question
Which of the following will most likely occur in an economy if more money is demanded than is supplied?
answer
Interest rates will increase.
question
Which of the following arguments is typically associated with classical economists?
answer
A market is self-correcting and thus will not remain in a recession indefinitely.
question
An increase in energy costs will most likely cause the price level and real gross domestic product to change in which of the following ways?
answer
Increase, decrease.
question
The Federal Reserve can increase the money supply by
answer
buying government bonds on the open market.
question
Which of the following is true according to the circular flow model?
answer
Households are demanded in the product markets and suppliers in the factor markets.
question
An increase in the money supply is most likely to have which of the following short-run effects on real interest rates and real output?
answer
Decrease, increase.
question
Which of the following will occur if the federal government runs a budget deficit?
answer
The size of the national debt will increase.
question
If on receiving a checking deposit of $300 a bank's excess reserves increased by $255, the required reserve ratio must be
answer
15 percent.
question
Which of the following constitutes the largest component of the United States money supply (M1)?
answer
Checkable deposits (demand deposits)
question
An increase in Japan's demand for United States goods would cause the value of the dollar to
answer
appreciate because Japan would be buying more United States dollars.
question
Which of the following changes will occur to the demand for United States dollars and the international value of the dollar in the short run if investors in the United States and abroad increase their purchases of United States government bond?
answer
Increase, increase.
question
Unexpected increases in inventories usually precede
answer
decrease in production.
question
Under which of the following conditions would a restrictive monetary policy be most appropriate?
answer
High inflation.
question
As a measure of economic welfare, gross domestic product underestimates a country's production of goods and services when there is an increase in
answer
household production.
question
Assume that the reserve requirements is 20 percent. If a bank initially has no excess reserves and $10,000 cash is deposited in the bank, the maximum amount by which this bank may increase its loans is
answer
$8,000.
question
In a closed economy with no taxes in which the average propensity to consume is 0.75, which of the following is true?
answer
If incomes is $200, then saving is $50.
question
The short-run aggregate supply curve is likely to shift to the left when there is an increase in
answer
the cost of productive resources.
question
One way in which the Federal Reserve works to change the United States money supply is by changing the
answer
discount rate.
question
(AP Question) The economy of a country is currently in equilibrium at point A in the diagram above. If the government does nothing and wages are flexible, which of the following will most likely occur in the long run?
answer
Falling wages will shift the AS curve to the right, producing full employment.
question
Crowding out due to government borrowing occurs when
answer
higher interest rates decrease private sector investment.
question
Which of the following would be most likely to occur if the United States placed high tariffs on imported goods?
answer
The United States economy would become less efficient.
question
If, at full employment, the government wants to increase its spending by $100 billion without increasing inflation in the short run, it must do which of the following?
answer
Raise taxes by more than $100 billion.
question
Which of the following would most likely cause a rightward shift in an economy's aggregate supply curve?
answer
An across-the-board reduction of wages in the manufacturing sector.
question
Open market operations refer to which of the following activities?
answer
The buying and selling of government securities by the Federal Reserve.
question
Which of the following policies would a Keynesian recommend during a period of high unemployment and low inflation?
answer
Decreasing taxes to stimulate aggregate demand.
question
Mary Jane is a lawyer who can earn $150 per hour in her law practice. She is also an excellent carpenter who can build cabinets three times as fast as the best carpenter, whose hourly wage is $20 per hour. Which of the following is a correct economic statement?
answer
Mary Jane has a comparative advantage in law so she should specialize in law and hire a carpenter to make her cabinets.
question
In a flexible system of exchange rates, an open market sale of bonds by the Federal Reserve will most likely change the money supply, the interest rate, and the value of the United States dollar in which of the following ways?
answer
Decrease, increase, increase.
question
If a U.S. citizen decides to increase their purchases of Japanese cars, this will lead to:
answer
decrease in the value of the dollar
question
The traditional Phillips curve shows the
answer
inverse relationship between the rate of inflation and the unemployment rate.
question
The appreciation of a currency will lead to
answer
an increase in imports.
question
In a mixed economy, what to produce and how much to produce are determined by
answer
markets and the government.
question
The major difference between real and nominal gross domestic production (GDP) is that real GDP
answer
is adjusted for price-level changes using a price index.
question
Which of the following statements exemplifies the concept of structural unemployment?
answer
Workers are fired because their skills are no longer in demand.
question
Under which of the following conditions would consumer spending most likely increase?
answer
Consumer's wealth is increased by changes in the stock market.
question
Federal budget deficits occur when
answer
the federal government spends more than it collects in taxes in a given year.
question
An increase in which of the following will increase aggregate demand?
answer
government spending
question
Under a fractional reserve banking system, banks are required to
answer
keep part of their demand deposits as reserves.
question
When the Federal Reserve buys government securities on the open market, which of the following will decrease in the short run?
answer
Interest rates.
question
An increase in government spending with no change in taxes leads to a
answer
higher interest rate
question
Changes in which of the following factors would affect the growth of an economy?
answer
I, II, and III.
question
When the United States government engages in deficit spending, that spending is primarily financed by
answer
issuing new bonds.
question
A favorable supply shock, such as a decrease in energy prices, is most likely to have which of the following short-run effects on the price level and output?
answer
Decrease, increase.
question
The federal funds rate is the interest rate that
answer
banks charge one another for short-term loans.
question
Country A can produce either 2 tons of cocoa or 4 cars with 10 units of labor. Country B can produce either 5 tons of cocoa or 25 cars with 10 units of labor. Based on the following information, which of the following is true?
answer
Country A has a comparative advantage in the production of cocoa, while Country B has a comparative advantage in the production of cars.
question
The long-run growth rate of an economy will be increased by an increase in all of the following EXCEPT real interest rate.
answer
real interest rate
question
Which of the following best explains why many United States economists support free international trade?
answer
The long-run gains to consumers and some producers exceed the losses to other producers.
question
In the country of Agronomia, banks charge 10 percent interest on all loans. If the general price level has been increasing at the rate of 4 percent per year, the real rate of interest in Agronomia is
answer
6%.
question
Which of the following best explains why transfer payments are not included in the calculation of gross domestic product?
answer
Recipients of transfer payments have not produced or supplied goods and services in exchange for these payments.
question
An increase in which of the following will lead to lower inflation and lower unemployment?
answer
labor productivity.
question
An unanticipated decrease in aggregate demand when the economy is in equilibrium will result in
answer
an increase in unplanned inventories.
question
If the Federal Reserve institutes a policy to reduce inflation, which of the following is most likely to increase?
answer
Interest rates.
question
If the economy is operating at full employment and there is a substantial increase in the money supply, the quantity theory of money predicts an increase in
answer
the price level.
question
Which of the following would cause the United States dollar to increase in value compared to the Japanese yen?
answer
An increase in the interest rates in the United States.
question
The unemployment rate measures the percentage of
answer
people in the labor force who do not have jobs.
question
If a certain combination of goods and services lies outside the production possibilities curve of an economy, which of the following is true?
answer
Resources are not available to achieve that combination of goods or services
question
Which of the following groups would most likely gain from unanticipated inflation?
answer
Individuals who have borrowed money at fixed interest rates.
question
With a constant money supply, if the demand for money decreases, the equilibrium interest rate and the quantity of money will change in which of the following ways?
answer
Decrease, not change.
question
If the exchange rate between the United States dollar and the British pound changed from $2 per pound to $3 per pound, and domestic prices in both countries stayed the same, then the United States dollar would
answer
depreciate, making United States imports from Britain more expensive.
question
The concept of opportunity cost would no longer be relevant if
answer
the supply of all resources were unlimited.
question
If the real interest rate in the United States increases relative to that of the rest of the world, capital should flow
answer
into the United States and the dollar will appreciate.
question
Which of the following will be counted as unemployed by the United States Bureau of Labor Statistics?
answer
Persons who were fired from their previous jobs and are actively applying for work.
question
Which of the following will occur in a competitive market when the price of a good is less than the equilibrium price?
answer
Price will increase to eliminate the shortage and restore equilibrium.
question
Which of the following will lead to an increase in the United States gross domestic product?
answer
Foreign companies build new assembly plants in the United States.
question
An increase in personal income taxes will most likely cause aggregate demand and aggregate supply to change in which of the following ways in the short run?
answer
Decrease, not change
question
Which type of unemployment would increase if workers lost their jobs because of a recession?
answer
Cyclical.
question
The law of demand states that
answer
price and quantity demanded are inversely related.
question
Which of the following is NOT a function of fiat money?
answer
A source of intrinsic value.
question
When an economy is at full employment, which of the following will most likely create demand-pull inflation in the short run?
answer
A decrease in the real rate of interest.
question
Which of the following household purchases will be counted as part of gross private investment in a country's gross domestic product?
answer
A newly constructed home.
question
A market:
answer
is an institution that brings together buyers and sellers.
question
The demand curve shows the relationship between
answer
price and quantity demanded.
question
Which of the following is a fundamental characteristic of the market system?
answer
Property rights.
question
The construction of demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is
answer
price.
question
The division of labors means that
answer
workers specialize in various production tasks.
question
Competition means that
answer
there are independently-acting buyers and sellers in each market.
question
Which of the following is one of the Four Fundamental Questions?
answer
What goods and services will be produced?
question
If a worker's nominal wage rate increased from $10 to $12 per hour and at the same time the general price level increases by 10 percent, the worker's real wage has
answer
approximately increased by 10%.
question
The value of which of the following is counted in the United States gross domestic product?
answer
A car produced in the United States and sold in Europe.
question
Aggregate demand may be measured by adding
answer
consumption, investment, government spending, and net exports.
question
According to the short-run Phillips curve, a decrease in unemployment is expected to be accompanied by
answer
an increase in inflation.
question
The annual inflation rate is expected to be 5 percent over the next 3 years. Robert Bearkat plans to take out a 3-year loan to purchase an automobile. If Robert decides not to take out the loan if the real interest rate exceeds 3 percent, the highest nominal interest rate he is willing to pay is
answer
8 percent.
question
Which of the following is true about the national debt of the United States?
answer
It is the accumulation of past and current budget deficits and surpluses.
question
Which of the following most undermines the ability of a nation's currency to store value?
answer
A decrease in the purchasing power of the currency.
question
Assume that the inflation rate in the United States is very high relative to the inflation rates in all of its trading partners. Which of the following is likely to happen to the currency of the United States in the foreign exchange market?
answer
The demand curve for the currency will shift to the left, and the currency will depreciate.
question
Comparative advantage implies that
answer
two countries should benefit from trade unless both have equal opportunities cost in every good.
question
This economy will experience unemployment if it produces at point
answer
D.
question
Other things equal, this economy will achieve the most rapid rate of growth if
answer
it chooses point A.
question
At the onset of the Second World War the United States had large amounts of idle human and property resources. Its economic adjustment from peacetime to wartime can best be described by the movement from point:
answer
Point A to Point B.
question
Refer to the below domestic production possibilities curve for Karalex. The gain to Karalex from specialization and international trade is represented by a move from
answer
B to E.
question
Point b on short-run Phillips Curve PC1 represents a rate of
answer
unemployment below the natural rate.
question
A decrease in quantity demanded is depicted by a
answer
move from point y to point x.
question
A decrease in supply is depicted by a
answer
shift from S2 to S1
question
An increase in quantity supplied is depicted by a
answer
move from point y to point x.
question
The initial aggregate demand curve is AD1 and the initial aggregate supply curve is AS1. Demand-pull inflation in the short run is best shown as
answer
a shift of the aggregate demand curve from AD1 to AD2.
question
The initial aggregate demand curve is AD1 and the initial aggregate supply curve is AS1. In the long run, the aggregate supply curve is vertical in the diagram because:
answer
price level increases produce perfectly offsetting changes in nominal wages and other input prices.
question
A decrease in demand is depicted by a
answer
shift from D2 to D1
question
A price of $60 in this market will result in
answer
a surplus of 100 units.
question
A price of $20 in this market will result in
answer
a shortage of 100 units.
question
The highest price that buyers will be willing and able to pay for 100 units of this product is
answer
$60.
question
If this is a competitive market, price and quantity will move toward
answer
$40 and 150 respectively.
question
Which of the diagrams illustrates the effect of an increase in automobile worker wages on the market for automobiles?
answer
D only.
question
Which of the diagrams illustrates the effect of a decline in the price of personal computers on the market for software?
answer
A only.
question
Which of the diagrams illustrates the effect of an increase in the price of Budweiser beer on the market for Coors beer?
answer
A only.
question
Which of the diagrams illustrates the effect of a decrease in incomes on the market for secondhand clothing?
answer
A only.
question
Which of the diagrams illustrates the effect of a governmental subsidy on the market for AIDS research?
answer
C only.
question
Which of the diagrams illustrates the effect of a decline in the price of irrigation equipment on the market for corn?
answer
C only.
question
A government-set price floor is best illustrated by
answer
price C
question
A government-set price ceiling is best illustrated by
answer
price A
question
Rent controls are best illustrated by
answer
price A.
question
Using equal of labor hours, Country and Country Y can each produce the number of watches and radios shown in the production possibilities curves above. Based on the information, which of the following is true?
answer
Country X and Y can engage in a mutually advantageous trade by exchanging 1 watch for 1 radio.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
