For multiple choice highlight the correct answer; for non-multiple choice write in your response. 1)ResourcesareallofthefollowingEXCEPT 1) A)scarceandthereforerequirechoicestobemade. B)limitedinquantityand canbeusedindifferentways. C)thethingsweusetoproducegoodsandservices. D)unlimitedandinabundance. 2)Who isassociatedwiththefollowingsummaryoftheeconomicwayofthinking:”Thetheoryofeconomicsdoesnot furnishabodyofsettledconclusionsimmediatelyacceptabletopolicy.Itisamethodratherthanadoctrine anapparatus ofthemind atechniqueofthinkingwhich helpsitsprocesser drawcorrectconclusions.” 2) A)AlfredMarshall B)PresidentHarryTruman C)JohnMaynardKeynes D)AdamSmith RecalltheApplication abouttheseverityoftherecessionof2007-2009toanswerthefollowing question(s). 3)AccordingtothisApplication it appearsthattheseverityoftherecessionof2007-2009willrivalthatoftherecessionof 3) A)1981-1982. B)1990-1991. C)1973-1975. D)2001. 4)Socialsecuritypaymentsareexamplesof 4) A)transferpayments. B)services. C)nondurablegoods. D)durablegoods. 5)Atradesurplusoccurs when 5) A)acountrysellsmoreabroadthanitpurchasesfromabroad. B) foreignfirmsopenmorestoresinacountrythanthecountryopensin foreigncountries. C)acountry’sfirmsopenmorestoresabroadthanforeignfirmsopeninthecountry. D)acountrypurchasesmorefromabroadthanothercountriespurchasefromit. 6)Ifinthethirdquarterof2010totalinvestmentspendingwas$4 768billionanddepreciationwas$3 292billion thennet investment was equalto6) A)$1 476billion. B)$3 292billion. C)$4 768billion. D)$8 060billion. 7)Whatarethetwocriticalmeasuresofanation’seconomichealth? 7) A)productionandincome B)incomeandspending C)wagesandraises D)salesandtaxes 8)Cost-of-livingadjustments are 8) A)automaticwagechangesbasedontheCPIwhichareincludedinsomeunioncontracts. B)qualitymeasurementsincludedinthecalculationoftheCPI. C)changesinthebasketofgoodsused incalculatingtheCPI. D)averagesofneighboringyears’basepricesusedinconstructingtheCPI. 9)Peoplewho wanttoworkbuthavestoppedlookingforworkbecausetheycouldnotfind jobsafteractivelysearching arecalled 9) A)discouragedworkers. B)unemployed. C)employed. D)empowered. RecalltheApplication aboutthetimeinvolvedinincluding cellphonesinthecalculationoftheCPItoanswerthe following question(s). 10)AccordingtothisApplication thefailureofincludingcellphonesinatimelymannerwhencalculatingtheCPIcaused thetelecommunications componentofthe price index 10) A)tobebiasedupward.B)tobecomenegative. C)tobebiaseddownward. D)toactuallyregisternoperceptiblebias. 11) Whenwages orbenefits areautomaticallyincreased based onthereported inflationrate it iscalled the adjustment. 11) A)changeinexports B)changeinimports C)cost-of-livingD)naturalflowofmoney 12)TheConsumerPriceIndex(CPI)differsfromachain-weightedpriceindexinthattheCPI 12) A)measuresthecostsofatypicalfixedbasketofgoodsovertime whilethechain-weightedindexdoesnot. B)comparesthepricesofallgoodsinoneyeartothepricesofallgoodsinotheryears. C)allowsforthegoodsconsumedinaneconomytochangeovertime whilethechain-weightedindexdoesnot. D)requirescalculationofGDP whilethechain-weightedindexdoesnot. RecalltheApplication abouttheeffectofglobalwarmingoneconomicgrowthtoanswerthefollowing question(s). 13)AccordingtothisApplication astudyofmunicipalitiesinLatinandSouthAmericafoundthataonedegreeCelsius rise intemperaturewas associated with 13) A)asmalldeclineinrealincomeandasmallincreaseinpercapitarealincome. B)adeclineinmunicipalpercapitaincome. C)no measurablechangeinpercapitaincome. D)aslightincreaseinmunicipalpercapitaincome. RecalltheApplication abouttherelationshipbetweenthegrowthinproductivityintheUnitedStatesandtheInternet andinformationtechnologytoanswerthefollowing question(s). U.S.productivitygrowthincreasedinthelasthalfof the1990s.Economists question whetherthecomputerandInternetrevolutionareresponsibleforthisincreasein productivitygrowth andwhethertheincreaseispermanentortemporary. 14)Accordingto thisApplication proponentsofa”new economy”have proclaimed that 14) A)therearebetterwaysto measureproductivitygrowththanthe impactofthecomputerandInternet. B)thecomputerandInternetrevolutionhaveledtopermanentincreasesinproductivitygrowth. C)thecomputerandInternetrevolutionhadlittletodo withincreasesinproductivitygrowthinthe1990s. D)includingaconsiderationofrelativepriceswouldenablebettercalculationsofGDPandproductivitygrowth. 15)Supposeconsumerssave5percentoftheirincomes.Ifthegovernmentcollects100dollarsintaxesfromeachtaxpayer privatesavingwill pertaxpayer. 15) A)increaseby$105 B)decreaseby$5 C)decreaseby95cents D)decreaseby$95 16)If thegovernmentincreaseditspurchasesofgoodsandservicesby$12 000 andthisresultedinaneventualincrease inGDPand income of$60 000 theMPSwouldbeequalto 16) A)0.2. B)0.4. C)0.8. D)2. 17)If thegovernmentdecreaseditspurchasesofgoodsandservicesby$4 000 andthisresultedinaneventualdecreasein GDPand incomeof$10 000 theMPCwould be equalto 17) A)2.5. B)1.5. C)0.6. D)0.4. .0/msohtmlclip1/01/clip_image002.jpg”> 18)RefertoFigure9.2.Amovementfrompointbtopointccouldbecausedbyasimultaneous and . 18) A)increaseintaxes;decreaseingovernmentspending B)increaseinthepriceofoil;massivecropfailure C)decreaseintaxes;decreaseinthepriceofoil D)increaseinthemoneysupply;increaseinthepriceofoil RecalltheApplication abouttheeffectiveness oftheObamastimuluspackageoneconomicrecoverytoanswerthe following question(s). 19)AccordingtotheApplication theCouncilofEconomicAdvisersused threedifferentwaystoevaluatethe effectivenessofthestimuluspackage.These included allofthefollowingEXCEPT 19) A)usingconventionaleconomicmodelstoestimatetheeffectsofthestimulus—essentiallyassumingconventional multipliersforgovernmentspendingandtaxes. B)comparinginternationalexperiencesofcountriesthatuseddifferentstimulusstrategiesandarguingthatthose countriesthathadthemostambitiousprogramsoffiscalstimulusimprovedthemost. C)usingstatisticalmethodstosuggestthatbothemploymentandeconomicgrowthwerehigherinthesecondandthird quartersof2009thenwouldhavebeenpredictedbystatisticalmodels. D)Usingstandardeconomicmethodsthatmeasuredtheeffectivenessofthetaxincreasesandspendingincreasesonthe reductionofunemploymentandon reversalofdeflationintheeconomy. 20)Whentheeconomyisproducingitspotentialoutput anincreaseingovernmentspendingmustnecessarilyreduce somecomponentofprivatespending.This phenomenon iscalled 20) A)fiscalpolicy.B)entitlementspending. C)themultipliereffect. D)crowdingout. 21)Whenthegovernmentconductsactivistfiscalpolicy whattypeofspendingdoes itusuallyuse? 21) A)entitlementandmandatoryspendingB)strategicspending C)discretionaryspending D)netinterestspending 22) The prospectoffuturedeficits 22) A)requiresagovernmenttoeliminateallentitlementspending. B)limitstheabilityofgovernmenttoconductfiscalpolicyinthenearfuture. C)wouldpromptgovernmenttovastlyexpanddiscretionaryspending. D)encouragesgovernmenttoconductexpansionaryfiscalpolicy. 23)LetC=40 0.8yandI=10.Autonomousconsumptionis 23) A)10. B)32. C)40. D)50. RecalltheApplication aboutJohnMaynardKeynes’influenceonworldeconomiestoanswerthefollowing question(s).Keynesbelieved thatmonetarypoliciescouldbeineffectiveduringdeeprecessions andthatgovernment neededtoadoptactivefiscalpoliciesinordertostimulatetheeconomy.Hisworkinfluencedanentiregenerationof economistsandprovidedtherationaleforactivistfiscalpolicytoday. 24)AccordingtothisApplication JohnMaynardKeynes’argumentthatgovernmentinterventionisneededduringtimes ofdeeprecession wouldbeillustrated as a(n) 24) A)increasedslopefortheplannedexpenditurescurve. B)upwardshiftoftheplannedexpenditurescurve. C)increasedslopeofthe long-runaggregatesupplycurve. D)upwardshiftoftheshort-runaggregatesupplycurve. 25)If themarginalpropensitytosaveis0.20 thenthevalueofthetaxmultiplieris 25) A)-5. B) -4. C)5. D)1.2. .0/msohtmlclip1/01/clip_image003.gif”>26)If theconsumptionfunctionisC=25 0.9yandincomeincreasesby$100 thensavingswillincreaseby 26) A)$10. B)$25. C)$90. D)$115. 27)Itisdifficulttodetermineexpectedrealratesofinterestbecause 27) A)weneverknowexactlywhatinflationratespeopleanticipate. B)theinflationrateisasubjectivemeasurement. C)wecannotmeasuretheinflationrate. D)wecannotmeasurethenominalinterestrate. 28)Thesecurityprovidedbythefederalgovernmentonmoneyinbanksiscalled28) A)ahedgefund. B)depositinsurance. C)investmentequity. D)socialsecurity. 29)Supposeyouhave$400toinvestatanominalinterestrateof5percent.If theinflationrateis2percent thenthereal returnonyour investment is approximately 29) A)$12. B)$20. C)$28. D)$36. RecalltheApplication abouttheFedincreasing bankreservesduringthefinancial crisisin2008toanswerthe following question(s). Duringtheheightofthefinancial crisisinSeptember 2008 TheFedinjected largeamountsof reservesintobanks andinthenextmonth theystartedpayinginteresttobanksonthesereserves.Priortothistime banksearnednointerestoneitherrequiredorexcessreserves. 30)AccordingtothisApplication theFed injectedlargeamountsofreservesintobanksduringthe2008financialcrisis. TheFedneedsto makesurethat inthelongrun banksdonotloanouttoomanyofthesereservesortheresultwillbe 30) A)higherinterestrates.B)higherinflation. C)additionalunemployment. D)asmallermoneymultiplier. 31)Supposeabankhas$1millionindeposits areserveratioof25percent andreservesof$250 000.Thisbankhasexcess reserves of 31) A)$250 000. B)$125 000. C)$62 500. D)$0. 32)Abankmaymakeloans untilits 32) A)totalassetsareexhausted. B) requiredreservesareexhausted. C)totalliabilitiesareexhausted.D)excessreservesareexhausted. 33)AnopenmarketsalebytheFedcausesthevalueofthedollarto 33) A)rise increasingnetexports. B) fall reducingnetexports. C)rise reducingnetexports. D)fall increasingnetexports. .0/msohtmlclip1/01/clip_image003.gif”>34)Basedonthemodelofthe moneymarket whenrealGDPincreases theequilibriuminterestrateshould 34) A)staythesame. B)decrease. C)increase. D)increasetothesameextentthatthesupplyofmoneyincreases. 35)Wagesandpricesthroughoutaneconomyarelessthanpreviousinflationrateswhenwhatoccurs? 35) A)Moregoodsareexportedabroad. B)Outputexceedspotentialoutput. C)Outputislessthanpotentialoutput. D)Importsincreasedramatically. RecalltheApplication aboutthelinks betweenpresidentialelections andmacroeconomicperformancetoanswerthe following question(s). Earlytheoriesonthelinks betweenpresidentialelections andmacroeconomic performance focusedonincumbent presidentstryingtomanipulatetheeconomyintheirfavortogainreelection. Subsequent researchbegantoincorporateotherfactors.Thefirstinnovation wasrecognizingthatpolitical partiescanhave differentgoalsorpreferences onhowtomanipulatetheeconomy.IntheUnitedStates Republicanshistoricallyhave beenmoreconcernedaboutfighting inflation whereasDemocratshaveconcentratedonreducingunemployment. The secondmajorinnovation wasrecognizingthatthepublicwouldanticipatethatpoliticianswilltrytomanipulate the economybeforeanelection. 36)Republicanshavehistoricallybeenprimarilyconcernedwithfightinginflation.Assumingthisistrue thenaftera Republicanelectoralvictory thepubliccouldanticipatewhichofthefollowingeconomicactionstofightinflation? 36) A)adecreaseinthediscountrateandanincreasein reserverequirements B)openmarketsalesandadecreaseingovernmentspending C)openmarketpurchasesandadecreaseintaxes D)an increaseintaxesandanincreaseingovernmentspending RecalltheApplication abouttheseverehyperinflationinZimbabwe toanswerthefollowing question(s). InJune 2008 theconsumerpriceindexinZimbabwe was8million percenthigherthanitwasayearbefore. 37)AccordingtothisApplication ZimbabweandictatorRobertMugabetookwhatactiontopayhis soldiers tobribehis supporters and to keepthegovernmentfunctioning? 37) A)HedevelopednewsourcesofenergywhichheexportedtoAsiaandEurope. B)Hehadhiscentralbankprintnewbanknotes. C)HeincreasedexportstootherAfricannations. D)Heraisedtaxesandincreasedtaxrevenues. .0/msohtmlclip1/01/clip_image003.gif”>38)Inthe long-run reducedmoneygrowthresultsin whilehavingnoeffectonthelevelofoutput. 38) A)lowerinterestratesandlowerinflation B)higherinterestratesandnochangeininflation C)lowerinflationandlowerunemployment D)lowerinterestratesandlesspurchasingofdurablegoods RecalltheApplication abouthowtoestimatetheshiftsinthenaturalrateofunemployment toanswerthefollowing question(s). 39)RecalltheApplication.Undernormalcircumstances thehighertheunemploymentrate the jobvacancies therewillbe.Overtime this wouldtendto thenaturalrateof unemployment. 39) A)fewer;increase B) fewer;decrease C)more;increase D)more;decrease 40)Tohelppullaneconomyoutofa recessionandputadditionalincomeinthehandsofthepublic agovernmentcan forceitsexpenditures to its revenues and createa . 40) A)reduce;deficit B)stimulate;depression C)exceed;deficit D)exceed;specialtaxes II. SHORT ANSWER(5questions 4pointseach). Writethephrasethatbestcompleteseachstatementor answerthequestion. 41)DefinetransferpaymentsandexplainwhytheyarenotincludedinthegovernmentpurchasessectionoftheGDP accounts. 41) 42) Whatis hyperinflation? 42) .0/msohtmlclip1/01/clip_image004.gif”>43)ThecapitaldeepeningmodeldevelopedbyRobertSolowshowsthe linksamongwhichthreeitems? 43) 44)Explainthedifferencesbetweenafederalbudgetdeficit afederalbudgetsurplus andabalancedfederalbudget. 44) 45) Whydoour politicalleadersfavor exports ofU.S.goods and “buyAmerican”policies? 45)
