Question

Question 16(Multiple Choice Worth 1 points)

In an economy with a horizontal aggregate supply curve, a decrease in taxes will affect price level and employment in which of the following ways?

Price Level / Employment

Decrease / Increase

Increase / Increase

Increase / Decrease

Increase / No Change

No Change / Decrease

No Change / Increase

Question 17(Multiple Choice Worth 1 points)

If personal income taxes are increased, we can expect that

the short-run Phillips curve will shift left.

the short-run Phillips curve will shift right.

there will be a movement to the right along the short-run Phillips curve.

there will be a movement to the left along the short-run Phillips curve

. the long-run Phillips curve will shift right.

Question 18(Multiple Choice Worth 1 points)

Economic growth would decrease if

consumer spending decreased.

employee wages increased.

floods ravaged the manufacturing sector in the north.

government spending decreases significantly.

the number of imports increased.

Question 19(Multiple Choice Worth 1 points)

A decrease in LRAS might indicate that

consumers were spending more money.

labor productivity fell.

there was less variety of goods.

consumers were spending less money.

net exports decreased.

Question 20(Multiple Choice Worth 1 points)

If nominal interest rate equals 12 percent and inflation is 4 percent, then nominal and real interest rates are respectively

12 percent and 8 percent.

12 percent and 16 percent.

16 percent and 8 percent.

16 percent and 12 percent.

8 percent and 4 percent.

Question 21(Multiple Choice Worth 1 points)

If the workforce is paid more frequently, then

real output will decrease.

the money supply will increase.

price level will decrease.

velocity of money will increase.

nominal output will decrease.

Question 22(Multiple Choice Worth 1 points)

If the prime interest rate is 14 percent and the consumer price index is rising at a rate of 6 percent each year, then the real rate of interest is

20 percent.

14 percent.

8 percent.

6 percent.

1.3 percent.

Question 23(Multiple Choice Worth 1 points)

Which of the following interest rates is correctly matched to its definition?

The prime interest rate is the rate the Fed charges member banks to borrow money.

The discount rate is the rate banks charge their best customers when they borrow money.

The federal funds rate is the rate the Fed charges member banks to borrow money.

The prime interest rate is the rate banks charge one another to borrow money.

The federal funds rate is the rate banks charge one another to borrow money.

Question 24(Multiple Choice Worth 1 points)

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

10 percent.

15 percent.

20 percent.

25 percent.

30 percent.

Question 25(Multiple Choice Worth 1 points)

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

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

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

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

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

Question 26(Multiple Choice Worth 1 points)

S1 52 5 51 52 S1 D2 D1 D1 01 S1 S2 S1 D1 D2 D2 D1

Suppose the U.S. Surgeon General announces that eating a high fiber diet while in your twenties decreases chances of developing Alzheimer’s disease by 50 percent. Which of the above market changes for cream of wheat, a food that is low in fiber, are likely to occur?

A

B

C

D

E

Question 27(Multiple Choice Worth 1 points)

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

inflation is decreasing in the economy.

inflation is increasing in the economy.

unemployment is increasing in the economy.

unemployment is decreasing in the economy.

the PPI has no relation to unemployment or inflation.

Question 28(Multiple Choice Worth 1 points)

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

cyclically unemployed

frictionally unemployed

structurally unemployed

an employed individual

not unemployed

Question 29(Multiple Choice Worth 1 points)

In the circular flow diagram, tourists spend money in

the product market that provides goods and services to firms.

the product market that provides profit for firms.

the product market that provides revenue for firms.

the factor market that provides profit for firms.

financial markets that provides profit for firms.

Question 30(Multiple Choice Worth 1 points)

In the circular flow diagram, profit flows from the

product market to the firms.

factor market to the firms.

firms to the product market to the households.

product market to the households.

factor market to the households.

Answer 1

Answer 16:

No change/ increase. A decrease in tax rate will shift the aggregate demand curve rightwards, and in case of horizontal aggregate supply curve, this will lead to no change in the price level and increase in employment rate in the economy as national output of the economy increases.

Answer 17:

there will be a movement to the right along the short-run Phillips curve. If personal taxes are increased then aggregate demand will decline in the economy and this will lead to rightward movement along thew Philips curve as unemployment rate increases and inflation rate in the economy falls.

Answer 18:

government spending decreases significantly. A fall in government spending will reduce the overall level of aggregate demand in the economy and this will reduce national output level in the economy and thus economic growth rate will decline.

Answer 19:

labor productivity fell. A fall in labor productivity will shift the aggregate supply curve of the economy leftwards.