Practice Questions Econ Exam

2. the expenditure category of GDP that fluctuate the most over time is investment

True

3. the SRAS curve is vertical at the natural level of real output

false

4. people continue to value money because they have confidence in its convertibility into goods and services

true

5. if the Fed paid a higher interest rate to banks on their reserves at the Fed, excess reserves in the banking system would tend to fail

false

6. A rapid, unexpected increase in the inflation rate could make real interest rates negative

true

1. if 2 countries produce both wheat and sugar and one country has the comparitive advantage in producing wheat than the other country must have the absolute advantage producing sugar

false

7. savings accounts are the most liquid of all assets because they can be quickly and easily transferred

false

8. when a country allows trade and becomes an exporter of goods both domestic consumers and domestic producers benefit

false

11. another name for the contractionary phase of a business cycle is recession

true

12. if inflation is the most significant issue in the economy an appropraite fiscal policy response would be to decrease taxation

false

13. according to the "misperception effect" explanation of short-run aggregate supply, firms increase output as the price level rises because they mistake the increase in overall prices for an increase in the relative price of their own output

true

14. There are 12 Federal Reserve Banks in the Federal Reserve System

true

15. An investment tax cerdit, which would lower taxes for firms that invested in new capital equipment, would shift the long-run aggregate supply curve to the right over time

q

A tariff on a good increases the domestic price of a good, increases domestic production of a good, reduces the amount of the good sold, and decreases imports of the good

wh

when a country allows trade and becomes an importer of goods everyone benefits.

t

The short run equilibrium level of real output and the price level are determined by the intersection of the aggregate demand curve and the short-run aggregate supply surve

the long-run aggregate supply curve is the relationshiup between the price level and the quantity of real GDP that is supplied once input prices have had time to fully adjust to that price level

If a worker was miscategorized as structurally unemployed when he was really frictionally unemployed, that would not change the natural rate of unemployment

imports are not included in GDP because they do not reflect output produced within the domestic economy

historically, the largest budget deficits and growing government debt occur during war years

a

an increase in net exports would lead to an increase aggregate demand but would not lead to an increase in aggregate supply

if there is currently a recessionary gap, a decrease in aggregate demand would make the recessionary gap larger

under the expenditure approach to GDP accounting, government purchases of goods and services include welfare payments

import tarriffs in the U.S. are likely to reduce US exports, both because of the resulting decrease in foreign earnings of dollars from exports to the U.S. and because of the likelihood of increases in other countries import restrictions against US goods

th

4 major componenets of aggregate demand are consumption, investment, government purchases of goods and services, and net exports

(1) 21. All of the following are intangible except

e: health, love, computer programming expertise, power,

(1) 24. Which of the following serve as the language of the market system?

C. Market prices

what factors can expand the production possibilities curve?

increases in land, labor, capital, and entrepreneurial activity can expand the PPC

What effects SRAS but not the LRAS curve?

a change in input prices and adverse supply shocks such as natural disasters

What is consumer surplus?

the difference between what a consumer has to pay and what the consumer is willing to pay (the top portion)

Produer surplus

the difference between what a seller recieves for selling a good or service and the price at which the seller is willing to supply that good or service