Font size
WorksheetsECO 121
Total questions: 108
Worksheet time: 54mins
Which type(s) of economies interact with other economies?
only closed economies
only open economies
closed economies and open economies
neither closed nor open economies
The increase in international trade in the United States is partly due to
(i) improvements in transportation.
(ii) advances in telecommunications.
(iii) increased trade of goods with a high value per pound.
All of (i), (ii), and (iii) are correct.
Paine Pharmaceuticals produces medicines in the U.S. Its overseas sales
are an export of the U.S. and increase U.S. net exports.
are an export of the U.S. and decrease U.S. net exports.
are an import of the U.S. and increase U.S. net exports.
are an import of the U.S. and decrease U.S. net exports
If Saudi Arabia had positive net exports last year, then it
sold more abroad than it purchased abroad and had a trade surplus.
sold more abroad than it purchased abroad and had a trade deficit.
bought more abroad than it sold abroad and had a trade surplus.
bought more abroad than it sold abroad and had a trade deficit.
If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate
increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases.
increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.
decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow decreases.
decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow increases.
Refer to Figure 32-6. Which of the following shifts show the effects of an import quota?
(i) shifting the middle supply curve in panel c to the one to its left.
(ii) shifting the demand curve from the right to the left in panel c.
(iii) shifting the demand curve from the left to the right in panel c.
None of (i), (ii), and (iii) is correct.
Which of the following will decrease U.S. net capital outflow?
(i) capital flight from the United States
(ii) the government budget deficit increases
(iii) the U.S. imposes import quotas
None of (i), (ii), and (iii) is correct.
Suppose the economy is in long-run equilibrium. If there is a tax cut at the same time that major new sources of oil are discovered in the country, then in the short-run
real GDP will rise and the price level might rise, fall, or stay the same.
real GDP will fall and the price level might rise, fall, or stay the same.
the price level will rise, and real GDP might rise, fall, or stay the same.
the price level will fall, and real GDP might rise, fall, or stay the same.
The model of short-run economic fluctuations focuses on the price level and
(i) real GDP.
(ii) economic growth.
(iii) the neutrality of money.
None of (i), (ii), and (iii) is correct.
The classical dichotomy refers to the separation of
variables that move with the business cycle and variables that do not.
changes in money and changes in government expenditures.
decisions made by the public and decisions made by the government.
real and nominal variables.
Which of the following shifts both the short-run and long-run aggregate supply right?
(i) an increase in the actual price level
(ii) an increase in the expected price level
(iii) an increase in the capital stock
None of (i), (ii), and (iii) is correct.
According to liquidity preference theory, equilibrium in the money market is achieved by adjustments in
the price level.
the interest rate.
the exchange rate.
real wealth.
Suppose the MPC is 0.75. There are no crowding out or investment accelerator effects. If the government increases its expenditures by $200 billion, then by how much does aggregate demand shift to the right? If the government decreases taxes by $200 billion, then by how far does aggregate demand shift to the right?
$800 billion and $800 billion
$800 billion and $600 billion
$600 billion and $600 billion
$600 billion and $450 billion
In the long run, fiscal policy primarily affects
aggregate demand. In the short run, it affects primarily aggregate supply.
aggregate supply. In the short run, it affects primarily saving, investment, and growth.
saving, investment, and growth. In the short run, it affects primarily aggregate demand.
saving, investment, and growth. In the short run, it affects primarily aggregate supply.
A reduction in U.S net exports would shift U.S. aggregate demand
rightward. In an attempt to stabilize the economy, the government could raise taxes.
rightward. In an attempt to stabilize the economy, the government could cut taxes.
leftward. In an attempt to stabilize the economy, the government could raise taxes.
leftward. In an attempt to stabilize the economy, the government could cut taxes.
Refer to Figure 3-3. If Enid must work 0.25 hour to produce each taco, then her production possibilities frontier is based on how many hours of work?
40 hours
100 hours
400 hours
1600 hours
The opportunity cost of an item is
the number of hours that one must work in order to buy one unit of the item.
what you give up to get that item.
always less than the dollar value of the item.
always greater than the cost of producing the item.
Refer to Figure 3-4. The opportunity cost of 1 novel for Jordan is
1/3 poem.
3 poems.
4 poems.
12 poems.
Refer to Table 3-9. Barb has an absolute advantage in
both setting up and testing computers and a comparative advantage in setting up computers.
both setting up and testing computers and a comparative advantage in testing computers.
neither setting up nor testing computers and a comparative advantage in setting up computers.
neither setting up nor testing computers and a comparative advantage in testing computers.
Refer to Table 3-11. Varick has a comparative advantage in the production of
wheat.
cloth.
both goods.
neither good.
The value of the housing services provided by the economy's owner-occupied houses is
included in GDP, and the estimated rental values of the houses are used to place a value on these housing services.
included in GDP, and the actual mortgage payments made on the houses are used to estimate the value of these rental services.
excluded from GDP since these services are not sold in any market.
excluded from GDP since the value of these housing services cannot be estimated with any degree of precision.
Def01 stands for GDP deflator in year 1. Def02 stands for GDP deflator in year 2. The inflation rate in year 2 equals
100*(Def02-Def01)/Def01.
100*(Def02-Def01)/Def02.
100*(Def01-Def02)/Def01.
100*(Def01-Def02)/Def02.
When economists talk about growth in the economy, they measure that growth as the
When economists talk about growth in the economy, they measure that growth as the
percentage change in nominal GDP from one period to another.
absolute change in real GDP from one period to another.
percentage change in real GDP from one period to another.
Which of the following items is counted as part of government purchases?
(i) The federal government pays the salary of a Navy officer.
(ii) The state of Nevada pays a private firm to repair a Nevada state highway.
(iii) The city of Las Vegas, Nevada pays a private firm to collect garbage in that city.
All (i), (ii), and (iii) are correct.
In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $1.7 million. A price index for nonresidential construction was 24 in 1949, 108 in 1987, and 126.5 in 2000. According to these numbers, the hospital cost about
$2.1 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars.
$2.1 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.
$2.6 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars.
$2.6 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.
The real interest rate tells you
how fast the number of dollars in your bank account rises over time.
how fast the purchasing power of your bank account rises over time.
the number of dollars in your bank account today.
the purchasing power of your bank account today.
The CPI is more commonly used as a gauge of inflation than the GDP deflator is because
the CPI is easier to measure.
the CPI is calculated more often than the GDP deflator is.
the CPI better reflects the goods and services bought by consumers.
the GDP deflator cannot be used to gauge inflation.
Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year. In 2002, the basket’s cost was $50; in 2004, the basket’s cost was $52; and in 2006, the basket’s cost was $54.60. The value of the CPI in 2004 was
96.2.
102.0.
104.0.
152.0.
Scenario 25-1.
An economy’s production form takes the form Y = AF(L, K, H, N)
Refer to Scenario 25-1. If the production function has the constant-returns-to-scale property, and output is zero whenever some input is zero, then it is possible that the specific form of the production function is
Y = 4L + 2K + 3H + N
Y = (L + K + H + N)/4
Y =2(LKHN)^0.25
Y = 4(L^3 × K^4 × H × N)^0.5
Given that a country’s real output has increased, in which of the following cases can we be sure that its productivity also has increased?
(i) The total number of hours worked rose.
(ii) The total number of hours worked stayed the same.
(iii) The total number of hours worked fell.
Both (ii) and (iii) are correct.
Over the past 100 years, U.S. real GDP per person has doubled about every 35 years. If, in the next 100 years, it doubles every 25 years, then a century from now U.S. real GDP per person will be
4 times higher than it is now.
8 times higher than it is now.
12 times higher than it is now.
16 times higher than it is now.
You put money into an account and earn an after-tax real interest rate of 2.5 percent. If the nominal interest rate on the account is 8 percent and the inflation rate is 2 percent, then what is the tax rate?
28.00 percent
36.25 percent
43.75 percent
67.50 percent
Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations. Other things the same, these actions
raise both U.S. net exports and U.S. net capital outflows.
raise U.S. net exports and lower U.S. net capital outflows.
lower both U.S. net exports and U.S. net capital outflows.
lower U.S. net exports and raise U.S. net capital outflows.
A Japanese firm buys lumber from the United States and pays for it with yen. Other things the same, Japanese
net exports increase, and U.S. net capital outflow increases.
net exports increase, and U.S. net capital outflow decreases.
net exports decrease, and U.S. net capital outflow increases.
net exports decrease, and U.S. net capital outflow decreases.
Paine Pharmaceuticals produces medicines in the U.S. Its overseas sales
are an export of the U.S. and increase U.S. net exports.
are an export of the U.S. and decrease U.S. net exports.
are an import of the U.S. and increase U.S. net exports.
are an import of the U.S. and decrease U.S. net exports
.
Suppose that more British decide to vacation in the U.S. and that the British purchase more U.S. Treasury bonds. Ignoring how payments are made for these purchases,
the first action by itself raises U.S. net exports, the second action by itself raises U.S. net capital outflow.
the first action by itself raises U.S. net exports, the second action by itself lowers U.S. net capital outflow.
the first action by itself lowers U.S. net exports, the second action by itself raises U.S. net capital outflow.
the first action by itself lowers U.S. net exports, the second action by itself lowers U.S. net capital outflow.
A Swiss company sells chocolates to a retailer in the United States. These sales by themselves
decrease U.S. net export and Swiss net exports.
decrease U.S. net exports and increase Swiss net exports.
increase U.S. and Swiss net exports.
increase U.S. net exports and decrease Swiss net exports.
Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to
rise because net capital outflow and domestic investment rise.
rise because national saving rises.
fall because net capital outflow and domestic investment rise.
fall because national saving falls.
If a country institutes policies that lead domestic firms to desire more capital stock
net capital outflows rise and the real exchange rate rises.
net capital outflows rise and the real exchange rate falls.
net capital outflows fall and the real exchange rate rises.
net capital outflows and the real exchange rate falls.
If the demand for dollars in the market for foreign-currency exchange shifts left, then the exchange rate
rises and the quantity of dollars exchanged rises.
rises and the quantity of dollars exchanged does not change.
falls and the quantity of dollars exchanged falls.
falls and the quantity of dollars exchanged does not change.
The aggregate quantity of goods and service demanded changes as the price level falls because
real wealth rises, interest rates rise, and the dollar appreciates.
real wealth rises, interest rates fall, and the dollar depreciates.
real wealth falls, interest rates rise, and the dollar appreciates.
real wealth falls, interest rates fall, and the dollar depreciates.
Other things the same, automatic stabilizers tend to
raise expenditures during expansions and recessions.
lower expenditures during expansions and recessions.
raise expenditures during recessions and lower expenditures during expansions.
raise expenditures during expansions and lower expenditures during recessions.
According to the quantity theory of money, a 2 percent increase in the money supply
causes the price level to fall by 2 percent.
leaves the price level unchanged.
causes the price level to rise by less than 2 percent.
causes the price level to rise by 2 percent.
One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports.
its trade surplus fell.
its trade surplus rose.
its trade deficit fell.
its trade deficit rose
Suppose that the nominal exchange rate is 120 yen per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Japan is 50,000 yen. Suppose that these values change to 100 yen per dollar, $600, and 70,000 yen. Then the real exchange rate would
appreciate which by itself would make U.S. net exports fall.
appreciate which by itself would make U.S. net exports rise.
depreciate which by itself would make U.S. net exports fall.
depreciate which by itself would make U.S. net exports rise.
Refer to this diagram to answer the questions below.
Refer to Figure 32-3. National saving is represented by the
demand curve in panel a.
demand curve in panel c.
supply curve in panel a.
supply curve in panel c.
When Mexico suffered from capital flight in 1994, Mexico's net capital outflow
and net exports decreased.
and net exports increased.
increased while net exports decreased.
decreased while net exports increased.
Suppose the economy is in long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then in the short run,
real GDP will rise and the price level might rise, fall, or stay the same. In the long-run, real GDP will rise and the price level might rise, fall, or stay the same.
the price level will fall, and real GDP might rise, fall, or stay the same. In the long-run, real GDP and the price level will be unaffected.
the price level will rise, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall.
the price level will fall, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall.
Other things the same, if the price level falls, people
increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases.
increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.
decrease foreign bond purchases, so the supply of dollars in market for foreign-currency exchange increases.
decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.
According to the theory of liquidity preference,
(i) if the interest rate is below the equilibrium level, then the quantity of money people want to hold is less than the quantity of money the Fed has created.
(ii) if the interest rate is above the equilibrium level, then the quantity of money people want to hold is greater than the quantity of money the Fed has created.
(iii) the demand for money is represented by a downward-sloping line on a supply-and-demand graph.
All of (i), (ii), and (iii) are correct.
Permanent tax cuts shift the AD curve
farther to the right than do temporary tax cuts.
not as far to the right as do temporary tax cuts.
farther to the left than do temporary tax cuts.
not as far to the left as do temporary tax cuts.
Suppose there were a large increase in net exports. If the Fed wanted to stabilize output, it could
buy bonds to increase the money supply.
buy bonds to decrease the money supply.
sell bonds to increase the money supply.
sell bonds to decrease the money supply.
According to the liquidity preference theory, which of the following events would shift money demand to the left?
an increase in the price level
a decrease in the price level
an increase in the interest rate
a decrease in the interest rate
Refer to Table 3-6. Assume that Hilda and Carlos each has 90 hours available. Originally, each person divided their time equally between the production of quilts and dresses. Now, each person spends all their time producing the good in which they have a comparative advantage. As a result, the total output of dresses increased by
3.5.
4.5.
5.5.
9.0.
Refer to Table 3-7. Korea should specialize in the production of
cars and import airplanes.
airplanes and import cars.
both goods and import neither good.
neither good and import both goods.
Refer to Table 3-2. Aruba’s opportunity cost of one cooler is
0.4 radio and Iceland’s opportunity cost of one cooler is 0.25 radio.
0.4 radio and Iceland’s opportunity cost of one cooler is 4 radios.
2.5 radios and Iceland’s opportunity cost of one cooler is 0.25 radio.
2.5 radios and Iceland’s opportunity cost of one cooler is 4 radios.
In the economy of Wrexington in 2008, consumption was 60% of GDP, government purchases were $212, imports were $67 and 67% of the value of exports, investment was one-half of the value of consumption. What was Wrexington’s GDP in 2008?
$1450
$1790
$2450
$2790
Household spending on education is counted in which component or subcomponent of GDP?
consumption of durable goods
consumption of nondurable goods
consumption of services
investment
The consumption component of GDP includes spending on
durable goods and nondurable goods, but not spending on services.
durable goods and services, but not spending on nondurable goods.
nondurable goods and services, but not spending on durable goods.
durable goods, nondurable goods, and services.
Gross domestic product is defined as
(i) the quantity of all final goods and services demanded within a country in a given period of time.
(ii) the quantity of all final goods and services supplied within a country in a given period of time.
(iii) the market value of all final goods and services produced within a country in a given period of time.
Both (i) and (ii) are correct.
The consumer price index was 225 in 2006 and 236 in 2007. The nominal interest rate during this period was 6.5 percent. What was the real interest rate during this period?
1.6 percent
4.9 percent
6.82 percent
11.4 percent
The GDP deflator reflects the
level of prices in the base year relative to the current level of prices.
current level of prices relative to the level of prices in the base year.
level of real output in the base year relative to the current level of real output.
current level of real output relative to the level of real output in the base year.
Table 24-1
The table below pertains to Pieway, an economy in which the typical consumer’s basket consists of 10 bushels of peaches and 15 bushels of pecans.
Refer to Table 24-1. If 2005 is the base year, then the CPI for 2005 was
83.3.
100.0.
120.0.
200.0.
The price of domestically produced DVD players increases dramatically, causing a 1 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by
(i) more than 1 percent.
(ii) less than 1 percent.
(iii) 1 percent.
None of (i), (ii), and (iii) is correct; this particular price increase will not affect the GDP deflator.
Suppose that real GDP grew more in Country A than in Country B last year.
(i) Country A must have a higher standard of living than country B.
(ii) Country A's productivity must have grown faster than country B's.
Both (i) and (ii) are correct.
None of (i) and (ii) is correct.
Which of the following is correct?
Although levels of real GDP per person vary substantially from country to country, the growth rate of real GDP per person is similar across countries.
Productivity is not closely linked to government policies.
The level of real GDP per person is a good gauge of economic prosperity, and the growth rate of real GDP per person is a good gauge of economic progress.
Productivity may be measured by the growth rate of real GDP per person.
Dilbert’s Incorporated produced 6,000,000 units of software in 2005. At the start of 2006 the pointy-haired boss raised employment from 10,000 total annual hours to 14,000 annual hours and production was 7,000,000 units. Based on these numbers what happened to productivity?
It fell by about 16.7%.
It stayed the same.
It rose by about 16.7%.
It rose by about 40%.
Human capital is the
knowledge and skills that workers acquire through education, training, and experience.
stock of equipment and structures that is used to produce goods and services.
total number of hours worked in an economy.
same thing as technological knowledge.
A change in the tax laws that increases the supply of loanable funds will have a bigger effect on investment when
the demand for loanable funds is more elastic and the supply of loanable funds is more inelastic.
the demand for loanable funds is more inelastic and the supply of loanable funds is more elastic.
both the demand for and supply of loanable funds are more elastic.
both the demand for and supply of loanable funds are more inelastic.
World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs. We would expect that this would
raise the demand for existing shares of the stock, causing the price to rise.
decrease the demand for existing shares of the stock, causing the price to fall.
raise the supply of the existing shares of stock, causing the price to rise.
raise the supply of the existing shares of stock, causing the price to fall.
Which of the following is not always correct for a closed economy?
National saving equals private saving plus public saving.
Net exports equal zero.
Real GDP measures both income and expenditures.
Private saving equals investment.
A person who is counted as unemployed by the Bureau of Labor Statistics
(i) is also in the labor force.
(ii) must have recently looked for work or be on temporary layoff.
(iii) be at least 16 years old.
All of (i), (ii), and (iii) are correct.
The efficiency-wage theory of worker health is
more relevant for explaining unemployment in less developed countries than in rich countries.
more relevant for explaining unemployment in rich countries than in less developed countries.
equally relevant for explaining unemployment in less developed countries and in rich countries.
not relevant for explaining unemployment.
When a union raises the wage above the equilibrium level, it
reduces both the quantity of labor supplied and the quantity of labor demanded, resulting in unemployment.
reduces the quantity of labor supplied and raises the quantity of labor demanded, resulting in unemployment.
raises the quantity of labor supplied and reduces the quantity of labor demanded, resulting in unemployment.
raises both the quantity of labor supplied and the quantity of labor demanded, resulting in unemployment.
Unemployment insurance
(i) reduces the hardship of unemployment, but it also increases the amount of unemployment.
(ii) reduces the incentive for the unemployed to find and take new jobs.
(iii) causes workers to be less likely to seek guarantees of job security when they negotiate with employers over the terms of employment.
All of (i), (ii), and (iii) are correct.
If the public decides to hold more currency and fewer deposits in banks, bank reserves
decrease and the money supply eventually decreases.
decrease but the money supply does not change.
increase and the money supply eventually increases.
increase but the money supply does not change.
According to monetary neutrality and the Fisher effect, an increase in the money supply growth rate eventually increases
inflation, nominal interest rates, and real interest rates.
inflation and nominal interest rates, but does not change real interest rates.
inflation and real interest rates, but does not change nominal interest rates.
neither inflation, nominal interest rates, nor real interest rates.
Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then
the value of money is lower than its equilibrium level.
the price level is higher than its equilibrium level.
the quantity of money demanded is greater than the quantity of money supplied.
the quantity of money supplied is greater than the quantity of money demanded.
When the money market is drawn with the value of money on the vertical axis, a decrease in the price level causes a
movement to the right along the money demand curve.
movement to the left along the money demand curve.
shift to the right of the money supply curve.
shift to the left of the money supply curve.
Assume that Zimbabwe and Portugal each has 180 machine minutes available. If each country divides its time equally between the production of toothbrushes and hairbrushes, then total production is
24 toothbrushes and 12 hairbrushes
48 toothbrushes and 24 hairbrushes
96 toothbrushes and 48 hairbrushes
720 toothbrushes and 1440 hairbrushes.
Which of the following is not correct?
Economists are generally united in their support of free trade.
The conclusions of Adam Smith and David Ricardo on the gains from trade have held up well over time.
David Ricardo argued that Britain should not restrict imports of grain.
Economists’ opposition to trade restrictions is still based largely on the principle of absolute advantage.
The CPI was 120 in 2000 and 132 in 2001. Dorgan borrowed money in 2000 and repaid the loan in 2001. If the nominal interest rate on the loan was 12 percent, then the real interest rate was
2 percent.
10 percent.
12 percent.
22 percent.
The consumer price index is used to
convert nominal GDP into real GDP.
turn dollar figures into meaningful measures of purchasing power.
characterize the types of goods and services that consumers purchase.
measure the quantity of goods and services that the economy produces.
People who buy newly issued stock in a corporation such as Crate and Barrel provide
debt finance and so become part owners of Crate and Barrel.
debt finance and so become creditors of Crate and Barrel.
equity finance and so become part owners of Crate and Barrel.
equity finance and so become creditors of Crate and Barrel.
For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2 trillion and the government runs a deficit of $1 trillion. What are private saving and national saving?
$4 trillion and $1 trillion, respectively
$4 trillion and $-1 trillion, respectively
$2 trillion and $1 trillion, respectively
$2 trillion and $-1 trillion, respectively
Which of the following does not help reduce frictional unemployment?
(i) government-run employment agencies
(ii) public training programs
(iii) unemployment insurance
All of (i), (ii), and (iii) help reduce frictional unemployment.
U.S. Department of Labor data show that minimum-wage workers tend to be
young and less educated.
young and more educated.
old and less educated.
old and more educated.
The amount of unemployment that an economy normally experiences is called the
average rate of unemployment.
natural rate of unemployment.
cyclical rate of unemployment.
typical rate of unemployment.
During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits
Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply increase.
Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease.
The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease.
The decision to hold relatively more currency would make the money supply decrease. The decision to hold relatively more excess reserves would make the money supply increase.
If the public decides to hold more currency and fewer deposits in banks, bank reserves
decrease and the money supply eventually decreases.
decrease but the money supply does not change.
increase and the money supply eventually increases.
increase but the money supply does not change.
In a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits, then
M1 would increase.
M1 would decrease.
M1 would not change.
M1 might rise or fall.
Which of the following functions of money is also a common function of most other financial assets?
(i) a unit of account
(ii) a store of value
(iii) medium of exchange
None of (i), (ii), and (iii) is correct.
Initially, the economy is in long-run equilibrium. The aggregate demand curve then shifts $80 billion to the left. The government wants to change spending to offset this decrease in demand. The MPC is 0.75. Suppose the effect on aggregate demand of a tax change is 3/4 as strong as the effect of a change in government expenditure. There is no crowding out and no accelerator effect. What should the government do if it wants to offset the decrease in real GDP?
Raise both taxes and expenditures by $80 billion dollars.
Raise both taxes and expenditures by $10 billion dollars.
Reduce both taxes and expenditures by $80 billion dollars.
Reduce both taxes and expenditures by $10 billion dollars.
All else equal, if there are diminishing returns, then which of the following is true if a country increases its capital by one unit?
Output will rise by more than it did when the previous unit was added.
Output will rise but by less than it did when the previous unit was added.
Output will fall by more than it did when the previous unit was added.
Output will fall but by less than it did when the previous unit was added.
When a country saves a larger portion of its GDP than it did before, it will have
more capital and higher productivity.
more capital and lower productivity.
less capital and higher productivity.
less capital and lower productivity.
Which of the following is correct?
In the national income accounts, investment and private saving refer to the same thing.
In a closed economy if national saving is greater than zero, then everyone must be saving.
The financial system channels funds from savers to borrowers.
People whose consumption exceeds their income are savers.
Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2,500 consumption equals 7,500 and government purchases equal 2,000. What are private saving, public saving, and national saving?
(i) 1,500, 1,000, and 500, respectively
(ii) 1,000, 500, and 1,500, respectively
(iii) 500, 1,500, and 1,000, respectively
None of (i), (ii), and (iii) is correct.
In one year, you meet 52 people who are each unemployed for one week and eight people who are each unemployed for the whole year. Normally there are 52 weeks in a year. What percentage of the unemployment spells you encountered was short-term, and what percentage of the unemployment you encountered in a given week was long-term?
52 percent and 13.3 percent
52 percent and 88.9 percent
86.7 percent and 13.3 percent
86.7 percent and 88.9 percent
Collective bargaining refers to
the process by which the government sets exemptions from the minimum wage law.
setting the same wage for all employees to prevent conflict among workers.
firms colluding to set the wages of employees in order to keep them below equilibrium.
the process by which unions and firms agree on the terms of employment.
During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits
Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply increase.
Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease.
The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease.
The decision to hold relatively more currency would make the money supply decrease. The decision to hold relatively more excess reserves would make the money supply increase.
The measure of the money stock called M1 includes
wealth held by people in their checking accounts.
wealth held by people in their savings accounts.
wealth held by people in money market mutual funds.
everything that is included in M2 plus some additional items.
If the reserve ratio for all banks is 5 percent, then $2,500 of additional reserves can create up to
$62,500 of new money.
$50,000 of new money.
$45,600 of new money.
$37,500 of new money.
High and unexpected inflation has a greater cost
for those who save than for those who borrow.
for those who hold a little money than for those who hold a lot of money.
for those whose wages increase by as much as inflation, than those who are paid a fixed nominal wage.
for savers in low income tax brackets than for savers in high income tax brackets.
If a dollar currently purchases 10 pesos and someone forecasts that in a year it will be 11 pesos, then the forecast is given in
real terms and implies the dollar will appreciate.
real terms and implies the dollar will depreciate.
nominal terms and implies the dollar will appreciate.
nominal terms and implies the dollar will depreciate.
Suppose that the nominal exchange rate is 120 yen per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Japan is 50,000 yen. Suppose that these values change to 100 yen per dollar, $600, and 70,000 yen. Then the real exchange rate would
appreciate which by itself would make U.S. net exports fall.
appreciate which by itself would make U.S. net exports rise.
depreciate which by itself would make U.S. net exports fall.
depreciate which by itself would make U.S. net exports rise.
depreciate which by itself would make U.S. net exports rise.
demand curve in panel a.
demand curve in panel c.
supply curve in panel a.
supply curve in panel c.
When Mexico suffered from capital flight in 1994, Mexico's net capital outflow
and net exports decreased.
and net exports increased.
increased while net exports decreased.
decreased while net exports increased.
Suppose there were a large increase in net exports. If the Fed wanted to stabilize output, it could
buy bonds to increase the money supply.
buy bonds to decrease the money supply.
sell bonds to increase the money supply.
sell bonds to decrease the money supply.
