Question 1

If the capital stock decreases, then the economy will produce ____ output with the ____ amount of labor.

Accepted Answer

A)  same, same 
B)  less, same 
C)  more, same 
D)  more, decreased 
A)  same, same 
B)  less, same 
C)  more, same 
D)  more, decreased

Question 2

During the course of the twentieth century, the average workweek in the United States has gotten shorter and Americans have enjoyed greater amounts of leisure time. How has this development affected potential GDP and labor productivity?

Accepted Answer

Decreasing the length of the workweek, o

Question 3

If expected inflation is 12 percent and the publicly regulated electric utility company is legally limited to a 10 percent rate of return, then we should expect

Accepted Answer

A)  increased investment by the utility. 
B)  expansion of electric power generating capacity. 
C)  future power shortages. 
D)  excess investment by the electric utility. 
A)  increased investment by the utility. 
B)  expansion of electric power generating capacity. 
C)  future power shortages. 
D)  excess investment by the electric utility.

Question 4

Define the following terms carefully: 
(a) Full employment 
(b) Purchasing power of money 
(c) Real wage rate 
(d) Relative price

Accepted Answer

(a) Full employment is a situation in wh

Question 5

If wages rise by 12 percent at the same time prices rise by 3 percent, then the increase in real wages is equal to

Accepted Answer

A)  12 percent. 
B)  9 percent. 
C)  6 percent. 
D)  3 percent. 
A)  12 percent. 
B)  9 percent. 
C)  6 percent. 
D)  3 percent.

Question 6

The real wage rate is defined as the wage rate divided by

Accepted Answer

A)  the interest rate. 
B)  the money supply. 
C)  nominal GDP. 
D)  the price level. 
A)  the interest rate. 
B)  the money supply. 
C)  nominal GDP. 
D)  the price level.

Question 7

A principal benefit of inflation is that it makes economic decisions easier.

Accepted Answer

A) True 
 B)False

Question 8

Sharon buys some common stock in 1990 for $10,000 and sells it in 2000 for $15,000. During the same period, prices have risen by 75 percent. The net result of Sharon's stock purchases is that she will

Accepted Answer

A)  pay no taxes because she earned negative real capital gains. 
B)  lose purchasing power and have to pay taxes anyway. 
C)  earn a real capital gain of $5,000 plus 75 percent. 
D)  earn a real capital gain of $15,000 minus 75 percent. 
A)  pay no taxes because she earned negative real capital gains. 
B)  lose purchasing power and have to pay taxes anyway. 
C)  earn a real capital gain of $5,000 plus 75 percent. 
D)  earn a real capital gain of $15,000 minus 75 percent.

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

Variable inflation rates may be more costly socially than low but predictable rates of inflation.

Accepted Answer

A) True 
 B)False

Question 11

GDP equals hours of work times

Accepted Answer

A)  labor force. 
B)  output per hour. 
C)  population. 
D)  capital stock. 
A)  labor force. 
B)  output per hour. 
C)  population. 
D)  capital stock.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The rate of interest written on a contract between a borrower and a lender is the

Accepted Answer

A)  nominal interest rate. 
B)  real interest rate. 
C)  implied interest rate. 
D)  expected interest rate. 
A)  nominal interest rate. 
B)  real interest rate. 
C)  implied interest rate. 
D)  expected interest rate.

Question 14

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 15

Changes in relative prices usually lead to increases in real income because prices have changed.

Accepted Answer

A) True 
 B)False

Question 16

Hyperinflation may cause the collapse of the market system.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following groups would be most optimistic about the effects of economic growth?

Accepted Answer

A)  Environmentalists 
B)  Psychologists 
C)  Economists 
D)  Political Scientists 
A)  Environmentalists 
B)  Psychologists 
C)  Economists 
D)  Political Scientists

Question 18

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 19

If borrowers and lenders expect a higher rate of inflation,

Accepted Answer

A)  nominal interest rates should decrease. 
B)  nominal interest rates should remain constant. 
C)  nominal interest rates should increase. 
D)  real interest rates should increase. 
A)  nominal interest rates should decrease. 
B)  nominal interest rates should remain constant. 
C)  nominal interest rates should increase. 
D)  real interest rates should increase.

Question 20

Due to the distortionary effects of inflation, capital investment may be reduced due to higher price levels.

Accepted Answer

A) True 
 B)False

Exam 22: The Goals of Macroeconomic Policy

If the capital stock decreases, then the economy will produce ____ output with the ____ amount of labor.

During the course of the twentieth century, the average workweek in the United States has gotten shorter and Americans have enjoyed greater amounts of leisure time. How has this development affected potential GDP and labor productivity?

If expected inflation is 12 percent and the publicly regulated electric utility company is legally limited to a 10 percent rate of return, then we should expect

Define the following terms carefully: (a) Full employment (b) Purchasing power of money (c) Real wage rate (d) Relative price

If wages rise by 12 percent at the same time prices rise by 3 percent, then the increase in real wages is equal to

The real wage rate is defined as the wage rate divided by

A principal benefit of inflation is that it makes economic decisions easier.

Sharon buys some common stock in 1990 for $10,000 and sells it in 2000 for $15,000. During the same period, prices have risen by 75 percent. The net result of Sharon's stock purchases is that she will

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

Variable inflation rates may be more costly socially than low but predictable rates of inflation.

GDP equals hours of work times

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

The rate of interest written on a contract between a borrower and a lender is the

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

Changes in relative prices usually lead to increases in real income because prices have changed.

Hyperinflation may cause the collapse of the market system.

Which of the following groups would be most optimistic about the effects of economic growth?

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

If borrowers and lenders expect a higher rate of inflation,

Due to the distortionary effects of inflation, capital investment may be reduced due to higher price levels.

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

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

Contemporary Issues in the Us Economy

Filters

If the capital stock decreases, then the economy will produce output with the amount of labor.