Questions 1 to 20:Select the best answer to each question. Note that a question and its answers may be split across a page break, so be sure that you have seen the entirequestion and allthe answers before choosing an answer.

1.As of the year 2006, which one of the following countries had the largestshare of total world exports? A.China B.Germany C.United States
D.Japan

2.Which one of the following statements is correctunder the theory of supply-side economics?A.Transfer payments increase incentives to work. B.High marginal tax rates severely discourage work, saving, and investment. C.The Federal Reserve should adhere to a monetary rule that limits increases in the money supply to a 5 percent annual rate. D.Increases in social security taxes and other business taxes shift the aggregate supply curve to the right.

3.In recent years, the governments of the industrially advanced countries haveA.substantially reduced their contributions to the World Bank. B.discouraged skilled developing countries' workers from emigrating to the industrially advanced countries. C.forgiven a portion of the debt owed by some low-income developing countries. D.substantially reduced foreign aid to the developing countries.

4.The international agency that lends money to developing countries for economic development projects is the
A.International Monetary Fund (IMF). B.World Bank. C.World Credit Union. D.World Trade Organization (WTO).

5.When most consumers and firms reduce spending only because they expect other consumers and firms to reduce spending, and a recession results,
A.a self-correction has occurred. B.a real-business-downturn has occurred. C.an adverse aggregate supply shock has occurred. D.a coordination failure has occurred.

6.As it relates to international trade, dumpingA.is the practice of selling goods in a foreign market at less than cost. B.is defined as selling more goods than allowed by an import quota. C.constitutes a general case for permanent tariffs. D.is a form of price discrimination illegal under U.S. antitrust laws.

7.Which one of the following statements about the World Bank is correct?
A.The World Bank provides military assistance to those nations interested in improving national defense.
B.The World Bank provides gold for developing countries that want to go on the gold standard.
C.The World Bank makes and guarantees loans for basic development projects such as the construction of dams, roads, and schools.
D.The World Bank provides short-term loans to developing countries that are incurring balance of payments deficits.

8.The basic problem portrayed by the traditional Phillips Curve isA.that unemployment rises at the same time the general price level is rising. B.that a level of aggregate demand sufficiently high to result in full employment may also cause inflation. C.that changes in the composition of total labor demand tend to be deflationary. D.the possibility that automation will increase the level of noncyclical unemployment.

9.Inflation accompanied by falling real output and employment is known as A.Okun's law. B.stagflation. C.the Phillips Curve.
D.Laffer's law.

10.The "brain drain" problem in the developing countries refers to the fact the best-educated workersA.often emigrate to industrialized countries. B.are reluctant to become entrepreneurs. C.are reluctant to work in the public sector.
D.are concentrated in rural areas where their skills are underutilized.

11.The exchange rate system currently used by the industrially advanced nations is A.the Bretton Woods system. B.the managed float. C.the gold standard.
D.a fixed rate system.

12.In the U.S. balance of payments, U.S. purchases of assets abroad are a(n) A.inpayment. B.U.S. dollar inflow. C.current account item.
D.U.S. dollar outflow.

13.When the actual rate of inflation is less than the expected rate,A.the unemployment rate will temporarily rise. B.firms will experience rising profits and thus increase their employment. C.the unemployment rate will temporarily fall.
D.firms will increase their output to recoup their falling profits.

14.A market in which the money of one nation is exchanged for the money of another nation is a A.bond market. B.resource market. C.stock market.
D.foreign exchange market.

15.The equation of exchange suggests that, if the supply and velocity of money remain unchanged, an
increase in the physical volume of goods and services produced will causeA.the unemployment rate to rise. B.a decline in the price level. C.the Federal Reserve Banks to sell securities in the open market.
D.an automatic budget deficit.

16.Which one of the following is an example of a land-intensive commodity? A.Chemicals B.Autos C.Watches
D.Wool

17.The Laffer Curve is a central concept inA.monetarism. B.supply-side economics. C.Keynesianism.
D.welfare economics.

18.Which one of the following statements about efficiency wages is correct?A.An efficiency wage is a "wage" that contains a profit-sharing component as well as traditional hourly pay. B.An efficiency wage is a wage that automatically rises with the national index of labor productivity. C.An efficiency wage is a wage payment necessary to compensate workers for risk of injury on the job. D.An efficiency wage is an above-market wage that minimizes a firm's labor cost per unit of output.

19.Suppose the domestic price (no-international-trade price) of copper is $1.20 a pound in the United States while the world price is $1.00 a pound. Assuming no transportation costs, the United States will
A.have a domestic surplus of copper. B.export copper. C.neither export nor import copper.
D.import copper.20.Over recent years, economists holding monetarist views have replaced their call for a monetary rule
with a call forA.nominal GDP targeting. B.inflationary and recessionary gap analysis. C.inflation targeting. D.artful Fed management of interest rates.