The following study suggestions are intended to give you a sense of what to expect on tests and exams and

to help you narrow your focus as you prepare. They are not necessarily the exact test questions nor do they include everything which you need to learn; consequently, you should develop a comprehensive mastery of the topics presented in the textbook and other course materials. You will find the best examples of typical test questions in the practice tests available in NS Online. A frequent inquiry each semester is: I cant find the answer to number six in the study suggestions. Could you tell me which page to read? Most of the items in the study suggestions and test questions require analysis and application of concepts, principles and theories from a chapter or several chapters; consequently, there is not a specific page in the text which has the answer. The course materials tend to build on one another from chapter to chapter; consequently, understanding chapter six requires understanding the first five chapters. Developing mastery of the course content requires much more than memorization of discrete facts; it requires analysis, synthesis, critical thinking and application of concepts, principles and theories. I am always glad to help if you are having difficulty with a few items from the study suggestions. Please do not ask me to review your responses to every item on the list as this would defeat the purpose and intent of the study suggestions. I have significant reservations about validating a student's entire list of responses for two reasons. First, I know from past experience that a few students simply go through the textbook looking for answers to the study suggestions and do not read, study, and learn the material. Second, the study suggestions are, in some instances, the actual test questions and I do not believe that learning is encouraged if I furnish students with both the test questions and the answers. I encourage you to use the discussion area in NS Online as an opportunity to discuss and debate the study suggestions with other class members. Please offer your thoughts about an appropriate answer when posting a question in the discussion area. This shows that you are trying to learn the material and have made a conscientious effort to answer a question rather than asking class members to do it for you. I will moderate the discussions among students and offer comments as necessary or appropriate.

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Study Suggestions Macroeconomics Test 1 (Chapters 1-4) Chapter 01 01. What is the best definition of economics? 02. Allocating scarce resources means answering the question(s) of: 03. Poverty should not be tolerated in a wealthy nation such as the United States. This statement is best described as a: 04. An economist studying the relationship between the minimum wage and teenage employment concludes that a 1% increase in the minimum wage causes a 0.2% increase in teenage unemployment. This statement is an example of: 05. If we wish to observe the effect that an increase in Variable X has on Variable Y as long as nothing else is changing, then we are making the assumption of: 06. Examples of marginal questions. 07. Positive incentives, such as rewards, are supposed to: 08. The branch of economics that studies the choices made by consumers, firms, and government and how their choices affect a market is: 09. Studying how Mary allocates her time between work and leisure is an example of: 10. Examples of normative questions. 11. Examples questions answered with positive economic analysis. 12. To make things simpler and focus attention on what really matters, economists would 13. The Latin phrase ceteris paribus means that when a relationship between two variables is being studied, Chapter 02 01. Opportunity costs of attending college. 02. Frank spends his weekly allowance of $20 on two goods: compact discs (CDs) and hamburgers. The price of a CD is $10 and the price of a burger is $2. The opportunity cost of purchasing a CD is: 03. The production possibilities curve is a curve that shows:

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04. Refer to Figure 2.1. Macroland is currently operating at point A. The best explanation for this is that:

Figure 2.1 05. According to Figure 2.2, a decrease in unemployment may be represented by the movement from:

Figure 2.2 06. Refer to Figure 2.3. If this society used all of its resources to make consumer goods, they would be at point:

Figure 2.3

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07. Refer to Figure 2.6. An improvement in technology may be represented by a:

Figure 2.6 08. Mary owns a stationary store. The store's total revenue depends on the number of hours the store is open each day as shown in Table 2.1. Each hour the store is open costs $20. Mary's store is currently open for 4 hours each day. What would be the marginal benefit from keeping the store open another hour each day?

Table 2.1 09. Example of a voluntary exchange. 10. According to the principle of diminishing returns, increasing one production input while holding the other input fixed yields: 11. According to Table 2.2, marginal benefits to labor increase until the addition of the:

Table 2.2 12. Last year, Max got a 3% raise from his boss. Over the same year, the prices of goods and services Max buys increased by 5% on average. What happened to his real and nominal income?

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13. Jerome has a "C" average in his philosophy course and a "B" average in his economics course. He decides to study an extra hour for his philosophy exam. This is an example of 14. An unemployed individual decides to spend the day fishing. The opportunity cost of fishing is equal to 15. If an economy is fully utilizing its resources, it can produce more of one product only if it

16. Joe runs a business and needs to decide how many hours to stay open. Figure 2.2 illustrates his marginal benefit of staying open for each additional hour. Suppose that Joe's marginal cost of staying open per hour is $24. How many hours should Joe stay open? Hours of Operation 1 2 3 4 5 6 7 Table 2.2 17. Krystal runs a nail salon and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that Krystal's marginal benefit of staying open per hour is $30. If she is following the marginal principle, how many hours should Krystal stay open?
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Marginal Cost 6 12 18 24 30 36 42

18. When referring to "marginal" changes, the economic focus is on Chapter 03 01. An arrangement that allows buyers and sellers to exchange things is a: 02. What is true of a market-based economy? 03. The basic coordinating mechanism in a market-based economy is: 04. Free markets guarantee that: 05. Markets exist to: 06. According to theory of comparative advantage, ________ raise(s) productivity by lowering opportunity costs. 07. Division of labor increases productivity because: 08. China has a comparative advantage, relative to Japan, in textile and an absolute advantage in radios. Japan has a comparative advantage, relative to China, in radios and an absolute advantage in textiles. According to this scenario: 09. According to the theory of comparative advantage, a country should: 10. Suppose that Argentina and Chile are both engaged in the production of copper and wheat, and that Argentina has an absolute advantage in the production of both goods. If Chile has a comparative advantage in the production of copper, then Chile: 11. Under a market economy, decisions are guided by: 12. In Prisoner of War camps during World War II, the price, in cigarettes, of different goods reflected: 13. Most governments provide a "social safety net" for what reasons? 14. The more times a worker performs a particular task, the more proficient the worker becomes at that task. This is called 15. A rich nation will trade with a poor nation because the 16. In which system are decisions made by thousands of people who have information about resources, production technology and consumer desires? 17. An economy in which government bureaucracy decides how much of a good to produce, how to produce the good, and who gets the good is known as a 18. Adam Smith used the metaphor of the "invisible hand" to explain how
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Chapter 04 01. The law of demand states that as the price of good increases, the: 02. Refer to Figure 4.1. The number of DVDs Amy rents per week increases from 3 to 5. This is caused by:

Figure 4.1 03. The price of hamburgers drops suddenly and you discover that you and your friends eat more hamburgers. The change in quantity demanded resulting from the change in price is due to: 04. Refer to Figure 4.2. Assume that there are only two people in the market for compact discs: Person A and Person B. Along the market demand curve for compact disks, at a price of ________, quantity demanded would be ________.

Figure 4.2 05. According to the law of supply, when price falls:

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06. Refer to Table 4.1. This market will be in equilibrium if the price per pizza is:

Table 4.1 07. Refer to Table 4.1. If the price per pizza is $12, the price will: 08. Refer to Figure 4.4. If the price is currently $120 in the rollerblade market, you accurately predict that the price will:

Figure 4.4 09. Refer to Figure 4.5. The market for blue jeans is in equilibrium at a price of ________ and a quantity of ________ blue jeans.

Figure 4.5 10. Refer to Figure 4.8. Which of the following would be most likely to cause the demand for Dr. Pepper to shift from D0 to D1?

Figure 4.8
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11. Every year during the holidays there seems to be a great demand for some particular "hot" toy. This is an example of the effect of ________ on demand. 12. When Hurricane Andrew passed through Louisiana in the summer of 1992, approximately a quarter of the sugar cane crop was destroyed. Ceteris paribus: 13. Lettuce and spinach are substitutes. During the winter, about 20% of the lettuce crop was destroyed by flooding. As a result of the flooding during the winter, you would expect that: 14. Suppose that automobile workers were to negotiate a very large wage increase. As a result, the equilibrium price of automobiles would ________, and the equilibrium quantity of automobiles would ________. 15. Suppose that TV news programs report that oat bran can lower one's cholesterol. As a result, the equilibrium price of oats would ________, and the equilibrium quantity of oats would ________. 16. Refer to Figure 4.19. When the market moves from point A to point E, there has been:

Figure 4.19
Quantity of Frozen Latte-On-A-Stick Supplied Price Flo's Supply Rita's Supply 1 0 0 2 0 3 3 4 6 4 9 9 5 15 12

Table 4.1 17. Refer to Table 4.1, which shows Flo's and Rita's individual supply schedules for frozen latte-on-a-stick. Assuming Flo and Rita are the only suppliers in the market, what is the market quantity supplied at a price of $2?

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18. Figure 4.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $7, there is an 19. In the event of excess supply in the coffee market

20. Figure 4.3 illustrates the demand for tacos. An increase in the demand for tacos is represented by the movement from 21. When the price of apples goes up The test consists of 50 questions.

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Study Suggestions Macroeconomics Test 2 (Chapters 5-7) Chapter 05 01. In the circular flow diagram, firms ________ inputs and households ________ products. 02. The total market value of all final goods and services produced in an economy in a given year is: 03. Example of a final good or service. 04. Examples of what would be included in GDP? 05. Examples of what would not be included in GDP? 06. The single largest expenditure component in GDP is: 07. If net investment is negative, the capital stock has ________; if net investment is positive, the capital stock has ________. 08. Net investment equals: 09. Depreciation is: 10. Examples of transfer payments. 11. When a country's exports of goods and services are greater than its imports of goods and services in a given period, it has a: 12. The largest component of national income is: 13. Nominal GDP is not an accurate measure of the real level of economic activity in a country because: 14. Real GDP is gross domestic product measured: 15. The most severe decline in output in U.S. history took place during: 16. GDP is not a perfect measure of social welfare and the society's economic well-being because: 17. Legalizing all forms of illegal activities: 18. If an economy produced 220 pounds of jelly beans at $5 per pound and 90 pounds of gum drops at $2 per pound in 2010, its real gross domestic product (GDP) was
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19. Gross domestic product calculations count only final goods and services because 20. How does real gross domestic product (GDP) differ from nominal GDP? 21. The largest component of GDP is 22. Gross investment is 23. Net investment is 24. Transfer payments are excluded from government purchases in GDP accounting because 25. GDP understates the value of output produced by an economy because it Chapter 06 01. Bob is unemployed if he: 02. Refer to Table 6.1. The labor force equals:

Table 6.1 03. Refer to Table 6.1. The unemployment rate is: 04. The labor-force participation rate is the ratio of the: 05. Mike has just graduated from college and is now looking for a job, but has not yet found one. This causes the unemployment rate to ________ and the labor-force participation rate to ________. 06. Discouraged workers. 07. Changes in the unemployment that occur as the economy expands and contracts are called ________ unemployment. 08. When an economics professor quits his job from a university and starts looking for a better job in another university, he is: 09. An auto worker in Ohio who loses her job because the company relocated the plant to another country represents an example of: 10. The demand for refrigerators falls when the economy enters a downturn. If a refrigerator manufacturer lays off workers during an economic downturn, this would be an example of:
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11. The natural rate of unemployment is generally thought of as the: 12. Some unemployment is inevitable because: 13. A price index is: 14. If 1999 is the base year and the inflation rate between 1999 and 2000 is 7%, the price index in 2000 must be equal to: 15. Both the CPI and the chain index for GDP overstate actual changes in cost of living due to: 16. Many economists believe that each year inflation is overestimated by between: 17. Deflation is a great economic problem because: 18. According to the classical economists, the economy: 19. Suppose an economy consists of 500,000 individuals 16 years and older, 260,000 are employed, and 21,000 are unemployed but actively seeking work. In this example the labor force is Employment status of the working age population of Metropolis is approximately: Employed full-time: 4,200 Employed part-time: 700 Not employed and looking for work: 300 Not employed and not looking for work: 200 Table 6.1 20. Given the data in Table 6.1, the labor force participation rate of Metropolis is approximately 21. The existence of discouraged workers will lead to an official unemployment rate that is 22. Hector voluntarily left his job to search for a job in accounting, the field in which he has his bachelor's degree. Hector is considered 23. Steel workers laid off from their jobs as the result of a recession are considered 24. Economists say that the economy is at "full employment" when the 25. In periods when GDP grows very rapidly for a long period, the actual unemployment rate will be ________ than the natural rate of unemployment.
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26. The index most widely used by the government and the private sector to measure changes in the cost of living is the The following table lists the basket of goods in the Astro Price Index (Assume 2008 is the base year.) 2008 2008 2009 2009 2010 2010 Quantity Price Quantity Price Quantity Price $11.0 $10.0 Sunglasses 8 $9.00 10 0 7 0 Toothpaste Ferrets Table 6.2 27. Using the information in Table 6.2, the Astro Price Index for 2008 is 28. Social security payments automatically increase when the CPI goes up because of the 29. Suppose that a price index in Latvia was 120 in 2009 and 150 in 2010. The inflation rate between those two years was Chapter 07 01. The relationship between the quantity of output produced and the quantity of inputs used to produce it is called: 02. Components of the stock of capital. 03. What would not be considered part of the stock of capital? 04. The production function is the mathematical representation of the technological relationship between: 05. An increase in the capital stock: 06. If each additional worker hired contributes less to total output: 07. When a profit-maximizing firm makes a decision to employ a worker, that decision is based on: 08. If the price of airline tickets rises, what will happen to the demand for flight attendants and wages?
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15 6

3.00 12.00

18 4

4.00 15.00

15 9

4.00 18.00

09. What happens to the labor supply curves in the U.S. and Canada when Canadian workers immigrate to the United States? 10. If the supply of labor decreases, what events will occur? 11. If the capital stock remains fixed while the supply of labor increases, it is likely that: 12. Diminishing returns implies that: 13. Refer to Figure 7.3. The classical economists argued the wage rate will ________ from ________ if the demand for labor changes from D' to D.

Figure 7.3 14. Because a tax on labor makes labor more expensive and raises the marginal cost of hiring workers, it follows that: 15. The reduction in consumption, investment or net exports that occurs when government spending increases is known as: Labor Input 3 4 5 6 7 8

Output 50 70 86 98 108 116 Table 7.1

16. Refer to Table 7.1. Output is increasing at 17. The labor demand curve is downward sloping because as the real wage ________ the amount of labor hired ________. 18. If the supply of labor ________, real wages fall and the amount of labor employed ________.
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19. If a firm increases its capital stock, real wages will likely ________ and the equilibrium quantity of labor will likely ________. 20. As a result of an increase in the enforcement of illegal immigration laws, the demand for labor will ________, the supply of labor will ________, and the real wage will ________. 21. What would result in a higher real wage rate and a greater level of employment in the United States?

22. Refer to Figure 7.1. In equilibrium, the wage is ________ and the amount of labor employed is ________. 23. Suppose that a new tax on hiring labor is imposed. The demand for labor will ________, and as a result real wages will ________ and employment will ________. 24. Suppose that technological advancement makes labor more productive. What is likely to happen wages and to potential output? 25. Decreases in consumption, investment, or net exports caused by an increase in government purchases are known as The test consists of 50 questions

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Study Suggestions Macroeconomics Mid-Term Exam (Chapters 1-10) Review the items from the first two tests and the following: Chapter 08 01. The reduction in consumption, investment or net exports that occurs when government spending increases is known as: 02. Per capita GDP decreases when: 03. Economic growth is best measured as an increase in: 04. Other things equal, relatively poor countries tend to grow ________ than relatively rich countries and this is known as ________. 05. If the capital-labor ratio of an economy decreases, ceteris paribus: 06. Relationships between public and private capital and growth. 07. The fast pace of technological progress in the U.S. can be explained due to the fact that: 08. Larger markets are likely to promote faster technological innovation because: 09. Education can contribute to economic growth through: Chapter 09 01. If output is rising and unemployment is falling, the economy must be in a (an): 02. The short-run in macroeconomics is the period in which: 03. When the general price level rises: 04. Refer to Figure 9.2. A reduction in the money supply causes:

Figure 9.2
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05. In the short run, an increase in aggregate demand will: Chapter 10 01. If the government wants to reduce unemployment, government spending should be ________ and/or taxes should be ________. 02. If the government chooses to increase government expenditure or to decrease taxes, according to the Aggregate Supply - Aggregate Demand model: 03. The largest category of federal spending is: 04. Entitlement and mandatory spending consist of: 05. The federal government runs a budget surplus when: 06. When the federal government runs a budget deficit: 07. The federal budget works as an automatic economic stabilizer because: The exam consists of 50 questions.

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Study Suggestions Macroeconomics Test 3 (Chapters 12-14) Chapter 12 01. Lacey buys a bond issued by XYZ Corporation. XYZ Corporation uses the funds from the sale of its bonds to build a new factory. Which is investing in capital? 02. Refer to Figure 12.1. Which of the following causes a movement from Point A to Point C?

Figure 12.1 03. Generally speaking, investment does ________ when GDP does ________. 04. The nominal interest rate is: 05. The real interest rate is: 06. If the nominal interest rate is 5 percent and the rate of inflation is 1 percent, then the real interest rate is: 07. If Andrew is paid an interest rate of 10% on his savings, but the inflation rate is 20%, the real interest rate is: 08. Bridget wants to make an 8% real return on a loan that she is planning to make, and the expected inflation rate during the period of the loan is 10%. She should charge an interest rate of: 09. A rise in the interest rate: 10. Determinants of firms' investment and employment decisions? 11. The boom period of the late 1990s was a good example of irrational exuberance because: 12. The term investment refers, in general, to

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13. If firms receive an economic forecast predicting future decreases in the growth of real GDP, they are likely to respond by 14. Compared to consumption, investment is a much ________ component of GDP and is much more ________. 15. Equation to calculate the real interest rate. 16. If the real interest rate is 4 percent and the inflation rate is 3 percent, then the nominal interest rate is 17. Suppose you have $400 to invest at a nominal interest rate of 5 percent. If the inflation rate is 2 percent, then the real return on your investment is approximately Expected Real Rates of Interest for Five Countries Nominal Inflation Expected Interest Rate Real Rate Country Rate Forecast of Interest Australia 4.5% 3.1% Japan 0.1% 1% Brazil 4.6% 6.15% South Africa 6.5% 4.2% United States 1.2% -0.95% Source: Trading Economics, September, 2010 Table 12.1 18. Refer to Table 12.1. The expected real rate of interest for Australia is 19. The neoclassical theory of investment Chapter 13 01. Financial intermediaries reduce the costs of negotiation between savers and investors through: 02. Assets from the most to the least liquid. 03. The Federal Deposit Insurance Corporation: 04. During the U.S. savings and loan crisis in the 1980s, depositors were saved at the expense of: 05. Mary wants to trade piano lessons for ice-skating lessons. Sarah wants to trade iceskating lessons for piano lessons. Mary and Sarah have:
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06. The development of money as a medium of exchange makes trade easier because: 07. When you keep your money in a savings account, you are using money as a(n): 08. Suppose after the semester ends, you take a trip to a tropical island. Upon arriving at the island, you make a stop at one of the markets and notice that everyone is carrying around jars full of little turtles. You also notice the person in line in front of you just paid for a bottle of rum with 6 turtles. Someone else just bought a straw hat for two turtles. Thinking back to your economics class (as painful as that may be), you would conclude that 09. Money that has no intrinsic value and is created by a government decree is called 10. The U.S. government is continually adding security features to its paper currency to help make counterfeit money easier to detect. If counterfeit currency remained undetected, a vast increase in the supply of counterfeit U.S. currency would 11. The narrowest definition of money supply is: 12. The Republic Bank has $2 million in deposits and $250,000 in reserves. If the required reserve ratio is 10%, excess reserves are equal to: 13. Suppose the required reserve ratio is 10%. A $10 million deposit allows commercial banks to create at most: 14. Suppose a bank has $200,000 in deposits, a reserve ratio of 10 percent, and reserves of $45,000. This bank has excess reserves of 15. The purpose of having the members of the Board of Governors of the Federal Reserve serve fourteen-year terms is to 16. The central bank of the United States is known as the: Chapter 14 01. What will most likely cause a decrease in the quantity of money demanded? 02. Refer to Figure 14.1. A movement from Point A to Point D can be caused by:

Figure 14.1
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03. Refer to Figure 14.2. A reduction in real GDP will:

Figure 14.2 04. An open-market purchase of government bonds by the Fed results in ________ in reserves and ________ in the supply of money. 05. A decrease in the required reserve ratio: 06. Refer to Figure 14.4. At an interest rate of 10%, there is:

Figure 14.4 07. An increase in demand in the money market causes: 08. An increase in supply in the money market causes:

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09. Refer to Figure 14.6. Assume the interest rate equals 8% and the money supply decreases from Ms0 to Ms1. If the interest rate remains at 8%:

Figure 14.6 10. Refer to Figure 14.7. If the money supply increases from Ms0 to Ms1:

Figure 14.7 11. Increasing the required reserve ratio shifts the money supply curve to the ________ and ________ the equilibrium interest rate. 12. Relationship of investment spending and the money supply. 13. Powers of the Fed to influence the economy? 14. A contractionary monetary policy has what effects? 15. An increase in the U.S. interest rate relative to the British interest rate will cause a(an): 16. The inside lag associated with stabilization policy represents: 17. Because of various ________, expansionary policies that should have been instituted at one time do not begin to have an effect until a later time, when they may be ________ .
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18. The amount of time it takes a given policy action to bring about a change in the state of the economy is called the: 19. Decreased investment spending in the economy would be a possible result of 20. What would be a way for the Federal Reserve to stimulate a sluggish economy? 21. To decrease the money supply using the reserve requirements, what would the Fed typically do? 22. If the quantity of money demanded exceeds the quantity of money supplied, then the 23. Based on the model of the money market, when real GDP increases, the equilibrium interest rate should 24. Lower U.S. interest rates cause the value of the dollar to The test consists of 50 questions.

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Study Suggestions Macroeconomics Test 4 (Chapters 15-17) Chapter 15 01. In the long run, the level of output: 02. The demand for nurses declined in the summer of 1993, but the starting wages paid to nurses was still the same at the end of 1993. This is an example of a: 03. Refer to Figure 15.1. According to Classical economists if the wage rate is $7? $8? $12?

Figure 15.1 04. Refer to Figure 15.2. Suppose the economy is currently at Point A producing potential output Y0. If the government increases spending, the economy moves to Point ________ in the short-run and to Point ________ in the long-run.

Figure 15.2 05. Suppose that potential output is $5 trillion and real GDP is currently $5.5 trillion. In the long run, we would expect that: 06. In order to shorten a recession when the economy is producing below full employment, the monetary authority could: 07. Assuming that the economy is in the long run equilibrium at full employment, an increase in the money supply will cause _________ in the long run:
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08. Sequence of events following an expansionary fiscal policy. 09. If the Fed increases the money supply at the same time the federal government increases spending through borrowing, the crowding-out effect: 10. The reduction in demand that results when an expansionary fiscal policy raises the real interest rate is called the: 11. According to Say's law: 12. Classical economists believed that: 13. According to Keynes, the level of employment is determined by: 14. In the short run 15. If GDP is ________ potential output, the economy is in a ________ and prices and wages will tend to decrease. 16. The short-run aggregate supply curve is relatively flat because

17. Refer to Figure 15.1. The long-run equilibrium occurs at point 18. Assuming an upward-sloping short-run aggregate supply curve, a decrease in taxes results in ________ in output and ________ in prices.

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19. Refer to Figure 15.2. The economy is at full employment and the unemployment rate is at the natural rate at point

20. Refer to Figure 15.3 If this economy is initially in a recession, the price level will start to change to bring the economy back to full employment, which is reflected by the movement from

21. Refer to Figure 15.4. Suppose that the economy is originally in equilibrium at point a. In the short run, as the supply of money increases, the economy moves to point

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Chapter 16 01. The Federal Reserve can use monetary policy to 02. If prices increase by 4 percent and wages increase by 4 percent, nominal and real wages: 03. Refer to Figure 16.2. Suppose the economy is at Point A on the Phillips Curve (SRPC), an increase in money supply will move the economy to Point ________ in the short run.

Figure 16.2 04. If the actual unemployment rate is below the natural rate, we would expect that inflation: 05. If individuals form rational expectations, an announced policy of reducing the rate of growth in the money supply that is credible will result in: 06. People are said to have rational expectations if they: 07. The heads of central banks are always very conservative about inflation because: 08. If the Fed is strongly committed to fight inflation, it will be reluctant to: 09. The velocity of money is: 10. After World War II, prices were increasing by 19,800% a month in Hungary. This is an example of: 11. The leading spokesman for monetarism over the last few decades has been: 12. Most economists believe that sustained ________ is a purely a ________ phenomenon. 13. Suppose workers receive a 5 percent increase in wages and prices are rising by 5 percent. Workers will experience

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14. Suppose the economy has been at full employment for the past two years with a 7 percent inflation rate. If the Federal Reserve unexpectedly decreases the rate of money growth to 3 percent, what sequence of events occurs? 15. How is a decrease in the inflation rate likely to be associated with employment? 16. When making economic policies or taking actions to fight inflation, a central bank will likely find ________ an acceptable part of the solution. 17. Based on the quantity theory of money, hyperinflations are most likely caused by a rapid Chapter 17 01. In addition to raising taxes, another way a budget deficit can be reduced or eliminated is by 02. In 1998, the city of Canfield collected $500,000 in taxes and spent $450,000. In 1998, the city of Canfield had a: 03. A decrease in government spending and an increase in taxes will cause the: 04. The fall in investment due to government borrowing is called: 05. Part of the argument against budget deficits is that they ________ interest rates and ________ investment. 06. What is a correct sequence of events during a recession? 07. What is a correct sequence of events during an expansion? 08. During a recession, automatic stabilizers cause the federal budget deficit to: 09. An example of an automatic stabilizer is: 10. A balanced budget amendment: 11. A fully anticipated increase in inflation will: 12. An unanticipated reduction in inflation will: 13. During periods of high growth and inflationary pressures, the Federal Reserve will likely: 14. A tax system that discourages savings hurts long-run growth prospects because: 15. The U.S. tax system discourages savings because:
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16. A consumption tax: 17. Replacing the personal income tax with a consumption tax would: 18. If the Federal Reserve purchases newly issued government debt 19. Burdens of the national debt. 20. Automatic stabilizers dampen economic fluctuations during recessions because ________ decrease while ________ increase. 21. Arguments for the balanced budget amendment include 22. Arguments against the balanced budget amendment include 23. A consumption tax system is likely to benefit The test consists of 50 questions.

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Study Suggestions Macroeconomics Final Exam (Chapters 12-19) Review the items from the last two tests and the following: Chapter 18 01. According to the theory of comparative advantage, a country: 02. The United States imports televisions from Japan and Japan imports computer chips from the United States. If the theory of comparative advantage guides trade between the two countries, it must be true that: 03. The main advantage of trade between two countries is that: 04. Free trade causes employment losses in industries in which a country has: 05. Given the natural displacement of workers across industries that is associated with free international trade, we should expect workers in exporting industries to: 06. Advocates of protectionism argue that: 07. It costs a computer manufacturer $3,000 to produce a personal computer. This manufacturer sells these computers abroad for $2,500. This is an example of: Chapter 19 01. If the profitability of investment in the United States increases, we would expect the demand for dollars: 02. If a nation's interest rates are relatively high compared to those of other countries, then the exchange value of its currency will tend to: 03. A depreciation of the U.S. real exchange rate causes consumers to buy ________ domestic goods and ________ foreign goods. 04. An appreciation of the U.S. real exchange rate causes consumers to buy ________ domestic goods and ________ foreign goods. 05. A high rate of inflation in one country relative to another puts pressure on the exchange rate between the two countries, and there is a general tendency: 06. Under a flexible exchange rate system, the exchange rate between two currencies is determined by: 07. Flexible exchange rates have the benefit of: 08. In 1971, most countries, including the United States: The exam consists of 50 questions
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