Question 21

Recognition lag, implementation lag, and impact lag are all examples of

A crowding-out.

B savings shifts.

C time lags that accompany policy decisions.

D automatic stabilizers.

E fiscal policies.

Question 22

The use of the money supply to influence the economy is

A called fiscal policy.

B called countercyclical policy.

C called monetary policy.

D initiated through actions of Congress.

E part of automatic stabilization.

Question 23

When you buy a new car built by Ford, it is included in the ________ category of gross domestic product (GDP).

A consumption

B investment

C government purchases

D export

E import

Question 24

An activity’s marginal benefit is ________ at the optimal quantity.

A zero

B greater than zero

C less than zero

D equal to the marginal cost

E greater than the marginal cost

Question 26

Laura leaves her job as an accountant, where she earns $80,000 per year, to start her own business. After the first year, her business earns a profit of $60,000. How would an economist describe the profitability of Laura’s career change?

A Laura had a profit of $140,000.

B Laura had a loss of $20,000.

C Laura had a profit of $20,000.

D Laura had a profit of $60,000.

E Laura had a loss of $80,000.

28 If over a period of time real gross domestic product (GDP) increases while nominal GDP decreases, then this implies

A a significant rise in the price level.

B a significant drop in the price level.

C that real GDP is much less than nominal GDP.

D that the given period occurs before the base period.

E that the given period year occurs after the base period.

Question 29

If real gross domestic product (GDP) grew by 4 percent and nominal GDP grew by 3 percent, then the inflation rate was

A 1 percent.

B -1 percent.

C 7 percent.

D 12 percent.

E 0 percent.

Question 30

Which of the following is an example of frictional unemployment?

A Raymond loses his job as a steel worker because the economy is in a downturn.

B Chad graduates with his master’s degree in economics and is searching for an analyst job.

C Edith has decided to retire after 35 years of working at the state prison.

D Cameron quits his job at the circus to volunteer for the Red Cross.

E Jasmine loses her job as a newspaper editor because the publication has gone digital.

Question 31

In the equation M ´ V = P ´ Y, the variable M stands for the

median rate of inflation.

movement of goods.

movement of prices.

quantity of money.

velocity of money.

Question 32

Inflation creates uncertainty because

A nominal values of prices and wages are unknown.

B it rapidly increases output.

C real interest rates, prices, and wages are unknown.

D borrowing continues at a rapid pace, creating a “false boom.”

E although price confusion problems are eliminated, the shoe-leather costs are exacerbated.

Question 33

Assume deflation is occurring in a nation; the implication(s)

A are that both real and nominal interest rates are positive.

B are that both real and nominal interest rates are negative.

C is that the nominal interest rate exceeds the real interest rate.

D is that the real rate of interest exceeds the nominal rate of interest.

E is that time preferences in the nation have fallen.

Question 34

An interest rate best represents ________ to borrowers and ________ to savers.

A cost; return

B return; cost

C rate of change; static value

D static value; rate of change

E nominal return; real return

Question 36

In the last decade, the U.S. savings rate has

A rebounded somewhat.

B dropped to new lows.

C leveled off around the historical average.

D begun to come down from unusually high levels.

E climbed to historic highs.

Question 37

Joe Kowalski invents a new product, and this new product becomes cheaper over time. This can be problematic because

A the consumer price index (CPI) will include Joe’s new product immediately if it is a consumer good, but as a consumer good, it will not be included in the gross domestic product (GDP) deflator.

B the percent change in the consumer price index (CPI) will be distorted, but the change in the gross domestic product (GDP) deflator will not be, regardless of whether the C product is a consumer good or a producer good.

C it is unlikely the consumer price index (CPI) will include Joe’s new product immediately, even if it is a consumer good.

D money illusion will cause consumers to buy more of this good than the consumer price index (CPI) would otherwise reflect.

E this good might be produced in a geographic location that is not included in the consumer price index (CPI).

Question 38

When actual unemployment is less than its natural rate

a the economy is producing below its long-run capabilities.

b the economy is producing within its long-run capabilities.

c resources are employed at levels that are not sustainable in the long run.

d resources are employed at levels that are sustainable in the long run.

e output is less than full-employment output.

Question 39

Individuals who are not working but are willing to work and who have looked for a job in the past 12 months but have not sought employment in the past four weeks are defined as

a unemployed.

b employed.

c unhappy workers.

d discouraged workers.

e retired.

Question 41

A country lowers trade barriers and institutes monetary and price stability. As a result, the annual growth rate of gross domestic product (GDP) increases from 2 percent to 4 percent per year. All else the same, in 35 years, GDP will be ________ as high as if there were no reform.

a 50 percent

b twice

c three times

d five times

e four times

Question 42

All countries have some resources and technology available to them. The ones that grow fastest are the ones that

a hoard their resources and never use them.

b invade other countries to capture their resources.

c have the institutions in place that allow those resources to be fully exploited.

d allow other countries to extract their resources for payment.

e require that all resources are collectively owned.

Question 43

The model used to study business cycles is the ________ model.

a labor

b savings

c growth

d aggregate demand-aggregate supply

e interest rate

Question 44

A lawn service company has 20 lawn mowers. This year they buy 3 new ones and get rid of 2 old ones. In this case, investment is equal to ________ and net investment is equal to ________.

a 3; 3

b 3; 1

c 3; 2

d 5; 3

e 3; 5