question
In the long run, the Phillips curve is a ________ at ________.
A)vertical line; the natural rate of unemployment
B)negatively sloped line; the intersection of aggregate demand and short-run aggregate supply
C)horizontal line; 0% inflation
D)None of the above are correct.
A)vertical line; the natural rate of unemployment
B)negatively sloped line; the intersection of aggregate demand and short-run aggregate supply
C)horizontal line; 0% inflation
D)None of the above are correct.
answer
A
question
Money is
A)an asset that people are willing to accept in exchange for goods and services.
B)a liability that people are willing to accept in exchange for goods and services.
C)one's assets net of one's liabilities at any point in time.
D)the income one earns over a period of time.
A)an asset that people are willing to accept in exchange for goods and services.
B)a liability that people are willing to accept in exchange for goods and services.
C)one's assets net of one's liabilities at any point in time.
D)the income one earns over a period of time.
answer
A
question
In an "underground economy", the production of goods and services
A)are not measured but are included in GDP.
B)are not measured nor included in GDP.
C)are measured and included in GDP.
D)are usually too insignificant to be included in GDP.
A)are not measured but are included in GDP.
B)are not measured nor included in GDP.
C)are measured and included in GDP.
D)are usually too insignificant to be included in GDP.
answer
B
question
Fiscal policy is defined as changes in federal ________ and ________ to achieve macroeconomic objectives such as price stability, high rates of economic growth, and high employment.
A)taxes; expenditures
B)interest rates; money supply
C)taxes; the money supply
D)taxes; interest rates
A)taxes; expenditures
B)interest rates; money supply
C)taxes; the money supply
D)taxes; interest rates
answer
A
question
Employees at the hospital have negotiated a 3 percent increase in wages for the next year, based on their inflation expectations. If inflation is actually 5 percent over the next year, which of the following will occur?
A)Inflation will be 3 percent the following year.
B)The increase in inflation is expected.
C)Unemployment of hospital employees will rise.
D)Real wages for hospital employees will fall.
A)Inflation will be 3 percent the following year.
B)The increase in inflation is expected.
C)Unemployment of hospital employees will rise.
D)Real wages for hospital employees will fall.
answer
D
question
The portion of ________ that a bank does not loan out or spend on securities is known as ________.
A)deposits; securities
B)loans; securities
C)loans; reserves
D)deposits; reserves
A)deposits; securities
B)loans; securities
C)loans; reserves
D)deposits; reserves
answer
D
question
The measure of production that values output using base-year prices is called
A)real GDP.
B)value-added GDP.
C)nominal GDP.
D)underground GDP.
A)real GDP.
B)value-added GDP.
C)nominal GDP.
D)underground GDP.
answer
A
question
________ are financial securities that represent partial ownership of a firm.
A)Certificates of deposit
B)Treasury bills
C)Bonds
D)Stocks
A)Certificates of deposit
B)Treasury bills
C)Bonds
D)Stocks
answer
D
question
In a market economy, who decides what goods and services will be produced?
A)the government
B)only the producers
C)only consumers
D)consumers and producers
A)the government
B)only the producers
C)only consumers
D)consumers and producers
answer
D
question
The narrowest official definition of the money supply is
A)M1.
B)M2.
C)M3.
D)L.
A)M1.
B)M2.
C)M3.
D)L.
answer
A
question
A monetary growth rule means that
A)the Fed will raise interest rates if it thinks the economy is growing faster than potential.
B)the money supply should grow in response to economic conditions.
C)the Fed will lower interest rates if it thinks a recession is on the horizon.
D)the money supply should grow at a constant rate.
A)the Fed will raise interest rates if it thinks the economy is growing faster than potential.
B)the money supply should grow in response to economic conditions.
C)the Fed will lower interest rates if it thinks a recession is on the horizon.
D)the money supply should grow at a constant rate.
answer
D
question
One would speak of a movement along a supply curve for a good, rather than a change in supply,if
A)the price of the good changes
B)the cost of producing the good changes.
C)prices of substitutes in production change.
D)supplier expectations about future prices change.
A)the price of the good changes
B)the cost of producing the good changes.
C)prices of substitutes in production change.
D)supplier expectations about future prices change.
answer
A
question
Changes in ________ do not affect the level of aggregate supply in the long run.
A)the number of workers in the economy
B)technology
C)the price level
D)the amount of accumulated capital equipment
A)the number of workers in the economy
B)technology
C)the price level
D)the amount of accumulated capital equipment
answer
C
question
The federal budget deficit acts as an automatic stabilizer because
A)unemployment insurance payments decrease during a recession.
B)government tax revenues decrease during a recession.
C)Medicaid payments increase during expansionary periods.
D)food stamp payments increase during expansionary periods.
A)unemployment insurance payments decrease during a recession.
B)government tax revenues decrease during a recession.
C)Medicaid payments increase during expansionary periods.
D)food stamp payments increase during expansionary periods.
answer
B
question
A recession begins with a(n) ________ in spending by firms on capital goods and a(n) ________ in spending on durable goods by households.
A)increase; decrease
B)decrease; decrease
C)increase; increase
D)decrease; increase
A)increase; decrease
B)decrease; decrease
C)increase; increase
D)decrease; increase
answer
B
question
For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which ofthe following is true about the comparative advantage between the two countries?
A)Switzerland has the comparative advantage in watches.
B)Switzerland has the comparative advantage in chocolate.
C)Germany has the comparative advantage in watches and chocolate.
D)Germany has the comparative advantage in watches.
A)Switzerland has the comparative advantage in watches.
B)Switzerland has the comparative advantage in chocolate.
C)Germany has the comparative advantage in watches and chocolate.
D)Germany has the comparative advantage in watches.
answer
A
question
The expansionary monetary and fiscal policies of the 1960s resulted in ________ inflation rates and________ rates of unemployment.
A)high; high
B)low; low
C)high; low
D)low; high
A)high; high
B)low; low
C)high; low
D)low; high
answer
C
question
An example of an intermediate good would be
A)the soda pop sold by Quiznos.
B)the bread that goes into a sub sandwich that is sold by Quiznos.
C)a sub sandwich sold by Quiznos.
D)the potato chips sold by Quiznos.
A)the soda pop sold by Quiznos.
B)the bread that goes into a sub sandwich that is sold by Quiznos.
C)a sub sandwich sold by Quiznos.
D)the potato chips sold by Quiznos.
answer
B
question
The Taylor rule helps explain the relationship between the Fed's ________ and ________.
A)federal funds target; economic conditions
B)money supply target; economic conditions
C)money supply target; the federal funds target
D)federal funds target; the monetary growth rule
A)federal funds target; economic conditions
B)money supply target; economic conditions
C)money supply target; the federal funds target
D)federal funds target; the monetary growth rule
answer
A
question
If an increase in investment spending of $20 million results in a $200 million increase in equilibrium real GDP, then
A)the multiplier is 0.1.
B)the multiplier is 1.
C)the multiplier is 10.
D)the multiplier is 100.
A)the multiplier is 0.1.
B)the multiplier is 1.
C)the multiplier is 10.
D)the multiplier is 100.
answer
C
question
Monetary policy refers to the actions the Federal Reserve takes to manage
A)income tax rates and interest rates to pursue its economic objectives.
B)government spending and income tax rates to pursue its economic objectives.
C)the money supply and interest rates to pursue its economic objectives.
D)the money supply and income tax rates to pursue its economic objectives.
A)income tax rates and interest rates to pursue its economic objectives.
B)government spending and income tax rates to pursue its economic objectives.
C)the money supply and interest rates to pursue its economic objectives.
D)the money supply and income tax rates to pursue its economic objectives.
answer
C
question
Which of the following is not a reason why low-income countries might experience low economic growth?
A)The country has a low rate of saving and investment.
B)The country has a good education system.
C)The country fails to enforce a rule of law.
D)The country has endured extended periods of war.
A)The country has a low rate of saving and investment.
B)The country has a good education system.
C)The country fails to enforce a rule of law.
D)The country has endured extended periods of war.
answer
B
question
Which of the following is a macroeconomics question?
A)What factors determine the price of iPhones?
B)What determines the unemployment rate?
C)How is the production quantity of digital cameras determined?
D)What determines the wages and benefits of flight attendants?
A)What factors determine the price of iPhones?
B)What determines the unemployment rate?
C)How is the production quantity of digital cameras determined?
D)What determines the wages and benefits of flight attendants?
answer
B
question
A stock market crash which causes stock prices to fall should cause
A)a decrease in consumption spending.
B)an increase in consumption spending.
C)no change in consumption spending.
D)an increase in wealth.
A)a decrease in consumption spending.
B)an increase in consumption spending.
C)no change in consumption spending.
D)an increase in wealth.
answer
A
question
If real GDP in a closed economy is $40 billion, consumption is $20 billion, and government purchases are $10 billion, what is investment?
A)$10 billion
B)$30 billion
C)$40 billion
D)$70 billion
A)$10 billion
B)$30 billion
C)$40 billion
D)$70 billion
answer
A
question
Cutting taxes
A)will lower disposable income and raise spending.
B)will raise disposable income and raise spending.
C)will lower disposable income and lower spending.
D)will raise disposable income and lower spending.
A)will lower disposable income and raise spending.
B)will raise disposable income and raise spending.
C)will lower disposable income and lower spending.
D)will raise disposable income and lower spending.
answer
B
question
The aggregate demand curve shows the relationship between the ________ and ________.
A)nominal interest rate; quantity of real GDP demanded
B)price level; quantity of real GDP demanded
C)real interest rate: quantity of real GDP supplied
D)inflation rate; quantity of real GDP demanded
A)nominal interest rate; quantity of real GDP demanded
B)price level; quantity of real GDP demanded
C)real interest rate: quantity of real GDP supplied
D)inflation rate; quantity of real GDP demanded
answer
B
question
Open market operations refer to the buying and selling of ________ by the ________ to control the money supply.
A)stocks and bonds; Treasury Department
B)Treasury securities; Federal Reserve
C)Treasury securities; Treasury Department
D)stocks and bonds; Federal Reserve
A)stocks and bonds; Treasury Department
B)Treasury securities; Federal Reserve
C)Treasury securities; Treasury Department
D)stocks and bonds; Federal Reserve
answer
B
question
Suppose the economy is at full employment and firms become more pessimistic about the future profitability of new investment. Which of the following will happen in the short run?
A)Output will rise.
B)Unemployment will rise.
C)Prices will rise.
D)The aggregate demand curve will shift to the right.
A)Output will rise.
B)Unemployment will rise.
C)Prices will rise.
D)The aggregate demand curve will shift to the right.
answer
B
question
Workers laid off as a result of a recession suffer
A)natural unemployment.
B)seasonal unemployment.
C)structural unemployment.
D)frictional unemployment.
E)cyclical unemployment.
A)natural unemployment.
B)seasonal unemployment.
C)structural unemployment.
D)frictional unemployment.
E)cyclical unemployment.
answer
E
question
To combat a recession with discretionary fiscal policy, Congress and the president should
A)raise taxes on interest and dividends, but not on personal income.
B)decrease government spending to balance the budget.
C)lower interest rates and increase investment by increasing the money supply.
D)decrease taxes to increase consumer disposable income.
A)raise taxes on interest and dividends, but not on personal income.
B)decrease government spending to balance the budget.
C)lower interest rates and increase investment by increasing the money supply.
D)decrease taxes to increase consumer disposable income.
answer
D
question
Poorly timed discretionary policy can do more harm than good. Getting the timing right with fiscal policy is generally
A)more difficult than with monetary policy.
B)far less difficult than with monetary policy.
C)about the same difficulty as with monetary policy.
D)less difficult than with monetary policy.
A)more difficult than with monetary policy.
B)far less difficult than with monetary policy.
C)about the same difficulty as with monetary policy.
D)less difficult than with monetary policy.
answer
A
question
The only way the standard of living of the average person in a country can increase is if ________increases faster than ________.
A)population; income
B)production; population
C)population; production
D)population; GDP per capita
A)population; income
B)production; population
C)population; production
D)population; GDP per capita
answer
B
question
The curve showing the short-run relationship between ________ and the ________ is called the Phillips curve.
A)the unemployment rate; the inflation rate
B)exchange rate; real interest rate
C)nominal interest rate; real interest rate
D)price level; real GDP
A)the unemployment rate; the inflation rate
B)exchange rate; real interest rate
C)nominal interest rate; real interest rate
D)price level; real GDP
answer
A
question
The best measure of a country's standard of living is
A)GDP per labor hour.
B)total nominal GDP.
C)GDP per capita.
D)GDP per unit of capital.
A)GDP per labor hour.
B)total nominal GDP.
C)GDP per capita.
D)GDP per unit of capital.
answer
C
question
During the 1990s positive technological change in the production of chicken caused the price of chicken to fall. Holding everything else constant, how would this affect the market for pork (a substitute for chicken)?
A)The supply of pork would increase and the equilibrium price of pork would decrease.
B)The demand for pork would increase because consumers could afford to buy more chicken and pork.
C)The demand for pork would decrease and the equilibrium price of pork would increase.
D)The demand for pork would decrease and the equilibrium price of pork would decrease.
A)The supply of pork would increase and the equilibrium price of pork would decrease.
B)The demand for pork would increase because consumers could afford to buy more chicken and pork.
C)The demand for pork would decrease and the equilibrium price of pork would increase.
D)The demand for pork would decrease and the equilibrium price of pork would decrease.
answer
D
question
Not enforcing property rights in an economy will
A)not change the level of investment.
B)cause the market system to work efficiently.
C)lower the level of investment.
D)raise the level of investment.
A)not change the level of investment.
B)cause the market system to work efficiently.
C)lower the level of investment.
D)raise the level of investment.
answer
C
question
According to the quantity theory of money, inflation is caused by
A)GDP growing faster than the money supply.
B)the money supply growing faster than real GDP.
C)GDP growing at the same rate as the money supply.
D)the money supply growing slower than real GDP.
A)GDP growing faster than the money supply.
B)the money supply growing faster than real GDP.
C)GDP growing at the same rate as the money supply.
D)the money supply growing slower than real GDP.
answer
B
question
Goods that have been produced but not yet sold are referred to as
A)pre-sold goods.
B)understocks.
C)inventories.
D)capital goods.
A)pre-sold goods.
B)understocks.
C)inventories.
D)capital goods.
answer
C
question
What is an economic model?
A)It is a description of an economic issue that includes all possible related information.
B)It is a description of an economic issue based on official government information.
C)It is a simplified version of some aspect of economic life used to analyze an economic issue.
D)It is a detailed version of some aspect of economic life used to analyze an economic issue.
A)It is a description of an economic issue that includes all possible related information.
B)It is a description of an economic issue based on official government information.
C)It is a simplified version of some aspect of economic life used to analyze an economic issue.
D)It is a detailed version of some aspect of economic life used to analyze an economic issue.
answer
C
question
When you purchase a new surfboard you do so in the
A)resource market.
B)product market
C)input market
D)factor market
A)resource market.
B)product market
C)input market
D)factor market
answer
B
question
You lend $5,000 to a friend for one year at a nominal interest rate of 10%. The CPI over that yearrises from 180 to 190. What is the real rate of interest you will earn?
A)0%
B)4.4%
C)5.5%
D)5.8%
A)0%
B)4.4%
C)5.5%
D)5.8%
answer
B
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