Principles of Macroeconomics Test Bank
Course Introduction
Principles of Macroeconomics offers an introduction to the fundamental concepts and analytical tools used to understand the overall functioning of an economy. The course covers topics such as national income determination, unemployment, inflation, economic growth, fiscal and monetary policy, and international trade. Through exploring real-world economic issues, students gain an appreciation for how government policies and global events affect aggregate economic performance, prices, and employment. Emphasis is placed on interpreting macroeconomic data and understanding the roles of institutions such as central banks and governments in shaping economic outcomes.
Recommended Textbook
Principles of Macroeconomics 8th Edition by
N. Gregory Mankiw
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Page 2
Chapter 1: Ten Principles of Economics
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Sample Questions
Q1) A variety of fuels can be used to generate electricity.Considering only the availability of the fuel and not the cost of converting it into electricity,which of the following fuels is most scarce?
A)wind power
B)solar energy
C)fossil fuel
D)hydro-power
Answer: C
Q2) The phenomenon of scarcity stems from the fact that
A)most economies' production methods are not very good.
B)in most economies,wealthy people consume disproportionate quantities of goods and services.
C)governments restrict production of too many goods and services.
D)resources are limited.
Answer: D
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Chapter 1: Ten Principles of Economics: How People Make Decisions
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Sample Questions
Q1) Ashley eats two bananas during a particular day.The marginal benefit she enjoys from eating the second banana
A)can be thought of as the total benefit Ashley enjoys by eating two bananas minus the total benefit she would have enjoyed by eating just the first banana.
B)determines Ashley's marginal cost of the first and second bananas.
C)does not depend on how many bananas Ashley has already eaten.
D)cannot be determined unless we know how much she paid for the bananas.
Answer: A
Q2) U.S.laws requiring that drivers wear seat belts have resulted in
A)a reduction in both driver deaths and pedestrian deaths.
B)fewer accidents and fewer deaths per accident.
C)fewer driver deaths,fewer accidents and fewer pedestrian deaths.
D)little change in the number of driver deaths,but more accidents and more pedestrian deaths.
Answer: D
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4
Chapter 1: Ten Principles of Economics: How People Interact
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Q1) In a market economy,economic activity is guided by A)the government.
B)public-interest groups.
C)central planners.
D)self-interest and prices.
Answer: D
Q2) When the "invisible hand" guides economic activity,prices of products reflect
A)only the values that society places on those products.
B)only the costs to society of producing those products.
C)both the values that society places on those products and the costs to society of producing those products.
D)none of the above;when the "invisible hand" guides economic activity,prices of products are set by the government in a manner that is thought to be "fair."
Answer: C
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Chapter 1: Ten Principles of Economics: How the Economy
As a Whole Works
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Q1) In response to the deep economic downturn in the US in 2008 and 2009,the US
A)reduced taxes.
B)increased government spending.
C)increased the supply of money.
D)All of the above are correct.
Q2) An increase in the overall level of prices in an economy is referred to as A)the income effect.
B)inflation.
C)deflation.
D)the substitution effect.
Q3) For a number of years country A had inflation of 3% but for the last five years has had inflation of 6%.Country B had inflation of 4% for many years,but very recently inflation unexpectedly rose to 9%.Other things the same,in which of the countries would the higher inflation rate be more likely to reduce unemployment?
A)both country A and country B
B)neither country A nor country B
C)country A but not country B
D)country B but not country A
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Chapter 1: Ten Principles of Economics: Part A
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Q1) Give an example of government intervention that is intended to improve equality.
Q2) Refer to Scenario 1-1.What is your opportunity cost of studying economics?
Q3) Invisible hand is a term used by the economist ------ to describe how the decisions of households and firms lead to desirable market outcomes.
Q4) What are the two possible causes of market failure?
Q5) Melinda quits her job at a bank,which pays $30,000 a year,to enroll in a two-year graduate program.Her annual school expenses are $22,000 for tuition and fees and $2,000 for books.What is her opportunity cost of attending the two-year graduate program?
Q6) Refer to Scenario 1-6.A customer is willing to pay $60 for the 601<sup>st</sup> heart rate monitor.Should the company produce and sell it? Explain.
Q7) Economists use the term ------ to refer to an increase in the overall level of prices in the economy.
Q8) In a centrally-planned economy,economic activity is guided by ------.
Q9) Refer to Scenario 1-3.What is the company's marginal cost?
Q10) Economists use the term ------ to refer to a situation in which the market on its own fails to produce an efficient allocation of resources.
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Q11) How does the study of economics depend upon the phenomenon of scarcity?
Chapter 1: Ten Principles of Economics: Part B
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Sample Questions
Q1) The opportunity cost of working one hour is the sum of the values you would have received from all other activities you could have done in that hour.
A)True
B)False
Q2) Equality means distributing society's resources in the most efficient manner.
A)True
B)False
Q3) Communist countries worked on the premise that government officials were in the best position to allocate the economy's scarce resources.
A)True
B)False
Q4) Inflation increases the value of money.
A)True
B)False
Q5) The goal of President Obama's stimulus package and increased government spending following the deep economic downturn in 2008 and 2009 was to reduce inflation.
A)True
B)False
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Chapter 2: Thinking Like an Economist
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Q1) Studying which of the following is helpful in learning to think like an economist?
A)theory.
B)case studies.
C)examples of economics in the news.
D)all of the above.
Q2) The language of economics is
A)needlessly arcane.
B)valuable because it provides a new and useful way of learning about the world.
C)easy to learn within a day.
D)unnecessary to learn for a thorough understanding of economics.
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Chapter 2: Thinking Like an Economist: The Economist As Scientist
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Sample Questions
Q1) Which of these statements about economic models is correct?
A)For economists,economic models provide insights about the world.
B)Economic models are built with assumptions.
C)Economic models are often composed of equations and diagrams.
D)All of the above are correct.
Q2) In the circular-flow diagram,
A)factors of production flow from government to firms.
B)goods and services flow from households to firms.
C)income paid to the factors of production flows from firms to households.
D)spending on goods and services flows from firms to households.
Q3) Refer to Figure 2-7.This economy has the ability to produce at which point(s)?
A)N,O,P
B)L,M
C)L,M,N,O,P
D)L,M,Q
Q4) In the markets for factors of production in the circular-flow diagram,
A)households provide firms with labor,land,and capital.
B)households provide firms with savings for investment.
C)firms provide households with goods and services.
D)firms provide households with revenue.
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Chapter 2: Thinking Like an Economist: The Economist As Policy Adviser
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Q1) A statement describing how the world is
A)is a normative statement.
B)is a positive statement.
C)would only be made by an economist speaking as a policy adviser.
D)would only be made by an economist employed by the government.
Q2) The difference between economists speaking as scientists or policy advisers boil down to the difference between
A)assumptions and theories.
B)true statements and false statements.
C)specific statements and general statements.
D)positive statements and normative statements.
Q3) Which of the following is an example of a positive,as opposed to normative,statement?
A)When the minimum wage is increased,unemployment is a predictable consequence.
B)The income tax rate should be increased to offset the budget deficit.
C)Increasing government spending is the best way to help the economy move out of a recession.
D)More than one of the above are positive statements.
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Chapter 2: Thinking Like an Economist: Why Economists
Disagree
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Q1) Sometimes economists disagree because their values differ.Which of the following instances best reflects this source of disagreement?
A)One economist believes the North American Free Trade Agreement (NAFTA)has led to a loss of American jobs;another economist disputes this claim.
B)One economist believes that when income taxes are cut,people will increase their spending;another economist believes that when income taxes are cut,people will increase their saving.
C)One economist advises against increases in sales taxes because she thinks such increases are unfair to low-income people;another economist disputes the idea that increases in sales taxes are unfair to low-income people.
D)One economist believes that,prior to the Civil War,slavery contributed to economic growth in the South;another economist believes that slavery held back the South's economic growth.
Q2) Almost all economists agree that local and state governments should
A)eliminate subsidies to professional sports franchises.
B)increase subsidies to professional sports franchises.
C)copy economic policy from Washington,D.C.
D)prevent companies from outsourcing work.
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Chapter
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Q1) According to economist John Maynard Keynes,a great economist must also be a(n)
A)mathematician.
B)historian.
C)philosopher.
D)All of the above are correct.
Q2) How did the influential economist John Maynard Keynes explain his remark that though economics is an easy subject compared with the higher branches of philosophy or pure science,it is a subject at which few excel?
A)Most people who study economics are not very bright.
B)Good economists must possess a rare combination of gifts.
C)Economics is quite boring;hence,people tend to lose interest in it before mastering it.
D)Good thinkers become frustrated with economics because it does not make use of the scientific method.
Q3) John Maynard Keynes referred to economics as an easy subject,
A)at which very few excel.
B)but not as easy as philosophy or the pure sciences.
C)which very few can enjoy.
D)which deals primarily with common sense.
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Chapter 2: Thinking Like an Economist: Graphing a Brief Review
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Q1) Refer to Figure 2-18.Which of the following could result in a movement from point B to point Z?
A)a change in the price of a restaurant meal
B)a change in the number of restaurant meals demanded
C)a change in income
D)Both a and b are correct.
Q2) The slope of a line passing through the points (15,3)and (10,6)is
A)-3/5.
B)3/5.
C)-5/3.
D)5/3.
Q3) The point where both x and y are zero is known as the A)origin.
B)null.
C)zero coordinate.
D)center.
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Chapter 2: Thinking Like an Economist: Part A
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Sample Questions
Q1) Refer to Figure 2-15.Consider the production possibilities frontier for an economy that produces only sofas and cars.As the economy moves from point A to point D,is the opportunity cost of cars increasing,constant,or decreasing?
Q2) Who would be more likely to study the inflation rate in the United States,a macroeconomist or a microeconomist?
Q3) In the circular flow diagram,when Daphne purchases a new mobile phone,she participates in the markets for
Q4) Refer to Figure 2-15.Consider the production possibilities frontier for an economy that produces only sofas and cars.The opportunity cost of one car is
Q5) Refer to Figure 2-14.The bowed outward shape of the production possibilities curve indicates that opportunity cost of apples in terms of sweaters is
Q6) Is the following a positive or normative statement? The federal minimum wage is lower than many state minimum wages.
Q7) Refer to Figure 2-22.Given that price is measured on the vertical axis,quantity is measured on the horizontal axis,and that the curves are downward-sloping,what type of curves are depicted here?
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Page 15
Chapter 2: Thinking Like an Economist: Part B
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Sample Questions
Q1) Deciding that A causes B when in fact B causes A is a mistake called omitted variable bias.
A)True
B)False
Q2) In the circular-flow diagram,factors of production include land,labor,and capital.
A)True
B)False
Q3) Two variables that have a positive correlation move in the same direction.
A)True
B)False
Q4) Historical episodes allow economists to illustrate and evaluate current economic theories.
A)True
B)False
Q5) In the markets for goods and services in the circular-flow diagram,households are buyers and firms are sellers.
A)True
B)False
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Chapter 3: Interdependence and the Gains From Trade
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Q1) When an economist points out that you and millions of other people are interdependent,he or she is referring to the fact that we all
A)rely upon the government to provide us with the basic necessities of life.
B)rely upon one another for the goods and services we consume.
C)have similar tastes and abilities.
D)are concerned about one another's well-being.
Q2) People who provide you with goods and services
A)are acting out of generosity.
B)do so because they get something in return.
C)have chosen not to become interdependent.
D)are required to do so by the government.
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Chapter 3: Interdependence and the Gains From Trade: A
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Q1) Refer to Figure 3-9.If the production possibilities frontiers shown are each for two days of production,then which of the following combinations of bolts and nails could Uzbekistan and Azerbaijan together make in a given 2-day production period?
A)12 bolts and 120 nails
B)24 bolts and 96 nails
C)38 bolts and 50 nails
D)44 bolts and 24 nails
Q2) Refer to Figure 3-2.The fact that the line slopes downward reflects the fact that A)for Brazil,it is more costly to produce peanuts than it is to produce cashews.
B)Brazil will produce more peanuts and fewer cashews as time goes by.
C)Brazil faces a tradeoff between producing peanuts and producing cashews. D)Brazil should specialize in producing cashews.
Q3) Refer to Figure 3-2.If the production possibilities frontier shown is for 24 hours of production,then how long does it take Brazil to make one cashew?
A)1/10 hour
B)1/3 hour
C)3 hours
D)10 hours
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Chapter 3: Interdependence and the Gains From Trade:
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Sample Questions
Q1) Refer to Figure 3-15.The opportunity cost of 1 poem for Perry is A)1/12 novel.
B)1/6 novel.
C)2 novels.
D)6 novels.
Q2) Refer to Figure 3-17.Suppose Maxine decides to increase her production of tarts by 5.What is the opportunity cost of this decision?
A)2/5 pie
B)2 pies
C)5/2 pies
D)10 pies
Q3) Refer to Figure 3-14.Arturo would incur an opportunity cost of 36 burritos if he increased his production of tacos by A)27.
B)48.
C)108.
D)144.
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Chapter 3: Interdependence and the Gains From Trade:
Applications of Comparative Advantage
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Q1) By definition,imports are
A)people who work in foreign countries.
B)goods in which a country has an absolute advantage.
C)limits placed on the quantity of goods leaving a country.
D)goods produced abroad and sold domestically.
Q2) Trade between countries
A)allows each country to consume at a point outside its production possibilities frontier.
B)limits a country's ability to produce goods and services on its own.
C)must benefit both countries equally;otherwise,trade is not mutually beneficial.
D)can best be understood by examining the countries' absolute advantages.
Q3) Serena Williams should probably not mow her own lawn because
A)her opportunity cost of mowing her lawn is higher than the cost of paying someone to mow it for her.
B)she has a comparative advantage in mowing her lawn relative to a landscaping service.
C)she has an absolute advantage in mowing her lawn relative to a landscaping service.
D)she might sprain her ankle.
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Chapter 3: Interdependence and the Gains From Trade:
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Q1) Which of the following is not an example of the principle that trade can make everyone better off?
A)Americans buy tube socks from China.
B)Residents of Maine drink orange juice from Florida.
C)A homeowner hires the kid next door to mow the lawn.
D)All of the above are examples of the principle that trade can make everyone better off.
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Chapter 3: Interdependence and the Gains From Trade:
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Sample Questions
Q1) Jennifer takes 2 hours to make a loaf of bread and 1 hour to make a dozen cookies.Janet takes 3 hours to make a loaf of bread and 3/4 hours to make a dozen cookies.Who,if either,has an absolute advantage baking bread? Who,if either,has an absolute advantage making cookies?
Q2) Refer to Scenario 3-1.Which if any good(s)does Greg have an absolute advantage producing?
Q3) Refer to Figure 3-26.What is Mary's opportunity cost of one cookie?
Q4) Economists use the term ------ to refer to the ability to produce a good using fewer inputs than another producer.
Q5) Tom's opportunity cost of mowing a lawn is 2 loads of laundry.Jen's opportunity cost of mowing a lawn is 1.5 loads of laundry.What is the range of prices for mowing a lawn at which Tom and Jen could both benefit from trade?
Q6) Refer to Scenario 3-1.What is Greg's opportunity cost of producing cake? Explain how you derived your answer.
Q7) Refer to Scenario 3-1.Which if any good(s)does Catherine have an absolute advantage producing?
Q8) What does a consumption possibilities frontier represent?
Q9) Refer to Figure 3-26.What is Kate's opportunity cost of one muffin? Page 22
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Chapter 3: Interdependence and the Gains From Trade:
Part B
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Q1) If Wrex can produce more math problems per hour and more book reports per hour than Maxine can,then Wrex cannot gain from trading math problems and book reports with Maxine.
A)True
B)False
Q2) Two countries can achieve gains from trade even if one country has an absolute advantage in the production of both goods.
A)True
B)False
Q3) Adam Smith wrote that a person should never attempt to make at home what it will cost him more to make than to buy.
A)True
B)False
Q4) Some countries win in international trade,while other countries lose. A)True
B)False
Q5) Differences in opportunity cost allow for gains from trade.
A)True B)False
Page 24
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Chapter 4: The Market Forces of Supply and Demand
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Q1) The two words economists use most often are
A)inflation and trade.
B)supply and demand.
C)competition and prices.
D)markets and equilibrium.
Q2) The two words most often used by economists are
A)prices and quantities.
B)resources and allocation.
C)supply and demand.
D)efficiency and equity.
Q3) In a market economy,supply and demand are important because they
A)are direct policy tools used by government agencies to regulate the economy.
B)illustrate when an market is in equilibrium,but they are not helpful when a market is out of equilibrium.
C)can be used to predict the impact on the economy of various events and policies.
D)All of the above are correct.
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Chapter 4: The Market Forces of Supply and
Demand:Markets and Competition
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Q1) For a market for a good or service to exist,there must be a A)group of buyers and sellers.
B)specific time and place at which the good or service is traded.
C)high degree of organization present.
D)All of the above are correct.
Q2) The supply of a good or service is determined by A)those who buy the good or service.
B)the government.
C)those who sell the good or service.
D)both those who buy and those who sell the good or service.
Q3) Assume Leo buys coffee beans in a competitive market.It follows that
A)Leo has a limited number of sellers from which to buy coffee beans.
B)Leo will negotiate with sellers whenever he buys coffee beans.
C)Leo cannot influence the price of coffee beans even if he buys a large quantity of them.
D)None of the above is correct.
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Chapter 4: The Market Forces of Supply and Demand: Demand
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Q1) Refer to Figure 4-7.The movement from Db to Da in the market for potato chips could be caused by a(n)
A)decrease in the price of potato chips.
B)decrease in income,assuming that potato chips are a normal good.
C)announcement by the FDA that potato chips lower cholesterol.
D)increase in the price of a pretzels.
Q2) Kari downloads 7 songs per month when the price is $1.29 per song and 10 songs per month when the price is $0.99 per song.Kari's behavior demonstrates the law of A)price.
B)supply.
C)demand.
D)income.
Q3) Refer to Figure 4-7.The shift from Da to Db is called
A)an increase in demand.
B)a decrease in demand.
C)a decrease in quantity demanded.
D)an increase in quantity demanded.
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Chapter 4: The Market Forces of Supply and Demand: Supply
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Q1) An increase in the price of a good would
A)increase the supply of the good.
B)increase the amount purchased by buyers.
C)give producers an incentive to produce more.
D)decrease both the quantity demanded of the good and the quantity supplied of the good.
Q2) Suppose you make jewelry.If the price of gold falls,then we would expect you to
A)be willing and able to produce less jewelry than before at each possible price.
B)be willing and able to produce more jewelry than before at each possible price.
C)face a greater demand for your jewelry.
D)face a weaker demand for your jewelry.
Q3) Ashley bakes bread that she sells at the local farmer's market.If she purchases a new convection oven that reduces the costs of baking bread,the
A)supply curve for Ashley's bread will increase.
B)supply curve for Ashley's bread will decrease.
C)demand curve for Ashley's bread will increase.
D)demand curve for Ashley's bread will decrease.
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Chapter 4: The Market Forces of Supply and Demand:
Supply and Demand Together
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Q1) In a given market,how are the equilibrium price and the market-clearing price related?
A)There is no relationship.
B)They are the same price.
C)The market-clearing price exceeds the equilibrium price.
D)The equilibrium price exceeds the market-clearing price.
Q2) Suppose buyers of coffee and sugar regard the two goods as complements.Then an increase in the price of coffee will cause a(n)
A)decrease in the demand for sugar and a decrease in the quantity supplied of sugar.
B)decrease in the supply of sugar and a decrease in the quantity demanded of sugar.
C)decrease in the equilibrium price of sugar and an increase in the equilibrium quantity of sugar.
D)increase in the equilibrium price of sugar and a decrease in the equilibrium quantity of sugar.
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Chapter 4: The Market Forces of Supply and
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Q1) In any economic system,scarce resources have to be allocated among competing uses.Market economies harness the forces of
A)government to allocate scarce resources.
B)supply and demand to allocate scarce resources.
C)credit cards to allocate scarce resources.
D)nature to allocate scarce resources.
Q2) The signals that guide the allocation of resources in a market economy are
A)surpluses and shortages.
B)quantities.
C)government policies.
D)prices.
Q3) Who gets scarce resources in a market economy?
A)the government
B)whoever the government decides gets them
C)whoever wants them
D)whoever is willing and able to pay the price
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Chapter 4: The Market Forces of Supply and Demand: Part
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Q1) Refer to Figure 4-30.In this market for tablet computers,more suppliers enter the market and the price of laptops,a substitute good,increases,while all other factors remain constant.Explain the change(s)in the equilibrium price and quantity.
Q2) If the price of steel,an input into the production of automobiles,rises,and at the same time the price of gasoline rises,what will happen to the equilibrium price and quantity of automobiles?
Q3) Refer to Figure 4-29.The movement from S1 to S2 is a
Q4) Studies show that lower cigarette prices are associated with greater use of marijuana;therefore,tobacco and marijuana are
Q5) Refer to Figure 4-31.At a price of $6,is there a shortage or surplus,and how large is the shortage/surplus?
Q6) If the demand for a good increases at the same time as the supply of the same good decreases,what will happen to the equilibrium price and quantity of the good?
Q7) According to the law of demand,when price increases the quantity demanded of a good
Q8) Suppose the number of buyers in a market decreases.As a result,would the demand curve in this market shift to the right or to the left?
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Chapter 4: The Market Forces of Supply and Demand: Part
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Q1) If a good or service has only one seller,then the seller is called a monopoly.
A)True
B)False
Q2) A market's equilibrium is the point at which the supply and demand curves intersect.
A)True
B)False
Q3) A shortage is the same as an excess demand.
A)True
B)False
Q4) A movement along a supply curve is called a change in supply while a shift of the supply curve is called a change in quantity supplied.
A)True
B)False
Q5) A movement upward and to the left along a given demand curve is called a decrease in demand.
A)True
B)False
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Chapter 5: Elasticity and Its Applications
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Q1) Which of the following statements about the consumers' responses to rising gasoline prices is correct?
A)About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars.
B)About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars.
C)About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars.
D)Because gasoline is a necessity,consumers do not decrease their quantity demanded in either the short run or the long run.
Q2) Elasticity is
A)a measure of how much buyers and sellers respond to changes in market conditions.
B)the study of how the allocation of resources affects economic well-being.
C)the maximum amount that a buyer will pay for a good.
D)the value of everything a seller must give up to produce a good.
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Chapter 5: Elasticity and Its Applications: The Elasticity of Demand
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Sample Questions
Q1) Demand is said to be price elastic if
A)the price of the good responds substantially to changes in demand.
B)demand shifts substantially when income or the expected future price of the good changes.
C)buyers do not respond much to changes in the price of the good.
D)buyers respond substantially to changes in the price of the good.
Q2) The difference between slope and elasticity is that slope
A)is a ratio of two changes,and elasticity is a ratio of two percentage changes.
B)is a ratio of two percentage changes,and elasticity is a ratio of two changes.
C)measures changes in quantity demanded more accurately than elasticity.
D)None of the above is correct;there is no difference between slope and elasticity.
Q3) Refer to Figure 5-3.Jenna says she would buy 10 gallons of gas per week regardless of the price.If this is true,then Jenna's demand for gas is represented by demand curve
A)A.
B)B.
C)C.
D)D.
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Chapter 5: Elasticity and Its Applications: The Elasticity of Supply
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Q1) If the price elasticity of supply is 0.8,and price increased by 5%,quantity supplied would
A)increase by 4%.
B)increase by 6.25%.
C)decrease by 4%.
D)decrease by 6.25%.
Q2) A key determinant of the price elasticity of supply is the A)time horizon.
B)income of consumers.
C)price elasticity of demand.
D)importance of the good in a consumer's budget.
Q3) Refer to Figure 5-15.Along which of these segments of the supply curve is supply least elastic?
A)GH
B)CD
C)AC
D)AB
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Chapter
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Sample Questions
Q1) Refer to Scenario 5-4.The equilibrium quantity will
A)increase in both the milk and beef markets.
B)increase in the milk market and decrease in the beef market.
C)decrease in the milk market and increase in the beef market.
D)decrease in both the milk and beef markets.
Q2) Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows.If the demand for milk is relatively inelastic,the discovery will
A)raise both price and total revenues.
B)lower both price and total revenues.
C)raise price and lower total revenues.
D)lower price and raise total revenues.
Q3) Why was OPEC unable to maintain high oil prices in the long run?
A)Demand and supply are both elastic in the long run compared to the short run.
B)Demand and supply are both inelastic in the long run compared to the short run.
C)Demand is elastic and supply is inelastic in the long run compared to the short run.
D)Demand is inelastic and supply is elastic in the long run compared to the short run.
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Chapter 5: Elasticity and Its Applications: Part A
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Q1) Suppose the price of natural gas,a typical fuel for heating homes,rises in January in Alaska.Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the price increase or at some point in the future?
Q2) Suppose you manage a baseball stadium.To pay the salary for a star player,you would like to increase the total revenue from ticket sales.Should you increase or decrease the price of a ticket to increase revenue? Explain.
Q3) Refer to Figure 5-21.Using the midpoint method,what is the price elasticity of supply between $15 and $25?
Q4) Suppose the price elasticity of demand for a product is 0.5.If a supplier wants to increase revenue,what change should it make to price,if any?
Q5) Suppose the price of gas increases by 20%.Will demand be more elastic if consumers have 3 weeks or 3 years to adjust to this price change?
Q6) Refer to Scenario 5-6.Considering the income elasticity,what type of good is mobile telephone service?
Q7) What is the price elasticity of demand at any point on a perfectly elastic demand curve?
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Chapter 5: Elasticity and Its Applications: Part B
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Q1) Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.
A)True
B)False
Q2) If demand is perfectly inelastic,the demand curve is vertical,and the price elasticity of demand equals 0.
A)True
B)False
Q3) Supply tends to be more elastic in the short run and more inelastic in the long run. A)True B)False
Q4) When demand is inelastic,a decrease in price increases total revenue. A)True B)False
Q5) If the price elasticity of demand is equal to 1,then demand is unit elastic. A)True B)False
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Page 38
Chapter 6: Supply Demand and Government Policies
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Q1) Rent-control laws dictate
A)the exact rent that landlords must charge tenants.
B)a maximum rent that landlords may charge tenants.
C)a minimum rent that landlords may charge tenants.
D)both a minimum rent and a maximum rent that landlords may charge tenants.
Q2) Which of the following is not correct?
A)Economists have two roles: scientist and policy adviser.
B)As scientists,economists develop and test theories to explain the world around them.
C)Economic policies rarely have effects that their architects did not intend or anticipate.
D)As policy advisers,economists use their theories to help change the world for the better.
Q3) Price controls
A)always produce a fair outcome.
B)always produce an efficient outcome.
C)can generate inequities of their own.
D)All of the above are correct.
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Chapter 6: Supply Demand and Government Policies:
Controls on Prices
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Q1) A shortage results when a
A)nonbinding price ceiling is imposed on a market.
B)nonbinding price ceiling is removed from a market.
C)binding price ceiling is imposed on a market.
D)binding price ceiling is removed from a market.
Q2) Suppose the government has imposed a price floor on the market for soybeans.Which of the following events could transform the price floor from one that is not binding into one that is binding?
A)Farmers use improved,draught-resistant seeds,which lowers the cost of growing soybeans.
B)The number of farmers selling soybeans decreases.
C)Consumers' income increases,and soybeans are a normal good.
D)The number of consumers buying soybeans increases.
Q3) A binding price floor will reduce a firm's total revenue
A)always.
B)when demand is elastic.
C)when demand is inelastic.
D)never.
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Chapter 6: Supply Demand and Government Policies: Taxes
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Q1) A $1.50 tax levied on the buyers of pomegranate juice will shift the demand curve
A)upward by exactly $1.50.
B)upward by less than $1.50.
C)downward by exactly $1.50.
D)downward by less than $1.50.
Q2) Most labor economists believe that the supply of labor is
A)less elastic than the demand,and,therefore,firms bear most of the burden of the payroll tax.
B)less elastic than the demand,and,therefore,workers bear most of the burden of the payroll tax.
C)more elastic than the demand,and,therefore,workers bear most of the burden of the payroll tax.
D)more elastic than the demand,and,therefore,firms bear most of the burden of the payroll tax.
Q3) When a tax is levied on buyers of tea,
A)buyers of tea and sellers of tea both are made worse off.
B)buyers of tea are made worse off,and the well-being of sellers is unaffected.
C)buyers of tea are made worse off,and sellers of tea are made better off.
D)the well-being of both buyers of tea and sellers of tea is unaffected.
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Chapter 6: Supply Demand and Government Policies: Part
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Q1) Refer to Figure 6-31.If the government set a price floor at $15,would there be a shortage or surplus,and how large would be the shortage/surplus?
Q2) Refer to Scenario 6-1.If the government set a price ceiling at $12,would there be a shortage or surplus,and how large would be the shortage/surplus?
Q3) Refer to Figure 6-32.If the government set a price ceiling at $80,would there be a shortage or surplus,and how large would be the shortage/surplus?
Q4) Refer to Figure 6-32.If the government set a price floor at $70,would there be a shortage or surplus,and how large would be the shortage/surplus?
Q5) Refer to Figure 6-34.If the government imposes a tax of $6 per unit in this market,how much will sellers receive per unit after the tax is imposed?
Q6) Refer to Scenario 6-2.What are the equilibrium price and equilibrium quantity in the market for this product?
Q7) Refer to Figure 6-31.If the government set a price ceiling at $15,would there be a shortage or surplus,and how large would be the shortage/surplus?
Q8) Does a binding price ceiling result in a shortage or a surplus in the market?
Page 42
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Chapter 6: Supply Demand and Government Policies: Part
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Q1) Taxes levied on sellers and taxes levied on buyers are equivalent.
A)True
B)False
Q2) All buyers benefit from a binding price ceiling.
A)True
B)False
Q3) A tax on sellers increases supply.
A)True
B)False
Q4) A binding price ceiling may not help all consumers,but it does not hurt any consumers.
A)True
B)False
Q5) Renters of rent-controlled apartments will likely benefit from both lower rents and higher quality of apartments.
A)True
B)False
Q6) Buyers and sellers always share the burden of a tax equally.
A)True
B)False Page 43
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Chapter 7: Consumers Producers and the Efficiency of Markets
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Sample Questions
Q1) Welfare economics is the study of
A)the well-being of less fortunate people.
B)welfare programs in the United States.
C)how the allocation of resources affects economic well-being.
D)the effect of income redistribution on work effort.
Q2) Welfare economics is the study of A)taxes and subsidies.
B)how technology is best put to use in the production of goods and services.
C)government welfare programs for needy people.
D)how the allocation of resources affects economic well-being.
Q3) An example of normative analysis is studying
A)how market forces produce equilibrium.
B)surpluses and shortages.
C)whether equilibrium outcomes are socially desirable.
D)income distributions.
Q4) Which of the following statements is correct?
A)Buyers always want to pay less and sellers always want to be paid more.
B)Buyers always want to pay less and sellers always want to be paid less.
C)Buyers always want to pay more and sellers always want to be paid more.
D)Buyers always want to pay more and sellers always want to be paid less.
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Chapter 7: Consumers Producers and the Efficiency of
Markets: Consumer Surplus
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Sample
Questions
Q1) Ray buys a new tractor for $118,000.He receives consumer surplus of $13,000 on his purchase.Ray's willingness to pay is
A)$13,000.
B)$105,000.
C)$118,000.
D)$131,000.
Q2) Kelly is willing to pay $5.20 for a gallon of gasoline.The price of gasoline at her local gas station is $3.80.If she purchases ten gallons of gasoline,then Kelly's consumer surplus is
A)$1.40.
B)$14.
C)$3.80.
D)$52.
Q3) The maximum price that a buyer will pay for a good is called A)consumer surplus.
B)willingness to pay.
C)equilibrium.
D)efficiency.
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Chapter 7: Consumers Producers and the Efficiency of
Markets: Producer Surplus
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Q1) Kristi and Rebecca sell lemonade on the corner.It costs them 7 cents to make each cup.On a certain day,they sell 40 cups.Their producer surplus for that day amounts to $19.20.Kristi & Rebecca sold each cup for
A)31 cents.
B)38 cents.
C)45 cents.
D)55 cents.
Q2) Refer to Figure 7-15.When the price falls from P2 to P1,which of the following would not be true?
A)The sellers who still sell the good are worse off because they now receive less.
B)Some sellers leave the market because they are not willing to sell the good at the lower price.
C)The total cost of what is now sold by sellers is actually higher than it was before the decrease in the price.
D)Producer surplus would fall by area A + B.
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Chapter 7: Consumers Producers and the Efficiency of
Markets: Market Efficiency
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Q1) If the government allowed a free market for transplant organs such as kidneys to exist,the
A)shortage of organs would be eliminated,and there would be no surplus of organs.
B)shortage of organs would be eliminated,but a surplus of organs would develop.
C)shortage of organs would persist.
D)overall well-being of society would remain unchanged.
Q2) If the government allowed a free market for transplant organs such as kidneys to exist,critics argue that such a market would
A)not reduce the shortage of organs.
B)benefit rich people but not poor people.
C)be inefficient because markets are not good at allocating scarce resources.
D)be inferior to a plan imposed by a benevolent dictator.
Q3) If the United States changed its laws to allow for the legal sale of a kidney,which of the following is least likely to occur?
A)The supply of kidneys would increase.
B)The shortage of kidneys would decrease.
C)Many lives would be saved.
D)The allocation of kidneys would be fair.
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Chapter 7: Consumers Producers and the Efficiency of
Markets: Conclusion Market Efficiency and Market Failure
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Q1) Market power and externalities are examples of
A)laissez-faire economics.
B)public policy.
C)market failure.
D)welfare economics.
Q2) Externalities are
A)side effects passed on to a party other than the buyers and sellers in the market.
B)side effects of government intervention in markets.
C)external forces that cause the price of a good to be higher than it otherwise would be.
D)external forces that help establish equilibrium price.
Q3) The decisions of buyers and sellers that affect people who are not participants in the market create
A)market power.
B)externalities.
C)profiteering.
D)market equilibrium.
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Chapter 7: Consumers Producers and the Efficiency of
Markets: Part A
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Q1) Refer to Scenario 7-2.How much is total producer surplus at the equilibrium price in this market?
Q2) Refer to Scenario 7-1.If the market equilibrium price is $10,how much is total consumer surplus in this market?
Q3) Refer to Figure 7-33.Suppose demand shifts such that consumers wish to purchase 12 fewer units at every price.How much is total consumer surplus in this market at the new equilibrium price?
Q4) Refer to Figure 7-34.Suppose there is initially a price floor set at $10 in this market.If the government removed the price floor,by how much would total consumer surplus increase?
Q5) Refer to Figure 7-34.Suppose there is initially a price floor set at $10 in this market.If the government removed the price floor,by how much would total consumer surplus increase for those consumers who enter the market after the price floor is removed?
Q6) Refer to Figure 7-34.Suppose there is initially a price ceiling set at $4 in this market.How much is total producer surplus with the price ceiling in place?
Q7) Refer to Figure 7-33.How much is total producer surplus in this market at the equilibrium price?
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Chapter 7: Consumers Producers and the Efficiency of
Markets: Part B
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Q1) Connie can clean windows in large office buildings at a cost of $1 per window.The market price for window-cleaning services is $3 per window.If Connie cleans 100 windows,her producer surplus is $200.
A)True
B)False
Q2) Connie can clean windows in large office buildings at a cost of $1 per window.The market price for window-cleaning services is $3 per window.If Connie cleans 100 windows,her producer surplus is $100.
A)True
B)False
Q3) Ticket scalping can increase total surplus in the market for tickets to sporting events. A)True
B)False
Q4) Efficiency refers to whether a market outcome is fair,while equality refers to whether the maximum amount of output was produced from a given number of inputs.
A)True
B)False
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Chapter 8: Application the Cost of Taxation
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Q1) In 1776,the American Revolution was sparked by anger over
A)the extravagant lifestyle of British royalty.
B)the crimes of British soldiers stationed in the American colonies.
C)British taxes imposed on the American colonies.
D)the failure of the British to protect American colonists from attack by hostile Native Americans.
Q2) Anger over British taxes played a significant role in bringing about the A)election of John Adams as the second American president.
B)American Revolution.
C)War of 1812.
D)"no new taxes" clause in the U.S.Constitution.
Q3) To fully understand how taxes affect economic well-being,we must compare the A)consumer surplus to the producer surplus.
B)price paid by buyers to the price received by sellers.
C)reduced welfare of buyers and sellers to the revenue raised by the government.
D)consumer surplus to the deadweight loss.
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Chapter 8: Application the Cost of Taxation: The
Deadweight Loss of Taxation
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Q1) Refer to Figure 8-2.Total surplus without the tax is
A)$10,and total surplus with the tax is $2.50.
B)$10,and total surplus with the tax is $7.50.
C)$20,and total surplus with the tax is $2.50.
D)$20,and total surplus with the tax is $7.50.
Q2) Refer to Figure 8-5.The loss in total welfare that results from the tax is represented by area
A)A+B+D+F.
B)A+B+C.
C)D+H+F.
D)C+H.
Q3) Refer to Scenario 8-1.If Ernesto cleans Erin's house for $90,Ernesto's producer surplus is
A)$80.
B)$30.
C)$20.
D)$10.
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Chapter 8: Application the Cost of Taxation: The Determinants of
the Deadweight
Loss
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Q1) Suppose a tax of $1 per unit is imposed on a good.The more elastic the supply of the good,other things equal,the
A)smaller is the response of quantity supplied to the tax.
B)larger is the tax burden on sellers relative to the tax burden on buyers.
C)larger is the deadweight loss of the tax.
D)All of the above are correct.
Q2) The amount of deadweight loss that results from a tax of a given size is determined by
A)whether the tax is levied on buyers or sellers.
B)the number of buyers in the market relative to the number of sellers.
C)the price elasticities of demand and supply.
D)the ratio of the tax per unit to the effective price received by sellers.
Q3) Economists generally agree that the most important tax in the U.S.economy is the A)income tax.
B)tax on labor.
C)inheritance or death tax.
D)tax on corporate profits.
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Chapter 8: Application the Cost of Taxation: Deadweight
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Q1) Which of the following scenarios is not consistent with the Laffer curve?
A)The tax rate is very low,and tax revenue is very low.
B)The tax rate is very high,and tax revenue is very low.
C)The tax rate is very high,and tax revenue is very high.
D)The tax rate is moderate (between very high and very low),and tax revenue is relatively high.
Q2) Refer to Figure 8-22.Suppose the government changed the per-unit tax from $3.00 to $4.50.Compared to the original tax rate,this higher tax rate would
A)increase tax revenue and increase the deadweight loss from the tax.
B)increase tax revenue and decrease the deadweight loss from the tax.
C)decrease tax revenue and increase the deadweight loss from the tax.
D)decrease tax revenue and decrease the deadweight loss from the tax.
Q3) Which of the following scenarios is consistent with the Laffer curve?
A)The tax rate is 1 percent,and tax revenue is very low.
B)The tax rate is 1 percent,and tax revenue is very high.
C)The tax rate is 99 percent,and tax revenue is very high.
D)The tax rate is moderate (between very high and very low),and tax revenue is very low.
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Chapter 8: Application the Cost of Taxation: Conclusion
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Q1) Taxes are of interest to
A)microeconomists because they consider how to balance equality and efficiency. B)microeconomists because they consider how best to design a tax system.
C)macroeconomists because they consider how policymakers can use the tax system to stabilize economic activity.
D)All of the above are correct.
Q2) Taxes are costly to market participants because they A)transfer resources from market participants to the government. B)alter incentives.
C)distort market outcomes.
D)All of the above are correct.
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Chapter 8: Application the Cost of Taxation: Part A
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Q1) Refer to Figure 8-26.What are the equilibrium price and equilibrium quantity in this market?
Q2) Refer to Figure 8-25.What are the equilibrium price and equilibrium quantity in this market?
Q3) Suppose the demand curve and the supply curve in a market are both linear,and suppose the price elasticity of supply is 0.5.Will the deadweight loss from a $3 tax per unit be larger if the price elasticity of demand is 0.3 or if the price elasticity of demand is 0.7?
Q4) Describe the Laffer curve.
Q5) Refer to Figure 8-25.Suppose the government places a $4 tax per unit on this good.What price will sellers receive for the good after the tax is imposed?
Q6) Refer to Figure 8-25.Suppose the government places a $4 tax per unit on this good.What price will consumers pay for the good after the tax is imposed?
Q7) Refer to Figure 8-26.How much is consumer surplus at the market equilibrium?
Q8) Refer to Figure 8-25.Suppose the government increases the size of the tax on this good from $4 per unit to $6 per unit.Will the tax revenue collected from the tax increase,decrease,or stay the same?
Page 57
Q9) Refer to Figure 8-26.How much is producer surplus at the market equilibrium?
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Chapter 8: Application the Cost of Taxation: Part B
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Q1) The demand for bread is less elastic than the demand for donuts;hence,a tax on bread will create a larger deadweight loss than will the same tax on donuts,other things equal.
A)True
B)False
Q2) Tax revenue equals the size of the tax multiplied by the quantity sold in the market after the tax is levied.
A)True
B)False
Q3) Economists disagree on whether labor taxes have a small or large deadweight loss. A)True
B)False
Q4) The idea that tax cuts would increase the quantity of labor supplied,thus increasing tax revenue,became known as supply-side economics.
A)True
B)False
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Chapter 9: Application International Trade
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Q1) A logical starting point from which the study of international trade begins is
A)the recognition that not all markets are competitive.
B)the recognition that government intervention in markets sometimes enhances the economic welfare of the society.
C)the principle of absolute advantage.
D)the principle of comparative advantage.
Q2) Which of the following is not an important question for economic policy raised by the experience of the textile industry?
A)How does international trade affect consumer well-being?
B)Who gains and who loses from free trade among countries?
C)How do the gains from trade compare to the losses?
D)Which argument for restricting free trade is politically feasible?
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Chapter 9: Application International Trade: The Determinants of Trade
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Q1) Suppose Brazil has an absolute advantage over other countries in producing almonds,but other countries have a comparative advantage over Brazil in producing almonds.If trade in almonds is allowed,Brazil
A)will import almonds.
B)will export almonds.
C)will either import almonds or export almonds,but it is not clear from the given information.
D)would have nothing to gain either from exporting or importing almonds.
Q2) Assume,for England,that the domestic price of wine without international trade is higher than the world price of wine.This suggests that,in the production of wine,
A)England has a comparative advantage over other countries and England will export wine.
B)England has a comparative advantage over other countries and England will import wine.
C)other countries have a comparative advantage over England and England will export wine.
D)other countries have a comparative advantage over England and England will import wine.
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Chapter 9: Application International Trade: The Winners
and Losers From Trade
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Sample Questions
Q1) When a country allows trade and becomes an exporter of a good,
A)domestic producers become better off,and domestic consumers become worse off.
B)domestic producers become worse off,and domestic consumers become better off.
C)domestic producers become better off,but the effect on the well-being of domestic consumers is ambiguous.
D)domestic consumers become worse off,but the effect on the well-being of domestic producers is ambiguous.
Q2) Refer to Figure 9-5.With trade,total surplus is
A)$3,240.
B)$6,480.
C)$7,760.
D)$15,520.
Q3) Refer to Figure 9-13.With trade,domestic production and domestic consumption,respectively,are
A)600 and 600.
B)600 and 300.
C)300 and 900.
D)600 and 900.
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Chapter 9: Application International Trade: The Arguments for Restricting Trade
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Sample Questions
Q1) "Owners of firms in young industries should be willing to incur temporary losses if they believe that those firms will be profitable in the long run." This observation helps to explain why many economists are skeptical about the
A)national-security argument.
B)infant-industry argument.
C)unfair-competition argument.
D)jobs argument.
Q2) When a country takes a unilateral approach to free trade,it
A)removes trade restrictions on its own.
B)reduces its trade restrictions while other countries do the same.
C)does not remove trade restrictions no matter what other countries do.
D)is willing to trade with multiple countries at once.
Q3) If the United States threatens to impose a tariff on Honduran blueberries if Honduras does not remove agricultural subsidies,the United States will be
A)better off no matter how Honduras responds.
B)better off if Honduras gives in,and will be no worse off if it doesn't.
C)worse off if Honduras doesn't give in to the threat.
D)worse off no matter how Honduras responds.
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Chapter 9: Application International Trade: Conclusion
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Q1) Economists view the fact that Florida grows oranges,Texas pumps oil,and California makes wine as
A)confirmation of the virtues of free trade.
B)confirmation of the infant-industry argument.
C)confirmation that free trade agreements are not necessary.
D)confirmation that specialization in absolute advantage works.
Q2) In 2008,the Los Angeles Times asked members of the American public whether free international trade has helped or hurt the economy.Of those surveyed,
A)57 percent said free international trade helped the economy.
B)26 percent said free international trade helped the economy.
C)30 percent said free international trade hurt the economy.
D)16 percent said free international trade hurt the economy.
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Chapter 9: Application International Trade: Part A
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Sample Questions
Q1) A tax on an imported good is called a ------ .
Q2) Refer to Figure 9-28.Suppose the world price in this market is $6.If the country allows free trade,how much is consumer surplus?
Q3) Refer to Figure 9-29.Suppose the country imposes a $1 per unit tariff.If the country allows trade with a tariff,how much is the deadweight loss caused by the tariff?
Q4) Refer to Scenario 9-3.With no trade allowed,how much are consumer surplus,producer surplus,and total surplus in this market?
Q5) Refer to Scenario 9-3.Suppose the world price in this market is $8 per unit.If the country allows free trade,by how much do consumer surplus,producer surplus,and producer surplus change?
Q6) Refer to Scenario 9-3.Suppose the world price in this market is $8 per unit.If the country allows free trade,will the country import or export this good,and how many units will be imported/exported?
Q7) Refer to Figure 9-29.Suppose the country imposes a $1 per unit tariff.If the country allows trade with a tariff,how much is tariff revenue?
Q8) List five arguments given to support trade restrictions.
Q9) List four benefits of international trade.
Page 64
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Chapter 9: Application International Trade: Part B
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Q1) According to the principle of comparative advantage,all countries can benefit from trading with one another because trade allows each country to specialize in doing what it does best.
A)True
B)False
Q2) The imposition of a tariff on imported wine will increase the domestic price of wine,decrease the quantity of wine imported,and increase the quantity of wine produced domestically.
A)True
B)False
Q3) "Trade raises the economic well-being of a nation in the sense that the gains of the winners exceed the losses of the losers." This statement is correct for a nation that exports manufactured goods,but it is not correct for a nation that imports manufactured goods.
A)True
B)False
Q4) Trade decisions are based on the principle of absolute advantage.
A)True
B)False
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Chapter 10: Measuring a Nations Income
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Q1) A macroeconomist is interested in
A)explaining how changes in sellers' behavior affect prices of a particular good.
B)explaining price changes in a particular market.
C)explaining why the unemployment rate is higher.
D)All of the above are correct.
Q2) Which of the following headlines is more closely related to what microeconomists study than to what macroeconomists study?
A)Unemployment rate falls from 7.5 percent to 7.3 percent.
B)Real GDP falls by 0.4 percent in the third quarter.
C)Inflation was 2.4 percent last year.
D)The price of gasoline rises due to rising oil prices.
Q3) Which of the following questions is more likely to be studied by a microeconomist than a macroeconomist?
A)Why do prices in general rise by more in some countries than in others?
B)Why do wages differ across industries?
C)Why do national production and income increase in some periods and not in others?
D)How rapidly is GDP currently increasing?
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Chapter 10: Measuring a Nations Income: The Economy's
Income and Expenditure
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Q1) In the simple circular-flow diagram,with households and firms,GDP can be computed
A)as the total payments for factors of production made by households.
B)as the total expenditures by households on goods but not services,since services are intangible.
C)as the total expenditures by households on goods and services.
D)as the total expenditures by households on goods and services,less taxes paid.
Q2) For an actual economy,total expenditures on goods and services by households does not equal GDP because
A)household spending exceeds their incomes.
B)household expenditures on goods and services falls short of GDP,since household save for the future.
C)household expenditures include only goods,since services are intangible and cannot be measured accurately.
D)household expenditures on goods and services are made using borrowed funds.
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Chapter 10: Measuring a Nations Income: The Measurement
of GDP
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Q1) The statistical discrepancy that regularly arises in national income accounting refers to the slight difference between
A)personal income and personal disposable income.
B)estimates of GDP and actual GDP.
C)the income and expenditure approaches to the calculation of GDP.
D)the quarterly and annual approaches to the calculation of GDP.
Q2) Which of the following examples of production of goods and services would be included in U.S.GDP?
A)Sally,a Canadian citizen,works on a drilling crew in North Dakota for Northland Gas Services,and Northland sells the natural gas to a utility company in Canada.
B)Jim grows pecans for his family in the yard of their San Antonio home.
C)Joe grows marijuana in his Kansas City home and sells it to his friends and neighbors.
D)None of the above examples of production would be included in U.S.GDP.
Q3) Which of the following is not included in GDP?
A)carrots grown in your garden and eaten by your family
B)carrots purchased at a farmer's market and eaten by your family
C)carrots purchased at a grocery store and eaten by your family
D)None of the above are included in GDP.
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Chapter 10: Measuring a Nations Income: The Components of GDP
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Q1) A U.S.firm produces nail guns in the first quarter of 2010 and adds them to its inventory.In the second quarter of 2010 the firm sells the nail guns to a U.S.construction company.In which quarter(s)does(do)these transactions raise investment?
A)the first and the second
B)the first but not the second
C)the second but not the first
D)neither the first nor the second
Q2) In the equation Y = C + I + G + NX,
A)Y represents the economy's total expenditure.
B)C represents household expenditures on services and durable goods.
C)all of the variables are always positive numbers.
D)All of the above are correct.
Q3) During the current quarter,a firm produces consumer goods and adds some of those goods to its inventory rather than selling them.The value of the goods added to inventory is
A)not included in the current quarter GDP.
B)included in the current quarter GDP as investment.
C)included in the current quarter GDP as consumption.
D)included in the current quarter GDP as a statistical discrepancy.
Page 69
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Chapter 10: Measuring a Nations Income: Real Versus Nominal GDP
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Q1) If the prices of all goods and services produced in the economy rose while the quantity of all goods and services stayed the same,which would rise?
A)both real GDP and nominal GDP.
B)real GDP but not nominal GDP.
C)nominal GDP but not real GDP.
D)neither nominal GDP nor real GDP.
Q2) If nominal GDP is $10 trillion and real GDP is $12 trillion,then the GDP deflator is
A)83.33,and this indicates that the price level has decreased by 16.67 percent since the base year.
B)83.33,and this indicates that the price level has increased by 83.33 percent since the base year.
C)120,and this indicates that the price level has increased by 20 percent since the base year.
D)120,and this indicates that the price level has increased by 120 percent since the base year.
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Chapter 10: Measuring a Nations Income: Is GDP a Good Measure of Economic Well-Being
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Sample Questions
Q1) During a presidential campaign,the incumbent argues that he should be reelected because nominal GDP grew by 12 percent during his 4-year term in office.You know that population grew by 4 percent over the period and that the GDP deflator increased by 6 percent during the past 4 years.You should conclude that real GDP per person
A)grew by more than 12 percent.
B)grew,but by less than 12 percent.
C)was unchanged.
D)decreased.
Q2) International data on GDP and socioeconomic variables
A)are inconclusive about the relationship between GDP and the economic well-being of citizens.
B)suggest that poor nations actually might enjoy a higher standard of living than do rich nations.
C)leave no doubt that a nation's GDP is closely associated with its citizens' standard of living.
D)indicate that there are few real differences in living standards around the world,in spite of the large differences in GDP between nations.
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Chapter 10: Measuring a Nations Income: Part A
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Sample Questions
Q1) List the four components of GDP.
Q2) Nominal GDP is $12 trillion and real GDP is $15 trillion.What is the GDP deflator? Show your work.
Q3) Which component of GDP includes spending on new structures and equipment?
Q4) Explain why it is the case that the value of intermediate goods produced and sold during the year is not included directly as part of GDP,but the value of intermediate goods produced and not sold is included directly as part of GDP.
Q5) Foreign countries buy $1.2 trillion of U.S.goods and services.U.S.residents purchase $1.8 trillion of foreign goods and services.What is net exports?
Q6) In 2011 a country had a real GDP of $13.89 trillion and GDP deflator of 110.In 2012 it had a nominal GDP of $17.8 trillion and real GDP of 14.24 trillion.What is the rate of inflation in 2012?
Q7) Explain the pattern seen between GDP per person and quality of life measures such as life expectancy,literacy,and Internet usage.
Q8) Define GDP.Remember to be specific about what it includes.
Q9) What three types of goods are included in investment spending?
Q10) What are exports,and how are they different from imports?
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Chapter 10: Measuring a Nations Income: Part B
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Sample Questions
Q1) Real GDP is a better gauge of economic well-being than is nominal GDP.
A)True
B)False
Q2) GDP does not directly measure those things that make life worthwhile,but it does measure our ability to obtain many of the inputs into a worthwhile life.
A)True
B)False
Q3) GDP is the market value of all final goods and services produced by a country's citizens in a given period of time.
A)True
B)False
Q4) GDP is a useful measure since it provides a single measure of the value of the entire variety of goods and services produced by an economy.
A)True
B)False
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Chapter 11: Measuring the Cost of Living
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Q1) The consumer price index is used to
A)monitor changes in the level of wholesale prices in the economy.
B)monitor changes in the cost of living over time.
C)monitor changes in the level of real GDP over time.
D)monitor changes in the stock market.
Q2) The consumer price index is used to
A)convert nominal GDP into real GDP.
B)turn dollar figures into meaningful measures of purchasing power.
C)characterize the types of goods and services that consumers purchase.
D)measure the quantity of goods and services that the economy produces.
Q3) Economists use the term inflation to describe a situation in which
A)some prices are rising faster than others.
B)the economy's overall price level is rising.
C)the economy's overall price level is high,but not necessarily rising.
D)the economy's overall output of goods and services is rising faster than the economy's overall price level.
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Chapter 11: Measuring the Cost of Living: The Consumer Price Index
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Sample Questions
Q1) In an imaginary economy,consumers buy only hot dogs and hamburgers.The fixed basket consists of 10 hot dogs and 6 hamburgers.A hot dog cost $3 in 2006 and $5.40 in 2007.A hamburger cost $5 in 2006 and $6 in 2007.Which of the following statements is correct?
A)When 2006 is chosen as the base year,the consumer price index is 90 in 2007.
B)When 2006 is chosen as the base year,the inflation rate is 150 percent in 2007.
C)When 2007 is chosen as the base year,the consumer price index is 100 in 2006.
D)When 2007 is chosen as the base year,the inflation rate is 50 percent in 2007.
Q2) Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year.In 2012,the basket's cost was $50;in 2014,the basket's cost was $52;and in 2016,the basket's cost was $58.The value of the CPI in 2016 was
A)106.0.
B)104.0.
C)111.5.
D)116.0.
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Chapter 11: Measuring the Cost of Living: Correcting
Economic Variables for the Effects of Inflation
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Q1) When we express Babe Ruth's 1931 salary in today's dollars and compare his salary to those of current New York Yankee players,we find that the current median salary of today's Yankees is
A)about three quarters of Ruth's salary.
B)about the same as Ruth's salary.
C)about twice Ruth's salary.
D)more than four times Ruth's salary.
Q2) Nate collected Social Security payments of $220 a month in 1985.If the price index rose from 90 to 108 between 1985 and 1986,then his Social Security payments for 1986 should have been
A)$228.
B)$238.
C)$257.
D)$264.
Q3) Refer to Scenario 24-4.The Wrexington salary in Charlieville dollars is
A)$30,000.00.
B)$33,333.33.
C)$45,000.00
D)$83,333.33.
Page 76
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Chapter 11: Measuring the Cost of Living: Part A
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Sample Questions
Q1) If the real interest rate is 6.8% and the inflation rate is 3.9%,what is the nominal interest rate?
Q2) Compute how much each of the following items is worth in terms of today's dollars using 177 as the price index for today.
a.In 1926,the CPI was 17.7 and the price of a movie ticket was $0.25.
b.In 1932,the CPI was 13.1 and a cook earned $15.00 a week.
c.In 1943,the CPI was 17.4 and a gallon of gas cost $0.19.
Q3) Refer to Scenario 24-5.Using 2009 as the base year,what is the CPI in each year?
Q4) Explain how the introduction of new goods might bias the calculation of the consumer price index.
Q5) List the five steps for calculating the consumer price index and inflation rate.
Q6) Consumer spending in what category is the largest component of the CPI?
Q7) If the real interest rate is 10.3% and the nominal interest rate is 12.6%,what is the inflation rate?
Q8) Suppose the nominal interest rate this year is 6.5% and that the economy experiences 2.3% deflation.What is the real interest rate?
Q9) What do real interest rates account for that nominal interest rates do not?
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Q10) If the CPI was 170 in 1998 and was 187 in 1999,what was the inflation rate in 1999?
Chapter 11: Measuring the Cost of Living: Part B
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Q1) If the real interest rate is 5 percent and the inflation rate is 2 percent,then the nominal interest rate is 7 percent.
A)True
B)False
Q2) Inflation can be measured using either the GDP deflator or the consumer price index.
A)True
B)False
Q3) If the quality of a good deteriorates from one year to the next while its price remains the same,then the value of a dollar falls.
A)True
B)False
Q4) The CPI is always 1 in the base year.
A)True
B)False
Q5) The Bureau of Labor Statistics surveys consumers to determine a fixed basket of goods.
A)True B)False
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Chapter 12: Production and Growth
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Q1) Over the past century in the United States,real GDP per person has grown,on average,by about
A)1 percent per year.
B)2 percent per year.
C)3 percent per year.
D)5 percent per year.
Q2) In which of the following countries has economic growth been sufficiently high that income would double every ten years?
A)Singapore
B)Nigeria
C)India
D)Indonesia
Q3) In which of the following countries did real GDP per person fall by about 13% from 2000 to 2014?
A)India
B)Singapore
C)Zimbabwe
D)None of the above are correct.
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Chapter 12: Production and Growth: Economic Growth
Around the World
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Q1) Which of the following statements is correct? In 2014,
A)real income per person in the U.S.was about 4 times that in China.
B)real income per person in China was more than 2 times that in India.
C)the typical resident of India had less real income than the typical resident of England in 1870.
D)All of the above are correct.
Q2) Mexico is
A)a poor country,and over the past century its rate of economic growth has been higher than that of the United States.
B)a poor country,and over the past century its rate of economic growth has been lower than that of the United States.
C)a middle-income country,and over the past century its rate of economic growth has been higher than that of the United States.
D)a middle-income country,and over the past century its rate of economic growth has been lower than that of the United States.
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Chapter 12: Production and Growth: Productivity Its Role and Determinants
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Q1) Which of the following is an example of physical capital?
A)the computer a secretary uses
B)rivers on which goods are transported
C)the skills and knowledge of a doctor
D)All of the above are correct.
Q2) The inputs into production of goods and services that are provided by nature,such as land,rivers,and mineral deposits are called
A)physical capital.
B)natural resources.
C)human capital.
D)technological knowledge.
Q3) Technological knowledge refers to
A)human capital.
B)available information on how to produce things.
C)resources expended transmitting society's understanding to the labor force.
D)All of the above are technological knowledge.
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Chapter 12: Production and Growth: Economic Growth and Public Policy
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Q1) Educated people may generate ideas that increase production.These ideas
A)produce a return to society from education that is greater than the return to the individual.
B)could justify government subsides for education.
C)are external benefits of education.
D)All of the above are correct.
Q2) In the long run,an increase in the saving rate
A)doesn't change the level of productivity or income.
B)raises the levels of both productivity and income.
C)raises the level of productivity but not the level of income.
D)raises the level of income but not the level of productivity.
Q3) According to research by Robert Fogel,people in Britain grew taller because of A)genetics.However this increase in height had no effect on productivity.
B)genetics.This increase in height is associated with higher productivity.
C)higher caloric intake.However,this increase in height had no effect on productivity.
D)higher caloric intake.This increase in height is associated with higher productivity.
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Chapter 12: Production and Growth: Conclusion the
Importance of Long-Run Growth
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Q1) In order to promote growth in living standards,policymakers must A)protect property rights.
B)maintain political stability.
C)encourage the accumulation of factors of production.
D)All of the above
Q2) Economists differ in their views of the role of the government in promoting economic growth.A controversial idea is that government should A)lend support to the invisible hand by maintaining property rights and political stability. B)lower barriers and impediments to free trade.
C)encourage capital formation.
D)target and subsidize specific industries important for technological progress.
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Chapter 12: Production and Growth: Part A
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Q1) What is the difference between human capital and technology?
Q2) Studies have found that there is a relationship between height and productivity.Briefly explain.
Q3) Is physical capital a produced factor of production? Is human capital a produced factor of production?
Q4) What are the long-run effects on productivity and income of an increase in the saving rate?
Q5) What particularly important role do courts play in a market economy?
Q6) Brazil gives cash payments to its poor citizens on the condition that those citizens' children stay in school.In terms of the determinants of productivity,how might this public policy contribute to higher productivity in Brazil?
Q7) How would an economist typically assess the extent of economic progress in a nation?
Q8) In the United States over the past century,real GDP per person has grown by about ---------- percent per year.
Q9) Some economists argue that it is possible to raise the standard of living by reducing population growth.As an economist interested in incentives rather than coercion,what kind of policy would you recommend to slow population growth?
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Chapter 12: Production and Growth: Part B
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Q1) Economists generally agree on the role the government should play in promoting productivity and economic growth.
A)True
B)False
Q2) An increase in capital increases productivity only if it is purchased and operated by domestic residents.
A)True
B)False
Q3) A forest is an example of a nonrenewable resource.
A)True
B)False
Q4) When Americans invest in Russia,the income of Russians (that is,Russian GNP)rises by more than production in Russia (that is,Russian GDP).
A)True
B)False
Q5) An increase in the saving rate permanently increases the growth rate of real GDP per person.
A)True
B)False
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Chapter 13: Saving Investment and the Financial System
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Sample Questions
Q1) When opening a print shop you need to buy printers,computers,furniture,and similar items.Economists call these expenditures
A)capital investment.
B)investment in human capital.
C)business consumption expenditures.
D)personal saving.
Q2) Institutions that help to match one person's saving with another person's investment are collectively called the A)Federal Reserve system.
B)banking system.
C)monetary system.
D)financial system.
Q3) The primary economic function of the financial system is to A)keep interest rates low.
B)provide expert advice to savers and investors.
C)match one person's consumption expenditures with another person's capital expenditures.
D)match one person's saving with another person's investment.
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86
Chapter 13: Saving Investment and the Financial System: Financial Institutions in the US economy
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Sample Questions
Q1) The prices of stock traded on exchanges are determined by
A)the Corporate Stock Administration.
B)the administrators of NASDAQ.
C)the supply of,and demand for,the stock.
D)All of the above are correct.
Q2) In addition to
A)performing financial intermediation,banks are important in that they help create a medium of exchange.
B)serving as financial markets,mutual funds are important in that they help create a store of value.
C)serving as stores of value,stocks and bonds also serve as media of exchange.
D)All of the above are correct.
Q3) Suppose that the tires of a certain tire manufacturer are discovered to be defective.Other things the same,this news would cause
A)the demand for this company's stock to decrease,so the price would rise.
B)the demand for this company's stock to decrease,so the price would fall.
C)the supply of this company's stock to decrease,so the price would fall.
D)the supply of this company's stock to decrease,so the price would rise.
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Chapter 13: Saving Investment and the Financial System:
Saving and Investment in the National Income Accounts
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Sample Questions
Q1) Suppose that in a closed economy GDP is equal to 20,000,consumption equal to 15,000,government purchases equal 4,000 and taxes equal 3,000.What are private saving,public saving,and national saving?
A)-2,000,1,000,and 2,000,respectively.
B)1,000,2,000,and 3,000,respectively.
C)2,000,-1,000,and 1,000,respectively.
D)2,000,1,000,and 2,000,respectively.
Q2) The assumption of a closed economy
A)applies to the world economy.
B)applies to most national economies.
C)requires us to assume that the government's budget is always balanced.
D)All of the above are correct.
Q3) In a closed economy,what does (T - G)represent?
A)national saving
B)investment
C)private saving
D)public saving
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Page 88
Chapter 13: Saving Investment and the Financial System:
The Market for Loanable Funds
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Sample Questions
Q1) A _____ is a certificate of indebtedness and a _____ is a claim to partial ownership in a firm.
Q2) The nominal interest rate increases by 5 percent.What is the effect on investment?
A)The real interest rate increases and investment increases
B)The real interest rate decreases and investment decreases.
C)The real interest rate increases and investment decreases.
D)Cannot be determined from the given information
Q3) Which of the following would not be a result of replacing the income tax with a consumption tax so that interest income was no longer taxed?
A)The interest rate would decrease.
B)Investment would decrease.
C)The standard of living would eventually rise.
D)The supply of loanable funds would shift right.
Q4) The two most important financial markets are the _____ market and the _____ market.
Q5) What variable adjusts to balance demand and supply in the market for loanable funds?
Q6) What is a mutual fund?
Page 89
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Chapter 13: Saving Investment and the Financial System:
Part A
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Sample Questions
Q1) Stock in Frozen Dreams,an ice cream manufacturer,has a price to earnings ratio of 24.Is this comparatively high or low? What are two explanations for the size of this company's price to earnings ratio?
Q2) When the government increases spending (holding taxes constant), the budget balance _____. This causes the interest rate in the market for loanable funds to _____ and investment to _____.
Q3) What is the main function of the financial system?
Q4) The interest rate will______and the quantity of loanable funds invested will_______when the government decreases the budget deficit.
Q5) What is the source of the supply of loanable funds?
Q6) When someone borrows to purchase capital goods, he is using someone elses _____ to fund his _____.
Q7) If the government reduces transfer payments,what happens to the budget deficit? What curve does this change in the market for loanable funds,which direction does it shift,and what happens to the equilibrium interest rate?
Q8) If federal tax rates increased,what would happen to the interest rate on municipal bonds?
Q9) Public saving is the difference between ----- and -----. Page 90
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Chapter 13: Saving Investment and the Financial System:
Part B
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Sample Questions
Q1) If the tax rate fell,holding municipal bonds would be less desirable so the interest rates on them would fall.
A)True
B)False
Q2) Credit risk refers to the probability that the issuer of a bond will fail to pay some or all of the interest or principal.
A)True
B)False
Q3) If,for an imaginary closed economy,investment amounts to $12,000 and the government is running a $2,000 deficit,then private saving must amount to $10,000.
A)True
B)False
Q4) In a closed economy,investment must be equal to private saving. A)True B)False
Q5) Public saving is equal to national saving minus private saving. A)True B)False
92
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Chapter 14: The Basic Tools of Finance
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Sample Questions
Q1) The financial system
A)involves bank accounts,mortgages,stock prices,and many other items.
B)involves decisions and actions undertaken by people at a point in time that affect their lives in the future.
C)coordinates the economy's saving and investment.
D)All of the above are correct.
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Chapter 14: The Basic Tools of Finance: Present Value
Measuring the Time Value of Money
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Q1) Which,if any,of the present values below are computed correctly?
A)A payment of $100 to be received one year from today,with a 2 percent interest rate,has a present value of $98.81.
B)A payment of $200 to be received two years from today,with a 3 percent interest rate,has a present value of $188.52.
C)A payment of $300 to be received three years from today,with a 4 percent interest rate,has a present value of $234.34.
D)None of the above are correct to the nearest cent.
Q2) If you put $125 into an account that paid 3.25 percent interest,then how much money would you have in the account after 20 years?
A)$285.83
B)$236.98
C)$202.04
D)$145.65
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94
Chapter 14: The Basic Tools of Finance: Managing Risk
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Sample Questions
Q1) Amanda talks with several different brokers at a social gathering.She hears the following advice from brokers A,B,and C.Which broker,if any,gave her incorrect advice?
A)Broker A: "There are risks in holding stocks,even in a highly diversified portfolio."
B)Broker B: "Portfolios with smaller standard deviations have lower risk."
C)Broker C: "Stocks with greater risks offer lower average returns."
D)They all gave her correct advice.
Q2) Shawn determines that if Lexall Corporation has high revenues,then Waters Corporation will have low revenues,and that if Lexall Corporation has low revenues,then Waters Corporation will have high revenues.Shawn buys stock in both corporations.
A)He has reduced firm-specific risk but not market risk.
B)He has reduced market risk,but not firm-specific risk.
C)He had reduce both firm-specific risk and market risk.
D)He has reduced neither firm-specific risk nor market risk.
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Chapter 14: The Basic Tools of Finance: Asset Valuation
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Sample Questions
Q1) Which of the following is not consistent with the efficient market hypothesis?
A)Stock prices should follow a random walk.
B)Index funds should typically outperform highly managed funds.
C)News has no effect on stock prices.
D)There is little point in spending many hours studying the business pages looking for undervalued stocks.
Q2) Which of the following is correct concerning diversification?
A)It only reduces firm-specific risk,but most of the reduction comes from increasing the number of stocks in a portfolio to well above 30.
B)It only reduces firm-specific risk;much of the reduction comes from increasing the number of stocks in a portfolio from 1 to 30.
C)It only reduces market risk,but most of the reduction comes from increasing the number of stocks in a portfolio to well above 30.
D)None of the above is correct.
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Chapter 14: The Basic Tools of Finance: Conclusion
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Sample Questions
Q1) Economists disagree as to whether
A)the stock price of a company should reflect the company's expected profitability.
B)the basic tools of finance reflect valid ideas.
C)stock prices reflect rational estimates of a company's true worth.
D)there is any relationship between stock market fluctuations and fluctuations in the economy more broadly.
Q2) Stock market fluctuations
A)often go hand in hand with fluctuations in the economy more broadly.
B)rarely have anything to do with fluctuations in the economy more broadly.
C)have few,if any,macroeconomic implications.
D)are attributable to the widespread belief that the efficient markets hypothesis is correct.
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Chapter 14: The Basic Tools of Finance: Part A
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Sample Questions
Q1) Write the formula to find the present value of $x to be paid in n years.
Q2) Refer to Scenario 27-2.Suppose Dave is faced with a choice between two options.With option A Dave receives a guaranteed $2 million.With option B Dave faces a lottery that pays $0 with probability 0.8 and pays $10 million with probability 0.2.Given Dave's utility function,will he prefer option A or option B? Provide evidence to support your answer.
Q3) Write the formula to find the present value of $750 to be paid in 5 years if the interest rate is 3 percent.
Q4) What's the difference between firm-specific risk and market risk? Will diversification eliminate one or both? Explain.
Q5) How does moral hazard matter in the market for insurance?
Q6) According to the efficient markets hypothesis,what changes the price of a share of a corporation's stock? Make up an example.
Q7) Until recently,shares of stock accounted for 40 percent of Jimmy's savings.A few days ago,Jimmy sold some bonds and bought some additional shares of stock.Now shares of stock account for 70 percent of Jimmy's savings.How did this change affect Jimmy's expected retun on his savings? How did it affect the risks he faces?
Q8) Define the efficient markets hypothesis.
Page 98
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Chapter 14: The Basic Tools of Finance: Part B
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Sample Questions
Q1) The present value of a payment of $500 to be made two years from today is greater if the interest rate is 7% than if it is 6%.
A)True
B)False
Q2) A company that can build a project that will cost $50,000,but returns $52,000 in one year would make a good decision by turning this project down if the interest rate were 3 percent.
A)True
B)False
Q3) According to the rule of 70,if you earn an interest rate of 3.5 percent,your savings will double about every 20 years.
A)True
B)False
Q4) According to the Rule of 70,it takes 70 years for a sum of money to double in value when the interest rate is 5 percent.
A)True
B)False
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Chapter 15: Unemployment
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Sample Questions
Q1) To maintain their standard of living,most people rely on
A)government assistance.
B)their personal savings.
C)their labor earnings.
D)rental income.
Q2) The deviation of unemployment from its natural rate is called
A)the economic rate of unemployment.
B)cyclical unemployment.
C)frictional unemployment.
D)structural unemployment.
Q3) An economy's natural rate of unemployment is the A)economy's long-run target level of unemployment.
B)amount of unemployment that the economy normally experiences.
C)lowest rate of unemployment the economy can achieve.
D)All of the above are correct.
Q4) In the long run the unemployment rate equals A)zero.
B)the cyclical rate of unemployment.
C)the natural rate of unemployment.
D)the sum of the cyclical and natural rate of unemployment.
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Chapter 15: Unemployment: Identifying Unemployment
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Sample Questions
Q1) Jai Li just lost her job,and she has not yet started looking for a new one.The Bureau of Labor Statistics counts Jai Li as
A)unemployed and in the labor force.
B)unemployed but not in the labor force.
C)in the labor force but not unemployed.
D)neither in the labor force nor unemployed.
Q2) Refer to Scenario 28-1.What is the total labor force?
A)25 million
B)28 million
C)29 million
D)30 million
Q3) Sheila is on a temporary layoff from her automobile factory job but has not looked for work in the last four weeks.The Bureau of Labor Statistics counts Sheila as
A)unemployed and in the labor force.
B)unemployed and not in the labor force.
C)employed and in the labor force.
D)employed and not in the labor force.
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Chapter 15: Unemployment: Job Search
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Sample Questions
Q1) Suppose that consumers decide to walk to work more frequently and drive cars less.Companies that make walking shoes hire workers,while automobile companies lay off workers.This is an example of
A)frictional unemployment created by sectoral shifts.
B)frictional unemployment created by efficiency wages.
C)structural unemployment created by efficiency wages.
D)structural unemployment created by sectoral shifts.
Q2) Which of the following is not correct?
A)Frictional unemployment is inevitable in a dynamic economy.
B)Although the unemployment created by sectoral shifts is unfortunate,in the long run such changes lead to higher productivity and higher living standards.
C)The internet can help facilitate the job search and reduce frictional unemployment.
D)Unemployment insurance decreases frictional unemployment.
Q3) Providing training for unemployed individuals is primarily intended to reduce
A)frictional unemployment.
B)seasonal unemployment.
C)structural unemployment.
D)cyclical unemployment.
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Chapter 15: Unemployment: Minimum-Wage Laws
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Sample Questions
Q1) Refer to Figure 28-4.If the government imposes a minimum wage of $8,how many workers will be unemployed?
A)0
B)2,000
C)4,000
D)8,000
Q2) Refer to Figure 28-3.If the government imposes a minimum wage of $8,then how many workers will be unemployed?
A)0
B)3,000
C)4,000
D)7,000
Q3) Minimum-wage laws
A)reduce unemployment.
B)cause labor shortages,which further raise wages above equilibrium.
C)affect highly-educated workers more than high school dropouts.
D)None of the above is correct.
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103
Chapter 15: Unemployment: Unions and Collective Bargaining
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Sample Questions
Q1) Suppose that dental hygienists are unionized in the eastern region of the country but not in the western region.If the unionized workers in the eastern region abolished their unions,employment
A)and wages of dental hygienists in the eastern region would rise.
B)of dental hygienists in the eastern region would rise,but wages of dental hygienists in the eastern region would fall.
C)and wages of dental hygienists in the eastern region would fall.
D)of dental hygienists in the eastern region would fall,but wages of dental hygienists in the eastern region would rise.
Q2) The Wagner Act of 1935
A)prevents unions from acting as cartels.
B)allows workers joining a unionized firm to choose not to join the union.
C)prevents employers from interfering when workers try to organize a union.
D)prevents firms from hiring permanent replacements for workers who are on strike.
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Chapter 15: Unemployment: The Theory of Efficiency Wages
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Sample Questions
Q1) Which of the following is an example of an efficiency wage?
A)a higher wage paid to a more experienced worker
B)a below-equilibrium wage paid by a small business exempt from minimum-wage laws
C)an above-equilibrium wage paid by a firm to reduce turnover costs
D)a wage tied to participation in a government-sponsored job training program
Q2) A firm may pay efficiency wages in an attempt to
A)reduce incentives to shirk.
B)reduce turnover.
C)attract a well-qualified pool of applicants.
D)All of the above are correct.
Q3) Efficiency wages create a
A)shortage of labor and so reduce unemployment.
B)shortage of labor and so raise unemployment.
C)surplus of labor and so reduce unemployment.
D)surplus of labor and so raise unemployment.
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Chapter 15: Unemployment: Part A
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Sample Questions
Q1) The adult non-institutionalized population in the town of Bedrock is 75 thousand.Within Bedrock,5 thousand are unemployed,and 40 thousand are employed.Calculate the number of people not in the labor force.
Q2) Briefly explain the four rationales for efficiency wages.
Q3) List the main employment characteristics over which a labor union negotiates for its workers.
Q4) Briefly compare the structural unemployment that arises from minimum-wage laws to the frictional unemployment that arises from the process of job search.
Q5) A labor union is similar to a ----------.
Q6) An important determinant of a countrys standard of living is the amount of __________ it typically experiences.
Q7) Give a few examples of how sectoral shifts temporarily cause unemployment.
Q8) Following the recession of 2001,there was a month in which employment and the unemployment rate both rose.Assuming the computations were correct,how is it possible for both to have increased?
Q9) Almost half of all spells of unemployment end when the unemployed person
Q10) Provide a definition of the natural rate of unemployment.
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Chapter 15: Unemployment: Part B
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Sample Questions
Q1) Long-run unemployment arises from a single problem that has a single solution.
A)True
B)False
Q2) The Bureau of Labor Statistics divides the adult population into two categories: those who are employed and those who are unemployed.
A)True
B)False
Q3) Most economists believe unions are bad for the economy as a whole.
A)True
B)False
Q4) When a minimum-wage law forces the wage to remain above the level that balances supply and demand,the quantity of labor supplied is higher and the quantity demanded of labor is lower than at the equilibrium wage.
A)True
B)False
Q5) The unemployment that results from the quantity of labor supplied exceeding the quantity demanded is called structural unemployment.
A)True
B)False
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Chapter 16: The Monetary System
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Q1) The existence of money leads to
A)greater specialization in production,but not to a higher standard of living.
B)a higher standard of living,but not to greater specialization.
C)greater specialization and to a higher standard of living.
D)neither greater specialization nor to a higher standard of living.
Q2) The existence of money
A)reduces specialization.
B)makes trade easier.
C)allows for barter.
D)hinders production.
Q3) You use U.S.currency to pay the owner of a restaurant for a delicious meal.The currency
A)has no intrinsic value.The exchange is an example of barter.
B)has no intrinsic value.The exchange is not an example of barter.
C)has intrinsic value.The exchange is not an example of barter.
D)has intrinsic value.The exchange is not an example of barter
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Chapter 16: The Monetary System: The Meaning of Money
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Q1) Mia puts money into a piggy bank so she can spend it later.What function of money does this illustrate?
A)store of value
B)medium of exchange
C)unit of account
D)None of the above is correct.
Q2) Dollar bills,rare paintings,and emerald necklaces are all
A)media of exchange.
B)units of account.
C)stores of value.
D)All of the above are correct.
Q3) Jim transfers money from his money market account to his savings account.This action
A)reduced M1 and increases M2.
B)increases M1 and reduces M2.
C)has no effect on M1 or M2.
D)increases M1 and M2.
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Chapter 16: The Monetary System: The Federal Reserve System
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Q1) The members of the Federal Reserve's Board of Governors
A)are appointed by the president of the U.S.and confirmed by the U.S.Senate.
B)serve six-year terms.
C)are also the presidents of the regional Federal Reserve banks.
D)share power equally,with no governor having any more influence or power than any other governor.
Q2) Over one time horizon or another,Fed policy decisions influence
A)inflation and employment.
B)inflation but not employment.
C)employment but not inflation.
D)neither inflation nor employment.
Q3) Who can vote on Federal Open Market Committee decisions?
A)all of the members of the Board of Governors and all of the Federal Reserve Bank presidents
B)all of the members of the Board of Governors and some of the Federal Reserve Bank presidents
C)some of the members of the Board of Governors and all of the Federal Reserve Bank presidents
D)some of the members of the Board of Governors and some of the Federal Reserve Bank presidents
Page 110
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Chapter 16: The Monetary System: Banks and the Money Supply
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Q1) A bank has $8,000 in deposits and $6,000 in loans.It has loaned out all it can given the reserve requirement.It follows that the reserve requirement is
A)2.5 percent.
B)33.3 percent.
C)25 percent.
D)75 percent.
Q2) Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves,but at some point banks still have $5 million more they wish to lend out.If the reserve requirement is 10 percent,how much more money can banks create if they lend out the remaining amount?
A)$55 million
B)$50 million
C)$45 million
D)$40 million
Q3) In a system of 100-percent-reserve banking,the purpose of a bank is to A)make loans to households.
B)influence the money supply.
C)give depositors a safe place to keep their money.
D)buy and sell gold.
Page 111
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Chapter 16: The Monetary System: The Feds Tools of Monetary Control
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Sample Questions
Q1) When the Fed conducts open-market sales,
A)it sells Treasury securities,which increases the money supply.
B)it sells Treasury securities,which decreases the money supply.
C)it auctions term loans,which increases the money supply.
D)it auctions term loans,which decreases the money supply.
Q2) To decrease the money supply,the Fed could A)sell government bonds.
B)increase the discount rate.
C)increase the reserve requirement.
D)All of the above are correct.
Q3) Suppose banks decide to hold fewer excess reserves relative to deposits.Other things the same,this action will cause the
A)money supply to fall.To reduce the impact of this the Fed could sell Treasury bonds.
B)money supply to fall.To reduce the impact of this the Fed could buy Treasury bonds.
C)money supply to rise.To reduce the impact of this the Fed could sell Treasury bonds.
D)money supply to rise.To reduce the impact of this the Fed could buy Treasury bonds.
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Page 112
Chapter 16: The Monetary System: Part A
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Sample Questions
Q1) How does the Fed Open Market Committee increase the money supply?
Q2) Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party. What are some ways that the organization of the Fed reflects such concerns?
Q3) Why do Federal Reserve Board of Governors have long (14 year)terms?
Q4) The Fed ____ bonds when it conducts an open-market purchase. This action _____ the money supply.
Q5) Explain how each of the following changes the money supply.
a.the Fed buys bonds
b.the Fed auctions credit
c.the Fed raises the discount rate
d.the Fed raises the reserve requirement
Q6) A bank has $30,000 in deposits and has $5,400 in reserves.What is its reserve ratio?
Q7) Economists argue that the move from barter to money increased trade and production.How is this possible?
Q8) Name three actions the Fed can take to increase the money supply.
Q9) List two reasons why the Fed can not control the exact size of the money supply.
Q10) List the two main functions performed by the Fed?
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Chapter 16: The Monetary System: Part B
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Sample Questions
Q1) Bottles of very fine wine are less liquid than demand deposits.
A)True
B)False
Q2) The Federal Reserve is a privately operated commercial bank.
A)True
B)False
Q3) If the Fed decreases reserve requirements,the money supply will increase.
A)True
B)False
Q4) An increase in the reserve requirement increases reserves and decreases the money supply.
A)True
B)False
Q5) Commodity money cannot be used as a unit of account.
A)True
B)False
Q6) M1 includes savings deposits.
A)True
B)False
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Chapter 17: Money Growth and Inflation
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22 Verified Questions
22 Flashcards
Source URL: https://quizplus.com/quiz/79726
Sample Questions
Q1) Which country is correctly matched with its 2015 inflation rate?
A)9 percent inflation in the United States.
B)3.6 percent inflation in Russia.
C)59 percent inflation in Venezuela.
D)4.9 percent inflation in India.
Q2) If the price level last year was 180 and this year it is 176,then
A)there was inflation of 2.3 percent.
B)there was inflation of 4.0 percent.
C)there was deflation of 2.2 percent.
D)there was deflation of 4.0 percent.
Q3) Which of the following is correct?
A)A period of hyperinflation is a period of extraordinarily low inflation.
B)A period of deflation is any period during which the inflation rate is decreasing.
C)In the 1970s,U.S.inflation averaged about 7.8 percent per year
D)All of the above are correct.
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Chapter 17: Money Growth and Inflation: The Classical
Theory of Inflation
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245 Verified Questions
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Sample Questions
Q1) Refer to Figure 30-2.Which of the following events could explain a shift of the money-demand curve from MD<sub>1</sub> to MD<sub>2</sub>?
A)an increase in the value of money
B)a decrease in the price level
C)an open-market purchase of bonds by the Federal Reserve
D)None of the above is correct.
Q2) Velocity is
A)Y/(M x P)and increases if dollars are exchanged less frequently.
B)Y/(M x P)and increases if dollars are exchanged more frequently.
C)(P x Y)/M and increases if dollars are exchanged less frequently.
D)(P x Y)/M and increases if dollars are exchanged more frequently.
Q3) According to the assumptions of the quantity theory of money,if the money supply increases 5 percent,then
A)both the price level and real GDP would rise by 5 percent.
B)the price level would rise by 5 percent and real GDP would be unchanged.
C)the price level would be unchanged and real GDP would rise by 5 percent.
D)both the price level and real GDP would be unchanged.
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Chapter 17: Money Growth and Inflation: The Costs of Inflation
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94 Verified Questions
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Sample Questions
Q1) Studies have found which of the following economic terms mentioned most often in U.S.newspapers?
A)Unemployment
B)Productivity
C)Inflation
D)Monetary policy
Q2) In which of the following cases is the after-tax real interest rate highest?
A)inflation is 6%,the pre-tax real interest rate is 3%,and the tax rate is 20%.
B)inflation is 6%,the pre-tax real interest rate is 3%,and the tax rate is 25%.
C)inflation is 4%,the pre-tax real interest rate is 2%,and the tax rate is 20%.
D)inflation is 4%,the pre-tax real interest rate is 2%,and the tax rate is 25%.
Q3) Which of the following helps to explain why the inflation fallacy is a fallacy?
A)Increases in the price level can be created by increases in money demand.
B)Nominal incomes tend to rise at the same time that the price level is rising.
C)As the price level rises,the value of a dollar falls.
D)Inflation only changes nominal variables.
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Chapter 17: Money Growth and Inflation: Conclusion
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Sample Questions
Q1) In order to maintain stable prices,a central bank must
A)maintain low interest rates.
B)keep unemployment low.
C)tightly control the money supply.
D)sell indexed bonds.
Q2) Inflation costs are minimized under which inflation rate?
A)-20 percent
B)5 percent
C)15 percent
D)575 percent
Q3) Inflation costs are minimized during periods of A)hyperinflation.
B)large,unexpected deflation.
C)moderate inflation.
D)rapid money growth.
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118
Chapter 17: Money Growth and Inflation: Part A
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Sample Questions
Q1) Some countries have experienced an extraordinarily high rate of inflation known as _____. This is usually due to governments using money creation as a way to pay for their spending. The revenue the government raises by creating money is called the
Q2) You earn a nominal return of 6% on your savings and the tax rate is 20%.If the rate of inflation is 2%,what are the before-tax real interest rate and your after-tax rate of return?
Q3) An economy produces two goods,x and y.A year ago the price of x was $4 and the price of y was $6.Today the price of x is $8 and the price of y is $10.What happened to the nominal and the real value of good x? What happened to the nominal and real value of good y?
Q4) A decrease in the value of money ________the quantity of money demanded.On a graph with the value of money on the vertical axis this effect on the value of money on quantity demanded is shown as ________.
Q5) According to the classical dichotomy and money neutrality,a doubling of the money supply,holding all else constant,causes prices to _______ and real GDP to
Q6) The theory that most economists rely on to explain inflation is called the __________.
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Chapter 17: Money Growth and Inflation: Part B
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Sample Questions
Q1) In the long run,an increase in the growth rate of the money supply leads to an increase in the real interest rate,but no change in the nominal interest rate.
A)True
B)False
Q2) If inflation is higher than expected,then lenders receive interest payments whose real values are less than they expected.
A)True
B)False
Q3) If P represents the price of goods and services measured in money,then 1/P is the value of money measured in terms of goods and services.
A)True
B)False
Q4) The money demand curve is downward sloping because as the value of money falls people desire to hold a larger quantity of money.
A)True
B)False
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Chapter 18: Open Economy Macroeconomics Basic Concepts
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Sample Questions
Q1) International trade
A)raises the standard of living in all trading countries.
B)lowers the standard of living in all trading countries.
C)leaves the standard of living unchanged.
D)raises the standard of living for importing countries and lowers it for exporting countries.
Q2) Which type(s)of economies interact with other economies?
A)only closed economies
B)only open economies
C)closed economies and open economies
D)neither closed nor open economies
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Chapter 18: Open Economy Macroeconomics Basic
Concepts: The International Flows of Goods and Capital
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227 Verified Questions
227 Flashcards
Source URL: https://quizplus.com/quiz/79721
Sample Questions
Q1) A company in Panama pays for a U.S.architect to design a factory building.By itself this transaction
A)increases U.S.exports and so increases the U.S.trade balance.
B)increases U.S.exports and so decreases the U.S.trade balance.
C)increases U.S.imports and so increases the U.S.trade balance.
D)increases U.S.imports and so decreases the U.S.trade balance.
Q2) Dave,a U.S.citizen buys a bicycle manufactured in China.Dave's purchase is
A)both a U.S.and Chinese export.
B)both a U.S.and Chinese import.
C)a U.S.import and a Chinese export.
D)a U.S.export and a Chinese import.
Q3) If a country changes its corporate tax laws so that domestic businesses build and manage more business in other countries,then the net capital outflow of that country
A)and the net capital outflow of other countries rise.
B)rises and the net capital outflow of other countries fall.
C)falls and the net capital outflow of other countries rise.
D)None of the above are correct.
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Chapter 18: Open Economy Macroeconomics Basic
Concepts: The Prices for International Transactions Real and Nominal Exchange Rates
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76 Verified Questions
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Sample Questions
Q1) If the exchange rate rises from .65 British pounds per dollar to .70 pounds per dollar,then compared to British goods,U.S.goods become
A)relatively more expensive for both British and U.S.residents.
B)relatively more expensive for British residents and relatively less expensive for U.S.residents.
C)relatively less expensive for British residents and relatively more expensive for U.S.residents.
D)relatively less expensive for both British and U.S.residents.
Q2) The nominal exchange rate is .80 euros per dollar and the real exchange rate is 4/3.Which of the following prices for a particular good are consistent with these exchange rates?
A)$4 in the U.S.and 3 euros in Italy.
B)$4 in the U.S.and 3.75 euros in Italy.
C)$5 in the U.S.and 3 euros in Italy.
D)$6 in the U.S.and 2.50 euros in Italy.
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Chapter 18: Open Economy Macroeconomics Basic
Concepts: A First Theory of Exchange-Rate Determination
Purchasing-Power Parity
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87 Verified Questions
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Sample Questions
Q1) If purchasing-power parity holds,the price level in the U.S.is 250,and the price level in Japan is 260,which of the following is true?
A)the real exchange rate is 250/260
B)the real exchange rate is 260/250
C)the nominal exchange rate is 250/260
D)the nominal exchange rate is 260/250
Q2) If the Mexican nominal exchange rate does not change,but prices rise faster in Mexico than in all other countries,then the Mexican real exchange rate
A)does not change.
B)rises.
C)declines.
D)There is not enough information to answer the question
Q3) According to purchasing-power parity,if it took 55 Indian rupees to buy a dollar today,but it took 58 to buy it a year ago,then the dollar has
A)appreciated,indicating inflation was higher in the U.S.than in India.
B)appreciated,indicating inflation was lower in the U.S.than in India.
C)depreciated,indicating inflation was higher in the U.S.than in India.
Page 124
D)depreciated,indicating inflation was lower in the U.S.than in India.
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Chapter 18: Open Economy Macroeconomics Basic
Concepts: Part A
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67 Verified Questions
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Source URL: https://quizplus.com/quiz/79653
Sample Questions
Q1) A farm equipment retailer in Azerbaijan exchanges Azerbaijan manats (the currency of Azerbaijan)for $300,000 a bank in Azerbaijan was holding.It uses the $300,000 to buy farm equipment from a U.S.company.The U.S.company deposits half of these funds in a U.S.bank and exchanges the other half for euros from a bank in London. As a result of these transactions,by how much,if at all,and in which direction did:
A.U.S.net exports change?
B.U.S.net capital outflow change?
Q2) What does purchasing-power parity imply about the real exchange rate? Explain what this means.
Q3) A U.S.grocery store chain bought $800,000 worth of Kenyan currency from a bank in Kenya.It then used these funds to buy $800,000 worth of coffee from Kenyan coffee growers.
As a result of this exchange,by how much and in which direction did:
A.U.S.net exports change?
B.U.S.net capital outflow change?
Q4) If a country's exports were 500 billion pesos and its imports were 300 billion pesos,what would its trade balance be?
Q5) What is the logic behind the theory of purchasing-power parity?
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Chapter 18: Open Economy Macroeconomics Basic
Concepts: Part B
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63 Verified Questions
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Sample Questions
Q1) A rational investor will always purchase the bond that pays the highest real interest rate.
A)True
B)False
Q2) According to purchasing-power parity theory,the nominal exchange rate between the U.S.and another country should equal the U.S.price level divided by the price level in the foreign country.
A)True
B)False
Q3) Reduced barriers to trade help explain an increase in U.S.exports and imports relative to GDP since 1950.
A)True
B)False
Q4) If a country's trade surplus falls,its net capital outflow rises.
A)True
B)False
Q5) A country with negative net exports has a trade surplus.
A)True B)False
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Chapter 19: A Macroeconomic Theory of the Open Economy
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3 Verified Questions
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Sample Questions
Q1) Over the past three decades,the United States has
A)generally had,or been very near to a trade balance.
B)had trade deficits in about as many years as it has trade surpluses.
C)persistently had a trade deficit.
D)persistently had a trade surplus.
Q2) The open-economy macroeconomic model includes
A)only the market for loanable funds.
B)only the market for foreign-currency exchange.
C)both the market for loanable funds and the market for foreign-currency exchange.
D)neither the market for loanable funds nor the market for foreign-currency exchange.
Q3) The open-economy macroeconomic model examines the determination of
A)the output growth rate and the real interest rate.
B)unemployment and the exchange rate.
C)the output growth rate and the inflation rate.
D)the trade balance and the exchange rate.
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Chapter 19: A Macroeconomic Theory of the Open
Economy: Supply and Demand for Loanable Funds and for Foreign-Currency Exchange
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141 Verified Questions
141 Flashcards
Source URL: https://quizplus.com/quiz/79717
Sample Questions
Q1) Other things the same,if the U.S.real exchange rate depreciated,then U.S.net exports would
A)fall and the quantity of dollars demanded in the market for foreign-currency exchange would fall.
B)fall and the quantity of dollars demanded in the market for foreign-currency exchange would rise.
C)rise and the quantity of dollars demanded in the market for foreign-currency exchange would fall.
D)rise and the quantity of dollars demanded in the market for foreign-currency exchange would rise.
Q2) If the demand for dollars in the market for foreign-currency exchange shifts left,then the exchange rate
A)rises and the quantity of dollars exchanged rises.
B)rises and the quantity of dollars exchanged does not change.
C)falls and the quantity of dollars exchanged falls.
D)falls and the quantity of dollars exchanged does not change.
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Chapter 19: A Macroeconomic Theory of the Open
Economy: Equilibrium in the Open Economy
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Source URL: https://quizplus.com/quiz/79716
Sample Questions
Q1) In the open-economy macroeconomic model,a decrease in the domestic interest rate shifts
A)demand in the market for foreign-currency exchange to the right.
B)demand in the market for foreign-currency exchange to the left.
C)supply in the market for foreign-currency exchange to the right.
D)supply in the market for foreign-currency exchange to the left.
Q2) In the open-economy macroeconomic model,if a country's supply of loanable funds shifts right,then
A)net capital outflow rises,so the exchange rate rises.
B)net capital outflow rises,so the exchange rate falls.
C)net capital outflow falls,so the exchange rate rises.
D)net capital outflow falls,so the exchange rate falls.
Q3) If U.S.residents want to buy more foreign bonds,then in the market for foreign-currency exchange the exchange rate
A)and the quantity of dollars traded rises.
B)rises and the quantity of dollars traded falls.
C)falls and the quantity of dollars traded rises.
D)and the quantity of dollars traded falls.
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Chapter 19: A Macroeconomic Theory of the Open
Economy: How Policies and Events Affect an Open Economy
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172 Verified Questions
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Source URL: https://quizplus.com/quiz/79715
Sample Questions
Q1) Which of the following is most likely to increase the exports of a country?
A)The government gives subsidies to firms that export goods or services.
B)The government reduces the size of the budget surplus.
C)Political instability within the country increases modestly.
D)None of the above will increase exports.
Q2) If the government of a country with a zero trade balance started with a budget deficit and moved to a budget surplus,domestic investment would
A)rise and there would be a trade surplus.
B)rise and there would be a trade deficit.
C)fall and there would be a trade surplus.
D)fall and there would be a trade deficit.
Q3) When Mexico suffered from capital flight in 1994,Mexico's net exports
A)decreased.
B)did not change.
C)increased.
D)decreased until the peso appreciated,then increased.
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Chapter 19: A Macroeconomic Theory of the Open
Economy: Part A
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Sample Questions
Q1) A country reduces its government budget deficit and also makes political reforms that lead people to believe this country's assets are less risky.Given the combination of a reduced deficit and lower asset risk,what happens to the interest rate?
Q2) If a country's government moves from a budget deficit to a budget surplus,which curve in the market for loanable funds shifts and which direction does it shift? What happens to the interest rate?
Q3) If a country's exchange rate rises,what happens to its exports and what happens to its imports?
Q4) What happens to net capital outflow as the real interest rate falls? Explain your answer.
Q5) Why do higher real interest rates lead to lower net capital outflow?
Q6) What do trade policies do to the standard of living?
Q7) If the government budget deficit rises,what happens to the interest rate? What does this change in the interest rate do to net capital outflow? Provide a detailed explanation of why this change in the interest rate changes net capital outflow.
Q8) Other things the same,if the U.S.interest rate rises,what happens to the net capital outflow of other countries?
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Chapter 19: A Macroeconomic Theory of the Open
Economy: Part B
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56 Verified Questions
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Sample Questions
Q1) Other things the same,if foreigners desire to purchase more U.S.bonds,then the demand for loanable funds shifts left.
A)True
B)False
Q2) In the open-economy macroeconomic model,other things the same,when a U.S.resident imports a foreign good,the demand for dollars in the foreign-currency exchange market decreases.
A)True
B)False
Q3) Over the past two decades the U.S.has persistently had trade deficits.
A)True
B)False
Q4) When a country imposes a trade restriction,the real exchange rate of that country's currency appreciates.
A)True
B)False
Q5) Capital flight raises a country's real exchange rate.
A)True B)False
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Chapter 20: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) Which of the following explains why production rises in most years?
A)increases in the labor force
B)increases in the capital stock
C)advances in technological knowledge
D)All of the above are correct.
Q2) In October 2009,the official unemployment rate rose to
A)10%.
B)8%.
C)6%
D)4%.
Q3) On average,over the last 50 years,real GDP has grown by about
A)3 percent per year.
B)2 percent per year.
C)1 percent per year.
D)4 percent per year.
Q4) During a recession the economy experiences
A)rising employment and income.
B)rising employment and falling income.
C)rising income and falling employment.
D)falling employment and income.
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Chapter
Three Key Facts About Economic Fluctuations
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Sample Questions
Q1) Many macroeconomic variables
A)fluctuate together and by different amounts.
B)fluctuate together by the same amounts.
C)never fluctuate together.
D)fluctuate together about half of the time and by the same amount.
Q2) During recessions which type of spending falls?
A)consumption and investment
B)investment but not consumption
C)consumption but not investment
D)neither consumption nor investment
Q3) When we say that economic fluctuations are "irregular and unpredictable," we mean that
A)the relationship between output and unemployment is erratic and difficult to characterize.
B)when one macroeconomic variable that measures income or spending is falling,other macroeconomic variables that measure income or spending are likely to be rising.
C)recessions do not occur at regular intervals.
D)All of the above are correct.
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Explaining Short-Run Economic Fluctuations
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Sample Questions
Q1) The model of aggregate demand and aggregate supply
A)is different from the model of supply and demand for a particular market,in that we cannot focus on the substitution of resources between markets to explain aggregate relationships.
B)is different from the model of supply and demand for a particular market,in that we have to separate real and nominal variables in the aggregate model.
C)is a straightforward extension of the model of supply and demand for a particular market,in which substitution of resources between markets is highlighted.
D)is a straightforward extension of the model of supply and demand for a particular market,in which the interaction between real and nominal variables is highlighted.
Q2) If money is neutral,then changes in the quantity of money
A)do not affect real output.
B)affect both nominal and real output
C)do not affect nominal output.
D)affect neither nominal nor real output.
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Chapter 20: Aggregate Demand and Aggregate Supply:
The Aggregate-Demand Curve
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Sample Questions
Q1) From 2006 to 2008 there was a dramatic fall in the price of houses.If this fall made people feel less wealthy,then it would have shifted
A)aggregate demand right.
B)aggregate demand left.
C)aggregate supply right.
D)aggregate supply left.
Q2) The wealth effect,interest-rate effect,and exchange-rate effect are all explanations for
A)the slope of short-run aggregate supply.
B)the slope of long-run aggregate supply.
C)the slope of the aggregate-demand curve.
D)everything that makes the aggregate-demand curve shift.
Q3) If countries that imported goods and services from the United States went into recession,we would expect that U.S.net exports would
A)rise,making aggregate demand shift right.
B)rise,making aggregate demand shift left.
C)fall,making aggregate demand shift right.
D)fall,making aggregate demand shift left.
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Chapter 20: Aggregate Demand and Aggregate Supply:
The Aggregate-Supply Curve
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Sample Questions
Q1) The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected,some firms will have
A)higher than desired prices,which leads to an increase in the aggregate quantity of goods and services supplied.
B)higher than desired prices,which leads to a decrease in the aggregate quantity of goods and service supplied.
C)lower than desired prices,which leads to an increase in the aggregate quantity of goods and services supplied.
D)lower than desired prices,which leads to a decrease in the aggregate quantity of goods and services supplied
Q2) Other things the same,continued increases in the money supply lead to
A)continued increases in the price level and real GDP.
B)continued increases in the price level but not continued increases in real GDP.
C)continued increases in real GDP but not continued increases in the price level.
D)a one-time permanent increase in both prices and real GDP.
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Chapter 20: Aggregate Demand and Aggregate Supply:
Two Causes of Economic Fluctuations
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Sample Questions
Q1) Recessions in Canada and Mexico would cause
A)the U.S.price level and real GDP to rise.
B)the U.S.price level and real GDP to fall.
C)the U.S.price level to rise and real GDP to fall.
D)the U.S.price level to fall and real GDP to rise.
Q2) Suppose that during World War II the long-run aggregate supply curve shifted right.In order for price and output to have changed in the direction they did,what would have to have happened to aggregate demand?
A)It would have to have shifted left by less than aggregate supply shifted
B)It would have to have to shifted left by more than aggregate supply shifted.
C)It would have to have shifted right by less than aggregate supply shifted
D)It would have to have to shifted right by more than aggregate supply shifted.
Q3) Refer to Figure 33-7.Suppose the economy starts at Y.If aggregate demand increases from AD<sub>2</sub> to AD<sub>3</sub>,then the economy moves to A)V.
B)W.
C)X.
D)Z.
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Chapter 20: Aggregate Demand and Aggregate Supply:
Part A
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Sample Questions
Q1) The wealth effect helps explain what feature in the aggregate demand and aggregate supply model?
Q2) Explain how a change in the expected price level would shift the short-run and long-run aggregate-supply curves.
Q3) A decrease in what variable will raise the quantity of goods and services supplied,and shift only the short run aggregate supply curve to the right?
Q4) What curve shows the quantity of goods and services that households,firms,the government,and customers abroad want to buy at each price level?
Q5) What do most economists believe concerning the relation between the price level and real output?
Q6) A recession with inflation is know by what term?
Q7) Other things the same,what happens in the long run to the price level and quantity of output after a contraction in aggregate demand?
Q8) Explain the short-run effects on output and the price level from a decrease in the aggregate-demand curve.
Page 139
Q9) Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.
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Chapter 20: Aggregate Demand and Aggregate Supply:
Part B
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Sample Questions
Q1) The aggregate-demand curve shows the quantity of domestic goods and services that households,firms,the government,and customers abroad want to buy at each price level.
A)True
B)False
Q2) Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.
A)True
B)False
Q3) If aggregate demand and aggregate supply both shift right,we can be sure that the price level is higher in the short run.
A)True
B)False
Q4) An increase in the expected price level shifts the short-run aggregate supply curve to the right.
A)True
B)False
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Chapter 21: The Influences of Monetary and Fiscal Policy on Aggregate Demand
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Sample Questions
Q1) The Federal Open Market Committee is
A)the group at the Federal Reserve that sets monetary policy.
B)in charge of tax collection.
C)the group that sets the amount of government spending.
D)the group that reviews income assistance programs.
Q2) A goal of monetary policy and fiscal policy is to
A)offset the shifts in aggregate demand and thereby eliminate unemployment.
B)offset shifts in aggregate demand and thereby stabilize the economy.
C)enhance the shifts in aggregate demand and thereby create fluctuations in output and employment.
D)enhance the shifts in aggregate demand and thereby increase economic growth
Q3) Fiscal policy affects the economy
A)only in the short run.
B)only in the long run.
C)in both the short and long run.
D)in neither the short nor the long run.
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Chapter 21: The Influences of Monetary and Fiscal Policy on
Aggregate Demand: How Monetary Policy Influences
Aggregate Demand
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198 Verified Questions
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Q1) In which of the following cases would the quantity of money demanded be smallest?
A)r = 0.06,P = 1.2
B)r = 0.05,P = 1.0
C)r = 0.04,P = 1.2
D)r = 0.06,P = 1.0
Q2) Which of the effects listed below increases the quantity of goods and services demanded when the price level falls and decreases the quantity of goods and services demanded when the price level rises?
A)the wealth effect
B)the interest-rate effect
C)the exchange-rate effect
D)All of the above are correct.
Q3) In which of the following cases would the quantity of money demanded be largest?
A)r = 0.03,P = 1.2
B)r = 0.03,P = 1.3
C)r = 0.04,P = 1.2
D)r = 0.05,P = 0.9
Page 142
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Chapter 21: The Influences of Monetary and Fiscal Policy on
Aggregate Demand: How Fiscal Policy Influences
Aggregate Demand
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Q1) Imagine that the government increases its spending by $75 billion.Which of the following by itself would tend to make the change in aggregate demand different from $75 billion?
A)both the multiplier effect and the crowding-out effect
B)the multiplier effect,but not the crowding-out effect
C)the crowding-out effect,but not the multiplier effect
D)neither the crowding out effect nor the multiplier effect
Q2) An increase in government spending
A)increases the interest rate and so investment spending increases.
B)increases the interest rate and so investment spending decreases.
C)decreases the interest rate and so increases investment spending increases.
D)decreases the interest rate and so investment spending decreases.
Q3) If the multiplier is 5.25,then the MPC is
A)0.19.
B)0.68.
C)0.81.
D)0.84.
Page 143
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Chapter 21: The Influences of Monetary and Fiscal Policy on
Aggregate Demand: Using Policy to Stabilize the Economy
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73 Verified Questions
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Sample Questions
Q1) A policy that results in slow and steady growth of the money supply is an example of
A)an "easy" monetary policy.
B)a "passive" monetary policy.
C)a "practical" monetary policy.
D)an "active" monetary policy.
Q2) The Employment Act of 1946 states that
A)the Fed should use monetary policy only to control the rate of inflation.
B)the government should promote full employment and production.
C)the government should periodically increase the minimum wage and unemployment insurance benefits.
D)All of the above are correct.
Q3) Suppose that businesses and consumers become much more optimistic about the future of the economy.To stabilize output,the Federal Reserve could
A)buy bonds to raise interest rates.
B)buy bonds to lower interest rates.
C)sell bonds to raise interest rates.
D)sell bonds to lower interest rates.
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Page 144
Chapter 21: The Influences of Monetary and Fiscal Policy on
Aggregate Demand: Part A
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60 Verified Questions
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Sample Questions
Q1) To stabilize output,the Federal Reserve will ----- the money supply when aggregate demand falls.
Q2) A decrease in taxes ---- aggregate demand through larger ----- by households.
Q3) The Federal Reserve sets ----- policy,while the president and Congress set ----policy.These two policies influence aggregate -----.
Q4) Open-market purchases cause a(n)----- in interest rates and a(n)----- in real GDP in the short run.
Q5) Suppose that the government increases expenditures by $150 billion while increasing taxes by $150 billion.Suppose that the MPC is .80 and that there are no crowding out or accelerator effects.What is the combined effects of these changes? Why is the combined change not equal to zero?
Q6) Explain why the interest rate is the opportunity cost of holding currency.What is the benefit of holding currency?
Q7) If the Federal Reserve's goal is to stabilize aggregate demand,then it will ----- the money supply in response to a stock market boom.This causes interest rates to -----.
Q8) Suppose households attempt to increase money holdings.To stabilize output and employment,the Federal Reserve will -----.
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Chapter 21: The Influences of Monetary and Fiscal Policy on
Aggregate Demand: Part B
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Sample Questions
Q1) According to the IGM poll,most economists think that the benefits of ARRA exceeded the costs.
A)True
B)False
Q2) Many economists oppose a constitutional amendment that would require a balanced budget for the federal government because it would probably make the business cycle more volatile.
A)True
B)False
Q3) One of President Obama's first policy initiatives was a stimulus bill that included large increases in government spending.
A)True
B)False
Q4) If the inflation rate is zero,then the nominal and real interest rate are the same.
A)True
B)False
Q5) During recessions,the government tends to run a budget deficit.
A)True
B)False
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Chapter 22: The Short Run Trade Off Between Inflation and Unemployment
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Q1) Closely watched indicators such as the inflation rate and unemployment are released each month by the
A)Bureau of the Budget.
B)Bureau of Labor Statistics.
C)Department of the Treasury.
D)President's Council of Economic Advisors.
Q2) In the long run,
A)the natural rate of unemployment depends primarily on the level of aggregate demand.
B)inflation depends primarily upon the money supply growth rate.
C)there is a tradeoff between the inflation rate and the natural rate of unemployment.
D)All of the above are correct.
Q3) The misery index is supposed to measure the A)social cost of unemployment.
B)health of the economy.
C)lost output associated with a particular unemployment rate.
D)short-run tradeoff between inflation and unemployment.
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Chapter 22: The Short Run Trade Off Between Inflation and Unemployment:
The Phillips Curve
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Sample Questions
Q1) When aggregate demand shifts rightward along the short-run aggregate-supply curve,inflation
A)increases and unemployment increases.
B)increases and unemployment decreases.
C)decreases and unemployment increases.
D)decreases and unemployment decreases.
Q2) According to the Phillips curve,policymakers could reduce both inflation and unemployment by
A)increasing the money supply.
B)increasing government expenditures.
C)raising taxes.
D)None of the above is correct.
Q3) Refer to Figure 35-1.Suppose points F and G on the right-hand graph represent two possible outcomes for an imaginary economy in the year 2012,and those two points correspond to points B and C,respectively,on the left-hand graph.Then it is apparent that the price index equaled
A)130 in 2011.
B)115 in 2011.
C)110 in 2011.
D)100 in 2011.
Page 148
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Chapter 22: The Short Run Trade Off Between Inflation and
Shifts in the Phillips Curve the Role of Expectations
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161 Verified Questions
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Sample Questions
Q1) A decrease in expected inflation shifts
A)the long-run Phillips curve left.
B)the short-run Phillips curve left.
C)neither the short-run nor long-run Phillips curve left.
D)both the short-run and long-run Phillips curve left.
Q2) The equation,
Unemployment rate = Natural rate of unemployment - a × ( ctual inflation - Expected inflation),
A)is the equation of the short-run Phillips curve.
B)implies there can be no stable short-run Phillips curve.
C)reflects the reasoning of Friedman and Phelps.
D)All of the above are correct.
Q3) Friedman argued that the Fed could use monetary policy to peg
A)the level of real GDP.
B)the growth rate of real GDP.
C)the rate of unemployment.
D)None of the above is correct.
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Chapter 22: The Short Run Trade Off Between Inflation and
Shifts in the Phillips Curve the Role of Supply Shocks
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60 Verified Questions
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Sample Questions
Q1) In the United States during the 1970s,expected inflation
A)rose substantially.
B)rose slightly.
C)fell slightly.
D)fell substantially.
Q2) An event that directly affects firms' costs of production and thus the prices they charge is called
A)a Phillips contraction.
B)an inflationary spiral.
C)a demand shock.
D)a supply shock.
Q3) Which of the following shifts aggregate supply to the right?
A)a decline in the price of imported natural resources
B)a technological advance
C)an older labor force that leaves jobs less frequently
D)All of the above are correct.
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Chapter 22: The Short Run Trade Off Between Inflation and Unemployment:
The Cost of Reducing Inflation
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87 Verified Questions
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Sample Questions
Q1) Refer to Monetary Policy in Flosserland.Suppose that the Flosserland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% but that it actually leaves inflation at 25%.Suppose that the public had expected that the Department of Finance would reduce inflation,but only to 20%.Then
A)unemployment falls,but it would have fallen more if people had been expecting 12.5% inflation.
B)unemployment falls,but it would have fallen more if people had been expecting 22% inflation.
C)unemployment rises,but it would have risen more if people had been expecting 12.5% inflation.
D)unemployment rises,but it would have risen more if people had been expecting 22% inflation.
Q2) Most economists believe that a tradeoff between inflation and unemployment exists
A)only in the short run.
B)only in the long run.
C)in both the short and long run.
D)in neither the short nor long run.
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Chapter 22: The Short Run Trade Off Between Inflation and Unemployment:
Part A
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62 Verified Questions
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Sample Questions
Q1) Some countries have inflation around or in excess of 8 percent. Suppose that the sacrifice ratio is 2.5. What is the cost of reducing inflation from 8 percent to 2 percent? In your answer, define the sacrifice ratio and explain how you found the cost of inflation reduction.
Q2) The Fed increases the money supply growth rate.Assuming inflation expectations remain constant,use a Phillips curve diagram to show the short-run effects of the Fed's policy.
Q3) If because they expect the central bank to disinflate, people reduce their inflation expectations, then is the sacrifice ratio larger or smaller the otherwise? Defend your answer by referring to the Phillips curve.
Q4) If expected inflation rises but actual inflation remains the same,what happens to the unemployment rate? Defend your answer.
Q5) How is a decrease in the natural rate of unemployment shown in the Phillips curve diagram? Does this decrease change the inflation rate?
Q6) If asset prices fall and inflation expectations remain unchanged,what happens to inflation and unemployment? Defend your answer.
Q7) List three things that shift the short-run Phillips curve to the right.
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Chapter 22: The Short Run Trade Off Between Inflation and Unemployment:
Part B
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Sample Questions
Q1) The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.
A)True
B)False
Q2) The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.
A)True
B)False
Q3) In the long run people come to expect whatever inflation rate the Fed chooses to produce,so unemployment returns to its natural rate.
A)True
B)False
Q4) A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.
A)True
B)False
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Page 153
Chapter 23: Six Debates Over Macroeconomic Policy:
Should Monetary and Fiscal Policymakers Try to Stabilize the Economy
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44 Verified Questions
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Source URL: https://quizplus.com/quiz/79699
Sample Questions
Q1) Which of the following is correct?
A)Economic forecasts are precise and aggregate spending responds almost immediately to interest rate changes.
B)Economic forecast are precise and aggregate spending responds to interest rate changes with a lag.
C)Economic forecasts are imprecise and aggregate spending responds almost immediately to interest rate changes.
D)Economic forecast are imprecise and aggregate spending responds to interest rate changes with a lag.
Q2) "Leaning against the wind" is exemplified by a(n)
A)tax increase when there is a recession.
B)increase in the money supply when there is a recession.
C)decrease in government expenditures when there is a recession.
D)All of the above are correct.
Q3) Fluctuations in employment and output result from changes in
A)aggregate demand only.
B)aggregate supply only.
C)aggregate demand and aggregate supply.
D)neither aggregate demand nor aggregate supply.
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Chapter 23: Six Debates Over Macroeconomic Policy:
Should the Government Fight Recessions With Spending
Hikes Rather Than Tax Cuts
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Q1) In which cases were tax cuts followed by robust growth?
A)the ones of the Kennedy administration in 1964 and the ones of the Reagan administration in 1981
B)the ones of the Kennedy administration in 1964 but not the ones of the Reagan administration in 1981
C)the ones of the Reagan administration in 1981 but not the ones of the Kennedy administration in 1964
D)neither the ones of the Kennedy administration in 1964 nor the ones of the Reagan administration in 1981
Q2) Which of the following can tax cuts influence?
A)Aggregate demand
B)Aggregate supply
C)Investment spending
D)All of the above
Q3) Which of the following can tax cuts influence?
A)aggregate demand and aggregate supply
B)aggregate demand but not aggregate supply
C)aggregate supply but not aggregate demand
D)neither aggregate demand nor aggregate supply
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Chapter 23: Six Debates Over Macroeconomic Policy:
Should Monetary Policy Be Made by Rule Rather Than by Discretion
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Sample Questions
Q1) Suppose that the central bank must follow a rule that requires it to increase the money supply when the price level falls and decrease the money supply when the price level rises.If the economy starts from long-run equilibrium and aggregate demand shifts right,the central bank must
A)increase the money supply so interest rates rise.
B)increase the money supply so interest rates fall.
C)decrease the money supply so interest rates rise.
D)decrease the moneys supply so interest rates fall
Q2) If there is a political business cycle and the Federal Reserve supports the incumbent,then we should expect that prior to elections
A)interest rates and output would rise.
B)interest rates would rise and output would fall.
C)interest rates would fall and output would rise.
D)interest rates and output would fall.
Q3) The Federal Open Market Committee meets about
A)every six days.
B)every six weeks.
C)every six months.
D)every sixteen months.
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Chapter 23: Six Debates Over Macroeconomic Policy:
Should the Central Bank Aim for Zero Inflation
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49 Verified Questions
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Q1) Paul Volcker's inflation reduction efforts
A)failed to reduce inflation.
B)failed to reduce expected inflation.
C)resulted in the highest unemployment rate since the Great Depression.
D)none of the above are correct.
Q2) Inflation reduction has the lowest cost when the efforts are
A)credible so that the sacrifice ratio is low.
B)credible so that the sacrifice ratio is high.
C)unexpected so that the sacrifice ratio is high.
D)unexpected so that the sacrifice ratio is low.
Q3) When wages are set by contract,inflation
A)reduces real wages;this likely makes labor markets more flexible.
B)reduces real wages;this likely makes labor markets less flexible.
C)raises real wages;this likely makes labor markets more flexible.
D)raises real wages;this likely makes labor markets less flexible.
Q4) In the early 1980's the Fed tightened monetary policy.Over the next few years
A)inflation remained high and unemployment rose.
B)inflation fell but unemployment rose temporarily.
C)inflation and unemployment fell.
D)inflation and unemployment rose.
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Chapter 23: Six Debates Over Macroeconomic Policy:
Should the Government Balance Its Budget
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38 Verified Questions
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Sample Questions
Q1) In June of 2010,the government had a debt of about $8.6 trillion.Over the next year real GDP grew by about 1.6% and inflation was about 2%.What is the largest deficit the government could have run over this time without raising the debt-to-GDP ratio?
A)about $68.8 billion
B)about $137.6 billion
C)about $275.2 billion
D)about $309.6 billion
Q2) The effect of budget deficits on interest rates
A)increases private investment,so eventually the capital stock rises.
B)increases private investment,so eventually the capital stock falls.
C)decreases private investment,so eventually the capital stock rises.
D)decreases private investment,so eventually the capital stock falls.
Q3) In fiscal year 2008,the U.S.government ran a deficit of about $459 billion.In fiscal year 2009,the government ran a deficit of about $1,413 billion.Other things the same,this change would be expected to have
A)decreased interest rates and investment.
B)decreased interest rates and increased investment.
C)increased interest rates and investment.
D)increased interest rates and decreased investment.
Page 158
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Chapter 23: Six Debates Over Macroeconomic Policy:
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Sample Questions
Q1) A year ago a country reduced the tax rate on all interest income from 20% to 10%.During the year private saving was $500 billion as compared to $400 billion the year before the tax reform.Taxes on interest income fell by $10 billion.Assuming no other changes in income,or government revenues or spending,which of the following is correct?
A)the substitution effect was larger than the income effect;national saving rose
B)the substitution effect was larger than the income effect;national saving fell
C)the income effect was larger than the substitution effect;national saving rose
D)the income effect was larger than the substitution effect;national saving fell
Q2) Which of the following is true concerning IRA's,401(k)and 403(b)plans?
A)Not everyone is eligible to put funds into them.
B)There are restrictions on the amount of funds that can be put into them.
C)Except under unusual circumstances,there are penalties for withdrawals before retirement.
D)All of the above are correct.
Q3) Means-tested government benefits base benefits on
A)a household's wealth and are an incentive to save.
B)a household's wealth and are a disincentive to save.
C)the current interest rate and are an incentive to save.
D)the current interest rate and are a disincentive to save.
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Chapter 23: Six Debates Over Macroeconomic Policy:
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Q1) The six debates over macroeconomic policy exist mostly because A)economists disagree over basic issues such as the importance of saving for economic growth.
B)there are tradeoffs and people disagree about the best way to deal with them.
C)politicians offer misleading information.
D)people fail to clearly see the benefits or the costs of most changes.
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Chapter 23: Six Debates Over Macroeconomic Policy: Part
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Q1) Explain why policy lags could make stabilization policies counterproductive.
Q2) Is it possible that deficits do not burden future generations?
Q3) Suppose the nation's price level rises as a result of an increase in aggregate demand and a decrease in aggregate supply which leaves output unchanged.If the Fed is required to follow a rule that stabilizes the price level,what will the Fed do to the money supply and what impact will this have on total output in the economy?
Q4) Explain why fiscal policy actions typically work with a lag.
Q5) Suppose that the government goes into deficit in order to help local school districts build better schools.Does this burden future generations?
Q6) Proponents of requiring the government to balance its budget argue that debt burdens future generations.Explain one claim they make to support this argument.
Q7) Suppose that changes in aggregate demand tended to be infrequent and that it takes a long time for the economy to return to long-run output.How would this affect the arguments of those who oppose using policy to stabilize output?
Q8) Means-tested government programs tend to reduce saving.What are means-tested programs and how do they reduce saving?
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Chapter 23: Six Debates Over Macroeconomic Policy: Part
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Sample Questions
Q1) Economists predict the business cycle well enough that stabilization policy is likely to work despite lags in the effects of policy.
A)True
B)False
Q2) Tax laws do not give preferential treatment to some kinds of retirement saving.
A)True
B)False
Q3) Some studies have found that saving is not very sensitive to the rate of return on saving.
A)True
B)False
Q4) If real output grows at 3 percent per year and the inflation rate is 3 percent per year then government debt can grow by 6 percent per year and not increase the ratio of debt to income.
A)True
B)False
Q5) Tax cuts affect only aggregate demand not aggregate supply.
A)True
B)False
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Q1) In 2011,the U.S.federal government collected approximately what percentage of the taxes in the economy?
A)10%
B)40%
C)50%
D)67%
Q2) In 2011,which category represented the largest category of spending for the U.S.federal government?
A)health
B)income security
C)national defense
D)net interest
Q3) In 2011,the U.S.federal government collected approximately how much in total tax receipts?
A)$800 million
B)$2.5 billion
C)$5.2 billion
D)$8.7 billion
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