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If a major hurricane devastated industry in the eastern United...

If a major hurricane devastated industry in the eastern United States, the result would most likely cause

 

an increase in aggregate demand.

a decrease in aggregate demand.

an increase in employment.

a decrease in aggregate supply.

an increase in aggregate supply.

2. 

All of the following will cause an increase in economic growth except

 

an increase in the degree of excess capacity.

an increase in the amount of capital goods.

a change in technology.

an increase in the factors of production.

an increase in education.

3. 

What will happen in an economy where the demand for loanable funds is greater than the supply?

 

investment spending will increase.

real GDP will increase.

consumer spending will increase.

interest rates will increase.

price level will increase.

4. 

Assume disposable income for an economy is $10,000, consumption is $7,500, and the marginal propensity to save (MPS) is .25. If disposable income increases by $1,000, what is the amount of consumption in this economy?

 

$10,000

$11,000

$8,250

$8,500

$7,500

5. 

In the circular flow diagram, profit flows from the

 

product market to the firms.

firms to the product market to the households.

factor market to the households.

factor market to the firms.

product market to the households.

6. 

Which of the following would be an example of structural unemployment?

 

A manual type-setter's job is eliminated by computer automation.

A college graduate is looking for his first job.

A wildland firefighter loses his job at the end of every fire season.

A worker loses her job as a result of decreased consumer spending.

A worker moves from Florida to New York to get a job on Broadway.

7. 

Which of the following might cause stagflation in an open-market economy operating at equilibrium in the intermediate range of the aggregate supply curve?

 

The government sets a price ceiling for gasoline below market equilibrium.

Consumers fear a recession so they cut back on spending causing massive layoffs in major cities across the United States.

The price of oil decreases as new reserves are found in the Alaskan wilderness.

An earthquake causes a serious rupture in the Alaskan oil pipeline that will take 6 months to repair.

Over the course of time, companies begin to provide educational opportunities for their employees.

8. 

If the Producer's Price Index changes from 100 to 90, economists will know that

 

the PPI has no relation to unemployment or inflation.

unemployment is increasing in the economy.

inflation is increasing in the economy.

inflation is decreasing in the economy.

unemployment is decreasing in the economy.

9. 

The production possibilities curve may shift outward as a result of a(n)

 

increase in consumer spending.

decrease in short run aggregate supply.

decrease in costs of production.

increase in worker training courses.

increase in short run aggregate supply.

10. 

Which of the following best explains why the aggregate demand curve is down sloping?

 

Rising interest rates cause investment to increase.

Low interest rates make American goods appear cheaper which increases net exports and the quantity of real output purchased.

As price levels increase, consumer spending increases.

Purchasing power increases as wealth decreases.

As price levels decrease, demand for imports increases.

11. 

Increased government spending to aid struggling African nations with feeding their population would be counted in the

 

surplus account.

checking account.

financial account.

current account.

deficit account.

12. 

The best way to increase investment while holding real output level would be to

 

decrease government spending and decrease the money supply.

increase government spending and decrease the money supply.

decrease government spending and increase the money supply.

increase government spending and increase the money supply.

increase government spending and decrease taxes.

13. 

Contractionary monetary policy would most likely result in

 

increased investment.

increased interest rates.

increased real GDP.

decreased consumer spending.

decreased aggregate supply.

15. 

An open market sale by the Federal Reserve will increase

 

business taxes.

the money supply.

investment spending.

interest rates.

bank loans.

16. 

The United States dollar will appreciate compared to the Costa Rican peso under which of the following conditions? 

 

There is a negative balance in the current account.

Interest rates increase in the United States.

Imports from Costa Rica increase as a result of CAFTA.

There is an increase in immigration from Costa Rica to the United States.

The Federal Reserve makes an open market purchase.

17. 

If exports from the United States increased, what would most likely happen to real gross domestic product and price level? 


Real GDP / Price Level

 

Increase / Decrease

Decrease / Increase

Decrease / Decrease

Increase / No Change

Increase / Increase

18. 

A worker who is unemployed while he switches from building houses to teaching school is

 

cyclically unemployed

an employed individual

structurally unemployed

not unemployed

frictionally unemployed

19. 

When a bank's excess reserves increase by $375 after $500 was deposited in the bank, the reserve requirement must be

 

10 percent.

30 percent.

15 percent.

20 percent.

25 percent.

21. 

Juan can either mow 2 lawns or clean 4 windows in 5 hours. Danny can either mow 5 lawns or clean 25 windows in 5 hours. Based on this information, which of the following is true?

 

Juan has a comparative advantage in the production of both goods.

Juan has a comparative advantage in window cleaning, while Danny has an absolute advantage in mowing lawns.

Danny has a comparative advantage in the production of both goods.

Juan has a comparative advantage in mowing lawns, while Danny has a comparative advantage in window cleaning.

Juan has a comparative advantage in window cleaning, while Danny has a comparative advantage in mowing lawns.

22. 

Danielle recently moved to the United States with $10,000 of acceptable currency that had never been in the system before. Assume Danielle deposits the money into First National Bank. If the central bank has set a required reserve ratio of 20 percent, what is the maximum amount of money First National Bank can create?

 

$40,000

$5,000

$4,000

$50,000

$800

23. 

If the workforce is paid more frequently, then

 

nominal output will decrease.

velocity of money will increase.

the money supply will increase.

price level will decrease.

real output will decrease.

24. 

Which of the following will cause the production possibilities frontier to shift outward?

 

An increase in government spending.

An increase in transfer payments.

An increase in aggregate demand.

A decrease in long-run aggregate supply.

An increase in worker productivity.

25. 

If Congress removes all tariffs on Chinese products in response to a new free trade agreement with China, then

 

fewer Chinese goods and services will be sold.

aggregate demand will shift left.

resources will be used more efficiently.

imports will decrease.

aggregate supply will shift left.

26. 

Assuming that crowding out is not an issue, if Congress increases business taxes at the same time that the Federal Reserve conducts an open market sale, output and price level are likely to change in which of the following ways?


Output / Price Level

 

Decrease / Increase

Decrease / Indeterminate

Decrease / Decrease

Indeterminate / Decrease

Increase / Decrease

27. 

If the required reserve ratio is 5 percent, then the money multiplier is

 

0.5

20

2

5

0.2

28. 

If the economy is operating in the classical (vertical) range of the aggregate supply graph, then a decrease in personal income taxes will impact output and price level in which of the following ways?


Output / Price Level

 

Increase / No Change

No Change / Increase

No Change / Decrease

Decrease / Decrease

Increase / Increase

29. 

Assume a nation's economy is operating in equilibrium. If exports increase and imports decrease, how will output, employment, and price level likely change?


Output / Employment / Price Level

 

Increase / Increase / Increase

Decrease / Decrease / Decrease

Increase / Decrease / Increase

Decrease / Decrease / Increase

Increase / Increase / Decrease

30. 

If the government wants to increase spending on public works by $100 billion to stimulate the economy without increasing inflation, it would

 

increase taxes by more than $100 billion.

decrease taxes by less than $100 billion.

decrease taxes by $100 billion.

increase taxes by $100 billion.

increase taxes by less than $100 billion.

Answer & Explanation
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