21.The __________ a Lorenz curve lies to (from) the 45-degree line, the __________ the distribution of income.

a.further; more equal

b.closer; less equal

c.further; more unequal

d.closer; better as far as economists are concerned.

22.Which of the following isfalseabout potential output?

a.It is the level of output an economy can achieve when labor is employed at its natural level.

b.It is the long run output level that guarantees price stability.

c.It is also called the natural level of real GDP.

d.If a country is producing its potential output, then it is producing at a point on its production possibilities frontier.

23.Which of the following statements istrueof the U.S. experience with regards to the Phillips curve hypothesis?

I. Values of inflation and unemployment rates during the 1960s are atypical in that they generally conformed to the tradeoff implied by the Phillips curve.

II. Annual observations of inflation and unemployment from 1961 to 2008 do not seem consistent with a Phillips curve.

III. Annual observations of inflation and unemployment from 1961 to 2008 seem consistent with a Phillips curve.

a.I only

b.II only

c.I and II only

d.III only

24.True or False? For investment to occur, saving must also occur.

25.Which of the following characterizes the relationship between inflation and unemployment in the United States?

I. There have been periods in which a clear tradeoff between inflation and unemployment seem to exist.

II. There have been periods in which inflation and unemployment rose together.

III. There have been periods in which inflation and unemployment fell together.

a.I, II, and III

b.I and II

c.I and III

d.I only

26.Prior to the Great Depression of the 1930s, macroeconomics was dominated by __________

a.Keynesian economics

b.monetarism

c.classical economics

d.supply-side economics

27.Demand is best defined as the __________

a.amount of a commodity that buyers would be willing and able to purchase at a specific price.

b.price that buyers would be willing and able to pay for a specific quantity of a good.

c.relationship between the price of a good and the quantity people are able to purchase and the independent variables that determine quantity.

d.relationship between the price of a good and the quantity people are willing and able to purchase and the independent variables that determine quantity.

28. True or False? In the long run, the major cause of inflation is excessive government spending.

29. Scarcity in economics means __________

a.not having sufficient resources to produce all the goods and services we want.

b.the wants of people are limited.

c.there must be poor people in rich countries.

d.economists are clearly not doing their jobs.

30.What is a sub-prime mortgage?

a.It is a mortgage loan which carries an interest rate below the prime lending rate.

b.It is a loan made to a homeowner by an insolvent lender.

c.It is a mortgage loan made to a buyer whose credit or income would not ordinarily qualify for a mortgage loan.

d.It is a mortgage loan made to a buyer whose outstanding credit score earns the buyer a preferential interest rate.