question
Lagging economic indicators follow economic activity. True/False
answer
true
question
The Consumer Price Index (CPI) and GDP deflator often show opposite trends. True/False
answer
false
question
The prices of some goods and services can fall during inflation. True/False
answer
true
question
Economists agree that setting a minimum wage causes some unemployment. True/False
answer
true
question
Certain types of unemployment are unavoidable. True/False
answer
true
question
It is possible for the number of unemployed workers in an economy to equal the number of job vacancies. True/False
answer
true
question
Business cycles are short-term fluctuations in the economy relative to the long-term trend in ______.
a. interest rates
b. inflation
c. output
d. employment
a. interest rates
b. inflation
c. output
d. employment
answer
c. output
question
If the real interest rate is 1 percent and the nominal interest rate is 2 percent, what is the rate of inflation?
a. 0 percent.
b. 1 percent.
c. 2 percent.
d. 3 percent.
a. 0 percent.
b. 1 percent.
c. 2 percent.
d. 3 percent.
answer
b. 1 percent.
question
Which of the following is an example of shoe-leather cost?
a. Diane has to shut down her supermarket for a day in order to change the prices on everything.
b. Viktor has to pay a value added tax on raw materials that he is manufacturing into goods for resale.
c. Zara has to calculate the depreciation of each of the goods in her office each year.
d. Ishmael goes to the ATM twice a week because consumer prices have been fluctuating so rapidly.
a. Diane has to shut down her supermarket for a day in order to change the prices on everything.
b. Viktor has to pay a value added tax on raw materials that he is manufacturing into goods for resale.
c. Zara has to calculate the depreciation of each of the goods in her office each year.
d. Ishmael goes to the ATM twice a week because consumer prices have been fluctuating so rapidly.
answer
d. Ishmael goes to the ATM twice a week because consumer prices have been fluctuating so rapidly.
question
What is the best definition of quality bias?
a. failure to capture the savings that households enjoy when they change their spending in response to relative price changes
b. failure to account for price changes to an item that result from product improvement
c. overstating of the prices some buyers actually pay for goods from cheaper retail outlets
d. failure to include new products into the Consumer Price Index until they become commonplace
a. failure to capture the savings that households enjoy when they change their spending in response to relative price changes
b. failure to account for price changes to an item that result from product improvement
c. overstating of the prices some buyers actually pay for goods from cheaper retail outlets
d. failure to include new products into the Consumer Price Index until they become commonplace
answer
b. failure to account for price changes to an item that result from product improvement
question
Read the following passage and then answer the question that follows.
Since 1995, the Bureau of Labor Statistics (BLS) has been eliminating or reducing biases in the Consumer Price Index (CPI). Many economists believe that the BLS improvements have cut inflationary bias in half, and it is now estimated to be less than 1 percentage point per year.
What is the best definition of "inflationary bias" in this context?
a. the tendency to believe that inflation is beneficial to the economy
b. the tendency to promote policies that cause a positive inflation rate
c. the tendency to overstate the rate of inflation
the tendency of the members of an economy to push price
Since 1995, the Bureau of Labor Statistics (BLS) has been eliminating or reducing biases in the Consumer Price Index (CPI). Many economists believe that the BLS improvements have cut inflationary bias in half, and it is now estimated to be less than 1 percentage point per year.
What is the best definition of "inflationary bias" in this context?
a. the tendency to believe that inflation is beneficial to the economy
b. the tendency to promote policies that cause a positive inflation rate
c. the tendency to overstate the rate of inflation
the tendency of the members of an economy to push price
answer
c. the tendency to overstate the rate of inflation
question
Which of the following does a price index typically measure?
a. the change in the money supply
b. the change in price of a good or service
c. the change in the price of a bundle of goods and services
d. the change in relative price of a good or service
a. the change in the money supply
b. the change in price of a good or service
c. the change in the price of a bundle of goods and services
d. the change in relative price of a good or service
answer
c. the change in the price of a bundle of goods and services
question
As inflation increases, purchasing power ______.
a. increases
b. decreases
c. remains constant
d. falls to zero
a. increases
b. decreases
c. remains constant
d. falls to zero
answer
b. decreases
question
In the United States, controlling inflation is the primary job of ______.
a. the Department of Labor
b. the Federal Reserve System
c. Congress
d. the Bureau of Labor Statistics
a. the Department of Labor
b. the Federal Reserve System
c. Congress
d. the Bureau of Labor Statistics
answer
b. the Federal Reserve System
question
Real gross domestic product (RGDP) differs from gross domestic product (GDP) in that RGDP ______.
a. is adjusted for inflation
b. reflects current unemployment figures
c. reflects a stable price level
d. is always smaller than GDP
a. is adjusted for inflation
b. reflects current unemployment figures
c. reflects a stable price level
d. is always smaller than GDP
answer
a. is adjusted for inflation
question
In August 2018, the U.S. unemployment rate was 3.9% and the civilian labor force was estimated to be 161,776,000. About how many unemployed workers were there in the United States?
a. 63.1 million
b. 41.5 million
c. 6.3 million
d. 3.9 million
a. 63.1 million
b. 41.5 million
c. 6.3 million
d. 3.9 million
answer
c. 6.3 million
question
Which of the following best describes how the U.S. Department of Labor treats discouraged workers in its calculations?
a. They are counted as unemployed members of the labor force.
b. They are counted as unemployed but not as members of the labor force.
c. They are not counted as unemployed but are counted as members of the labor force.
d. They are not counted as unemployed or as members of the labor force.
a. They are counted as unemployed members of the labor force.
b. They are counted as unemployed but not as members of the labor force.
c. They are not counted as unemployed but are counted as members of the labor force.
d. They are not counted as unemployed or as members of the labor force.
answer
d. They are not counted as unemployed or as members of the labor force.
question
Individuals who have not actively sought work for four weeks because they cannot find a job are called ______.
a. job losers
b. job leavers
c. discouraged workers
d. seasonal workers
a. job losers
b. job leavers
c. discouraged workers
d. seasonal workers
answer
c. discouraged workers
question
When workers and employers take time to find the right skills match for a job, what type of unemployment results?
a. cyclical
b. frictional
c. seasonal
d. structural
a. cyclical
b. frictional
c. seasonal
d. structural
answer
b. frictional
question
Which of the following types of workers is most likely to face seasonal unemployment?
a. carnival game operator
b. police officer
c. fast food worker
d. costume designer
a. carnival game operator
b. police officer
c. fast food worker
d. costume designer
answer
a. carnival game operator
question
What causes structural unemployment?
a. workers searching for suitable jobs and firms looking for suitable workers
b. the persistent mismatch of workers' skills and the requirements of jobs
c. short-term cyclical fluctuations in the economy
d. short-term seasonal fluctuations in the job market
a. workers searching for suitable jobs and firms looking for suitable workers
b. the persistent mismatch of workers' skills and the requirements of jobs
c. short-term cyclical fluctuations in the economy
d. short-term seasonal fluctuations in the job market
answer
b. the persistent mismatch of workers' skills and the requirements of jobs
question
Which of the following demonstrates how labor markets and markets for goods and services differ?
a. Whereas the goods and services market is affected by inflation, the labor market is not usually affected.
b. Whereas the goods and services market dictates prices, the labor market does not always determine wages.
c. Whereas the goods and services market is bolstered by an increase in demand, the labor market usually experiences a downturn.
d. Whereas the goods and services market has an ideal equilibrium state, the labor market does not.
a. Whereas the goods and services market is affected by inflation, the labor market is not usually affected.
b. Whereas the goods and services market dictates prices, the labor market does not always determine wages.
c. Whereas the goods and services market is bolstered by an increase in demand, the labor market usually experiences a downturn.
d. Whereas the goods and services market has an ideal equilibrium state, the labor market does not.
answer
b. Whereas the goods and services market dictates prices, the labor market does not always determine wages.
question
Li is delivering a business presentation. Which of the following is evidence she could present in support of the efficiency wage model?
a. "Our new on-the-job training program increased productivity by 28 percent."
b. "We pay above the minimum wage because we care about our employees."
c. Increasing wages by just $0.75 per hour translates to a productivity increase of 12 percent."
d. "Our new initiative to hire high-performing college graduates has increased productivity threefold."
a. "Our new on-the-job training program increased productivity by 28 percent."
b. "We pay above the minimum wage because we care about our employees."
c. Increasing wages by just $0.75 per hour translates to a productivity increase of 12 percent."
d. "Our new initiative to hire high-performing college graduates has increased productivity threefold."
answer
c. Increasing wages by just $0.75 per hour translates to a productivity increase of 12 percent."
question
Which of the following best describes the relationship between the efficiency wage and the equilibrium wage?
a. The efficiency wage is higher.
b. The equilibrium wage is higher.
c. They are equal.
d. The efficiency wage may be either higher or lower.
a. The efficiency wage is higher.
b. The equilibrium wage is higher.
c. They are equal.
d. The efficiency wage may be either higher or lower.
answer
a. The efficiency wage is higher.
question
In 1914, Henry Ford increased his workers' wages from $3 to $5 per day and succeeded in increasing his profits. Which of the following principles was he demonstrating?
a. efficiency wage
b. relative price
c. natural rate of unemployment
d. potential output
a. efficiency wage
b. relative price
c. natural rate of unemployment
d. potential output
answer
a. efficiency wage
question
GDP includes the value of new goods as well as used goods. True/False
answer
false
question
For the economy as a whole, expenditures must equal income. True/False
answer
true
question
Services is one of the three categories that consumption is divided into. True/False
answer
true
question
In economics, an investment involves trading money for stock certificates. True /False
answer
false
question
The GDP often reflects important changes in the improvements in the quality of goods.True/False
answer
false
question
The main problem in calculating accurate GDP statistics happens when comparing the GDP over time.True/False
answer
true
question
Which country best reinforces the idea that a low real GDP per capita leads to a low life expectancy?
a. Pakistan
b. Nigeria
c. Bangladesh
d. Afghanistan
a. Pakistan
b. Nigeria
c. Bangladesh
d. Afghanistan
answer
b. Nigeria
question
_____ is an effect caused by the production of goods and services.
a. An externality
b. Depreciation
c. Consumption
d. An investment
a. An externality
b. Depreciation
c. Consumption
d. An investment
answer
a. An externality
question
Which of the following examples belong to the most significant type of nonmarket transaction excluded from the GDP?
a. Lorenzo talks to a friend on a beach.
b. Leonard trades three baseball cards for a baseball.
c. Monica cleans the kitchen in her house.
d. Alessia does charity work for her church.
a. Lorenzo talks to a friend on a beach.
b. Leonard trades three baseball cards for a baseball.
c. Monica cleans the kitchen in her house.
d. Alessia does charity work for her church.
answer
c. Monica cleans the kitchen in her house.
question
Economic growth is considered to have occurred whenever real GDP per capita has ______.
a. fluctuated
b. risen
c. fallen
d. remained constant
a. fluctuated
b. risen
c. fallen
d. remained constant
answer
b. risen
question
What measure of economic well-being is most often used?
a. gross domestic product
b. gross domestic product per capita
c. nominal gross domestic product per capita
d. real gross domestic product per capita
a. gross domestic product
b. gross domestic product per capita
c. nominal gross domestic product per capita
d. real gross domestic product per capita
answer
d. real gross domestic product per capita
question
To calculate real GDP, an index number of ______ is assigned to some base year.
a. 25
b. 50
c. 100
d. 150,
a. 25
b. 50
c. 100
d. 150,
answer
c. 100
question
______ is achieved when depreciation is subtracted from gross national product.
a. Personal income
b. National income
c. Net national product
d. National domestic product
a. Personal income
b. National income
c. Net national product
d. National domestic product
answer
c. Net national product
question
Which of the following would be subtracted from the GDP to determine the GNP?
a. the profits a Chinese company earns in China
b. the profits a U.S. company earns in the United States
c. the profits a U.S. company earns in China
d. the profits a Chinese company earns in the United States
a. the profits a Chinese company earns in China
b. the profits a U.S. company earns in the United States
c. the profits a U.S. company earns in China
d. the profits a Chinese company earns in the United States
answer
d. the profits a Chinese company earns in the United States
question
BlueLake, Inc pays a $100,000 a month to use land for a resort. This is an example of a(n) ______.
a. factor payment
b. transfer payment
c. nonfixed payment
d. appreciation payment
a. factor payment
b. transfer payment
c. nonfixed payment
d. appreciation payment
answer
a. factor payment
question
Why are government transfer payments not included in the GDP?
a. It is spending that is too small to count in the GDP.
b. It is spending that disperses income among the citizens.
c. It is spending used to buy goods and services.
d. It is spending used to broker international agreements.
a. It is spending that is too small to count in the GDP.
b. It is spending that disperses income among the citizens.
c. It is spending used to buy goods and services.
d. It is spending used to broker international agreements.
answer
b. It is spending that disperses income among the citizens.
question
What is the most volatile category of GDP?
a. net exports
b. consumption
c. investment
d. government purchases
a. net exports
b. consumption
c. investment
d. government purchases
answer
c. investment
question
Which of the following purchases would most likely be classified as an investment?
a. sun block used to prevent sunburn
b. a paper hat used for a birthday celebration
c. a robot used to make computers
d. chocolate chip cookies used for a lunch
a. sun block used to prevent sunburn
b. a paper hat used for a birthday celebration
c. a robot used to make computers
d. chocolate chip cookies used for a lunch
answer
c. a robot used to make computers
question
Of the following examples, expenditures on ______ will most likely increase dramatically when the GDP rises.
a. HDTVs
b. pants
c. cough drops
d. milk
a. HDTVs
b. pants
c. cough drops
d. milk
answer
a. HDTVs
question
Which of the following examples involves a durable good?
a. Lotte uses binoculars at a soccer game.
b. Sem drinks a soda at a basketball game.
c. Sophie eats a hot dog at a baseball game.
d. Finn brings a paper bag to put on his head to a football game.
a. Lotte uses binoculars at a soccer game.
b. Sem drinks a soda at a basketball game.
c. Sophie eats a hot dog at a baseball game.
d. Finn brings a paper bag to put on his head to a football game.
answer
a. Lotte uses binoculars at a soccer game.
question
Which of the following equations represents the expenditure approach?
a. GDP = C + I + G + (X - M)
b. GDP = C - I - G - (X + M)
c. GDP = C + I + G x (X - M)
d. GDP = C - I + G x (X + M)
a. GDP = C + I + G + (X - M)
b. GDP = C - I - G - (X + M)
c. GDP = C + I + G x (X - M)
d. GDP = C - I + G x (X + M)
answer
a. GDP = C + I + G + (X - M)
question
Based on the circular flow diagram, what two entities pay wages to households?
a. rest of the world and financial markets
b. government and financial markets
c. firms and government
d. firms and financial markets
a. rest of the world and financial markets
b. government and financial markets
c. firms and government
d. firms and financial markets
answer
c. firms and government
question
_____ is the measure of economic performance based on the value of all final goods and services produced within a nation during a given period.
a. GNP
b. GDP
c. NI
d. PI
a. GNP
b. GDP
c. NI
d. PI
answer
b. GDP
question
What determines the value of goods and services for GDP?
a. market prices
b. quality of product
c. stock rating
d. investment
a. market prices
b. quality of product
c. stock rating
d. investment
answer
a. market prices
question
Which of the following is an accurate statement concerning the definition of GDP?
a. The term given period refers to a three-year period of time.
b. The term given period refers to a six month period of time.
c. The word final means a good is ready to be used in the ultimate way that has been planned.
d. The word final means a good is ready to be packaged and shipped to retail stores.
a. The term given period refers to a three-year period of time.
b. The term given period refers to a six month period of time.
c. The word final means a good is ready to be used in the ultimate way that has been planned.
d. The word final means a good is ready to be packaged and shipped to retail stores.
answer
c. The word final means a good is ready to be used in the ultimate way that has been planned.
question
Which of the following is an example of double counting in regards to GDP?
a. counting the value of two products often bought together, such as chips and dip
b. counting the value of sweaters that are inferior quality
c. counting the value of plastic used to make model kits as well as the final kit itself
d. counting the value of products that have two or more components such a TV with a remote control
a. counting the value of two products often bought together, such as chips and dip
b. counting the value of sweaters that are inferior quality
c. counting the value of plastic used to make model kits as well as the final kit itself
d. counting the value of products that have two or more components such a TV with a remote control
answer
c. counting the value of plastic used to make model kits as well as the final kit itself
question
How is the value added for each firm calculated?
a. by multiplying the product value for the previous firm with the product value for the current firm
b. by dividing the product value for the current firm by the product value for the next firm
c. by subtracting the product value for the previous firm from the product value for the current firm
d. by adding the product value for the current firm to the product value for the next firm
a. by multiplying the product value for the previous firm with the product value for the current firm
b. by dividing the product value for the current firm by the product value for the next firm
c. by subtracting the product value for the previous firm from the product value for the current firm
d. by adding the product value for the current firm to the product value for the next firm
answer
c. by subtracting the product value for the previous firm from the product value for the current firm
question
Which of the following is an accurate statement about the underground economy?
a. It is given a penalty tax in addition to a standard tax.
b. It can account for more than one-third of the GDP in developing countries.
c. It often includes everyday activities, such as housework and gardening.
d. It is reported to the U.S. government through official channels.
a. It is given a penalty tax in addition to a standard tax.
b. It can account for more than one-third of the GDP in developing countries.
c. It often includes everyday activities, such as housework and gardening.
d. It is reported to the U.S. government through official channels.
answer
b. It can account for more than one-third of the GDP in developing countries.
question
What is the opportunity cost of leisure?
a. the relaxation a person gets
b. the income given up by not working
c. the vacation time taken
d. the chance to socialize with friends and family
a. the relaxation a person gets
b. the income given up by not working
c. the vacation time taken
d. the chance to socialize with friends and family
answer
b. the income given up by not working
question
A country that is increasing its rate of consumption is reducing its level of production. True/False
answer
false
question
The four factors that determine productivity and economic growth are natural resources, human capital, physical capital, and technology. True/False
answer
true
question
While some economists believe that improvements in infrastructure can increase productivity, other economists believe that increased productivity leads to better infrastructure. True/False
answer
true
question
The law of diminishing marginal returns means that population growth can result in workers with insufficient capital. True/False
answer
true
question
A larger population means a larger labor force, greater production, and higher standards of living for the average worker. True/False
answer
false
question
On average, societies where saving some of one's income is favored over spending it grow at a slower rate than other societies. True/False
answer
false
question
The population growth rate is 1 percent in Maria's country and 3 percent in Daniel's country? Which statement about their countries is most likely true?
a. People in Daniel's country are generally wealthier than people in Maria's country.
b. Families in Maria's country have better access to medical care than families in Daniel's country.
c. Women in Maria's country have lower opportunity costs associated with raising children than women in Daniel's country.
d. Women in Daniel's country are generally better educated than women in Maria's country.
a. People in Daniel's country are generally wealthier than people in Maria's country.
b. Families in Maria's country have better access to medical care than families in Daniel's country.
c. Women in Maria's country have lower opportunity costs associated with raising children than women in Daniel's country.
d. Women in Daniel's country are generally better educated than women in Maria's country.
answer
b. Families in Maria's country have better access to medical care than families in Daniel's country.
question
In Kejana's country, the population is growing at a rate of 3.5 percent per year. Due to environmental factors, the country has a limited supply of land on which to grow food, and food output is increasing at a rate of 2.75 percent per year. The population growth rate in Kejana's country is ______ the per capita output.
a. having minimal impact on
b. positively affecting
c. operating separately from
d. negatively affecting
a. having minimal impact on
b. positively affecting
c. operating separately from
d. negatively affecting
answer
d. negatively affecting
question
Which statement about population growth and economic growth is true?
a. Population growth means more workers, which ultimately means an increase in the standard of living for the average citizen.
b. Population growth will inevitably lead to slower economic growth because the quantity and quality of available land is fixed.
c. Population growth can result in more scientists, engineers, and entrepreneurs whose contributions can lead to greater economic growth.
d. Population growth generally has little to no impact on economic growth because it is one factor among many.
a. Population growth means more workers, which ultimately means an increase in the standard of living for the average citizen.
b. Population growth will inevitably lead to slower economic growth because the quantity and quality of available land is fixed.
c. Population growth can result in more scientists, engineers, and entrepreneurs whose contributions can lead to greater economic growth.
d. Population growth generally has little to no impact on economic growth because it is one factor among many.
answer
c. Population growth can result in more scientists, engineers, and entrepreneurs whose contributions can lead to greater economic growth.
question
In the twentieth century what policies helped Taiwan, Singapore, and South Korea grow faster than more developed nations?
a. investment in natural resources
b. low levels of saving and high levels of consumption
c. investment in human resources and technology
d. lax enforcement of property rights
a. investment in natural resources
b. low levels of saving and high levels of consumption
c. investment in human resources and technology
d. lax enforcement of property rights
answer
c. investment in human resources and technology
question
All other things being equal, which country is likely to have the slowest economic growth?
a. Country A's government does little to enforce the rule of law.
b. Country B has a few natural resources within its borders.
c. Country C places great emphasis on the importance of education for all its citizens.
d. Country D's government invests in its infrastructure and health system.
a. Country A's government does little to enforce the rule of law.
b. Country B has a few natural resources within its borders.
c. Country C places great emphasis on the importance of education for all its citizens.
d. Country D's government invests in its infrastructure and health system.
answer
a. Country A's government does little to enforce the rule of law.
question
Most people living in Country Y have no more than a ninth-grade education. In contrast, about half of the adult population of Country Z has a college degree. Based on this information, which statement about these two countries is most likely true?
a. Country Z does not have many natural resources available.
b. Country Y has a higher rate of economic growth than Country Z.
c. There are more people living in Country Y than in Country Z.
d. The per capita output of Country Z is higher than that of Country Y.
a. Country Z does not have many natural resources available.
b. Country Y has a higher rate of economic growth than Country Z.
c. There are more people living in Country Y than in Country Z.
d. The per capita output of Country Z is higher than that of Country Y.
answer
d. The per capita output of Country Z is higher than that of Country Y.
question
The principle of comparative advantage suggests that governments should pursue free trade because it ______.
a. equitably distributes human capital worldwide
b. enables countries to grow their economies through specialization
c. prevents poor countries from pursuing technological advances
d. reduces pressure on the economies of countries that have few natural resources
a. equitably distributes human capital worldwide
b. enables countries to grow their economies through specialization
c. prevents poor countries from pursuing technological advances
d. reduces pressure on the economies of countries that have few natural resources
answer
b. enables countries to grow their economies through specialization
question
The government in Katrina's country does little to enforce property rights. Which statement about this situation is most likely true?
a. The government is encouraging economic growth.
b. People in Katrina's country are saving most of their incomes.
c. People in Katrina's country are unwilling or unable to invest.
d. The economy is growing too rapidly for the government to keep up.
a. The government is encouraging economic growth.
b. People in Katrina's country are saving most of their incomes.
c. People in Katrina's country are unwilling or unable to invest.
d. The economy is growing too rapidly for the government to keep up.
answer
c. People in Katrina's country are unwilling or unable to invest.
question
The official policy of Lolita's government is that while some consumption is good, a significant percentage of a person's earnings should be saved. Why is this policy good for economic growth?
a. It prevents money from leaving the country.
b. It reduces consumption of scarce natural resources.
c. Saving is a form of human capital.
d. Saving leads to more investment and capital formation.
a. It prevents money from leaving the country.
b. It reduces consumption of scarce natural resources.
c. Saving is a form of human capital.
d. Saving leads to more investment and capital formation.
answer
d. Saving leads to more investment and capital formation.
question
Elsa and Moshe have different ideas about how their country should invest its tax revenues. Elsa feels that some of it should be used to fund an ambitious space science program. Moshe feels the money would be better spent on improvements to roads, bridges, and airports. It is likely that Elsa is more interested in ______ than Moshe.
a. stimulating innovation
b. enhancing natural resources
c. boosting population growth
d. reducing poverty
a. stimulating innovation
b. enhancing natural resources
c. boosting population growth
d. reducing poverty
answer
a. stimulating innovation
question
Jermaine's country is relatively small and does not have many natural resources. Nonetheless, it has enjoyed strong economic growth and has become one of the 20 wealthiest countries in the world. How is this possible?
a. Abundant natural resources are often more harmful than helpful to economic growth.
b. A lack of natural resources poses no barrier to economic growth.
c. Economic growth is unrelated to the availability of natural resources.
d. Natural resources are important, but sustained growth depends on other factors.
a. Abundant natural resources are often more harmful than helpful to economic growth.
b. A lack of natural resources poses no barrier to economic growth.
c. Economic growth is unrelated to the availability of natural resources.
d. Natural resources are important, but sustained growth depends on other factors.
answer
d. Natural resources are important, but sustained growth depends on other factors.
question
Kaleo's government is working to protect forest lands and thereby preserve the health of its nation's watersheds. What is Kaleo's government investing in?
a. physical capital
b. technology
c. natural resources
d. human capital
a. physical capital
b. technology
c. natural resources
d. human capital
answer
c. natural resources
question
Javier's government has decided to make school attendance a requirement for everyone under the age of 18. What determinant of productivity and economic growth is Javier's government investing in?
a. technology
b. human capital
c. natural resources
d. physical capital
a. technology
b. human capital
c. natural resources
d. physical capital
answer
b. human capital
question
Which statement best describes what will happen if a poor country with little capital and a rich country with a lot of capital each add a single unit of capital?
a. The rich country will experience a relatively large increase in production, while the poor country will experience a relatively small increase in production.
b. The poor country will experience a relatively large increase in production, while the rich country will experience a relatively small increase in production.
c. The poor country will experience a relatively small increase in production, and the rich country will experience a relatively small increase in production.
d. The poor country will experience a relatively large increase in production, and the rich country will experience a relatively large increase in production.
a. The rich country will experience a relatively large increase in production, while the poor country will experience a relatively small increase in production.
b. The poor country will experience a relatively large increase in production, while the rich country will experience a relatively small increase in production.
c. The poor country will experience a relatively small increase in production, and the rich country will experience a relatively small increase in production.
d. The poor country will experience a relatively large increase in production, and the rich country will experience a relatively large increase in production.
answer
b. The poor country will experience a relatively large increase in production, while the rich country will experience a relatively small increase in production.
question
Georgie's country is working to increase its economic growth rate by providing incentives for companies to build new factories. Georgie's country is focused on increasing economic growth by improving its ______.
a. natural resources
b. human capital
c. physical capital
d. technology
a. natural resources
b. human capital
c. physical capital
d. technology
answer
c. physical capital
question
Marta's country has advanced technology and highly educated workers. In Jin's country, workers are also highly educated and have access to the same advanced technology available in Marta's country. However, the workers in Jin's country produce more output. What is the most likely cause of this difference?
a. Jin's country has a smaller population.
b. Marta's country has more people splitting the work.
c. Jin's country has more and better-quality tools, machinery, and factories.
d. Marta's country has better laws protecting property and investments.
a. Jin's country has a smaller population.
b. Marta's country has more people splitting the work.
c. Jin's country has more and better-quality tools, machinery, and factories.
d. Marta's country has better laws protecting property and investments.
answer
c. Jin's country has more and better-quality tools, machinery, and factories.
question
Which of these statements about the productivity of resources is true?
a. While labor can become more productive, natural resources cannot.
b. Less productive resources result in more sustainable economic growth.
c. Capital, labor, and natural resources can all become more productive.
d. It is not possible to make a resource more productive.
a. While labor can become more productive, natural resources cannot.
b. Less productive resources result in more sustainable economic growth.
c. Capital, labor, and natural resources can all become more productive.
d. It is not possible to make a resource more productive.
answer
c. Capital, labor, and natural resources can all become more productive.
question
According to the rule of 70, a nation that has an economic growth rate of 5 percent will double its output in ______ years.
a. 14
b. 35
c. 3.5
d. 7
a. 14
b. 35
c. 3.5
d. 7
answer
a. 14
question
A country can shift the production possibilities curve outward by ______.
a. discouraging entrepreneurial activity
b. decreasing its population growth rate
c. raising the standard of living
d. improving and increasing its capital
a. discouraging entrepreneurial activity
b. decreasing its population growth rate
c. raising the standard of living
d. improving and increasing its capital
answer
d. improving and increasing its capital
question
Which statement most accurately defines economic growth?
a. a sustained increase in a country's production of services and goods
b. how much an economy produces at its potential output
c. a nation's natural rate of output of goods and services
d. the application of new knowledge that creates or improves products
a. a sustained increase in a country's production of services and goods
b. how much an economy produces at its potential output
c. a nation's natural rate of output of goods and services
d. the application of new knowledge that creates or improves products
answer
a. a sustained increase in a country's production of services and goods
question
Focusing on real GDP per capita allows economists to control for how ______ impacts economic growth.
a. annual percentage change
b. the standard of living
c. population growth
d. international changes
a. annual percentage change
b. the standard of living
c. population growth
d. international changes
answer
c. population growth
question
Economists usually use real GDP per capita to measure ______.
a. the distribution of income
b. per worker output
c. the standard of living
d. economic growth
a. the distribution of income
b. per worker output
c. the standard of living
d. economic growth
answer
d. economic growth
question
Malmud wants to know how much the economy of his country has grown since he was born 30 years ago. First, he compares the GDP from 30 years ago to today's GDP and finds that the economy grew by over 300 percent. This seems wrong to Malmud, because he does not believe his country is vastly wealthier than it was when he was young. Then he realizes that he has not considered how much the population of his country has grown over that same period. To get a better picture of how much the country's economy has grown, he should look at the change in ______.
a. average incomes
b. physical capital
c. real GDP per capita
d. diminishing returns
a. average incomes
b. physical capital
c. real GDP per capita
d. diminishing returns
answer
c. real GDP per capita
question
Stockholders are the people who own corporations. True/False
answer
true
question
Retained earnings means a corporation puts profits back into the company instead of paying them as dividends. True/False
answer
true
question
If a government collects more taxes than it spends, there is a budget deficit. True/False
answer
false
question
Both the supply and the demand curves of loanable funds are negatively sloped. True/False
answer
false
question
Early in the twenty-first century, it was common for people to get mortgages with no down payment and minimal documentation. True/False
answer
true
question
Between 2000 and 2006, many mortgage-backed securities were given AAA ratings. True/False
answer
true
question
Bipartisan legislation passed in 2018 to deal with the banking industry ______.
a. extended the Dodd-Frank Act to cover smaller banks
b. required banks of all sizes to face annual stress tests.
c. removed the Dodd-Frank Act restrictions for many smaller banks
d. increased federal oversight of banks of all sizes
a. extended the Dodd-Frank Act to cover smaller banks
b. required banks of all sizes to face annual stress tests.
c. removed the Dodd-Frank Act restrictions for many smaller banks
d. increased federal oversight of banks of all sizes
answer
c. removed the Dodd-Frank Act restrictions for many smaller banks
question
Zero-down mortgages meant that borrowers were ______.
a. more motivated to find a way to pay their mortgage
b. more likely to default and walk away from their mortgage
c. less able to borrow more than they could afford
d. more able to build equity quickly
a. more motivated to find a way to pay their mortgage
b. more likely to default and walk away from their mortgage
c. less able to borrow more than they could afford
d. more able to build equity quickly
answer
b. more likely to default and walk away from their mortgage
question
The United States was officially in a recession in ______.
a. January 2004
b. January 2005
c. December 2006
d. December 2007
a. January 2004
b. January 2005
c. December 2006
d. December 2007
answer
d. December 2007
question
From 2006 to 2008, ______ fell by $350 billion.
a. mortgage-backed security valuations
b. individual foreclosures
c. subprime mortgage originations
d. housing construction
a. mortgage-backed security valuations
b. individual foreclosures
c. subprime mortgage originations
d. housing construction
answer
d. housing construction
question
During the housing bust that began in 2006, the fewest foreclosures were among people with ______ mortgages.
a. subprime
b. zero-down
c. adjustable-rate
d. fixed-rate
a. subprime
b. zero-down
c. adjustable-rate
d. fixed-rate
answer
d. fixed-rate
question
In 2006, Jan and Lou bought a house for $100,000. After a year, they still owed $98,000, but the home was worth $220,000, so they used it as collateral to get a $90,000 loan to buy a boat. What have they done?
a. taken out a hybrid loan
b. bought a mortgage-backed security
c. borrowed against their equity
d. entered a subprime mortgage
a. taken out a hybrid loan
b. bought a mortgage-backed security
c. borrowed against their equity
d. entered a subprime mortgage
answer
c. borrowed against their equity
question
Why did rising housing prices from 2001 to 2006 encourage lenders to give mortgages even to people they thought would default?
a. Lenders felt the government would pay for any losses they suffered from defaults.
b. Lenders felt credit was so easy to obtain that customers in default could easily get more financing.
c. Lenders felt that if borrowers defaulted that would leave the lenders with houses that were worth more than they had been owed.
d. Lenders felt that regulations would soon change to help people facing foreclosure and prevent defaults.
a. Lenders felt the government would pay for any losses they suffered from defaults.
b. Lenders felt credit was so easy to obtain that customers in default could easily get more financing.
c. Lenders felt that if borrowers defaulted that would leave the lenders with houses that were worth more than they had been owed.
d. Lenders felt that regulations would soon change to help people facing foreclosure and prevent defaults.
answer
c. Lenders felt that if borrowers defaulted that would leave the lenders with houses that were worth more than they had been owed.
question
Why were many loans in the early 2000s referred to as subprime?
a. The interest rate on them was lower than the prime rate.
b. The borrowers who used them had less than prime credit.
c. The houses they were used to buy cost less than prime real estate.
d. The loan officers who made them received less than a prime commission.
a. The interest rate on them was lower than the prime rate.
b. The borrowers who used them had less than prime credit.
c. The houses they were used to buy cost less than prime real estate.
d. The loan officers who made them received less than a prime commission.
answer
b. The borrowers who used them had less than prime credit.
question
Why were the low rates on adjustable-rate mortgages in the early 2000s considered to be teaser rates?
a. because they were very hard to qualify for
b. because they were very easy to qualify for
c. because they were likely to increase after a brief time
d. because they were likely to decrease after a brief time
a. because they were very hard to qualify for
b. because they were very easy to qualify for
c. because they were likely to increase after a brief time
d. because they were likely to decrease after a brief time
answer
c. because they were likely to increase after a brief time
question
Prior to the housing crisis of 2008, the federal government had been trying to ______ lending standards for low income people to ______ home ownership.
a. raise, decrease
b. raise, increase
c. lower, decrease
d. lower, increase
a. raise, decrease
b. raise, increase
c. lower, decrease
d. lower, increase
answer
d. lower, increase
question
Fannie Mae and Freddie Mac are the______.
a. largest brokerages services to be bought out during the 2008 financial crisis
b. senators who sponsored a bill to reform subprime lending practices
c. largest investment banking firms in the United States
d. government-sponsored organizations that back most mortgages in the United States
a. largest brokerages services to be bought out during the 2008 financial crisis
b. senators who sponsored a bill to reform subprime lending practices
c. largest investment banking firms in the United States
d. government-sponsored organizations that back most mortgages in the United States
answer
d. government-sponsored organizations that back most mortgages in the United States
question
Budget deficits lead to ______ interest rates and ______ amounts of saving and investment.
a. lower; smaller
b. lower; larger
c. higher; smaller
d. higher; larger
a. lower; smaller
b. lower; larger
c. higher; smaller
d. higher; larger
answer
c. higher; smaller
question
Which of the following equations represents investment spending in a closed economy?
a. I = Y + C - G
b. I = Y - C - G
c. I = Y - C + G
d. I = Y/ (C - G)
a. I = Y + C - G
b. I = Y - C - G
c. I = Y - C + G
d. I = Y/ (C - G)
answer
b. I = Y - C - G
question
Beth would like to invest in the stock market, but she has a low income. She would have to purchase shares of stock in just one or two companies, and she fears that is too risky. Which financial intermediary could best help her buy stocks in many companies with her limited assets?
a. a bank
b. a savings and loan
c. a mutual fund
d. an insurance company
a. a bank
b. a savings and loan
c. a mutual fund
d. an insurance company
answer
c. a mutual fund
question
Economists describe the stock market as being a ______.
a. wild ride
b. random walk
c. leisurely stroll
d. dead run
a. wild ride
b. random walk
c. leisurely stroll
d. dead run
answer
b. random walk
question
Large corporations, such as Ford and IBM, are owned by ______.
a. a few rich individuals
b. millions of different stockholders
c. the federal government
d. five large banks
a. a few rich individuals
b. millions of different stockholders
c. the federal government
d. five large banks
answer
b. millions of different stockholders
question
A certain investment involves ownership in a single company, pays a set dividend, and guarantees that its owners get paid before some investors, but after others. What type of investment is this?
a. a mutual fund
b. a bond
c. common stock
d. preferred stock
a. a mutual fund
b. a bond
c. common stock
d. preferred stock
answer
d. preferred stock
question
Which of the following people owns common stock?
a. Lance, who may get a dividend depending upon how a company performs.
b. Vivian, who has no ownership in the company she is investing in.
c. Marti, who gets paid before anyone else if the company has problems.
d. Natasha, who has no voting rights in the company she invested in.
a. Lance, who may get a dividend depending upon how a company performs.
b. Vivian, who has no ownership in the company she is investing in.
c. Marti, who gets paid before anyone else if the company has problems.
d. Natasha, who has no voting rights in the company she invested in.
answer
a. Lance, who may get a dividend depending upon how a company performs.
question
Economists continue to debate the actual shape of the short-run aggregate supply curve. True/False
answer
true
question
It is rare that actual and potential real GDP are equal. True/False
answer
true
question
The short-run equilibrium level of real output and the price level are given by the intersection of the aggregate demand curve and the short-run aggregate supply curve. True/False
answer
true
question
Changes in the stock of capital will alter the amount of goods and services the economy can produce. True/False
answer
true
question
The misperception effect involves a false perception about relative prices. True/False
answer
true
question
A fall in incomes abroad can reduce U.S. net exports and cause a leftward shift in the U.S. aggregate demand curve. True/False
answer
true
question
A Keynesian short-run aggregate supply curve has a flatter portion and a steep portion. How does a decrease in aggregate demand affect the actual real GDP differently across these two portions?
a. There is a large decrease in the actual real GDP across the flatter portion and a small decrease in the actual real GDP across the steep portion.
b. There is a large increase in the actual real GDP across the flatter portion and a small increase in the actual real GDP across the steep portion.
c. There is a small decrease in the actual real GDP across the flatter portion and a large increase in the actual real GDP across the steep portion.
d. There is a small increase in the actual real GDP across the flatter portion and a large increase in the actual real GDP across the steep portion.
a. There is a large decrease in the actual real GDP across the flatter portion and a small decrease in the actual real GDP across the steep portion.
b. There is a large increase in the actual real GDP across the flatter portion and a small increase in the actual real GDP across the steep portion.
c. There is a small decrease in the actual real GDP across the flatter portion and a large increase in the actual real GDP across the steep portion.
d. There is a small increase in the actual real GDP across the flatter portion and a large increase in the actual real GDP across the steep portion.
answer
a. There is a large decrease in the actual real GDP across the flatter portion and a small decrease in the actual real GDP across the steep portion
question
Which of the following is a difference between the Keynesian and classical models?
a. Price stickiness is considered in the Keynesian model but not in the classical model.
b. Input prices are completely flexible in the Keynesian model but are inflexible in the classical model.
c. The overall price level can change in the Keynesian model but not in the classical model.
d. Input prices adjust quickly to economic changes in the Keynesian model but not in the classical model.
a. Price stickiness is considered in the Keynesian model but not in the classical model.
b. Input prices are completely flexible in the Keynesian model but are inflexible in the classical model.
c. The overall price level can change in the Keynesian model but not in the classical model.
d. Input prices adjust quickly to economic changes in the Keynesian model but not in the classical model.
answer
a. Price stickiness is considered in the Keynesian model but not in the classical model.
question
Keynes argued that ______ prevents the market solution from working rapidly enough to avert a(n) ______.
a. wage inflexibility, increase in the price level
b. disinflation, prolonged inflationary gap
c. low demand, unexpected positive shock
d. wage inflexibility, prolonged recession
a. wage inflexibility, increase in the price level
b. disinflation, prolonged inflationary gap
c. low demand, unexpected positive shock
d. wage inflexibility, prolonged recession
answer
d. wage inflexibility, prolonged recession
question
Which of the following can prolong the duration of a recessionary gap?
a. an increase in aggregate demand
b. lowering of interest rates
c. an increase in consumer confidence
d. the downward stickiness of prices and wages
a. an increase in aggregate demand
b. lowering of interest rates
c. an increase in consumer confidence
d. the downward stickiness of prices and wages
answer
d. the downward stickiness of prices and wages
question
The 2007-2008 recession in the United States appears to have been the product of ______.
a. negative shocks to both supply and demand
b. positive shocks to both supply and demand
c. a negative shock to supply coupled with a positive shock to demand
d. a positive shock to supply coupled with a negative shock to demand
a. negative shocks to both supply and demand
b. positive shocks to both supply and demand
c. a negative shock to supply coupled with a positive shock to demand
d. a positive shock to supply coupled with a negative shock to demand
answer
a. negative shocks to both supply and demand
question
Which of the following is an example of a positive supply shock?
a. an unexpected labor strike
b. a major widespread forest fire
c. an unexpected price cut in imported oil
d. a decrease in the overall price level
a. an unexpected labor strike
b. a major widespread forest fire
c. an unexpected price cut in imported oil
d. a decrease in the overall price level
answer
c. an unexpected price cut in imported oil
question
How did the entry of women and baby boomers into the U.S. labor force during the 1960s affect the nation's short-run aggregate supply (SRAS) curve and long-run aggregate supply (LRAS) curve?
a. The SRAS curve and LRAS curve both shifted to the left.
b. The SRAS curve shifted rightward, and the LRAS curve shifted leftward.
c. The SRAS curve shifted leftward, and the LRAS curve shifted rightward
d. The SRAS curve and LRAS curve both shifted to the right.
a. The SRAS curve and LRAS curve both shifted to the left.
b. The SRAS curve shifted rightward, and the LRAS curve shifted leftward.
c. The SRAS curve shifted leftward, and the LRAS curve shifted rightward
d. The SRAS curve and LRAS curve both shifted to the right.
answer
d. The SRAS curve and LRAS curve both shifted to the right.
question
The long-run aggregate supply curve ______.
a. has the same slope as the short-run aggregate supply curve
b. has the same slope as the short-run aggregate demand curve
c. is perfectly horizontal at the minimum price level in the economy
d. is perfectly vertical at the natural rate of output in an economy
a. has the same slope as the short-run aggregate supply curve
b. has the same slope as the short-run aggregate demand curve
c. is perfectly horizontal at the minimum price level in the economy
d. is perfectly vertical at the natural rate of output in an economy
answer
d. is perfectly vertical at the natural rate of output in an economy
question
Contrast the sticky wage theory with the sticky price (menu cost) theory in a situation where the overall price level increases.
a. Under the sticky wage theory, producers expand production and sales because of higher profit margins, whereas under the sticky price theory, producers find their sales increasing because their prices are relatively lower.
b. Under the sticky wage theory, producers find their sales increasing because their prices are relatively lower, whereas under the sticky price theory, producers expand production and sales because of lower profit margins.
c. Under the sticky wage theory, producers reduce production and sales because of higher profit margins, whereas under the sticky price theory, producers find their sales decreasing because their prices are relatively lower.
d. Under the sticky wage theory, producers find their sales decreasing because their prices are relatively lower, whereas under the sticky price theory, producers decrease production and sales because of higher profit margins.
a. Under the sticky wage theory, producers expand production and sales because of higher profit margins, whereas under the sticky price theory, producers find their sales increasing because their prices are relatively lower.
b. Under the sticky wage theory, producers find their sales increasing because their prices are relatively lower, whereas under the sticky price theory, producers expand production and sales because of lower profit margins.
c. Under the sticky wage theory, producers reduce production and sales because of higher profit margins, whereas under the sticky price theory, producers find their sales decreasing because their prices are relatively lower.
d. Under the sticky wage theory, producers find their sales decreasing because their prices are relatively lower, whereas under the sticky price theory, producers decrease production and sales because of higher profit margins.
answer
a. Under the sticky wage theory, producers expand production and sales because of higher profit margins, whereas under the sticky price theory, producers find their sales increasing because their prices are relatively lower.
question
The aggregate demand curve shifts rightward in response to ______.
a. increases in total purchases in the economy
b. a fall in consumer confidence
c. decreases in total purchases in the economy
d. increases in real interest rates
a. increases in total purchases in the economy
b. a fall in consumer confidence
c. decreases in total purchases in the economy
d. increases in real interest rates
answer
a. increases in total purchases in the economy
question
Assume that U.S. imports remain constant while U.S. exports change, ceteris paribus. Which of the following statements is correct?
a. A decrease in U.S. exports increases U.S. net exports.
b. An increase in U.S. exports shifts the aggregate demand curve rightward.
c. An increase in U.S. exports decreases U.S. net exports.
d. A decrease in U.S. exports shifts the aggregate demand curve rightward.
a. A decrease in U.S. exports increases U.S. net exports.
b. An increase in U.S. exports shifts the aggregate demand curve rightward.
c. An increase in U.S. exports decreases U.S. net exports.
d. A decrease in U.S. exports shifts the aggregate demand curve rightward.
answer
b. An increase in U.S. exports shifts the aggregate demand curve rightward.
question
Which sequence of events accurately captures the wealth effect of a change in the price level?
a. Price level changes, interest rate changes, and quantity of real GDP demanded changes.
b. Consumer spending changes, price level changes, and net exports change.
c. Investment changes, interest rate changes, and net exports change.
d. Price level changes, consumer spending changes, and quantity of real GDP demanded changes.
a. Price level changes, interest rate changes, and quantity of real GDP demanded changes.
b. Consumer spending changes, price level changes, and net exports change.
c. Investment changes, interest rate changes, and net exports change.
d. Price level changes, consumer spending changes, and quantity of real GDP demanded changes.
answer
d. Price level changes, consumer spending changes, and quantity of real GDP demanded changes.
question
The wealth effect, the interest rate effect, and the foreign trade effect are three complementary explanations for the ______ of the aggregate demand curve.
a. leftward shift
b. negative slope
c. rightward shift
d. positive slope
a. leftward shift
b. negative slope
c. rightward shift
d. positive slope
answer
b. negative slope
question
Aggregate demand is calculated by which of the following equations?
a. C + I + G + (X + M)
b. C + I + G + (X - M)
c. C + M + X + (G - I)
d. C + X + M + (I - G)
a. C + I + G + (X + M)
b. C + I + G + (X - M)
c. C + M + X + (G - I)
d. C + X + M + (I - G)
answer
b. C + I + G + (X - M)
question
The largest single component of aggregate demand is ______.
a. investment spending
b. exports
c. disposable income
d. consumption
a. investment spending
b. exports
c. disposable income
d. consumption
answer
d. consumption
question
Aggregate expenditures have historically been especially important to the economy in the short run. True/False
answer
true
question
Marginal propensity to consume refers to how much you tend to spend on consumer goods and services out of your additional disposable income. True/False
answer
true
question
Equilibrium in the aggregate expenditure model requires that aggregate expenditure equals income. True/False
answer
true
question
Optimistic consumer expectations can cause changes to several of the autonomous components of aggregate expenditure. True/False
answer
true
question
The true expenditure multiplier is usually larger than the calculated multiplier. True/False
answer
false
question
As aggregate expenditure increases, the aggregate demand curve shifts right. True/False
answer
true
question
Why is the aggregate expenditure model important to economists?
a. It helps explain fluctuations in the economy that can cause major disruptions.
b. It illuminates methods of fostering long-term growth in the economy.
c. It explains why the economy sometimes produces beyond the natural rate of real output.
d. It aids economic planning by providing a measure of the level of inflation in the economy.
a. It helps explain fluctuations in the economy that can cause major disruptions.
b. It illuminates methods of fostering long-term growth in the economy.
c. It explains why the economy sometimes produces beyond the natural rate of real output.
d. It aids economic planning by providing a measure of the level of inflation in the economy.
answer
a. It helps explain fluctuations in the economy that can cause major disruptions.
question
Which of the following did John Maynard Keynes believe held the key to understanding fluctuations in investment?
a. how people spend their money
b. how businesses make predictions
c. how inflation affects the economy
d. how governments enact policy
a. how people spend their money
b. how businesses make predictions
c. how inflation affects the economy
d. how governments enact policy
answer
a. how people spend their money
question
Keynes believed that prices and wages were rigid or fixed until the economy reaches ______.
a. equilibrium
b. full employment
c. recession
d. expansion
a. equilibrium
b. full employment
c. recession
d. expansion
answer
b. full employment
question
Household spending on goods and services amounts for what percentage of GDP?
a. 30
b. 50
c. 70
d. 90
a. 30
b. 50
c. 70
d. 90
answer
c. 70
question
How do most people respond when their disposable income increases?
a. They spend all of the increase.
b. They save all of the increase.
c. They save some and spend some.
d. They neither spend nor save.
a. They spend all of the increase.
b. They save all of the increase.
c. They save some and spend some.
d. They neither spend nor save.
answer
c. They save some and spend some.
question
Tyrone is reviewing his income and expenses for the two previous years. He notes that he made $7,200 more in the second year than in the first year and he spent $2,400 more in the second year than in the first year. What is his marginal propensity to consume?
a. 7 percent
b. 33 percent
c. 67 percent
d. 333 percent
a. 7 percent
b. 33 percent
c. 67 percent
d. 333 percent
answer
b. 33 percent
question
What concept does the following formula express?
ΔS/ΔDY
a. autonomous change in consumption spending
b. marginal propensity to consume
c. marginal propensity to save
d. equilibrium in the aggregate expenditure model
ΔS/ΔDY
a. autonomous change in consumption spending
b. marginal propensity to consume
c. marginal propensity to save
d. equilibrium in the aggregate expenditure model
answer
c. marginal propensity to save
question
In the following equation, what does the symbol ≡ denote?
AE ≡ C + I + G + (X - M)
a. The equation is an estimate.
b. The equation is absolute.
c. The equation is just a suggestion.
d. The equation is just a definition.
AE ≡ C + I + G + (X - M)
a. The equation is an estimate.
b. The equation is absolute.
c. The equation is just a suggestion.
d. The equation is just a definition.
answer
d. The equation is just a definition.
question
Which of the following is the best description of the effect of firms' perceptions of the future on planned investment?
a. It is chaotic and hard to analyze.
b. It has an inverse relationship.
c. It has no relationship.
d. It compounds over time.
a. It is chaotic and hard to analyze.
b. It has an inverse relationship.
c. It has no relationship.
d. It compounds over time.
answer
d. It compounds over time.
question
Which of the following U.S. economic periods was characterized by a negative expenditure multiplier?
a. the period following World War II
b. the period following the introduction of Reaganomics
c. the dot-com boom
d. the period following the financial crisis of 2008
a. the period following World War II
b. the period following the introduction of Reaganomics
c. the dot-com boom
d. the period following the financial crisis of 2008
answer
d. the period following the financial crisis of 2008
question
Which of the following best explains why the aggregate expenditure curve gets higher as the price level drops?
a. Purchasing power increases.
b. The economy moves closer to equilibrium.
c. Planned investment decreases.
d. Government purchases are falling.
a. Purchasing power increases.
b. The economy moves closer to equilibrium.
c. Planned investment decreases.
d. Government purchases are falling.
answer
a. Purchasing power increases.
question
The aggregate demand curve is a function of ______.
a. real aggregate expenditure and real GDP
b. price level and real aggregate expenditure
c. price level and real GDP
d. real aggregate expenditure and real aggregate demand
a. real aggregate expenditure and real GDP
b. price level and real aggregate expenditure
c. price level and real GDP
d. real aggregate expenditure and real aggregate demand
answer
c. price level and real GDP
question
Which of the following does the aggregate expenditure model help explain?
a. price-level changes
b. stagflation
c. shifts in the aggregate supply curve
d. short-run business cycles
a. price-level changes
b. stagflation
c. shifts in the aggregate supply curve
d. short-run business cycles
answer
d. short-run business cycles
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