Exercise 1.

Gross Domestic Product is:

national income after taxes

the total value of all final goods and services plus intermediate goods and services

the value of all final goods and services produced domestically within a given period

the total value of all consumer expenditures within a given period

1 points

QUESTION 2

GDP that has been adjusted for changes in the price level is called:

personal income

net GDP

real GDP

nominal GDP

1 points

QUESTION 3

The most important determinant of consumer spending is:

the level of income

the stock of wealth

consumer expectations

the level of household debt

1 points

QUESTION 4

Which of the following would not be included as a final good in the GDP:

aftermarket floor mats

a sheet of glass purchased by General Motors for the side window of a new car

a piece of glass bought by a consumer to fix a broken window

a sheet of glass produced this year and included in the inventory of a hardware store

1 points

QUESTION 5

At higher real interest rates, people:

people refinance homes

people save more

people consume more

people save less

1 points

QUESTION 6

If population increases:

it may lead to economies of large-scale production

it will generally result in a greater labor force

faster than output, then per capita output will fall

all of these options are possible

1 points

QUESTION 7

Economic growth is best measured as:

the annual percentage change in nominal GDP

the annual percentage change in real GDP

the annual percentage change in disposable income

the annual percentage change in per capita real GDP

1 points

QUESTION 8

Which of the following affects the rate of economic growth?

technological change

the quantity of available resources

the quality of available resources

all of these options affect the rate of growth

1 points

QUESTION 9

Which of the following will decrease aggregate demand?

exports falling faster than imports

exports rising and imports falling

exports rising the same amount as imports

exports rising faster than imports

1 points

QUESTION 10

In the simplest Keynesian expenditure model, which of the following is fixed to allow for easy evaluation of changes in demand due to real income?

interest rates

tastes and preferences

the price level

future expectations

1 points

QUESTION 11

Which of the following observations concerning the Keynesian model is not true?

It is helpful in explaining the events that unfolded in the 1930s

It explains the stagflation of the 1970s

It does not incorporate possible shifts in the aggregate supply curve

It is less useful in explaining today's economy

1 points

QUESTION 12

After legislation is signed into law, the time it takes before actual fiscal stimulus is noticed is termed as:

recognition lag

signal lag

political lag

effect lag

1 points

QUESTION 13

If the government sought to end a recession, which of the following would be an appropriate policy?

Decrease taxes

Decrease transfer payments

Increase taxes

Decrease government purchases

1 points

QUESTION 14

A contractionary fiscal policy may be implemented in order to:

create or expand a budget surplus

increase government purchases

reduce a budget surplus

increase a budget deficit

1 points

QUESTION 15

Budget surpluses exist when:

expansionary fiscal policies increase real GDP and the price level

government spending equals its tax tax revenues

government tax revenues exceed its spending

government spending exceeds its tax revenues

1 points

QUESTION 16

Expansionary fiscal policy may consist of:

decreased government purchases, decreased taxes, decreased transfer payments

increased government purchases, increased taxes, decreased transfer payments

increased government purchases, increased taxes, increased transfer payments

increased government purchases, decreased taxes, increased transfer payments

1 points

QUESTION 17

The government's fiscal policy is its plan to regulate aggregate demand by manipulating:

the Secretary of the Treasury

the money supply

taxation and spending

the Congressional Budget Office

1 points

QUESTION 18

Changing taxes primarily affects aggregate demand by:

altering government puchases by an equal amount

altering disposable income and consumption spending

altering investment by an equal and opposite amount

altering exports and net exports

1 points

QUESTION 19

An economist who favors smaller government would recommend:

tax increases during recession and tax cuts during inflation

increases in government spending during recession and tax increases during inflation

tax cuts during recession and tax cuts increases during inflation

tax cuts during recession and reductions in government spending during inflation

1 points

QUESTION 20

Paper money in the United States is:

fiat currency

always higher valued than the Swiss Franc

convertible into gold or silver at the holder's request

partially backed by gold and silver in Fort Knox

1 points

QUESTION 21

The primary purpose of money is that it serves as:

inherent value

a trade account

a barter value

a medium of exchange

1 points

QUESTION 22

The money supply in the United States is backed:

by the Fed's ability to control the supply of money and the Treasury Department's ability to pay the underlying assets

dollar-for-dollar with gold and silver

by government bonds only

dollar-for-dollar with gold bullion

1 points

QUESTION 23

When interest rates are higher:

the opportunity cost of holding monetary assets is lower, and the demand for money increases

the opportunity cost of holding monetary assets is lower, and the quantity of money demanded, but not the demand for money, is greater

the opportunity cost of holding monetary assets is higher, and the quantity of money demanded, but not the demand for money, is lower

the opportunity cost of holding monetary assets is higher, and the demand for money increases

1 points

QUESTION 24

Expansionary monetary policy will tend to have what effect?

Decrease the money supply and increase interest rates

Decrease the money supply and lower interest rates

Increase the money supply and lower interest rates

Increase the money supply and increase interest rates

1 points

QUESTION 25

An increase in money supply:

shifts the aggregate demand curve to the left

will probably result in inflation if the economy is fully employed

causes interest rates to rise

will definitely result in inflation if unemployment is high and there is much unused industrial capacity

1 points

QUESTION 26

Which of the following is the Fed's most common way to change the money supply?

Open market operations

The required reserve rate

Moral suasion

The discount rate

1 points

QUESTION 27

Which of the following actions of the Fed is likely to lead to a decrease in the money supply?

A decrease in reserve requirements

An increase in reserve requirements

A purchase of government securities by the Fed in the open market

A decrease in the discount rate

1 points

QUESTION 28

When the Fed wants to expand money supply through open market operations, it:

sells government securities to banks

purchases imported raw materials

sells government securities to the Treasury Department

purchases government securities

1 points

QUESTION 29

If the Fed sells a U.S. government bond to a bank, what is the effect on the moeny supply?

It wil increase

It will shrink

It depends on the dollar's value

It will not change

1 points

QUESTION 30

The amount that a commercial bank can lend is determined by its:

excess reserves

employee stock option plans

corporate tax rate

required reserves

1 points

QUESTION 31

If the Fed was attempting to reduce demand-pull inflation, the proper policies would be to:

sell government securities, raise reserve requirements, and lower the discount rate

sell government securities, raise reserve requirements, and raise the discount rate

buy government securities, raise reserve requirements, and raise the discount rate

sell government securities, lower reserve requirements, and lower the discount rate

1 points

QUESTION 32

Many economists suggest that, in the long run, the economy generally tends to move toward:

an accelerating inflation rate

the natural or full-employment rate of inflation

an unstable price level

the natural or full-employment rate of unemployment

1 points

QUESTION 33

Which of the following would likely shift the short-run aggregate supply curvey inward?

any of these options could shift the curve inward

an increase in inflationary pressures

an adverse supply shock

a decrease in inflationary expectations

1 points

QUESTION 34

A U.S. import tariff imposed on steel is likely to:

increase employment in the U.S. steel industry

raise the total quantity of foreign and domestic steel sold in the U.S.

increase real incomes of steel users

decrease employment in the U.S. steel industry

1 points

QUESTION 35

According to international trade theory, a country should:

import goods in which it has an absolute advantage

export goods in which it has a comparative disadvantage

specialize in the production of the good in which it has an absolute disadvantage

specialize in the production of the good in which it has a comparative advantage

1 points

QUESTION 36

Raising an existing tariff on grapes from Chile will:

increase U.S. imports of Chilean grapes

increase risk of job loss in California

increase U.S. consumption of domestically-produced grapes

increase total U.S. consumption of grapes

1 points

QUESTION 37

If the dollar appreciates, it can be said that:

it takes more dollars to buy units of other currencies

Europeans respect the United States more

another currency depreciates

other currencies also appreciate

1 points

QUESTION 38

At any given moment, there is one exchange rate:

established by the Federal Reserve Board of Governors

for all the world's currencies

between every pair of currencies

for currencies in the free world

1 points

QUESTION 39

The U.S. balance of trade:

is the difference between merchandise exports and merchandise imports

excludes trade activity with OPEC nations

typically is positive because the U.S. exports far more goods than it imports

includes net military transactions

1 points

QUESTION 40

The record of all transactions with foreign nations that involve the exchange of merchandise goods and services or unilateral gifts is called the:

balance of power

current account

capital account

balance of trade

1 points

QUESTION 41

Which of the following would increase the demand for U.S. dollars in the foreign exchange market?

the spending of U.S. tourists in France

the purchase of Japanese automobiles by American consumers

the purchase of a Mexican shoe factory by a U.S. investor

the sale of U.S. computer equipment to a Canadian buyer

1 points

QUESTION 42

The traditional Phillips Curve ("the pendulum") suggests a trade-off between:

the unemployment level and price level stability

unemployment and income equality

price level stability and income equality

economic growth and frictional unemployment

1 points

QUESTION 43

Under an international gold standard:

a nation's balance of payments deficit will be corrected by an inflow of gold

domestic output and price level will fall in those nations receiving international gold flows

a nation's exchange rate is virtually fixed

a nation's balance of payments surplus will be corrected by an outflow of gold

1 points

QUESTION 44

At the equilibrium level of GDP:

V = 1/MPS

M = nominal GDP

M x V = RGDP - MPC

M x V = nominal C + I + G + NX

1 points

QUESTION 45

Non-economic costs of unemployment include:

each of these are possible costs

psychological

political

societal

1 points

QUESTION 46

The type of unemployment with the greatest negative impact is:

structural

empirical

cyclical

frictional

1 points

QUESTION 47

Inflation is most often measured by using the:

Price Inflation Prediction Model

Consumer Price Index

Dow Jones Industrial Average

Production Possibilities Curve

1 points

QUESTION 48

Deflation does which of the following:

Increases the price of oil

Increases all world currencies simultaneously

Increases the purchasing power of money

Increases GDP for democracies

1 points

QUESTION 49

Free trade based on comparative advantage is economically beneficial because:

it provides consumers with a wider range of products

it increases competition

of all of these reasons

it promotes an efficient allocation of world resources

1 points

QUESTION 50

Because both input and output prices adjust to economic changes in the long run, the Long Run Aggregate Supply Curve always:

slopes to the right

remains vertical

remains horizontal

shifts with the Earth's axis

1 points

QUESTION 51

Which curve movement best portrays the effects of an increase in resource productivity?

Increase in aggregate supply

Decrease in aggregate supply

Increase in aggregate demand

Decrease in aggregate demand

1 points

QUESTION 52

Which curve movement best portrays the effects of a decrease in the availability of key natural resources?

Increase in aggregate supply

Decrease in aggregate supply

Increase in aggregate demand

Decrease in aggregate demand

1 points

QUESTION 53

Which curve movement best portays the effects of an increase in foreign spending on U.S. products?

Increase in aggregate supply

Decrease in aggregate supply

Increase in aggregate demand

Decrease in aggregate demand

1 points

QUESTION 54

Which curve movement best portrays the effects of an increase in consumer spending?

Increase in aggregate supply

Decrease in aggregate supply

Increase in aggregate demand

Decrease in aggregate demand

1 points

QUESTION 55

Which curve movement best portrays an improvement in expected rates of return on investment?

Increase in aggregate supply

Decrease in aggregate supply

Increase in aggregate demand

Decrease in aggregate demand

1 points

QUESTION 56

Which curve movement best portrays the effects of declines in the incomes of U.S. trading partners?

Increase in aggregate supply

Decrease in aggregate supply

Increase in aggregate demand

Decrease in aggregate demand

1 points

QUESTION 57

Which curve movement best portrays the effects of declines in the prices of imported resources?

Increase in aggregate supply

Decrease in aggregate supply

Increase in aggregate demand

Decrease in aggregate demand

1 points

QUESTION 58

Which curve movement best portrays the effects of a substantial reduction in government spending?

Increase in aggregate supply

Decrease in aggregate supply

Increase in aggregate demand

Decrease in aggregate demand

1 points

QUESTION 59

Which curve movement best portrays the effects of a dramatic increase in energy prices?

Increase in aggregate supply

Decrease in aggregate supply

Increase in aggregate demand

Decrease in aggregate demand

1 points

QUESTION 60

Which curve movement best portrays a period of stagflation?

Increase in aggregate supply

Decrease in aggregate supply

Increase in aggregate demand

Decrease in aggregate demand