Question 1

Inflation is a very minor problem for lenders because it is relatively easy to estimate future rates of inflation.

Accepted Answer

A) True 
 B)False

Question 2

The reduction of structural unemployment in the United States' economy may require

Accepted Answer

A)  an increase in the minimum wage. 
B)  a reduction in government spending. 
C)  an decrease in interest rates. 
D)  increased spending on worker retraining. 
A)  an increase in the minimum wage. 
B)  a reduction in government spending. 
C)  an decrease in interest rates. 
D)  increased spending on worker retraining.

Question 3

If you as a lender want an increase in purchasing power of 4 percent from making a loan and you set the nominal interest rate at 9 percent, then your

Accepted Answer

A)  real rate of interest is 13 percent. 
B)  expected rate of inflation is 5 percent. 
C)  expected rate of inflation is 13 percent. 
D)  real rate of interest is 36 percent. 
A)  real rate of interest is 13 percent. 
B)  expected rate of inflation is 5 percent. 
C)  expected rate of inflation is 13 percent. 
D)  real rate of interest is 36 percent.

Question 4

The term frictional unemployment refers to persons who are out of work

Accepted Answer

A)  due to technological change. 
B)  due to strikes or lockouts. 
C)  and have given up looking for work. 
D)  because they are between jobs. 
A)  due to technological change. 
B)  due to strikes or lockouts. 
C)  and have given up looking for work. 
D)  because they are between jobs.

Question 5

Potential GDP is an estimate of the economy's ability to produce goods and services if the

Accepted Answer

A)  labor force is fully employed. 
B)  price level is stable. 
C)  trade balance is zero. 
D)  federal budget is balanced. 
A)  labor force is fully employed. 
B)  price level is stable. 
C)  trade balance is zero. 
D)  federal budget is balanced.

Question 6

Structural unemployment arises when

Accepted Answer

A)  marginal productivity of labor becomes zero. 
B)  there is a cyclical change in the economy. 
C)  jobs are eliminated by changes in the economy. 
D)  people change their jobs. 
A)  marginal productivity of labor becomes zero. 
B)  there is a cyclical change in the economy. 
C)  jobs are eliminated by changes in the economy. 
D)  people change their jobs.

Question 7

When real GDP grows more slowly than potential GDP,

Accepted Answer

A)  nominal GDP rises. 
B)  the unemployment rate falls. 
C)  labor productivity falls. 
D)  the unemployment rate rises. 
A)  nominal GDP rises. 
B)  the unemployment rate falls. 
C)  labor productivity falls. 
D)  the unemployment rate rises.

Question 8

The principal effect of unemployment insurance on the entire U.S.economy is

Accepted Answer

A)  that it spreads the costs of unemployment. 
B)  that it eliminates the social costs of unemployment. 
C)  that it reduces the social costs of unemployment. 
D)  the reduction in the federal debt. 
A)  that it spreads the costs of unemployment. 
B)  that it eliminates the social costs of unemployment. 
C)  that it reduces the social costs of unemployment. 
D)  the reduction in the federal debt.

Question 9

When governments rapidly increase the supply of money, the usual result is

Accepted Answer

A)  deflation. 
B)  low inflation. 
C)  hyperinflation. 
D)  increasing long-term investment. 
A)  deflation. 
B)  low inflation. 
C)  hyperinflation. 
D)  increasing long-term investment.

Question 10

The unemployment rate for married men is usually higher than the rate for teenagers.

Accepted Answer

A) True 
 B)False

Question 11

Real wages more accurately reflect the payment to labor because they are adjusted for the effects of inflation.

Accepted Answer

A) True 
 B)False

Question 12

Hyperinflations are usually made possible by

Accepted Answer

A)  multinational corporations. 
B)  highly mobile international capital. 
C)  governments printing money rapidly. 
D)  higher and higher tax rates. 
A)  multinational corporations. 
B)  highly mobile international capital. 
C)  governments printing money rapidly. 
D)  higher and higher tax rates.

Question 13

Does the existence of unemployment insurance eliminate the economic costs of unemployment?

Accepted Answer

While unemployment insurance reduces the

Question 14

Full employment implies which of the following is reduced to zero?

Accepted Answer

A)  cyclical unemployment only 
B)  frictional unemployment only 
C)  frictional and structural unemployment only 
D)  frictional, structural, and cyclical unemployment 
A)  cyclical unemployment only 
B)  frictional unemployment only 
C)  frictional and structural unemployment only 
D)  frictional, structural, and cyclical unemployment

Question 15

If inflation is expected by both borrowers and lenders, then we would expect

Accepted Answer

A)  real rates to be higher than nominal rates of interest. 
B)  real rates to be equal to nominal rates of interest. 
C)  real rates to be lower than nominal rates of interest. 
D)  nominal rates of interest to be less than the expected inflation rate. 
A)  real rates to be higher than nominal rates of interest. 
B)  real rates to be equal to nominal rates of interest. 
C)  real rates to be lower than nominal rates of interest. 
D)  nominal rates of interest to be less than the expected inflation rate.

Question 16

The amount of goods and services the economy could produce if the labor force is fully employed is called

Accepted Answer

A)  nominal GDP. 
B)  real GDP. 
C)  actual GDP. 
D)  potential GDP. 
A)  nominal GDP. 
B)  real GDP. 
C)  actual GDP. 
D)  potential GDP.

Question 17

If prices rise, then persons living on fixed incomes will

Accepted Answer

A)  see their real incomes falling. 
B)  see the purchasing power of their savings fall. 
C)  need to spend more to maintain their standard of living. 
D)  All of the above are true. 
A)  see their real incomes falling. 
B)  see the purchasing power of their savings fall. 
C)  need to spend more to maintain their standard of living. 
D)  All of the above are true.

Question 18

Since 1948, the history of real wage rates generally shows that

Accepted Answer

A)  prices and wages have risen at the same rate. 
B)  prices have risen at a slower rate than wages. 
C)  prices have risen faster than wages. 
D)  real wages have remained constant over the period. 
A)  prices and wages have risen at the same rate. 
B)  prices have risen at a slower rate than wages. 
C)  prices have risen faster than wages. 
D)  real wages have remained constant over the period.

Question 19

Recent research suggests that the federal minimum wage law

Accepted Answer

A)  clearly causes significant unemployment. 
B)  causes unemployment for teenagers. 
C)  causes unemployment for high wage workers. 
D)  may not cause much, if any, unemployment. 
A)  clearly causes significant unemployment. 
B)  causes unemployment for teenagers. 
C)  causes unemployment for high wage workers. 
D)  may not cause much, if any, unemployment.

Question 20

An increase in the capital stock would be expected to

Accepted Answer

A)  decrease the labor force. 
B)  increase the level of output. 
C)  decrease real GDP per capita. 
D)  increase real GDP per capita. 
A)  decrease the labor force. 
B)  increase the level of output. 
C)  decrease real GDP per capita. 
D)  increase real GDP per capita.

Exam 23: The Goals of Macroeconomic Policy

Inflation is a very minor problem for lenders because it is relatively easy to estimate future rates of inflation.

The reduction of structural unemployment in the United States' economy may require

If you as a lender want an increase in purchasing power of 4 percent from making a loan and you set the nominal interest rate at 9 percent, then your

The term frictional unemployment refers to persons who are out of work

Potential GDP is an estimate of the economy's ability to produce goods and services if the

Structural unemployment arises when

When real GDP grows more slowly than potential GDP,

The principal effect of unemployment insurance on the entire U.S.economy is

When governments rapidly increase the supply of money, the usual result is

The unemployment rate for married men is usually higher than the rate for teenagers.

Real wages more accurately reflect the payment to labor because they are adjusted for the effects of inflation.

Hyperinflations are usually made possible by

Does the existence of unemployment insurance eliminate the economic costs of unemployment?

Full employment implies which of the following is reduced to zero?

If inflation is expected by both borrowers and lenders, then we would expect

The amount of goods and services the economy could produce if the labor force is fully employed is called

If prices rise, then persons living on fixed incomes will

Since 1948, the history of real wage rates generally shows that

Recent research suggests that the federal minimum wage law

An increase in the capital stock would be expected to

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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