What matters to people is the real value of money or income.

True

False

Markets exist to facilitate exchange between people.

True

False

Two goods are substitutes if an increase in the price of one good leads to an increase in demand for the other.

True

False

An increase in demand will cause the equilibrium price and quantity to rise,ceteris paribus.

True

False

A decrease in population would shift the demand curve to the left.

True

False

If supply of a product increases and demand for the product decreases, equilibrium price will definitely change.

True

False

Real GDP measures the value of goods and services using current-year prices.

True

False

GDP measures underestimate the value of output produced by an economy because they include services not transferred through markets.

True

False

Unemployment occurs even during periods when the economy is growing.

True

False

Structural unemployment is unemployment reflecting a mismatch of skills and jobs.

True

False

Frictional unemployment exists because workers and employers try to find the right employment matches.

True

False

The basket of goods measured in computing the CPI includes goods produced in prior years and imported goods.

True

False

Most economists believe that the CPI overstates the actual changes in prices while the chain index for GDP understates them.

True

False

Inflation must be high in Los Angeles because it is very expensive to live there.

True

False

Inflation distorts the operation of our tax and financial system.

True

False

Unemployment and recessions are sometimes necessary to curb high inflation.

True

False

Investments are actions that incur costs today but provide expected benefits in the future.

True

False

Investment is a smaller component of GDP than consumption, but it is a more stable component.

True

False

Banks prefer to make loans than keep reserves because they earn interest on loans but not reserves.

True

False

A bank's required reserves are the fraction of deposits they are required by law to hold as reserves.

True

False

If the reserve ratio is 0.3 and a deposit of $100 is made to the bank, the bank can lend out $70.

True

False

When one individual writes a check to another individual the money supply will not be changed.

True

False

When the Federal Reserve buys bonds on the open market, it decreases the money supply.

True

False

Banks can obtain funds to make loans by borrowing reserves from other banks through the federal funds market.

True

False

The discount rate is the interest rate at which banks can borrow from the Fed.

True

False

If the opportunity cost of 1 table is 5 chairs in nation A and 1 chair in nation B, it makes sense for nation B to produce chairs.

True

False

The ability to produce a product at a lower resource cost than another nation can produce the same product is called comparative advantage.

True

False

Free trade will affect a country's employment in different industries.

True

False

An import quota is the same as an import ban.

True

False

From the perspective of consumers, a quota is preferred to a tariff.

True

False

If the dollar appreciates against the yen it means that U.S. goods become more expensive in Japan.

True

False

The exchange rate between currencies of different countries is controlled primarily by supply and demand in currency markets.

True

False

Federal income tax on wages is the smallest source of revenue for the government.

True

False

Unlike income taxes, social insurance taxes are paid by on wages only.

True

False

When government spending amounts to less than tax revenues, the federal government runs a budget deficit.

True

False