1. Which of the following economic variables move in the same direction in general?
A. unemployment rate and personal income
B. unemployment rate and GDP growth
C. GDP growth and government tax revenues
D. unemployment rate and tax revenues
E. unemployment rate and inflation rate
2. Which of the following statements is true?
A. Money neutrality means nominal changes are irrelevant in the long run; only real changes matter.
B. The classical dichotomy refers to the fact that only real variables are important in the long run.
C. The wealth effect on the part of consumers explains why output is higher when the price level is lower.
D. A falling price level benefits lenders at the expense of borrowers.
E. All of the above are true.
3. The aggregate-supply curve can be shifted to the right by all but which of the following?
A. discovery of new oil reserves
B. new technologies
C. a tax increase
D. an increase in immigration
E. investment tax credit
4. Which of the following is an example of "supply-side economics"?
A. an investment tax credit
B. a one-time tax rebate to low-income families
C. a new Medicare drug benefit for the elderly
D. an increase in Social Security benefits
E. all of the above
5. If people's expectations are rational and their central bank is credible, an announcement of an imminent reduction in the money supply would result in
A. less inflation but more unemployment.
B. more inflation but less unemployment.
C. less inflation but the same level of unemployment.
D. more inflation but the same level of unemployment.
E. less inflation and less unemployment.
6. Which of the following statements about inflation is false?
A. Disinflation is defined as a reduction in the rate of inflation.
B. Policymakers can exploit a trade-off between inflation and unemployment in the short run but not in the long run.
C. Unemployment rates below the natural rate of unemployment are difficult to achieve in the short run, but easy to achieve in the long run.
D. The sacrifice ratio is the number of percentage points annual output falls for each percentage point reduction in inflation.
E. In the long run, the inflation rate depends primarily on the money supply growth rate.
7. Which of the following statements about budget deficits is false?
A. Deficits and surpluses could be used to avoid fluctuations in the tax rate.
B. Reducing the budget deficit rather than funding more education spending could, all things considered, make future generations worse off.
C. A potential cost of deficits is that they reduce national saving, thereby reducing growth of the capital stock and output growth.
D. The U.S. debt per person is large compared with average lifetime income.
E. In 2005, the U.S. government had a deficit.
8. Which of the following statements about budget deficits is false?
A. Deficits and surpluses could be used to avoid fluctuations in the tax rate.
B. Reducing the budget deficit rather than funding more education spending could, all things considered, make future generations worse off.
C. A potential cost of deficits is that they reduce national saving, thereby reducing growth of the capital stock and output growth.
D. The U.S. debt per person is large compared with average lifetime income.
E. In 2005, the U.S. government had a deficit.