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Which of the following is not a commonly-advanced argument for trade restrictions? a. the jobs argument b. the infant-industry argument c. the national-security argument d. the efficiency argument |
d |
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When a country takes a unilateral approach to free trade, it a. reduces its trade restrictions while other countries do the same. b. removes trade restrictions on its own. c. is willing to trade with multiple countries at once. d. does not remove trade restrictions no matter what other countries do. |
b |
|
A tariff is a a. limit on how much of a good can be exported. b. tax on an exported good. c. tax on an imported good. d. limit on how much of a good can be imported. |
c |
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Some goods can be produced at low cost only if they are produced in large quantities. This phenomenon is called a. economies of production. b. marginal cost of production. c. economies of scale. d. marginal benefit of size. |
c |
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The North American Free Trade Agreement a. is an example of the unilateral approach to free trade. b. eliminated tariffs on imports to North America from the rest of the world. c. reduced trade restrictions among Canada, Mexico and the United States. d. All of the above are correct. |
c |
|
The problem with the protection-as-a-bargaining-chip argument for trade restrictions is a. if it works producer surplus falls. b. if it fails total surplus will increase. c. if it works consumer surplus will decline. d. if it fails the country faces a choice between two bad options. |
d |
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The price of a good that prevails in a world market is called the a. absolute price. b. relative price. c. world price. d. comparative price. |
c |
|
The General Agreement on Tariffs and Trade (GATT) was initiated in response to a. in increase in exports of low-priced goods from developing countries to developed countries. b. high tariffs imposed during the Great Depression of the 1930s. c. the replacement of manufacturing jobs with service jobs in developed countries. d. economic dislocations caused by the North American Free Trade Agreement (NAFTA) in the 1990s. |
b |
|
A quota is a. a tax on exports to other countries. b. an excess of exports over imports. c. a tax placed on imports. d. a limit on the quantity of imports. |
d |
|
Economists view the fact that Florida grows oranges, Texas pumps oil, and California makes wine as a. confirmation of the virtues of free trade. b. confirmation that specialization in absolute advantage works. c. confirmation of the infant-industry argument. d. confirmation that free trade agreements are not necessary. |
a |
|
When a country takes a multilateral approach to free trade, it |
reduces its trade restrictions while other countries do the same. |
|
GDP a. is not used to monitor the performance of the overall economy but is the single best measure of a society’s economic well-being. b. is used to monitor the performance of the overall economy but is not the single best measure of a society’s economic well-being. c. is used to monitor the performance of the overall economy and is the single best measure of a society’s economic well-being. d. is not used to monitor the performance of the overall economy and is not the single best measure of a society’s economic well-being. |
c |
|
U.S. GDP a. excludes production of foreigners working in the U.S. and production by U.S. residents working in foreign countries. b. includes production of foreigners working in the U.S. but excludes production by U.S. residents working in foreign countries. c. excludes production of foreigners working in the U.S. but includes production by U.S. residents working in foreign countries. d. includes production of foreigners working in the U.S. and production by U.S. residents working in foreign countries. |
b |
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1. The percentage change in the price level from one period to another is called a. the growth rate. b. the inflation rate. c. the GDP deflator. d. the unemployment rate. |
b |
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According to the circular-flow diagram GDP a. can be computed as either the revenue firms receive from the sales of goods and services or the payments they make to factors of production. b. can be computed as the revenue firms receive from the sales of goods and services but not as the payments they make to factors of production. c. can be computed as payments firms make to factors of production but not as revenues they receive from the sales of goods and services. d. cannot be computed as either the revenue firms receive or the payments they make to factors of production. |
a |
|
If total spending rises from one year to the next, then a. either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both. b. the economy must be producing a larger output of goods and services. c. employment or productivity must be rising. d. goods and services must be selling at higher prices. |
a |
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Which of the following is included in the investment component of GDP? a. spending on new business equipment such as power tools and spending on stocks and bonds b. spending on new business equipment such as power tools but not spending on stocks and bonds c. spending on stocks and bonds but not spending on new business equipment such as power tools d. neither spending on new business equipment such as power tools nor spending on stocks and bonds |
b |
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Real GDP is the yearly production of final goods and services valued at a. the ratio of current prices to constant prices. b. constant prices. c. expected future prices. d. current prices. |
b |
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1. Which of the following is always measured in prices from a base-year? a. nominal but not real GDP b. both nominal and real GDP c. real but not nominal GDP d. neither nominal nor real GDP |
c |
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The term economists use to describe a situation in which the economy’s overall price level is rising is a. inflation. b. expansion. c. growth. d. recession. |
a |
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Spots, Inc. produces ink and sells it to Write on Target, which makes pens. The ink produced by Spots, Inc. is called a. an intermediate good. b. a transitory good. c. an inventory good. d. a final good. |
a |
|
When the consumer price index rises, the typical family a. has to spend more dollars to maintain the same standard of living. b. can spend fewer dollars to maintain the same standard of living. c. can offset the effects of rising prices by saving more. d. finds that its standard of living is not affected. |
a |
|
The inflation rate is calculated a. by adding up the price increases of all goods and services. b. by computing a simple average of the price increases for all goods and services. c. by determining the percentage increase in the price index from the preceding period. d. by determining the change in the price index from the preceding period. |
c |
|
One of the differences between the GDP deflator and the consumer price index is a. the GDP deflator reflects prices for all goods and services produced domestically and the consumer price index reflects prices for some goods and services bought by consumers. b. the consumer price index includes items not included in the GDP deflator such as airplanes purchased by the Air Force. c. the GDP deflator includes income earned by American citizens working in foreign countries and the consumer price index is based solely on purchases made in the U.S. d. the consumer price index basket of goods is updated constantly by the Bureau of Labor Statistics whereas the GDP deflator is updated only occasionally. |
a |
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When box office receipts are corrected for inflation, the most popular movie of all time is a. Titanic. b. Star Wars. c. The Sound of Music. d. Gone With the Wind. |
d |
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By far the largest category of goods and services in the CPI basket is a. transportation. b. education & communication. c. housing. d. food & beverages. |
c |
|
In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the fixed basket are determined by a. surveying consumers. b. working backward from the rate of inflation to arrive at imputed values for those quantities. c. surveying sellers of the goods and services. d. arbitrary choices made by federal government employees. |
a |
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The consumer price index is used to a. measure the quantity of goods and services that the economy produces. b. turn dollar figures into meaningful measures of purchasing power. c. convert nominal GDP into real GDP. d. characterize the types of goods and services that consumers purchase. |
b |
|
Which is the most accurate statement about the GDP deflator and the consumer price index? a. The consumer price index compares the price of a fixed basket of goods and services to the price of the basket in the base year, whereas the GDP deflator compares the price of currently produced goods and services to the price of the same goods and services in the base year. b. The GDP deflator compares the price of a fixed basket of goods and services to the price of the basket in the base year, whereas the consumer price index compares the price of currently produced goods and services to the price of the same goods and services in the base year. c. Both the GDP deflator and the consumer price index compare the price of a fixed basket of goods and services to the price of the basket in the base year. d. Both the GDP deflator and the consumer price index compare the price of currently produced goods and services to the price of the same goods and services in the base year. |
a |
|
1. The GDP deflator reflects the a. level of prices in the base year relative to the current level of prices. b. current level of real output relative to the level of real output in the base year. c. current level of prices relative to the level of prices in the base year. d. level of real output in the base year relative to the current level of real output. |
c |
|
The primary purpose of measuring the overall level of prices in the economy is to a. allow for the comparison of dollar figures from the same point in time. b. allow for the measurement of GDP. c. allow for the comparison of dollar figures from different points in time. d. allow consumers to know what kinds of prices to expect in the future. |
c |
|
Minimum wages create unemployment in markets where they create a a. shortage of labor. Minimum wage laws are not the predominant reason for unemployment in the U.S. b. shortage of labor. Minimum wage laws are the predominant reason for unemployment in the U.S. c. surplus of labor. Minimum wage laws are not the predominant reason for unemployment in the U.S. d. surplus of labor. Minimum wage laws are the predominant reason for unemployment in the U.S. |
c |
|
Over the past several decades, the difference between the labor-force participation rates of men and women in the U.S. has a. been eliminated. b. gradually increased. c. remained constant. d. gradually decreased. |
d |
|
1. Measuring unemployment is the job of the a. Department of Commerce. b. Council of Economic Advisers. c. Bureau of Labor Statistics. d. Congressional Budget Office. |
c |
|
The deviation of unemployment from its natural rate is called a. deviant unemployment. b. the normal rate of unemployment. c. fluctuating unemployment. d. cyclical unemployment. |
d |
|
Which of the following is not one of the categories into which the Bureau of Labor Statistics places each adult of each surveyed household? a. employed b. unemployed c. underemployed d. not in the labor force |
c |
|
The unemployment rate is computed as the number of unemployed a. times the labor-force participation rate, all times 100. b. divided by the number of employed, all times 100. c. divided by the adult population, all times 100. d. divided by the labor force, all times 100. |
d |
|
Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills is called a. frictional unemployment. b. cyclical unemployment. c. structural unemployment. d. the natural rate of unemployment. |
a |
|
The Bureau of Labor Statistics is part of the U.S. Department of a. Labor. b. Commerce. c. the Interior. d. the Treasury. |
a |
|
The labor-force participation rate measures the percentage of the a. labor force that is employed. b. labor force that is either employed or unemployed. c. total adult population that is in the labor force. d. total adult population that is employed. |
c |
|
Efficiency wages a. decrease productivity and increase unemployment. b. decrease productivity but reduce unemployment. c. increase productivity but increase unemployment. d. increase productivity and reduce unemployment. |
c |
|
Which of the following defer payments? a. debit cards but not credit cards b. credit cards but not debit cards c. neither credit cards nor debit cards d. credit cards and debit cards |
b |
|
The federal funds rate is the a. percentage of deposits that banks must hold as reserves. b. percentage of face value that the Federal Reserve is willing to pay for Treasury Securities. c. interest rate at which the Federal Reserve makes short-term loans to banks. d. interest rate at which banks lend reserves to each other overnight. |
d |
|
An open-market purchase a. decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public. b. increases the number of dollars and the number of bonds in the hands of the public. c. decreases the number of dollars and the number of bonds in the hands of the public. d. increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public. |
d |
|
Which of the following statements is correct? a. All items that are included in M2 are included also in M1. b. Savings deposits are included in both M1 and M2. c. All items that are included in M1 are included also in M2. d. Credit cards are included in both M1 and M2. |
c |
|
If R represents the reserve ratio for all banks in the economy, then the money multiplier is a. (1+R)/R. b. 1/(1-R). c. 1/R. d. 1/(1+R). |
c |
|
The Federal Reserve a. is responsible for conducting the nation’s monetary policy, and it plays a role in regulating banks. b. is not responsible for conducting the nation’s monetary policy, and it plays a role in regulating banks. c. is not responsible for conducing the nation’s monetary policy, and it plays no role in regulating banks. d. is responsible for conducing the nation’s monetary policy, but it plays no role in regulating banks |
a |
|
The interest rate that the Fed charges banks that borrow reserves from it is the a. federal funds rate. b. discount rate. c. reserve requirement. d. prime rate. |
b |
|
When the Federal Reserve conducts open-market operations to increase the money supply, it a. decreases its lending to member banks. b. redeems Federal Reserve notes. c. buys government bonds from the public. d. raises the discount rate. |
c |
|
At any meeting of the Federal Open Market Committee, that committee’s voting members consist of a. 5 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors. b. 12 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. d. 5 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. |
d |
|
Which of the following is not included in M1? a. traveler’s checks b. currency c. savings deposits d. demand deposits |
c |
|
When the money market is drawn with the value of money on the vertical axis, a. money demand slopes downward and money supply is horizontal. b. money demand slopes downward and money supply is vertical. c. money demand slopes upward and money supply is horizontal. |
b |
|
When inflation falls, people a. make less frequent trips to the bank and firms make less frequent price changes. b. make more frequent trips to the bank while firms make less frequent price changes. c. make more frequent trips to the bank and firms make more frequent price changes. d. make less frequent trips to the bank while firms make more frequent price changes. |
a |
|
When prices are falling, economists say that there is a. a contraction. b. disinflation. c. an inverted inflation. d. deflation. |
d |
|
Menu costs refers to a. resources used by people to maintain lower money holdings when inflation is high. b. the distortion in incentives created by inflation when taxes do not adjust for inflation. c. resources used to price shop during times of high inflation. d. the cost of more frequent price changes induced by higher inflation. |
d |
|
Market economies rely on which of the following to allocate scarce resources? a. consumers b. government c. real interest rates d. relative prices |
d |
|
Interest rates adjusted for the effects of inflation a. are nominal variables; inflation is a real variable. b. are real variables; inflation is a nominal variable. c. and inflation are nominal variables. |
b |
|
In the U.S., people are required to pay taxes on a. nominal interest earnings, irrespective of their real interest earnings. b. real interest earnings, irrespective of their nominal interest earnings. c. real capital gains, irrespective of their nominal capital gains. d. All of the above are correct. |
a |
|
With the value of money on the vertical axis, the money supply curve is a. downward-sloping. b. upward-sloping. c. vertical. d. horizontal. |
c |
|
In the U.S., taxes on capital gains are computed using a. nominal gains. This is one way by which higher inflation discourages saving. b. real gains. This is one way by which higher inflation encourages saving. c. real gains. This is one way by which higher inflation discourages saving. d. nominal gains. This is one way by which higher inflation encourages saving |
a |
|
Printing money to finance government expenditures a. causes the value of money to rise. b. imposes a tax on everyone who holds money. c. is the principal method by which the U.S. government finances its expenditures. d. None of the above is correct. |
b |
|
Which of the following is not included in national income? |
Depreciation |
|
Which of the following would increase the aggregate demand function? |
D |
|
Which of the following is not included in the U.S. GDP? |
C |
|
According to the quantity theory of money, increasing the money supply serves to A.stimulate short-run production and employment with very little long-run inflation. |
B |
|
Of the following choices, the most direct exchange in the circular flow model of a private closed economy is when A.households provide goods to firms in exchange for wage payments. |
D |
|
Which of the following is most likely to produce stronger economic growth over time? A. More rapid consumption of natural resources. |
D |
|
Real GDP is the yearly production of final goods and services valued at |
b |
|
Changes in nominal GDP reflect |
c |
|
GDP does not reflect |
d |
|
The CPI is more commonly used as a gauge of inflation than the GDP deflator is because |
c |
|
When computing the cost of the basket of goods and services purchased by a typical consumer, which of the following changes from year to year? |
b |
|
The equipment and structures available to produce goods and services are called |
a |
|
When we want to measure and record economic value, we use money as the |
c |
|
Currently, U.S. currency is |
b |
|
Credit card limits are included in |
d |
|
Which tool of monetary policy does the Federal Reserve use most often? |
b |
|
Which of the following lists two things that both increase the money supply? |
b |
|
The principle of monetary neutrality implies that an increase in the money supply will |
c |
|
The shoeleather cost of inflation refers to a. the redistributional effects of unexpected inflation. |
c |
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