Survey of Economics Question
Bank
Course Introduction
Survey of Economics is an introductory course that provides students with a broad overview of fundamental economic concepts and principles. The course explores both microeconomic and macroeconomic topics, including supply and demand, market structures, consumer behavior, production and costs, national income, unemployment, inflation, and the role of government in the economy. It emphasizes real-world applications of economic theory to current events and everyday decision-making, helping students develop critical thinking skills and an understanding of how economic forces shape individual and societal outcomes. This course is suitable for non-majors seeking a general understanding of economics as well as those considering further study in the field.
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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Q1) In the broadest sense,economics is the study of
A)production methods.
B)how society manages its scarce resources.
C)how households decide who performs which tasks.
D)the interaction of business and government.
Answer: B
Q2) Economics is the study of how society manages its
A)limited wants and unlimited resources.
B)unlimited wants and unlimited resources.
C)limited wants and limited resources.
D)unlimited wants and limited resources.
Answer: D
Q3) Which of the following is a subject that economists study?
A)the growth in average income
B)the fraction of the population that cannot find work
C)the rate at which prices are rising
D)All of the above are correct.
Answer: D
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Chapter 1: Ten Principles of Economics: How People Make Decisions
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Q1) Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight.The airline should sell a ticket to a standby passenger only if the passenger is willing to pay
A)more than $200.
B)more than $300.
C)more than $500.
D)This cannot be determined from the information given.
Answer: D
Q2) College-age athletes who drop out of college to play professional sports
A)are not rational decision makers.
B)are well aware that their opportunity cost of attending college is very high.
C)are concerned more about present circumstances than their future.
D)underestimate the value of a college education.
Answer: B
Q3) Economists are particularly adept at understanding that people respond to A)laws.
B)incentives.
C)punishments more than rewards.
D)rewards more than punishments.
Answer: B
Page 4
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Chapter 1: Ten Principles of Economics: How People Interact
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Sample Questions
Q1) Trade between countries tends to
A)reduce both competition and specialization.
B)reduce competition and increase specialization.
C)increase competition and reduce specialization.
D)increase both competition and specialization.
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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Sample Questions
Q1) Suppose the Federal Reserve announces that it will be making a change to a key interest rate to decrease the money supply.This is likely because the Federal Reserve is
A)worried about inflation.
B)worried about unemployment.
C)hoping to increase the demand for goods and services.
D)worried that the economy is growing too slowly.
Q2) What is the most important factor that explains differences in living standards among countries?
A)labor unions
B)minimum wage laws
C)productivity
D)efficiency
Q3) The irregular and largely unpredictable fluctuations in economic activity are called
A)market failure.
B)business cycle.
C)inflation.
D)unemployment.
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Page 6
Chapter 1: Ten Principles of Economics: Part A
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Sample Questions
Q1) Give an example of government intervention that is intended to improve equality.
Q2) Rational people make decisions "at the margin" by comparing ------.
Q3) Refer to Scenario 1-4.What is your opportunity cost of going to the movies?
Q4) Refer to Scenario 1-1.What is your opportunity cost of studying economics?
Q5) Zack quits his job at a consulting firm,which pays $40,000 a year,to enroll in a two-year graduate program.His annual school expenses are $30,000 for tuition,$2,000 for books,and $600 for food.What is his opportunity cost of attending the two-year graduate program?
Q6) Economists use the term ------ to refer to a situation in which the market on its own fails to produce an efficient allocation of resources.
Q7) Refer to Scenario 1-5.What is your opportunity cost of going to the movies?
Q8) What is the main difference between a centrally planned economy and a market economy?
Q9) Economics is the study of ------ .
Q10) Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run.
Q12) In a centrally-planned economy,economic activity is guided by ------. Page 7
Q11) How does the study of economics depend upon the phenomenon of scarcity?
Q13) What does the term "marginal change" mean?
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Page 8
Chapter 1: Ten Principles of Economics: Part B
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Sample Questions
Q1) Equality means distributing society's resources in the most efficient manner.
A)True
B)False
Q2) Trade can make everyone better off except in the case where one person is better at doing everything.
A)True
B)False
Q3) A rational decision maker takes an action if and only if the marginal benefit exceeds the marginal cost.
A)True
B)False
Q4) Productivity is defined as the quantity of goods and services produced from each unit of labor input.
A)True
B)False
Q5) Variations in the standard of living across countries is due almost entirely to differences in each nation's total output of goods and services.
A)True
B)False
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Chapter 2: Thinking Like an Economist
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Q1) 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.
Q2) 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.
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Chapter 2: Thinking Like an Economist: The Economist As Scientist
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Sample Questions
Q1) Any point on a country's production possibilities frontier represents a combination of two goods that an economy
A)will never be able to produce.
B)can produce using all available resources and technology.
C)can produce using some portion,but not all,of its resources and technology.
D)may be able to produce in the future with more resources and/or superior technology.
Q2) The circular-flow diagram is a
A)visual model of the economy.
B)visual model of the relationships among money,prices,and businesses.
C)model that shows the effects of government on the economy.
D)mathematical model of how the economy works.
Q3) Refer to Figure 2-7.What is the opportunity cost of moving from point M to point L?
A)zero
B)15 tvs
C)20 engines and 15 tvs
D)20 engines
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Chapter 2: Thinking Like an Economist: The Economist As Policy Adviser
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Q1) You know an economist has crossed the line from policy adviser to scientist when he or she
A)claims that the problem at hand is widely misunderstood by non-economists.
B)makes positive statements.
C)talks about values.
D)makes a claim about how the world should be.
Q2) Economists speaking like policy advisers make
A)claims about how the world is.
B)descriptive statements.
C)normative statements.
D)More than one of the above is correct.
Q3) Which of the following statements is an example of a positive,as opposed to normative,statement?
A)Americans deserve a cleaner environment.
B)Reducing emissions reduces days missed from school due to asthma.
C)All Americans are entitled to quality health care.
D)Economic policies should focus on improving equality.
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Page 12
Chapter 2: Thinking Like an Economist: Why Economists
Disagree
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Q1) Differences in scientific judgment between economists are similar to all of the following except
A)astronomers debating whether the sun or earth was at the center of the solar system.
B)meteorologists debating the existence of global warming.
C)two politicians arguing about the fairness of the tax code.
D)explorers debating whether or not the earth was flat before the time of Christopher Columbus.
Q2) Almost all economists agree that tariffs and import quotas
A)reduces general economic welfare.
B)increases general economic welfare.
C)have no effect on general economic welfare.
D)stimulate a less than fully employed economy.
Q3) A survey of professional economists revealed that more than three-fourths of them agreed with a number of statements,including which of the following?
A)Tariffs and import quotas usually reduce general economic welfare.
B)A large federal budget deficit has an adverse effect on the economy.
C)Minimum wage increases unemployment among young and unskilled workers.
D)All of the above are correct.
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Sample Questions
Q1) Congressman Dearmark justified spending $3 million on a new entertainment complex in his district because it will create 450 new jobs for his residents.As a student of economics,you know that
A)this is a case of the "broken window fallacy."
B)this is a great use of taxpayer dollars.
C)this policy diverts money from spending somewhere else in the economy.
D)Both a and c are correct.
Q2) 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.
Q3) When a government program is justified not on its merits but on the number of jobs it will create,
A)the program is an efficient use of taxpayer dollars.
B)it should be approved only if the unemployment rate is low.
C)taxes should be raised to fund the program.
D)it is known as the "broken window fallacy."
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Chapter 2: Thinking Like an Economist: Graphing a Brief Review
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Sample Questions
Q1) When income increases the slope of an individual's demand curve,the demand curve
A)turns positive.
B)becomes undefined.
C)remains negative.
D)becomes infinite.
Q2) In the ordered pair (20,30),20 is the
A)the x-coordinate.
B)the horizontal location of the point.
C)the y-coordinate.
D)Both a and b are correct.
Q3) 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.
Q4) A demand curve shows the relationship A)between income and quantity demanded.
B)between price and income.
C)between price and quantity demanded.
15
D)among income,price,and quantity demanded.
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Chapter 2: Thinking Like an Economist: Part A
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Sample Questions
Q1) Refer to Figure 2-3.What does the arrow going from oval A to rectangle 2 represent in the figure?
Q2) Refer to Figure 2-22.Is a move from point A to point R considered a shift of the curve or a movement along the curve?
Q3) Economists at which administrative department analyze data on workers and those looking for work to help formulate labor-market policies?
Q4) Just like other scientific models,economic models simplify reality using
Q5) Refer to Figure 2-3.What do the rectangles represent in the figure?
Q6) Refer to Figure 2-15.Consider the production possibilities frontier for an economy that produces only sofas and cars.The opportunity cost of one sofa is
Q7) 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?
Q8) Is the following a positive or normative statement? The Federal Reserve should set an inflation target and employ policies to meet the target.
Q9) What type of statement is a prescriptive statement about how the world ought to be?
Page 16
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Chapter 2: Thinking Like an Economist: Part B
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Sample Questions
Q1) Refer to Figure 2-14.If this economy uses all its resources in the dishwasher industry,it produces 35 dishwashers and no doghouses.
A)True
B)False
Q2) When a production possibilities frontier is bowed outward,the opportunity cost of one good in terms of the other is constant.
A)True
B)False
Q3) All scientific models,including economic models,simplify reality in order to improve our understanding of it.
A)True
B)False
Q4) Historical episodes are not valuable to economists.
A)True
B)False
Q5) For economists,conducting experiments is often difficult and sometimes impossible.
A)True
B)False
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Chapter 3: Interdependence and the Gains From Trade
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Sample Questions
Q1) 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.
Q2) 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.
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Chapter 3: Interdependence and the Gains From Trade: A
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Sample Questions
Q1) Refer to Figure 3-6.If Daisy must work 2.5 hours to make each pie,then her production possibilities frontier is based on how many hours of work?
A)6 hours
B)7.5 hours
C)37.5 hours
D)50 hours
Q2) Refer to Figure 3-5.If the production possibilities frontier shown for Merve is for 8 hours of work,then how long does it take Merve to make one purse?
A)1/2 hour
B)2 hours
C)4 hours
D)8 hours
Q3) Refer to Figure 3-4.If the production possibilities frontier shown for Lisa is for 4 months of work,then how long does it take Lisa to produce one jacket?
A)1/4 month
B)1/2 month
C)2 months
D)4 months
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Chapter 3: Interdependence and the Gains From Trade:
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Sample Questions
Q1) Refer to Figure 3-17.If Maxine and Daisy switch from each person dividing her time equally between the production of pies and tarts to each person spending all of her time producing the good in which she has a comparative advantage,then total production of tarts will increase by A)7.
B)10.
C)17.
D)20.
Q2) Refer to Figure 3-24.Betty has
A)an absolute and comparative advantage producing good x.
B)an absolute but not a comparative advantage producing good x.
C)a comparative but not an absolute advantage producing good x.
D)neither a comparative nor an absolute advantage producing good x.
Q3) If Shawn can produce more donuts in one day than Sue can produce in one day,then
A)Shawn has a comparative advantage in the production of donuts.
B)Sue has a comparative advantage in the production of donuts.
C)Shawn has an absolute advantage in the production of donuts.
D)Sue has an absolute advantage in the production of donuts.
Page 20
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Chapter 3: Interdependence and the Gains From Trade:
Applications of Comparative Advantage
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Q1) Refer to Figure 3-25.Chile should specialize in the production of A)coffee and import soybeans.
B)soybeans and import coffee.
C)both goods and import neither good.
D)neither good and import both goods.
Q2) Serena Williams should pay someone else to mow her lawn instead of mowing it herself,unless
A)Serena has an absolute advantage over everyone else in mowing her lawn.
B)Serena has a comparative advantage over everyone else in mowing her lawn.
C)Serena's opportunity cost of mowing her lawn is higher than it is for everyone else.
D)All of the above are correct.
Q3) Refer to Figure 3-25.Colombia should specialize in the production of A)coffee and import soybeans.
B)soybeans and import coffee.
C)both goods and import neither good.
D)neither good and import both goods.
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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) Refer to Figure 3-26.What is Mary's opportunity cost of one cookie?
Q2) Refer to Scenario 3-1.Which if any good(s)does Greg have an absolute advantage producing?
Q3) The gains from specialization and trade are based on ------ advantage.
Q4) Economists use the term ------ to refer to the ability to produce a good using fewer inputs than another producer.
Q5) Refer to Scenario 3-1.What is Greg's opportunity cost of producing ice cream? Explain how you derived your answer.
Q6) With eight hours of work Elmer can produce 20 pounds of carrots or 15 pounds of peas.With eight hours Bugs can produce 10 pounds of carrots or 7.5 pounds of peas.Can Elmer and Bugs gain from trade? Defend your answer.
Q7) Refer to Figure 3-26.Who has a comparative advantage in making muffins?
Q8) Refer to Figure 3-26.What is Mary's opportunity cost of one muffin?
Q9) Refer to Figure 3-26.What is Kate's opportunity cost of one cookie?
Q10) What does a consumption possibilities frontier represent?
Q11) Refer to Scenario 3-1.What is Greg's opportunity cost of producing cake? Explain how you derived your answer. Page 23
Q12) Define absolute advantage.
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Page 24
Chapter 3: Interdependence and the Gains From Trade:
Part B
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Sample Questions
Q1) International trade can make some individuals within a country worse off,even as it makes the country as a whole better off.
A)True
B)False
Q2) Jake can complete an oil change in 45 minutes and he can write a poem in 90 minutes.Ming-la can complete an oil change in 30 minutes and she can write a poem in 90 minutes.Jake's opportunity cost of writing a poem is lower than Ming-la's opportunity cost of writing a poem.
A)True
B)False
Q3) Adam Smith was the author of the 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations.
A)True
B)False
Q4) When each person specializes in producing the good in which he or she has a comparative advantage,each person can gain from trade but total production in the economy is unchanged.
A)True
B)False
25
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Chapter 4: The Market Forces of Supply and Demand
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Q1) 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.
Q2) 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.
Q3) The two words economists use most often are
A)inflation and trade.
B)supply and demand.
C)competition and prices.
D)markets and equilibrium.
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Chapter 4: The Market Forces of Supply and
Demand:Markets and Competition
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Q1) When all market participants are price takers who have no influence over prices,the markets have
A)only a few buyers and sellers.
B)numerous sellers but only a few buyers.
C)numerous buyers but only a few sellers.
D)numerous buyers and sellers.
Q2) In competitive markets,
A)firms produce identical products.
B)buyers can influence the market price more easily than sellers.
C)markets are more likely to be in equilibrium.
D)sellers are price setters.
Q3) The market for ice cream is a
A)monopolistic market.
B)highly competitive market.
C)highly organized market.
D)Both b and c are correct.
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Chapter 4: The Market Forces of Supply and Demand: Demand
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Q1) Which of the following demonstrates the law of demand?
A)After Jon got a raise at work,he bought more pretzels at $1.50 per pretzel than he did before his raise.
B)Melissa buys fewer muffins at $0.75 per muffin than at $1 per muffin,other things equal.
C)Dave buys more donuts at $0.25 per donut than at $0.50 per donut,other things equal.
D)Kendra buys fewer Snickers at $0.60 per Snickers after the price of Milky Ways falls to $0.50 per Milky Way.
Q2) A downward-sloping demand curve illustrates
A)that demand decreases over time.
B)that prices fall over time.
C)the relationship between income and quantity demanded.
D)the law of demand.
Q3) A decrease in demand is represented by a
A)movement downward and to the right along a demand curve.
B)movement upward and to the left along a demand curve.
C)rightward shift of a demand curve.
D)leftward shift of a demand curve.
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Page 28
Chapter 4: The Market Forces of Supply and Demand: Supply
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Q1) A movement downward and to the left along a supply curve is called a(n)
A)increase in supply.
B)decrease in supply.
C)decrease in quantity supplied.
D)increase in quantity supplied.
Q2) Which of the following would shift the supply of Green Bay Packers football jerseys to the left?
A)The Green Bay Packers make it to the Super Bowl.
B)The price of the jerseys increases by $15.
C)The technology of sewing machines use to make the jerseys improves.
D)The cost of the fabric used to make the jerseys increases.
Q3) Refer to Figure 4-11.The movement from point A to point B on the graph is caused by
A)a decrease in the price of the good.
B)an increase in the price of the good.
C)an advance in production technology.
D)a decrease in input prices.
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Chapter 4: The Market Forces of Supply and Demand:
Supply and Demand Together
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Q1) Suppose roses are currently selling for $20 per dozen,but the equilibrium price of roses is $30 per dozen.We would expect a
A)shortage to exist and the market price of roses to increase.
B)shortage to exist and the market price of roses to decrease.
C)surplus to exist and the market price of roses to increase.
D)surplus to exist and the market price of roses to decrease.
Q2) Consider the market for portable air conditioners in equilibrium.A summer of unseasonably cool weather would cause
A)both the equilibrium price and quantity to decrease.
B)both the equilibrium price and quantity to increase.
C)the equilibrium price to increase and the equilibrium quantity to decrease.
D)the equilibrium price to decrease and the equilibrium quantity to increase.
Q3) If the supply of a product increases,then we would expect equilibrium price
A)to increase and equilibrium quantity to decrease.
B)to decrease and equilibrium quantity to increase.
C)and equilibrium quantity to both increase.
D)and equilibrium quantity to both decrease.
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Page 30
Chapter 4: The Market Forces of Supply and
DemandConclusion How Prices Allocate Resources
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Q1) 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
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) 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.
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Chapter 4: The Market Forces of Supply and Demand: Part
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Q1) If income rises in the market for a normal good,will the demand curve for the normal good shift to the right or to the left?
Q2) Refer to Figure 4-28.Using the points on the figure,describe the change that would occur if a news report stated that the price of this good was expected to increase next week.
Q3) If income rises in the market for an inferior good,will the demand curve for the inferior good shift to the right or to the left?
Q4) A group of buyers and sellers of a particular good or service is called a
Q5) Refer to Figure 4-31.At a price of $3,is there a shortage or surplus,and how large is the shortage/surplus?
Q6) If the supply of pencils,a substitute for pens,increases,what will happen to the equilibrium price of pencils and to the equilibrium price of pens?
Q7) Refer to Scenario 4-1.Suppose the price is currently equal to 10 in this market.Is there a shortage or surplus in this market,and how large is the shortage/surplus?
Q8) Suppose the supply and demand of corn both increase.As a result,what will happen to the equilibrium price and equilibrium quantity in the market?
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Chapter 4: The Market Forces of Supply and Demand: Part
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Q1) If baked potatoes and sour cream are complements,then an increase in the price of sour cream decreases the demand for baked potatoes.
A)True
B)False
Q2) The quantity supplied of a good or service is the amount that sellers are willing and able to sell at a particular price.
A)True
B)False
Q3) A market's equilibrium is the point at which the supply and demand curves intersect.
A)True
B)False
Q4) In a perfectly competitive market,buyers and sellers are price setters.
A)True
B)False
Q5) When an increase in the price of one good lowers the demand for another good,the two goods are called complements.
A)True
B)False
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Chapter 5: Elasticity and Its Applications
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Q1) When studying how some event or policy affects a market,elasticity provides information on the
A)equity effects on the market by identifying the winners and losers.
B)magnitude of the effect on the market.
C)speed of adjustment of the market in response to the event or policy.
D)number of market participants who are directly affected by the event or policy.
Q2) When studying how some event or policy affects a market,elasticity provides information on the A)change in the costs of production.
B)tradeoff between equality and efficiency.
C)effect on the budget deficit or surplus.
D)direction and magnitude of the effect.
Q3) In general,elasticity is a measure of
A)the extent to which advances in technology are adopted by producers.
B)the extent to which a market is competitive.
C)how firms' profits respond to changes in market prices.
D)how much buyers and sellers respond to changes in market conditions.
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Chapter 5: Elasticity and Its Applications: The Elasticity of Demand
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Sample Questions
Q1) Which of the following is likely to have the most price inelastic demand?
A)yoga mats
B)prescription medicine
C)protein powder
D)gym memberships
Q2) Refer to Figure 5-5.At a price of $50 per unit,sellers' total revenue equals
A)$500.
B)$750.
C)$1000.
D)$1250.
Q3) Refer to Figure 5-8.An increase in price from $10 to $15 would
A)increase total revenue by $1,000.
B)decrease total revenue by $1,000.
C)increase total revenue by $500.
D)decrease total revenue by $500.
Q4) Which of the following is likely to have the most price elastic demand?
A)dental floss
B)milk
C)salt
D)diamond earrings
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Chapter 5: Elasticity and Its Applications: The Elasticity of Supply
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Sample Questions
Q1) 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.
Q2) Refer to Figure 5-16.Using the midpoint method,what is the price elasticity of supply between $6 and $8?
A)0.86
B)1.00
C)1.17
D)1.25
Q3) If sellers do not adjust their quantities supplied at all in response to a change in price,
A)advances in technology must be prevalent.
B)the time period under consideration must be very long.
C)supply is perfectly elastic.
D)supply is perfectly inelastic.
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Chapter
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Sample Questions
Q1) Between 1950 and today there was a
A)20 percent drop in the number of farmers,but farm output increased by more than ten times.
B)30 percent drop in the number of farmers,but farm output more than tripled.
C)40 percent drop in the number of farmers,but farm output more than doubled.
D)70 percent drop in the number of farmers,but farm output increased by about five times.
Q2) Farm programs that pay farmers not to plant crops on all their land
A)hurt farmers by lowering their total revenue and hurt consumers by causing shortages of some food items.
B)help farmers by cutting costs,which helps consumers by lowering food prices.
C)help farmers by increasing total revenue in the market but hurt consumers by raising food prices.
D)help farmers directly since they receive government payments but have no real effects on consumers.
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Chapter 5: Elasticity and Its Applications: Part A
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Sample Questions
Q1) If the income elasticity of demand for a good is -1.40,is the good a normal or inferior good?
Q2) Refer to Scenario 5-6.Using the midpoint method,what is the cross price elasticity of demand for landline and mobile service?
Q3) What is the price elasticity of demand at any point on a perfectly elastic demand curve?
Q4) Refer to Figure 5-21.Using the midpoint method,what is the price elasticity of supply between $15 and $25?
Q5) Refer to Scenario 5-6.Considering the income elasticity,what type of good is mobile telephone service?
Q6) If the cross-price elasticity of demand between two goods is negative,what is the relationship between the two goods?
Q7) Suppose the price elasticity of demand for a product is 1.3.If a supplier wants to increase revenue,what change should it make to price,if any?
Q8) Refer to Scenario 5-2.Good X and Good Y are related as
Q9) The measure of how willing consumers are to buy less of a good as its price rises is called
Q10) If the quantity supplied is exactly the same regardless of the price,supply is
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Chapter 5: Elasticity and Its Applications: Part B
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Sample Questions
Q1) The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.
A)True
B)False
Q2) Price elasticity of demand along a linear,downward-sloping demand curve increases as price falls.
A)True
B)False
Q3) The flatter the demand curve that passes through a given point,the more inelastic the demand.
A)True
B)False
Q4) If we observe that when the price of ice cream rises by 10%,ice cream manufacturers increase the quantity supplied of ice cream by 20%,then the price elasticity of supply is 2.
A)True B)False
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Chapter 6: Supply Demand and Government Policies
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Q1) 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.
Q2) Which of the following is not an example of a public policy?
A)rent-control laws
B)minimum-wage laws
C)taxes
D)equilibrium laws
Q3) 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.
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Chapter 6: Supply Demand and Government Policies:
Controls on Prices
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Q1) Refer to Figure 6-7.For a price ceiling to be binding in this market,it would have to be set at
A)any price below $7.
B)any price above $3.
C)any price below $9.
D)any price above $7.
Q2) Which of the following is not a short-run effect of rent control on the housing market?
A)reduced rents
B)a large shortage
C)a small increase in quantity demanded
D)a small decrease in quantity supplied
Q3) The imposition of a binding price ceiling on a market causes
A)quantity demanded to be greater than quantity supplied.
B)quantity demanded to be less than quantity supplied.
C)quantity demanded to be equal to quantity supplied.
D)the price of the good to be greater than its equilibrium price.
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Page 41
Chapter 6: Supply Demand and Government Policies: Taxes
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Sample Questions
Q1) Refer to Figure 6-24.The price paid by buyers after the tax is imposed is
A)$24.
B)$21.
C)$18.
D)$16.
Q2) You receive a paycheck from your employer,and your pay stub indicates that $400 was deducted to pay the FICA (Social Security/Medicare)tax.Which of the following statements is correct?
A)This type of tax is an example of a payback tax.
B)Your employer is required by law to pay $400 to match the $400 deducted from your check.
C)The $400 that you paid is the true burden of the tax that falls on you,the employee.
D)All of the above are correct.
Q3) Which of the following causes a surplus of a good?
A)a binding price floor
B)a binding price ceiling
C)a tax on the good
D)More than one of the above is correct.
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Chapter 6: Supply Demand and Government Policies: Part
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Sample Questions
Q1) If the demand curve is more price elastic than the supply curve,will the buyers or the sellers bear a greater burden of a tax? Draw a diagram to illustrate your answer.
Q2) Refer to Scenario 6-2.Suppose the government sets a price ceiling at $12 for this product.Is this price ceiling binding,and what will be the size of the shortage/surplus in this market?
Q3) Refer to Figure 6-33.Suppose a $4 per-unit tax is imposed on the sellers of this good.How many units of this good will be sold after the tax is imposed?
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 6-31.If the government set a price ceiling at $8,would there be a shortage or surplus,and how large would be the shortage/surplus?
Q6) Refer to Scenario 6-1.What are the equilibrium price and quantity in the market for good X?
Q7) Refer to Figure 6-33.Suppose a $3 per-unit tax is imposed on the sellers of this good.How much is the burden of this tax on the buyers in this market?
Q8) Does a binding price ceiling result in a shortage or a surplus in the market?
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Chapter 6: Supply Demand and Government Policies: Part B
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Sample Questions
Q1) A tax on sellers and an increase in input prices affect the supply curve in the same way.
A)True
B)False
Q2) The true burden of a payroll tax has nothing to do with the percentage of the tax that employers are required to pay.
A)True
B)False
Q3) Refer to Figure 6-36.If the government places a $2 tax in the market,the buyer bears $2 of the tax burden.
A)True
B)False
Q4) A price ceiling is always a binding price control,whereas a price floor may be either binding or not binding.
A)True
B)False
Q5) Price is the rationing mechanism in a free,competitive market.
A)True
B)False
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Chapter 7: Consumers Producers and the Efficiency of Markets
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Sample Questions
Q1) An example of positive analysis is studying
A)how market forces produce equilibrium.
B)whether equilibrium outcomes are fair.
C)whether equilibrium outcomes are socially desirable.
D)if income distributions are fair.
Q2) Which of the Ten Principles of Economics does welfare economics explain more fully?
A)The cost of something is what you give up to get it.
B)Markets are usually a good way to organize economic activity.
C)Trade can make everyone better off.
D)A country's standard of living depends on its ability to produce goods and services.
Q3) The particular price that results in quantity supplied being equal to quantity demanded is the best price because it
A)maximizes costs of the seller.
B)maximizes tax revenue for the government.
C)maximizes the combined welfare of buyers and sellers.
D)minimizes the expenditure of buyers.
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Chapter 7: Consumers Producers and the Efficiency of
Markets: Consumer Surplus
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Sample Questions
Q1) Motor oil and gasoline are complements.If the price of motor oil increases,consumer surplus in the gasoline market
A)decreases.
B)is unchanged.
C)increases.
D)may increase,decrease,or remain unchanged.
Q2) Refer to Figure 7-5.If the price of the good is $12,then consumer surplus is
A)$9.
B)$11.
C)$13.
D)$16.
Q3) Willingness to pay
A)measures the value that a buyer places on a good.
B)is the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept.
C)is the maximum amount a buyer is willing to pay minus the minimum amount a seller is willing to accept.
D)is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
Page 46
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Chapter 7: Consumers Producers and the Efficiency of
Markets: Producer Surplus
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Sample Questions
Q1) Refer to Figure 7-11.If the supply curve is S and the demand curve shifts from D to D',what is the increase in producer surplus to existing producers?
A)$625
B)$2,500
C)$3,125
D)$5,625
Q2) Refer to Figure 7-10.Which area represents the increase in producer surplus when the price rises from P1 to P2 due to new producers entering the market?
A)BCG
B)ACH
C)DGH
D)AHGB
Q3) Refer to Figure 7-16.If the price of the good is $500,then producer surplus amounts to A)$450.
B)$575.
C)$700.
D)$800.
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Page 47
Chapter 7: Consumers Producers and the Efficiency of
Markets: Market Efficiency
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Sample Questions
Q1) Refer to Figure 7-24.At equilibrium,consumer surplus is A)$18.
B)$36.
C)$54.
D)$72.
Q2) Refer to Figure 7-26.If the government imposes a price floor of $90 in this market,then consumer surplus will be
A)$225.
B)$450.
C)$975.
D)$1,350
Q3) Inefficiency exists in an economy when a good is A)not being consumed by buyers who value it most highly.
B)not distributed fairly among buyers.
C)not produced because buyers do not value it very highly.
D)being produced with less than all available resources.
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Chapter 7: Consumers Producers and the Efficiency of
Markets: Conclusion Market Efficiency and Market Failure
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Q1) Inefficiency can be caused in a market by the presence of A)market power.
B)externalities.
C)imperfectly competitive markets.
D)All of the above are correct.
Q2) Market power refers to the
A)side effects that may occur in a market.
B)government regulations imposed on the sellers in a market.
C)ability of market participants to influence price.
D)forces of supply and demand in determining 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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49
Chapter 7: Consumers Producers and the Efficiency of
Markets: Part A
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Sample Questions
Q1) Refer to Figure 7-30.If the market equilibrium price falls from $120 to $80,how much is the increase in consumer surplus to the consumers who were initially in the market at the $120 price?
Q2) Answer each of the following questions about supply and producer surplus.
a.What is producer surplus,and how is it measured?
b.What is the relationship between the cost to sellers and the supply curve?
c.Other things equal,what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve.
Q3) Refer to Figure 7-32.If the government imposed a price ceiling at $20 in this market,how much are consumer surplus,producer surplus,and total surplus?
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 for those consumers who were purchasing the good when the price floor was in place?
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?
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Chapter 7: Consumers Producers and the Efficiency of
Markets: Part B
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Q1) Welfare economics is the study of the welfare system.
A)True
B)False
Q2) If the government removes a binding price ceiling in a market,then the producer surplus in that market will increase.
A)True
B)False
Q3) The area below the price and above the supply curve measures the producer surplus in a market.
A)True
B)False
Q4) Ticket scalping can increase total surplus in the market for tickets to sporting events.
A)True
B)False
Q5) Economists generally believe that,although there may be advantages to society from ticket-scalping,the costs to society of this activity outweigh the benefits.
A)True
B)False
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Chapter 8: Application the Cost of Taxation
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Sample Questions
Q1) Who once said that taxes are the price we pay for a civilized society?
A)Aristotle
B)George Washington
C)Oliver Wendell Holmes,Jr.
D)Ronald Reagan
Q2) Which of the following tools help us evaluate how taxes affect economic well-being?
(i)Consumer surplus
(ii)Producer surplus
(iii)Tax revenue
(iv)Deadweight loss
A)(i)and (ii)only
B)(i), (ii),and (iii)only
C)(iii)and (iv)only
D)(i), (ii), (iii),and (iv)
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Chapter 8: Application the Cost of Taxation: The
Deadweight Loss of Taxation
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Sample Questions
Q1) Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by J+K+I represents
A)consumer surplus after the tax.
B)consumer surplus before the tax.
C)producer surplus after the tax.
D)producer surplus before the tax.
Q2) Refer to Figure 8-4.The amount of deadweight loss as a result of the tax is
A)$35.00.
B)$45.25.
C)$52.50.
D)$105.00.
Q3) Refer to Figure 8-3.The amount of deadweight loss associated with the tax is equal to
A)P3ACP1.
B)ABC.
C)P2ADP3.
D)P1DCP2.
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Page 53
Chapter 8: Application the Cost of Taxation: The Determinants of the Deadweight Loss
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Q1) Refer to Figure 8-16.Panel (a)and Panel (b)each illustrate a $2 tax placed on a market.In comparison to Panel (b),Panel (a)illustrates which of the following statements?
A)When demand is relatively inelastic,the deadweight loss of a tax is smaller than when demand is relatively elastic.
B)When demand is relatively elastic,the deadweight loss of a tax is larger than when demand is relatively inelastic.
C)When supply is relatively inelastic,the deadweight loss of a tax is smaller than when supply is relatively elastic.
D)When supply is relatively elastic,the deadweight loss of a tax is larger than when supply is relatively inelastic.
Q2) Labor taxes may distort labor markets greatly if
A)labor supply is highly inelastic.
B)many workers choose to work 40 hours per week regardless of their earnings.
C)the number of hours many part-time workers want to work is very sensitive to the wage rate.
D)"underground" workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes.
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Page 54
Chapter 8: Application the Cost of Taxation: Deadweight
Loss and Tax Revenue As Taxes Vary
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Q1) Refer to Figure 8-20.Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)
Q2) Refer to Figure 8-22.Suppose the government initially imposes a $3 per-unit tax on this good.Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50.Which of the following statements is correct?
A)Compared to the original tax,the smaller tax will decrease both tax revenue and deadweight loss.
B)Compared to the original tax,the larger tax will increase both tax revenue and deadweight loss.
C)Compared to the original tax,the larger tax will decrease tax revenue and increase deadweight loss.
D)Both a and b are correct.
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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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Sample Questions
Q1) Refer to Figure 8-28.Suppose that Market A is characterized by Demand 1 and Supply 1,and Market B is characterized by Demand 1 and Supply 2.If an identical tax is imposed on each market,the tax will create a larger deadweight loss in which market? Explain.
Q2) Refer to Figure 8-26.Suppose the government places a $3 tax per unit on this good.How much is producer surplus after the tax is imposed?
Q3) Suppose that the market for product X is characterized by a typical,downward-sloping,linear demand curve and a typical,upward-sloping,linear supply curve.If a $2 tax per unit results in a deadweight loss of $200,how large would be the deadweight loss from a $6 tax per unit?
Q4) Refer to Figure 8-26.How much is consumer surplus at the market equilibrium?
Q5) Suppose the demand curve and the supply curve in a market are both linear.To begin,there was a $5 tax per unit,and the $5 tax resulted in a deadweight loss of $1,500.Now,the tax per unit is higher,with the higher tax resulting in a deadweight loss of $6,000.What is the amount of the new tax per unit?
Q6) Refer to Figure 8-25.Suppose the government places a $4 tax per unit on this good.How much is producer surplus after the tax is imposed?
Q7) In terms of gains from trade,why is it true that taxes cause deadweight losses?
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Chapter 8: Application the Cost of Taxation: Part B
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Q1) When demand is relatively elastic,the deadweight loss of a tax is larger than when demand is relatively inelastic.
A)True
B)False
Q2) 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
Q3) Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade.
A)True
B)False
Q4) Taxes affect market participants by increasing the price paid by the buyer and decreasing the price received by the seller.
A)True
B)False
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Page 58
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) The price of a good that prevails in a world market is called the A)absolute price.
B)relative price.
C)comparative price.
D)world price.
Q2) Assume,for Vietnam,that the domestic price of textiles without international trade is lower than the world price of textiles.This suggests that,in the production of textiles,
A)Vietnam has a comparative advantage over other countries and Vietnam will import textiles.
B)Vietnam has a comparative advantage over other countries and Vietnam will export textiles.
C)other countries have a comparative advantage over Vietnam and Vietnam will import textiles.
D)other countries have a comparative advantage over Vietnam and Vietnam will export textiles.
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Page 60
Chapter 9: Application International Trade: The Winners
and Losers From Trade
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Q1) Refer to Figure 9-5.Bearing in mind that this country is "small," which of the following events conceivably could cause the country to switch from being an importer of tricycles to an exporter of tricycles?
A)Incomes of domestic citizens increase,and tricycles are a normal good.
B)Within this country,the price of a substitute for tricycles decreases.
C)Within this country,the price of a complement to tricycles decreases.
D)Wages increase for domestic workers who produce tricycles.
Q2) If Freedonia changes its laws to allow international trade in software and the world price is higher than its domestic price,then it must be the case that
A)both consumer surplus and producer surplus increase.
B)consumer surplus increases and producer surplus decreases.
C)consumer surplus decreases and producer surplus increases.
D)both consumer surplus and producer surplus decrease.
Q3) Refer to Figure 9-17.Without trade,total surplus is
A)$600.
B)$1,200.
C)$1,800.
D)$2,250.
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Chapter 9: Application International Trade: The Arguments for Restricting Trade
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Q1) Which of the following is not a commonly-advanced argument for trade restrictions?
A)the jobs argument
B)the national-security argument
C)the infant-industry argument
D)the efficiency argument
Q2) Congresswoman Gaga represents a state in which several firms manufacture furniture.She wants to impose tariffs on all imported furniture.Which of the following is the least likely consequence of such tariffs?
A)Domestic furniture buyers will lose consumer surplus,have less variety,and will pay higher prices.
B)Domestic furniture producers will gain producer surplus.
C)Domestic furniture producers will have a higher rate of technological advance.
D)Domestic furniture producers will have more market power.
Q3) A common argument in favor of restricting trade
A)concerns the strategy of bargaining.
B)is that efforts should be made to get new industries started.
C)emphasizes the belief that all countries should play by the same rules.
D)All of the above are correct.
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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) Most economists view the United States' experience with trade as
A)one from which no firm conclusions about the virtues of free trade can be reached,due to the relatively short history of international trade in the U.S.
B)one from which no firm conclusions about the virtues of free trade can be reached,due to the lack of trade within the U.S.throughout most of the early history of the U.S.
C)an ongoing experiment that confirms the virtues of free trade.
D)an ongoing experiment that calls into serious question the notion that free trade enhances the economic well-being of a nation.
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Chapter 9: Application International Trade: Part A
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Q1) 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?
Q2) Refer to Figure 9-27.With no trade allowed,what are the equilibrium price and equilibrium quantity in this market?
Q3) Suppose in the country of Jumanji that the price of wheat with no trade allowed is above the world price of wheat.If Jumanji allows free trade,will Jumanji be an importer or an exporter of wheat?
Q4) Refer to Scenario 9-3.With no trade allowed,what are the equilibrium price and quantity in this market?
Q5) Refer to Figure 9-28.With no trade allowed,what are the equilibrium price and equilibrium quantity in this market?
Q6) Refer to Figure 9-26.Suppose the world price in this market is $7.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 Scenario 9-3.With no trade allowed,how much are consumer surplus,producer surplus,and total surplus in this market?
Q8) How does an import quota differ from an equivalent tariff?
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Chapter 9: Application International Trade: Part B
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Q1) The rules established under the General Agreement on Tariffs and Trade (GATT)are enforced by an international body called the World Trade Organization (WTO).
A)True
B)False
Q2) Since a tariff can increase employment in an industry,the result is a net increase in total surplus.
A)True B)False
Q3) The history of the textile industry raises important questions for economic policy.
A)True
B)False
Q4) Free trade causes job losses in industries in which a country does not have a comparative advantage,but it also causes job gains in industries in which the country has a comparative advantage.
A)True
B)False
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Chapter 10: Measuring a Nations Income
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Q1) Which of the following statistics is usually regarded as the best single measure of a society's economic well-being?
A)the unemployment rate
B)the inflation rate
C)gross domestic product
D)the trade deficit
Q2) Which of the following topics are more likely to be studied by a macroeconomist than by a microeconomist?
A)the effect of taxes on the prices of airline tickets,and the profitability of automobile-manufacturing firms
B)the price of beef,and wage differences between genders
C)how consumers maximize utility,and how prices are established in markets for agricultural products
D)the percentage of the labor force that is out of work,and differences in average income from country to country
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66
Chapter 10: Measuring a Nations Income: The Economy's
Income and Expenditure
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Q1) If an economy's GDP falls,then it must be the case that the economy's
A)income falls and saving rises.
B)income and saving both fall.
C)income falls and expenditure rises.
D)income and expenditure both fall.
Q2) Total income from the domestic production of final goods and services equals A)only household expenditures on these goods and services
B)only household and business expenditures on these goods and services.
C)only household and government expenditures on these goods and services.
D)the expenditures on these goods and services by whoever buys them.
Q3) Because every transaction has a buyer and a seller,
A)GDP is more closely associated with an economy's income than it is with an economy's expenditure.
B)every transaction contributes equally to an economy's income and to its expenditure.
C)the number of firms must be equal to the number of households in a simple circular-flow diagram.
D)firms' profits are necessarily zero in a simple circular-flow diagram.
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Page 67
Chapter 10: Measuring a Nations Income: The Measurement
of GDP
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Q1) U.S.GDP
A)includes production of foreigners working in the U.S.and production by U.S.residents working in foreign countries.
B)includes production of foreigners working in the U.S.but excludes production by U.S.residents working in foreign countries.
C)excludes production of foreigners working in the U.S.but includes production by U.S.residents working in foreign countries.
D)excludes production of foreigners working in the U.S.and production by U.S.residents working in foreign countries.
Q2) Which of the following is not included in U.S.GDP?
A)The market value of an oil change that Ben performs on his own car.
B)The market value of an oil change at Speedy Lube.
C)The market value of oil purchased by Ben.
D)Production of foreign citizens living in the United States that work in an oil packaging facility.
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Chapter 10: Measuring a Nations Income: The Components of GDP
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Q1) Unemployment compensation is
A)part of GDP because it represents income.
B)part of GDP because the recipients must have worked in the past to qualify.
C)not part of GDP because it is a transfer payment.
D)not part of GDP because the payments reduce business profits.
Q2) Micah buys a used car for $10,000 and spends $200 on a new radio that is made in the U.S.The end result of these two transactions is
A)U.S.consumption purchases increase by $200 and U.S.GDP increases by $200.
B)U.S.consumption purchases increase by $200 and U.S.GDP increases by $10,000.
C)U.S.consumption purchases increase by $10,000 and U.S.GDP increases by $10,200.
D)U.S.consumption purchases increase by $10,200 and U.S.GDP increases by $10,200.
Q3) In the United States in 2015,consumption represented slightly less than
A)60 percent of GDP.
B)70 percent of GDP.
C)80 percent of GDP.
D)90 percent of GDP.
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Chapter 10: Measuring a Nations Income: Real Versus Nominal
GDP
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Sample Questions
Q1) Real GDP is the yearly production of final goods and services valued at A)current prices.
B)constant prices.
C)expected future prices.
D)the ratio of current prices to constant prices.
Q2) Suppose an economy produces only iPhones and bananas.In 2010,1000 iPhones are sold at $300 each and 5000 pounds of bananas are sold at $3 per pound.In 2009,the base year,iPhones sold at $400 each and bananas sold at $2 per pound.For 2010,
A)nominal GDP is $315,000,real GDP is $410,000,and the GDP deflator is 76.83.
B)nominal GDP is $410,000,real GDP is $315,000,and the GDP deflator is 130.16.
C)nominal GDP is $315,000,real GDP is $410,000,and the GDP deflator is 130.16.
D)nominal GDP is $410,000,real GDP is $315,000,and the GDP deflator is 76.83.
Q3) Which of the following is correct?
A)Nominal GDP is always less than real GDP.
B)Nominal GDP is always greater than real GDP.
C)Nominal GDP equals real GDP in the base year.
D)Nominal GDP equals real GDP in all years but the base year.
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Page 70
Chapter 10: Measuring a Nations Income: Is GDP a Good Measure of Economic Well-Being
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Q1) Underground economic activity as a percentage of GDP was highest in A)Bolivia.
B)Mexico.
C)Australia.
D)the United States.
Q2) 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.
Q3) GDP per person tells us the income and expenditure of the A)richest person in the economy.
B)poorest person in the economy.
C)average person in the economy.
D)entire economy.
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Chapter 10: Measuring a Nations Income: Part A
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Q1) 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.
Q2) For the economy as a whole,how does income compare to expenditures? Explain.
Q3) Are sales of used goods included in GDP? Explain why or why not.Hint: Remember how GDP is defined.
Q4) What measure of GDP shows the value of goods and services produced if we valued these good and services at the prices that prevailed in some specific year in the past?
Q5) Which component of GDP includes spending on new structures and equipment?
Q6) Nominal GDP is $15 trillion and real GDP is $10 trillion.What is the GDP deflator? Show your work.
Q7) Refer to Figure 23-2.List the locations associated with the flow of inputs and outputs.
Q8) Define gross domestic product.
Q9) Consumption is $7 trillion,investment is $1.5 trillion,government expenditures are $2 trillion,government transfer payments are $1 trillion,exports are $1.50 trillion and imports are $1.25 trillion.What is GDP?
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Chapter 10: Measuring a Nations Income: Part B
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Sample Questions
Q1) GDP is the market value of all final goods and services produced within a country in a given period of time.
A)True
B)False
Q2) When you purchase a run-down 1965 Ford Mustang to restore and resell,the purchase of the vehicle and all restoration expenditures are included in current GDP.
A)True
B)False
Q3) An increase in nominal U.S.GDP necessarily implies that the United States is producing a larger output of goods and services.
A)True
B)False
Q4) The GDP deflator can be used to take inflation out of nominal GDP.
A)True
B)False
Q5) U.S.GDP excludes the production of most illegal goods.
A)True
B)False
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Chapter 11: Measuring the Cost of Living
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Q1) Which of the following statements is correct?
A)The CPI can be used to compare dollar figures from different points in time.
B)The percentage change in the CPI is a measure of the inflation rate,but the percentage change in the GDP deflator is not a measure of the inflation rate.
C)Compared to the consumer price index (CPI),the GDP deflator is the more common gauge of inflation.
D)The GDP deflator better reflects the goods and services bought by consumers than does the CPI.
Q2) The term inflation is used to describe a situation in which
A)the overall level of prices in the economy is increasing.
B)incomes in the economy are increasing.
C)stock-market prices are rising.
D)the economy is growing rapidly.
Q3) The inflation rate is defined as the
A)price level in an economy.
B)change in the price level from one period to the next.
C)percentage change in the price level from the previous period.
D)price level minus the price level from the previous period.
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Chapter 11: Measuring the Cost of Living: The Consumer Price Index
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Q1) One of the differences between the GDP deflator and the consumer price index is
A)the GDP deflator includes income earned by American citizens working in foreign countries and the consumer price index is based solely on purchases made in the U.S.
B)the consumer price index basket of goods is updated constantly by the Bureau of Labor Statistics whereas the GDP deflator is updated only occasionally.
C)the consumer price index includes items not included in the GDP deflator such as airplanes purchased by the Air Force.
D)the GDP deflator reflects prices for all goods and services produced domestically and the consumer price index reflects prices for some goods and services bought by consumers.
Q2) The CPI is a measure of the overall cost of the goods and services bought by A)a typical firm.
B)the government.
C)a typical consumer.
D)All of the above are correct.
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Chapter 11: Measuring the Cost of Living: Correcting
Economic Variables for the Effects of Inflation
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Sample Questions
Q1) When box office receipts are not corrected for inflation,
A)The Sound of Music ranks as the most popular movie of all time.
B)Gone with the Wind does not rank as one of the 50 most popular movies of all time.
C)Titanic ranks as the most popular movie of all time.
D)Avatar does not rank as one of the 50 most popular movies of all time.
Q2) When box office receipts are not corrected for inflation,the most popular movie of all time is
A)Star Wars: The Force Awakens.
B)Avatar.
C)Gone With the Wind.
D)The Dark Knight.
Q3) In 1931 the price of a movie ticket was $0.25.The consumer price index was 15.2 in 1931,and 210 in 2008.Using 2008 prices,the real price of a movie in 1931 was A)$13.82.
B)$52.50.
C)$1.81.
D)$3.45.
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Page 76
Chapter 11: Measuring the Cost of Living: Part A
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Sample Questions
Q1) Consumer spending in what category is the largest component of the CPI?
Q2) What measure reflects the overall cost of goods and services produced domestically?
Q3) Explain how the prices of goods and services used in the CPI differ from the prices used in the PPI.
Q4) Refer to Scenario 24-5.Using 2010 as the base year,what is the CPI in each year?
Q5) For a country like the United States,explain why the CPI would increase at a faster rate than the GDP deflator during periods of oil and gasoline price increases.
Q6) Suppose that the CPI in 1990 was 150,that the inflation rate in 1991 was 6%,and that the inflation rate in 1992 was 4%.What was the CPI in 1991 and 1992?
Q7) Suppose the nominal interest rate this year is 6.5% and that the economy experiences 2.3% deflation.What is the real interest rate?
Q8) In 1954,Mickey Mantle earned $21,000 playing for the New York Yankees.The CPI in 1954 was 26.9,and the CPI in 2010 was 218.06.What is Mickey Mantle's 1954 salary in 2010 dollars?
Q9) List the five steps for calculating the consumer price index and inflation rate.
Q10) What do real interest rates account for that nominal interest rates do not?
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Chapter 11: Measuring the Cost of Living: Part B
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Q1) The producer price index measures the cost of a basket of goods and services bought by firms rather than consumers.
A)True
B)False
Q2) The GDP deflator reflects the prices of all goods and services produced around the world,whereas the consumer price index reflects the prices of all goods and services bought by consumers.
A)True
B)False
Q3) The inflation rate for 2007 is computed by dividing (the CPI in 2007 minus the CPI in 2006)by the CPI in 2006,then multiplying by 100.
A)True
B)False
Q4) The real interest rate tells you how fast the purchasing power of your bank account rises over time.
A)True
B)False
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Chapter 12: Production and Growth
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Q1) A country experiencing a growth rate of 12% per year can go from being one of the poorest to one of the richest in
A)one generation.In the last couple of decades China's growth rate has been higher than 12%.
B)one generation.However,in the last couple of decades not even China's growth rate has been this high.
C)three generations.In the last couple of decades China's growth rate has been higher than 12%.
D)three generations.However,in the last couple of decades not even China's growth rate has been this high.
Q2) During the past century the average growth rate of U.S.real GDP per person implies that it doubled,on average,about every
A)100 years.
B)70 years.
C)35 years.
D)25 years.
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Chapter 12: Production and Growth: Economic Growth
Around the World
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Q1) Of the following countries,which grew most slowly,in terms of real GDP per person,over about the last 120 years?
A)Brazil
B)Mexico
C)China
D)United States
Q2) Which of the following is correct?
A)Over the last 100 years Japan had a higher average growth rate than the United States.It follows that,today,the standard of living in Japan is higher than in the United States.
B)The typical person in Bangladesh today has about twice the real income of a typical American 100 years ago.
C)The typical citizen of China today has about one-half as much real income as the typical citizen of America today.
D)None of the above is correct.
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Chapter 12: Production and Growth: Productivity Its Role and Determinants
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Sample Questions
Q1) Upland has a population of 15,000,of whom 9,000 work 8 hours a day to produce real output of $342,000.Lowland has a population of 8,000,of whom 7,000 work 7 hours a day to produce real output of $171,500.
A)Upland has higher productivity and higher real GDP per person than Lowland.
B)Upland has higher productivity but lower real GDP per person than Lowland.
C)Upland has lower productivity but higher real GDP per person than Lowland.
D)Upland has lower productivity and lower real GDP per person than Lowland.
Q2) In a market economy,scarcity of resources is most clearly reflected in A)supply.
B)demand.
C)market prices.
D)the stock of the resource.
Q3) A management professor discovers a way for corporate management to operate more efficiently.He publishes his findings in a journal.His findings are
A)proprietary and common knowledge.
B)common,but not proprietary,knowledge.
C)proprietary,but not common,knowledge.
D)neither proprietary nor common knowledge.
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Chapter 12: Production and Growth: Economic Growth and Public Policy
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Q1) If a country's saving rate increases,then in the long run
A)productivity is higher but real GDP per person is not higher.
B)real GDP per person is higher but productivity is not higher.
C)productivity and real GDP per person are both higher.
D)neither productivity nor real GDP per person is higher.
Q2) Suppose an economy experiences an increase in its saving rate.The higher saving rate leads to a higher growth rate of productivity
A)in the short run,but not in the long run.
B)in the long run,but not in the short run.
C)in both the short run and the long run.
D)in neither the short run nor the long run.
Q3) Refer to Figure 25-1.The curve becomes flatter as the amount of capital per worker increases because of
A)increasing returns to capital.
B)increasing returns to labor.
C)diminishing returns to capital.
D)diminishing returns to labor.
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Page 82
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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83
Chapter 12: Production and Growth: Part A
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Q1) Why is productivity related to the standard of living? In your answer be sure to explain what productivity and the standard of living mean.Make a list of things that determine labor productivity.
Q2) What are inward-oriented policies? Do most economists recommend these types of policies to poor countries?
Q3) In addition to investment in physical and human capital,what other public policies might a country adopt to increase productivity?
Q4) Consider the production function \( Y=2 F(L, K, H, N) \). Suppose \( F(12,10,9,7)=100 \) and \( F(24,20,18,14)=180 \) . Does the production function have the property of constant returns to scale? Why or why not?
Q5) Susan and Calvin paint houses.Susan consistently paints about 400 square feet of a house's exterior per hour,while Calvin consistently paints about 300 square feet per hour.Susan's ---------- exceeds that of Calvin.
Q6) What is the difference between human capital and technology?
Q7) Is physical capital a produced factor of production? Is human capital a produced factor of production?
Q8) In what sense is capital accumulation costly to a society?
Page 84
Q9) Explain the distinction between technological knowledge and human capital.
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Chapter 12: Production and Growth: Part B
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Q1) It is possible for a country without a lot of domestic natural resources to have a high standard of living.
A)True
B)False
Q2) Investment in human capital has opportunity costs,but investment in physical capital does not.
A)True
B)False
Q3) Although growth rates across countries vary some,rankings of countries by income remain pretty much the same over time.
A)True
B)False
Q4) Petroleum is an example of a nonrenewable resource.
A)True
B)False
Q5) Randomized control trials can help economists evaluate the impact of global aid programs in the same way that doctors test drugs.
A)True
B)False
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Chapter 13: Saving Investment and the Financial System
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Q1) The financial system does NOT influence
A)long-run economic growth.
B)saving and investment.
C)the amount of capital in the economy.
D)the amount of natural resources in the economy.
Q2) 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.
Q3) Given that Monika's income exceeds her expenditures,Monika is best described as a A)saver or as a supplier of funds.
B)saver or as a demander of funds.
C)borrower or as a supplier of funds.
D)borrower or as a demander of funds.
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Chapter 13: Saving Investment and the Financial System:
Financial Institutions in the US economy
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177 Verified Questions
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Source URL: https://quizplus.com/quiz/79750
Sample Questions
Q1) Other things the same,which bond would you expect to pay the highest interest rate?
A)a bond issued by the U.S.government
B)a bond issued by Microsoft Corporation
C)a bond issued by the state of Montana
D)a bond issued by a new chain of Brazilian-style restaurants
Q2) Which of the following is not a nonsensical headline?
A)British perpetuities about to mature.
B)Disney issues new bonds with term of 7 percent.
C)Corporate bonds currently pay higher interest rates than government bonds.
D)Standard and Poor's judges new junk bond to have very low credit risk.
Q3) The bond market
A)is a financial market,whereas the stock market is a financial intermediary.
B)is a financial intermediary,whereas the stock market is a financial market.
C)is a financial market,as is the stock market.
D)is a financial intermediary,as is the stock market.
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Chapter 13: Saving Investment and the Financial System:
Saving and Investment in the National Income Accounts
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98 Verified Questions
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Sample Questions
Q1) For an economy that engages in international trade,GDP is divided into four components.Which of the following items is not one of those components?
A)consumption.
B)national saving.
C)government purchases.
D)net exports.
Q2) According to the definitions of national saving and private saving,if Y,C,and G remained the same,an increase in taxes would
A)raise both national saving and private saving.
B)raise national saving and reduce private saving.
C)leave national saving and private saving unchanged.
D)leave national saving unchanged and reduce private saving.
Q3) Refer to Scenario 26-2.For this economy,investment amounts to
A)$0.4 trillion.
B)$2.1 trillion.
C)$1.7 trillion.
D)$1.2 trillion.
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88
Chapter 13: Saving Investment and the Financial System:
The Market for Loanable Funds
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Sample Questions
Q1) Refer to Figure 26-4.If the equilibrium quantity of loanable funds is $50 billion and if the equilibrium nominal interest rate is 8 percent,then
A)there is an excess supply of loanable funds at a real interest rate of 6 percent.
B)there is an excess demand for loanable funds at a real interest rate of 8 percent.
C)the rate of inflation is approximately 2 percent.
D)the rate of inflation is approximately 14 percent.
Q2) The slope of the demand for loanable funds curve represents the
A)positive relation between the real interest rate and investment.
B)negative relation between the real interest rate and investment.
C)positive relation between the real interest rate and saving.
D)negative relation between the real interest rate and saving.
Q3) If Congress instituted an investment tax credit,the interest rate would
A)rise and saving would rise.
B)fall and saving would fall.
C)rise and saving would fall.
D)fall and saving would rise.
Q4) Public saving is the difference between _____ and _____.
Q5) What is a bond buyer promised when she buys a bond?
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Chapter 13: Saving Investment and the Financial System:
Part A
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57 Verified Questions
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Sample Questions
Q1) Your brother-in-law wants to buy either stock or bonds in Cedar Valley Furniture,which manufactures wooden furniture.He wants your advice on whether to buy stock or bonds.Explain how each of his quotes below should affect his choice between the stock and the bond.
a."I have reason to believe that people are soon going to find rocking chairs have health benefits."
b."I would like to tell people I am part owner of Cedar Valley Furniture."
c."I do not want to take on much risk."
Q2) _____ and _____ are the two most important financial intermediaries.
Q3) In the terminology of macroeconomics,what's the difference between a saver and an investor?
Q4) Robert buys bonds.Rachel buys a new truck for her landscaping business.Identify both as savers,investors,both,or neither.
Q5) In a closed economy,GDP is $1000,government purchases are $200,and consumption is $700.If the government has a budget surplus of $25,what are investment,taxes,private saving,and national saving?
Q6) Which government policy raises the interest rate and raises investment spending?
Page 90
Q7) The two most important financial markets are the _____ market and the _____ market.
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Chapter 13: Saving Investment and the Financial System:
Part B
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Sample Questions
Q1) An increase in the demand for loanable funds increases the equilibrium interest rate and decreases the equilibrium level of saving.
A)True
B)False
Q2) In a closed economy,investment must be equal to private saving.
A)True
B)False
Q3) Because of differences in tax treatment,municipal bonds pay a higher interest rate than do corporate bonds.
A)True
B)False
Q4) In a closed economy,each unit of output is either consumed by households or invested.
A)True B)False
Q5) When an economy's government goes from running a budget deficit to running a budget surplus,the economy's long-run growth prospects are improved.
A)True B)False
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Chapter 14: The Basic Tools of Finance
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Sample Questions
Q1) Which of the following statements best describes the economist's view of finance and the financial system?
A)The financial system is very important to the functioning of the economy,and the tools of finance are often helpful to us as individuals when we find ourselves making certain decisions.
B)The financial system,while interesting,is not very important to the functioning of the economy;however,the tools of finance are often helpful to us as individuals when we find ourselves making certain decisions.
C)The financial system is very important to the functioning of the economy;however,the tools of finance are not particularly helpful to us as individuals since we seldom make decisions for which those tools are useful.
D)The field of finance is intimately concerned with the financial system and the tools of finance,and financial economists see great importance in them;however,the "mainstream" economist sees little value in studying financial markets or the tools of finance.
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Chapter 14: The Basic Tools of Finance: Present Value
Measuring the Time Value of Money
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Sample Questions
Q1) The future value of a deposit in a savings account will be larger
A)the longer a person waits to withdraw the funds.
B)the higher the interest rate is.
C)the larger the initial deposit is.
D)All of the above are correct.
Q2) Which of the following has the highest future value?
A)$100 saved for 2 years at 10 percent interest
B)$110 saved for 2 years at 9 percent interest
C)$120 saved for 2 years at 8 percent interest
D)$130 saved for 2 years at 7 percent interest
Q3) At which interest rate is the present value of $145.80 two years from today equal to $125 today?
A)2 percent
B)4 percent
C)6 percent
D)8 percent
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93
Chapter 14: The Basic Tools of Finance: Managing Risk
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Sample Questions
Q1) The utility function of a risk-averse person has a
A)positive slope and gets steeper as wealth increases.
B)positive slope but gets flatter as wealth increases.
C)negative slope but gets steeper as wealth increases.
D)negative slope and gets flatter as wealth increases.
Q2) Which of the following actions best illustrates moral hazard?
A)A person adds risky stock to his portfolio.
B)A person who has narrowly avoided many accidents applies for automobile insurance.
C)A person is unwilling to buy a stock when she believes its price has an equal chance of rising or falling $10.
D)A person purchases homeowners insurance and then checks his smoke detector batteries less frequently.
Q3) Kayla faces risks and she pays a fee to ABC Company;in return,ABC Company agrees to accept some or all of Kayla's risks.ABC Company is A)a mutual fund.
B)an insurance company.
C)a diversified company.
D)an equity-financed company.
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94
Chapter 14: The Basic Tools of Finance: Asset Valuation
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Sample Questions
Q1) The word "efficient" in the term "efficient markets hypothesis" refers to the idea that A)fundamental analysis is an efficient way to go about choosing which stocks to buy or sell.
B)stock prices move upward and downward "efficiently," rather than following a "random walk."
C)the stock market is "informationally efficient."
D)companies employ officers and managers who are well-qualified to perform their jobs.
Q2) Fundamental analysis is
A)the study of the relation between risk and return of stock portfolios.
B)the determination of the allocation of savings between stocks and bonds based on a person's degree of risk aversion.
C)the study of a company's accounting statements and future prospects to determine its value.
D)a method used to determine how adding stocks to a portfolio will change the risk of the portfolio.
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Chapter 14: The Basic Tools of Finance: Conclusion
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Sample Questions
Q1) 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.
Q2) 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.
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Chapter 14: The Basic Tools of Finance: Part A
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Sample Questions
Q1) Suppose you invest $10,000 at 7% interest to be withdrawn by your heirs in 100 years.According to the rule of 70,approximately how much will your heirs be able to withdraw?
Q2) A company has an investment project that will cost $2 million today and yield a payoff of $3 million in 5 years.If the interest rate is 7%,should the firm undertake the project? Show evidence to support your answer.
Q3) Refer to Scenario 27-1.Suppose Lisa is faced with a choice between two options.With option A Lisa receives a guaranteed $9 million.With option B Lisa faces a lottery that pays $16 million with probability P and pays $4 million with probability (1-P).Given Lisa's utility function,how high does P need to be before Lisa will prefer option B?
Q4) Suppose your bank account pays a 4% interest rate.You are considering purchasing a share of stock in ABC Corporation for $500.The stock will pay you a $10 dividend at the end of years 1,2,and 3.You expect to be able to sell the stock at the end of year 3 for $550.Is ABC a good investment? Provide evidence to support your answer.
Q5) From the standpoint of the economy as a whole,the role of insurance is not to eliminate the risks inherent in life.Then what is its purpose?
Q6) How does adverse selection affect the insurance market?
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Page 97
Chapter 14: The Basic Tools of Finance: Part B
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Sample Questions
Q1) According to fundamental analysis,when choosing stocks for your portfolio,you should prefer undervalued stocks.
A)True
B)False
Q2) Increasing the number of corporations whose stocks are in your portfolio reduces market risk.
A)True
B)False
Q3) According to the efficient markets hypothesis,the number of people who think a stock is overvalued exactly balances the number of people who think a stock is undervalued.
A)True
B)False
Q4) Managed mutual funds usually outperform mutual funds that are supposed to follow some stock index.
A)True
B)False
Q5) Diversification can reduce firm-specific risk.
A)True
B)False
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Chapter 15: Unemployment
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Sample Questions
Q1) The natural rate of unemployment
A)varies less than the measured unemployment rate.
B)cannot be changed by government policy.
C)is closely associated with the ups and downs in economic activity.
D)is set by the Federal Reserve.
Q2) Cyclical unemployment
A)has a different explanation than does the natural rate of unemployment.
B)refers to the year-to-year fluctuation in unemployment around an economy's natural rate of unemployment.
C)is closely associated with short-run ups and downs of economic activity.
D)All of the above are correct.
Q3) Cyclical unemployment is closely associated with
A)long-term economic growth.
B)short-run ups and downs of the economy.
C)fluctuations in the natural rate of unemployment.
D)changes in the minimum wage.
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99
Chapter 15: Unemployment: Identifying Unemployment
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Sample Questions
Q1) John is a stockbroker.He has had several job offers,but he has turned them down because he thinks he can find a firm that better matches his tastes and skills.Curtis has looked for work as an accountant for some time.While the demand for accountants does not appear to be falling,there seems to be more people applying than jobs available.
A)John and Curtis are both frictionally unemployed.
B)John and Curtis are both structurally unemployed.
C)John is frictionally unemployed,and Curtis is structurally unemployed.
D)John is structurally unemployed,and Curtis is frictionally unemployed.
Q2) Suppose there are a large number of men who used to work or seek work who now no longer do either.Other things the same,this makes
A)the number of people unemployed rise but does not change the labor force.
B)the number of people unemployed rise but makes the labor force fall.
C)both the number of people unemployed and the labor force fall.
D)the number of people unemployed fall but does not change the labor force.
Q3) Refer to Scenario 28-1.What is the labor-force participation rate?
A)83.3%
B)86.7%
C)93.3%
D)96.7%
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Page 100
Chapter 15: Unemployment: Job Search
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Sample Questions
Q1) Public policy
A)can reduce both frictional unemployment and the natural rate of unemployment.
B)can reduce frictional unemployment,but it cannot reduce the natural rate of unemployment.
C)cannot reduce frictional unemployment,but it can reduce the natural rate of unemployment.
D)cannot reduce either frictional unemployment or the natural rate of unemployment.
Q2) An economist claims that changes in information technology and unemployment insurance have reduced unemployment.Which of these changes affect frictional unemployment?
A)both the changes in information technology and unemployment insurance
B)only the changes in information technology
C)only the changes in unemployment insurance
D)neither the changes in information technology nor the changes in unemployment insurance
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101
Chapter 15: Unemployment: Minimum-Wage Laws
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Sample Questions
Q1) Minimum-wage laws are most likely to affect the wages paid to A)teenagers.
B)people with advanced technical training.
C)people who are self-employed.
D)union members.
Q2) Refer to Figure 28-4.If the government imposes a minimum wage of $12,how many workers will be unemployed?
A)0
B)2,000
C)4,000
D)10,000
Q3) Refer to Figure 28-4.If the government imposes a minimum wage of $10,how many workers will be unemployed?
A)0
B)2,000
C)4,000
D)8,000
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102
Chapter 15: Unemployment: Unions and Collective Bargaining
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Sample Questions
Q1) Suppose that roofers are not unionized.If roofers unionize,then the supply of labor in other sectors of the economy will
A)decrease,raising wages in industries that are not unionized.
B)decrease,reducing wages in industries that are not unionized.
C)increase,raising wages in industries that are not unionized.
D)increase,reducing wages in industries that are not unionized.
Q2) Unions
A)raise the wages of unionized workers and raise unemployment.
B)raise the wages of unionized workers and reduce unemployment.
C)reduce the wages of unionized workers and raise unemployment.
D)reduce the wages of unionized workers and reduce unemployment.
Q3) Since the 1940's U.S.union membership has
A)fallen.This decline should have reduced structural unemployment.
B)fallen.This decline should not have reduced structural unemployment.
C)risen.This increase should have raised structural unemployment.
D)risen.This increase should not have raised structural unemployment.
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Page 103
Chapter 15: Unemployment: The Theory of Efficiency Wages
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Sample Questions
Q1) Paying efficiency wages means that wages are
A)above equilibrium,and profits are higher than otherwise.
B)above equilibrium,and profits are lower than otherwise.
C)below equilibrium,and profits are higher than otherwise.
D)below equilibrium,and profits are lower than otherwise.
Q2) Efficiency wages,minimum-wage laws,and unions all keep wages
A)below the equilibrium level,causing a shortage of labor.
B)below the equilibrium level,causing a surplus of labor.
C)above the equilibrium level,causing a shortage of labor.
D)above the equilibrium level,causing a surplus of labor.
Q3) Minimum-wage laws,unions,and efficiency wages contribute to
A)both structural unemployment and the natural rate of unemployment.
B)neither structural unemployment nor the natural rate of unemployment.
C)structural unemployment,but not the natural rate of unemployment.
D)the natural rate of unemployment,but not structural unemployment.
Q4) Efficiency wages contribute to
A)frictional unemployment and the natural rate of unemployment.
B)frictional unemployment but not the natural rate of unemployment.
C)structural unemployment and the natural rate of unemployment.
D)structural unemployment but not the natural rate of unemployment.
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Chapter 15: Unemployment: Part A
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Sample Questions
Q1) List the four ways to explain unemployment in the long run.
Q2) Almost half of all spells of unemployment end when the unemployed person
Q3) How does the government measure the economy's rate of unemployment?
Q4) An important determinant of a countrys standard of living is the amount of __________ it typically experiences.
Q5) In the town of Gotham the adult population is 560 thousand,the number unemployed is 25 thousand,and 185 thousand are not in the labor force.Calculate the unemployment rate.
Q6) Explain how the actions of labor unions generate greater unemployment.
Q7) A labor union is similar to a ----------.
Q8) List the main employment characteristics over which a labor union negotiates for its workers.
Q9) Give an historical example of an efficiency wage that was considered by the firm to be "one of the finest cost-cutting moves we ever made."
Q10) Refer to Figure 28-7.If the minimum wage is set at $100,how many will be unemployed?
Page 105
Q11) Do economists believe that labor unions are good or bad for the U.S. economy?
Q12) Write the formula for calculating the labor force participation rate.
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Chapter 15: Unemployment: Part B
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Sample Questions
Q1) A firm might offer efficiency wages in order to attract a better pool of applicants.
A)True
B)False
Q2) The Bureau of Labor Statistics defines marginally attached workers as persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past.
A)True
B)False
Q3) Public policy can reduce the economy's natural rate of unemployment.
A)True
B)False
Q4) Unions are often thought to cause conflict between different groups of workers -between the insiders who benefit from high union wages and the outsiders who do not get the union jobs.
A)True
B)False
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Chapter 16: The Monetary System
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Sample Questions
Q1) As opposed to a payments system based on barter,a payments system based on money
A)requires a double coincidence of wants.
B)leads to less specialization.
C)makes trades less costly.
D)None of the above is correct.
Q2) Money
A)is more efficient than barter.
B)makes trades easier.
C)allows greater specialization.
D)All of the above are correct.
Q3) In an economy that relies upon barter,
A)trade does not require a double coincidence of wants.
B)scarce resources are allocated just as easily as they are in economies that do not rely upon barter.
C)there is no item in the economy that is widely accepted in exchange for goods and services.
D)All of the above are correct.
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Chapter 16: The Monetary System: The Meaning of Money
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Sample Questions
Q1) Prisoners sometimes determine a single good to be used as money.This good becomes
A)a medium of exchange and a unit of account.
B)a medium of exchange,but not a unit of account.
C)a unit of account,but not a medium of exchange.
D)neither a unit of account nor a medium of exchange.
Q2) Economists equate money with
A)individual wealth.
B)income regularly earned.
C)assets people use regularly to buy goods and services.
D)individual saving.
Q3) Which of the following is a function of money?
A)a unit of account
B)a store of value
C)medium of exchange
D)All of the above are correct.
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Chapter 16: The Monetary System: The Federal Reserve System
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Sample Questions
Q1) At the Federal Reserve,
A)the nation's monetary and fiscal policies are made by the Federal Open Market Committee,which meets about every six weeks.
B)the nation's monetary and fiscal policies are made by the Federal Open Market Committee,which meets twice a year.
C)the nation's monetary policy is made by the Federal Open Market Committee,which meets about every six weeks.
D)the nation's monetary policy is made by the Federal Open Market Committee,which meets twice a year.
Q2) At any given time,the voting members of the Federal Open Market Committee include
A)five of the presidents of the regional Federal Reserve banks.
B)the president of the Federal Reserve Bank of New York.
C)the seven members of the Board of Governors.
D)All of the above are correct.
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Page 110
Chapter 16: The Monetary System: Banks and the Money Supply
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Sample Questions
Q1) Which of the following is an asset of a bank and a liability for its customers?
A)deposits of its customers and loans to its customers
B)deposits of its customers but not loans to its customers
C)loans to its customers but not the deposits of its customers
D)neither the deposits of its customers nor the loans to its customers
Q2) If the reserve ratio is 5 percent,then $500 of additional reserves can create up to
A)$10,500 of new money.
B)$10,000 of new money.
C)$9,500 of new money.
D)$2,500 of new money.
Q3) Suppose the banking system currently has $300 billion in reserves,the reserve requirement is 5 percent,and excess reserves are $30 billion.What is the level of loans?
A)$270 billion
B)$5,400 billion
C)$6,000 billion
D)$5,100 billion
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Chapter 16: The Monetary System: The Feds Tools of Monetary Control
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Sample Questions
Q1) Refer to Scenario 29-1.Assume that banks desire to continue holding the same ratio of excess reserves to deposits.What is the reserve requirement and what is the reserve ratio?
A)2 percent,8 percent
B)8 percent,10 percent
C)10 percent,12.5 percent
D)None of the above is correct.
Q2) What does the Fed auction at the Term-Auction Facility?
A)government bonds of a quantity it sets
B)government bonds with the quantity determined at the auction
C)loans of a quantity it sets
D)loans with the quantity determined at the auction
Q3) People hold $400 million of bank deposits but no currency.Banks have made $380 million dollars of loans and only hold enough reserves to satisfy reserve requirements.Because of uncertainty,banks choose to hold $10 million more in reserves.The Fed takes no action.What happens to bank loans?
A)they fall $220 million
B)they fall $200 million
C)they rise $200 million
D)they rise $220 million
Page 112
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Chapter 16: The Monetary System: Part A
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Sample Questions
Q1) What is the difference between money and wealth?
Q2) Which two of the Ten Principles of Economics imply that the Fed can profoundly affect the economy?
Q3) Suppose that in a country the total holdings of banks were as follows: required reserves = $45 million excess reserves = $15 million deposits = $750 million loans = $600 million Treasury bonds = $90 million
Show that the balance sheet balances if these are the only assets and liabilities. Assuming that people hold no currency, what happens to each of these values if the central bank changes the reserve requirement ratio to 2%, banks still want to hold the same percentage of excess reserves, and banks dont change their holdings of Treasury bonds? How much does the money supply change by?
Q4) If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by _____ and M2 will change by _____.
Q5) The primary tool used by the Federal Reserve to change the money supply is _____.
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Page 113
Chapter 16: The Monetary System: Part B
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Sample Questions
Q1) Money allows people to specialize in what they do best,thereby raising everyone's standard of living.
A)True
B)False
Q2) The use of money allows trade to be roundabout.
A)True
B)False
Q3) M2 is both larger and less liquid than M1.
A)True
B)False
Q4) Because of the multiple tools at its disposal,the Fed can control the money supply very precisely.
A)True
B)False
Q5) If the Fed decreases reserve requirements,the money supply will increase.
A)True
B)False
Q6) The Federal Reserve was created in 1913 after a series of bank failures in 1907. A)True
B)False
Page 114
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Chapter 17: Money Growth and Inflation
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22 Verified Questions
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Sample Questions
Q1) In which of the following cases was the inflation rate 12 percent over the last year?
A)One year ago the price index had a value of 110 and now it has a value of 120.
B)One year ago the price index had a value of 120 and now it has a value of 132.
C)One year ago the price index had a value of 134 and now it has a value of 150.
D)One year ago the price index had a value of 145 and now it has a value of 163.
Q2) Over the past 80 years,prices in the U.S.have risen on average about
A)2 percent per year.
B)4 percent per year.
C)3.6 percent per year.
D)6 percent per year.
Q3) Inflation can be measured by the
A)change in the consumer price index.
B)percentage change in the consumer price index.
C)percentage change in the price of a specific commodity.
D)change in the price of a specific commodity.
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115
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) If the CPI rises,the number of dollars needed to buy a representative basket of goods
A)increases,and so the value of money rises.
B)increases,and so the value of money falls.
C)decreases,and so the value of money rises.
D)decreases,and so the value of money falls
Q2) Shawn puts money into an account.One year later he sees that he has 6 percent more dollars and that his money will buy 5 percent more goods.
A)The nominal interest rate was 11 percent and the inflation rate was 5 percent.
B)The nominal interest rate was 6 percent and the inflation rate was 5 percent.
C)The nominal interest rate was 5 percent and the inflation rate was -1 percent.
D)The nominal interest rate was 6 percent and the inflation rate was 1 percent.
Q3) Changes in nominal variables are determined mostly by the quantity of money and the monetary system according to
A)both the classical dichotomy and the quantity theory of money.
B)the classical dichotomy,but not the quantity theory of money.
C)the quantity theory of money,but not the classical dichotomy.
D)neither the classical dichotomy nor the quantity theory of money.
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Page 116
Chapter 17: Money Growth and Inflation: The Costs of
Inflation
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94 Verified Questions
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Sample Questions
Q1) If people had been expecting prices to rise but in fact prices fell,then who among the following would benefit?
A)lenders and people holding a lot of currency
B)lenders but not people holding a lot of currency
C)people holding a lot of currency but not lenders
D)neither lenders nor people holding a lot of currency
Q2) Given a nominal interest rate of 6 percent,in which of the following cases would you earn the highest after-tax real rate of interest?
A)Inflation is 3 percent;the tax rate is 25 percent.
B)Inflation is 1 percent;the tax rate is 50 percent.
C)Inflation is 1 percent;the tax rate is 55 percent.
D)Inflation is 4 percent;the tax rate is 10 percent.
Q3) Given a nominal interest rate of 6 percent,in which of the following cases would you earn the lowest after-tax real rate of interest?
A)Inflation is 4 percent;the tax rate is 5 percent.
B)Inflation is 3 percent;the tax rate is 20 percent.
C)Inflation is 2 percent;the tax rate is 30 percent.
D)The after-tax real interest rate is the same for all of the above.
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Chapter 17: Money Growth and Inflation: Conclusion
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Sample Questions
Q1) Inflation costs are minimized during periods of A)hyperinflation.
B)large,unexpected deflation.
C)moderate inflation.
D)rapid money growth.
Q2) 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.
Q3) Inflation costs are minimized under which inflation rate?
A)-20 percent
B)5 percent
C)15 percent
D)575 percent
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118
Chapter 17: Money Growth and Inflation: Part A
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63 Verified Questions
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Sample Questions
Q1) Wages and prices are many times higher today than they were 30 years ago,yet people do not work a lot more hours or buy fewer goods.How can this be?
Q2) If the price level were to rise from 160 to 200,in what direction and by how much would the value of a dollar change?
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) Suppose that velocity and output are constant and that the quantity theory and the Fisher effect both hold.What happens to inflation,real interest rates,and nominal interest rates when the money supply growth rate increases from 5 percent to 10 percent?
Q5) In the early 1920s U.S. consumer prices fell, while Germany experienced hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S. households (relative to German households) made _____ frequent trips to the bank and U.S. firms changed prices _____ frequently.
Q6) The classical dichotomy says that two groups of variables are affected by different forces.What are these two groups of variables?
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Page 119
Chapter 17: Money Growth and Inflation: Part B
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Sample Questions
Q1) Suppose the nominal interest rate is 10 percent,the tax rate on interest income is 28 percent,and the inflation rate is 6 percent.Then the after-tax real interest rate is -3.2 percent.
A)True
B)False
Q2) The United States has never had deflation.
A)True
B)False
Q3) For a given level of money and real GDP,an increase in velocity would lead to an increase in the price level.
A)True
B)False
Q4) If the Fed increases the money supply,the equilibrium value of money decreases and the equilibrium price level increases.
A)True
B)False
Q5) Shoeleather costs and menu costs are both costs of anticipated inflation. 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
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Sample Questions
Q1) Most of the change from 1980 to 1987 in U.S.net capital outflow as a percent of GDP was due to a(n)
A)decrease in U.S.investment.
B)decrease in U.S.national saving.
C)increase in U.S.investment.
D)increase in U.S.national saving.
Q2) If a country has a trade deficit
A)it has positive net exports and positive net capital outflow.
B)it has positive net exports and negative net capital outflow.
C)it has negative net exports and positive net capital outflow.
D)it has negative net exports and negative net capital outflow.
Q3) A country has $20 billion of domestic investment and net capital outflow of $10 billion.What is saving?
A)$10 billion
B)$30 billion
C)-$20 billion
D)-$30 billion
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Page 122
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) Suppose the real exchange rate is 3/4 gallon of country A's gasoline per gallon of U.S.gasoline,a gallon of U.S.gasoline costs $3.00 U.S. ,and a gallon of gas in country A costs 6 units of their currency.What is the nominal exchange rate?
A)3/8 of a unit of country A's currency per dollar.
B)3/2 units of country A's currency per dollar.
C)8/3 units of country A's currency per dollar.
D)None of the above is correct.
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.
Q3) If the U.S.real exchange rate appreciates,U.S.exports to Europe
A)and European exports to the U.S.both rise.
B)and European exports to the U.S.both fall.
C)rise,and European exports to the U.S.fall.
D)fall,and European exports to the U.S.rise.
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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 140,and the price level in Canada is 120,which of the following is true?
A)the real exchange rate is 120/140.
B)the real exchange rate is 140/120.
C)the nominal exchange rate is 120/140
D)the nominal exchange rate is 140/120
Q2) If over the next few years inflation is higher in Mexico than in the U.S. ,then according to purchasing-power parity which of the following should rise?
A)the U.S.real exchange rate but not the U.S.nominal exchange rate
B)the U.S.nominal exchange rate but not the U.S.real exchange rate
C)the U.S.real exchange rate but not the U.S.nominal exchange rate.
D)neither the U.S.real nor the U.S.nominal exchange rate.
Q3) The ability to profit by purchasing wheat in the U.S.and selling it in China implies that the
A)nominal exchange rate is less than 1.
B)nominal exchange rate is greater than 1.
C)real exchange rate is less than 1.
D)real exchange rate is greater than 1.
Page 124
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Chapter 18: Open Economy Macroeconomics Basic
Concepts: Part A
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67 Verified Questions
67 Flashcards
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Sample Questions
Q1) What does purchasing-power parity imply about the real exchange rate? Explain what this means.
Q2) Last year a country had $700 billion of saving and $900 of investment.What was its net capital outflow? How is it possible for a country to have investment that exceeds saving?
Q3) How do we find the real exchange rate from the nominal exchange rate?
Q4) Last year a country purchased $1.5 trillion worth of goods and services from foreign countries,sold $2 trillion worth of goods and services to foreign countries and had national saving of $1.25 trillion.What was the value of its domestic investment? Show your work.
Q5) Why are net exports and net capital outflow always equal?
Q6) Last year a country sold $500 billion euros worth of goods to foreigners and had a trade deficit of $100 billion euros.What was the value of its imports?
Q7) Suppose that a U.S.dollar buys more gold in Australia than it buys in Russia.What does purchasing-power parity imply should happen?
Q8) Derive the relation between savings,domestic investment,and net capital outflow using the national income accounting identity.
Q9) What is the logic behind the theory of purchasing-power parity? Page 125
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Chapter 18: Open Economy Macroeconomics Basic
Concepts: Part B
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63 Verified Questions
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Source URL: https://quizplus.com/quiz/79630
Sample Questions
Q1) If foreign residents purchase 30 billion pesos of Mexican assets and Mexican residents purchase 25 billion pesos of foreign assets,then Mexico has a net capital outflow of 5 billion pesos.
A)True
B)False
Q2) According to purchasing power parity,the nominal exchange rate between the U.S.and another country should equal the price level of foreign goods divided by the price level of U.S.goods.
A)True
B)False
Q3) In the 1970s and 1980s the U.S.dollar depreciated against the German mark and appreciated against the Italian lira because U.S.inflation was lower than in Germany but higher than in Italy.
A)True
B)False
Q4) If the exchange rate is 12.5 pesos per U.S.dollar,it is also 1/12.5 U.S.dollars per peso.
A)True
B)False
Page 127
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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 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.
Q3) 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.
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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) If the demand for loanable funds shifts left,then
A)the real interest rate and the equilibrium quantity of loanable funds both fall.
B)the real interest rate falls and the equilibrium quantity of loanable funds rises.
C)the real interest rate and the equilibrium quantity of loanable funds both rise.
D)the real interest rate rises and the equilibrium quantity of loanable funds falls.
Q2) If the supply of loanable funds shifts right,then the equilibrium
A)interest rate falls,so domestic residents will want to purchase more foreign assets.
B)interest rate falls,so domestic residents will want to purchase fewer foreign assets.
C)interest rate rises,so domestic residents will want to purchase more foreign assets.
D)interest rate rises,so domestic residents will want to purchase fewer foreign assets.
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Chapter 19: A Macroeconomic Theory of the Open
Economy: Equilibrium in the Open Economy
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45 Verified Questions
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Source URL: https://quizplus.com/quiz/79716
Sample Questions
Q1) If a U.S.resident purchases a foreign bond,her transactions are included
A)in the U.S.supply of loanable funds and the supply of dollars in the market for foreign-currency exchange.
B)in the U.S.supply of loanable funds and the demand for dollars in the market for foreign-currency exchange.
C)in the U.S.demand for loanable funds and the supply of dollars in the market for foreign-currency exchange.
D)in the U.S.demand for loanable funds and the demand for dollars in the market for foreign-currency exchange.
Q2) In the open-economy macroeconomic model,net capital outflow rises if
A)either the exchange rate rises or the real interest rate falls.
B)either the exchange rate falls or the real interest rate rises.
C)the real interest rate rises.Net capital outflow does not depend on the exchange rate.
D)the real interest rate falls.Net capital outflow does not depend on the exchange rate.
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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
172 Flashcards
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Sample Questions
Q1) Refer to Figure 32-7.Suppose the Mexican economy starts at r2 and e2.Which of the following new equilibrium is consistent with capital flight?
A)r2 and e3
B)r3 and e2
C)r3 and e1
D)None of the above is correct.
Q2) In 1998 the Russian government defaulted on its bonds.According to the open-economy macroeconomic model,this should have
A)increased Russian interest rates and net exports.
B)reduced Russian interest rates and net exports.
C)increased Russian interest rates and reduced Russian net exports.
D)reduced Russian interest rates and increased Russian net exports.
Q3) In which case(s)does(do)a country's supply of loanable funds shift left?
A)both an increase in the budget deficit and capital flight
B)an increase in the budget deficit,but not capital flight
C)capital flight,but not an increase in the budget deficit
D)neither an increase in the budget deficit nor capital flight
Page 131
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Chapter 19: A Macroeconomic Theory of the Open
Economy: Part A
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47 Verified Questions
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Sample Questions
Q1) Other things the same,if the U.S.interest rate rises,what happens to the net capital outflow of other countries?
Q2) A country recently had 500 billion euros of national saving and -200 billion euros of net capital outflow.What was its domestic investment? What was its quantity of loanable funds supplied?
Q3) Explain how a decrease in the demand for capital goods in the U.S.can lead to a change in the U.S.exchange rate.
Q4) 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?
Q5) If the exchange rate rises, domestic goods become relatively ______ expensive. This change in the affordability of domestic goods makes domestic goods _____ attractive to foreigners. So, _______ ______.
Q6) Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve.
Q7) Define net capital outflow.
Q8) What do trade policies do to the standard of living?
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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) Over the past two decades,the U.S.has persistently exported more goods and services than it has imported.
A)True
B)False
Q2) In the open-economy macroeconomic model,if there is currently a surplus in the foreign exchange market,the quantity of desired net exports will increase as the market moves to equilibrium.
A)True
B)False
Q3) As the interest rate rises,it is possible that net capital outflow could move from a positive to a negative value.
A)True
B)False
Q4) Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.
A)True
B)False
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Chapter
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Sample Questions
Q1) A relatively mild period of falling incomes and rising unemployment is called a(n)
A)depression.
B)recession.
C)expansion.
D)business cycle.
Q2) 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.
Q3) During recessions
A)workers are laid off.
B)factories are idle.
C)firms may find they are unable to sell all they produce.
D)All of the above are correct.
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Three Key Facts About Economic Fluctuations
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Sample Questions
Q1) During recessions employment typically
A)falls substantially.As the recession ends,employment rises rapidly.
B)rises substantially.As the recession ends,employment declines gradually.
C)falls substantially.As the recession ends,employment rises gradually.
D)rises substantially.As the recession ends,employment declines rapidly.
Q2) Below are pairs of GDP growth rates and unemployment rates.Economists would be shocked to see most of these pairs in the U.S.Which pair of GDP growth rates and unemployment rates is realistic?
A)5 percent,1 percent
B)3 percent,5 percent
C)-1 percent,3 percent
D)-2 percent,4 percent
Q3) The best example of recessions being close to each other in the United States can be found in the A)1980s.
B)1970s.
C)1990s. D)2000s.
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Sample Questions
Q1) The aggregate demand and aggregate supply graph has
A)the price level on the horizontal axis.The price level can be measured by the GDP deflator.
B)the price level on the horizontal axis.The price level can be measured by real GDP.
C)the price level on the vertical axis.The price level can be measured by the GDP deflator.
D)the price level on the vertical axis.The price level can be measured by GDP.
Q2) According to classical macroeconomic theory,changes in the money supply affect
A)variables measured in terms of money and variables measured in terms of quantities or relative prices
B)variables measured in terms of money but not variables measured in terms of quantities or relative prices
C)variables measured in terms of quantities or relative prices,but not variables measured in terms of money
D)neither variables measured in terms of money nor variables measured in terms of quantities or relative prices
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136
Chapter 20: Aggregate Demand and Aggregate Supply:
The Aggregate-Demand Curve
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Sample Questions
Q1) Which of the following shifts aggregate demand to the right?
A)both an investment tax credit and a decrease in income tax rates
B)an investment tax credit but not a decrease in income tax rates
C)a decrease in income tax rates but not an investment tax credit
D)neither an investment tax credit nor a decrease in income tax rates
Q2) If businesses in general decide that they have overbuilt and so now have too much capital,their response to this would initially shift
A)aggregate demand right.
B)aggregate demand left.
C)aggregate supply right.
D)aggregate supply left.
Q3) Aggregate demand shifts right if at a given price level
A)taxes rise and shifts left if the money supply increases.
B)taxes rise and shifts right if the money supply increases.
C)taxes fall and shifts left if the money supply increases.
D)taxes fall and shifts right if the money supply increases.
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Page 137
Chapter 20: Aggregate Demand and Aggregate Supply:
The Aggregate-Supply Curve
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Sample Questions
Q1) The aggregate demand and aggregate supply model implies monetary neutrality
A)only in the short run.
B)only in the long run.
C)in both the short run and the long run.
D)in neither the short run nor long run.
Q2) The long-run aggregate supply curve would shift right if the government were to A)reduce the minimum-wage.
B)make unemployment benefits more generous.
C)raise taxes on investment spending.
D)All of the above are correct.
Q3) The position of the long-run aggregate supply curve
A)is determined by resource usage and technology.
B)is at the point where the unemployment rate is zero.
C)shifts to the right when the money supply increases.
D)is at the point where the economy would cease to grow.
Q4) Which of the following would shift the long-run aggregate supply curve right?
A)both an increase in the capital stock and an increase in the price level
B)an increase in the capital stock,but not an increase in the price level
C)an increase in the money supply,but not an increase in the capital stock
D)neither an increase in the money supply nor an increase in the capital stock
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Chapter 20: Aggregate Demand and Aggregate Supply:
Two Causes of Economic Fluctuations
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Sample Questions
Q1) Which of the following affected aggregate demand during the recession of 2008-2009?
A)a decline in residential construction and a decrease in lending
B)a decline in residential construction but not a decrease in lending
C)a decrease in lending but not a decline in residential construction
D)neither a decrease in residential construction nor a decrease in lending
Q2) Refer to Figure 33-11.A movement from P<sub>1</sub> and Y<sub>2</sub>,to P<sub>2</sub> and Y<sub>1</sub> would be consistent with
A)a decrease in consumption expenditures.
B)stagflation.
C)sticky-wages.
D)an increase in net exports.
Q3) Suppose the economy is in long-run equilibrium.In a short span of time,there is a large influx of skilled immigrants,a major new discovery of oil,and a major new technological advance in electricity production.In the short run,we would expect
A)the price level to rise and real GDP to fall.
B)the price level to fall and real GDP to rise.
C)the price level and real GDP both to stay the same.
D)All of the above are possible.
Page 139
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Chapter 20: Aggregate Demand and Aggregate Supply:
Part A
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Sample Questions
Q1) A recession with inflation is know by what term?
Q2) Identify the variables that could cause shifts in both the short-run and long-run aggregate-supply curves.
Q3) Suppose technology advances within a nation.Which curves in the aggregate demand and aggregate supply model would be affected,and which way would they shift?
Q4) Explain the short-run effects on output and the price level from a decrease in the aggregate-demand curve.
Q5) Other things the same,what happens to the price level and quantity of output when an adverse shift in the short run aggregate supply curve occurs?
Q6) Write the mathematical expression that summarizes the three alternative explanations for the upward slope of the short run aggregate supply curve.
Q7) The long-run trend in real GDP is upward.How is this possible given business cycles? What explains the upward trend?
Q8) Who wrote the 1936 book titled The General Theory of Employment, Interest, and Money?
Page 140
Q9) Make a list of expenditures whose sum equals GDP.
Q10) During periods of stagflation,what happens to output and prices in the economy?
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Chapter 20: Aggregate Demand and Aggregate Supply:
Part B
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Sample Questions
Q1) If aggregate demand shifts right,then eventually price level expectations rise.The increase in price level expectations causes the short-run aggregate-supply curve to shift to the left.
A)True
B)False
Q2) All explanations for the upward slope of the short-run aggregate supply curve suppose that the quantity of output supplied increases when the actual price level exceeds the expected price level.
A)True
B)False
Q3) The explanations for the slopes of the aggregate demand and short-run aggregate supply curves are the same as the explanations for the slopes of demand and supply curves for specific goods and services.
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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Q1) Shifts in the aggregate-demand curve can cause fluctuations in
A)neither the level of output nor the level of prices.
B)the level of output,but not in the level of prices.
C)the level of prices,but not in the level of output.
D)the level of output and in the level of prices.
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) Shifts in aggregate demand affect the price level in
A)the short run but not in the long run.
B)the long run but not in the short run.
C)both the short and long run.
D)neither the short nor long run.
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Page 143
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) Which of the following is correct?
A)A higher price level shifts money demand rightward.
B)When money demand shifts rightward,the interest rate rises.
C)A higher interest rate reduces the quantity of goods and services demanded.
D)All of the above are correct.
Q2) According to liquidity preference theory,
A)an increase in the interest rate reduces the quantity of money demanded.This is shown as a movement along the money-demand curve.An increase in the price level shifts money demand to the right.
B)an increase in the interest rate increases the quantity of money demanded.This is shown as a movement along the money-demand curve.An increase in the price level shifts money demand leftward.
C)an increase in the price level reduces the quantity of money demanded.This is shown as a movement along the money-demand curve.An increase in the interest rate shifts money demand rightward.
D)an increase in the price level increases the quantity of money demanded.This is shown as a movement along the money-demand curve.An increase in the interest rate shifts money demand leftward.
Page 144
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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) In a certain economy,when income is $500,consumer spending is $375.The value of the multiplier for this economy is 5.It follows that,when income is $510,consumer spending is
A)$381.67.
B)$378.
C)$383.
D)$383.33.
Q2) An increase in government spending on goods to build or repair infrastructure
A)shifts the aggregate demand curve to the right.
B)has a multiplier effect.
C)shifts the aggregate supply curve to the right,but this effect is likely more important in the long run.
D)All of the above are correct.
Q3) Which of the following events shifts aggregate demand rightward?
A)an increase in government expenditures or a decrease in the price level
B)a decrease in government expenditures or an increase in the price level
C)an increase in government expenditures,but not a change in the price level
Page 145
D)a decrease in the price level,but not an increase in government expenditures
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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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Q1) According to the IGM poll,what percentage of economists polled agreed that the unemployment rate at the end of 2010 was lower with ARRA than without?
A)97%
B)75%
C)19%
D)3%
Q2) Suppose there were a large decline in net exports.If the Fed wanted to stabilize output,it 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.
Q3) Which of the following policy alternatives would be an appropriate response to a sharp increase in investment spending,assuming policymakers want to stabilize output?
A)increase taxes
B)increase the money supply
C)increase government expenditures
D)All of the above are correct.
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Chapter 21: The Influences of Monetary and Fiscal Policy on
Aggregate Demand: Part A
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Q1) 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 -----.
Q2) If the Federal Reserve's goal is to stabilize aggregate demand,then in response to an increase in money demand,the Federal Reserve will ----- the money supply.
Q3) Suppose that there are no crowding-out effects and the MPC is .9.By how much must the government increase expenditures to shift the aggregate demand curve right by $10 billion?
Q4) The ease with which an asset can be converted into the medium of exchange is known as -----.
Q5) Explain why the interest rate is the opportunity cost of holding currency.What is the benefit of holding currency?
Q6) Refer to Figure 34-14.Initial equilibrium exists at point A.A decline in prices will cause households to ----- their desired money holdings,moving the interest rate to -----.
Q7) There are three factors that help explain the slope of the aggregate demand curve.Which two are less important? Why are they less important?
Q8) Unemployment insurance benefits are an example of -----.
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Chapter 21: The Influences of Monetary and Fiscal Policy on
Aggregate Demand: Part B
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Q1) When the Fed announces a target for the federal funds rate,it essentially accommodates the day-to-day fluctuations in money demand by adjusting the money supply accordingly.
A)True
B)False
Q2) The main criticism of those who doubt the ability of the government to respond in a useful way to the business cycle is that the theory by which money and government expenditures change output is flawed.
A)True
B)False
Q3) An implication of the Employment Act of 1946 is that the government should respond to changes in the private economy to stabilize aggregate demand.
A)True
B)False
Q4) In liquidity preference theory,an increase in the interest rate,other things the same,decreases the quantity of money demanded,but does not shift the money demand curve.
A)True
B)False
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Chapter 22: The Short Run Trade Off Between Inflation and Unemployment
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Q1) One determinant of the natural rate of unemployment is the A)rate of growth of the money supply.
B)minimum wage rate.
C)expected inflation rate.
D)All of the above are correct.
Q2) Which of the following statements is correct?
A)In the short run,unemployment and inflation are positively related.In the long run they are largely unrelated problems.
B)Inflation and unemployment are positively related in the short run and in the long run.
C)In the short run,unemployment and inflation are negatively related.In the long run they are largely unrelated problems.
D)Inflation and unemployment are negatively related in the short run and in the long run.
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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Page 149
Chapter 22: The Short Run Trade Off Between Inflation and Unemployment:
The Phillips Curve
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Q1) Suppose that the money supply increases.In the short run,this increases prices according to
A)both the short-run Phillips curve and the aggregate demand and aggregate supply model.
B)neither the short-run Phillips curve nor the aggregate demand and aggregate supply model.
C)the short-run Phillips curve,but not according to the aggregate demand and aggregate supply model.
D)the aggregate demand and aggregate supply model but not according to the short-run Phillips curve.
Q2) Refer to Figure 35-2.If the economy starts at C and 1,then in the short run,an increase in taxes moves the economy to
A)B and 2.
B)D and 3.
C)E and 2.
D)None of the above is correct.
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Page 150
Chapter 22: The Short Run Trade Off Between Inflation and Unemployment:
Shifts in the Phillips Curve the Role of Expectations
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Q1) Milton Friedman and Edmund Phelps argued in the late 1960s that in the long run the Phillips curve is
A)downward-sloping,which implies that monetary and fiscal policies can influence the level of unemployment in the long run.
B)downward-sloping,which implies that monetary and fiscal policies cannot influence the rate of inflation in the long run.
C)vertical,which implies that monetary and fiscal policies cannot influence the level of unemployment in the long run.
D)vertical,which implies that monetary and fiscal policies cannot influence the rate of inflation in the long run.
Q2) If an increase in inflation permanently reduced unemployment,then
A)money would not be neutral and the long-run Phillips curve would slope upward.
B)money would not be neutral and the long-run Phillips curve would slope downward.
C)money would be neutral and the long-run Phillips curve would slope upward.
D)money would be neutral and the long-run Phillips curve would slope downward.
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Page 151
Chapter 22: The Short Run Trade Off Between Inflation and Unemployment:
Shifts in the Phillips Curve the Role of Supply Shocks
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Q1) If a central bank increases the money supply in response to an adverse supply shock,then which of the following quantities moves closer to its pre-shock value as a result?
A)both the price level and output
B)the price level but not output
C)output but not the price level
D)neither output nor the price level
Q2) A favorable supply shock causes the price level to
A)rise.To counter this a central bank would increase the money supply.
B)rise.To counter this a central bank would decrease the money supply.
C)fall.To counter this a central bank would increase the money supply.
D)fall.To counter this a central bank would decrease the money supply.
Q3) An adverse supply shock will shift short-run aggregate supply
A)right,making prices rise.
B)left,making prices rise.
C)right,making prices fall.
D)left,making prices fall.
Page 152
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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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Source URL: https://quizplus.com/quiz/79700
Sample Questions
Q1) In 1979,when the Fed was deciding how aggressively to fight inflation,the typical estimate of the sacrifice ratio was A)1.
B)5.
C)7.
D)10.
Q2) The monetary-policy framework called inflation targeting is used explicitly by A)no major country.
B)most major countries except the United States and Japan.
C)the United States,but it is not used by other major countries.
D)most major countries,including the United States and Japan.
Q3) Suppose a central bank announced that it was going to make a serious effort to fight inflation.A few years later the inflation rate is lower,but there had been a serious recession.We could conclude with certainty that
A)the rational expectations hypothesis is false.
B)the rational expectations hypothesis is true.
C)the policymakers lacked credibility.
D)None of the above is certain.
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Chapter 22: The Short Run Trade Off Between Inflation and Unemployment:
Part A
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Sample Questions
Q1) Does a more steeply sloped Phillips curve make the sacrifice ratio smaller or larger than otherwise?
Q2) For a given short-run Phillips curve,if expected inflation is 8% but actual inflation is 10%,is the unemployment rate above or below its natural rate?
Q3) Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?
Q4) 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.
Q5) In the long run what primarily determines the natural rate of unemployment? In the long run what primarily determines the inflation rate? How does this relate to the classical dichotomy?
Q6) A central bank pledges to reduce the inflation rate from 20% to 5%. People reduce their inflation expectations to 10%, but the central bank only reduces inflation to 15%. What happens to the unemployment rate?
Q7) Use the sticky-wage theory of aggregate demand to explain the short-run Phillips curve.
Q9) What is meant by accommodation? Page 154
Q8) 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) An adverse supply shock shifts the short-run Phillips curve right.If people raise their inflation expectations,the short-run Phillips curve shifts farther right.
A)True
B)False
Q2) A central bank announces it will decrease the inflation rate by 10 percentage points.People are skeptical of the announcement,but do expect the central bank will reduce inflation by 5 percentage points and so expected inflation falls by 5 percentage points.If the central bank decreases inflation by only 3 percentage points then the unemployment rate will fall.
A)True
B)False
Q3) Just as the aggregate-supply curve slopes upward only in the short run,the trade-off between inflation and unemployment holds only in the short run.
A)True
B)False
Q4) In most of the 1970s,the Fed's policy created expectations of high inflation.
A)True
B)False
156
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Chapter 23: Six Debates Over Macroeconomic Policy:
Should Monetary and Fiscal Policymakers Try to Stabilize the Economy
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Q1) The Federal Reserve will tend to tighten monetary policy when
A)interest rates are rising too rapidly.
B)it thinks the unemployment rate is too high.
C)the growth rate of real GDP is quite sluggish.
D)it thinks inflation is too high today,or will become too high in the future.
Q2) Those who desire that policymakers stabilize the economy would advocate which of the following when aggregate demand is insufficient to ensure full employment?
A)decrease the money supply
B)increase taxes
C)increase government expenditures
D)Do nothing and let markets correct themselves.
Q3) When aggregate demand is high,risking higher inflation,those in favor of using monetary and fiscal policy to stabilize the economy might recommend
A)increasing government spending.
B)expanding the money supply.
C)lowering taxes.
D)the Fed sell government bonds.
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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) Which of the following would those in favor of increasing government spending rather than decreasing taxes to prop up aggregate demand probably not agree with?
A)Traditional Keynesian analysis indicates that increases in government purchases are a more potent tool than decreases in taxes for increasing aggregate demand.
B)Increased government spending on "shovel-ready" projects can be helpful to boost aggregate demand.
C)Increases in government spending offer a greater "bang for the buck" than decreases in taxes.
D)When the government gives a dollar in tax cuts to a household,that dollar immediately and fully adds to aggregate demand.
Q2) 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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Q1) The Federal Open Market Committee meets about
A)every six days.
B)every six weeks.
C)every six months.
D)every sixteen months.
Q2) A 1977 amendment to the Federal Reserve Act of 1913 says the Fed should "promote" which of the following goals?
A)only price stability
B)only maximum employment
C)only price stability and maximum employment
D)price stability,maximum employment,and moderate long-term interest rates
Q3) According to the political business cycle theory,if the Fed wanted to see a President re-elected,prior to the election it might
A)buy bonds to raise interest rates.
B)buy bonds to reduce interest rates.
C)sell bonds to raise interest rates.
D)sell bonds to reduce interest rates.
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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) Using the typical estimate of the sacrifice ratio,how much output would be lost in reducing inflation from 3% to 1%?
A)5%
B)10%
C)15%
D)20%
Q2) When wages are fixed by contract,inflation reduces
A)nominal wages;this likely makes labor markets more flexible.
B)nominal wages;this likely makes labor markets less flexible.
C)real wages;this likely makes labor markets more flexible.
D)real wages;this likely makes labor markets less flexible.
Q3) Inflation reduction has the highest 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.
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Chapter 23: Six Debates Over Macroeconomic Policy:
Should the Government Balance Its Budget
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Q1) Which of the following is not a typical justification for running a budget deficit?
A)financing a war
B)dealing with a recession
C)fighting inflation
D)dealing with unemployment
Q2) At the end of 2007,the government had a debt of about $5,000 billion.During 2007,real GDP grew by about 0.8 percent and inflation was about 2.7 percent.About what is the largest deficit the government could have run without raising the debt-to-GDP ratio?
A)135 billion
B)143 billion
C)169 billion
D)175 billion
Q3) Between 1980 and 1995 government debt as a percentage of GDP
A)increased from about 25% to 50%.
B)decreased from about 50% to 25%.
C)decreased from about 25% to almost zero.
D)increased from about 10% to 20%.
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Chapter 23: Six Debates Over Macroeconomic Policy:
Should the Tax Laws Be Reformed to Encourage Saving
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Q1) Which of the following might explain a decrease in national saving when the tax rate on savings is reduced?
A)its substitution effect on saving and its effect on the government budget
B)its substitution effect on saving but not its effect on the government budget
C)its effect on the government budget but not its substitution effect on saving
D)neither its substitution effect on saving nor its effect on the government budget
Q2) Eliminating double-taxation would likely
A)raise saving and primarily benefit people with lower incomes.
B)raise saving but primarily benefit people with higher incomes.
C)reduce saving but primarily benefit people with lower incomes.
D)reduce saving and primarily benefit people with higher income.
Q3) Proponents of tax-law changes to encourage saving would
A)argue that corporate tax rates should be decreased.
B)increase the number of government benefits which are means-tested.
C)argue that state sales tax should be replaced with state income tax.
D)favor none of the above programs.
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Page 162
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) Proponents of requiring the government to balance its budget argue that debt burdens future generations.Explain one claim they make to support this argument.
Q2) A higher return on saving ------ the amount a household needs to save to achieve any target level of future consumption.This effect on saving is called the ------- effect.If the income effect is large enough,then a reduction in taxes on saving might ------ tax revenues.
Q3) According to traditional Keynesian analysis,which has a greater impact on aggregate demand,changing taxes or changing government expenditures? Why?
Q4) Explain why fiscal policy actions typically work with a lag.
Q5) Advocates of cutting taxes rather than increasing government expenditures in response to a recession argue that the increase in spending by consumers and business may be more effective than that of the government.Explain this argument.
Q6) If net exports fall,what actions could a central bank take to stabilize the economy?
Q7) Suppose tax policies are changed to encourage saving.Explain how the income effect and substitution effect influence the amount saved.
Q8) What is meant by the political business cycle?
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Chapter 23: Six Debates Over Macroeconomic Policy: Part
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Q1) One prominent debate over macroeconomic policy centers on the question of whether monetary and fiscal policy should be used to try to stabilize the economy.
A)True
B)False
Q2) If the Fed followed a rule for monetary policy,the time inconsistency problem would be eliminated.
A)True
B)False
Q3) Advocates of stabilization policy argue that when there is a recession,the government should increase the money supply and increase government expenditures.
A)True
B)False
Q4) The laws that created the Fed give it some specific recommendations about what goals it should pursue so it has little discretion in making policy.
A)True
B)False
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Page 165
Chapter 24: A-Financial-Overview-Of-The-US
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Q1) The "other" category of federal spending consists of many less expensive functions of government,including all of the following except
A)housing credit programs.
B)farm support programs.
C)funding for the National Institutes of Health.
D)the federal court system.
Q2) The largest source of income for the federal government is
A)individual income taxes.
B)corporate taxes.
C)tariffs.
D)"sin" taxes on alcohol and cigarettes.
Q3) Medicaid is
A)the government's health plan for the elderly.
B)the government's health plan for the poor.
C)another name for Social Security.
D)Both a and c are correct.
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