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A small reduction in a country's growth rate is a concern to policymakers because

a. this leads to deflation, which makes people feel worse off.

b. a reduction usually leads to future reductions until finally the economy stagnates.

c. policymakers focus too much on economic growth and not enough on increasing savings rates.

d. a small change can have large effects on per capita GDP over time.

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Related questions

Q1. In the short run, an increase in the discount rate usually

a. causes the equilibrium level of real GDP and the price level to fall.

b. leads banks to hold fewer excess reserves.

c. leads to an increase in the price of existing bonds.

d. results in decreases in other interest rates.

Q2. Both Keynesians and monetarists agree that monetary policy works by shifting aggregate supply.

a. true

b. false

Q3. The effect of expansionary monetary policy is to

a. increase real output and decrease the price level.

b. decrease real output and increase the price level.

c. increase real output and increase the price level.

d. decrease real output and decrease the price level.

Q4. The price of bonds and the interest rate are

a. unrelated.

b. inversely related.

c. related, but we are not sure how.

d. positively related.

Q5. If the Fed increases the reserve requirement,

a. banks will issue more loans.

b. consumers will save more.

c. banks will issue fewer loans.

d. consumers will save less.

Q6. A central bank that engages in inflation targeting is following a monetary rule.

a. true

b. false

Q7. The Federal Reserve increased the money supply significantly during the Great Depression, but prices continued to fall anyway.

a. true

b. false

Q8. Keynesian theory argues that

a. decreases in the money supply lead to increases in the interest rate which increases investment which increases the level of real GDP.

b. increases in the money supply lead to decreases in the interest rate which increases investment which increases the level of real GDP.

c. increases in the money supply lead to decreases in the interest rate which decreases investment which decreases the level of real GDP.

d. increases in the money supply cause consumers to spend more which reduces the unemployment rate and therefore increases real GDP.

Q9. The effect of contractionary monetary policy is to

a. decrease real output and increase the price level.

b. increase real output and decrease the price level.

c. increase real output and increase the price level.

d. decrease real output and decrease the price level.

Q10. Keynesian economists believe that monetary policy works through its effect on

a. long-run aggregate supply.

b. the interest rate.

c. consumer confidence.

d. the federal budget deficit.

Q11. An expansionary monetary policy results in lower interest rates, which in turn

a. lead to higher rates of taxation.

b. cause firms to invest more.

c. lead to lower bond prices.

d. cause consumers to save more.

Q12. Contractionary monetary policy is used to combat recessions.

a. true

b. false

Q13. Economic growth can also be defined as the cumulative contribution of the rate of growth of capital, the rate of growth of labor, and the rates of growth of capital and labor productivity.

a. true

b. false

Q14. Small differences in the annual growth rate of a country add up to large differences over time because of compounding.

a. true

b. false

Q15. Economic growth occurs when

a. there is an increase in the inflation rate.

b. there is an increase in the amount of capital.

c. there is an increase in the unemployment rate.

d. the production possibilities curve becomes flatter.

Q16. Which one of the following is TRUE?

a. Small changes in the annual growth rate amount to a measurable difference in the long-term growth trend of a country.

b. For every country that experiences an increase in its growth rate, there must be another experiencing a decline.

c. A well-defined system of property rights benefits only the wealthy, and consequently it produces income inequality that will stifle economic growth.

d. Restricting imports will enhance a country's economic growth.

Q17. Economic growth is reflected in

a.

growth in total output.

b. an increase in tax revenue.

c. increases in the level of employment.

d. increase in per capita real GDP.

Q18. Economic growth is reflected in the production possibilities curve becoming flatter.

a. true

b. false

Q19. Research has shown that the growth of developing countries is most strongly enhanced by

a. providing a good secondary education.

b. increasing the money supply.

c. providing incentives to have large families.

d. providing colleges and universities.

Q20. Which of the following is the most important factor affecting economic growth?

a. the rate of interest

b. the exchange rate

c. the price level

d. the rate of saving

Q21. Secondary schooling makes measurable contributions to economic growth in developing countries.

a. true

b. false

Q22. Poorly defined property rights inhibit economic growth.

a. true

b. false

Q23. Which one of the following helps preserve incentives to develop new technologies?

a. tariffs

b. income taxes

c. patents

d. quantity restrictions on imports

Q24. Studies indicate that

a. there is no relationship between economic growth and saving.

b. there is a negative relationship between economic growth and saving.

c. there is a positive relationship between economic growth and saving.

d. saving does not contribute to capital formation.

Q25. The European Union is

a. an organization established to resolve trade disputes among member nations.

b. a group of countries that impose tariffs on one another's agricultural goods.

c. a restricted trade zone.

d. a common market.

Q26. Which one of the following is FALSE?

a. Trade of goods facilitates the exchange of intellectual property as well.

b. The end result of trade is that richer countries take advantage of poorer ones.

c. A country enjoys an absolute advantage if it can produce a good with fewer resources than any other country can.

d. Countries that engage in trade will end up specializing according to their own comparative advantage.

Q27. If there are two goods and two countries, then one country can have

a. an absolute advantage in both goods but a comparative advantage in only one good.

b. an absolute advantage in both goods and a comparative advantage in both goods.

c. an absolute advantage in neither good and a comparative advantage in both goods.

d. an absolute advantage in one good, an absolute disadvantage in the other good, and a comparative advantage in neither.

Q28. An infant industry is one in which

a. the firms are too new and too small to compete internationally.

b. no country has a comparative advantage.

c. no country has an absolute advantage.

d. the products are only consumed domestically.

Q29. The European Union is an example of a common market.

a. true

b. false

Q30. An import quota will make the supply curve for the imported good

a. unitary elastic.

b. negatively sloped.

c. perfectly elastic.

d. perfectly inelastic.

Q31. If the infant-industry argument is used to protect an industry that has already matured then

a. consumers lose because they pay a price for a product which is below the world price.

b. consumers lose because they pay a price for a product which is above the world price.

c. no one loses.

d. stockholders lose because the firm cannot compete with other firms.

Q32. Protection should be withdrawn from an infant-industry when the companies in the industry

a. reach a sufficient size to compete with foreign firms.

b. become profitable.

c. are listed on the domestic stock exchange.

d. double their sales revenues.

Q33. Which of the following is a true statement?

a. Exporters benefit from trade and importers do not.

b. Free trade harms domestic producers of goods that face import competition.

c. Consumers benefit from trade and producers do not.

d. Everyone benefits from free trade in the short run.

Q34. In the United States today, imports are over

a. 22 percent of GDP.

b. 26 percent of GDP.

c. 14 percent of GDP.

d. 18 percent of GDP.

Q35. Table 16.6

Product Country X Country Y

Gallons of Ice Cream 2,000 1,000

Yards of Textiles 6,000 2,000

Table 16.6 shows the combinations of quantities of two goods, gallons of ice cream and yards of textiles, that can be produced with all of the resources available in two countries, X and Y.

Refer to Table 16.6. Which of the following statements is TRUE?

a. Country X has a lower opportunity cost of producing ice cream than does Country Y.

b. Country Y has a comparative advantage in producing textiles.

c. Country X has a comparative advantage in producing ice cream.

d. In Country X, the opportunity cost of producing a gallon of ice cream is three yards of textiles.

Q36. Table 16.1

Alpha's Production Possibilities

A B C D E

Cookies 4 3 2 1 0

Coffee 0 5 10 15 20

Beta's Production Possibilities

A B C D E

Cookies 8 6 4 2 0

Coffee 0 6 12 18 24

Table 16.1 shows the quantities of cookies and coffee that can be produced with the full amount of resources available in each of two countries, Alpha and Beta.

Refer to Table 16.1. The table shows the production possibilities of cookies and coffee in Alpha and Beta measured in tons. In Alpha the domestic cost of 1 ton of cookies

a. is 5 tons of coffee.

b. changes with the level of coffee production.

c. changes with the level of cookie production.

d. averages 4 tons of coffee.

Q37. Table 16.1

Alpha's Production Possibilities

A B C D E

Cookies 4 3 2 1 0

Coffee 0 5 10 15 20

Beta's Production Possibilities

A B C D E

Cookies 8 6 4 2 0

Coffee 0 6 12 18 24

Table 16.1 shows the quantities of cookies and coffee that can be produced with the full amount of resources available in each of two countries, Alpha and Beta.

Refer to Table 16.1. If these two countries, Alpha and Beta, specialize based on comparative advantage

a. Beta will specialize in producing both items.

b. Alpha will specialize in cookies, and Beta will specialize in coffee production.

c. Alpha will specialize in coffee, and Beta will specialize in cookies.

d. Alpha will specialize in producing both items.

Q38. A country is made richer by its exports and poorer by its imports.

a. true

b. false

Q39. The demand for Japanese yen will increase when

a. Japan becomes more productive relative to the United States.

b. Americans change preferences in favor of domestically produced goods.

c. America is perceived as more stable politically and economically than Japan.

d. real interest rates in Japan fall.

Q40. If labor productivity improves in India relative to other countries,

a. the demand for the Indian rupee will decrease, leading to its appreciation.

b. the demand for the Indian rupee will decrease, leading to its depreciation.

c. the demand for the Indian rupee will increase, leading to its depreciation.

d. the demand for the Indian rupee will increase, leading to its appreciation.

Q41. Assume that there is an increased demand in the United States for Australian wines. If all other factors are held constant, this will result in

a. an appreciation of the Australian dollar.

b. a movement along the demand curve for Australian wine.

c. a decrease in the supply of U.S. dollars in the foreign exchange market.

d. an appreciation of the U.S. dollar.

Q42. Capital account transactions occur

a. when a U.S. citizen purchases stock in a U.S. corporation.

b. because of foreign investments.

c. when you move money from one U.S. bank to another U.S. bank.

d. when a U.S. company purchases goods from a foreign company.

Q43. When a country intervenes in foreign currency markets to maintain a fixed exchange rate

a. it is engaged in hedging.

b. it increases the foreign exchange risk faced by its citizens.

c. it does so by using its foreign exchange reserves.

d. it smoothes out fluctuations in the level of business activity.

Q44. An increase in the U.S. demand for Japanese yen causes

a. an increase in the dollar-price of yen.

b. an increase in the demand for U.S. goods.

c. an increase in the yen-price of dollars.

d. a decrease in the supply of yen.

Q45. Other factors held constant, a rise in the price level in Japan that exceeds the rise in the price level in other countries will most likely result in

a. a decrease in the supply of the Japanese yen.

b. an increase in the supply of Japanese goods.

c. a depreciation of the dollar.

d. a decline in the level of Japanese exports.

Q46. The fact that the United States has a trade deficit means that

a. U.S. workers cannot compete with workers overseas.

b. the United States has a surplus in its capital account.

c. interest rates in the United States are low compared to the world average.

d. the United States has a deficit in its capital account.

Q47. Which of the following statements is true about the role of gifts given to U.S. citizens from foreigners?

a. Gifts are only included in the balance of payments if the gift is over $1,000,000.

b. Gifts given to U.S. citizens are not included in the balance of payments, but gifts given to foreigners are included as deficit items.

c. Gifts are included in the balance of payments.

d. Gifts are not included in the balance of payments.

Q48. Every transaction concerning the exportation of American goods constitutes a

a. demand for foreign currency and a supply of dollars.

b. demand for dollars, with no effect on markets for foreign currencies.

c. supply of foreign currency, with no effect on the market for dollars.

d. supply of foreign currency and demand for dollars.

Q49. If the capital account is in surplus, the current account will be in deficit.

a. true

b. false

Q50. The balance of payments consists of the

a. capital account, official reserve transactions account, and recent account.

b. current account, official reserve transactions account, and monetary account.

c. current account, capital account, and official reserve transactions account.

d. current account, capital account, and gold flows.

Q1. In the short run, an increase in the discount rate usually

a. causes the equilibrium level of real GDP and the price level to fall.

b. leads banks to hold fewer excess reserves.

c. leads to an increase in the price of existing bonds.

d. results in decreases in other interest rates.

Q2. Both Keynesians and monetarists agree that monetary policy works by shifting aggregate supply.

a. true

b. false

Q3. The effect of expansionary monetary policy is to

a. increase real output and decrease the price level.

b. decrease real output and increase the price level.

c. increase real output and increase the price level.

d. decrease real output and decrease the price level.

Q4. The price of bonds and the interest rate are

a. unrelated.

b. inversely related.

c. related, but we are not sure how.

d. positively related.

Q5. If the Fed increases the reserve requirement,

a. banks will issue more loans.

b. consumers will save more.

c. banks will issue fewer loans.

d. consumers will save less.

Q6. A central bank that engages in inflation targeting is following a monetary rule.

a. true

b. false

Q7. The Federal Reserve increased the money supply significantly during the Great Depression, but prices continued to fall anyway.

a. true

b. false

Q8. Keynesian theory argues that

a. decreases in the money supply lead to increases in the interest rate which increases investment which increases the level of real GDP.

b. increases in the money supply lead to decreases in the interest rate which increases investment which increases the level of real GDP.

c. increases in the money supply lead to decreases in the interest rate which decreases investment which decreases the level of real GDP.

d. increases in the money supply cause consumers to spend more which reduces the unemployment rate and therefore increases real GDP.

Q9. The effect of contractionary monetary policy is to

a. decrease real output and increase the price level.

b. increase real output and decrease the price level.

c. increase real output and increase the price level.

d. decrease real output and decrease the price level.

Q10. Keynesian economists believe that monetary policy works through its effect on

a. long-run aggregate supply.

b. the interest rate.

c. consumer confidence.

d. the federal budget deficit.

Q11. An expansionary monetary policy results in lower interest rates, which in turn

a. lead to higher rates of taxation.

b. cause firms to invest more.

c. lead to lower bond prices.

d. cause consumers to save more.

Q12. Contractionary monetary policy is used to combat recessions.

a. true

b. false

Q13. Economic growth can also be defined as the cumulative contribution of the rate of growth of capital, the rate of growth of labor, and the rates of growth of capital and labor productivity.

a. true

b. false

Q14. Small differences in the annual growth rate of a country add up to large differences over time because of compounding.

a. true

b. false

Q15. Economic growth occurs when

a. there is an increase in the inflation rate.

b. there is an increase in the amount of capital.

c. there is an increase in the unemployment rate.

d. the production possibilities curve becomes flatter.

Q16. Which one of the following is TRUE?

a. Small changes in the annual growth rate amount to a measurable difference in the long-term growth trend of a country.

b. For every country that experiences an increase in its growth rate, there must be another experiencing a decline.

c. A well-defined system of property rights benefits only the wealthy, and consequently it produces income inequality that will stifle economic growth.

d. Restricting imports will enhance a country's economic growth.

Q17. Economic growth is reflected in

a.

growth in total output.

b. an increase in tax revenue.

c. increases in the level of employment.

d. increase in per capita real GDP.

Q18. Economic growth is reflected in the production possibilities curve becoming flatter.

a. true

b. false

Q19. Research has shown that the growth of developing countries is most strongly enhanced by

a. providing a good secondary education.

b. increasing the money supply.

c. providing incentives to have large families.

d. providing colleges and universities.

Q20. Which of the following is the most important factor affecting economic growth?

a. the rate of interest

b. the exchange rate

c. the price level

d. the rate of saving

Q21. Secondary schooling makes measurable contributions to economic growth in developing countries.

a. true

b. false

Q22. Poorly defined property rights inhibit economic growth.

a. true

b. false

Q23. Which one of the following helps preserve incentives to develop new technologies?

a. tariffs

b. income taxes

c. patents

d. quantity restrictions on imports

Q24. Studies indicate that

a. there is no relationship between economic growth and saving.

b. there is a negative relationship between economic growth and saving.

c. there is a positive relationship between economic growth and saving.

d. saving does not contribute to capital formation.

Q25. The European Union is

a. an organization established to resolve trade disputes among member nations.

b. a group of countries that impose tariffs on one another's agricultural goods.

c. a restricted trade zone.

d. a common market.

Q26. Which one of the following is FALSE?

a. Trade of goods facilitates the exchange of intellectual property as well.

b. The end result of trade is that richer countries take advantage of poorer ones.

c. A country enjoys an absolute advantage if it can produce a good with fewer resources than any other country can.

d. Countries that engage in trade will end up specializing according to their own comparative advantage.

Q27. If there are two goods and two countries, then one country can have

a. an absolute advantage in both goods but a comparative advantage in only one good.

b. an absolute advantage in both goods and a comparative advantage in both goods.

c. an absolute advantage in neither good and a comparative advantage in both goods.

d. an absolute advantage in one good, an absolute disadvantage in the other good, and a comparative advantage in neither.

Q28. An infant industry is one in which

a. the firms are too new and too small to compete internationally.

b. no country has a comparative advantage.

c. no country has an absolute advantage.

d. the products are only consumed domestically.

Q29. The European Union is an example of a common market.

a. true

b. false

Q30. An import quota will make the supply curve for the imported good

a. unitary elastic.

b. negatively sloped.

c. perfectly elastic.

d. perfectly inelastic.

Q31. If the infant-industry argument is used to protect an industry that has already matured then

a. consumers lose because they pay a price for a product which is below the world price.

b. consumers lose because they pay a price for a product which is above the world price.

c. no one loses.

d. stockholders lose because the firm cannot compete with other firms.

Q32. Protection should be withdrawn from an infant-industry when the companies in the industry

a. reach a sufficient size to compete with foreign firms.

b. become profitable.

c. are listed on the domestic stock exchange.

d. double their sales revenues.

Q33. Which of the following is a true statement?

a. Exporters benefit from trade and importers do not.

b. Free trade harms domestic producers of goods that face import competition.

c. Consumers benefit from trade and producers do not.

d. Everyone benefits from free trade in the short run.

Q34. In the United States today, imports are over

a. 22 percent of GDP.

b. 26 percent of GDP.

c. 14 percent of GDP.

d. 18 percent of GDP.

Q35. Table 16.6

Product Country X Country Y

Gallons of Ice Cream 2,000 1,000

Yards of Textiles 6,000 2,000

Table 16.6 shows the combinations of quantities of two goods, gallons of ice cream and yards of textiles, that can be produced with all of the resources available in two countries, X and Y.

Refer to Table 16.6. Which of the following statements is TRUE?

a. Country X has a lower opportunity cost of producing ice cream than does Country Y.

b. Country Y has a comparative advantage in producing textiles.

c. Country X has a comparative advantage in producing ice cream.

d. In Country X, the opportunity cost of producing a gallon of ice cream is three yards of textiles.

Q36. Table 16.1

Alpha's Production Possibilities

A B C D E

Cookies 4 3 2 1 0

Coffee 0 5 10 15 20

Beta's Production Possibilities

A B C D E

Cookies 8 6 4 2 0

Coffee 0 6 12 18 24

Table 16.1 shows the quantities of cookies and coffee that can be produced with the full amount of resources available in each of two countries, Alpha and Beta.

Refer to Table 16.1. The table shows the production possibilities of cookies and coffee in Alpha and Beta measured in tons. In Alpha the domestic cost of 1 ton of cookies

a. is 5 tons of coffee.

b. changes with the level of coffee production.

c. changes with the level of cookie production.

d. averages 4 tons of coffee.

Q37. Table 16.1

Alpha's Production Possibilities

A B C D E

Cookies 4 3 2 1 0

Coffee 0 5 10 15 20

Beta's Production Possibilities

A B C D E

Cookies 8 6 4 2 0

Coffee 0 6 12 18 24

Table 16.1 shows the quantities of cookies and coffee that can be produced with the full amount of resources available in each of two countries, Alpha and Beta.

Refer to Table 16.1. If these two countries, Alpha and Beta, specialize based on comparative advantage

a. Beta will specialize in producing both items.

b. Alpha will specialize in cookies, and Beta will specialize in coffee production.

c. Alpha will specialize in coffee, and Beta will specialize in cookies.

d. Alpha will specialize in producing both items.

Q38. A country is made richer by its exports and poorer by its imports.

a. true

b. false

Q39. The demand for Japanese yen will increase when

a. Japan becomes more productive relative to the United States.

b. Americans change preferences in favor of domestically produced goods.

c. America is perceived as more stable politically and economically than Japan.

d. real interest rates in Japan fall.

Q40. If labor productivity improves in India relative to other countries,

a. the demand for the Indian rupee will decrease, leading to its appreciation.

b. the demand for the Indian rupee will decrease, leading to its depreciation.

c. the demand for the Indian rupee will increase, leading to its depreciation.

d. the demand for the Indian rupee will increase, leading to its appreciation.

Q41. Assume that there is an increased demand in the United States for Australian wines. If all other factors are held constant, this will result in

a. an appreciation of the Australian dollar.

b. a movement along the demand curve for Australian wine.

c. a decrease in the supply of U.S. dollars in the foreign exchange market.

d. an appreciation of the U.S. dollar.

Q42. Capital account transactions occur

a. when a U.S. citizen purchases stock in a U.S. corporation.

b. because of foreign investments.

c. when you move money from one U.S. bank to another U.S. bank.

d. when a U.S. company purchases goods from a foreign company.

Q43. When a country intervenes in foreign currency markets to maintain a fixed exchange rate

a. it is engaged in hedging.

b. it increases the foreign exchange risk faced by its citizens.

c. it does so by using its foreign exchange reserves.

d. it smoothes out fluctuations in the level of business activity.

Q44. An increase in the U.S. demand for Japanese yen causes

a. an increase in the dollar-price of yen.

b. an increase in the demand for U.S. goods.

c. an increase in the yen-price of dollars.

d. a decrease in the supply of yen.

Q45. Other factors held constant, a rise in the price level in Japan that exceeds the rise in the price level in other countries will most likely result in

a. a decrease in the supply of the Japanese yen.

b. an increase in the supply of Japanese goods.

c. a depreciation of the dollar.

d. a decline in the level of Japanese exports.

Q46. The fact that the United States has a trade deficit means that

a. U.S. workers cannot compete with workers overseas.

b. the United States has a surplus in its capital account.

c. interest rates in the United States are low compared to the world average.

d. the United States has a deficit in its capital account.

Q47. Which of the following statements is true about the role of gifts given to U.S. citizens from foreigners?

a. Gifts are only included in the balance of payments if the gift is over $1,000,000.

b. Gifts given to U.S. citizens are not included in the balance of payments, but gifts given to foreigners are included as deficit items.

c. Gifts are included in the balance of payments.

d. Gifts are not included in the balance of payments.

Q48. Every transaction concerning the exportation of American goods constitutes a

a. demand for foreign currency and a supply of dollars.

b. demand for dollars, with no effect on markets for foreign currencies.

c. supply of foreign currency, with no effect on the market for dollars.

d. supply of foreign currency and demand for dollars.

Q49. If the capital account is in surplus, the current account will be in deficit.

a. true

b. false

Q50. The balance of payments consists of the

a. capital account, official reserve transactions account, and recent account.

b. current account, official reserve transactions account, and monetary account.

c. current account, capital account, and official reserve transactions account.

d. current account, capital account, and gold flows.

Question 32

  1. Tim, a citizen of the United States living in Virginia, buys a computer that was made in South Korea by a Japanese firm. This transaction would affect the GDP of the United States in which way?

    Net exports would decrease and GDP would decrease.

    Net exports would decrease and GDP would be unaffected.

    Net exports would increase and GDP would increase.

    Net exports would increase and consumption would increase.

1 points

Question 33

  1. An increase in U.S. government spending tends to

    increase U.S. interest rates and increase the U.S. capital account surplus.

    increase U.S. interest rates and decrease the U.S. capital account surplus.

    decrease U.S. interest rates and increase the U.S. capital account surplus.

    decrease U.S. interest rates and decrease the U.S. capital account surplus.

1 points

Question 34

  1. A _______ is a system in which the government intervenes extensively in the foreign exchange market to keep the exchange rate within certain bounds.

    dirty float

    floating exchange rate

    fixed exchange rate

    dollarization

1 points

Question 35

  1. Suppose the exchange rate between the euro and the dollar is E0.5 to $1. If a Big Mac costs $3 in the United States and E1.5 in Germany, then the real exchange rate is

    1:1.

    2:1.

    1:2.

    It cannot be determined from this information.

1 points

Question 36

  1. Which of the following prevent the purchasing power parity theorem from holding perfectly?

    transportation costs

    goods that cannot be shipped

    tariffs and quotas

    Each of these answers is correct.

1 points

Question 37

  1. Fiscal policy is more effective in affecting economic activity if

    many resources are unemployed.

    there is a real shock instead of an aggregate demand shock.

    the economy returns to the long-run condition almost immediately.

    there is a long implementation lag.

1 points

Question 38

  1. In a typical year, changes in government spending compared to overall spending are relatively

    small.

    large.

    unpredictable.

    well-timed.

1 points

Question 39

  1. Which statement is TRUE about the difference between monetary and fiscal policy?

    Fiscal policy can quickly adjust to changes in aggregate demand.

    Fiscal policy can have a more direct impact.

    Monetary policy is subject to many long lags.

    Monetary policy can affect the economy regardless of the actions banks take.

1 points

Question 40

  1. Fiscal policies that help an economy in a recession without additional actions by policy makers are called

    consumption smoothers.

    Ricardian equalizers.

    automatic stabilizers.

    Each of these answers is correct.

1 points

Question 41

  1. The U.S. individual income tax system can best be described as a

    regressive tax system.

    flat tax system.

    zero tax system.

    progressive tax system.

1 points

Question 42

  1. What demographic change in the United States will cause government spending to increase in the next 50 years?

    The population over 65 will grow.

    The population will be younger.

    Women will have fewer children.

    Immigration will increase.

1 points

Question 43

  1. What kind of rising costs will mostly cause U.S. government spending to skyrocket in the future?

    defense

    environmental protection

    education

    health care

1 points

Question 47

  1. The Fed could have popped the bubble of the housing boom in the 2000s by

    lending directly to homeowners.

    regulating the stock markets more.

    reducing the growth rate of the money supply.

    doing nothing.

1 points

Question 48

  1. Which of the following would be an example of running monetary policy by rules?

    A 5 percent increase in money supply automatically leads to a 2 percent increase in real GDP.

    An increase in money supply automatically leads to an increase in inflation.

    The Fed will increase money growth to different levels, depending on the severity of the recession.

    A 1 percent drop in real GDP will automatically elicit a 2 percent increase in money supply.

    Question 50

    Moral hazard occurs when

    the failure of one financial institution can bring down other institutions as well.

    financial institutions take on too much risk because they are insured.

    financial institutions become insolvent because they issued too many loans.

    there are more short-term liabilities than short-term assets.

    Which of the following is NOT a transmission mechanism?

    reductions in the money supply

    intertemporal substitution

    uncertainty

    sticky wages and prices

    Question 56

    For a given increase in government spending growth, intertemporal substitution is more widespread when

    the impact of AD growth on both inflation and real GDP growth is stronger.

    the impact of AD growth on both inflation and real GDP growth is weaker.

    the impact of AD growth on inflation is stronger and the impact of the AD growth on real GDP growth is weaker.

    the impact of AD growth on inflation is weaker and the impact of AD growth on real GDP growth is stronger.

    Stalin:

    instituted democratic reforms, leading to widespread prosperity.

    took government control of the farms in Ukraine, leading to the starvation of millions of people.

    increased the provision of public goods, which had a positive effect on lowering the unemployment rate.

    tried unsuccessfully to expand voting rights in 1924 Russia.

    1 points

    Question 60

    1 points

    Question 59

    If voters care about two issues such as taxes and war, then politicians:

    will form a stable policy on these issues.

    can pose a policy that will never lose against another policy.

    must assume that there is no median voter.

    may never converge on a stable outcome.

    1 points

    Question 58

    Policy A adversely affects 50 million people at a cost of $1 per person. But Policy A also benefits 1,000 people at $30,000 per person. Which of the following statements is true?

    Policy A will not become law because it hurts more people than it helps.

    Policy A concentrates all the costs among a small group of people and all the benefits among a large group of people.

    Policy A is likely to be supported by politicians even though it makes society worse off.

    Since Policy A negatively affects many people, and so rational ignorance will not be a problem.

    1 points

    Question 57

    Data for the United States show that the incumbent party tends to win the election if:
    I. personal disposable income is growing.
    II. the inflation rate is low.
    III. the political party has not been in power for too many continuous terms.

    I only

    I and II only

    I and III only

    I, II, and III

    1 points

    Question 53

    1 points

    Question 52

    What is the purpose of the Fed's structure?

    to give the President of the United States as many tools as possible to regulate the economy

    to make sure all states are given equal access to monetary policy decisions

    to keep the private sector out of the monetary policy making arena

    to keep the power of the Fed dispersed

    1 points

    Question 51

    An increase in money growth will cause inflation to increase in

    the short run only.

    the long run only.

    both the short run and the long run.

    neither the short run nor the long run.

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