Economics Review Chapters 13-17

20 Questions | By Katereneewortman | Updated: Mar 15, 2022 | Attempts: 140

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Review of Chapters 12-17 in "Principles of Macroeconomics. "

Questions and Answers

1.

After the Great Depression of the 1930's and particularly since World War II until the 1970's, the ideas of the ____ school became conventional wisdom.
- A.
  
  Classical
- B.
  
  Keynesian
- C.
  
  Monetarism
- D.
  
  Supply-side
- E.
  
  Rational expectation
2.

In the view of the classical school, unemployment
- A.
  
  Is a permanent condition
- B.
  
  Disappears when everyone who is willing to work at the equilibrium wage finds employment
- C.
  
  Exists because people do not interfere with the competitive process
- D.
  
  Is only temporary because all wages and prices are rigid
- E.
  
  Is necessary and not really harmful to the economy
3.

The Phillips curve traces a set of combinations of rates of
- A.
  
  Interest and unemployment
- B.
  
  Real GDP and inflation
- C.
  
  Real GDP and interest
- D.
  
  Inflation and interest
- E.
  
  Unemployment and inflation
4.

When the economy enteres a prosperity phase personal income tax collections
- A.
  
  Fall along with consumption and real GDP
- B.
  
  Rise along with real GDP but unemployment insurance payments to workers fall
- C.
  
  Rise but real GDP and unemployment insurance payments to workers fall
- D.
  
  Fall along with real GDP but unemployment insurance payments to workers rise
- E.
  
  Fall causing real incomes and employment to fall
5.

City streets, sewage systems, and police protection are all examples of
- A.
  
  Public goods
- B.
  
  Private goods
- C.
  
  Exclusive goods
- D.
  
  Rival goods
- E.
  
  Consumer goods
6.

The highest expenditure on a security item found in national spending at the federal, state, and local level is on
- A.
  
  Social Security
- B.
  
  Fire
- C.
  
  Corrections
7.

Social Security is financed, in part, by
- A.
  
  Sales taxes
- B.
  
  Excise taxes
- C.
  
  Payroll taxes
- D.
  
  Alcohol and cigarette taxes
- E.
  
  State lotteries
8.

Contributions to and payments from Social Security
- A.
  
  Represent transfers from the young to the elderly
- B.
  
  Represent transfers from the elderly to the young
- C.
  
  Are voluntary
- D.
  
  Represent transfers from high-income to low-income people
- E.
  
  Are part of the government's public goods purchases
9.

The term used to describe the situation in which government spending causes interest rates to increase and private sector investment to fall is
- A.
  
  Negative feedback
- B.
  
  Crowding out
- C.
  
  Positive pressure
- D.
  
  Transfer of burden
- E.
  
  Investment shift
10.

Unlike an internally held public debt, an externally held public debt
- A.
  
  Cannot pass the debt burden on to future generations
- B.
  
  Can pass the debt burden to future generations
- C.
  
  Expires upon maturity
- D.
  
  Cannot be reduced because foreigners hold the debt
- E.
  
  Causes crowding out
11.

Compared to the rest of the industrial world, the United State's tax revenues
- A.
  
  As a percent of GDP is the lowest
- B.
  
  As a percent of GDP ranks among the highest
- C.
  
  As a percent of GDP ranks among the lowest
- D.
  
  As a percent of GDP is the highest
- E.
  
  Is the lowest
12.

When a person's income rises and the tax rate is constant, the tax is a
- A.
  
  Regressive tax
- B.
  
  Poll tax
- C.
  
  Progressive tax
- D.
  
  Head tax
- E.
  
  Proportional tax
13.

A nation should specialize in the production of the good for which it has a(n)
- A.
  
  Absolute advantage
- B.
  
  Exchange rate
- C.
  
  Specialization
- D.
  
  Comparative advantage
- E.
  
  Terms of trade
14.

Since the 1930's, average U.S. tariff rates on imports have
- A.
  
  Risen dramatically
- B.
  
  Risen slowly
- C.
  
  Declined dramatically
- D.
  
  Declined slowly
- E.
  
  Remained about the same
15.

A tariff is a tax on _____ goods that is designed to ____.
- A.
  
  Exported; protect domestic industries
- B.
  
  Exported; hurt foreign industries
- C.
  
  Imported; make domestic consumers pay more
- D.
  
  Imported; protect domestic industries
- E.
  
  Domestic; discourage imports
16.

A lawyer once boasted, "I can fix my plumbing problem faster than that plumber." His friend replied, "Then why don't you fix it?" The lawyer explained: "Because
- A.
  
  The plumber could practice law, and I prefer law."
- B.
  
  I have an absolute advantage practicing law."
- C.
  
  The plumber uses fewer labor resources."
- D.
  
  The plumber is more efficient."
- E.
  
  I have a comparative advantage practicing law."
17.

An appreciation of Canadian currency means that
- A.
  
  Canada's exports will become less expensive
- B.
  
  Canada's imports will become more expensive
- C.
  
  Canada's imports will become less expensive
- D.
  
  It now requires more Canadian currency to exchange for one unit of another currency
- E.
  
  It now requires less of other currencies to exchange for a unit of Canadian currency
18.

If foreign exchange rates are determined by the interaction of supply and demand forces for the various currencies, then the exchange rate is
- A.
  
  Fixed
- B.
  
  Government determined
- C.
  
  Set by the value of gold
- D.
  
  Said to float
- E.
  
  Not in equilibrium
19.

The current account in a balance of payments records
- A.
  
  All money flows among countries
- B.
  
  Exports and imports of goods and services
- C.
  
  Only the international transaction involving capital goods
- D.
  
  Only the international transactions involving consumer goods
- E.
  
  Only exports and imports purchased on credit
20.

If the United States government wants to eliminate an unfavorable balance of trade, it could
- A.
  
  Reduce tariffs
- B.
  
  Encourage imports
- C.
  
  Reduce quotas on imports
- D.
  
  Depreciate the dollar
- E.
  
  Increase taxes on exported goods