AP Econ midterm
When inflation makes money less reliable unit of measurement, the economy is experiencing which of the following costs of inflation? a. unit of account b. shoe leather c. menu d. measurement e. monetary
b. shoe leather
The long-run Phillips curve is a. horizontal. b. vertical. c. upward sloping. d. downward sloping. e. U-shaped.
b. vertical.
Depreciation leads to... a. a reduction in human capital b. an increase in human capital c. a reduction of physical capital d. an advantage in technology e. an outward shift of the production possibilities curve
c. a reduction of physical capital
A positive supply shock will lead to which of the following? a. stagflation b. an increase in the aggregate price level c. a recession d. a rightward shift of the short-run aggregate supply curve e. an increase in aggregate output along with inflation
d. a rightward shift of the short-run aggregate supply curve
Assume a country has a population of 1000. If 400 people are employed and 100 people are unemployed, what is the country's unemployment rate? a. 50% b. 40% c. 25% d. 20% e. 10%
20%
Which of the following combinations of output is efficient?(table on pg 34) pounds of potatoes / pounds of fish a. 1,000 / 0 b. 600 / 600 c. 400 / 500 d. 500 / 400 e. 0 / 0
a. 1,000 / 0
If Atlantis is efficient in production, what is the opportunity cost of increasing the annual output of potatoes from 600 to 800 pounds?(table on pg 34) a. 200 pounds of fish b. 300 pounds of fish c. 500 pounds of fish d. 675 pounds of fish e. 800 pounds of fish
a. 200 pounds of fish
Which of the following is a potential problem with persistent increases in government debt? a. Government borrowing may crowd out private investment. b. Government debt is caused by budget deficits, which are always bad for the economy. c. It will always lead the government to default. d. It creates inflation because the government has to print money to pay it off. e. It causes automatic stabilizers to raise taxes in the future.
a. Government borrowing may crowd out private investment.
Which of the following will occur if the Federal Reserve buys Treasury bills? a. The money supply will increase. b. The money supply curve will shift to the left. c. The money demand curve will shift to the right. d. Interest rates will rise. e. Aggregate demand will decrease.
a. The money supply will increase.
Which of the following is true for this year if real GDP is greater than nominal GDP? a. the price level has decreased since the base year b. the consumer price index has increased since the base year c. the economy is experiencing inflation d. there has been economic growth e. net exports are positive
a. The price level has decreased since the base year
If two goods are complements, an increase in the price of one good will cause which of the following? a. a decrease in the demand for the other b. a decrease in the quantity demanded of the other c. an increase in the demand for the other d. an increase in the quantity demanded of the other e. no change in the demand for the other
a. a decrease in the demand for the other
Which of the following is an example of a positive demand shock? a. a large increase in defense spending b. the stock market crash of 1929 c. the discovery of a large, previously unknown oil field d. a reduction in the aggregate price level e. an increase in nominal wages
a. a large increase in defense spending
The long-run Phillips curve illustrates which of the following? a. a positive relationship between unemployment and inflation b. a negative relationship between unemployment and inflation c. that unemployment will always return to the NAIRU d. that unemployment will adjust so that the economy experiences 2% inflation e. that output will adjust so that there is no unemployment or inflation in the long run
a. a positive relationship between unemployment and inflation
Falling output in an economy is consistent with which of the following? a. a recession b. an expansion c. a recovery d. falling unemployment e. long-term economic growth
a. a recession
Which of the following will most likely result in a decrease in the quantity of lemons demanded? a. an increase in the price of lemons b. an increase in the price of limes c. an increase in the price of lemonade d. an increase in the number of lemonade stands e. a decrease in consumer income
a. an increase in the price of lemons
Which of the following will shift the supply curve for loanable funds to the right? a. an increase in the rate of return on investment spending b. an increase in the government budget deficit c. a decrease in the national saving rate d. an increase in expected inflation e. capital inflows from abroad
a. an increase in the rate of return on investment spending
The process of bringing down the rate of inflation that has become embedded in expectations is known as a. disinflation. b. deflation. c. negative inflation. d. debt deflation. e. monetary policy.
a. disinflation.
Which type of policy can be used to address a decrease in aggregate output to below potential output? a. expansionary b. contractionary c. indiscretionary d. recessionary e. inflationary
a. expansionary
A worker who is not working while engaged in a job search after moving to a new city is considered which of the following? a. frictionally unemployed b. structurally unemployed c. cyclically unemployed d. underemployed e. a discouraged workers
a. frictionally unemployed
Which of the following is part of an economy's infrastructure? a. highways b. factories c. banks d. automobiles e. workers
a. highways
As a result of the wealth effect, a higher aggregate price level will reduce which of the following? a. households' purchasing power b. interest rates c. investment spending d. nominal wages e. aggregate demand
a. households' purchasing power
When banking regulations were changed so that banks could pay interest on checking accounts, what was the effect on interest rates and the equilibrium quantity of money? Interest rate / Quantity of money a. increase / decrease b. decrease / increase c. increase / increase d. decrease / decrease e. increase / no change
a. increase / decrease
What is the most important ingredient in long-run economic growth? a. increased labor productivity b. increased population c. low price level d. expansionary monetary policy e. deficit spending
a. increased labor productivity
If an economy experiences long-run economic growth which of the following is true of it potential output? a. it has increased b. it has decreased c. it is greater than actual output d. it is less than actual output e. it is no longer equal to LRAS
a. it has increased
Fiat money derives its value from which of the following? a. its official status b. the good being used as a medium of exchange c. a promise it can be converted into something valuable d. gold or silver e. exchange rates
a. its official status
In the aggregate supply and demand model, a rightward shift of the LRAS curve indicates which of the following? a. long run economic growth b. an increase in unemployment c. a decrease in real gdp d. an increase in the aggregate price level e. an economic recovery
a. long run economic growth
Which of the following actions would the Federal Reserve use to address inflation? a. make an open-market sale of Treasury bills b. increase the money supply c. lower the discount rate d. decrease money demand e. raise taxes
a. make an open-market sale of Treasury bills
The real interest rate is equal to the nominal interest rate a. minus the inflation rate b. plus the inflation rate c. divided by the inflation rate d. times the inflation rate e. plus the real interest rate divided by the inflation rate
a. minus the inflation rate
A financial intermediary that resells shares of a stock portfolio is a a. mutual fund. b. pension fund. c. loan-backed security. d. bond broker. e. depository institution.
a. mutual fund
Which of the following types of shocks poses a policy dilemma due to the inability to use stabilization policy to address inflation and unemployment at the same time? a. negative supply shock b. positive supply shock c. negative demand shock d. positive demand shock e. negative budget shock
a. negative supply shock
When the economy is experiencing an inflationary gap, the output gap is a. positive. b. negative. c. zero. d. decreasing. e. increasing.
a. positive.
The supply curve for loanable funds is a.upward sloping. b. vertical. c. horizontal. d. downward sloping. e. U-shaped.
a.upward sloping.
If the government establishes a quota of 7 million pounds in the market, what will the demand price of swordfish be (per pound)? (table on pg 102) a. $20 b. $18 c. $16 d. $14 e. $12
b. $18
How much does a price floor of $5 cost the government if it maintains the price floor by buying any surplus corn?(graph on page 101) a. $0 b. $2000 c. $4000 d. $5000 e. $6000
b. $2000
If there is a quota of 7 million pounds and swordfish fishing licenses are traded in a market, how much will the price of a fishing license be per pound? a.$0 b.$6 c.$12 d.$18 e.$30
b. $6
What is the quota rent per pound of swordfish received by licensed fishing boats when the government sets a quota of 7 million pounds?a.$0 b.$6 c.$12 d.$18 e.$30
b. $6
What is the value of disposable income? (diagram on pg 155) a. $750 b. $650 c. $550 d.$530 e.$510
b. $650
If the consumer price index rises from 120 to 132, what is the inflation rate? a. 8% b. 10% c. 12% d. 20% e. 32%
b. 10%
How many bushels of corn are purchased by the government if it maintains a price floor of $5 by buying all surplus corn?(graph on page 101) a. 0 b. 400 c. 800 d. 1,000 e. 1,200
b. 400
Which of the following will occur if an increase in interest rates leads to a decrease in investment spending? a. Aggregate demand will increase. b. Aggregate demand will decrease. c. There will be no change in aggregate demand or supply. d. Aggregate supply will increase. e. Aggregate supply will decrease.
b. Aggregate demand will decrease.
Which of the following is true about the long-run aggregate supply curve? a. It is horizontal. b. It is the result of nominal wages being fully flexible. c. It is the result of sticky prices. d. It is upward sloping. e. It intersects the horizontal axis at the actual level of real GDP.
b. It is the result of nominal wages being fully flexible.
Which of the following will occur if consumer incomes increase? a.The demand for inferior goods will increase. b.The demand for normal goods will increase. c.The demand for all goods will increase. d. The demand for normal goods will decrease. e.The demand for all goods will decrease.
b. The demand for normal goods will increase
An increase in the wages of workers producing a good will most likely lead to which of the following? a. a decrease in the quantity of the good supplied b. a decrease in the supply of the good c. an increase in the quantity of the good supplied d. an increase in the supply of the good e. no change in the supply of the good
b. a decrease in the supply of the good
Which of the following will occur if the federal government reduces defense spending? a. Aggregate demand will increase. b. Aggregate demand will decrease. c. There will be no change in aggregate demand or supply. d. Aggregate supply will increase. e. Aggregate supply will decrease.
b. aggregate demand will decrease
Which of the following will increase the demand for money? a. a fall in the aggregate price level b. an increase in real GDP c. technological advances d. open-market operations by the Fed e. a decrease in the interest rate
b. an increase in real GDP
Crowding out is illustrated by which of the following changes in the loanable funds market? a. a decreasing equilibrium interest rate b. an increase in the demand for loanable funds c. a decrease in the demand for loanable funds d. an increase in the supply of loanable funds e. a decrease in the supply of loanable funds
b. an increase in the demand for loanable funds
The number of people counted as unemployed includes which of the following types of workers? a. discouraged workers b. aspiring workers seeking their first job c. underemployed workers d. retired workers e. part time workers
b. aspiring workers seeking their first job
Which of the following is part of the money supply but not part of the monetary base? a. checkable bank deposits b. bank reserves c. currency in circulation d. deposits at the Fed e. savings accounts
b. bank reserves
Which of the following refers to a loan in the form of an IOU that pays interest? (table on pg 155) a. stock b. bond c. disposable income d. government transfers e. investment
b. bond
The M1 money supply includes which of the following? a. near-moneys b. checkable deposits c. savings accounts d. time deposits e. mutual funds
b. checkable deposits
The interest rate effect of a decrease in the aggregate price level will increase which of the following? a. the purchasing power of money holdings b. investment spending c. interest rates d. aggregate supply e. aggregate demand
b. investment spending
As Atlantis produces more potatoes, what is true about the opportunity cost of producing potatoes?(table on pg 34) a. it stays the same b. it continually increases c. it continually decreases d. it increases then decreases e. it decreases and then increases
b. it continually increases
An outward shift of the production possibilities curve indicates which of the following? a. a decrease in the cyclical unemployment b. long run economic growth c. a reduction in productive resources d. a decrease in opportunity costs e. a decrease in potential output and the natural rate of unemployment
b. long run economic growth
In a market economy, most choices about production and consumption are made by which of the following? a. politicians b. many individuals and firms c. the government d. managers e. economists
b. many individuals and firms
Investment spending includes spending on which of the following? a. stocks b. physical capital c. inputs d. services e. reductions in investments
b. physical capital
Which of the following is an example of using money as a unit of account? a. buying a new T-shirt b. purchasing $10 worth of candy c. keeping the dollar you receive each year for your birthday for 10 years d. putting money into your savings account e. paying for lunch with your debit card
b. purchasing $10 worth of candy
The required reserve ratio is a. the most cash that banks are allowed to hold in their vault. b. set by the Federal Reserve. c. responsible for most bank runs. d. equal to 5% of bank deposits. e. the fraction of bank loans held as reserves.
b. set by the Federal Reserve.
A worker who is not working because his or her skills are no longer demanded in the labor market is considered which of the following? a. frictionally unemployed b. structurally unemployed c. cyclically unemployed d. underemployed e. a discouraged workers
b. structurally unemployed
The technical means for the production of goods and services is known as? a. physical capital b. technology c. human capital d. productivity e. machinery and equipment
b. technology
According to the concept of money neutrality, changes in the money supply will affect which of the following in the long run? a. only real values b. the aggregate price level c. employment d. aggregate output e. aggregate demand
b. the aggregate price level
The Federal Open Market Committee sets a target for which of the following? a. the income tax rate b. the federal funds rate c. the money supply d. the prime interest rate e. the unemployment rate
b. the federal funds rate
Which of the following changes will result in an increase in the natural rate of unemployment? a. more teenagers focus on their studies and do not look for jobs until after college b. the government increases the time during which an unemployed worker can receive benefits c. greater access to the internet makes it easier for job seekers tot find jobs d. union membership declines e. opportunities for job training improve
b. the government increases the time during which an unemployed worker can receive benefits
The public debt increases when a. the government collects more in taxes than it spends. b. the government runs a budget deficit. c. taxes exceed transfer payments. d. the budget balance is positive. e. individuals borrow for goods like houses and cars.
b. the government runs a budget deficit.
The interest rate is a. the opportunity cost of lending money. b. the price borrowers pay for the use of lenders' savings. c. a percentage of the amount saved by borrowers. d. the rate charged by banks to hold savings for one year. e. the amount earned by using profits to build a new factory.
b. the price borrowers pay for the use of lenders' savings.
Which of the following is true if the real wage rate is equal to the nominal wage rate? a. real income is constant b. the price level for the current year is the same as the price level in the base year c. the CPI is increasing d. the demand for labor is increasing e. the economy is experiencing deflation
b. the price level for the current year is the same as the price level in the base year
Short-run equilibrium aggregate output is the quantity of aggregate output produced when a. the aggregate demand curve and the short-run aggregate supply curve are identical. b. the quantity of aggregate output supplied is equal to the quantity demanded. c. the economy reaches its potential output. d. the short-run aggregate supply curve is vertical. e. all prices, including nominal wages, are fully flexible.
b. the quantity of aggregate output supplied is equal to the quantity demanded.
The short-run Phillips curve shows the relationship between the inflation rate and the a. GDP growth rate. b. unemployment rate. c. employment rate. d. real interest rate. e. nominal interest rate.
b. unemployment rate.
According to the Quantity Theory of Money, a. the money supply times velocity is equal to nominal GDP. b. velocity varies significantly with the business cycle. c. changes in the money supply have no long-run effect on the economy. d. activist monetary policy is necessary to promote economic growth. e. monetary policy rules promote business-cycle fluctuations.
b. velocity varies significantly with the business cycle.
The money supply curve is a. upward sloping. b. vertical. c. horizontal. d. downward sloping. e. U-shaped.
b. vertical.
If the interest rate is 2%, the amount received 1 year from now as a result of lending $1,000 today is a. $980. b. $1,000. c. $1,020. d. $1,200. e. $2,000.1/(1-0.02) * 1000 = $1020
c. $1,020.
The present value of $1 you receive one year from now is equal to a. $1(1 + r). b. $1/(1 - r). c. $1/(1 + r). d. $1(1 + r^2) e. $1(1 + r)^2
c. $1/(1 + r).
For the last 70 years, the U.S. government has used price supports to provide income assistance to American farmers. At times, the government has used price floors, which it maintains by buying the surplus farm products. At other times, it has used target prices, a policy by which the government gives the farmer an amount equal to the difference between the market price and the target price for each unit sold. What are the equilibrium price and quantity in the market for corn?(graph on page 101) price / quantity a. $1 / 800 b. $1 / 1,200 c. $3 / 1,000 d. $5 / 800 e. $5 / 1,200
c. $3 / 1,000
If rr is the reserve requirement, the money multiplier is equal to a. rr. b. 1-rr. c. 1/rr. d. rr^2 e. 1/rr^2
c. 1/rr.
What is the value of GDP? (table on pg 155) a. $10,000 b. $11,600 c. $14,100 d. $15,100 e. $18,100
c. 14,100
How many apartments will be offered for rent if the government sets a price ceiling at $400? (graph on pg 102) a.0 b.40,000 c.180,000 d.200,000 e.220,000
c. 180,000
Atlantis can produce which of the following combinations of output? (table on pg 34) pounds of potatoes / pounds of fish a. 1,000 / 675 b. 600 / 600 c. 400 / 600 d. 300 / 800 e. 200 / 675
c. 400 / 600
What is the value of GDP? (diagram on pg 155) a. $550 b. $650 c. $750 d. $770 e. $790
c. 750
If the government sets a price floor of $5 per bushel, how many bushels of corn are produced by consumers?(graph on page 101) a. 0 b. 400 c. 800 d. 1,000 e. 1,200
c. 800
Which of the following is true when the economy is experiencing a recessionary gap? a. Potential output is below aggregate output. b. Aggregate demand is below aggregate supply. c. There is high unemployment. d. The aggregate price level is rising. e. The economy has self-corrected.
c. There is high unemployment.
Which of the following will occur as a result of an increase in the aggregate price level? a. Aggregate demand will increase. b. Aggregate demand will decrease. c. There will be no change in aggregate demand or supply. d. Aggregate supply will increase. e. Aggregate supply will decrease.
c. There will be no change in aggregate demand or supply.
In the ancient country of Roma, only two goods—spaghetti and meatballs—are produced. There are two tribes in Roma, the Tivoli and the Frivoli. By themselves, in a given month, the Tivoli can produce 30 pounds of spaghetti and no meatballs, 50 pounds of meatballs and no spaghetti, or any combination in between. In the same month, the Frivoli can produce 40 pounds of spaghetti and no meatballs, 30 pounds of meatballs and no spaghetti, or any combination in between. Which of the following has a comparative advantage in meatball and spaghetti production? meatballs / spaghetti a. Tivoli / Tivoli b. Frivoli / Frivoli c. Tivoli / Frivoli d. Frivoli / Tivoli e. neither / both
c. Tivoli / Frivoli
Compared to an increase in taxes, an equal-sized increase in government spending will have what effect on real GDP? a. a larger, negative effect b. a smaller, negative effect c. a larger, positive effect d. a smaller, positive effect e. an equal, offsetting effect
c. a larger, positive effect
An increase in expected inflation has what effect on the short-run Phillips curve? a. a movement up and to the left along the curve b. a movement down and to the right along the curve c. an upward shift of the curve d. a downward shift of the curve e. an increase in the slope of the curve
c. an upward shift of the curve
A worker who is unemployed due to fluctuations in the business cycle is considered which of the following? a. frictionally unemployed b. structurally unemployed c. cyclically unemployed d. underemployed e. a discouraged workers
c. cyclically unemployed
According to the convergence hypothesis, over time, international differences in real GDP per capita will? a. increase exponentially b. increase slightly c. decrease d. remain the same e. disappear
c. decrease
The unemployment rate is the number people unemployed divided by the number a. employed b. employed plus the number discouraged c. in the labor force d. in the population aged 16 and above e. in the population
c. in the labor force
Assuming diminishing returns to physical capital capital, if physical per worker is 50,000, real GDP per worker will most likely equal which of the following? (graph on pg 403) a. more than 60,000 b. 60,000 c. less than 60,000 but greater than 40,000 d. 40,000 e. 0
c. less than 60,000 but greater than 40,000
The collapse of wealth and business and consumer confidence that caused the Great Depression is an example of which type of shock? a. negative supply shock b. positive supply shock c. negative demand shock d. positive demand shock e. negative recessionary shock
c. negative demand shock
A price ceiling set at $600 will result in which of the following in the market for apartments? a.a surplus of 40,000 apartments b.a surplus of 220,000 apartments c.no surplus or shortage d.a shortage of 40,000 apartments e.a shortage of 220,000 apartments
c. no surplus or shortage
The liquid assets banks keep in their vaults are known as bank a. deposits. b. savings. c. reserves. d. money. e. Returns.
c. reserves.
Sticky nominal wages in the short run cause the short run aggregate supply curve to a. shift to the right. b. shift to the left. c. slope upward. d. slope downward. e. be vertical.
c. slope upward.
A higher aggregate price level leads to higher profit per unit of output and increased output in the short run because of which of the following? a. the wealth effect b. the interest rate effect c. sticky nominal wages d. productivity gains e. stabilization policy
c. sticky nominal wages
When money acts as a means of holding purchasing power over time, it is serving which function? a. medium of exchange b. source of liquidity c. store of value. d. unit of account e. source of wealth
c. store of value.
The budget balance is equal to a. total spending by the government. b. taxes minus transfer payments. c. taxes minus government spending and transfer payments. d. the sum of deficits and surpluses over time. e. total tax revenues collected.
c. taxes minus government spending and transfer payments.
Which of the following is a normative statement? a. The unemployment rate is expected to rise. b. Individuals purchase more of a good when the price rises. c. The government should increase the minimum wage. d. An increase in the tax rate on wage earnings reduces the incentive to work e. Public education generates greater benefits than costs.
c. the government should increase the minimum wage
A countries labor force is equal to which of the following? a. the number of people aged 16 and above b. the number of people employed plus the number retired c. the number of people employed plus the number unemployed d. the number of people working for pay e. the number of people employed plus the number who have given up looking for work
c. the number of people employed plus the number unemployed
If the marginal propensity to consume is 0.75, an initial increase in aggregate spending of $1,000 will lead to a total change in real GDP equal to a. $750 b. $1,000 c. $1,333 d. $4,000 e. $7,500
d. $4,000
If real GDP grows by 5% per year. approximately how many years will it take for it to double? a. 150 b.. 75 c. 35 d. 15 e. 5
d. 15
Which of the following will occur if the price of steel decreases as a result of the discovery of new deposits of iron ore used to make steel? a. Aggregate demand will increase. b. Aggregate demand will decrease. c. There will be no change in aggregate demand or supply. d. Aggregate supply will increase. e. Aggregate supply will decrease.
d. Aggregate supply will increase.
Which of the following is included in the calculation of GDP? a. intermediate goods and services b. used goods c. stocks and bonds d. foreign-produced goods and services e. domestically produced capital goods
d. Domestically produced capital goods
(In the ancient country of Roma, only two goods—spaghetti and meatballs—are produced. There are two tribes in Roma, the Tivoli and the Frivoli. By themselves, in a given month, the Tivoli can produce 30 pounds of spaghetti and no meatballs, 50 pounds of meatballs and no spaghetti, or any combination in between. In the same month, the Frivoli can produce 40 pounds of spaghetti and no meatballs, 30 pounds of meatballs and no spaghetti, or any combination in between.) In A.D. 100, the Frivoli discovered a new technique for making meatballs and doubled the quantity of meatballs they could produce each month. After the discovery of this new technique in Frivoli only, which tribe had an absolute advantage in meatball production and which had a comparative advantage in meatball production? absolute advantage / comparative advantage a. Tivoli / Tivoli b. Frivoli / frivoli c. Tivoli / Frivoli d. Frivoli / Tivoli e. Frivoli / both
d. Frivoli / Tivoli
Which of the following is true when the output gap is negative? a. Aggregate output is above potential output. b. The unemployment rate is below the natural rate. c. The economy is experiencing inflation. d. Potential output is above aggregate output. e. The natural rate of unemployment is decreasing.
d. Potential output is above aggregate output.
If potential output is equal to actual aggregate output, which of the following is true? a. The economy is experiencing inflation. b. The economy is experiencing cyclical unemployment. c. Nominal wages are sticky. d. The economy is in long-run equilibrium. e. The aggregate price level is rising.
d. The economy is in long-run equilibrium.
Which of the following leads to self-correction when the economy is experiencing a recessionary gap? a. Nominal wages and prices rise. b. The short-run aggregate supply curve decreases. c. The long-run aggregate supply curve decreases. d. The short-run aggregate supply curve shifts to the right. e. Unemployment leads to an increase in aggregate demand.
d. The short-run aggregate supply curve shifts to the right.
A price ceiling set at $400 will result in which of the following in the market for apartments? (graph on page 102) a.a surplus of 40,000 apartments b.a surplus of 220,000 apartments c.no surplus or shortage d.a shortage of 40,000 apartments e.a shortage of 220,000 apartments
d. a shortage of 40,000 apartments
Which of the following will lead to long-run economic growth? a. a decrease in nominal wages b. a decrease in the aggregate price level c. an increase in the production of consumer goods d. an increase in total factor productivity e. actual output that exceeds potential output
d. an increase in total factor productivity
Which of the following situations is explained by increasing opportunity costs? a. more people go to college when the job market is good b. More people do their own home repairs when hourly wages fall. c. There are more parks in crowded cities than in suburban areas. d. Convenience stores cater to busy people. People with higher wages are more likely to mow their own lawns.
d. convenience stores cater to busy people
An increase in the aggregate price level caused by a significant increase in the price of an input with economy- wide importance is called a. demand-pull inflation. b. seignorage inflation. c. supply-push inflation. d. cost-push inflation. e. input-pull inflation.
d. cost-push inflation.
Bringing down the inflation rate is known as a. negative inflation b. deflation c. bubble popping d. disinflation e. contraction
d. disinflation
The $750 of wages, profits, interest, and rent shown by the red arrow pointing into the factor markets box illustrates the calculation of GDP using which approach? (diagram on pg 155) a. value added b. aggregate spending c. expenditure d. income e. resource
d. income
The Federal Reserve is a(n) a. single central bank located in New York. b. government agency overseen by the Secretary of the Treasury. c. system of 10 regional banks. d. institution that oversees the banking system. e. depository institution that lends to large corporations
d. institution that oversees the banking system.
The normal unemployment rate around which the actual unemployment rate fluctuates is known as which of the following? a. frictional unemployment rate b. structural unemployment rate c. cyclical unemployment rate d. natural rate of unemployment e. maximum unemployment rate
d. natural rate of unemployment
An inflation tax is the result of a. the federal government running a budget surplus. b. the Federal Reserve raising the federal funds rate. c. an increase in the demand for money. d. printing money to cover a budget deficit. e. contractionary fiscal policy
d. printing money to cover a budget deficit.
When the government spends money to create and implement new technologies, it has invested in? a. human capital b. physical capital c. infrastructure d. research and development e. political stability
d. research and development
Which of the following is a goal for the macroeconomy? a. declining labor force b. inflation c. deflation d. rising aggregate output e. rising unemployment rate
d. rising aggregate output
Which of the following is an example of an automatic stabilizer? a. the Works Progress Administration established during the Great Depression b. lump-sum taxes c. a balanced budget requirement for the government d. sales taxes e. economic stimulus checks from the government
d. sales taxes
If long-run economic growth can continue into the future despite limited natural resources, it is considered? a. acceptable b. equitable c. economical d. sustainable e. expandable
d. sustainable
You can either go to a movie or study for an exam. Which of the following is an opportunity cost of studying for the exam? a. higher grade on the exam b. the price of a movie ticket c. the cost of paper, pens, books, and other study materials d. the enjoyment from seeing the movie e. the sense of achievement from learning
d. the enjoyment from seeing the movie
Comparative advantage explains which of the following? a. a country's ability to produce more of a particular good or service b. when production is considered efficient c. why the production possibilities curve is bowed outward d. the source of gains from trade e. why the production possibilities curve shifts outward
d. the source of gains from trade
Which of the following is a desirable characteristic of money? a. fixed supply b. large denominations c. made of precious metal d. widely accepted e. backed by commodities
d. widely accepted
A survey indicated that chocolate is America's favorite ice cream flavor. Which of the following will lead to a decrease in the price of chocolate ice cream? a.A drought in the Midwest causes farmers to reduce the number of dairy cows they raise. b.A new report from the American Medical Association concludes that chocolate has significant health benefits. c.The price of vanilla ice cream increases. d.New freezer technology lowers the cost of producing ice cream. e.The price of ice cream toppings decreases.
d.New freezer technology lowers the cost of producing ice cream.
If the government establishes a quota of 7 million pounds in the market, what will the supply price of swordfish be (per pound)? (table on pg 102) a.$20 b.$18 c.$16 d.$14 e.$12
e. $12
How much revenue do corn farmers receive if there is a price floor at $5?(graph on page 101) a. $0 b. $1200 c. $3000 d. $4000 e. $6000
e. $6000
What is the value of net exports? (table on pg 155) a. $3,500 b. $2,000 c. $1,500 d. $500 e. -$500
e. -$500
If the government sets a price floor of $5 per bushel, how many bushels of corn are produced?(graph on page 101) a. 0 b. 400 c. 800 d. 1,000 e. 1,200
e. 1,200
If the government sets a price ceiling at $400, how many apartments will be demanded by consumers?(graph on page 102) a.0 b.40,000 c.180,000 d.200,000 e.220,000
e. 220,000
If the marginal propensity to consume is equal to 0.80, the spending multiplier is a. 0.80 b. 1.25 c. 4.00 d. −4.00 e. 5.00
e. 5.00
Which of the following is an example of a negative supply shock? a. Production costs decrease. b. Information technologies lead to productivity growth. c. The stock market collapses. d. The government runs a budget deficit. e. World oil supplies are disrupted.
e. World oil supplies are disrupted.
An increase in the money supply will generate which of the following? a. a negative short-run effect on real GDP b. an increase in real GDP in the long run c. a decrease in real GDP in the long run d. a decrease in the aggregate price level in the long run e. an increase in the aggregate price level in the short run and the long run
e. an increase in the aggregate price level in the short run and the long run
The number of people who are considered unemployed is equal to the number of people who are not working and a. are receiving unemployment compensation b. have given up seeking work c. plan to look for work in the future d. have looked for work in the recent past e. are actively seeking work
e. are actively seeking work
Where must an effective price ceiling in this market be set?(graph on page 102) a. at $500 b. above $400 c. above $500 d. below $600 e. below $500
e. below $500
The Taylor rule sets the target federal funds rate based on which of the following? a. the inflation rate only b. the unemployment rate only c. the output gap only d. both the inflation rate and the unemployment rate e. both the output gap and the inflation rate
e. both the output gap and the inflation rate
Which of the following assets is most liquid? a. stock b. bond c. loan d. mutual fund e. cash
e. cash
When transactions do not occur due to price or quantity controls, what is the term for the lost gains? a.wasted resources b.inefficient quality c.price wedge d.black market losses e.deadweight loss
e. deadweight loss
Which of the following is a task of an economy's financial system? a. maximizing risk b. increasing transactions costs c. decreasing diversification d. eliminating liquidity e. enhancing the efficiency of financial markets
e. enhancing the efficiency of financial markets
Which of the following is a basic source of economic growth in the production possibilities model? a. specialization b. efficiency c. opportunity cost d. trade offs e. improved technologies
e. improved technology
The Federal Reserve is charged with doing all of the following EXCEPT a. providing financial services to commercial banks. b. supervising and regulating banks. c. maintaining the stability of the financial system. d. conducting monetary policy. e. insuring bank deposits.
e. insuring bank deposits.
Which of the following pairs indicates a category of resources and an example of that resource? Category / example a. money / investment b. capital / money c. capital / minerals d. land / factory e. land / timber
e. land / timber
Who loses from unanticipated inflation? a. borrowers b. the government c. investors d. mortgage owners e. people on fixed incomes
e. people on fixed incomes
An upward shift of the curve shown could be caused by which of the following? (graph on pg 403) a. an increase in real GDP per worker b. investment in physical capital c. diminishing returns to physical capital d. increases in population e. rising total factory productivity
e. rising total factory productivity
Which of the following identities is true in a simplified economy with no government and no interaction with other countries? a. consumer spending = investment spending b. total income = consumer spending − investment spending c. total spending = investment spending + savings d. investment spending = total spending − savings e. savings = investment spending
e. savings = investment spending
Which of the following is a major reason for productivity growth? a. financial investment b. an increase in the amount of capital available per worker c. a decrease in the amount of capital available per worker d. an increase in the price of capital e. technological progress
e. technological progress
The cyclically adjusted budget deficit adjusts the actual budget deficit for the effect of a. discretionary fiscal policy. b. discretionary monetary policy. c. inflation. d. transfer payments. e. the business cycle
e. the business cycle
Which of the following changes will most likely result in an increase in the demand for hamburgers in your hometown? a. the price of hotdogs decreases b. the price of drinks sold at hamburger restaurants increases c. income in your town decreases and hamburgers are a normal good d. the local newspaper publishes a story on health problems caused by red meat e. the number of vegetarians in your town decreases and the population size remains the same
e. the number of vegetarians in your town decreases and the population size remains the same
A liquidity trap occurs when conventional monetary policy is ineffective because a. the short-run Phillips curve is negatively sloped. b. the public will not buy or sell Treasury bills. c. the unemployment rate can't go below 5%. d. the nominal interest rate can't be negative. e. the real interest rate can't be negative.
e. the real interest rate can't be negative.
Which of the following changes will most likely result in a decrease in the supply of guitars? a. the popularity of guitar music increases b. consumer incomes decrease c. a new firm enters the guitar industry d. the guitar-making process is re-engineered to be more efficient e. the wages of guitar makers increase
e. the wages of guitar makers increase
Which of the following is true about the role of natural resources in productivity growth? a. they are a more important determinant of productivity than human or physical capital b. they have played an increasingly prominent role in productivity growth in recent years c. they play no role in determining productivity growth d. they played a less important role in productivity growth in the 1800s e. they result in higher productivity, other thing equal
e. they result in higher productivity, other thing equal
A budget surplus exists when the government does which of the following? a. saves b. collects less tax revenue than it spends c. has a negative budget balance d. increases the national debt e. uses expansionary fiscal policy
e. uses expansionary fiscal policy
If the marginal propensity to consume is 0.9, every $10 billion increase in taxes will cause a change in spending equal to a. $100 billion. b. $90 billion. c. $9 billion. d. −$10 billion. e. −$90 billion.
e. −$90 billion.
Which of the following events will increase both the price and the quantity of pizza? a.The price of mozzarella cheese increases. b.New health hazards of eating pizza are widely publicized. c.The price of pizza ovens rises. d.Consumers expect the price of pizza to fall next week. e.Consumer income falls and pizza is an inferior good.
e.Consumer income falls and pizza is an inferior good.
Which of the following is true at the equilibrium price in a market?a. Consumers who purchase the good may be better off buying something else instead. b.The market has not yet cleared. c.There is a tendency for the price to decrease over time. d.There may be either a surplus or a shortage of the good. e.The quantity demanded of the good equals the quantity supplied.
e.The quantity demanded of the good equals the quantity supplied.
