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Contractionary fiscal policy is so named because it: is expressly designed to expand real GDP. involves a contraction of the nation's money supply. necessarily reduces the size of government. is aimed at reducing aggregate demand and thus achieving price stability.

is aimed at reducing aggregate demand and thus achieving price stability.

Expansionary fiscal policy is so named because it: is designed to expand real GDP. is aimed at achieving greater price stability. necessarily expands the size of government. involves an expansion of the nation's money supply.

is designed to expand real GDP.

The amount of money reported as M2: excludes coins and currency. is larger than the amount reported as M1. includes large ($100,000 or more) certificates of deposit. is smaller than the amount reported as M1.

is larger than the amount reported as M1.

(Consider This) North Korea's command economy: has grown much faster than South Korea's economy since the two countries were divided after World War II. has undergone significant market reforms and is now one of the fastest-growing economies. is one of the few remaining command economies. produces a per capita GDP of nearly $25,000.

is one of the few remaining command economies

In the theory of comparative advantage, a good should be producedin that nation where: the production possibilities line lies further to the right than the trading possibilities line. its absolute money cost of production is least. its absolute cost in terms of real resourcesused is least. its cost is least in terms of alternative goods that might otherwise be produced.

its cost is least in terms of alternative goods that might otherwise be produced.

The percentage of the working-age population in the labor force (= employed + officially unemployed) is called the: employment-population ratio. labor force participation rate. work-activity rate. work-nonwork ratio.

labor force participation rate.

Other things equal, if a full-employment economy reallocated a substantial quantity of its resources to capital goods, we would expect: a lower rate of growth of real GDP. present consumption to rise. labor productivity to rise.

labor productivity to rise.

Answer the question on the basis of the data given in the following production possibilities table: Refer to the table. For these data, the law of increasing opportunity costs is reflected in the fact that: A.the economy's resources are presumed to be scarce B.larger and larger amounts of capital goods must be sacrificed to get additional units of consumer goods. C.the amount of consumer goods that must be sacrificed to get more capital goods diminishes beyond a point. D.the production possibilities data would graph as a straight downsloping line.

larger and larger amounts of capital goods must be sacrificed to get additional units of consumer goods.

A decline in investment will shift the AD curve to the: left by a multiple of the change in investment. right by the same amount as the change in investment. right by a multiple of the change in investment. left by the same amount as the change in investment.

left by a multiple of the change in investment.

A lender need not be penalized by inflation if the: short-term rate of inflation is less than the long-term rate of inflation. lender correctly anticipates inflation and increases the nominal interest rate accordingly. inflation is unanticipated by both borrower and lender. long-term rate of inflation is less than the short-term rate of inflation.

lender correctly anticipates inflation and increases the nominal interest rate accordingly.

The most important determinant of consumption and saving is the: level of bank credit. level of income. price level.

level of income.

(Consider This) When making a capital stock and reservoir analogy, the: inflow from the river is the stock of capital. level of water in the reservoir is the stock of capital. level of water in the reservoir is net investment. outflow below the dam is gross investment.

level of water in the reservoir is the stock of capital.

Refer to the diagrams. The location of curve B depends on the: level of real GDP. interest rate together with the location of curve A. interest rate only. location of curve A only.

location of curve A.

Refer to the figure. Assuming this market is representative of the economy as a whole, a negative demand shock will: increase unemployment. cause inflation. reduce both prices and output. lower prices but leave output unaffected.

lower prices but leave output unaffected.

The federal funds rate is: lower than both the prime interest rate and the discount rate. lower than the prime interest rate but higher than the discount rate. higher than both the prime interest rate and the discount rate. higher than the prime interest rate but lower than the discount rate.

lower than both the prime interest rate and the discount rate.

If m equals the maximum number of new dollars that can be created for a single dollar of excess reserves and R equals the required reserve ratio, then for the banking system: m = 1/R. m = R - 1. R = m/1. R = m - 1.

m = 1/R.

Appreciation of the Canadian dollar will: make Canada's exports and imports both more expensive. make Canada'sexports less expensiveand its importsmore expensive. make Canada's exports more expensive and its importsless expensive. intensifyan existing disequilibrium in Canada'sbalance of payments.

make Canada's exports more expensive and its importsless expensive.

In constructing models, economists:

make simplifying assumptions

Answer the question on the basis of the following information about a hypothetical economy: Refer to the given information. The unemployment rate is: 25 percent. 16.7 percent. 12.5 percent. 18.8 percent.

12.5 percent.

If Fred's annual real income rises by 8 percent each year, his annual real income will double in about: 5-6 years. 10-11 years. 8-9 years. 19-20 years.

8-9 years.

(Last Word) The combined cost of Social Security and Medicare programs was what percent of U.S. GDP in 2011? 8.5. 17.2. 12.0. 13.0.

8.5.

Globally, on average test scores of eighth-grade math and science students, the U.S. ranks (as of 2011): 9th and 10th, respectively. 5th and 7th, respectively. 8th and 6th, respectively. 1st and 1st, respectively.

9th and 10th, respectively.

Refer to the diagram for a private closed economy. Unplanned changes in inventories will be zero: only at the $300 level of GDP. only at the $400 level of GDP. at all levels of GDP. only at the $200 level of GDP.

only at the $300 level of GDP.

Refer to the diagrams, in which AD1 and AS1 are the "before" curves and AD2 and AS2 are the "after" curves. Other things equal, a decrease in resource prices is depicted by: panel (C) only. panel (A) only. panels (B) and (C). panel (B) only.

panel (C) only.

The political business cycle refers to the possibility that: incumbent politicians will be reelected regardless of the state of the economy. recessions coincide with election years. there is more inflation during Democratic administrations than during Republican administrations. politicians will manipulate the economy to enhance their chances of being reelected.

politicians will manipulate the economy to enhance their chances of being reelected.

Refer to the diagram. A government-set price floor is best illustrated by: price A. quantity E. price C. priterm-46ce B.

price C.

(Last Word) According to economist Donald Boudreaux: the market system threatens to do irreparable harm to the world's ecosystem. private property eliminates the possibility that resource arrangements will be random. arranging resources under the market system is much like shuffling a deck of cards. the market system works wondrously for advanced industrial nations but not for developing nations.

private property eliminates the possibility that resource arrangements will be random.

Other things equal, if the price of a key resource used to produce product X falls, the: product demand curve of X will shift to the right. product supply curve of X will not shift. product supply curve of X will shift to the left. product supply curve of X will shift to the right.

product supply curve of X will shift to the right.

Suppose that an economy's labor productivity and total worker-hours each grew by 3 percent between year 1 and year 2. We could conclude that this economy's: real GDP remained constant. capital stock increased by 3 percent. production possibilities curve shifted inward. production possibilities curve shifted outward.

production possibilities curve shifted outward.

Investment spending in the United States tends to be unstable because: profits are highly variable. the price level fluctuates rapidly. capital wears out quickly and must be replaced often. investment spending is affected by interest rates.

profits are highly variable.

Between March 2001 and November 2002, the Fed reduced the federal funds rate from 5 percent to just above 1 percent. The Fed's purpose was to: reduce the public debt. prevent rising inflation. promote recovery from recession. strengthen the international value of the dollar.

promote recovery from recession.

The growth of GDP may understate changes in the economy's economic well-being over time if the: amount of leisure decreases. environment deteriorates because of pollution. distribution of income becomes increasingly unequal. ! quality of products and services improv

quality of products and services improves

The growth of GDP may understate changes in the economy's economic well-being over time if the: environment deteriorates because of pollution. amount of leisure decreases. distribution of income becomes increasingly unequal. quality of products and services improves.

quality of products and services improves.

If the monetary authorities want to reduce the monetary multiplier, they should: lower the required reserve ratio. increase bank reserves. lower interest rates. raise the required reserve ratio.

raise the required reserve ratio.

Specialization in production is important primarily because it: allows society to have fewer capital goods. allows society to trade by barter. allows society to avoid the coincidence-of-wants problem. results in greater total output

results in greater total output

In a mixed open economy, the equilibrium GDP exists where: Ca + Ig = Sa + T + X. Ca + Ig + Xn + G = GDP. Ca + Ig + Xn = Sa + T. Ca + Ig + Xn intersects the 45-degree line.

Ca + Ig + Xn + G = GDP.

n a mixed open economy, the equilibrium GDP exists where: Ca + Ig + Xn intersects the 45-degree line. Ca + Ig + Xn = Sa + T. Ca + Ig + Xn + G = GDP. Ca + Ig = Sa + T + X.

Ca + Ig + Xn + G = GDP.

The public debt is held as: U.S. gold certificates. U.S. securities, corporate bonds, and common stock. Federal Reserve Notes. Treasury bills, Treasury notes, Treasury bonds, and U.S. savings bonds.

Treasury bills, Treasury notes, Treasury bonds, and U.S. savings bonds.

Which of the following programs was not designed and implemented by the Federal Reserve? Term Securities Lending Facility. Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility. Primary Dealer Credit Facility. Troubled Asset Relief Program.

Troubled Asset Relief Program.

Other things equal, if a change in the tastes of American consumers causes them to purchase more foreign goods at each level of U.S. GDP, then: inflation will occur domestically. U.S. real GDP will rise. unemployment will decrease domestically. U.S. real GDP will fall.

U.S. real GDP will fall.

Which of the following institutional arrangements is most likely to promote growth? Unrestricted trade between nations. Patents and copyrights that expire quickly and are loosely enforced. Strong government control over resource allocation decisions. All of these.

Unrestricted trade between nations.

Which of the following are all assets to a commercial bank? Vault cash, property, and reserves. Vault cash, property, and stock shares. Vault cash, stock shares, and demand deposits. Demand deposits, stock shares, and reserves.

Vault cash, property, and reserves.

National income accountants define investment to include: the purchase of common or preferred stock. any increase in business inventories. the addition of cash to a savings account. the purchase of any durable good, for example, an automobile or a refrigerator.

any increase in business inventories.

Inflation is undesirable because it: invariably leads to hyperinflation. reduces everyone's standard of living. arbitrarily redistributes real income and wealth. usually is accompanied by declining real GDP.

arbitrarily redistributes real income and wealth.

Answer the question on the basis of the following table: The MPC and MPS in the economy: are .8 and .2 respectively. cannot be determined from the information given. are .6 and .4 respectively. are .4 and .6 respectively.

are .6 and .4 respectively.

Index funds: are neither passively nor actively managed. are actively managed. may be either passively or actively managed. are passively managed.

are passively managed.

Refer to the diagram in which T is tax revenues and G is government expenditures. All figures are in billions. The budget will entail a deficit: only when GDP is stable. at all levels of GDP. at any level of GDP below $400. at any level of GDP above $400

at any level of GDP below $400.

According to the Bureau of Labor Statistics, to be officially unemployed a person must: be waiting to be called back from a layoff. have lost a job. be in the labor force. be 21 years of age or older.

be in the labor force.

A person should consume more of something when its marginal: A. cost equals its marginal benefit. B. benefit is still better. C. benefit exceeds its marginal cost. D.cost exceeds its marginal benefit

benefit exceeds its marginal cost.

The amount by which federal tax revenues exceed federal government expenditures during a particular year is the: Federal Reserve. public debt. budget surplus. budget deficit.

budget surplus.

The amount by which federal tax revenues exceed federal government expenditures during a particular year is the: budget deficit. budget surplus. Federal Reserve. public debt.

budget surplus.

Economic growth is best defined as an increase in: total consumption expenditures. nominal GDP. either real GDP or real GDP per capita.

either real GDP or real GDP per capita.

Economic growth is best defined as an increase in: total consumption expenditures. nominal GDP. either real GDP or real GDP per capita. wealth in the economy.

either real GDP or real GDP per capita.

Dr. Homer Simpson, an economics professor, decided to take a year off from teaching to run a commercial fishing boat in Alaska. That year, Professor Simpson would be officially counted as: not in the labor force. structurally unemployed. frictionally unemployed. employed.

employed.

The investment demand slopes downward and to the right because lower real interest rates: create tax incentives to invest. expand consumer borrowing, making investments more profitable. boost expected rates of returns on investment. enable more investment projects to be undertaken profitably.

enable more investment projects to be undertaken profitably.

An outward shift of a nation's production possibilities curve: ensures the nation of an increase in real GDP, but not of real GDP per capita. ensures a nation of an increase in both real GDP and real GDP per capita. ensures the nation of an increase in real GDP per capita. ensures a nation neither of an increase in real GDP nor of an increase in real GDP per capita.

ensures a nation neither of an increase in real GDP nor of an increase in real GDP per capita.

The economy's long-run AS curve assumes that wages and other resource prices: eventually rise and fall to match upward or downward changes in the price level. are relatively inflexible both upward and downward. are flexible upward but inflexible downward.

eventually rise and fall to match upward or downward changes in the price level

eventually rise and fall to match upward or downward changes in the price level.

Answer the question on the basis of the following consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 30 percent. All figures are in billions. Refer to the data. If the commercial banking system actually loans the maximum amount it is able to lend: excess reserves will be $2.6 billion. excess reserves will fall to $1.7 billion. reserves and deposits equal to that amount will be gained. excess reserves will be reduced to zero.

excess reserves will be reduced to zero.

If, in the market for money, the amount of money supplied exceeds the amount of money households and businesses want to hold, the interest rate will: rise, causing households and businesses to hold more money. rise, causing households and businesses to hold less money. fall, causing households and businesses to hold less money. fall, causing households and businesses to hold more money.

fall, causing households and businesses to hold more money.

(Consider This) If wages were more downwardly flexible, then we would expect: more layoffs during recessions. fewer layoffs during recessions. no business cycle fluctuations. more severe recessions.

fewer layoffs during recessions.

f the multiplier in an economy is 5, a $20 billion increase in net exports will: increase GDP by $20 billion. decrease GDP by $100 billion. increase GDP by $100 billion. reduce GDP by $4 billion.

increase GDP by $100 billion

The foreign purchases effect suggests that a decrease in the U.S. price level relative to other countries will: decrease U.S. exports and increase U.S. imports. shift the aggregate supply curve leftward. increase U.S. exports and decrease U.S. imports. shift the aggregate demand curve leftward.

increase U.S. exports and decrease U.S. imports.

Refer to the given graph. A shift of the consumption schedule from C2 to C1 might be caused by a(n): increase in real GDP. decrease in saving. reverse wealth effect, caused by a decrease in stock market prices. decrease in income tax rates.

reverse wealth effect, caused by a decrease in stock market prices.

Unemployment involving a mismatch of the skills of unemployed workers and the skills required for available jobs is called: compositional unemployment. ! structural unemployment. cyclical unemployment. frictional unemployment.

structural unemployment

Answer the question on the basis of the following data. All figures are in billions of dollars. Refer to the data. NI is: $362. $402. $447. $372.

$402.

Use the following table for a hypothetical single-product economy. Refer to the data. Nominal GDP in year 3 is: $450. $100. $225. $150.

$450.

Refer to the information. Money supply M2 for this economy is: $130. $490. $630. $480.

$480.

Use the following balance sheet for the ABC National Bank in answering the question. Assume the required reserve ratio is 20 percent. Refer to the data. This commercial bank has excess reserves of: $5,000. $0. $12,000. $3,000.

$5,000.

At the end of 2012, U.S. households and nonprofit organizations held approximately __________ in mutual funds. $787 billion $15.7 trillion $6 trillion $5.3 trillion

$5.3 trillion

Answer the question on the basis of the following table for a commercial bank or thrift: Refer to the table. When the legal reserve ratio is 10 percent, the money-creating potential of this single bank is: $6,000. $0. $60,000. $30,000.

$6,000.

Which of the following statements best reflects the concept of present value? "You owe me $500, due at the end of the year, but I will reduce your debt to $450 if you pay me now." "The savings bond I bought five years ago is now worth $1,000." "The $5,000 in my savings account is worth less today than five years ago because of inflation." "My $100 savings bond will be worth $200 in 10 years."

"You owe me $500, due at the end of the year, but I will reduce your debt to $450 if you pay me now."

Answer the question on the basis of the following information. An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labor to produce its total output of 640 units. Each unit of capital costs $10; each unit of raw materials, $4; and each unit of labor, $3.Refer to the information. The per-unit cost of production in this economy is: $0.10. $1.00. $0.50. $0.05.

$0.10.

Refer to the diagram. The equilibrium price and quantity in this market will be: $1.60 and 290. $0.50 and 130. $1.00 and 200. $1.60 and 130.

$1.00 and 200.

Answer the question on the basis of the following table for a commercial bank or thrift: Refer to row 4 in the table. The number appropriate for space Z is: $10,000. $70,000. $48,000. zero.

$10,000.

Answer the question on the basis of the following table that illustrates the multiplier process. Refer to the given table. The change in income in round two will be: $24. $20. $16. $4.

$16.

If a U.S. importer can purchase 10,000 British pounds for $20,000,the rate of exchangeis: $1 = 2 Britishpounds in the UnitedStates. $1 = 2 Britishpounds in Great Britain. $2 = 1 Britishpound in the UnitedStates. $.5 = 1 Britishpound in GreatBritain.

$2 = 1 Britishpound in the UnitedStates.

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. Answer the following question on the basis of this information.The per-unit cost of production in the economy described is: $2. $.50. $1. $5.

$2.

Setup Corporation buys $100,000 of sand, rock, and cement to produce ready-mix concrete. It sells 10,000 cubic yards of concrete at $30 a cubic yard. The value added by Setup Corporation is: $300,000. zero dollars. $200,000.

$200,000.

Answer the question on the basis of the following information for a specific year in a hypothetical economy for which Okun's law is applicable: Refer to the given data. The amount of output being forgone by the economy is: $24 billion. $18 billion. $15 billion. $12 billion.

$24 billion.

Answer the question on the basis of the following data. All figures are in billions of dollars. Refer to the data. DI is: $402. $274. $329. $284.

$274.

Answer the question on the basis of the following data. All figures are in billions of dollars. Refer to the data. DI is: $402. $274. $329. $284.

$274.

Refer to the table. Per capita GDP was about: $303 in year 3 in Zorn. $105 in year 3 in Alta. $200 in year 1 in Zorn.

$303 in year 3 in Zorn

Refer to the table. Per capita GDP was about: $303 in year 3 in Zorn. $105 in year 3 in Alta. $200 in year 1 in Zorn. $5 in year 2 in Alta.

$303 in year 3 in Zorn.

Answer the question on the basis of the following data. All figures are in billions of dollars. Refer to the data. The gross domestic product is: $307. $282. $300. $326.

$307.

If actual GDP is $340 billion and there is a positive GDP gap of $20 billion, potential GDP is: $360 billion. $20 billion. $320 billion. $660 billion.

$320 billion.

Answer the question on the basis of the following data for a private closed economy. Refer to the data for a private closed economy. If gross investment is $12 billion, the equilibrium level of GDP will be: $350. $380. $360. $370.

$360.

If a $100 billion decrease in investment spending causes income to decline by $100 billion in the first round of the multiplier process and by $75 billion in the second round, income will eventually decline by: $400 billion. $200 billion. $300 billion. $500 billion.

$400 billion

Answer the question on the basis of the following information for a private closed economy. Assume that for the entire business sector of the economy there is $0 worth of investment projects that will yield an expected rate of return of 25 percent or more. But there are $15 worth of investments that will yield an expected rate of return of 20-25 percent; another $15 with an expected rate of return of 15-20 percent; and similarly an additional $15 of investment projects in each successive rate of return range down to and including the 0-5 percent range.Refer to the given information. If the real interest rate is 5 percent, what amount of investment will be undertaken? $30. $60. $15. $45.

$60.

Answer the question on the basis of the following national income data for the economy. All figures are in billions of dollars. The gross domestic product for the above economy is: $609. $592. $584. $623.

$623.

Refer to the table. If demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5), equilibrium price and quantity will be: $8 and 60 units. $7 and 50 units. $9 and 50 units. $10 and 60 units.

$8 and 60 units.

Answer the question on the basis of the following information for the Moolah Bank. Refer to the information and assume that Moolah Bank is "loaned up." If it receives a $100 deposit of currency, the banking system of which Moolah is a part could expand loans by: $1,000. $900. $90. $100.

$900.

A $1 billion increase in investment will cause a: (MPC - MPS) billion increase in GDP. (1/MPS) billion increase in GDP. (MPS) billion increase in GDP. (1 - MPC) billion increase in GDP.

(1/MPS) billion increase in GDP.

Answer the question on the basis of the following data for a hypothetical economy. Refer to the given data. At the $100 level of income, the average propensity to save is: .10. .20. .90. .25.

.10.

Refer to the given table. The marginal propensity to save is: .1. .5. .2.

.2.

Answer the question on the basis of the following consumption schedules. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars. Refer to the given data. The marginal propensity to consume in economy (1) is: .5. .7. .8. .3.

.7.

Refer to the given data. The marginal propensity to consume is: .80. .75. .25. .20.

.80.

Refer to the given data. The marginal propensity to consume is: .20. .25. .80. .75.

.80.

The average number of months between price changes for gasoline is: 0.2. 1.0. 1.8. 0.6.

0.6

Refer to the diagram. If aggregate expenditures in this economy are (C + Ig + Xn2), then the equilibrium levels of GDP and aggregate expenditures respectively will be: 0A and 0E. 0D and DJ. 0A and AH. 0B and 0F.

0D and DJ.

Use the list below to answer the following question:1. Improvements in technology.2. Increases in the supply (stock) of capital goods.3. Purchases of expanding output.4. Obtaining the optimal combination of goods, each at least-cost production.5. Increases in the quantity and quality of natural resources.6. Increases in the quantity and quality of human resources.Which set of items in the list would shift an economy's production possibilities curve outward? 1, 2, 5, and 6 only. 1, 3, and 4 only. 2, 4, 5, and 6 only. 2, 5, and 6 only.

1, 2, 5, and 6 only.

The following diagram is a flexibleexchange market for foreign currency:Refer to the diagram.At the equilibrium exchange rate: $8 will buy 1 euro. 1.25 euros will buy $1. $1 will buy8 euros. 0.8 euros will buy $1.

1.25 euros will buy $1.

The consumer price index was 177.1 in 2001 and 179.9 in 2002. Therefore, the rate of inflation in 2002 was about: 2.8 percent. 1.6 percent. 3.4 percent. 4.1 percent.

1.6 percent.

The multiplier is: 1/(1 - MPS). 1/MPS. 1/(1 + MPC). 1/MPC.

1/MPS.

Assume that a bank initially has no excess reserves. If it receives $5,000 in cash from a depositor and the bank finds that it can safely lend out $4,500, the reserve requirement must be: 20 percent. 25 percent. zero. 10 percent.

10 percent.

At an annual growth rate of 7 percent, real GDP will double in about: 10 years. 11½ years. 13½ years. 9

10 years.

At an annual growth rate of 7 percent, real GDP will double in about: 10 years. 11½ years. 13½ years. 9 years.

10 years.

At an annual growth rate of 7 percent, real GDP will double in about: 13½ years. 11½ years. 9 years. 10 years.

10 years.

Answer the question on the basis of the following information for a specific year in a hypothetical economy for which Okun's law is applicable: Refer to the given data. The size of the negative GDP gap as a percent of potential GDP for the economy is: 9 percent. 6 percent. 12 percent. 15 percent.

12 percent.

If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inflation rate is: 24 percent. 12 percent. 18 percent. 6 percent.

12 percent.

If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inflation rate is: 24 percent. 6 percent. 12 percent. 18 percent.

12 percent.

Answer the question on the basis of the following table for a particular country in which C is consumption expenditures, Ig is gross investment expenditures, G is government expenditures, X is exports, and M is imports. All figures are in billions of dollars. Each question is independent of other question using the same table, unless otherwise stated. Refer to the table. If the amounts of GDP supplied at the price levels shown (in descending order) are $27, $25, $22, $18, and $13, the equilibrium price level will be: 119. 125. 122. 128.

125.

The Federal Reserve System was created in: 1895. 1913. 1946. 1926.

1913.

If a $50 billion decrease in investment spending causes income to decline by $50 billion in the first round of the multiplier process and by $25 in the second round, the multiplier in the economy is: 10. 5. 3.33. 2.

Between 1950 and 2012, U.S. real GDP per capita grew at an average annual rate of about: 5.5 percent. 2.0 percent. 3.2 percent.

2.0 percent.

Between 1950 and 2012, U.S. real GDP per capita grew at an average annual rate of about: 5.5 percent. 4.2 percent. 2.0 percent.

2.0 percent.

Between 1950 and 2012, U.S. real GDP per capita grew at an average annual rate of about: 5.5 percent. 4.2 percent. 2.0 percent. 3.2 percent.

2.0 percent.

Answer the question below on the basis of the following information for a private closed economy: Refer to the information. The multiplier for this economy is: 2.5. 3. 4. 2.

2.5.

If the MPC is .6, the multiplier will be: 6.0. 2.5. 4.0. 1.67.

2.5.

In the diagram, the economy's short-run AS curve is line ___ and its long-run AS curve is line ___. 1; 3 2; 4 2; 1 3; 4

2; 1

Use the list below to answer the following question:1. Improvements in technology.2. Increases in the supply (stock) of capital goods.3. Purchases of expanding output.4. Obtaining the optimal combination of goods, each at least-cost production.5. Increases in the quantity and quality of natural resources.6. Increases in the quantity and quality of human resources.Which set of items in the list would move an economy from a point inside its production possibilities curve to a point on its production possibilities curve? 1, 2, 5, and 6 only. 1, 3, and 4 only. 3 and 4 only. 3 only.

3 and 4 only.

Answer the question on the basis of the following information. An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labor to produce its total output of 640 units. Each unit of capital costs $10; each unit of raw materials, $4; and each unit of labor, $3.Refer to the information. If the per-unit price of raw materials rises from $4 to $8 and all else remains constant, the per-unit cost of production will rise by about: 40 percent. 30 percent. 50 percent. 100 percent.

30 percent.

Answer the question on the basis of the following data for a private closed economy. Refer to the data. At the $370 billion level of DI, the APS is approximately: 1 percent. 7 percent. 16 percent. 4 percent.

4 percent.

Suppose nominal GDP in 2009 was $100 billion and in 2010 it was $260 billion. The general price index in 2009 was 100 and in 2010 it was 180. Between 2009 and 2010 the real GDP rose by approximately: 44 percent. 80 percent. 160 percent. 37 percent.

44 percent.

Answer the question on the basis of the following sequence of events involving fiscal policy: (1) The composite index of leading indicators turns downward for three consecutive months, suggesting the possibility of a recession. (2) Economists reach agreement that the economy is moving into a recession. (3) A tax cut is proposed in Congress. (4) The tax cut is passed by Congress and signed by the president. (5) Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover.Refer to the information. The operational lag of fiscal policy is reflected in event(s): 2 and 3. 1 and 2. 3 and 4. 5.

Refer to the table. Between years 1 and 2, real GDP grew by __________ percent in Alta. 3 10 5 4

If actual reserves in the banking system are $50,000, excess reserves are $5,000, and checkable deposits are $225,000, then the monetary multiplier is: 2. 10. 5. 4.

Answer the question on the basis of the following information about the hypothetical economy of Scoob. All figures are in millions. Refer to the given information. The unemployment rate in Scoob is: 5.0 percent. 6.9 percent. 2.5 percent. 3.2 percent.

6.9 percent.

Suppose that lenders want to receive a real rate of interest of 5 percent, and that they expect inflation to remain steady at 2 percent in the coming years. Based on this, lenders should charge a nominal interest rate of: 3 percent. 7 percent. 2 percent. 5 percent.

7 percent

Refer to the given table. The equilibrium interest rate is: 8 percent. 4 percent. 6 percent. 2 percent.

8 percent.

Which of the following would reduce GDP by the greatest amount? $20 billion increases in both government spending and taxes. A $20 billion decrease in government spending. $20 billion decreases in both government spending and taxes. A $20 billion increase in taxes.

A $20 billion decrease in government spending.

Which of the following represents the most contractionary fiscal policy? A $30 billion increase in government spending. A $30 billion tax increase. A $30 billion tax cut. A $30 billion decrease in government spending.

A $30 billion decrease in government spending.

If the demand curve for product B shifts to the right as the price of product A declines, then: A is a superior good and B is an inferior good. both A and B are inferior goods. A and B are complementary goods. is an inferior good and B is a superior good. A is an inferior good and B is a superior good.

A and B are complementary goods.

Which one of the following would not shift the aggregate demand curve? A change in the price level. An increase in personal income tax rates. Depreciation of the international value of the dollar. A decline in the interest rate at each possible price level.

A change in the price level.

Which one of the following would not shift the aggregate demand curve? Depreciation of the international value of the dollar. A change in the price level. A decline in the interest rate at each possible price level. An increase in personal income tax rates.

A change in the price level.

Which of the following is an example of a supply shock? A dramatic increase in energy prices increases production costs for firms in the economy. A surprise tax rebate from the government gives people more money to spend. Government increases spending on education. A surge in consumer optimism prompts increased buying of goods and services.

A dramatic increase in energy prices increases production costs for firms in the economy.

Which of the following is an example of a supply shock? A surprise tax rebate from the government gives people more money to spend. A surge in consumer optimism prompts increased buying of goods and services. A dramatic increase in energy prices increases production costs for firms in the economy. Government increases spending on education.

A dramatic increase in energy prices increases production costs for firms in the economy.

efer to the figures. Which of the following events would most likely result in inflation? A shift from D2 to D1 in Figure A. A shift from D2 to D3 in Figure A. A shift from D2 to D1 in Figure B. A shift from D2 to D3 in Figure B.

A shift from D2 to D3 in Figure A

Answer the question on the basis of the following production possibilities tables for two countries, North Cantina and South Cantina: Refer to the tables. Suppose that North Cantina is producing 2 units of capital goods and 17 units of consumer goods while South Cantina is producing 2 units of capital goods and 21 units of consumer goods. We can conclude that: A. South Cantina is fully and efficiently using its resources, but North Cantina is not. B. North Cantina is fully and efficiently using its resources, but South Cantina is not. C. both South Cantina and North Cantina are fully and efficiently using their resources. D.neither South Cantina nor North Cantina is fully and efficiently using its resources.

A. South Cantina is fully and efficiently using its resources, but North Cantina is not.

The shift of the budget line from cd to ab in the figure is consistent with: A. a decrease in money income. B.decreases in the prices of both M and N. C.an increase in the price of M and a decrease in the price of N. D.an increase in money income.

A. a decrease in money income.

The fact that the slope of the production possibilities curve becomes steeper as we move down along the curve indicates that: A. the principle of increasing opportunity costs is relevant. B. society's resources are limited. C. the opportunity cost of producing each product is constant. D. resources are perfectly shiftable between alternative uses.

A. the principle of increasing opportunity costs is relevant.

Refer to the diagram for a private closed economy. The multiplier is: FE/GF. AB/GF. GF/GB. GF/DE.

AB/GF.

Which of the following economic regions has experienced the leastgrowth in real GDP per capita since 1820? Asia excluding Japan. Latin America. Western Europe. Africa.

Africa

If the exchangerate changes so that more Mexicanpesos are required to buy a dollar,then: more U.S. goods and services will be demanded by the Mexicans. Americanswill buy more Mexican goods and services. the dollar has depreciated in value. the peso has appreciated in value.

Americanswill buy more Mexican goods and services.

Which of the following would most likely reduce aggregate demand (shift the AD curve to the left)? An appreciation of the U.S. dollar. Increased consumer optimism regarding future economic conditions. Increased government spending on military equipment. A reduced amount of excess capacity.

An appreciation of the U.S. dollar.

Assuming competitive markets with typical supply and demand curves, which of the following statements is correct? An increase in supply with no change in demand will result in a decline in sales. An increase in supply with no change in demand will result in an increase in price. An increase in supply with a decrease in demand will result in an increase in price. An increase in demand with no change in supply will result in an increase in sales.

An increase in demand with no change in supply will result in an increase in sales.

Assume the current equilibrium level of income is $200 billion as compared to the full-employment income level of $240 billion. If the MPC is .625, what change in aggregate expenditures is needed to achieve full employment? An increase of $25 billion. A decrease of $12 billion. An increase of $15 billion. An increase of $10 billion.

An increase of $15 billion.

Refer to the figures. Which figure(s) represent(s) a situation where firms are likely to hold inventories to accommodate unexpected changes in demand? Both A and B. B only. A only. Neither A nor B.

B only.

Economic systems differ according to which two main characteristics? A. The political system in place and the degree of scarcity facing the economy. B. Who owns the factors of production and the methods used to coordinate economic activity. C. The technology used in production and the quantity and quality of natural resources. D. How goods are produced and who gets them.

B. Who owns the factors of production and the methods used to coordinate economic activity.

A positive statement is one that is: A. derived by deduction. B. objective and is based on facts. C. derived by induction. D. subjective and is based on a value judgment.

B. objective and is based on facts

Which of the following would an economist consider to be investment? A stockbroker buying 10,000 shares of Starbucks stock. Oprah buying a $10 million home from a fellow celebrity. All of these. Boeing building a new factory.

Boeing building a new factory.

Which of the following statements is correct? Built-in stability works in halting inflation, but it cannot alleviate unemployment. Built-in stability only partially offsets fluctuations in economic activity. Built-in stability can be relied on to eliminate completely any fluctuation in economic activity. Built-in stability has eliminated the need for discretionary fiscal policy.

Built-in stability only partially offsets fluctuations in economic activity.

Which of the following did not contribute directly to the Great Recession? Crisis in the mortgage lending market. Freezing credit markets. Pessimism originating from financial market turmoil. Bursting of the dot.com stock market bubble.

Bursting of the dot.com stock market bubble.

Use the following diagrams for the U.S. economy to answer the following question. Which of the diagrams best portrays the effects of an increase in foreign spending on U.S. products? A. B. D. C.

The problems of aggregate inflation and unemployment are: A.peculiar to command economies. B. major topics of microeconomics. C. major topics of macroeconomics. D. not relevant to the U.S. economy.

C. major topics of macroeconomics.

Refer to the given diagram. The marginal propensity to consume is equal to: CB/AB. CD/CF. CF/CD. AE/0E.

CB/AB.

In a mixed open economy, the equilibrium GDP exists where: Ca + Ig + Xn intersects the 45-degree line. Ca + Ig + Xn = Sa + T. Ca + Ig + Xn + G = GDP. Ca + Ig = Sa + T + X.

Ca + Ig + Xn + G = GDP.

Which of the following statements is most accurate about the prospects for poorer ("follower") countries catching up with richer ("leader") countries? Catching up is possible as "follower countries" tend to grow faster than "leader countries." Catching up is unlikely to occur because their growth rates are the same on average. Catching up is possible, but only if growth rates in leader countries fall to zero or become negative. Catching up is unlikely to occur because richer countries tend to grow at a faster rate.

Catching up is possible as "follower countries" tend to grow faster than "leader countries."

(Last Word) In response to the Great Recession, the federal government engaged in significant deficit-funded spending, but it did not fully achieve the desired result. Which of the following best explains why the fiscal policy actions fell short of their objective? Although the fiscal stimulus increased consumer spending significantly, it mostly went to purchase foreign-produced goods and services. Monetary policy counteracted fiscal policy, keeping the unemployment rate from falling as much as intended. The fiscal stimulus caused massive inflation that further disrupted economic activity. Consumers did not respond to the fiscal stimulus as well as hoped, as they put more income into saving and repaying debt.

Consumers did not respond to the fiscal stimulus as well as hoped, as they put more income into saving and repaying debt.

Refer to the diagram. At disposable income level D, consumption is equal to: CD/D. CD. CD plus BD. D minus CD.

D minus CD.

Which of the following is a labor resource? A. A piece of software used by a firm. B. Silicon (sand) used to make computer chips. C. A computer. D. A computer programmer.

D. A computer programmer.

Refer to the given market-for-money diagrams. The asset demand for money is shown by: D2. D3. D1. S.

D2.

Refer to the diagram. If aggregate supply is AS1 and aggregate demand is AD0, then: at any price level above G a shortage of real output would occur. F represents a price level that would result in a shortage of real output of AC. F represents a price level that would result in a surplus of real output of AC. a surplus of real output of GH would occur.

F represents a price level that would result in a shortage of real output of AC.

Which of the following statements concerning the equilibrium level of GDP is incorrect? There will be no tendency for businesses to alter the aggregate rate of production. Leakages equal injections. No unintended changes in inventories will occur. Full employment will necessarily be realized.

Full employment will necessarily be realized.

Refer to the diagram that applies to a private closed economy. The APC is equal to 1 at income level: H. G. M. J.

Which of the following best measures improvements in the standard of living of a nation? Growth of nominal GDP. Growth of real GDP. Growth of real GDP per capita. Growth of national income.

Growth of real GDP per capita.

Refer to the diagram. Which of the following would shift the investment demand curve from ID1 to ID3? Higher expected rates of return on investment. A higher interest rate. A lower interest rate. Lower expected rates of return on investment.

Higher expected rates of return on investment.

Which of the following best defines disposable income? The market value of the annual output net of consumption of fixed capital. The before-tax income received by households. All income earned by resource suppliers for their current contributions to production. Income received by households less personal taxes.

Income received by households less personal taxes.

(Last Word) In The General Theory of Employment, Interest, and Money: J. B. Say developed "Say's law." John Maynard Keynes attacked the classical economist's contention that recession or depression will automatically cure itself. Adam Smith stated his idea of the invisible hand. Thorstein Veblen poked fun at the leisure class.

John Maynard Keynes attacked the classical economist's contention that recession or depression will automatically cure itself.

Refer to the graph. Which of the three Security Market Lines depicts the situation where investors most dislike risk? Line C. Line B. It cannot be determined from the graph. Line A

Line C.

Lower expected rates of return on investment.

Last Word) Which of the following explanations argues that the Great Recession resulted from asset-price bubbles caused by euphoria and debt-fueled speculation? Minsky explanation. Stimulus explanation. Austrian explanation. Structural explanati

Minsky explanation

(Last Word) In response to the Great Recession, the federal government engaged in significant deficit-funded spending. What was the result of that spending over the first three years? Neither economic growth nor unemployment responded as well as many economists had predicted. Economic growth remained sluggish, but the unemployment rate fell to predicted levels. Both economic growth and the unemployment rate responded well, reaching the fiscal policy targets set by the government. Economic growth responded in accordance with predictions, but unemployment remained much higher than anticipated.

Neither economic growth nor unemployment responded as well as many economists had predicted.

Which of the following countries would economists say definitively is achieving modern economic growth? South Africa experiences a 4.2 percent increase in real GDP. Nigeria experiences a 2.7 percent increase in real GDP per person. Zimbabwe experiences a 5.6 percent increase in nominal GDP. Ghana experiences a 3.6 percent increase in nominal GDP per person.

Nigeria experiences a 2.7 percent increase in real GDP per person.

If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP? Nominal GDP would rise, but real GDP would be unchanged. Real GDP would rise, but nominal GDP would be unchanged. Nominal and real GDP would both rise. Nominal and real GDP would both be unchanged.

Nominal GDP would rise, but real GDP would be unchanged.

If real GDP falls from one period to another, we can conclude that: inflation occurred. None of these necessarily occurred. deflation occurred. nominal GDP fell.

None of these necessarily occurred.

Which of the following tools of monetary policy is flexible and able to affect bank reserves quickly and by relatively specific amounts? The reserve ratio. The discount rate. Open-market operations. The federal funds rate.

Open-market operations.

Transfer payments are included in: NDP. GDP. PI. NI.

PI.

Which of the following is not common to all investments? Investors are required to pay some price to acquire them. Owners are given the opportunity to receive future payments. Paying a positive rate of interest. Future payments are typically risky.

Paying a positive rate of interest.

What is the primary reason that changes in total spending lead to cyclical changes in output and employment? Changes in total spending cause supply shocks that cause cyclical variation. Prices are sticky in the short run. Government is unable to respond by changing the amount of money in circulation. Prices are flexible in the long run.

Prices are sticky in the short run.

Which of the following statements best describes price flexibility in the economy? Prices tend to be just as sticky in the short run as in the long run. Prices tend to be sticky in the short run but become more flexible over time. Prices tend to be flexible in the short run but become more sticky over time. Prices tend to be sticky in the short run and stuck in the long run.

Prices tend to be sticky in the short run but become more flexible over time.

Which of the following is a fundamental characteristic of the market system? Property rights. Central planning by government. Unselfish behavior. Government-set wages and prices.

Property rights

Which of the following is a primary difference between QE2 and QE3? QE2 was vague about the size of the bond purchases; QE3 gave specific values. QE2 was open-ended; QE3 had a specific deadline. There were no significant differences; QE3 was just a continuation of QE2. QE2 had a specific deadline; QE3 was open-ended.

QE2 had a specific deadline; QE3 was open-ended.

Refer to the figure. Suppose that the economy is currently operating at the intersection of AS and AD2, and that the full-employment level of output is Y. If contractionary fiscal policy and accompanying multiplier effects move aggregate demand from AD2 to AD1, what will be the effect on real GDP and the price level? Real GDP will fall to X and the price level will remain unchanged, assuming a ratchet effect occurs. Real GDP will fall to Y and the price level will fall to P0, assuming a ratchet effect occurs. Real GDP will fall to X and the price level will fall to P0, assuming a ratchet effect occurs. Real GDP will fall to Y and the price level will remain unchanged, assuming a ratchet effect occurs.

Real GDP will fall to X and the price level will remain unchanged, assuming a ratchet effect occurs.

Which of the following statements is correct for a private closed economy? Saving equals planned investment only at the equilibrium level of GDP. All levels of GDP where planned investment exceeds saving will be too high for equilibrium. Planned and actual investment are identical at all possible levels of GDP. Saving equals actual investment only at the equilibrium level of GDP.

Saving equals planned investment only at the equilibrium level of GDP.

Which of the following is common to all investments? Owners are guaranteed future payments. The payment of interest. Government insurance backs them. Some price must be paid to acquire them.

Some price must be paid to acquire them.

Present value is best defined as the: expected future value of a financial asset purchased today. worth in the future of a current flow of returns or costs. worth or value today of future expected returns or costs. current worth of a financial asset purchased in the past.

worth or value today of future expected returns or costs.

Refer to the diagram. Which tax system will generate the largest cyclical deficits? T1. T4. T2. T3.

T1.

Which of the following programs provides loans of U.S. securities to primary dealers for one-month terms, in an effort to enhance liquidity in U.S. securities markets? Term Securities Lending Facility. Term Asset-Backed Securities Loan Facility. Commercial Paper Funding Facility. Primary Dealer Credit Facility.

Term Securities Lending Facility.

Which of the following is correct? The transactions demand for money is downsloping because the opportunity cost of holding money varies inversely with the interest rate. The asset demand for money is downsloping because the opportunity cost of holding money declines as the interest rate rises. The asset demand for money is downsloping because the opportunity cost of holding money increases as the interest rate rises. The asset demand for money is downsloping because bond prices and the interest rate are directly related.

The asset demand for money is downsloping because the opportunity cost of holding money increases as the interest rate rises.

Which of the following would most likely move the economy into a recession in the short term? The central bank printing less money than was anticipated. Invention of a new product that most consumers want to buy. Congress passing a reduction in personal income tax rates. Innovations in management that enhance worker productivity.

The central bank printing less money than was anticipated.

Which of the followingwill generate a demand for country X's currency in the foreign exchange market? The importsof country X. The desireof foreigners to buy stocks and bonds of firms in country X. Charitable contributions by country X's citizens to citizensof developing nations. Travelby citizens of countryX in other countries.

The desireof foreigners to buy stocks and bonds of firms in country X.

Other things equal, which of the following would increase labor productivity the most? The increase in inputs of labor exceeds the increase in the stock of real capital. Inputs of labor increase and the stock of real capital remains constant. The increase in the stock of real capital exceeds the increase in inputs of labor. The stock of real capital and inputs of labor increase proportionately.

The increase in the stock of real capital exceeds the increase in inputs of labor.

Which of the following is an intermediate good? The purchase of baseball uniforms by a professional baseball team. The purchase of gasoline for a ski trip to Colorado. The purchase of jogging shoes by a professor. The purchase of a pizza by a college student.

The purchase of baseball uniforms by a professional baseball team.

In making international comparisons of living standards using GDP, which of the following is not adjusted for in the calculation? The quantity of resources available to the economy. Different currency values. Population size. Purchasing power parity.

The quantity of resources available to the economy

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by: an increase in the price of coffee. consumers expecting donut prices to fall. a change in buyer tastes. an increase in the cost of making donuts.

a change in buyer tastes.

Refer to the diagram, in which Qf is the full-employment output. The shift of the aggregate demand curve from AD3 to AD2 is consistent with: an expansionary fiscal policy. demand-pull inflation. a major recession. a contractionary fiscal policy.

a contractionary fiscal policy.

An appropriate fiscal policy for a severe recession is: a decrease in government spending. appreciation of the dollar. an increase in interest rates. a decrease in tax rates.

a decrease in tax rates.

A large negative GDP gap implies: an excess of imports over exports. a high rate of unemployment. a low rate of unemployment. a sharply rising price level.

a high rate of unemployment

The period in the U.S. economy from 1995 to 2012 is characterized by: the end of the business cycle. a higher trend rate of productivity growth. a higher trend rate of saving. a higher natural rate of unemployment.

a higher trend rate of productivity growth

When economists say that money serves as a medium of exchange, they mean that it is: a means of payment. a monetary unit for measuring and comparing the relative values of goods. declared as legal tender by the government. a way to keep wealth in a readily spendable form for future use.

a means of payment.

The fact that international specialization and trade based on comparative advantage canincrease world output is demonstrated by the realitythat: the production possibilities curvesof any two nations are identical. a nation'sproduction possibilities and trading possibilities lines coincide. a nation's trading possibilities line lies to the right of its production possibilities line. a nation's production possibilities line lies to the right of its trading possibilities line.

a nation's trading possibilities line lies to the right of its production possibilities line.

Refer to the diagram, in which Qf is the full-employment output. If the economy's current aggregate demand curve is AD0, it is experiencing: a negative GDP gap. a positive GDP gap. inflation. an adverse supply shock.

a negative GDP gap.

Refer to the diagram, in which Qf is the full-employment output. If the economy's current aggregate demand curve is AD0, it is experiencing: inflation. an adverse supply shock. a negative GDP gap. a positive GDP gap.

a negative GDP gap.

Unemployment describes the condition where: a person cannot get a job but is willing to work and is actively seeking work. equipment and machinery are going unused. a person does not have a job, regardless of whether or not he or she wants one.

a person cannot get a job but is willing to work and is actively seeking work.

Unemployment describes the condition where: any resource sits idle. equipment and machinery are going unused. a person does not have a job, regardless of whether or not he or she wants one. a person cannot get a job but is willing to work and is actively seeking work.

a person cannot get a job but is willing to work and is actively seeking work.

A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP than will a $1 decline in taxes because: taxes vary directly with income. a portion of a tax cut will be saved. government spending increases the money supply and a tax reduction does not. government spending is more employment-intensive than is either consumption or investment spending.

a portion of a tax cut will be saved.

Refer to the data for a fictional economy. The changes in the budget conditions between 1998 and 1999 best reflect: a recession. demand-pull inflation. an expansionary fiscal policy. a contractionary fiscal policy.

a recession.

The problem of cyclical asymmetry refers to the idea that: an expansionary monetary policy can force an expansion of the money supply, but a restrictive monetary policy may not achieve a contraction of the money supply. the monetary authorities have been less willing to use an expansionary monetary policy than they have a restrictive monetary policy. cyclical downswings are typically of longer duration than cyclical upswings. a restrictive monetary policy can force a contraction of the money supply, but an expansionary monetary policy may not achieve an increase in the money supply.

a restrictive monetary policy can force a contraction of the money supply, but an expansionary monetary policy may not achieve an increase in the money supply.

Refer to the table. Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were artificially set at $6: a shortage of 40 units would occur. a surplus of 40 units would occur. the market would clear. demand would change from columns (3) and (2) to columns (3) and (1).

a shortage of 40 units would occur.

Refer to the diagram. Assume that G and T1 are the relevant curves, the economy is currently at A, and the full-employment GDP is B. This economy has a(n): cyclically adjusted budget surplus. actual budget surplus. actual budget deficit. cyclically adjusted budget deficit.

actual budget surplus.

Planned investment plus unintended increases in inventories equals: consumption. unintended saving. actual investment. consumption minus saving.

actual investment.

Refer to the diagram for a private closed economy. At the $300 level of GDP: saving exceeds planned investment. aggregate expenditures and GDP are equal. consumption is $200 and planned investment is $50. consumption plus saving is $400.

aggregate expenditures and GDP are equal

Suppose an economist says that "other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that: A. all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant. B. one cannot generalize about the relationship between the price of bananas and the quantity purchased. C. the quantity of bananas purchased determines the price of bananas. D.economists can conduct controlled laboratory experiments.

all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant.

Answer the question on the basis of the following information: Suppose 30 units of product A can be produced by employing just labor and capital in the four ways shown below. Assume the prices of labor and capital are $2 and $3 respectively. Refer to the information. If the price of product A is $0.50, the firm will realize: an economic profit of $4. an economic profit of $6. a loss of $3. an economic profit of $2.

an economic profit of $2.

All of the following are economic implications of the 1995-2012 rise in the average rate of productivity growth except: a lower natural rate of unemployment. a greater rate of economic growth. larger outward shifts of the economy's production possibilities curve. an end to the business cycle.

an end to the business cycle.

Refer to the given diagram. Consumption will be equal to income at: point C. an income of E. point D. an income of F.

an income of E.

The effect of a government surplus on the equilibrium level of GDP is substantially the same as: a decrease in imports. an increase in consumption. an increase in investment. an increase in saving.

an increase in saving.

The investment demand curve will shift to the left as a result of: increased business optimism with respect to future economic conditions. a decrease in business taxes. a decrease in labor costs. ! an increase in the excess production capacity available in industry.

an increase in the excess production capacity available in industry.

Refer to the diagrams. The numbers in parentheses after the AD1, AD2, and AD3 labels indicate the levels of investment spending associated with each curve. All figures are in billions. If the MPC for the economy described by the figures is 0.8: an increase in the money supply from $80 to $100 will shift the aggregate demand curve rightward by $50 billion at each price level. a decrease in the interest rate from 6 percent to 3 percent will shift the aggregate demand curve leftward by $50 billion at each price level. an increase in the money supply from $80 to $100 will shift the aggregate demand curve leftward by $40 billion at each price level. a decrease in the interest rate from 9 percent to 6 percent will shift the aggregate demand curve leftward by $100 billion at each price level.

an increase in the money supply from $80 to $100 will shift the aggregate demand curve rightward by $50 billion at each price level.

In situations of sticky prices and negative demand shocks, we would expect firms to: build up inventories before reducing production. reduce production before building up inventories. deplete inventories before increasing production. lower prices before reducing production or building up inventories.

build up inventories before reducing production.

Recurring upswings and downswings in an economy's real GDP over time are called: recessions. output yo-yos. business cycles. total product oscillations.

business cycles.

Answer the question on the basis of the following consolidated balance sheet of the commercial banking system. Assume that the reserve requirement is 10 percent. All figures are in billions and each question should be answered independently of changes specified in any preceding ones. Refer to the given data. Suppose the Fed wants to increase the money supply by $400 billion to drive down interest rates and stimulate the economy. Assuming that the money multiplier is operating to full effect, to accomplish the desired increase, the Fed could: buy $20 billion of U.S. securities from the banks. sell $40 billion of U.S. securities to the banks. sell $20 billion of U.S. securities to the banks. buy $40 billion of U.S. securities from the banks.

buy $40 billion of U.S. securities from the banks.

Given the annual rate of inflation, the "rule of 70" allows one to: determine when the value of a real asset will approach zero. calculate the number of years required for the price level to double. calculate the accompanying rate of unemployment. determine whether the inflation is demand-pull or cost-push.

calculate the number of years required for the price level to double.

Refer to the figures. If government policy can be used to affect the level of demand in the economy, these figures suggest that government policy: can be used to simultaneously affect the levels of output and prices. cannot affect output in either the very short run or the longer run. can affect the level of output in the very short run, when prices are stuck.

can affect the level of output in the very short run, when prices are stuck.

Answer the question on the basis of the following information about a hypothetical economy: Refer to the given information. The rate of inflation: cannot be determined from the data. is 110 percent. is 0 percent. is 10 percent.

cannot be determined from the data.

Refer to the diagram in which T is tax revenues and G is government expenditures. All figures are in billions. The equilibrium level of GDP in this economy: cannot be determined from the information given. is $400. is greater than $400. is less than $400.

cannot be determined from the information given.

The multiplier is defined as: change in GDP - initial change in spending. change in GDP/initial change in spending. change in GDP × initial change in spending. 1 - MPS.

change in GDP/initial change in spending.

In an economy experiencing a persistently falling price level: changes in nominal GDP overstate changes in real GDP. potential GDP will necessarily exceed actual GDP. changes in nominal GDP understate changes in real GDP. changes in nominal GDP may either overstate or understate changes in real GDP.

changes in nominal GDP understate changes in real GDP.

Digital cameras and memory cards are: independent goods. substitute goods. complementary goods. inferior goods.

complementary goods.

In national income accounting, the consumption category of expenditures includes purchases of: changes in business inventories. consumer durable goods, consumer nondurable goods, and services. consumer durable goods and consumer nondurable goods but not services.

consumer durable goods, consumer nondurable goods, and services.

If the MPC is .8 and disposable income is $200, then: consumption and saving cannot be determined from the information given. personal consumption expenditures will be $80. saving will be $40. saving will be $20

consumption and saving cannot be determined from the information given.

f the marginal propensity to save is 0.2 in an economy, a $20 billion rise in investment spending will increase: consumption by $80 billion. GDP by $20 billion. saving by $25 billion. GDP by $120 billion.

consumption by $80 billion.

Refer to the diagram for a private closed economy. At the $400 level of GDP: consumption is $300 and planned investment is $50 so that aggregate expenditures are $350. consumption is $350 and planned investment is zero so that aggregate expenditures are $350. aggregate expenditures exceed GDP with the result that GDP will rise. consumption is $300 and actual investment is $100 so that aggregate expenditures are $400.

consumption is $300 and planned investment is $50 so that aggregate expenditures are $350.

If a lump-sum income tax of $25 billion is levied and the MPS is .20, the: consumption schedule will shift downward by $20 billion. consumption schedule will shift upward by $25 billion. consumption schedule will shift downward by $25 billion. saving schedule will shift upward by $5 billion.

consumption schedule will shift downward by $20 billion.

if a lump-sum income tax of $25 billion is levied and the MPS is .20, the: consumption schedule will shift downward by $20 billion. consumption schedule will shift upward by $25 billion. consumption schedule will shift downward by $25 billion. saving schedule will shift upward by $5 billion.

consumption schedule will shift downward by $20 billion.

The consumption schedule directly relates: consumption to saving. consumption to the level of disposable income. disposable income to domestic income. saving to the level of disposable income.

consumption to the level of disposable income.

"Under central planning, some group has to decide how to get the necessary inputs produced in the right amounts and delivered to the right places at the right time. This is a nearly impossible task without markets and profits." This quotation best identifies the: incentive problem under central planning. self-sufficiency dilemma under communism. resource overcommitment problem under communism. coordination problem under central planning.

coordination problem under central planning.

Commercial banks create money when they: accept cash deposits from the public. create checkable deposits in exchange for IOUs. purchase government securities from the central banks. raise their interest rates.

create checkable deposits in exchange for IOUs.

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X.Refer to the given information. An increase in the price of a product that is a complement to X will: decrease S, decrease P, and decrease Q. increase D, increase P, and decrease Q. increase D, increase P, and increase Q. decrease D, decrease P, and decrease Q.

decrease D, decrease P, and decrease Q.

f government increases its tax revenues by $15 billion and the MPC is 2/3, then we can expect the equilibrium GDP to: decrease by $55 billion. decrease by $35 billion. decrease by $30 billion. decrease by $45 billion.

decrease by $30 billion.

Other things equal, appreciation of the dollar: increases aggregate demand in the United States and may decrease aggregate supply by reducing the prices of imported resources. increases aggregate demand in the United States and may increase aggregate supply by reducing the prices of imported resources. decreases aggregate demand in the United States and may reduce aggregate supply by increasing the prices of imported resources. decreases aggregate demand in the United States and may increase aggregate supply by reducing the prices of imported resources.

decreases aggregate demand in the United States and may increase aggregate supply by reducing the prices of imported resources.

The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the: determinants of aggregate supply. determinants of aggregate demand. sole determinants of the equilibrium price level and the equilibrium real output. real-balances, interest-rate, and foreign purchases effects.

determinants of aggregate demand.

The aggregate demand curve is: downsloping because production costs decrease as real output rises. downsloping because of the interest-rate, real-balances, and foreign purchases effects. vertical under conditions of full employment. horizontal when there is considerable unemployment in the economy.

downsloping because of the interest-rate, real-balances, and foreign purchases effects.

Capital goods, because their purchases can be postponed like ______ consumer goods, tend to contribute to ________ in investment spending. durable; instability nondurable; stability durable; stability nondurable; instability

durable; instability

In order for mutually beneficial tradeto occur between two otherwise isolated nations: each nation must face constant costs in the production of the good it exports. each nation must be able to produceat least one good relatively cheaper than the other. one nation's production must be labor-intensive while the other nation's production is capital-intensive. each nation must be able to produceat least one good absolutely cheaper than the other.

each nation must be able to produceat least one good relatively cheaper than the other.

When aggregate demand declines, the price level may remain constant, at least for a time, because: firms individually may fear that their price cut may set off a price war. price cuts tend to increase efficiency wages. product markets are highly competitive. menu costs rise.

firms individually may fear that their price cut may set off a price war.

Prices and wages tend to be: flexible both upward and downward. flexible upward, but inflexible downward. inflexible both upward and downward. flexible downward, but inflexible upward.

flexible upward, but inflexible downward.

A market in whichthe money of one nation is exchangedfor the money of another nation is a: bond market. resourcemarket. stock market. foreignexchange market.

foreignexchange market.

Assume that Kyle is temporarily unemployed because he has voluntarily quit his job with company A and will begin a better job next week with company B. Kyle will be considered as: cyclically unemployed. structurally unemployed. frictionally unemployed.

frictionally unemployed.

he natural rate of unemployment is the: full-employment unemployment rate. unemployment rate experienced at the depth of a depression. unemployment rate experienced by the most-skilled workers in the economy. unemployment rate experienced by the least-skilled workers in the economy.

full-employment unemployment rate.

The crowding-out effect suggests that: government borrowing to finance the public debt increases the real interest rate and reduces private investment. tax increases are paid primarily out of saving and therefore are not an effective fiscal device. it is very difficult to have excessive aggregate spending in a capitalist economy. consumer and investment spending always vary inversely.

government borrowing to finance the public debt increases the real interest rate and reduces private investment.

If net foreign factor income is zero and there are no statistical discrepancies, the sum of national income and the consumption of fixed capital equals: personal income. gross domestic product. disposable income. net domestic product.

gross domestic product.

Indy owns 100 shares of stock in Pet Mart Corporation that he purchased for $20 per share. Every year he has received, from company profits, $1 for each share he owns.Refer to the information given. Indy should necessarily sell his stock if: any of these circumstances occur. he expects the sum of future capital gains and dividends to be negative. the company stops paying dividends. the price falls below $20 per share.

he expects the sum of future capital gains and dividends to be negative.

The period in the U.S. economy from 1995 to 2012 is characterized by: the end of the business cycle. higher trend rate of productivity growth. a higher trend rate of saving. a higher natural rate of unemployment.

higher trend rate of productivity growth.

The immediate-short-run aggregate supply curve is: upsloping. vertical. horizontal. downsloping.

horizontal.

Refer to the diagram of the market for money. The equilibrium interest rate is: i1. i2. not determinable without additional information. i3.

i2.

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the: substitution effect. income effect. cost effect. inflationary effect.

income effect

The foreign purchases effect suggests that a decrease in the U.S. price level relative to other countries will: shift the aggregate supply curve leftward. decrease U.S. exports and increase U.S. imports. shift the aggregate demand curve leftward. increase U.S. exports and decrease U.S. imports.

increase U.S. exports and decrease U.S. imports.

The consumption schedule is drawn on the assumption that as income increases, consumption will: increase absolutely but decline as a percentage of income. increase absolutely but remain constant as a percentage of income. be unaffected. increase both absolutely and as a percentage of income.

increase absolutely but decline as a percentage of income.

The consumption schedule is drawn on the assumption that as income increases, consumption will: increase absolutely but decline as a percentage of income. increase both absolutely and as a percentage of income. be unaffected. increase absolutely but remain constant as a percentage of income.

increase absolutely but decline as a percentage of income.

Other things equal, if $100 billion of government purchases (G) is added to private spending (C + Ig + Xn), GDP will: fall by $100 billion. increase by less than $100 billion. increase by $100 billion. increase by more than $100 billion.

increase by more than $100 billion.

Answer the question on the basis of the following information for a private closed economy: Refer to the information. In this economy, a 3 percentage point decrease in the interest rate will: increase equilibrium GDP by $200. increase equilibrium GDP by $100. decrease equilibrium GDP by $50. increase equilibrium GDP by $50.

increase equilibrium GDP by $100.

With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will: reduce the quantity demanded but not shift the demand curve. increase equilibrium price and quantity if the product is a normal good. decrease equilibrium price and quantity if the product is a normal good. have no effect on equilibrium price and quantity.

increase equilibrium price and quantity if the product is a normal good.

Suppose the price level is fixed, the MPC is .5, and the GDP gap is a negative $100 billion. To achieve full-employment output (exactly), government should: increase government expenditures by $100 billion. reduce taxes by $200 billion. increase government expenditures by $50 billion. reduce taxes by $50 billion.

increase government expenditures by $50 billion.

In the diagram, a shift from AS2 to AS3 might be caused by a(n): decrease in interest rates. decrease in the prices of domestic resources. increase in business taxes and costly government regulation. decrease in the price level.

increase in business taxes and costly government regulation.

Refer to the diagram. Other things equal, a shift of the aggregate supply curve from AS0 to AS1 might be caused by a(n): increase in government regulation. decline in nominal wages. increase in productivity. increase in aggregate demand.

increase in government

Refer to the diagram, which shows demand and supply conditions in the competitive market for product X. A shift in the demand curve from D0to D1 might be caused by a(n): decrease in income if X is an inferior good. increase in the price of substitute product Y. increase in the price of complementary good Y. increase in money incomes if X is a normal good.

increase in the price of complementary good Y.

In the diagram, a shift from AS1 to AS3 might be caused by a(n): increase in the prices of imported resources. decrease in the prices of domestic resources. increase in productivity. decrease in business taxes.

increase in the prices of imported resources.

Refer to the figure. Assuming this market is representative of the economy as a whole, a negative demand shock will most likely: cause inflation. increase unemployment. lower prices but leave output unaffected. reduce both prices and output.

increase unemployment.

If in some year gross investment was $120 billion and net investment was $65 billion, then in that year the country's capital stock: may have either increased or decreased. decreased by $55 billion. increased by $65 billion. increased by $55 billion.

increased by $65 billion.

Consider This) Over the past several decades, the percentage of women in the paid U.S. workforce has: increased due to higher wages, expanded job accessibility, changing preferences and attitudes, and other factors. increased for unmarried women but decreased for married women. decreased because relatively more women are staying home to raise their children. increased in spite of declining wages for women.

increased due to higher wages, expanded job accessibility, changing preferences and attitudes, and other factors.

Prices tend to be sticky because: foreign competition discourages domestic firms from price changes. most firms have agreements with each other to fix prices at profit-maximizing levels. government controls most prices. firms are worried that frequent price changes would annoy consumers.

irms are worried that frequent price changes would annoy consumers.

Consider This) Over the past several decades, the percentage of women in the paid U.S. workforce has: decreased because relatively more women are staying home to raise their children. increased in spite of declining wages for women. increased due to higher wages, expanded job accessibility, changing preferences and attitudes, and other factors. increased for unmarried women but decreased for married women.

increased due to higher wages, expanded job accessibility, changing preferences and attitudes, and other factors.

Harry's Pepperoni Pizza Parlor produced 10,000 large pepperoni pizzas last year that sold for $10 each. This year Harry's again produced 10,000 large pepperoni pizzas (identical to last year's pizzas) but sold them for $12 each. Based on this information we can conclude that Harry's production of large pepperoni pizzas this year: increased nominal GDP by $120,000 and increased real GDP by $100,000. increased nominal GDP by $20,000 but left real GDP unchanged. left nominal GDP unchanged but increased real GDP by $20,000. increased nominal GDP by $120,000 but left real GDP unchanged.

increased nominal GDP by $20,000 but left real GDP unchanged.

An economist who favored expanded government would recommend: tax cuts during recession and tax increases during inflation. tax increases during recession and tax cuts during inflation. increases in government spending during recession and tax increases during inflation. tax cuts during recession and reductions in government spending during inflation.

increases in government spending during recession and tax increases during inflation.

More than half the growth of real GDP in the United States is caused by: increases in the productivity of labor. the use of fewer inputs of labor. a falling price level. the reallocation of labor from manufacturing to agriculture.

increases in the productivity of labor.

If the MPC in an economy is .75, government could shift the aggregate demand curve leftward by $60 billion by: increasing taxes by $15 billion. increasing taxes by $20 billion. reducing government expenditures by $12 billion. reducing government expenditures by $60 billion.

increasing taxes by $20 billion.

The invisible hand promotes society's interests because: it makes sure that everyone wins from competition in the market. individuals pursuing their self-interest will try to produce goods and services that people in society want and are willing to purchase. government regulation pushes business into producing the right mix of goods and services. individuals will produce goods for others out of concern for their fellow human beings.

individuals pursuing their self-interest will try to produce goods and services that people in society want and are willing to purchase.

Refer to the table. If the full-employment real GDP is $40, the: inflationary expenditure gap is $30. recessionary expenditure gap is $30. recessionary expenditure gap is $10. inflationary expenditure gap is $10.

inflationary expenditure gap is $10.

Refer to the diagram. If the full-employment level of GDP is B and aggregate expenditures are at AE1, the: recessionary expenditure gap is BC. inflationary expenditure gap is BC. inflationary expenditure gap is zero. inflationary expenditure gap is ei.

inflationary expenditure gap is ei.

Viewed through the aggregate expenditures model, the U.S. recession of 2007-2009 resulted mainly from: insufficient aggregate expenditures. a fall in the average propensity to save. increased taxes. reduced government spending.

insufficient aggregate expenditures.

Refer to the diagrams. The location of curve B depends on the: interest rate only. level of real GDP. location of curve A only. interest rate together with the location of curve A.

interest rate together with the location of curve A.

Structural unemployment: is also known as frictional unemployment. is said to occur when people are waiting to be called back to previous jobs. may involve a locational mismatch between unemployed workers and job openings. is the main component of cyclical unemployment.

may involve a locational mismatch between unemployed workers and job openings.

Answer the question on the basis of the following table for a particular country in which C is consumption expenditures, Ig is gross investment expenditures, G is government expenditures, X is exports, and M is imports. All figures are in billions of dollars. Each question is independent of other question using the same table, unless otherwise stated. Refer to the table. If this nation's equilibrium price level is 125, its net exports will be: minus $2 billion. $2 billion. minus $4 billion. zero.

minus $2 billion.

GDP is the: monetary value of all goods and services, final and intermediate, produced in a specific year. monetary value of all final goods and services produced within the borders of a nation in a particular year. national income minus all nonincome charges against output. monetary value of all economic resources used in producing a year's output.

monetary value of all final goods and services produced within the borders of a nation in a particular year.

Countries that have experienced modern economic growth have also tended to: Correct! move toward more democratic forms of government. restrict women and minorities from holding certain economic and political positions. adopt feudalistic institutions. have less leisure time for sport and artistic activities.

move toward more democratic forms of government.

An increase in aggregate expenditures resulting from a decrease in the price level is equivalent to a: decrease in aggregate supply. rightward shift of the aggregate demand curve. movement downward along a fixed aggregate demand curve. leftward shift of the aggregate demand curve.

movement downward along a fixed aggregate demand curve.

Cost-push inflation: shifts the nation's production possibilities curve leftward. is a mixed blessing because it has positive effects on real output and employment. is caused by excessive total spending. moves the economy inward from its production possibilities curve.

moves the economy inward from its production possibilities curve.

If a nation has a comparative advantage in the production of X, this means the nation: has a production possibilities curve identicalto those of other nations. must give up less of other goods than other nations in producing a unit of X. cannot benefitby producing and tradingthis product. is not subject to increasing opportunity costs.

must give up less of other goods than other nations in producing a unit of X.

Firms whose central business is providing individual account shares of a group of stocks, bonds, or both are known as: insurance companies. mutual funds companies. thrifts. commercial banks.

mutual funds companies.

If country A can produce both goods X and Y more efficiently, that is, with smallerabsolute amounts of resources, than can countryB: mutuallyadvantageous specialization and trade betweenA and B may still be possible. it will necessarily be advantageous for B to importboth X and Y from A. then there is no possible basis for mutuallyadvantageous specialization and trade between A and B. we can concludethat A is an industrially advanced economyand B is a developing economy.

mutuallyadvantageous specialization and trade betweenA and B may still be possible.

The system that measures the economy's overall performance is formally known as: final output and income statistics. national income accounting. business cycle measurement. GDP assessment.

national income accounting.

The system that measures the economy's overall performance is formally known as: final output and income statistics. national income accounting. business cycle measurement. GDP assessment.

national income accounting.

The smallest component of aggregate spending in the United States is: investment. \ net exports. government purchases. consumption.

net exports.

If depreciation (consumption of fixed capital) exceeds gross domestic investment, we can conclude that: net investment is negative. the economy's production capacity is expanding. nominal GDP is rising but real GDP is declining. the economy is importing more than it exports.

net investment is negative.

If real disposable income fell during a particular year, we can conclude that: personal taxes increased. inflation occurred. none of these necessarily occurred. transfer payments declined.

none of these necessarily occurred

(Consider This) Suppose that Toyota buys a factory previous owned by Chrysler Motors. Economists would: consider this to be an economic investment. not consider this to be an economic investment because there is no way to know how it will affect stock holdings in the two companies. not consider this to be an economic investment because Toyota is less efficient than Chrysler. not consider this to be an economic investment because no new capital is created through the purchase.

not consider this to be an economic investment because no new capital is created through the purchase.

Currency held in the vault of First National Bank is: counted as part of M2 but not M1. only counted as part of M1 if it was deposited into a checking account. not counted as part of the money supply. counted as part of M1.

not counted as part of the money supply.

By summing the dollar value of all market transactions in the economy, we would: obtain a sum substantially larger than the GDP. measure GDP. determine the market value of all resources used in the production process. determine value added for the economy.

obtain a sum substantially larger than the GDP.

Demand-pull inflation: occurs when prices of resources rise, pushing up costs and the price level. occurs when total spending exceeds the economy's ability to provide output at the existing price level. occurs only when the economy has reached its absolute production capacity. is also called cost-push inflation.

occurs when total spending exceeds the economy's ability to provide output at the existing price level.

The ZZZ Corporation issued $25 million in new common stock in 2013. It used $18 million of the proceeds to replace obsolete equipment in its factory and $7 million to repay bank loans. As a result, investment: has not occurred. of $25 million has occurred. of $7 million has occurred. of $18 million has occurred.

of $18 million has occurred.

Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as: A.selfish because he is asking for a wage that is higher than others might charge. B. rational self-interest because he is attempting to increase his own income by identifying and satisfying someone else's wants. C.irrational because some neighbors refused his offer. D. greedy because he is asking for a high wage that some of his neighbors can't afford to pay.

rational self-interest because he is attempting to increase his own income by identifying and satisfying someone else's wants.

For a nation's real GDP per capita to rise during a year: consumption spending must increase. investment spending must increase. population must increase more rapidly than real GDP. real GDP must increase more rapidly than population.

real GDP must increase more rapidly than population

The three statistics that are the main focus for those measuring macroeconomic health are: real GDP, nominal GDP, and inflation. real GDP, nominal GDP, and unemployment. real GDP, inflation, and unemployment. nominal GDP, unemployment, and inflation.

real GDP, inflation, and unemployment.

A recession is defined as a period in which: nominal domestic output falls. demand-pull inflation is present. cost-push inflation is present. real domestic output falls.

real domestic output falls.

(Consider This) During the Great Recession of 2007-2009: real interest rates and investment real interest rates and investment spending both declined. real interest rates increased, choking off investment spending. real interest rates decreased, but expected returns from investment remained unchanged.

real interest rates and investment spending both declined

(Consider This) During the Great Recession of 2007-2009: real interest rates and investment spending both increased. real interest rates increased, choking off investment spending. real interest rates and investment spending both declined. real interest rates decreased, but expected returns from investment remained unchanged.

real interest rates and investment spending both declined.

Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to: reduce the demand for tacos and increase the demand for soda. reduce the demand for soda and increase the demand for tacos. increase the demand for both soda and tacos. reduce the demand for both soda and tacos.

reduce the demand for soda and increase the demand for tacos.

Refer to the diagram, where T is tax revenues and G is government expenditures. All figures are in billions of dollars. If the full-employment and actual GDP are each $400 billion, government can balance its cyclically adjusted budget by: reducing G by $20 billion. increasing T by $10 billion and reducing G by $20 billion. reducing T by $20 billion. increasing T by $40 billion.

reducing G by $20 billion.

Demand shocks: cause fewer short-run fluctuations than supply shocks. refer to unexpected changes in the desires of households and businesses to buy goods and services. refer to unexpected changes in the ability of firms to produce and sell goods and services. always have a negative impact on the economy

refer to unexpected changes in the desires of households and businesses to buy goods and services.

Answer the question on the basis of the following information about the relationship between input quantities and real domestic output in a hypothetical economy: Refer to the table. Suppose that the price of each input increased from $5 to $8. The per-unit cost of production in the economy would rise by 60 percent and the aggregate supply curve would shift to the left. rise by 60 percent and the aggregate demand curve would shift to the left. rise by $1.50 and the aggregate supply curve would shift to the right. fall by $1.50 and the aggregate demand curve would shift to the right.

rise by 60 percent and the aggregate supply curve would shift to the left.

Answer the question on the basis of the following information: The economy above has experienced a: declining nominal GDP. rising price level. declining real GDP. rising real GDP.

rising real GDP.

In 2010, Tatum's nominal income rose by 4.6 percent and the price level rose by 1.6 percent. We can conclude that Tatum's real income: fell by approximately 13 percent. rose by approximately 6.2 percent. rose by approximately 3 percent. may have either increased or decreased

rose by approximately 3 percent

The cyclically adjusted budget deficit for the United States: rose to -7.1 percent of potential GDP in 2009 but has since declined. changed to a surplus in 2009. was zero in 2009, but the cyclical deficit created by the recession was -7.1 percent of potential GDP. rose to -10.1 percent of potential GDP in 2009 but has since declined.

rose to -7.1 percent of potential GDP in 2009 but has since declined.

If an economy wants to increase its current level of investment, it must: sacrifice future consumption. offer more stocks and bonds to financial investors. print more money. sacrifice current consumption.

sacrifice current consumption.

Households and businesses are: sellers in the resource and product markets respectively. sellers in the product and resource markets respectively. both sellers in the product market. both buyers in the resource market.

sellers in the resource and product markets respectively

Refer to the graph. An increase in an economy's labor productivity would: move the economy away from point A and toward point B. move the economy away from point B and toward point A. shift curve CD to AB. shift curve AB to CD.

shift curve AB to CD.

Refer to the diagram. Increases in the quantity and quality of human resources and capital are best represented by a: move from Y on CD to X on AB. shift in the production possibilities curve from AB to CD. shift in the production possibilities curve from CD to AB. move from X to Z along AB.

shift in the production possibilities curve from AB to CD.

In an aggregate expenditures diagram, a lump-sum tax (T) will: shift the C + Ig + Xn line downward by an amount equal to T × MPC. not affect the C + Ig + Xn line. shift the C + Ig + Xn line downward by an amount equal to T. shift the C + Ig + Xn line upward by an amount equal to T.

shift the C + Ig + Xn line downward by an amount equal to T × MPC.

The business cycle depicts: short-run fluctuations in output and employment. the phases a business goes through from when it first opens to when it finally closes. fluctuations in the general price level. the evolution of technology over time.

short-run fluctuations in output and employment.

The business cycle depicts: the evolution of technology over time. fluctuations in the general price level. short-run fluctuations in output and employment. the phases a business goes through from when it first opens to when it finally closes.

short-run fluctuations in output and employment.

Refer to the diagram. A price of $20 in this market will result in a: surplus of 50 units. shortage of 100 units. surplus of 100 units. shortage of 50 units.

shortage of 100 units.

Economic profits in an industry suggest the industry: can earn more profits by increasing product price. is the size that consumers want it to be. has excess production capacity. should be larger to better satisfy consumers' desire for the product

should be larger to better satisfy consumers' desire for the product

Index funds are a portfolio of: mutual funds that track different indexes. stocks guaranteed rates of return in excess of growth in the GDP price index. bonds with rates of return fixed at 2 percentage points above the rate of inflation. stocks or bonds that exactly match a particular index.

stocks or bonds that exactly match a particular index.

Suppose that inventories were $80 billion in 2012 and $70 billion in 2013. In 2013, national income accountants would: subtract $75 billion (= $150/2) from other elements of investment in calculating total investment. add $75 billion (= $150/2) to other elements of investment in calculating total investment. subtract $10 billion from other elements of investment in calculating total investment. add $10 billion to other elements of investment in calculating total investment.

subtract $10 billion from other elements of investment in calculating total investment.

Consumption of fixed capital (depreciation) can be determined by: adding net investment to gross investment. subtracting net investment from GDP. subtracting NDP from GDP. adding taxes on production and imports to NDP.

subtracting NDP from GDP.

The public debt is the amount of money that: Americans owe to foreigners. state and local governments owe to the federal government. the federal government owes to holders of U.S. securities. the federal government owes to taxpayers.

the federal government owes to holders of U.S. securities.

Value added can be determined by: subtracting the purchase of intermediate products from the value of the sales of final products. deflating nominal GDP. summing the profits of all enterprises in the economy. calculating the year-to-year changes in real GDP.

subtracting the purchase of intermediate products from the value of the sales of final products.

If government set a minimum price of $50 in the market, a: surplus of 125 units would occur. shortage of 125 units would occur. shortage of 21 units would occur. surplus of 21 units would occur.

surplus of 21 units would occur.

If price is above the equilibrium level, competition among sellers to reduce the resulting: surplus will decrease quantity demanded and increase quantity supplied. shortage will increase quantity demanded and decrease quantity supplied. shortage will decrease quantity demanded and increase quantity supplied. surplus will increase quantity demanded and decrease quantity supplied.

surplus will increase quantity demanded and decrease quantity supplied.

If the economy has a cyclically adjusted budget surplus, this means that: the actual budget is necessarily also in surplus. tax revenues would exceed government expenditures if full employment were achieved. the public sector is exerting an expansionary impact on the economy. the economy is actually operating at full employment.

tax revenues would exceed government expenditures if full employment were achieved.

If the economy has a cyclically adjusted budget surplus, this means that: the public sector is exerting an expansionary impact on the economy. the economy is actually operating at full employment. tax revenues would exceed government expenditures if full employment were achieved. the actual budget is necessarily also in surplus.

tax revenues would exceed government expenditures if full employment were achieved.

Empirical studies suggest that: technological advances account for about 40 percent of U.S. productivity growth. the achieving of economies of scale is the most important factor in U.S. economic growth. labor productivity has declined throughout U.S. history.

technological advances account for about 40 percent of U.S. productivity growth.

Risk management in command economies: tends to be done poorly because decision makers are insulated from the risk of making a poor decision. tends to be done poorly because government officials do not understand risk. is easy because the government controls most activity and can eliminate risk. is easy because there is no risk.

tends to be done poorly because decision makers are insulated from the risk of making a poor decision.

If intermediate goods and services were included in GDP: nominal GDP would exceed real GDP. the GDP would then have to be deflated for changes in the price level. the GDP would be understated. the GDP would be overstated.

the GDP would be overstated.

If actual GDP is less than potential GDP: the price level will rise. investment spending will fall. the actual unemployment rate will be higher than the natural unemployment rate. potential GDP will fall

the actual unemployment rate will be higher than the natural unemployment rate.

To say that "the U.S. public debt is mostly held internally" is to say that: the bulk of the public debt is owned by U.S. citizens and institutions. official figures understate the size of the public debt. only interest payments on the public debt are an economic burden. the public debt is equal to the land and building assets owned by the federal government.

the bulk of the public debt is owned by U.S. citizens and institutions.

During a severe recession, we would expect output to fall the most in: the construction industry. the health care industry. agriculture. the clothing industry.

the construction industry.

If the dollar price of yen rises, then: the yen price of dollars also rises. the yen depreciates relative to the dollar. the dollar depreciates relative to the yen. the dollarwill buy fewer U.S. goods.

the dollardepreciates relative to the yen.

The income and substitution effects account for: movements along a given supply curve. the downward-sloping demand curve. shifts in the demand curve. the upward-sloping supply curve

the downward-sloping demand curve.

Macroeconomics is mostly focused on: the economy as a whole. the individual markets within an economy. only the largest industries in the economy. why specific businesses fail.

the economy as a whole.

Assume in a private closed economy that the equilibrium level of income is $380 and the MPS is .25. Now suppose government collects taxes of $50 and spends the entire amount. As a result: the equilibrium level of real income and the price level will both remain unchanged. the equilibrium level of income will rise to $420. the equilibrium level of income will remain unchanged. the equilibrium level of income will rise to $430.

the equilibrium level of income will rise to $430.

Charter One, Pentagon Federal Credit Union, and Boeing Employees Credit Union are all primarily: pension funds. thrifts. commercial banks. insurance companies.

thrifts.

If someone produced too much of a good, this would suggest that: A. certain goods and services such as education and health care are inherently desirable and should be produced regardless of costs and benefits. B. rational choice cannot be applied to many economic decisions. C.the good was produced to the point where its marginal benefit exceeded its marginal cost. D. the good was produced past the point where its marginal cost exceeded its marginal benefit.

the good was produced past the point where its marginal cost exceeded its marginal benefit.

When we draw an investment demand curve, we hold constant all of the following except: the expected rate of return on the investment. business taxes. the interest rate. the present stock of capital goods

the interest rate.

The asset demand for money is downsloping because: it is more attractive to hold money at high interest rates than at low interest rates. the opportunity cost of holding money increases as the interest rate rises. bond prices rise as interest rates rise. the opportunity cost of holding money declines as the interest rate rises.

the opportunity cost of holding money increases as the interest rate rises.

The "shadow banking system" refers to: the process by which securities exchanges provide credit for personal and business needs apart from traditional bank lending. mortgage loans made to homebuyers who are poor credit risks. the series of illegal financial transactions that precipitated the financial crisis of 2007 and 2008. the provision of credit through the underground economy when the financial crisis of 2007 and 2008 occurred.

the process by which securities exchanges provide credit for personal and business needs apart from traditional bank lending. mortgage loans made to homebuyers who are poor credit risks.

Open-market operations refer to: purchases of stocks in the New York Stock Exchange. the specifying of loan maximums on stock purchases. the purchase or sale of government securities by the Fed. central bank lending to commercial banks.

the purchase or sale of government securities by the Fed.

Refer to the figures. As the economy moves from the very short run to the longer run, we would expect: the representation of the economy to move from Figure B to Figure A. the economy to gravitate to P1. the representation of the economy to move from Figure A to Figure B. demand shocks to be eliminated.

the representation of the economy to move from Figure B to Figure A.

Refer to the graph. The intercept of the three Security Market Lines is determined by: the rate on long-term U.S. government bonds. the interest rate on financial assets with a beta of 1. the risk-free interest rate. all of these.

the risk-free interest rate.

Nominal GDP is: the sum of all monetary transactions that occur in the economy in a year. the amount of production that occurs when the economy is operating at full employment. the sum of all monetary transactions involving final goods and services that occur in the economy in a year. money GDP adjusted for inflation.

the sum of all monetary transactions involving final goods and services that occur in the economy in a year.

Assume the Standard Internet Company negotiates a loan for $5,000 from the Metro National Bank and receives a checkable deposit for that amount in exchange for its promissory note (IOU). As a result of this transaction: a claim has been "demonetized." the supply of money declines by the amount of the loan. the Metro Bank acquires reserves from other banks. the supply of money is increased by $5,000.

the supply of money is increased by $5,000.

The phase of the business cycle in which real GDP is at a minimum is called: the underside. a recession. the trough. the peak.

the trough

The phase of the business cycle in which real GDP is at a minimum is called: the peak. the trough. the underside. a recession.

the trough.

Productive efficiency refers to: the production of the product mix most wanted by society. production at some point inside of the production possibilities curve. the full employment of all available resources. the use of the least-cost method of production.

the use of the least-cost method of production

Proponents of economic growth make all of the following arguments except: it is easier to reduce poverty when the economy is growing than when it is not. growth provides an economic environment favorable to education and self-fulfillment. growth is the basic means of improving living standards. there is a direct relationship between a growing real GDP and rising pollution.

there is a direct relationship between a growing real GDP and rising pollution.

To say that the Federal Reserve Banks are quasi-public banks means that: they are privately owned but managed in the public interest. they are publicly owned but privately managed. they deal only with commercial banks, and not the public. they deal only with banks of foreign nations and do not have direct business contact with U.S. banks.

they are privately owned but managed in the public interest.

Indy owns 100 shares of stock in Pet Mart Corporation that he purchased for $20 per share. Every year he has received, from company profits, $1 for each share he owns.Refer to the information given. If Indy sells all his shares at a price of $30 per share, he will receive a: total capital gain of $10. a capital gain of $30 per share. dividend of $10 per share. total capital gain of $1,000.

total capital gain of $1,000.

The shape of the immediate-short-run aggregate supply curve implies that: output prices are flexible, but input prices are not. government cannot bring an economy out of a recession by increasing spending. increases in aggregate demand are inflationary. total output depends on the volume of spending.

total output depends on the volume of spending.

abor productivity is defined as: the ratio of real capital to worker-hours. nominal GDP minus real GDP. total output/worker-hours. the annual increase in nominal GDP per worker.

total output/worker-hours.

When aggregate demand declines, wage rates may be inflexible downward, at least for a time, because of: wage contracts. inflexible product prices. the wealth effect. the foreign purchases effect.

wage contracts.

The annual growth of U.S. labor productivity: was negative in the late 1990s. averaged nearly 5 percent in the 1990s. was greater between 1973 and 1995 than between 1995 and 2012. was greater between 1995 and 2012 than between 1973 and 1995.

was greater between 1995 and 2012 than between 1973 and 1995.

If an unintended increase in business inventories occurs: we can expect aggregate production to be unaffected. we can expect businesses to lower the level of production. aggregate expenditures must exceed the domestic output. we can expect businesses to increase the level of production.

we can expect businesses to lower the level of production.

Refer to the given graph. A shift of the consumption schedule from C1 to C2 might be caused by a(n): increase in income tax rates. recession. wealth effect of an increase in stock market prices. increase in saving.

wealth effect of an increase in stock market prices.

The real-balances, interest-rate, and foreign purchases effects all help explain: why the aggregate supply curve is upsloping. shifts in the aggregate demand curve. shifts in the aggregate supply curve. why the aggregate demand curve is downsloping.

why the aggregate demand curve is downsloping.

Increasing marginal cost of production explains: why the demand curve is downsloping. the law of demand. the income effect. why the supply curve is upsloping.

why the supply curve is upsloping.

If the price index rises from 100 to 120, the purchasing power value of the dollar: will rise by 20 percent. will rise by one-sixth. will fall by one-sixth. may either rise or fall.

will fall by one-sixth.

Assume that the price level is flexible both upward and downward and that the Fed's policy is to keep the price level from either rising or falling. If aggregate supply increases in the economy, the Fed: will have to increase interest rates to keep the price level from falling. can keep the price level stable without altering the money supply or interest rate. will have to increase the money supply to keep the price level from falling. will have to reduce the money supply to keep the price level from rising.

will have to increase the money supply to keep the price level from falling.

Built-in stability means that: with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus while a decline in income will result in a deficit or a lower budget surplus. Congress will automatically change the tax structure and expenditure programs to correct upswings and downswings in business activity. an annually balanced budget will offset the procyclical tendencies created by state and local finance and thereby stabilize the economy. government expenditures and tax receipts automatically balance over the business cycle, though they may be out of balance in any single year.

with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus while a decline in income will result in a deficit or a lower budget surplus.

Assume an economy that makes only one product and that year 3 is the base year. Output and price data for a five-year period are as follows. Answer the question on the basis of these data. Refer to the data. In determining real GDP, the nominal GDP for: each year must be multiplied by the relevant price index. years 4 and 5 must be inflated. years 1 and 2 must be inflated. years 1 and 2 must be deflated.

MACRO

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