In the wake of the financial crisis of 2007-2009, the debt-to-GDP ratio has risen in many countries around the world. Should the expenditures enabled by this debt be considered government consumption or government investment?
What will be an ideal response?
Question 2Real business cycle proponents argue that
a. recessions are caused by movements of output away from the natural rate of output.
b. prices and wages are sticky.
c. macroeconomics should be based on the same assumptions as microeconomics.
d. monetary policy is important in determining recessions.
e. none of the above.
Question 3What do the foreign leaders investing in the industrial enclaves of developing countries of today have in common with those foreign investors who helped colonize North America?
(a) Both sets of leaders exploit the labor of the indigenous people.
(b) Both expect to make personal and business sacrifices, take on risks and gain
something of high expected value.
(c) Both are driven primarily by their desires to extract materials for high profits.
(d) Both strive to boost agricultural profits in international markets in the developing
countries in which they invest.
Question 4The IS curve shifts when all of the following variables change except
a. tax rates.
b. interest rates.
c. government spending.
d. the marginal propensity to consume.
e. both b and d.
Question 5What must be true in a perfectly competitive equilibrium?
a. the marginal product of labor is equal to the real wage for every unit of labor.
b. the marginal product of labor is equal to the money wage for the last unit of labor.
c. the marginal product of labor can be less than the real wage for some units of labor.
d. the marginal product of labor can be greater than the price level for some units of labor.
e. the marginal product of labor only has to be equal to the real wage for the last unit of labor.
Question 6The energy source most often used by the earliest factories was
(a) animal power.
(b) wind power.
(c) water power.
(d) steam engines.
Question 7Suppose that Apple computer buys computer components for 10,000 and uses them to make ipods that they sell to Best Buy for 30,000 . Best Buy sells these ipods for 32,000 . As a result, GDP has risen by:
a. 22,000
b. 2,000
c. 20,000
d. 32,000
Question 8Suppose an economy is in a steady state, then its saving rate falls, once and permanently. As the economy approaches its new long-run steady state, consumption per worker is ________.
A) falling
B) rising
C) unaffected
D) either rising or falling
Question 9The Taylor rule relates
a. inflation rates to unemployment rates.
b. the federal funds rate to inflation and output rates.
c. differences in the federal funds rate from its target to differences in inflation and unemployment from its target.
d. differences in the federal funds rate from its target to differences in inflation and unemployment from its target.
e. All of the above
Question 10In the case where money demand is completely interest insensitive (interest elasticity equals zero), an increase in the quantity of money will
a. increase income but leave the interest rate unchanged.
b. increase income and lower the interest rate.
c. lower the interest rate but leave income unchanged.
d. leave both income and the interest rate unchanged.
Question 11Following an increase in the saving rate, consumption per worker ________.
A) increases
B) decreases
C) is unaffected
D) may either rise or fall
Question 12The primary tool utilized by the Federal Reserve today in conducting monetary policy is
a. the discount rate.
b. reserve requirements.
c. open market operations.
d. selective credit controls.
Question 13With regard to the subject matter of American economic history, Hughes and Cain (2011) suggest that
(a) the presence of the highest living standards known in world history supports the claim that American history is largely a success story.
(b) the American economy is an economy with only successes but no failures.
(c) U.S. history provides a fragmented record of problem-solving and problem-producing
solutions to the challenges of economic development.
(d) there is no link between today's economy and the economy of yesteryear.
Question 14A default in the past makes it much more likely that a government will default again, even if the current government is a new regime with every intention of honoring its debts. Why might that be?
What will be an ideal response?
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