Consider the employment situation for the following three people: William lost his job four months ago. He would like to work, but gave up searching for a job six weeks ago. Frank quit his job six weeks ago and went back to school full time. Elizabeth lost her full-time job last month. Since then, she's worked one day per week through a temp agency
Elizabeth and William
Frank and Elizabeth
Frank and William
All of them are considered unemployed
None of them are considered unemployed
Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?
Allocative efficiency
Productive efficiency
Profit maximization
Marginal efficiency
Allocation maximization
Which one of the following scenarios would be least likely to change one's behavior?
The city of Saskatoon pays everyone a penny for each can they recycle to promote environmental protection
To make people eat healthier, the city of Bakersville tells its resident to eat whole wheat bread instead of white bread.
The country of Ravamock enacts a policy to fine companies 20% of their earnings if the safety standards are not acceptable.
A basketball team hires three new famous basketball stars who then clamor for other players to come and join their team to win the guaranteed championship.
Fiscal and monetary policies are less effective when
the a recession is caused by a real shock
the recession is caused by inflation
a firm has market dominance
the economic boom is caused by a real shock
Which of the following describes the process whose ultimate result is illustrated by the multiplier?
When people spend money, the money ends up in the hands or bank accounts of other people who then use that money in some way
When people see the government spending more money, they realize that the government thinks prices are low and thus a good time to buy things
When people see others spending money, they know that the economy is about to improve and so they also spend money
The multiplier exists because money today is always more valuable than money spent in the future due to inflation and interest. As such, when money is spent today, its value to the economy is a multiple of the value to the economy of money spent in the future.
As interest rates ________ , investment ___________.
decreases; decreases
increases; increases
increases; stays the same
decreases; increases
stays the same; decreases
The unemployment rate __________ if the number of discouraged workers increases.
decreases
increases
stays the same
There is not enough information to determine and answer
What is not a way to increase the money supply (Expansionary Policy)
Open market purchases
Lower the discount rate
Open market sales
Lower the reserve requirement
As the income tax increases, labor force participation _______, and as incentive _______ labor force increases.
increases; decreases
Which of the following is not a problem with inflation
Interacts with other taxes
Causes price confusion and money illusion
Painful to stop
Redistributes wealth
Can cause a closed economy
Maggie gets a 10% raise, and therefore decides to take on a higher mortgage. Inflation during this period has increased by 10%. What has Maggie experienced?
Money illusion
Wealth redistribution
Real GDP growth
Price confusion
Interaction with other taxes
What happens when inflation is higher than the expected inflation rate?
Nothing happens
Wealth is redistributed from the lender to the borrower
Wealth is redistributed from the borrower to the lender
Both the borrower and the lender are benefited.
John's real returns on his loan to Tim are negative. What should John do?
Save the money so someone else can borrow it and therefore increase investment
Spend the money because it is gaining value
Spend the money because it is losing value
Do nothing
If the Reserve releases $1,000 and the reserve rate is 5%, how much will the money supply change?
10,000
5,000
20,000
21,000
15,000
Which is not a way to decrease the money supply (Contractionary Policy)
Conduct open market sales
Raise discount rate
Lower discount rate
Raise Reserve requirement
What is one problem that arises from bank bailouts?
Systematic risk
Moral hazard
Confidence risk
Inflation
What is not a limit to fiscal policy?
Crowding Out
Drop in the Bucket
Matter of Timing
Real Shocks
Aggregate Demand Shocks
Which is not considered money?
Currency
Reserves
Checkable deposits
Savings deposits
Credit Cards
Which of the following is not a major role of the Federal Reserve?
Controlling the money supply
Setting income taxes
Clearing checks between banks
Lender of last resort
If your nominal wage rises faster than the price level then we can say your real wage has _______ and the purchasing power of your income has ________
risen;fallen
fallen;fallen
risen;risen
fallen;risen
What is market failure?
It refers to the inability of a market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost.
It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal private cost.
It refers to a situation where an entire sector of the economy (for example, the airline industry) collapses because of some unforeseen event.
It refers to a breakdown in a market economy because of widespread corruption in government.
Which of the following is an example of a good/service that is non-excludable and rival in consumption?
Radio Spectrum
National Defense
Charitable Donations
Lighthouse
Don't forget the markup in monopoly graphs! (Cover ATC)
Okay
What?
In a noncompetetive market, if the average cost is higher than the price, the market will
Suffer a loss
Break even
Make a profit
Be forced to exit the market
Why does the short run aggregate supply curve shift to the right in the long run, following a decrease in aggregate demand?
Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices.
Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and prices.
Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices.
Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices.
An increase in government spending growth will cause the Solow growth curve to
shift outward
shift inward
remain unchanged
first shift outward then shift inward
Which of the following will not cause aggregate demand to increase?
decreased imports and lower taxes
higher government spending and increased exports
increased net exports and higher taxes
faster money growth rate and increased wealth
