then hot dogs and hamburgers are​ _______.

substitutes

DSM13. The government debt is best measured as the:

sum of past budget deficits minus the sum of past budget surpluses.

hw3. Suppose that there is a substantial fall in the price of apples. Apples are​ (obviously) the major ingredient in apple juice. As a result of this​ event, the market for apple juice changes in this​ way: ​ ________________.

supply increases and price falls

hw7. A government budget surplus​ occurs, which increases the ______ loanable funds. The real interest rate​ ______, household saving​ ______,

supply of ​falls; decreases and investment increases

pt3. In​ 2013, the price of corn fell and in 2014 some corn farmers will switch from growing corn to growing soybeans. This statement illustrates the law of​ _________because the fall in the price of corn results in​ _________. A corn farmer would grow soybean because​ _______.

supply; a decrease in the quantity of corn supplied soybean is a substitute in production for​ corn, and when the relative price of corn​ falls, farmers plant more soybeans

pt2. Economic growth is defined as the ​ _____ .

sustained expansion of production possibilities

PQ13. The relationship between the​ _____ is called the Laffer Curve.

tax rate and the amount of tax revenue collected

DSM13. Supply-side economics emphasizes the role that __________ play in the supply of output in the economy.

taxes

PQ13. The cyclical surplus or deficit is the budget balance that arises because​ _____ and​ _____ are​ _____ their​ full-employment levels.

tax​ revenues; outlays; not at

hw3. A supply curve​ _______.

tells us the lowest price at which someone is willing to sell

pt3. A supply curve​ _______.

tells us the lowest price at which someone is willing to sell

10. When the price​ level, the money wage​ rate, and other factor prices rise by the same​ percentage, there is a movement along​ ______. Potential GDP​ ______.

the LAS curve​; does not change

P102. When the price​ level, the money wage​ rate, and other factor prices rise by the same​ percentage, there is a movement along​ ______. Potential GDP​ ______.

the LAS curve​; does not change

P102. When the price level rises but the money wage rate and other factor prices remain the​ same, there is a movement along​ ______. The quantity of real GDP supplied​ ______.

the SAS curve; increases

P9. If a U.K. bank deposit earns 4 percent a year and a U.S. bank deposit earns 5 percent a​ year, then people expect that​ ______.

the U.S. dollar will depreciate by 1 percent a year

pt4. Exports of goods and services are items that firms in​ _____ produce and sell to​ _____.

the United​ States; any other country

hw5. The price level is​ ______.

the average level of​ prices, and the value of money

DSM4. The cycle of short-term ups and downs in the economy is called:

the business cycle

DSM8. The Federal Reserve System is __________.

the central bank of the United States

11. To calculate the​ multiplier, we divide​ ______ by​ ______.

the change in equilibrium​ expenditure; the change in autonomous expenditure

hw3. Events in the market for a particular good are such that the market​ (equilibrium) price and market​ (equilibrium) quantity of the good move opposite direction​ (i.e., price falls as quantity​ rises, ​ and\or price rises as quantity​ falls). It must therefore be true that​ _________.

the decisive event in the marketplace is a shifting supply curve

P9. In the short​ run, the nominal exchange rate is determined by​ ______. And in the short run​ ______.

the demand for U.S. dollars and the supply of U.S. dollars in the foreign exchange​ market; a change in the nominal exchange rate brings an equivalent change in the real exchange rate

pt2. Technological change is​ _____ new goods and of​ _____ of producing goods and services.

the development​ of; of better ways

DSM3. Given linear demand curves, if demand increases and supply decreases, then __________.

the equilibrium price will increase but the effect on the equilibrium quantity will be ambiguous

P9. The quantity of U.S. dollars demanded in the foreign exchange market depends on many​ factors, the main ones being​ ______.

the exchange​ rate, world demand for U.S.​ exports, interest rates in the United States and other​ countries, and the expected future exchange rate

hw6. Economic growth is​ _______. Growth rates are calculated in a similar manner for all variables. Real GDP growth rate​ = [(Real GDP in​ ______ yearminus−Real GDP in​ ______ ​year) divided by ÷Real GDP in​ ______ year ​] times ×100.

the expansion of production possibilities current; previous; previous

12. Along the​ short-run Phillips​ curve, ______.

the expected inflation rate and the natural unemployment rate are constant

PT5. All of the following statements are included in new growth theory except​ ______.

the forces of competition destroy incentives to make new discoveries.

T92. When there is a shortage of dollars in the foreign exchange​ market, ______.

the forces of supply and demand pull the foreign exchange market into equilibrium

T91. The demand for U.S. dollars changes when there is a change in any of the following except​ ______.

the foreign exchange rate

T91. The supply of U.S. dollars changes when there is a change in any of the following except​ ______.

the foreign exchange rate

9. The U.S. interest rate differential rises if​ ______, and the larger the U.S. interest rate​ differential, the​ ______ is the demand for U.S. dollars in the foreign exchange market.

the foreign interest rate​ falls; greater

10. In the long-run, the level of output is:

the full-employment level of output

pt1. Cost of Sochi Winter Olympics The opportunity cost of the Sochi Olympics is​ _______

the goods and services that would have been purchased with​ $23.4 billion if the infrastructure in Sochi was upgraded only because of the Olympics

hw1. The opportunity cost of any action is

the highest−valued alternative given up.

PT5. The fundamental precondition for labor productivity growth is​ _______.

the incentive system created by​ firms, markets, property​ rights, and money

hw8. One of the​ Fed's main policy tools is​ ______.

the last resort​ loan, which means that if a bank is short of​ reserves, it can borrow from the Fed

PQ13. Generational accounting is an accounting system that measures​ _____.

the lifetime tax burden and benefits of each generation

P121. If the natural unemployment rate increases and the expected inflation rate remains​ constant, then​ ______.

the long-run Phillips curve shifts rightward and the short-run Phillips curve shifts rightward.

pt1. You can stay in school or you can quit school and get a full-time job. You have an incentive to stay in school if​ ______.

the marginal benefit of staying in school is greater than the marginal cost of staying in school

hw2. Veronica has two bowls of soupbowls of soup for lunch. The marginal benefit that Veronica receives from the second bowl of soup is​ _______.

the maximum amount that she is willing to pay for the second bowl of soup

DSM8. If real GDP increases:

the money demand curve shifts to the right.

pt2. The relative price of a gallon of gasoline in terms of a pound of bananas is​ ______.

the money price of a gallon of gasoline divided by the money price of a pound of bananas

P12. All of the following events except an increase in​ ______ might cause a​ demand-pull inflation. Starting at point A​, the initial effect of a​ demand-pull inflation is a move to point​ ______. As a​ demand-pull inflation spiral​ proceeds, it follows the path​ ______.

the money wage rate C; E,​ H, I

T122. According to mainstream business cycle​ theory, _______.

the money wage rate is sticky and consequently if aggregate demand grows faster than potential​ GDP, an inflationary gap emerges

P101. As we move up along the​ short-run aggregate supply​ curve, ______.

the money wage rate, the price of other resources, and potential GDP remain constant.

10. As we move up along the​ short-run aggregate supply​ curve, ______.

the money wage​ rate, the prices of other​ resources, and potential GDP remain constant

T.122 When aggregate demand unexpectedly​ increases, ______.

the natural unemployment rate does not change

hw2. The table shows some of​ Brazil's production possibilities for ethanol and food crops. Marginal cost of a good is​ _______. When the quantity of food produced is 2.5 tons a​ day, the marginal cost of producing a ton of food is ____ barrels of ethanol.

the opportunity cost of producing one more unit of it 14

pt2. The table shows some of​ Brazil's production possibilities for ethanol and food crops. Marginal cost of a good is​ _______. Marginal benefit from a good or service is the benefit received from consuming​ ______. It is measured by the most that people are willing to pay for​ ______. Marginal benefit from food crops​ _______.

the opportunity cost of producing one more unit of it one more unit of​ it; an additional unit of it cannot be calculated from the table

DSM13 Many economists believe that tinkering with the economy via discretionary fiscal policy is not effective due to:

the presence of time lags.

PQ13. Fiscal imbalance is the present value of the​ government's commitments to pay benefits minus​ _____.

the present value of its tax revenues

PQ13. Increase in Payroll Taxes Needed for Social Security-Social Security faces a​ $5.3 trillion shortfall over the next 75​ years, but a congressional report says the massive gap could be erased by increasing payroll taxes paid by both employees and employers from 6.2 percent to 7.3 percent and by raising the retirement age to 70. Social Security is facing a​ $5.3 trillion shortfall over the next 75 years because​ ______. Increasing payroll taxes​ ______ government receipts and raising the retirement age to 70​ ______ government​ outlays, which would reduce the shortfall. The suggestions in the news clip _______ the generational imbalance.

the present value of the​ government's commitments to pay benefits exceeds the present value of its Social Security tax revenues ​increases; decreases change

PQ13. Under current​ policies, a plausible projection is that U.S. public debt will reach 250 percent of GDP in 30 years and nearly 500 percent in 50 years. A fiscal imbalance is​ ______. The U.S. government could reduce the fiscal imbalance by doing all of the following except ​_______. If the fiscal imbalance is reduced in a way that reduces benefits and hikes taxes that affect the current​ generation, the generational imbalance _____ change.

the present value of the​ government's commitments to pay benefits minus the present value of its tax revenues raising Social Security benefits will

hw8. An open market operation is​ ______.

the purchase or sale of securities by the Federal Reserve System in the loanable funds market

hw3. Suppose the price of a bag of chips is 60 cents. To return to​ equilibrium, ______.

the quantity demanded decreases and the quantity supplied increases

pt3. The equilibrium price is the price at which​ _____ and the equilibrium quantity is the​ _____.

the quantity demanded equals the quantity​ supplied; the quantity bought and sold at the equilibrium price

pt3. The quantity of bottled water that firms plan to sell this month depends on all of the following except​ _______ because​ ______.

the quantity of bottled water that consumers plan to buy this​ month; a change in the quantity of bottled water that consumers plan to buy this month changes the quantity supplied

P10. Inflation results when​ ______.

the quantity of money increases rapidly

P102. High inflation accompanies economic growth when​ ______.

the quantity of money increases rapidly

P121. A stagflation can turn into a​ cost-push inflation process when​ _______.

the quantity of money persistently increases

P102. When firms are unable to meet the demand for their​ output, _____. Prices​ _____.

the quantity of real GDP demanded is greater than the quantity of real GDP​ supplied; rise

P101. When unwanted inventories pile​ up, ​_____. Prices ​_____.

the quantity of real GDP supplied is greater than the quantity of real GDP demanded; fall

P101. With a rise in the money wage​ rate, ______.

the quantity that firms are willing to supply at every level decreases

pt2. The flows in the market economy that go from firms to households are​ _______. The flows in the market economy that go from households to firms are​ _______.

the real flows of goods and services and the income flows of​ wages, rent,​ interest, and​ profit; the real flows of​ labor, land,​ capital, and entrepreneurship and the flow of expenditure on goods and services

hw6. The two broad sources of potential GDP growth are growth of​ ______ and growth of​ ______.

the supply of​ labor; labor productivity

12. Along the​ long-run Phillips​ curve, _______.

the unemployment rate is constant at the natural unemployment rate

10. New classical theorists believe that:

the uneven pace of technological change is the most significant cause of business cycle fluctuations.

DSM4. Real GDP is __________.

the value of final goods and services produced in a given year when valued at the prices of a reference base year

DSM8. When the interest rate decreases, __________.

there is movement down a stationary money demand curve

DSM6. According to theory regarding labor productivity growth, workers will be more productive if __________.

they have more human capital

hw8. When the Fed buys securities from a​ bank, ______.

the​ bank's reserves increase but its deposits do not change

P9. The foreign exchange market is the market in which​ _____ of one country is exchanged for​ _____ of another.

the​ currency; the currency

hw7. ​G-20 Leaders Look to Shake off Lingering Economic Troubles-The​ "capital" referred to in the news clip is​ ______. The financial institutions that the​ G-20 might require to hold more capital are​ ______. The requirement to hold more capital can make financial institutions safer because by using more of its own funds and less borrowed​ funds, a financial institution​ ______.

the​ institutions' own​ funds; banks and insurance companies decreases its risk of insolvency

12. If the natural unemployment rate increases and the expected inflation rate remains​ constant, then​ ______.

the​ long-run Phillips curve shifts rightward and the​ short-run Phillips curve shifts rightward

12. If the expected inflation rate increases and the natural rate of unemployment remains​ constant, then​ _______.

the​ short-run Phillips curve shifts upward and the​ long-run Phillips curve does not shift

T92. A change in the expected future exchange rate changes the demand for U.S. dollars​ ______, and a change in the world demand for U.S. exports changes the demand for U.S. dollars​ ______.

today; today

P121. A movement​ ______ along the​ short-run Phillips curve occurs when there is an​ ______ increase in aggregate demand.

up; unexpected

PT5. The CPI basket consists of items that _____ households buy. The CPI places more weight on​ _______ than on​ _______.

urban transportation; medical care

pt2. Allocative efficiency is a situation in which the quantities of goods and services produced are those that people​ _____ - it is not possible to produce more of a good or service​ _____ some of another good that people​ _____.

value most​ highly; without giving​ up; value more highly

hw1. All economic questions arise because we

want more than we can get.

pt2. Allocative efficiency occurs when​ ______.

we are producing at a point on the PPF such that marginal benefit at the quantity produced equals marginal cost

hw1. The what​, how​, and for whom questions in economics are questions about​ ______.

what goods and services do we​ produce, how do we use the factors of production to produce these​ goods, and who consumes the goods and services that are produced

pt1. The what​, how​, and for whom questions in economics are questions about​ ______.

what goods and services do we​ produce, how do we use the factors of production to produce these​ goods, and who consumes the goods and services that are produced

pt 1. All of the following are consequences of scarcity faced by people in the United States except deciding​ _______.

whether a tomato is a fruit or a vegetable

P131. A country has been in existence for only two years. In the first​ year, receipts were​ $1.0 million and outlays were​ $1.5 million. In the second​ year, receipts were​ $1.5 million and outlays were​ $2.0 million. At the end of the second​ year, the government had issued debt worth​ ______.

​$1 million

P132. The figure shows the labor market when an income tax is imposed. The tax wedge is​ ______.

​$15 an hour

PQ13. If tax revenues are​ $3,650 billion and outlays are​ $3,400 billion, calculate the budget surplus. If tax revenues are​ $4,000 billion and outlays are​ $4,800 billion, calculate the budget deficit.

​$250 billion;​ $800 billion

pt1. Jim, a computer science ​student, buys two cups of coffee a​ day, which costs him ​$7.00. He decides to buy one more cup each day and his expenditure on coffee increases to ​$10.50. The marginal cost to Jim of a cup of coffee is​ _______.

​$3.50

hw6. Over the past 100​ years, the average growth rate of U.S. real GDP per person is 2 percent. Over the past 100​ years, growth was most rapid during the​ ______ and slowest during the​ ______.

​1960s; Great Depression

hw2. When Kim and Liam move from spending 30 minutes of each hour producing pies and 30 minutes producing cakes to specializing in the good in which they have a comparative​ advantage, the total gains from trade are​ ______ pies and​ ______ cakes. If they share the total gains​ equally, Kim gives Liam​ ______ and Liam gives Kim​ ______.

​30; 100 50​ cakes; 15 pies

hw1. Which of the following best defines capital as a factor of​ production?

​Instruments, machines, and buildings used in production.

P121.In​ ______ cycle​ theory, animal spirits are the main source of fluctuations in aggregate demand. In​ ______ cycle​ theory, fluctuations in both investment and consumption​ expenditure, driven by fluctuations in the growth rate of the quantity of​ money, are the main source of fluctuations in aggregate demand.

​Keynesian; monetarist

PQ13. The relationship between the tax rate and the amount of tax revenue collected is called the​ ______ curve. If the United States were on the​ "wrong" side of this​ curve, a decrease in the tax rate would​ ______ tax revenue.

​Laffer; increase

P10. Mexico trades with the United States. When the U.S. economy goes into a recession​, ​______. When Mexico increases the quantity of​ money, Mexico's aggregate demand​ ______. When the price level in Mexico falls, the quantity of real GDP increases

​Mexico's exports to the United States decrease​, ​Mexico's aggregate demand decreases​, and​ Mexico's AD curve shifts leftward increases and its AD curve shifts rightward

pt4. Classify each of the following items as a final good or service or an intermediate good or service and identify which is a component of consumption​ expenditure, investment, or government expenditure on goods and​ services: Item 1. Trucks bought by Fedex Item 2. The purchase of new computers for the office of Secretary of State Item 3. Banking services bought by a student Item 4. Fertilizer bought by a Florida tomato grower Item 1 is​ ______ and item 2 is​ ______.

​a final good that is an investment; a final good which is government expenditure a final good that is consumption expenditure​; an intermediate good

11. The multiplier is the amount by which the change in​ ______ expenditure is magnified or multiplied to determine the change in equilibrium expenditure and real GDP. For every dollar increase in​ ______ expenditure, the multiplier determines the increase in real GDP.

​autonomous; autonomous

P9. Arbitrage is the practice of seeking to profit by​ _____ in one market and​ _____ in another related market.

​buying; selling for a higher price

2. Production efficiency is a situation in which the economy is getting all that it can from its resources and​ _____ produce more of one good or service without producing​ _____ of something else.

​cannot; less

P9. The​ ______ account records receipts from exports of goods and services sold​ abroad, payments for imports of goods and services from​ abroad, and​ ______.

​current; net interest income paid abroad and net transfers

pt3. In January​ 2010, the price of gasoline was​ $2.70 a gallon. By spring​ 2010, the price had increased to​ $3.00 a gallon. Assume that there were no changes in average​ income, population, or any other influence on buying plans. Given the law of​ demand, you would expect the rise in the price of gasoline to​ ______ the quantity of gasoline demanded and​ ______ the demand for gasoline.

​decrease; not change

P10. A new Classical view is that business cycle fluctuations are the​ _____ responses of a​ well-functioning market economy that is bombarded by shocks that arise from the uneven pace of​ _____.

​efficient; technological change

pt3. ​"As fewer people buy computers​, the demand for Internet service will decrease and the price of Internet service will increase. The ]rise in the price of Internet serviceInternet service will increaseincrease the supply of Internet serviceInternet service​." This statement is​ ______ because​ ______.

​false; a decrease in demand for Internet serviceInternet service does not increaseincrease the price of Internet serviceInternet service and an increasean increase in the price of Internet serviceInternet service does not increaseincrease the supply of Internet service

T91. The law of demand for foreign exchange states that other things remaining the​ same, the​ ______ the exchange​ rate, the smaller is the​ ______ in the foreign exchange market.

​higher; quantity of U.S. dollars demanded

P9. Explain the effect of the Bank of​ Japan's announcement on the demand for and supply of U.S. dollars. The Bank of​ Japan's announcement would​ _____ the demand for U.S. dollars and​ _____ the supply of U.S. dollars on June 2.

​increase; decrease

P9. Explain the effect of the​ Fed's announcement on the demand for and supply of U.S. dollars. The demand for U.S. dollars would​ _____ and the supply of U.S. dollars would​ _____ on June 2.

​increase; decrease

9. If speculation like that made by Mr. Reddy becomes​ widespread, the demand for U.S. dollars will​ ______ and the supply of U.S. dollars will​ ______. The U.S. dollar exchange rate will

​increase; decrease rise

PQ13. Economy Needs Treatment-Since​ 2008, U.S. government debt has​ ______ because as a percentage of​ GDP, _______. A​ "credible business​ plan" for the government to adopt is a plan to​ ______.

​increased; outlays increased by more than receipts increased decrease government expenditure

pt3. Indian Weddings Boost Gold Price Hopes-During wedding​ season, the demand for gold​ ________ and the supply of gold​ _______. Expectations of a rising gold price during wedding season in India​ ______ the supply of gold and​ ______ the demand for gold prior to wedding season. When the wedding season​ begins, the price rises by less than it would have done if the wedding season was a surprise.

​increases; does not change ​decrease; increase True

P10. The fall in the average weekly wage rate​ ______ short-run aggregate supply and​ ______ long-run aggregate supply. The fall in the minimum wage​ ______ short-run aggregate supply and​ ______ long-run aggregate supply.

​increases; does not change increases; increases

hw2. With this new​ technology, the opportunity cost of producing a ton of salmon ​______ and the fish farmfish farm is​ ______ efficient.

​increases; equally

P10. Treasury Secretary Timothy Geithner is reported as having said that the United States can no longer rely on consumer spending to be the growth engine of recovery from recession. Washington needs to plant the seeds for business investment and exports.​ "We can't go back to a situation where​ we're depending on a near​ short-term boost in consumption to carry us​ forward," he said. In the short​ run, an increase in consumer spending​ ______ real GDP and​ ______ the price level. In the short​ run, an increase in business investment​ ______ real GDP and​ ______ the price level. In the short​ run, an increase in exports​ ______ real GDP and​ ______ the price level.

​increases; increases increases; increases ​increases; increases

PT6. An increase in the population​ ______ the equilibrium quantity of​ labor, ______ and potential GDP. An increase in the population _______ the real wage rate.

​increases; increases lowers

P10. The increase in the personal consumption expenditures​ ______ aggregate demand. The increase in exports​ ______ aggregate demand. The increase in investment​ ______ aggregate demand. The decrease in government spending​ _______ aggregate demand.

​increases; increases ​increases; decreases

P10. If the price level rises and the money wage rate remains​ constant, the quantity of real GDP supplied​ ______ and there is a movement up along the​ ______ aggregate supply curve.

​increases; short-run

pt1. Factors of production are grouped into four​ categories, which are​ _______. ​______ is an example of​ ______.

​land, labor,​ capital, and entrepreneurship Upper A telephone system; capital

pt1. Rent is the income paid for the use of ​_____. Wages are income paid for the services of​ _____. Profit ​(or loss) is the​ _____ earned by an entrepreneur for running a business. Interest is the income paid for the use of​ _____.

​land; ​labor; ​income; capital

P12. The new Keynesian cycle theory emphasizes the fact that​ today's money wage rates were negotiated at many past​ dates, which means that​ _____ rational expectations of the​ _____ price level influence the money wage rate and the position of the SAS curve.

​past; current

P10. A Keynesian macroeconomist believes that left​ alone, the economy would​ _____ operate at full employment and that to achieve and maintain full​ employment, active help from fiscal policy and monetary policy is required. A modern version of the Keynesian​ view, known as the new Keynesian​ view, holds not only that the money wage rate is​ _____ but also that prices of goods and services are​ _____.

​rarely; ​sticky; sticky

PQ13. Do Tax Cuts Ever Increase Government​ Revenues?-Republican politicians insist that tax cuts​ "pay for​ themselves," increasing receipts by goosing economic growth. Democrats and virtually all economists say​ they're wrong. A tax cut pays for itself if the economy lies to the​ ______ of the maximum point on the Laffer curve. This statement implies that the absolute value of the tax multiplier is​ ______. Tax cuts will not pay for themselves if​ ______.

​right; greater than 1 the economy lies to the left of the maximum point on the Laffer curve

hw8. When the interest rate rises​, other things remaining the​ same, the opportunity cost of holding money​ ______ and​ ______.

​rises; the quantity of money demanded decreases

hw3. In​ 1998, the price of a barrel of oil was​ $20. In​ 2012, the price of a barrel of oil was​ $106. In​ 1998, the price of a loaf of bread was​ $0.86. In​ 2012, the price of a loaf of bread was​ $2.32. Between 1998 and​ 2012, the relative price of a barrel of oil with respect to a loaf of bread​ _______ and the relative price of a loaf of bread with respect to a barrel of oil​ _______.

​rose; fell

P101. The business cycle is actually a continuous series of different​ ______.

​short-run macroeconomic equilibriums

P131. When a tax is applied to labor​ income, the result is a​ ______ full-employment quantity of labor and a​ ______ potential GDP.

​smaller; lower

PQ13. The effect of tax cuts depends on who receives the tax cuts because the greater the amount of disposable income that is​ ______ the greater is the increase in​ ______.

​spent; aggregate demand

hw3. Coal and oil are​ ______. A skateboard and an iPod are​ ______. A cellphone and a phone call are​ ______. A text message and an email are​ ______. Pasta and pizza are​ ______. A video game and a laptop are​ ______. Pizza and sausage are​ ______. Wheat and rye are​ ______.

​substitutes; complements ​complements; substitutes ​substitutes; complements ​complements; substitutes

DSM5. Which one of these groups is most hurt by unanticipated inflation?

Wealthy people who hold cash in their wall safes

PT8. In an​ economy, there is ​$175 million in currency held outside​ banks, ​$75 million in​ traveler's checks, ​$225 million in currency held inside the​ banks, ​$100 million in checking​ deposits, ​$400400 million in savings​ deposits, ​$2 comma 0002,000 million in time​ deposits, and ​$1 comma 0001,000 million in money market mutual funds and other deposits. The value of M1 is​ ______ and the value of M2 is​ ______.

$350 million, $3750 million

P9. The U.K. pound is trading at 1.50 U.S. dollars per U.K. pound. There is purchasing power parity at this exchange rate. The interest rate in the United States is 1 percent a year and the interest rate in the United Kingdom is 1.5 percent a year. What is the U.S. interest rate​ differential? What is the U.K. pound expected to be worth in terms of U.S. dollars one year from​ now? The U.S. interest rate differential is ______ percent. A year from​ now, the U.K. pound is expected to _____ Which country more likely has the lower inflation​ rate?

-0.5 depreciate by .5 percent United States

DSM7. If the inflation rate is 6 percent and the nominal rate of interest is 4 percent, then the real interest rate is __________.

-2 percent

DSM6. During the past decade, a nation's average annual rate of population growth was 4 percent, and its average annual real GDP growth rate was 1 percent. Thus, the average annual rate of growth in per capita real GDP was __________.

-3.0 percent

pt3. Which of the following is an example of absolute advantage​?

. Tom does his math homework in 2 hours while Harry takes only 30 minutes to do the same task.

William Gregg owned a mill in South Carolina. In December​ 1862, he placed a notice in the Edgehill Advertiser announcing his willingness to exchange cloth for food and other items. Here is an​ extract: 1 yard of cloth for 1 pound of bacon 2 yards of cloth for 1 pound of butter 4 yards of cloth for 1 pound of wool 8 yards of cloth for 1 bushel of salt Calculate the relative price of 1 pound of butter in terms of bushels of salt. If the price of butterbutter is ​$0.30 a​ pound, what do you predict is the money price of a pound of wool​? The relative price of 1 pound of butter is ___ bushels of salt. If the price of butterbutter is ​$0.30 a​ pound, you would predict that the price of a pound of wool is ​____. If the money price of bacon was 20cents¢ a pound and the money price of salt was​ $2.00 a​ bushel, people​ _____ buy bacon and trade it for cloth because​ ______.

0.25 $0.60 ​would; they could buy 8 yards of cloth for only​ $1.60, and use that cloth to obtain a bushel of salt

pt3. In one​ hour, Sue can produce 60 caps or 18 jackets and Tessa can produce 60 caps or 24 jackets. ​Sue's opportunity cost of producing a cap is​ ______ jackets and​ Tessa's opportunity cost of producing a cap is​ ______ jackets. ​______ has a comparative advantage in producing caps. If Sue and Tessa each specialize in producing the good in which they have a comparative advantage and trade 1 jacket for 3 ​caps, ______.

0.3; 0.40 Sue​; both Sue and Tessa gain

hw1. The night before a midterm​ exam, you decide to go to the movies instead of studying for the exam. You score 60 percent on your exam. If you had studied the night​ before, you'd have scored 70 percent. What was the opportunity cost of your evening at the​ movies?

10 percent off your grade.

P9. The U.S. dollar exchange rate increased from ​$0.96 Canadian in June 2011 to ​$1.031.03 Canadian in June 2012​, and it decreased from 81 Japanese yenJapanese yen in June 2011 to 78 Japanese yen in June 2012. In June 2011​, the value of the Canadian dollar was $_____ US In June 2012​, the value of the Canadian dollar was $ _____ US The Canadian dollar ________ against the U.S. dollar between June 2011 and June 2012.

1.04 0.97 Depreciated

hw2. The table below shows the maximum output of wine and cloth that England and Portugal can produce under constant cost conditions. WINE CLOTH ENGLAND 150 140 PORTUGAL 110 70 What is the lowest possible price England will sell cloth​ for? ​(Answer to two places after the​ decimal.) What is the highest possible price Portugal will pay for​ cloth?

1.07 1.57

T91. Item Billions of dimes Imports of goods and services 200 Exports of goods and services 300 Foreign investment in Nickleodeon 310 ​Nickleodeon's investment abroad 450 DecreaseDecrease in official holdings of foreign currency 40 The table shows the only international transactions that the citizens of​ Nickleodeon, whose currency is the​ dime, conducted in 2010. What is​ Nickleodeon's current account​ balance, capital and financial account​ balance, and official settlements account​ balance?

100 -140 40

PT5. Labor Market Data Working-age population 212.6 million Labor force 142.6 million Unemployed 5.7 million The table gives information about the U.S. labor market in 2000. What is the number of people employed​? The number of people employed is ____ million.

136.9

pt3. If the money price of a cup of coffee is​ $1 and the money price of gum is 50 cents per​ pack, then the relative price of a cup of coffee in terms of a pack of gum is​ _____.

2

P112. In an economy without taxes and​ imports, an increase in investment of​ $50 billion increases equilibrium expenditure by ​$125 billion. What are the values of the multiplier and the slope of the AE​ curve?

2.5 0.6

T111. An economy has a consumption function of C​ = 15​ + 0.7Y​, investment of​ 8, government expenditure of​ 12, exports of​ 20, and an import function of M​ = 0.2Y. If government expenditure increases by​ 10, what is the increase in equilibrium​ expenditure?

20

T112. The marginal propensity to consume is​ 0.8, the marginal tax rate is​ 0.20, and the marginal propensity to import is 0.14. The government increases government expenditure and autonomous taxes each by​ $50 billion. What is the resulting change in equilibrium​ expenditure?

20

PT8. Suppose that potential GDP and the velocity of circulation are constant. What is the change in the price level in the long run if the quantity of money increases by 3 percent a​ year? If the quantity of money increases by 3 percent a​ year, in the long run the change in the price level is __ percent a year.

3

PT5. In 2013 and in​ 2014, consumers in Dexter consumed only books and pens. Books $3 5 $7 6 Pens $8 4 $7 9 The prices and quantities for 2013 and 2014 are listed in the table. The reference base period for​ Dexter's CPI is​ 2013, and 2013 is also the year of the Consumer Expenditure Survey. The inflation rate in 2014 is​ ______ percent.

34.0

hw3. The money price of a box of ramen noodles is ​$0.20 and the money price of a tube of toothpaste is ​$0.80. The opportunity cost of a tube of toothpaste is​ _______. The relative price of a tube of toothpaste is an opportunity cost because​ ______.

4.00 boxes of ramen noodles​, which is the relative price of a tube of toothpaste the relative price tells us how many boxes of ramen noodles we must give up to get a tube of toothpaste

pt1.Rowanplays softball three nights a week and her current grade in economics is 60 percent. She decides to play softball for four nights each week and her economics grade falls to 55 percent. The marginal cost to Rowan of playing softball one more night each week is​ _______.

5 percentage points

PT6. Year Real GDP ​ (trillions of dollars​) Population ​(billions) 2007 30,000 150 2008 32,240 155 The table provides some data on real GDP and the population of Pacifica in 2007 and 2008. What is the growth rate of real GDP in Pacifica in 2008​? What is the growth rate of real GDP per person in Pacifica in 2008​? The growth rate of real GDP in PacificaPacifica in 2008 is ____ percent. The growth rate of real GDP per person in Pacifica in 2008 is ___ percent.

7 5

12. In the real business cycle model, which of these best explains an increase in real GDP above the full-employment level?

A positive technology shock

DSM13 Which of these fiscal policy actions will increase real GDP in the short run?

An increase in government expenditures

12. Choose the statement about the​ long-run Phillips curve that is incorrect.

An unexpected increase in aggregate demand shifts the​ long-run Phillips curve rightward.

T122. Choose the statement about the​ long-run Phillips curve that is incorrect.

An unexpected increase in aggregate demand shifts the​ long-run Phillips curve rightward.

PT5. Choose the statement that is incorrect.

An unexpected inflation or deflation has no effect on the economy.

hw4. ​______ good is an item that is bought by its final user during a specified time period. ​______ good is an item that is produced by one​ firm, bought by another​ firm, and used as a component of a final good or service.

A​ final; An intermediate

hw2. Choose the correct statements. a. Opportunity cost of a good is the increase in the quantity produced of one good divided by the decrease in the quantityOpportunity cost of a good is the increase in the quantity produced of one good divided by the decrease in the quantity produced of another good as we move along the PPF .produced of another good as we move along the PPF. nothing b. The opportunity cost of an action is the highest dash valued alternative forgone.The opportunity cost of an action is the highest-valued alternative forgone. nothing nothing c. Opportunity cost of a good is the decrease in the quantity produced of one good divided by the increase in the quantityOpportunity cost of a good is the decrease in the quantity produced of one good divided by the increase in the quantity produced of another good as we move along the PPF .produced of another good as we move along the PPF. nothing d. There is no relationship between the opportunity cost of producing an additional good measured on the x dash axis andThere is no relationship between the opportunity cost of producing an additional good measured on the x-axis and the opportunity cost of producing an additional good measured on the y dash axis.the opportunity cost of producing an additional good measured on the y-axis.

B and C

P132. Choose the statement about U.S. international debt that is incorrect.

Borrowing from the rest of the world as a source of loanable funds decreased during the late 1990s and 2000s

PQ13. Choose the correct statements. a. The purpose of the American Recovery and Reinvestment Act of 2009 was to lower interest rates and increase b. The increase in total unemployment benefits triggered by the massive rise in the unemployment rate through 2009 is an example of discretionary fiscal policy. c. A fiscal policy action initiated by an act of Congress is called discretionary fiscal policy. d. Fiscal stimulus is the use of fiscal policy to increase production and employment.

C and D

hw1. What kind of economic system relies on private ownership of​ resources, direct incentives and decisions made via markets and the price​ mechanism?

Capitalism

hw8. What is the largest component of​ M1? What is the largest component of​ M2?

Checkable deposits Savings deposits

pt2. A country produces only pencils and erasers. Pencil production is efficient if the marginal​ _______ a pencil equals the marginal​ _______.

benefit​ from; cost of a pencil

pt3. Which of the following is an example of comparative advantage​?

Dave makes 4 pizzas giving up 6 jars of milk shakes while Rob makes 2 pizzas giving up 4 jars of milk shakes.

hw8. Choose the correct statement.

Deposits are​ money, checks are not​ money, and credit cards are not money.

DSM13. Every time the federal government runs a budget deficit, the government must:

borrow, which adds to the government debt.

PQ13. The President submits a budget proposal to Congress in​ ______. After this​ date, Congress​ debates, amends, and enacts the budget until​ ______. Fiscal 2015 begins on​ ______ and supplementary budget laws for 2015 may be passed until fiscal 2015 ends on​ ______.

February​ 2014; October 1, 2015 October​ 1, 2014; September​ 30, 2015

pt3. Which of the following statements describes a change in the quantity supplied and which describes a change in supply​? I Farms are selling less chicken because the price of turkey has increased. II Farms are selling less chicken because the price of chicken has fallen. III Farms are selling more chicken because the price of chicken has risen. IV Farms are selling more chicken because the cost of chicken feed has fallen.

I and IV are changes in supply and II and III are changes in the quantity supplied.

pt3. Which of the following statements is about a normal good​, which is about an inferior good​, which is about​ both, and which is about​ neither? I With incomes falling in the​ recession, people are buying more chicken. II People are buying more beef now that incomes have increased. III People are buying more chicken because the price of chicken has fallen. IV With higher incomes people are switching from chicken to beef.

I is​ inferior, II is​ normal, III is​ neither, and IV is both

DSM3. Assume the cost of aluminum used by soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft drinks? I. The demand for soft drinks decreases. II. The quantity of soft drinks demanded decreases. III. The supply of soft drinks decreases. IV. The quantity of soft drinks supplied decreases.

II and III

DSM7. Which of these statements about interest rates and inflation is true?

If there is zero inflation, the nominal interest rate is equal to the real interest rate.

12. Choose the statement that is incorrect.

In a​ deflation, the inflation rate is positive but decreasing in consequent years.

P11. An economy has a fixed price​ level, no​ imports, and no income taxes. MPC is 0.8​, and real GDP is ​$250 billion. Businesses increase investment by ​$10 billion. Calculate the multiplier and the change in real GDP.

Multiplier: 5 Change in Real GDP: 50 billion

pt4. Which of the following is an example of consumption expenditure​?

Rachel buying a TV.

12. According to the ____ theory of business cycles, a change in the monetary growth rate has no effect on real GDP.

Real Business Cycle

PQ13. The source of the fiscal imbalance is​ ______. To meet its​ obligations, the federal government must consider four​ alternatives: ___income taxes. ___Social Security taxes. ____ Social Security benefits. ____ federal government discretionary spending.

Social Security pensions and Medicare benefits Raise Raise Cut Cut

hw2. Choose the correct statements. 1. We measure the marginal benefit from a good or service by the most that people are willing to pay for an additional unit of it. 2. The marginal benefit from a good or service is the benefit received from consuming one more unit of it. 3. We measure the marginal benefit from a good or service by the least that people are willing to pay for all the units they consume. 4. We measure the marginal benefit from a good or service by the most that people are willing to pay for all the units they consume.

Statements 1 and 2 are correct.

hw2. Choose the correct statements. a. Opportunity cost of a good is the increase in the quantity produced of one good divided by the decrease in the quantity b. The opportunity cost of an action is the highest dash valued alternative forgone. c. Opportunity cost of a good is the decrease in the quantity produced of one good divided by the increase in the quantity d. Opportunity cost of a good cannot be accurately measured along a PPF because the PPF shows only two goods.

Statements b and c are correct.

DSM6. Which of these factors contributes to economic growth?

Technological progress

DSM2. In his 1776 book, "An Inquiry into the Nature and Causes of the Wealth of Nations," Adam Smith notes that specialization increases productivity. Which of the following was the cause of this phenomenon?

The division of labor

hw8. Suppose that Sara withdraws​ $1,000 from her savings account at the Lucky​ S&L, keeps​ $50 in​ cash, and deposits the balance in her checking account at the Bank of Illinois. The immediate change is​ ______ in M1 of​ $1,000 and​ ______ in M2.

an​ increase; no change

DSM7. The real interest rate is:

The nominal interest rate minus the inflation rate.

pt3. Dairies make​ low-fat milk from​ full-cream milk. In the process of making​ low-fat milk, the dairies produce​ cream, which is made into ice cream. In the market for​ low-fat milk, which of the following events illustrates the law of​ supply?

The price of​ low-fat milk rises.

hw6. Choose the statement about an increase in the population that is incorrect.

The production function shifts upward.

DSM7. Which of these determines the supply of loanable funds?

The willingness of households and governments to save

PQ13. Choose the statement that is incorrect. The _____ the interest​ rate, the greater is the present value of a given future amount.

There is no uncertainty about which interest rate to use to calculate the present value of the​ government's debts to older Americans in the form of pensions and medical benefits. lower

DSM5. Which of these are included in the labor force?

Those who are employed and those who are unemployed

DSM8. Velocity of circulation is defined as __________.

V = (P x Y) / M

10. If an economy is at a​ full-employment equilibrium and a decrease in consumption expenditure​ occurs, the new​ short-run equilibrium is​ _____ and​ _____ gap emerges.

a below​ full-employment equilibrium; a recessionary

pt4. Classify each of the following items as a final good or an intermediate​ good, and identify which is a component of consumption​ expenditure, investment, or government expenditure on goods and​ services: Item 1. A new apartment building Item 2. A new battle ship bought by the U.S. navy Item 3. A Starbuck's grande mocha frappuccino bought by a student Item 4. Coffee beans bought by Starbucks Item 1 is​ ______ and item 2 is​ ______. Item 3 is​ ______ and item 4 is​ ______.

a final good that is investment​; a final good which is government expenditure a final good that is consumption expenditure​; an intermediate good

hw6. The effect of the United States returning millions of workers to their countries of origin is​ _____ the U.S. PF and​ _____ in potential GDP.

a movement down​ along; a decrease

hw5. Classify each of the following into the appropriate category of unemployment. Your choices​ are: Frictional Cyclical Structural Seasonal Not unemployed a. An unemployed auto assembly line worker during a sales slump. b. A snow plow driver during the summer. c. A record player repairman who has not learned the latest laser disk player repair technology. d. A computer programmer who quits his job to look for a job with better benefits. e. A high school dropout with few skills who has been looking for a job unsuccessfully for weeks. f. A person who leaves their job to attend graduate school full time. g. A recent business school graduate looking for her first job. h. A person whose job has been automated out of existence. i. A vendor who sells beer at major league baseball games during the winter months. j. A welder who finds that robots have replaced most of the welding jobs on assembly lines. k. A top salesman for a computer company who quit because he did not like his boss. l. A parent who quit to care for his or her child at home. This person has removed themself from the labor force

a. Cyclical b. Seasonal c. Structural d. Frictional e. Structural f. Not unemployed g. Frictional h. Structural i. Seasonal j. Structural k. Frictional l. Not unemployed

PT5. In the United​ States, the CPI basket consists of items that​ ______ . ​______ has the greatest weight in the CPI basket.

an average urban household​ buys; Housing

10. At arrow​ 2, the economy is in​ ______ full-employment equilibrium and the intersection of the AD and SAS curves is to the​ ______ of the LAS curve.

an​ above; right

P11. The multiplier is the amount by which the change in​ ______ expenditure is magnified or multiplied to determine the change in equilibrium expenditure and real GDP. For every dollar increase in​ ______ expenditure, the multiplier determines the increase in real GDP. The multiplier matters because we can use it to determine by how much we should change autonomous expenditure to​ ______.

autonomous; autonomous increase real GDP by a given amount

P11. A multiplier is the amount by which a change in any component of​ _____ is magnified or multiplied to determine the change in​ _____ and​ _____ that it generates.

autonomous​ expenditure; equilibrium​ expenditure; real GDP

PT5. The reference base period for the CPI is​ 1982-1984. In January ​2014, the CPI was 233.9. This number tells us that the​ ______ of the prices paid by urban consumers for a fixed basket of consumer goods and services was​ ______ .

average; 133.9 percent higher in January 2014 than in the average of 1982-1984.

PQ13. In​ 2015, the federal budget has projected​ _______.

a​ $644 billion budget deficit

P102. A business cycle can be described by the following​ sequence: ​______ equilibrium,​ ______ equilibrium,​ ______ equilibrium.

below​ full-employment; full-employment; above​ full-employment

hw3. The price of food increased during the past year. The law of demand applies to food because when the price of food​ rises, there is​ ______. The substitution effect influences food purchases because when the price of a certain food​ rises, other things remaining the​ same, ______. Consumers​ ______. The income effect influences food purchases because when the price of a certain food​ rises, other things remaining the​ same, ______. Consumers​ ______.

both a substitution effect and an income effect its relative price​ rises; purchase more of a different food that is less expensive the price rises relative to​ income; cannot afford to buy all the things they previously​ bought, so they normally buy less of the food that has experienced the price rise

DSM3. Market price is determined by _________.

both supply and demand

P9. These events that resulted in this change in the value of the U.S. dollar changed​ _______.

both the demand for dollars and the supply of dollars

T92. Suppose the exchange rate is 90 yen per U.S. dollar and the United States wants to keep the exchange rate at a target rate of 90 yen per U.S. dollar. If the demand for U.S. dollars decreases​, the Fed​ ______.

buys dollars to raise the exchange rate

pt1. Which of the following pairs does not​ match?

capital; wages

DSM7. An increase in the real interest rate will:

cause a movement along the demand curve for loanable funds

PT8. Depository institutions provide four​ benefits, which are​ ______.

creating liquidity, lowering the cost of borrowing, lowering the cost of monitoring borrowers, and pooling​ risk.

P9. A rise in the expected future exchange rate​ ______ the supply of U.S. dollars. An increase in the world demand for U.S. exports​ ______ the supply of U.S. dollars.

decreases; does not change

pt3. Dairies make​ low-fat milk from​ full-cream milk. In the process of making​ low-fat milk, the dairies produce​ cream, which is made into ice cream. A rise in the wage rate of dairy workers​ ______ the supply of​ low-fat milk. A rise in the price of cream​ ______ the supply of​ low-fat milk. A rise in the price of​ low-fat milk _______ the supply of​ low-fat milk. With the period of low rainfall​ extending, dairies raise their expected price of​ low-fat milk next year. The supply of​ low-fat milk​ ______ today. With advice from​ health-care experts, dairy farmers decide to switch from producing​ full-cream milk to growing vegetables. The supply of​ low-fat milk​ ______. A new technology lowers the cost of producing ice cream. The supply of​ low-fat milk _____ .

decreases; increases does not change does not change; decreases increases

P10. Chinese Premier Wen Jiabao has warned Japan that its companies operating in China should raise the pay for their workers. A rise in wages in China​ _______ aggregate supply.

decreases​ China's short-run

hw4. Real GDP​ ______.

does not include a measure of leisure time or environmental quality

P12. The table shows the aggregate demand and​ short-run aggregate supply schedules of Shell Island in which potential GDP is​ $600 billion. The economy is at​ full-employment. The government of Shell Island announces an increase in spending of​ $50 billion a year and the central bank will increase the quantity of money to pay for the spending. Does the economy go into a​ boom? Will there be​ inflation? The economy​ _____ into a​ boom, real GDP​ _____ billion, and​ _____ arises.

does not​ go; remains at​ $600; inflation

hw6. The Rule of 70 states that the number of years it takes for the level of any variable to​ ______ is approximately​ ______. If real GDP per person doubles in 20​ years, then the annual growth rate of real GDP per person is​ ______ percent a year.

double; 70 divided by the annual percentage growth rate of the variable 3.5

hw3. ​Consumers' actions indicate that airline tickets and hotel rooms are complements. Suppose that for some reason the price that airline companies pay to buy airplane fuel falls. As a result​ --- assuming all other relevant factors remain unchanged​ --- the price of airline tickets​ _____________, and the price of hotel rooms​ _______________.

falls; rises

9. A __________ is one where the government or central bank determines their exchange rate by intervening in the foreign exchange market.

fixed exchange rate

9. A __________ is where a government or central bank intervenes in currency exchange markets and buy or sell currency in order to keep an exchange rate fixed or on a determined path.

fixed exchange rate or a crawling peg

P9. The official settlements account records the change in U.S. official​ reserves, which are the​ government's holdings of​ ______. If U.S. official reserves decrease​, the official settlements account balance is​ ______.

foreign currency; positive.

pt2. In​ 1969, the production possibilities per person in the United States were more than​ ______ times those in Hong Kong. The United States devoted​ ______ of its resources to accumulating capital and the remainder to consumption. Hong Kong devoted​ ______ of its resources to accumulating capital and the remainder to consumption. Hong​ Kong's production possibilities have ________ than the United States.

four one fifth; one third expanded more quickly than

hw5. Governor Plans to Boost Economy with Ecofriendly Jobs-The main type of unemployment that Governor Kulongoski is using policies to avoid is​ ______. If these policies are​ successful, we would expect to see​ Oregon's natural unemployment rate​ ______.

frictional and structural fall

DSM5. The short-term unemployment that arises from workers, in the process of changing jobs, is called __________.

frictional unemployment

DSM7. The financial capital markets exist in order to __________.

funnel household savings to firms

pt1. The benefit of something is the​ _____. Benefit is determined by preferences​ - by what a person​ _____ and the intensity of those feelings.

gain or pleasure it​ brings; likes and dislikes

P132. An accounting system that measures the lifetime tax burden and benefits of each generation is called​ ______.

generational accounting

PT6. The fundamental source of labor productivity growth is​ ______.

human capital

DSM5. Unanticipated deflation __________.

hurts borrowers

T122. Unanticipated deflation does all of the following except​ _______.

increase the velocity of circulation

DSM13 Budget deficits automatically __________ during recessions and __________ during expansions.

increase, decrease

PQ13. The economy is at full​ employment, the inflation rate is 2 percent a​ year, and the federal budget deficit is 3.5 percent of GDP. Congress wants to make real GDP grow faster and is debating whether to spend more on infrastructure or to cut income taxes. 1a. What would be the​ short-run effects of new government infrastructure​ expenditure? In the short​ run, new infrastructure expenditure will increase the government budget​ deficit, which​ will_____ the real interest rate and​ _____ private investment. 1b. What would be the​ short-run effects of new infrastructure​ expenditure? In the short​ run, new infrastructure expenditure will ​ _____ aggregate demand and with no change in aggregate supply will create​ _____ gap. 2. What would be the​ long-run effects of new government infrastructure​ expenditure? The​ long-run effects of new infrastructure expenditure are a​ _____ rate and​ _____ in potential GDP. 3. How would lower income taxes change the macroeconomic​ variables? Lower income taxes​ _____ equilibrium employment and​ _____ potential GDP. 4. Which policy would increase the economic growth​ rate? A​ _____ will increase investment​ income, which will increase the rate of capital accumulation and increase the economic growth rate.

increase; decrease some ​increase; an inflationary rise in the money​ wage; an increase increases; increases lower tax rate on interest income

PQ13. Fiscal Policy Priorities In​ 2008, the Obama administration proposed the following fiscal policy​ actions: ​(1) Increased spending on universal health insurance​ ($65 billion), alternative energy​ ($15 billion), help for homeowners​ ($20 billion), infrastructure​ ($60 billion), a scheme to pay college tuition in exchange for public service​ ($10 billion), and many other projects. ​(2) End​ Bush-era tax cuts on families with incomes greater than​ $250,000, increase payroll taxes on​ high-income earners, increase the tax rate on capital gains to 25​ percent, increase the tax on​ dividends, and end arrangements that enable corporations to lower their taxes. ​ Expenditure on alternative energy and the​ nation's infrastructure​ ______ short-run aggregate supply and​ ______ potential GDP Ending the Bush tax cuts​ ______ short-run aggregate supply and​ ______ potential GDP. Expenditure on college tuition​ ______ short-run aggregate supply and ​ ______ potential GDP. Increasing taxes on business and investment​ ______ short-run aggregate supply and​ ______ potential GDP.

increases; increases; decreases; decreases increases; increases decreases; decreases

DSM6. The only way that the standard of living of the average person in a country can increase is by:

increasing production faster than population growth

P12. Deflation can be ended by​ _______.

increasing the growth rate of the quantity of money

T122. When costs increase and the Fed wants to return the economy to full​ employment, the Fed responds by​ ______ the quantity of money. If the Fed continually responds to successive increases in​ costs, a​ ______ inflation evolves.

increasing; cost-push

P12. The ​short-run phillips curve is a curve that shows the relationship between the​ _____ rate and​ _____ when​ _____ and the​ _____ remain constant.

inflation; the unemployment​ rate; the natural unemployment​ rate; expected inflation rate

hw8. In the short​ run, the quantity of real money and real GDP are given and the​ ______ adjusts to achieve equilibrium. In the long​ run, supply and demand in the loanable funds market determines the​ ______. In the long​ run, _______ adjusts to make the quantity of real money supplied equal the quantity demanded.

interest​ rate; real interest rate the price level

hw6. The fundamental precondition for labor productivity growth is the incentive system created by all of the following except​ ______.

population growth

pt1. Indicate whether each of the following news items is a positive or a normative statement. 1. An increase in the gas tax will decrease urban 2. MP 3 file sharing should be illegal 3. The poor pay too much for housing 4. A ban on smoking will lower the Medicare budget. Statement 1 is a​ ______ statement, and statement 2 is a​ ______ statement. Statement 3 is a​ ______ statement, and statement 4 is a​ ______ statement.

positive; normative normative; positive

P121. According to mainstream business cycle​ theory, ______ grows at a steady rate and​ ______ grows at a fluctuating rate.

potential​ GDP; aggregate demand

P12. The combination of a rising​ _____ and decreasing​ _____ is called stagflation.

price​ level; real GDP

hw1. Jobs alone are not the measure of economic​ well-being. If this were the​ case, then we could increase the​ well-being of an economy by giving highway workers spoons rather than backhoes and garment workers needles and thread instead of computerized sewing machines. What does provide the source of high living​ standards?

productions of goods and services people value

DSM6. Because the focus of long-run economic growth is on the standard of living of the average person, we measure the standard of living in terms of:

real GDP per capita

P111. A fall in the price level​ _______.

shifts the AE curve upward and brings a movement down along the AD curve

P12. Recession? Maybe.​ Depression? Get Real. The unemployment rate during the Great Depression peaked at nearly 25 percent in​ 1933, after an initial spike from 3 percent in 1929 to nearly 8.7 percent in 1930. The unemployment rate is just 5​ percent, only up from 4.5 percent a year ago. Also during the Great Depression there was​ deflation, which is not happening today. The inflation and unemployment trends during the Great Depression can be explained by a movement along the​ ______ Phillips curve that​ ______. During​ 2008, the inflation rate increased and the unemployment rate increased. These events​ ______.

short-run; lowers the inflation rate and increases the unemployment rate cannot be explained by a movement along the SRPC because along this curve the inflation rate and unemployment rate move in opposite directions

pt1. Zach is a math student who is considering taking an extra course in French. An incentive that might encourage him to take the French course is​ _______.

softer grading in Frenchsofter grading in French

pt1. Zach is an engineering student who is considering taking an extra course in history. An incentive that might encourage him to take the history course is​ _______.

softer grading in history

DSM8. If the Federal Reserve increases the money supply at 5% a year, in the long run there will be __________.

something less than 5% annual inflation

12. An economy is at potential GDP when it experiences an increase in costs. The economy experiences​ _______.

stagflation

T92. A change in the expected future exchange rate changes the supply of U.S. dollars​ ______, and a change in U.S. demand for imports changes the supply of U.S. dollars​ ______.

today; today

10. The wealth effect refers to the fact that:

when the price level falls, the real value of household wealth rises, and so will consumption

hw2. Harry enjoys tennis but wants a high grade in his economics course. Figure 1 shows​ Harry's PPF. Figure 2 shows​ Harry's marginal benefit curve for tennis. If Harry uses his time to achieve allocative​ efficiency, he plays 7 hours of tennis a week and his economics grade is 65 percent. Harry would be​ ______ off getting a higher grade in economics because​ ______ ​Harry's PPF​ ______and his MB curve​ ______. Harry's efficient time allocation ____.

worse; his marginal benefit from tennis would exceed his marginal cost does not​ change; shifts rightward increases

P9. If saving is​ $850 billion, investment is​ $500 billion, government expenditure on goods and services is​ $600 billion, and net exports is​ $100 billion, then calculate private sector balance.

​$350 billion

PQ13. The government increases the tax rate on labor income. As a​ result, the supply of labor​ ______ and the demand for labor​ ______. The equilibrium level of employment ______. At the equilibrium level of​ employment, the​ before-tax wage rate​ ______ and the​ after-tax wage rate​ ______. Potential GDP _____.

​decreases; does not change decreases rises; falls decreases

hw3. Producers of electric guitars expect the population to increase and the number of firms producing and selling electric guitars to increase. You predict that the price of an electric guitar will​ ______ and the quantity of electric guitars bought will​ ______.

​either rise, fall, or remain the same; increase

pt1. Costs Soar for London Olympics The cost of regenerating East London​ ______ an opportunity cost of hosting the 2012 Olympic Games​ ______.

​is; if the regeneration of East London would not occur unless London hosted the 2012 Olympics

pt1. The resources that are used to produce goods and services​ - _____ are factors of production.

​land, labor,​ capital, and entrepreneurship

PQ13. Stimulus Debate Turns on Rebates- ​$150 billion worth of government spending would have a​ ______ effect on aggregate demand than​ $150 billion worth of tax rebates because​ ______ .

​larger; all of government expenditure is added to aggregate demand but part of the tax rebates is saved

P112. For a given increase in aggregate​ demand, the steeper the slope of the​ short-run aggregate supply​ curve, the​ ______ is the increase in the price level and the​ ______ is the multiplier effect on real GDP in the short run.

​larger; smaller

hw2.In an​ hour, JimJim can catch 4 pounds of pickerel or pick 8 pounds of strawberries. In an​ hour, Sam can catch 4 pounds of pickerel or pick 20 pounds of strawberries. The opportunity cost of catching a pound of pickerel is​ ______ for Jim than for Sam​, and the opportunity cost of picking a pound of strawberries is​ ______ for Jim than for Sam. So​ ______ has a comparative advantage in producing​ ______.

​lower; higher Jim; Pickerel

hw3. An increase in the demand for sports cars together with an increase in the supply of sports cars ​______ create a surplus or a shortage of sports cars at the original price. The price of sports cars ​______.

​might; might​ fall, rise, or not change

P12. Stagflation Is Back.​ Here's How to Beat It- Read the news​ clip, then answer the following question. The analysis of macroeconomic performance in the news clip reflects the​ ______ business cycle theory because it discusses​ ______.

​real; factors that change potential GDP

P10. The defining feature of the classical view of macroeconomics is that the economy is​ ______. Classical macroeconomists recommend​ ______.

​self-regulating and always at full employment policies that minimize the disincentive effects of taxes on​ employment, investment, and technological change

P10. The defining feature of the monetarist view of macroeconomics is that the economy​ is______. Monetarist macroeconomists recommend​ ______.

​self-regulating and that it will normally operate at full​ employment, provided that monetary policy is not erratic and that the pace of money growth is kept steady policies that keep taxes low to avoid disincentive effects that decrease potential GDP