The term “sovereign debt crisis” applies when ________. A) private businesses cannot borrow money because the government is borrowing so much B) nations compete fiercely with each other to increase their borrowing C) a government finds that the cost of borrowing is higher than it had anticipated D) the debt of a particular government quickly […]
Which of the following would be included in GDP? a. Production of computers by IBM in Japan b. The value of a car. c. The commission on the sale of your house. d. The value of childcare provided at home by the child’s mother. ANSWER C
If money demand does not depend upon income, then a. monetary policy cannot have any effect upon the economy. b. monetary policy will only affect the level of the price level. c. monetary policy will only affect interest rates. d. monetary policy will have a larger impact on income. ANSWER A
“All available information” in the definition of rational expectations means that a. agents use all possible information that could be out there. b. agents use all possible public information that could be out there. c. agents use all information that is relevant. d. agents use all information that is available in which the marginal benefits […]
The natural rate of unemployment a. is 6 percent. b. is the long-run average rate of unemployment. c. is 4 percent. d. varies between 4 and 6 percent. ANSWER B
The total government expenditure multiplier is less than one because A) government expenses affect labor demand. B) labor supply reacts to interest rate changes and consumption demand is affected by taxes. C) investment demand falls dramatically when the government goes into debt. D) the marginal propensity to consume is less than one. ANSWER B
The IS curve becomes steeper when there is a. a higher marginal propensity to save. b. a smaller parameter measuring the interest sensitivity of investment. c. a lower marginal propensity to save. d. Both a and b e. Both b and c ANSWER D
An increase in taxes on labor earnings, everything else equal a. shifts the labor supply curve to the left and increases the real wage. b. shifts the labor supply curve to the right and increases the real wage. c. shifts the labor supply curve to the right and reduces the real wage. d. shifts the […]
The equilibrium effects of a temporary increase in total factor productivity include A) an increase in the real wage and an increase in the real interest rate. B) an increase in the real wage and a decrease in the real interest rate. C) a decrease in the real wage and an increase in the real […]
The Congressional Budget Office projects that Social Security spending will rise from 5% of GDP to 6% over the next four decades. Why is that a problem? What will be an ideal response? ANSWER The dependency ratio — the ratio of benefits-eligible retirees to contributing workers — has declined, due to improved longevity and […]
