Econ 102 Final

Which of the following are included in the supply of loanable funds? I. Private saving II. Government budget surplus III. International Borrowing a. I, II and III b. I and III c. II and III d. I and II

a I, II, and III

Between 2013 and 2014 the government estimates that disposable income in the United States decreased. Consequently, as a result of this change, consumption expenditure A) decreased. B) remained constant. C) increased. D) More information is needed about how taxes changed between 2013 and 2014.

a decreased

When firms in an economy start producing more computers and fewer televisions, they are answering the ____ part of one of the two big economic questions. a. "what" b. "for whom" c. "where" d. "when"

a. "what"

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

a. $140 billion

If imports are $100 million less than exports, government expenditures are $500 million, consumer expenditures are $1 billion and gross investment spending is $500 million, then GDP is a. $2.1 billion b. $1 billion c. $1.9 billon d. $2 billion

a. $2.1 billion

According to the table above, the value of M1 is ________ and the value of M2 is ________. a. $813 billion; $3303 billion b. $813 billion; $2490 billion c. $1,488 billion; $3978 billion d. $805 billion; $2490 billion

a. $813 billion; $3303 billion

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

a. 1 machine

The information in the table above gives the 2012 reference based period CPI basket and prices used to construct the CPA for a small nation. It also has the 2013 prices. What is the value of the CPI for the reference base period, 2012? a. 100 b. 140 c. 75 d. 133

a. 100

Last year's price level was 120 and since then there has been a 5% inflation. This year's price level is a. 126 b. 130 c. 125 d. none of the above

a. 126

If the CPI was 132.5 at the end of last year and 137.5 at the end of this year, the inflation rate over these two years was a. 3.8% b. 3.6% c. 5.0% d. none of the above answers

a. 3.8%

In the above table, the number of marginally attached workers is a. 15 million b. 40 million c. 55 million d. 100 million

a. 40 million

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

a. 6 South African goods per U.S. good

Using the information in the above tale, the employment-to-population ratio is a. 64% b. 62% c. 67% d. 50%

a. 64%

In the figure above, an economy would grow fastest if it produces at point a. A b. B c. C d. D

a. A

In the figure above, household income is shown by flow a. A b. B c. C d. F

a. A

Which of the following are major influences on the expected profit from an investment? I. technology advances II. stock market behavior III. accounting practices a. I only b. I and II c. I and III d. II and III

a. I only

Which of the following can be said about economic growth? I. Economic growth is the result of increases in long-run aggregate supply. II. Economic growth is the result of increases in aggregate demand. A) I only B) II only C) I and II D) neither I or II

a. I only

Which of the following is used to calculate the standard of living? a. real GDP/population b. real GDP/aggregate hours c. (real GDP in current year-real GDP in previous year)x 100 d. the one-third rule

a. Real GDP/population

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

a. SAS curve will shift leftward

The Industrial Revolution in England in large was result of a. technological innovations encouraged by the patent system b. growth in human capital c. population growth d. technological innovations that were financed mainly by government spending

a. Technological innovations encouraged by the patent system

Each point on a supply curve represents a. the lowest price for which a supplier can profitably sell another unit b. the highest price buyers will pay for the good c. the highest price sellers can get for each unit over time d. the lowest price buyers will accept per unit of the good

a. The lowest price for which a supplier can profitably sell another unit

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

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

Which of the following will shift the supply of loanable funds curve leftward? a. a decrease in disposable income b. a decrease in the real interest rate c. a decrease in expected future income d. a decrease in real wealth

a. a decrease in disposable income

In markets, people's decisions are coordinated by a. adjustments in prices b. changes in property rights c. learning-by-doing d. specialization according to absolute advantage

a. adjustments in prices

The term "business cycle" out closely refers to the a. alternating periods of expansions and recessions b. accounting period used by firms c. fluctuating profits of firms d. fiscal year

a. alternating periods of expansions and recessions

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

a. an exchange rate depreciation

In the above figure, flow B represents households' ____ a. consumption expenditures b. investment c. income d. saving

a. consumption expenditures

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

a. crawling peg

The unemployment rate is at the natural unemployment rate when a. cyclical unemployment equal zero b. structural unemployment equals zero c. all types of unemployment equal zero d. frictional unemployment equals zero

a. cyclical unemployment equals zero

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

a. decrease interest rates in order to stimulate business investment and consumption expenditure, thereby increasing AD

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

a. decreases in the expected profit

In the figure above, moving from production at point d to production at point a requires a. decreasing the output of consumer goods in order to boost the outcome of capital goods b. technological change c. a decrease in unemployment d. both capital accumulation and decrease in unemployment

a. decreasing the output of consumer goods in order to boost the outcome of capital goods

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

a. demand for foreign currencies and a supply of dollars

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

a. depreciate 4 percent

Marginal benefit curves slope a. downward, but not because of increasing opportunity cost b. downward, because of increasing opportunity cost c. upward, but not because of increasing opportunity cost d. upward because of increasing opportunity cost

a. downward, but not because of increasing opportunity cost

Real GDP is not a perfect indicator of economic welfare because____ a. economic welfare depends on many factor not measure or not measured accurately by real GDP b. it includes the underground economy c. it includes a direct measure of health and life expectancy d. it underestimates inflation

a. economic welfare depends on many factors not measured or not measured accurately by real GDP

Which of the following statement regarding human capital is INCORRECT? a. education is the only vehicle for the creation of human capital because training simply reinforces what has already been learned b. the accumulation of human capital is the source of both increased productivity and technological advance c. writing and mathematics, the most basic of human skills, are crucial elements in the economic progress d. human capital is the accumulated skill and knowledge of human beings

a. education is the only vehicle for the creation o human capital because training simply reinforces what has already been learned

The percentage of people of working age who have jobs is called the a. employment- to- population ratio b. inverse of the unemployment ratio c. employment- to- working age population ratio d. labor force

a. employment-to-population ratio

In the above figure, if 4,000 bicycles are produced per month a. fewer bicycles should be produced to reach the allocatively efficient level of output b. the marginal cost of production is 2 bottle of soda per bicycle c. marginal benefit is greater than marginal cost d. both answers A and B are correct

a. fewer bicycles should be produced to reach the allocatively efficient level of output

Gross domestic product is equal to the sum of consumption expenditure, investment, net exports, and ____ a. government expenditures on goods and services b. saving c. net taxes d. profits

a. government expenditures on goods and services

When real GDP is ____ potential GDP, the unemployment rate is ____ the natural unemployment rate. a. greater than; less than b. equal to; greater than c. less than; equal to d. greater than; greater than

a. greater than; less than

The principle of decreasing marginal benefit means that as the quantity of a good consumed a. increases, its margin benefit decreases b. increases, its total benefits decreases c. decreases its marginal benefit decreases d. none of the above answers are correct

a. increases it's marginal benefit decreases

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

a. increases; rises

Which of the following best defines capital as a factor of production? a. instruments, machines, and buildings used in production b. financial assets used by business c. the knowledge and skills that people obtain from education and use in production of goods and services d. the gifts of nature that businesses use to produce goods and services

a. instruments, machines, and buildings used in production

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

a. investment occurs

If a new and better good replaced an older and less expensive good, then the price level measure by the CPI ____ a. is higher than the actual price level b. is lower than the actual price level c. is the same as the actual price level because it measure the prices of the actual gods d. might be either higher or lower than the actual price

a. is higher than the actual price level

The labor force participation rate is calculated as the a. labor force divided by the working age population then multiplied by 100 b. number of persons unemployed divided by the labor force then multiplied by 100 c. labor force divided by the unemployment rate then multiplied by 100 d. labor force divided by the number of persons employed then multiplied by 100

a. labor force divided by the working age population then multiplied by 100

With everything else the same, in the foreign exchange market the A) larger the value of U.S. exports, the greater is the quantity of dollars demanded. B) the higher the exchange rate, the cheaper are U.S.-produced goods and services. C) the lower the exchange rate, the smaller is the expected profit from buying dollars. D) lower the exchange rate, the smaller the amount of U.S. exports.

a. large the value of US exports, the greater is the quantity of dollars demanded

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

a. less than $16.0 trillion

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a a. medium of exchange. b. store of value. c. standard of deferred payment. d. All of the above answers are correct.

a. medium of exchange

In broad terms the difference between microeconomics and macroeconomics is that a. microeconomics studies decisions of individual people and firms and macroeconomics studies the entire national economy b. macroeconomics studies the effects of government regulation and taxes on the price of individual goods and services whereas micro economics does not c. microeconomics studies the effects of government taxes on the national unemployment rate d. they use different sets of tools and ideas

a. microeconomics studies decision of individual people and firms and macroeconomics studies the entire national economy

In the US economy, which of the following statements is TRUE? a. more services are produced than goods b. production is divided evenly between goods and services c. more goods are produced than services d. the economy is too complex to determine that proportion of production that is devoted to producing services

a. more services are produced than goods

As disposable income increases, there is a ________ the saving function. A) movement along B) rightward shift of C) change in the slope of D) leftward shift of the

a. movement along

A nation's investment must be financed by a. national saving plus borrowing from the rest of the world. b. borrowing from the rest of the world only. c. the government's budget deficit. d. national saving only.

a. national saving plus borrowing from the rest of the world

An increase in disposable income shifts A) neither the consumption function or the savings function because it leads to a movement along both the consumption and savings function. B) the consumption function upward and leads to a movement along the savings function. C) both the consumption and savings functions downward. D) both the consumption and savings functions upward.

a. neither the consumption function or the savings function because it leads to a movement along both the consumption and savings function

The sum of compensation to employees, rental income, corporate profits, net interest, and proprietors' income is a. net domestic income at factor cost b. gross domestic product c. net domestic product d. gross domestic income

a. net domestic income at factor cost

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

a. point c; an increase in the use of credit cards

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

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

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

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

We distinguish between the long-run aggregate supply curve and the short-run aggregate supply curve. In the long run A) real GDP equals potential GDP. B) the price level is constant but in the short run it fluctuates. C) technology is fixed but it is not in the short run. D) the aggregate supply curve is horizontal while in the short run it is upward sloping.

a. real GDP equals potential GDP

When the nominal interest rate rises, the opportunity cost of holding money a. rises and people hold less money. b. falls and people hold more money. c. rises and people hold more money. d. falls and people hold less money.

a. rises and people hold less money

The above table shows the demand schedule and supply schedule for chocolate chip cookies. If the price is $4.00 per pound, there is a a. shortage of 3 lbs of chocolate chip cookies b. shortage of 2 lbs of chocolate chip cookies c. shortage of 5 lbs of chocolate chip cookies d. surplus of 3 lbs of chocolate chip cookies

a. shortage of 3 pounds of chocolate chip cookies

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

a. supply of US dollars

Classical growth theory proposed that real GDP growth is ____ and that the real GDP per person will ____ the subsistence level a. temporary; temporarily be above b. permanent; always be above c. temporary; be above and below d. permanent; temporarily be above

a. temporary; temporarily be above

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

a. the cash in its vaults and its deposits at the federal reserve

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

a. the expected future exchange rate rises

Laura is manager for HP. When Laura must decide whether to produce a few addition printers, she is choose at the margin when she compares a. the extra revenue from selling a few addition printers to the extra cost of producing the printers b. the total revenue from sales of printers to the total cost of producing all of the printers c. HP's printers to printers from competing companies such as Lexmark d. the extra revenue from selling a few addition printers to the average cost of producing the additional printers

a. the extra revenue from selling a few additional printers to the extra cost of producing the printers

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

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

Moving along the short-run aggregate supply curve, ________. A) the money wage rate, the prices of other resources, and potential GDP remain constant B) real GDP equals nominal GDP C) real GDP equals potential GDP D) the real wage rate is constant

a. the money wage. rate, the price of other resources, and potential GDP remain constant

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

a. the price level and the aggregate quantity supplied

Assume the inflation rate falls from 4%- 2%. This means that a. the price level is increasing more slowly b. the economy is experiencing deflation c. the price level has fallen d. real GDP is decreasing

a. the price level is increasing more slowly

Based on the data in the table above, at the short-run equilibrium A) the unemployment rate is greater than the natural unemployment rate. B) the economy is at full employment. C) the money wage rate will rise in the long run. D) the unemployment rate is less than the natural unemployment rate.

a. the unemployment rate is greater than the natural unemployment rate

The labor force participation rate is percentage of the ____ who are in the labor force a. working age population b. people under age 65 c. population d. people over age 16

a. working age population

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

b. $16 trillion

You decide to take a vacation and the trip costs you $2,000. While you are on vacation, you do not go to work where you could have earned $750. In terms of dollars, the opportunity cost of vacation is a. $750 b. $2,750 c. $1,250 d. $2,000

b. $2,750

The table above shows the balance sheet for Ralph's Bank. If the desired reserve ratio is 15 percent, Ralph's Bank has excess reserves of ________. a. $2,500 b. $50 c. $500 d. $450

b. $50

Using the data in the table above, what is the value of GDP? a. $13,516 billion b. $8,403 billion c. $9,541 billion d. $10,679 billion

b. $8,403 billion

Suppose that the total labor force is 100 individuals with 10 unemployed. The unemployment rate is ____. Now assume that 10 people drop out of the labor force and 10 remain unemployed. The new unemployment rate is ____. a. 9%; 10% b. 10%; 11% c. 10%; 9% d. 11%; 10%

b. 10%; 11%

If real GDP per person is growing at 4% per year, approximately how many years will it take to double? a. 25 b. 17.5 c. 4 d. 8

b. 17.5

in 2012, consumers in Dexter consumed only books and pens. The prices and quantities for 2012 and 2013 are listed in the table above. The reference base period for Dexter's CPI is 2012. What is the inflation rate in 2013? a. 31% b. 69% c. 0% d. 2%

b. 69%

The table above represents the marginal cost and marginal benefit associated with pizza (in terms of movies). What quantity of pizza should be produced if resources are to be used efficiently? a. 5 pizzas b. 7 pizzas c. 6 pizzas. d. 8 pizzas

b. 7 pizzas

Using the Rule of 70, if the country of Huttodom's current growth rate of real GDP per person was 10% per year, how long would it take the country's real GDP per person to double? a. 0.7 years b. 7 years c. 10 years d. 20 years

b. 7 years

Suppose Joe can prepare 10 sandwiches or 5 pizzas in an hour and Beth can produce 12 sandwiches or 9 pizzas. Which of the following is TRUE? a. Joe should produce pizza because he has a higher opportunity cost of producing pizza than Beth does b. Beth should produce pizza because she has a lower opportunity cost of producing pizza than Joe c. Joe should produce pizza because he has a lower opportunity cost of producing pizza than Beth d. Beth should produce pizza because she has a higher opportunity cost than Joe

b. Beth should produce pizza because she has a lower opportunity cost of producing pizza than Joe

If the money price of hats rises and no other prices change, the I. relative price of a hat rises II. Opportunity cost of a hat rises a. only I b. Both I and II c. Only II d. neither I or II

b. Both I and II

Which part of the Federal Reserve System meets every 6 weeks to determine the nation's monetary policy? a. the Federal Reserve Banks b. Federal Open Market Committee c. Board of Governors d. depository institutions such as commercial banks

b. Federal Open Market Committee

If the price level increase but workers' money wage rate remain constant, which of the following is TRUE? I. The quantity of labor demanded will increase II. The real wage rate will decrease III. Measures the quantity of goods and services an hour's work can buy a. I only b. I and II c. II and III d. I, II, and III

b. I and II

An increase in the demand for computers and a decrease in the number of sellers of computers will a. not change the price of a computer and increase the number of computer bought b. increase the price of a computer c. increase the price of a computer and the number of computers bought d. increase the number of computers bought

b. Increase the price of a computer

Technological change a. decreases labor productivity b. increases potential GDP c. lowers the real wage rate d. has no effect on employment

b. Increases potential GDP

According to the Economic Times, Standard & Poor's forecast for India's GDP growth rate was cut by 1% point to 5.5% as the entire Asia Pacific region feel the pressure of ongoing economic uncertainty. India has average 7% growth in GDP since 1997. Which of the following is TRUE? a. India's PPF has not shifted since 1997 b. India's PPF has been shifting rightward since 1997 c. India's PPF has been shifting leftward since 1997 d. India has been moving from a point within its PPF to points beyond its PPF

b. India's PPR has been shifting rightward since 1997

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

b. Keynesian economists

The above table shows production points on Sweet Tooth Land's production possibilities frontier. Which of the following statements is TRUE? a. Producing 30 chocolate bars and 38 colas is only attainable with an increase in technology b. Producing 0 chocolate bars and 100 cans of cola is both attainable and efficient c. producing 40 chocolate bars and 0 cans of cola is unattainable and inefficient d. producing 2 chocolate bars and 80 cans of cola is attainable but inefficient

b. Producing 0 chocolate bars and 100 cans of cola is both attainable and efficient

Human capital is the a. machinery used by humans to produce GDP b. Skill and knowledge accumulated by humans c. plant and equipment produced by humans and not by machines d. technology used by humans to produce GDP

b. Skill and knowledge accumulated by humans

In the above figure, the economy is at the equilibrium point on the supply of loanable funds curve SLF and demand for loanable funds curve DLF. What happens if real wealth decreases? a. The supply of loanable funds curve would shift leftward. b. The supply of loanable funds curve would shift rightward. c. Nothing; the economy would remain at the equilibrium point. d. There would be a movement along the supply of loanable funds curve SLF.

b. The supply of loanable funds curve would shift rightward

Suppose a scientific breakthrough made free solar power available in unlimited quantities in the US. The effect of this invention move the a. United States inside its production possibilities frontier b. US production possibilities frontier outward c. US beyond its production possibilities frontier d. US production possibilities frontier inward

b. US production possibilities frontier outward

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

b. Washing has an absolute advantage in the production of both pecans and pears

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

b. a currency drain occurs

In the above figure, the movement from point B to point A might be the result of A) an increase in government expenditures because of increases in education expenditures. B) a fall in the price level. C) an increase in government expenditures because of a war. D) an increase in the demand for manufacturing goods because of new technology.

b. a fall in the price level

A change in which of the following shifts the demand curve for hamburgers a. an increase in the price of a hamburger b. a fall in the price of French fries, a complement for hamburgers c. an increase in the number of hamburger restaurants d. an increase in the price of the meat used to produce hamburgers

b. a fall in the price of French fries, a complement for hamburgers

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

b. a flexible exchange rate

Joe pays $8,000 in tuition. The $8,000-tutition Joe pays in an example of what economists call a. an opportunity cost b. a money price c. an indexed price d. a relative price

b. a money price

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

b. above target levels so firms will increase production

If Nike, an American corporation, produced sneakers in Thailand this would a. count as part of the US GPD since it is a US corporation b. add to Thailand's GDP but not to the US GDP c. count for both Thailand's GDP and US GDP d. add to neither US nor Thailand's GDP

b. add to Thailand's GDP but not to the US GDP

When the Fed is ________ it is ________. a. regulating the nation's financial institutions; conducting monetary policy b. adjusting the amount of money in circulation; conducting monetary policy c. issuing government bonds; conducting monetary policy d. adjusting the amount of money in circulation; issuing government bonds

b. adjusting the amount of money in circulation; conducting monetary policy

Inflation occurs over time as a result of A) long-run aggregate supply increasing faster than aggregate demand. B) aggregate demand increasing faster than long-run aggregate supply. C) long-run aggregate supply increasing faster than short-run aggregate supply. D) decreases in aggregate demand.

b. aggregate demand increasing faster than long-run aggregate supply

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

b. all three investors hold dollars

Using the table above, if the current market value of the dollar is 125 francs A) investor A holds francs, but B and C hold dollars. B) all three investors hold francs. C) investor A holds dollars, but B and C hold francs. D) all three investors hold dollars.

b. all three investors hold francs

Saving and investment that increase a nation's capital lead to a. slower growth because there is a lack on consumption b. an increase in labor productivity c. a decrease in labor productivity as capital is used to replace labor d. a decrease in the amount of capital per worker

b. an increase in labor productivity

Moving along the aggregate demand curve, a decrease in the quantity of real GDP demanded is a result of A) an increase in income. B) an increase in the price level. C) a decrease in income. D) a decrease in the price level.

b. an increase in the price level

Which of the following is a positive statement? a. my favorite dinner is pizza and soda b. an increase in the price of pizza will lead fewer students to buy pizza c. the government should spend more on education d. the government must provide health insure so that the poor can obtain decent medical treatment

b. an increase in the price of pizza will lead fewer students to buy pizza

Which of the following is consistent with the law of demand? a. an increase in the price of a DVD causes an increase in the quantity of DVDs demanded b. an increase in the price of soda causes a decrease in the quantity of soda demanded c. a decrease in the price of juice causes no change in the quantity of juice demanded d. a decrease in the price of a gallon of milk causes a decrease in the quantity of milk demanded

b. an increase in the price of soda causes a decrease in the quantity of soda demanded

Suppose the price level, the money wage, and the price of all other resources rise by 10 percent. This set of changes leads to A) a leftward shift of the LAS curve. B) an upward movement along the LAS curve. C) an upward movement along the SAS curve. D) a downward movement along the LAS curve.

b. an upward movement along the LAS curve

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

b. appreciated; depreciated

Structural unemployment is a. associated with the general downturns in the economy b. associated with the general decline of specific industries c. associated with the normal changing of jobs in a dynamic economy d. almost always short-term in nature

b. associated with the general decline of specific industries

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

b. buying U.S. dollars today because it expects profit from buying U.S. dollars and holding them

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

b. can buy dollars

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

b. can sell dollars

With consumption expenditure on the vertical axis and disposable income on the horizontal axis, the consumption function intersects the 45-degree line at $8 trillion. This result indicates that A) consumption spending is more than $8 trillion because taxes have been paid. B) consumption spending is $8 trillion when disposable income is $8 trillion. C) consumption spending is less than $8 trillion because taxes must be paid. D) autonomous consumption spending is $8 trillion.

b. consumption spending is $8 trillion when disposable income is $8 trillion

the tradeoff between current consumption and the production of capital goods also reflects a tradeoff between a. satisfying today the needs of the poor and the wants of the wealthy b. current consumption and future consumption c. the future production of capital goods and future consumption of goods d. economic growth and technological change

b. current consumption and future consumption

The government increases taxes. As a result, in the short run, real GDP ________ and the price level ________. A) increases; rises B) decreases; falls C) decreases; rises D) increases; falls

b. decreases; falls

The above figure shows the market for oil. Because of the development of a new deep sea drilling technology the a. demand curve shifts from D1 to D2 and the supply curve does not shift b. demand curve does not shift and the supply curve shifts from S1 to S2 c. demand curve does not shift, and the supply curve shifts from S2 to S1 d. demand curve shifts from D1 to D2 and the supply curve shifts from S1 to S2

b. demand curve does not shift and the supply curve shifts from S1 to S2

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

b. demand, supply

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

b. does not change; decreases

Macroeconomics is concerned with a. the effects on Ford Motor of a strike by the United Auto Workers b. Economy-wide variables c. government decision making concerning farm price supports d. individual consumers

b. economy-wide variables

Human resources that perform the functions of organizing, managing, and assembling the other resources are called a. productive capital b. entrepreneurship c. venture capital d. physical capital

b. entrepreneurship

A factor determining the supply of U.S. dollars in the foreign exchange market is the A) expected future interest rate in the United States. B) expected future exchange rate. C) U.S. supply of exports. D) expected future interest rate in foreign countries.

b. expected future exchange rate

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

b. falls from 10 percent to 8 percent

Suppose the economy is experiencing a recessionary gap. In the long run, if aggregate demand does not change, the following events happen: the money wage rate ________, unemployment ________, and the price level ________. A) falls; rises; falls B) falls; falls; falls C) rises; falls; rises D) rises; rises; rises

b. falls; falls; falls

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

b. foreigners must borrow from the United States or sell US assets to make up the difference

Catherine quit her job in order to look for a new one; therefore she is best considered as a. cyclically unemployed b. frictionally unemployed c. structurally unemployed d. seasonally unemployed

b. frictionally unemployed

Country A can produce 1 cello by giving up the production of 5 guitars. Country b can produce 1 guitar by giving up the production of 4 cellos. In which good does country A have a comparative advantage? a. cellos b. guitars c. both goods d. neither good

b. guitars

A president of the US promise to produce more defense goods without any decreases in other goods. This promise can be valid a. if the US is producing at a point on its production possibilities frontier b. if the US is producing at a point inside of the production possibilities frontier c. only if the production possibilities frontier shifts rightward d. if the US is producing at a point beyond its production possibilities frontier

b. if the US is producing at a point inside of the production possibilities frontier

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

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

The reason that it is possible for the economy in the above figure to be at equilibrium point E2 rather than at equilibrium point E1 is that A) AD always shifts rightward and never shifts leftward. B) in the short run the economy can produce more than it can in a long-run situation. C) in the long run there is always less than full employment. D) the economy must be in a recession.

b. in the short run the economy can produce more than it can in a long run situation

In the above figure, if the marginal propensity to consume increases, the slope of the AE curve would A) decrease. B) increase. C) stay the same but the AE curve would shift upwards. D) stay the same but the AE curve would shift downwards.

b. increase

An increase in saving that leads to more capital accumulation ____ labor productivity a. probably changes but in an ambiguous direction b. increases c. decreases d. does not change

b. increases

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

b. increases; C

The data in the above table indicate that when the price level is 100 A) the unemployment rate is at its equilibrium level. B) inventories fall and the price level rises. C) the economy is in a long-run macroeconomic equilibrium. D) inventories rise and the price level falls.

b. inventories fall and the price level rises

In the national income accounts, the purchase of a new house counts as a. an addition to inventory b. investment c. consumption expenditure d. transfer

b. investment

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

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

When the U.S. exchange rate rises, foreign goods become ________ and U.S. imports ________. A) less expensive; decrease B) less expensive; increase C) more expensive; increase D) more expensive; decrease

b. less expensive; increase

When there is unplanned inventory investment, aggregate planned expenditure is ________ real GDP and actual investment is ________ planned investment. A) greater than; less than B) less than; greater than C) greater than; greater than D) less than; less than

b. less than; greater than

In every economic system, choices must be made because resources are ____ and our wants are ____. a. limited; limited b. limited; unlimited c. unlimited; unlimited d. unlimited, limited

b. limited; unlimited

Gross domestic product is the total ____ produced within a country in a given time period a. market value of all goods and services b. market value of all final goods and services c. market value of all final and intermediate goods and services d. amount of final and intermediate goods and services

b. market value of all final goods and services

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

b. monetarists

Dissaving A) is equal to consumption expenditure when disposable income is greater than zero. B) occurs when consumption is greater than disposable income. C) is equal to the amount of saving when consumption is less than disposable income. D) is equal to taxation when disposable income is zero.

b. occurs when consumption is greater than disposable income

People must make choices because a. there are many goods available b. of scarcity c. most people enjoy shopping d. none of the above

b. of scarcity

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

b. only classical

The table above gives the quantity of money and money demand schedules. Suppose that the interest rate is equal to 6 percent. The effect of this interest rate in the money market is that a. bond prices fall and so the interest rate falls. b. people buy bonds and the interest rate falls. c. the money market is in equilibrium. d. people sell bonds and the interest rate falls.

b. people buy bonds and the interest rate falls.

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

b. people expect that the dollar will depreciate

In the above figure, a change in quantity supplied with unchanged supply is represented by a movement from a. point b to point e b. point b to point a c. point e to point c d. point a to point e

b. point B to point A

The above table shows production points on Sweet-Tooth Land's production possibilities frontier. A movement from ____ represents the greatest opportunity cost of increasing cola production. a. Point E to point D b. Point B to point A c. Point C to point B d. Point D to point C

b. point B to point A

In the above figure, which point represents the under use of resources? A. point H b. point G c. point F d. point K

b. point G

The relationship between real GDP and potential GDP is that a. Real GDP always equals potential GDP b. real GDP fluctuates about potential GDP c. real GDP is always below potential GDP d. real GDP never equal potential GDP

b. real GDP fluctuates about potential GDP

Which of the following are parts of the business cycle? a. real GDP and potential GDP b. recession and expansion c. peak and potential GDP d. inflation and recession

b. recession and expansion

The first step in measuring CPI is to a. collect prices for the basket of goods and services b. select the market basket c. conduct a monthly survey d. interview business

b. select the market basket

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

b. shift from the supply of money curve MS0 to the supply of money curve MS1.

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

b. shift the demand for loanable funds curve rightward

The unemployment rate will never equal zero because a. there will always be some people who do not want to work b. some portion of the labor force will always be between jobs c. there will always be discouraged workers d. cyclical unemployment will always exist

b. some portion of the labor force will always be between jobs

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

b. surplus of $50 billion; surplus of $25 billion

The curve labeled A in the above figure will shift rightward when A) the quantity of capital increases or the price level falls. B) technology increases or the quantity of capital increases. C) the quantity of capital increases or the price level rises. D) technology increases or the price level increases.

b. technology increases or the quantity of capital increases

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

b. the demand for money curve would shift leftward to MD0.

For consumers, goods A and B are complementary. The cost of a resource used in the production of A decreases. As a result a. the equilibrium prices of both A and B will fall b. the equilibrium price of B will rise and the equilibrium price of A will fall c. the equilibrium prices of both A and B will rise d. the equilibrium price of B will fall and the equilibrium price of A will rise

b. the equilibrium price of B will rise and the equilibrium price of A will fall

In the figure above, the shift in the supply curve for U.S. dollars from S0 to S2 could occur when A) the current exchange rate falls. B) the expected future exchange rate falls. C) the current exchange rate rises. D) the expected future exchange rate rises.

b. the expected future exchange rate falls

A movement along the consumption function to higher levels of consumption expenditure arises because A) the level of disposable income decreases. B) the level of disposable income increases. C) the level of desired saving rises. D) household wealth rises.

b. the level of disposable income increases

The notion that technological change is not random but instead is driven by the pursuit of profits is an essential event of a. neoclassical growth theory b. the new growth theory c. perpetual growth theory d. classical growth theory

b. the new growth period

Net exports is negative if a. the tariff payments are included in the value of important and exported items b. the value of imports exceeds the value of exports c. the value of exports exceeds the value of imports d. too much production of all the nation's farms, factories, shops, and offices measure at the prices of the year it was produced

b. the value of imports exceeds the value of exports

In terms of dollars, the marginal benefit of working five days a week instead of four days a week is a. the wages received for 4 days of work b. the wages received for the 5th day of work c. the wages received for 5 days of work d. none of the above

b. the wages received for the 5th day of work

If the real wage rate is such that the quantity of labor supplied by workers is less than the quantity of labor demanded by firms a. the real wage rate will fall to restore equilibrium, b. there is a shortage of labor c. the economy is at full employment d. actual real GDP equal potential GDP because firms make the decision about how many workers to hire.

b. there is a shortage of labor

This year Pizza Hut makes a total investment of $1.3 billion in new gross investment is ________ and its net investment is ________. a. $1.0 billion; $0.7 billion b. $1.0 Billion; $1.3 Billion c. $1.3 billion; $1.0 billion d. $1.3 billion; $1.6 billion

c. $1.3 billion, $1.0 billion

During this summer you have made the decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books and supplies cost $1,300. In terms of dollars, the opportunity cost of attending summer school is a. $3,300 b. $6,000 c. $10,300 d. $4,300

c. $10,300

During 2014, the country of Economia has a real GDP of $115 billion and the population was 0.9 billion. In 2013, real GDP was 105 billion and the population was 0.85. in 2014, real GDP per person was a. $135 b. $117 c. $128 d. $124

c. $128

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

c. $200,000

The data in the above table show that the economy will be in a short-run macroeconomic equilibrium at a price level of A) 90. B) 100. C) 120. D) 110.

c. 120

In the table above, Country B is producing 4 units of X and 6 units of Y. For country B, the opportunity cost of producing an additional unit of Y is a. 2. units of X per unit of Y b. 1/2 unit of X per unit of Y c. 2/3 unit of X per unit of Y d. 3 units of X per unit of Y

c. 2/3 unit of X per unit of Y

Suppose the current unemployment rate is 5%, the labor force is 400 million people, the labor force participation rate is 80% and the working-age population is 500 million people. What number of people are unemployed? a. 5 million b. 25 million c. 20 million d. 100 million

c. 20 million

20) The above table gives the initial balance sheet for Mini Bank. Mini Bank's actual reserve ratio equals ________. a. 33.3 percent b. 20 percent c. 25 percent d. 12.5 percent

c. 25 percent

If the nominal interest rate is 7 percent and the inflation rate is 1 percent, the real interest rate is approximately a. -6 percent. b. 7 percent. c. 6 percent. d. 8 percent.

c. 6 percent

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

c. 950 million yuan

Between which pair of countries or continents listed below has real GDP per person converged the most since 1960? a. Canada and South America b. United States and Africa c. Canada and Japan d. United States and South America

c. Canada and Japan

Who of the following is counted as unemployed? a. Kim, a worker on strike from her company for a week b. Homer, a full-time student at a vocational school c. Glen, a student who just graduated from college last week and is currently looking for a job d. Rene, a retired chemist

c. Glen, a student who just graduated from college last week and is currently looking for a job

Which of the following is TRUE? I. As the real interest rate increases, people increase the quantity they save. II. The supply of loanable funds curve is downward sloping. III. As disposable income increases, the supply of loanable funds curve becomes steeper. a. I and III b. II and III c. I only d. III only

c. I only

During the 1990s, which of the following experienced the slowest rate of growth in real GDP per person? a. the big 4 nations of Europe b. Canada c. Japan d. United States

c. Japan

The "gifts of nature" are included as part of which factor of production? a. capital b. labor c. land d. entrepreneurship

c. Land

Over the past four decades a. US real GDP per person has fallen below that of other rich industrial countries b. the growth rate of real GDP per person in the US has been increasing c. US real GDP per person has increased d. Both answers A and C are correct

c. US real GDP per person has increased

In 2014, the price of peanuts was rising, which lead peanut butter sellers and buyers to expect the price of PB would rise in the future. Consequently, the current market for peanut butter there was ____ which resulted in a ____ in the price of peanut butter and ____ in the quantity of peanut butter. a. decrease in supply and decrease in demand; rise, fall, or possibly no change; a decrease b. an increase in supply and in increase in demand; rise; an increase, decrease, or possibly no change c. a decrease in supply and an increase in demand; rise; an increase, decrease, or possibly no change d. decrease in supply and an increase in demand; fall; an increase, decrease, or possibly no change

c. a decrease in supply and an increase in demand; rise; an increase, decrease, or possibly no change

Which of the following increases aggregate demand? A) a rise in the interest rate B) a decrease in government expenditure C) a decrease in taxes D) a decrease in foreign income

c. a decrease in taxes

An increase in a nation's population results in a. a rightward shift in the labor demand curve b. an upward shift of the nation's production function c. a movement along the nation's production function d. a decrease in the full-employment quantity of labor

c. a movement along the nation's production function

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

c. a shift to AD2

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

c. a shift to AD2

If planned expenditures equal $16 trillion when real GDP is $16.5 trillion, then A) inventories will decrease by $0.5 trillion. B) there will be excess demand for most goods. C) actual investment will exceed planned investment. D) the economy must have a trade surplus to sell the excess goods and services.

c. actual investment will exceed planned investment

There is a movement along the consumption function if there is ________. A) an increase in autonomous consumption B) an increase in the expected future income C) an increase in disposable income D) a decrease in the real interest rate

c. an increase in disposable income

Which of the following shifts the aggregate demand curve rightward? A) an increase in the exchange rate B) an increase in imports C) an increase in government expenditure D) an increase in tax rates

c. an increase in government expenditure

When the Fed lowers the federal funds rate, it can lead to a. a decrease in demand deposits. b. the Fed selling government securities. c. an increase in lending by banks. d. a decrease in the quantity of money.

c. an increase in lending by banks

An economy is at full employment. Which of the following events can create a recessionary gap? A) a decrease in money wages B) an increase in foreign income C) an increase in taxes D) a decrease in the quantity of capital

c. an increase in taxes

Which of the following shifts the supply curve for good X leftward? a. a technological advance in the production of X b. a situation in which quantity demanded exceeds quantity supplied c. an increase in the cost of the machinery used to produce X d. a decrease in the wages of workers employed to produce X

c. an increase in the cost of the machinery used to produce X

Which of the following shifts the aggregate demand curve rightward? A) an increase in the tax rate B) an increase in the exchange rate C) an increase in the quantity of money D) a decrease in the price level

c. an increase in the quantity of money

Which of the following increases aggregate demand and shifts the AD curve rightward? A) an increase in the exchange rate that makes imports less expensive B) a fall in the price level C) an increase in the quantity of money and a resulting fall in the interest rate D) predictions of a recession that lead to expectations of lower future income

c. an increase in the quantity of money and a resulting fall in the interest rate

the relative price of a good is a. equal to the price of that good divided by the quantity demanded of the good b. what you get paid for babysitting your cousin c. an opportunity cost d. equal to the money price of a good

c. an opportunity cost

Suppose the equilibrium level of expenditure is $13 trillion. If real GDP is $14 trillion, then planned expenditures A) are less than real GDP, and real GDP will increase. B) exceed real GDP, and real GDP will increase. C) are less than real GDP, and real GDP will decrease. D) are equal to real GDP, and there will be no change in real GDP.

c. are less than real GDP, and real GDP will decrease

Expenditure that does NOT depend on real GDP is called A) induced expenditure. B) equilibrium expenditure. C) autonomous expenditure. D) spurious expenditure.

c. autonomous expenditure

Which of the following is NOT an example of an opportunity cost? a. by choosing to attend college, Jean was not able to continue working as an electrician, as a result, she gave up more than $85,000 in earnings while she was in college b. because David used all of his vacation time to paint his house, he was unable to visit the Caribbean last year c. because Mary is now being paid a higher wage, she can afford to buy a new car even though she is moving into a bigger apartment d. by spending Thursday night studying for an economics exam, a student was unable to complete a homework assignment for calculus class

c. because Mary is now being paid a higher wage, she can afford to buy a new car even though she is moving into a bigger apartment

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

c. buy dollars

Positive economic statements a. prescribes what should be b. cannot be tested against the facts c. can be tested against the facts d. are related to only microeconomics

c. can be tested against facts

An effective allocation of resources occurs when we a. cannot produce more of a good or service without giving up some other good or service that we need b. produces the goods and service that people want c. cannot produce more of a good or service without giving up some other good or service that we value more highly d. produces the goods and services that people need

c. cannot produce more of a good or service without giving up some other good or service that we value more highly

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

c. decreases the amount of its lending

An increase in the currency drain a. results in an increase in deposits. b. results in an increase in required reserves. c. decreases the size of the money multiplier. d. leads to an increase in excess reserves.

c. decreases the size of the money multiplier

In the foreign exchange market, an increase in the world demand for U.S. exports shifts the A) supply curve for U.S. dollars rightward. B) supply curve for U.S. dollars leftward. C) demand curve for U.S. dollars rightward. D) demand curve for U.S. dollars leftward

c. demand curve for US dollars rightward

A recent article states that "...gains from two centuries of rapid technological innovation are largely exhausted, and new discoveries lack the same revolutionary quality...{Further}, 80 percent of the growth between 1950 and 1993 came from the new application of old ideas, and these old ideas are now mostly wrung dry." (The Economist, 03/03/2011) If this quote is TRUE, what would the neoclassical growth theory predict? a. Economic growth will persist indefinitely because technological change will accelerate again as firms seek profits. b. Economic growth is temporary regardless of technological change and GDP per person returns to subsistence levels. c. Economic growth stops because most technological advances have already been made. d. Economic growth will accelerate because these technological changes are permanent.

c. economic growth stops because most technological advances have already been made

If the price of a movie download falls, the rental rate of DVDs ____ and the equilibrium quantity of DVDs rented ____. a. rises; increases b. rises; decreases c. falls; decreases d. falls; increases

c. falls; decreases

If aggregate planned expenditure is less than real GDP then A) firms increase their planned expenditure until aggregate planned expenditure increases to equal real GDP. B) firms' inventories will decrease and real GDP will decrease as production falls. C) firms' inventories will increase and real GDP will decrease as production falls. D) consumers increase their planned expenditure until aggregate planned expenditure increases to equal real GDP.

c. firms' inventories will increase and real GDP will decrease as production falls

If the MPC equals 0.75, then A) consumption expenditure is always more than disposable income. B) for every $100 increase in disposable income, saving increases by $75. C) for every $100 increase in disposable income, saving increases by $25. D) for every $100 increase in consumption expenditure, disposable income increases by $75.

c. for every $100 increase in disposable income, saving increases by $25

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

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

The crowding-out effect refers to a. private investment crowding out government saving. b. government spending crowding out private spending. c. government investment crowding out private investment. d. private saving crowding out government saving.

c. government investment crowding out private investment

The historical record for the US for the past 100 years shows a. economic growth for about half the years and economic decline for the other half b. growth until 1970 and then a period of constant per person real GDP c. growth in real GDP per person during most years d. continuous economic growth, although at different rates, throughout the entire century

c. growth in real GDP per person during most years

George and Michael can gain from exchange a. unless they have different opportunity costs b. unless one has an absolute advantage in all goods c. if each specializes in the production of the good for which he has the lower opportunity cost d. if each specializes in the production of the good for which he has the higher opportunity cost

c. if each specializes in the production of the good for which he has the lower opportunity cost

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

c. increase the supply of dollars by buying yen

If Frito Lay, an American snack company, opens a new manufacturing facility in Mexico and produces snacks which are distributed in South America, then Mexico's GPD ____ and US GPD ____ a. increases; increases b. does not change; increases c. increases; does not change d. increases; decreases

c. increases; does not change

In the above figure, if the level of real GDP is $17 trillion aA) inventories are equal to the levels planned by firms. B) planned expenditures are zero. C) inventories are above the levels planned by firms. D) inventories are below the levels planned by firms.

c. inventories are above the levels planned by firms

Due to the recession in 2008, firms decreased their profit expectations. As a result, there was a ________ shift in the ________ loanable funds curve. a. rightward; demand for b. rightward, supply of c. leftward; demand for d. rightward; supply of

c. leftward; demand for

When the U.S. exchange rate falls, U.S. goods become ________ to foreign residents and U.S. exports ________. A) more expensive; decrease B) more expensive; increase C) less expensive; increase D) less expensive; decrease

c. less expensive; increase

A trough is the a. upper turning point of a business cycle when an expansion begins b. upper turning point of a business cycle when a recession begins c. lower turning point of a business cycle when an expansion begins d. lower turning point of a business cycle when a recession begins

c. lower turning point of a business cycle when an expansion begins

The data in the above table show that when the price level is 120, if aggregate demand does not change then the A) short-run aggregate supply curve will shift leftward. B) long-run aggregate supply curve will shift leftward. C) money wage rate will fall in the future. D) money wage rate will rise in the future.

c. money wage rate will fall in the future

When the price of a good falls, the income effect for a normal good implies that people buy a. less of that good because the relative price of the good has fallen b. more of that good because the relative price of the good has risen c. more of that good because they can afford to buy more of all the things they previously bought d. less of that good because they cannot afford to buy all the things they previously bought

c. more of that good because they can afford to buy more of all the things they previously bought

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

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

In the figure above, the shift in the demand curve for U.S. dollars from D0 to D1 could occur when A) the U.S. interest rate decreases. B) foreign interest rates increase. C) people expect that the dollar will appreciate. D) the expected future exchange rate falls.

c. people expect that the dollar will appreciate

In the above figure, if the economy is at point a, an increase in ________ will move the economy to ________. A) expected future income; point d B) real wealth from the fall in the price level; point b C) real wealth from the fall in the price level; point c D) expected future income; point c

c. real wealth from the fall in the price level; point c

In the US, the inflation rate has a. risen constantly over the past 30 years b. remained almost constant over the past 25 years c. risen and fallen since the 1970s d. fallen as a result of the OPEC oil price hikes

c. risen and fallen since the 1970s

The natural unemployment rate a. rises with a decrease in frictional unemployment b. rises with an increase in cyclical unemployment c. rises with an increase in structural unemployment d. falls with an increase in cyclical unemployment

c. rises with an increase in structural unemployment

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

c. securities increase by $100 million and reserves of Bank A increase by $100 million

In the above figure, a price of $15 per dozen roses would result in a ____ so that the price of roses will ____ a. surplus; rise b. shortage; fall c. shortage; rise d. surplus; fall

c. shortage; rise

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

c. smaller is the expected profit from buying US dollars today and holding hem

If you have $1,000 in wealth and the price level increases by 20 percent, then A) the $1,000 dollars will buy 20 percent more goods and services. B) you will be able to buy fewer goods, but the real value of those goods will increase. C) the $1,000 will buy fewer goods and services. D) the real value of the $1,000 increases.

c. the $1,000 will buy fewer goods and services

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

c. the SAS curve shifts

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

c. the US interest rate differential increases

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

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

The marginal propensity to consume measures A) how much consumption expenditure occurs at the equilibrium level of income. B) what percentage of disposable income goes to saving. C) the fraction of a change in disposable income that is spent on consumption expenditure. D) how much of a given level of disposable income is consumed.

c. the fraction of a change in disposable income that is spent on consumption expenditure

According to the quantity theory of money, in the long run, an increase in the quantity of money results in an equal percentage increase in ________. a. the growth rate of real GDP b. the growth rate of potential GDP c. the price level d. the inflation level

c. the price level

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

c. the price level and the quantity of real GDP supplied

Which of the following is a microeconomic topic? a. the reasons for a decline in average prices b. effect of the govt budget def on inflation c. the reasons why Kathy buys less orange juice d. reasons why total employment decreases

c. the reasons why Kathy buys less orange juice

The Keynesian model of aggregate expenditure describes the economy in A) only a strong expansion. B) both the short run and the long run. C) the short run. D) the long run.

c. the short run

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

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

In the above figure, at a disposable income level of $2 trillion, saving equals A) consumption expenditures. B) disposable income. C) zero. D) $4 trillion.

c. zero

The quantity of money in an economy is $9 million, and the velocity of circulation is 3. Nominal GDP in this economy is ________. a. $9 million b. $3 million c. $6 million d. $27 million

d. $27 million

Use the information in the table above to calculate the value of government saving. a. $15 million b. -$5 million c. $45 million d. $5 million

d. $5 million

In the above figure, what is the minimum supply price for the fourth gallon of ice cream? a. $4.00 b. $2.00 c. $3.00 d. $5.00

d. $5.00

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

d. $50

In the above table, C is consumption expenditure, I is investment, G is government expenditure, X is exports, and M is imports. All entries are in dollars. What is the level of aggregate planned expenditure when real GDP is equal to $900 billion? A) $675 B) $1,714 C) $814 D) $796

d. $796

Using the information in the table above, calculate gross domestic product a. $108 b. $118 c. $78 d. $86

d. $86

Suppose China Airlines wants to purchase a French Airbus. The price of the Airbus is 95 million Euro. If the exchange rate is 1 euro per 9 yuan, the price of this airplane to China Airlines is A) 85.5 million yuan. B) 10.6 million yuan. C) 11.11 million yuan. D) 855 million yuan.

d. 855 million yuan

In the above figure, once on PPF2, a country would grow slowest by producing at point a. A b. B c. C d. D

d. D

Based on the figures above, which figure shows the impact of a decrease in the population available to work? a. Figure A b. Figure B c. Figure C d. Figure D

d. Figure D

The term "foreign currency" refers to foreign I. coins II. notes III. bank deposits A) II only B) II and III only C) I and II only D) I, II, and III

d. I, II, and III

Investment is financed by which of the following? I. Government spending II. National saving III. Borrowing from the rest of the world a. I, II, and III b. I and II only c. I and III only d. II and III only

d. II and III only

Which of the following is TRUE regarding the circular flow diagram> I. "aggregate income" is the flow of income earned by firms II. Retained earnings are considered income earned by firms rather than part of households' income III. The government, households, and firms all have transactions in the goods market a. I only b. I and II c. I and III d. III only

d. III only

Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecan per year or 48,000 tons of pears per year. If these two states were to engage in trade, which of the following is TRUE a. Half of both Washington's and Missouri's resources would be devoted to pears and the other half to pecans because that is the comparative advantage b. Washington would produce both pears and pecans and Missouri would produce neither c. Missouri would specialize in pear production and trade pears to Washington for pecans d. Missouri would specialize in pecan production and trade pecans to Washington for pears

d. Missouri would specialize in pecan production and trade pecan to Washington for pears

The opportunity cost of good A in terms of good B is equal to the a. money price of good B minus the money price of good A b. ratio of the money price of good B to the money price of good A c. money price of good A minus the money price of good B d. ratio of the money price of good A to the money price of good B

d. Ratio of the money price of good A to the money price of good B

When the quantity of capital increases, then the A) SAS curve shifts rightward and the LAS curve shifts leftward. B) SAS curve shifts rightward and the LAS curve does not shift. C) LAS curve shifts rightward and the SAS curve does not shift. D) SAS curve shifts rightward and the LAS curve shifts rightward.

d. SAS curve shifts rightward and the LAS curve shifts rightward

Which of the following statements CORRECTLY describes the policy stance of a macroeconomist? A) A Keynesian believes that if taxes are always kept low and the quantity of money is kept on a steady growth path, no policy actions will be needed to maintain full employment. B) A new classical macroeconomist believes that fiscal and monetary policy are required to maintain full employment. C) A monetarist believes that the quantity of money should be constantly changed in order to offset changes in aggregate demand. D) A classical macroeconomist believes that maintaining consistently low taxes will allow the economy to expand at an appropriate and rapid pace.

d. a classical macroeconomist believes that maintaining consistently low taxes will allow the economy to expand at an appropriate and rapid pace

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

d. a shift to AD1

In the above figure, a price of $15 per dozen roses would result in a. downward pressure on prices b. equilibrium .c. a surplus d. a shortage

d. a shortage

GDP equals a. the value of the aggregate production in a country during a given time period b. aggregate expenditure c. aggregate income d. all of the above

d. all of the above

Gross Domestic Product (GDP) is a. the sum of compensation of employees, proprietors' income, net interest, rental income, corporate profits, depreciation, and indirect business taxes minus subsidies b. the value of all final goods and services produced in a country during a year c. the sum of consumer,ption expenditure, investment, government expenditure on goods and services, and net exports d. all of the above

d. all of the above

Real GDP can be criticized as a measure of economic welfare because it a. does not take account the degradation of environmental equality b. does not include leisure time available to a society c. does not include the value of products produced in the household d. all of the above

d. all of the above

In the above figure, the shift from AD1 to AD2 might have been the result of A) a decrease in taxes. B) an increase in government expenditure. C) an increase in the quantity of money. D) All of the above answers are correct.

d. all of the above answers are correct

If property rights are not clearly defined and enforced, the a. resources are devoted to protecting possession rather than to production b. incentives for specialization based on comparative advantage are weakened c. some potential gains from specialization are lost d. all of the above are correct

d. all of the above are correct

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

d. an increase in British demand for U.S. imports

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

d. appreciated; depreciated

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

d. appreciates; more

Checks are NOT money because they a. are not backed by either gold or silver. b. have value in exchange but little intrinsic value. c. are issued by banks, not by the government. d. are merely instructions to transfer money.

d. are merely instructions to transfer money

In the foreign exchange market, the supply curve for dollars slopes upwards because A) supply curves always slope upwards. B) as the exchange rate rises, more dollars are supplied since the profit from selling dollars falls. C) as the exchange rate rises, imports become more expensive, and more dollars are supplied to pay for the imports. D) as the exchange rate rises, imports become cheaper, and more dollars are supplied to pay for the increase in the quantity of imports.

d. as the exchange rates rises imports become cheaper, and more dollars are supplied to pay for the increase in the quantity of imports

In the short run, when the Fed increases the quantity of money a. the demand for money increases. b. bond prices fall and the interest rate rises. c. the supply of money curve shifts leftward. d. bond prices rise and the interest rate falls.

d. bond prices rise and the interest rate falls

A marginal cost curve a. sows that as more of a good is produced, opportunity cost of producing another unit increases b. is upward sloping c. is bowed inward so that its slope can become negative d. both answers A and B are correct

d. both answers A and B are correct

If a worker is temporarily laid off because the economy is in a recession a. structural unemployment increases b. the size of the labor force rises c. frictional unemployment increases d. cyclical unemployment increases

d. cyclical unemployment increases

Ham and eggs are complements. If the price of ham rises, the demand for eggs will a. increase or decrease but the demand curve for ham will not change b. not change but there will be a movement along the demand curve for eggs c. decrease and the demand curve for ham will shift rightward d. decrease and the demand curve for eggs will shift leftward

d. decrease and the curve for eggs will shift leftward

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

d. decreases aggregate demand

A decrease in the expected future price of cars a. decreases the current quantity demanded of cars, that is, there is a movement upward along the demand curve for cars b. increases the current demand for cars, that is, there is a rightward shift of the demand curve for cars c. increases the current quantity demanded of cars, that is, there is a movement downward along the demand curve for cars d. decreases the current demand for cars, that is there is a leftward shift of the demand curve for cars

d. decreases the current demand for cars, that is there is a leftward shift of the demand curve for cars

If 100 Japanese yen buy more U.S. dollars today than yesterday, the dollar has ________ and the yen has ________. A) depreciated; depreciated B) appreciated; appreciated C) appreciated; depreciated D) depreciated; appreciated

d. depreciated; appreciated

Normative economic statements a. deal with economic hypotheses that are not well-established laws b. describe what is rather than what ought to be c. describe the process of economic policy making d. describe what ought to be

d. describe what ought to be

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

d. does not change; increases

Which factor of production earns profit? a. money b. land c. human capital d. entrepreneurship

d. entrepreneurship

The unemployment rate generally falls during ____ in the business cycle a. through b. peak c. recession d. expansion

d. expansion

In the above figure, which part corresponds to a fall in the money wage rate? A) Figure A B) Figure B C) Figure C D) Figure D

d. figure D

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

d. give billions of dollars to businesses and low- and middle-incomeamerican in order to stimulate business investment and consumption expenditure, and thereby increasing AD

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

d. greater is the expected profit from buying US dollars today and holding them

According to the BEA, in the second quarter of 2012 purchases of new residential structures rose by 8.9%. Using the expenditure approach, this change increases a. government expenditure on goods and services b. personal consumption expenditures c. net exports of goods and services d. gross private domestic investment

d. gross private domestic investment

When a government has a budget surplus, the surplus a. must be subtracted from private saving to get total saving. b. crowds-out private saving. c. increases the world real interest rate. d. helps finance investment.

d. helps finance investment

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

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

In the absence of the Ricardo-Barro effect, an increase in the government deficit results in a ________ real interest rate and a ________ equilibrium quantity of investment. a. lower; lower b. lower; higher c. higher; higher d. higher; lower

d. higher; lower

Which of the following is a normative statement? a. low rents are good because they make apartments more affordable b. owners of apartment buildings are free to charge whatever rent they want c. low rents will restrict the supply of housing d. housing costs are rising

d. housing costs are rising

As a country that has bowed-out production possibilities frontier produces more of one opportunity cost of a unit of that good ____ a. remains the same b. decreases c. might increase or decrease d. increases

d. increases

An expansion occurs when the level of real GDP is a. decreasing b. at a cyclical peak c. at. a cyclical trough d. increasing

d. increasing

The gap between real GDP per person in Africa and real GDP per person in the US has been a. decreasing b. there is no gap in real GDP per person between Africa and the US c. remaining fairly constant d. increasing

d. increasing

The quantity of real money demanded is a. proportional to the price level b. negatively related to the price level c. positively related to the price level. d. independent of the price level.

d. independent of the price level

The demand for labor curve a. shifts rightward when the real wage rate rises b. is upward sloping and the supply curve of labor is downward sloping c. is upward sloping because productivity of labor diminishes as more workers are employed d. is downward sloping because productivity of labor diminishes as more workers are employed

d. is downward sloping because productivity of labor diminishes as more workers are employed

In the figure above, if the interest rate is 8 percent, people demand $0.1 trillion a. less money than the quantity supplied and bond prices will fall. b. more money than the quantity supplied and bond prices will fall. c. more money than the quantity supplied and bond prices will rise. d. less money than the quantity supplied and bond prices will rise.

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

________ economists believe that the economy is self-regulating and will be at full employment as long as monetary policy is not erratic. A) All B) Classical C) Keynesian D) Monetarist

d. monetarist

The short-run aggregate supply curve is upward sloping because A) most business firms operate with long-term contracts for output but not labor. B) lower taxes motivate people to work more. C) a lower price level creates a wealth effect. D) money wage rates do not immediately change when the price level changes.

d. money wage rates do not immediately change when he price level changes

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

d. move to point such as X

Which of the following statements regarding aggregate supply are CORRECT? A) Moving along the short-run aggregate supply curve, both the price level and the money wage rate change by the same percentage. B) Moving along the long-run aggregate supply curve, the money wage rate changes but the price level is constant. C) Moving along the short-run aggregate supply curve, the money wage rate changes but the price level is constant. D) Moving along the long-run aggregate supply curve, both the price level and the money wage rate change by the same percentage.

d. moving along the long-run aggregate supply curve, both the price level and the money wage rate change by the same percentage

At equilibrium expenditure, unplanned changes in inventory A) must be positive. B) must be negative. C) might be either positive or negative. D) must be zero.

d. must be zero

According to BEA, in the second quarter of 2012, federal government spending on goods and serviced changed by -.1 percent. This decrease could have been cause by a decrease in spending on a. interest payments on national debt b. social security c. unemployment benefits d. national defense

d. national defense

When the company moves into an out of recessions and expansion, the unemployment rate fluctuates around the a. frictional unemployment rate b. cyclical unemployment rate c. structural unemployment rate d. natural unemployment rate

d. natural unemployment rate

By using only the aggregate demand curve, we can determine A) only the quantity of real GDP. B) both the price level and quantity of real GDP. C) only the price level. D) neither the price level nor the quantity of real GDP.

d. neither the price level nor the quantity of real GDP

If the economy's capital stock increases over time a. depreciation is less than zero b. depreciation exceeds gross investment c. gross investment equals depreciation d. net investment is positive

d. net investment is positive

The marginal propensity to consume is A) the percentage or fraction of income that is consumed. B) the percentage change in disposable income. C) the slope of the savings function. D) never greater than 1.

d. never greater than 1

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

d. none of the above answers is correct

The loss of the highest-valued alternative defines the concept of a. entrepreneurship b. marginal benefit c. scarcity d. opportunity cost

d. opportunity cost

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

d. opportunity cost

Fundamental economic problems basically arise from a. turmoil in the stock market b. the unequal distribution of income c. society has more than its needs d. our wants exceeding our scarce resources

d. our wants exceeding our scarce resources

In the above figure, suppose the economy is initially at point A. The interest rate in Japan rises relative to the interest rate in the United States. As a result, there will be a change from point A to a point such as ________. A) point B B) point C C) point D D) point E

d. point E

The social arrangement that gives John Grisham, the writer of best-selling novels, the ownership of his novels is a. a market b. dynamic comparative advantages c. absolutely advantage d. property rights

d. property rights

By measuring ____ w can see that the economies of Honk Kong and Singapore are catching up to the economies of North America but that the economies of Central and South America are not. a. inflation per person b. real GDP c. the population d. real GDP per person

d. real GDP per person

A fall in the money wage rate shifts A) the LAS curve rightward but leaves the SAS curve unchanged. B) both the SAS and LAS curves rightward. C) both the SAS and LAS curves leftward. D) the SAS curve rightward but leaves the LAS curve unchanged.

d. the SAS curve rightward but leaves the LAS curve unchanged

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

d. the U.S. dollar would depreciate

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

d. the demand curve for European euros shifts rightward and the supply curve of European euros shifts leftward

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

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

In the above figure, if the demand curve is D2 then a. the equilibrium price will be P1 and the equilibrium quantity will be Q1 b. an increase in price will shift the demand curve to D3 c. there will be a shortage equal to Q2-Q1 d. the equilibrium price will be P1 and the equilibrium quantity will be Q2

d. the equilibrium price will be P1 and the equilibrium quantity will be Q2

Which of the following statements is TRUE? A) The long-run aggregate demand curve is upward sloping. B) The long-run aggregate supply curve is upward sloping. C) The short-run aggregate supply curve is vertical. D) The long-run aggregate supply curve is vertical.

d. the long-run aggregate supply curve is vertical

A change in ________ results in a movement along the short-run aggregate supply curve but does not shift the short-run aggregate supply curve. A) the money wage rate B) the quantity of capital C) technology D) the price level

d. the price level

A supply curve shows the relation between the quantity of a good supplied and a. income; usually a supply curve has a negative slope b. the price of the good; usually a supply curve has a negative slope c. income; usually the supply curve has a positive slope d. the price of the good; usually a supply curve has a positive slope

d. the price of the good; usually a supply curve has a positive slope

Twenty years ago a stove cost $300 and a refrigerator cost $1,500. Today a stove cost $600 while a refrigerator cost $1,800. Which of the following statements is TRUE? a. the money price of the refrigerator has fallen b. the relative price of stoves and refrigerators has not changed c. the relative price of a refrigerator has increased d. the relative price of a stove has increased

d. the relative price of a stove has increased

Human capital is a. all capital owned by individuals of corporations, but not by governments b. machinery that meets or exceeds federal safety standards for use by humans c. all capital owned by individuals, but mot by corporations or governments d. the skill and knowledge of workers

d. the skill and knowledge of workers

If the real interest rate increases from 3 percent to 5 percent a. the supply of loanable funds curve will shift rightward. b. the nominal interest rate will also increase. c. the demand for loanable funds curve will shift rightward. d. there will be a movement up along the demand for loanable funds curve.

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

All economic question arise because we a. have an abundance of resources b. want more than we need c. have limited wants that need satisfied d. want more than we can get

d. want more than we can get