Question 1

An increase in taxes
I. violates the Taylor rule.
II. decreases real GDP.
III. forces the Fed to change its instruments.

Accepted Answer

A)  I and II 
B)  I only 
C)  II only 
D)  I and III 
A)  I and II 
B)  I only 
C)  II only 
D)  I and III

Question 2

Suppose disposable income increases from $11 trillion to $12 trillion. At the same time, consumption expenditure increases from $4.2 trillion to__________ . Thus the MPC must equal__________

Accepted Answer

A)  $5.0 trillion; 0.50 
B)  $5.5 trillion; 0.50 
C)  $5.0 trillion; 0.80 
D)  $4.4 trillion; 0.40 
A)  $5.0 trillion; 0.50 
B)  $5.5 trillion; 0.50 
C)  $5.0 trillion; 0.80 
D)  $4.4 trillion; 0.40

Question 3

An example of a fiscal policy designed to increase real GDP is

Accepted Answer

A)  a decrease in government expenditure. 
B)  a cut in taxes. 
C)  an increase in taxes. 
D)  None of the above answers is correct. 
A)  a decrease in government expenditure. 
B)  a cut in taxes. 
C)  an increase in taxes. 
D)  None of the above answers is correct.

Question 4

$$\begin{array} { | l | l | } 
\hline \begin{array} { l } 
\text { Cheese } \
\text { (tons) }
\end{array} & \begin{array} { l } 
\text { DVDs } \
\text { (thousands } \
\text { ) }
\end{array} \
\hline 0 & 60 \
\hline 2 & 56 \
\hline 4 & 48 \
\hline 6 & 36 \
\hline 8 & 20 \
\hline 10 & 0 \
\hline
\end{array}$$
-The table above lists six points on the production possibilities frontier for cheese and DVDs. Given this information, which of the following combinations is unattainable?

Accepted Answer

A)  6 tons of cheese and 34 thousand DVDs 
B)  7 tons of cheese and 20 thousand DVDs 
C)  2 tons of cheese and 56 thousand DVDs 
D)  8 tons of cheese and 21 thousand DVDs 
A)  6 tons of cheese and 34 thousand DVDs 
B)  7 tons of cheese and 20 thousand DVDs 
C)  2 tons of cheese and 56 thousand DVDs 
D)  8 tons of cheese and 21 thousand DVDs

Question 5

Shoes are a normal good and peopleʹs incomes rise. As a result, the equilibrium price of a pair of shoes________ and the equilibrium quantity ________.

Accepted Answer

A)  rises; increases 
B)  falls; decreases 
C)  falls; increases 
D)  rises; decreases 
A)  rises; increases 
B)  falls; decreases 
C)  falls; increases 
D)  rises; decreases

Question 6

A significant decline in activity spread across the economy, lasting more than a few months is called

Accepted Answer

A)  a recession. 
B)  inflation. 
C)  an expansion. 
D)  a peak. 
A)  a recession. 
B)  inflation. 
C)  an expansion. 
D)  a peak.

Question 7

The impulse leading to business cycles in the Keynesian model is changes in

Accepted Answer

A)  the expected future price level. 
B)  open market operations. 
C)  business confidence. 
D)  the structural deficit. 
A)  the expected future price level. 
B)  open market operations. 
C)  business confidence. 
D)  the structural deficit.

Question 8

Country X devoted 70 percent of its resources to consumption, while Country Y devoted 80 percent to consumption. Other things being equal, you can predict that

Accepted Answer

A)  Country Xʹs economy will grow faster than Country Yʹs. 
B)  Country Yʹs economy will grow faster than Country Xʹs. 
C)  Country Xʹs opportunity cost of economic growth is lower than Country Yʹs. 
D)  Country Yʹs rate of capital accumulation is higher than Country Xʹs 
A)  Country Xʹs economy will grow faster than Country Yʹs. 
B)  Country Yʹs economy will grow faster than Country Xʹs. 
C)  Country Xʹs opportunity cost of economic growth is lower than Country Yʹs. 
D)  Country Yʹs rate of capital accumulation is higher than Country Xʹs

Question 9

Shoes are a normal good and peopleʹs incomes rise. Simultaneously the number of companies making shoes decreases. As a result, the equilibrium price of a pair of shoes________and the equilibrium quantity ________.

Accepted Answer

A)  definitely rises; might increase, decrease, or not change 
B)  might rise, fall, or not change; might increase, decrease, or not change 
C)  definitely rises; definitely increases 
D)  None of the above answers is correct. 
A)  definitely rises; might increase, decrease, or not change 
B)  might rise, fall, or not change; might increase, decrease, or not change 
C)  definitely rises; definitely increases 
D)  None of the above answers is correct.

Question 10

Classical economists believe that the economy

Accepted Answer

A)  requires activist government intervention to reach its potential level of GDP. 
B)  is persistently below its potential level of GDP. 
C)  is self-regulating and does not require government intervention. 
D)  can be affected by only monetary policy. 
A)  requires activist government intervention to reach its potential level of GDP. 
B)  is persistently below its potential level of GDP. 
C)  is self-regulating and does not require government intervention. 
D)  can be affected by only monetary policy.

Question 11

A recessionary gap occurs when

Accepted Answer

A)  the economy is at its long-run equilibrium. 
B)  the short-run aggregate supply curve shifts rightward. 
C)  government interferes with the economy. 
D)  real GDP is less than potential GDP. 
A)  the economy is at its long-run equilibrium. 
B)  the short-run aggregate supply curve shifts rightward. 
C)  government interferes with the economy. 
D)  real GDP is less than potential GDP.

Question 12

If pizza is a normal good, then an increase in peopleʹs incomes shifts the _________curve________ .

Accepted Answer

A)  supply; rightward 
B)  demand; leftward 
C)  supply; leftward 
D)  demand; rightward 
A)  supply; rightward 
B)  demand; leftward 
C)  supply; leftward 
D)  demand; rightward

Question 13

The difference between nominal GDP and real GDP is that real GDP eliminates the effects from

Accepted Answer

A)  inflation. 
B)  changes in productivity. 
C)  depreciation. 
D)  the unemployment rate. 
A)  inflation. 
B)  changes in productivity. 
C)  depreciation. 
D)  the unemployment rate.

Question 14

The Keynesian aggregate expenditure model best describes the economy in the __________run when prices are __________ .

Accepted Answer

A)  long; variable 
B)  short; fixed 
C)  long; fixed 
D)  short; variable 
A)  long; variable 
B)  short; fixed 
C)  long; fixed 
D)  short; variable

Question 15

The ________growth theory assumes that population growth is not driven by real GDP per person and the________ growth theory predicts that differences in the economic growth rate can last indefinitely.

Accepted Answer

A)  neoclassical; new 
B)  neoclassical; neoclassical 
C)  new; classical 
D)  classical; neoclassical 
A)  neoclassical; new 
B)  neoclassical; neoclassical 
C)  new; classical 
D)  classical; neoclassical

Question 16

The velocity of circulation is

Accepted Answer

A)  the same as the aggregate demand curve. 
B)  equal to the price level multiplied by real GDP. 
C)  increased when the Fed lowers the required reserve ratio. 
D)  the average number of times a dollar bill is used in a year to buy the goods and services in GDP. 
A)  the same as the aggregate demand curve. 
B)  equal to the price level multiplied by real GDP. 
C)  increased when the Fed lowers the required reserve ratio. 
D)  the average number of times a dollar bill is used in a year to buy the goods and services in GDP.

Question 17

The level of potential GDP

Accepted Answer

A)  determines the location of the long-run aggregate supply curve. 
B)  rises and falls with the business cycle. 
C)  increases when the inflation rate rises. 
D)  changes when cyclical unemployment changes. 
A)  determines the location of the long-run aggregate supply curve. 
B)  rises and falls with the business cycle. 
C)  increases when the inflation rate rises. 
D)  changes when cyclical unemployment changes.

Question 18

Purchasing new capital________ .

Accepted Answer

A)  shifts the aggregate production function downward 
B)  creates an upward movement along the aggregate production function 
C)  shifts the aggregate production function upward 
D)  creates a downward movement along the aggregate production function 
A)  shifts the aggregate production function downward 
B)  creates an upward movement along the aggregate production function 
C)  shifts the aggregate production function upward 
D)  creates a downward movement along the aggregate production function

Question 19

In the foreign exchange market, if the supply of dollars ________and simultaneously the demand for dollars ________, then the exchange rate definitely________ .

Accepted Answer

A)  increases; decreases; depreciates 
B)  decreases; increases; depreciates 
C)  increases; increases; depreciates 
D)  decreases; decreases; appreciates 
A)  increases; decreases; depreciates 
B)  decreases; increases; depreciates 
C)  increases; increases; depreciates 
D)  decreases; decreases; appreciates

Question 20

If the economy is at the natural unemployment rate,

Accepted Answer

A)  real GDP = potential GDP. 
B)  real GDP  potential GDP. 
D)  All of the above can occur when the economy is at the natural unemployment rate. 
A)  real GDP = potential GDP. 
B)  real GDP  potential GDP. 
D)  All of the above can occur when the economy is at the natural unemployment rate.

An increase in taxes I. violates the Taylor rule. II. decreases real GDP. III. forces the Fed to change its instruments.

Suppose disposable income increases from $11 trillion to $12 trillion. At the same time, consumption expenditure increases from $4.2 trillion to . Thus the MPC must equal

An example of a fiscal policy designed to increase real GDP is

Cheese (tons) DVDs (thousands ) 0 60 2 56 4 48 6 36 8 20 10 0 -The table above lists six points on the production possibilities frontier for cheese and DVDs. Given this information, which of the following combinations is unattainable?

Shoes are a normal good and peopleʹs incomes rise. As a result, the equilibrium price of a pair of shoes and the equilibrium quantity .

A significant decline in activity spread across the economy, lasting more than a few months is called

The impulse leading to business cycles in the Keynesian model is changes in

Country X devoted 70 percent of its resources to consumption, while Country Y devoted 80 percent to consumption. Other things being equal, you can predict that

Shoes are a normal good and peopleʹs incomes rise. Simultaneously the number of companies making shoes decreases. As a result, the equilibrium price of a pair of shoesand the equilibrium quantity .

Classical economists believe that the economy

A recessionary gap occurs when

If pizza is a normal good, then an increase in peopleʹs incomes shifts the _curve .

The difference between nominal GDP and real GDP is that real GDP eliminates the effects from

The Keynesian aggregate expenditure model best describes the economy in the run when prices are .

The growth theory assumes that population growth is not driven by real GDP per person and the growth theory predicts that differences in the economic growth rate can last indefinitely.

The velocity of circulation is

The level of potential GDP

Purchasing new capital________ .

In the foreign exchange market, if the supply of dollars and simultaneously the demand for dollars , then the exchange rate definitely .

If the economy is at the natural unemployment rate,

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Review

An increase in taxes I. violates the Taylor rule. II. decreases real GDP. III. forces the Fed to change its instruments.

Suppose disposable income increases from $11 trillion to $12 trillion. At the same time, consumption expenditure increases from $4.2 trillion to__________ . Thus the MPC must equal__________

An example of a fiscal policy designed to increase real GDP is

Cheese (tons) DVDs (thousands ) 0 60 2 56 4 48 6 36 8 20 10 0 -The table above lists six points on the production possibilities frontier for cheese and DVDs. Given this information, which of the following combinations is unattainable?

Shoes are a normal good and peopleʹs incomes rise. As a result, the equilibrium price of a pair of shoes________ and the equilibrium quantity ________.

A significant decline in activity spread across the economy, lasting more than a few months is called

The impulse leading to business cycles in the Keynesian model is changes in

Country X devoted 70 percent of its resources to consumption, while Country Y devoted 80 percent to consumption. Other things being equal, you can predict that

Shoes are a normal good and peopleʹs incomes rise. Simultaneously the number of companies making shoes decreases. As a result, the equilibrium price of a pair of shoes________and the equilibrium quantity ________.

Classical economists believe that the economy

A recessionary gap occurs when

If pizza is a normal good, then an increase in peopleʹs incomes shifts the _________curve________ .

The difference between nominal GDP and real GDP is that real GDP eliminates the effects from

The Keynesian aggregate expenditure model best describes the economy in the __________run when prices are __________ .

The ________growth theory assumes that population growth is not driven by real GDP per person and the________ growth theory predicts that differences in the economic growth rate can last indefinitely.

The velocity of circulation is

The level of potential GDP

Purchasing new capital________ .

In the foreign exchange market, if the supply of dollars ________and simultaneously the demand for dollars ________, then the exchange rate definitely________ .

If the economy is at the natural unemployment rate,

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Suppose disposable income increases from $11 trillion to $12 trillion. At the same time, consumption expenditure increases from $4.2 trillion to . Thus the MPC must equal

Shoes are a normal good and peopleʹs incomes rise. As a result, the equilibrium price of a pair of shoes and the equilibrium quantity .

Shoes are a normal good and peopleʹs incomes rise. Simultaneously the number of companies making shoes decreases. As a result, the equilibrium price of a pair of shoesand the equilibrium quantity .

If pizza is a normal good, then an increase in peopleʹs incomes shifts the _curve .

The Keynesian aggregate expenditure model best describes the economy in the run when prices are .

The growth theory assumes that population growth is not driven by real GDP per person and the growth theory predicts that differences in the economic growth rate can last indefinitely.

In the foreign exchange market, if the supply of dollars and simultaneously the demand for dollars , then the exchange rate definitely .