Question 1

Explain how the current U.S.tax system levies taxes on capital gains and earned interest.What does this mean for the costs of inflation?

Accepted Answer

The U.S.tax system levies taxes on nominal interest earned and on capital gains earned from investment in financial assets.Specifically,the government collects a certain percentage of nominal interest and capital gains earned by households and businesses. Nominal interest rates are the interest rates stated in a loan contract.Economists explain that the true cost of lending and borrowing is the real interest rate.The real interest rate is the nominal interest rate minus the rate of inflation.This correction for inflation makes the real interest rate a more accurate measure of the transfer of purchasing power between the borrower and the lender.If the government collects a certain percentage of nominal interest earned,then,during periods of high inflation,nominal interest earned may increase,even if real interest earned does not. Similarly,when the inflation rate is high,prices of financial assets rise to keep pace with the rising prices of goods and services.While an investor may earn a capital gain in nominal terms,he or she may earn no gain in real terms.Since the government collects a percentage of the nominal capital gain,the investor is made worse off by high inflation. The tax system limits the amount of funds savers are willing to lend and invest in financial assets during periods of high inflation,limiting the funds available for investment in physical capital.This reduction in funds available for investment would slow down production of capital goods and could hinder technical progress that is often made possible by new investment.

Question 2

When various firms fail because their output is not demanded by society,workers may suffer

Accepted Answer

A)  structural unemployment. 
B)  frictional unemployment. 
C)  seasonal unemployment. 
D)  cyclical unemployment. 
A)  structural unemployment. 
B)  frictional unemployment. 
C)  seasonal unemployment. 
D)  cyclical unemployment. D

Question 3

The use of automated teller machines (ATMs)has caused some bank tellers to lose their jobs.This is an example of

Accepted Answer

A)  cyclical unemployment. 
B)  seasonal unemployment. 
C)  frictional unemployment. 
D)  structural unemployment. 
A)  cyclical unemployment. 
B)  seasonal unemployment. 
C)  frictional unemployment. 
D)  structural unemployment. D

Question 4

When governments rapidly increase the supply of money,the usual result is

Accepted Answer

A)  deflation. 
B)  low inflation. 
C)  hyperinflation. 
D)  increasing long-term investment. 
A)  deflation. 
B)  low inflation. 
C)  hyperinflation. 
D)  increasing long-term investment.

Question 5

Economists and psychologists are often on opposite sides of the economic growth debate.The nature of the debate is such that

Accepted Answer

A)  economists emphasize the benefits of growth to finance valuable programs,and psychologists question whether more goods make people happier. 
B)  economists emphasize that more money means more income for the government,and psychologists believe poorer people are happier. 
C)  economists believe that economic growth imposes no serious costs on the economy,and psychologists question the statistical reliability of GDP numbers. 
D)  economists stress the importance of money relative to leisure,and psychologists stress the importance of an unstructured life. 
A)  economists emphasize the benefits of growth to finance valuable programs,and psychologists question whether more goods make people happier. 
B)  economists emphasize that more money means more income for the government,and psychologists believe poorer people are happier. 
C)  economists believe that economic growth imposes no serious costs on the economy,and psychologists question the statistical reliability of GDP numbers. 
D)  economists stress the importance of money relative to leisure,and psychologists stress the importance of an unstructured life.

Question 6

Someone who is out of work because they are between jobs is experiencing

Accepted Answer

A)  frictional unemployment. 
B)  structural unemployment. 
C)  seasonal unemployment. 
D)  cyclical unemployment. 
A)  frictional unemployment. 
B)  structural unemployment. 
C)  seasonal unemployment. 
D)  cyclical unemployment.

Question 7

If the nominal interest rate was 12 percent and the inflation rate was 10 percent in 1980,while the nominal interest rate was 7 percent and the inflation rate was 2 percent in 2001,then

Accepted Answer

A)  real rates were higher in 2001. 
B)  real rates were higher in 1980. 
C)  credit was more expensive in 1980. 
D)  credit was cheaper in 2001 because the nominal rate was lower. 
A)  real rates were higher in 2001. 
B)  real rates were higher in 1980. 
C)  credit was more expensive in 1980. 
D)  credit was cheaper in 2001 because the nominal rate was lower.

Question 8

Economists generally assume that ____ economic growth is better for society.

Accepted Answer

A)  slower 
B)  faster 
C)  stable 
D)  declining 
A)  slower 
B)  faster 
C)  stable 
D)  declining

Question 9

Since 1948,the history of real wage rates generally shows that

Accepted Answer

A)  prices and wages have risen at the same rate. 
B)  prices have risen at a slower rate than wages. 
C)  prices have risen faster than wages. 
D)  real wages have remained constant over the period. 
A)  prices and wages have risen at the same rate. 
B)  prices have risen at a slower rate than wages. 
C)  prices have risen faster than wages. 
D)  real wages have remained constant over the period.

Question 10

As inflation rates increase,borrowing and lending contracts tend to

Accepted Answer

A)  increase in size. 
B)  decrease in size. 
C)  decrease in length of time. 
D)  increase in length of time. 
A)  increase in size. 
B)  decrease in size. 
C)  decrease in length of time. 
D)  increase in length of time.

Question 11

If an investor had a $25,000 long-term capital gain on a $100,000 investment from 1984 to 2010,her real rate of return was most likely

Accepted Answer

A)  equal to the expected rate of inflation. 
B)  equal to the nominal rate of inflation. 
C)  zero. 
D)  negative. 
A)  equal to the expected rate of inflation. 
B)  equal to the nominal rate of inflation. 
C)  zero. 
D)  negative.

Question 12

Labor productivity times hours of work equals

Accepted Answer

A)  per capita GDP. 
B)  capital stock. 
C)  population. 
D)  GDP. 
A)  per capita GDP. 
B)  capital stock. 
C)  population. 
D)  GDP.

Question 13

A new technological innovation would increase

Accepted Answer

A)  the labor force. 
B)  labor hours worked. 
C)  labor productivity. 
D)  population growth. 
A)  the labor force. 
B)  labor hours worked. 
C)  labor productivity. 
D)  population growth.

Question 14

When the growth rates of actual and potential GDP diverge,they usually diverge because

Accepted Answer

A)  actual GDP growth equals potential GDP growth. 
B)  actual GDP growth falls below potential GDP growth. 
C)  potential GDP growth rates fall below actual GDP growth rates. 
D)  potential GDP growth rates fluctuate while actual GDP growth rates remain stable. 
A)  actual GDP growth equals potential GDP growth. 
B)  actual GDP growth falls below potential GDP growth. 
C)  potential GDP growth rates fall below actual GDP growth rates. 
D)  potential GDP growth rates fluctuate while actual GDP growth rates remain stable.

Question 15

In the United States,labor productivity is approximately

Accepted Answer

A)  $73 per hour. 
B)  $94 per hour. 
C)  $102 per hour. 
D)  $110 per hour. 
A)  $73 per hour. 
B)  $94 per hour. 
C)  $102 per hour. 
D)  $110 per hour.

Question 16

The difference between the purchase price of a financial asset and the sale price of the asset is called a(n)

Accepted Answer

A)  capital gain. 
B)  dividend. 
C)  profit. 
D)  investment. 
A)  capital gain. 
B)  dividend. 
C)  profit. 
D)  investment.

Question 17

After a particular loan has been paid off,neither the borrower nor the lender has lost purchasing power.Therefore,it must be true that actual inflation was

Accepted Answer

A)  greater than expected inflation. 
B)  equal to expected inflation. 
C)  less than expected inflation. 
D)  greater than the nominal rate of interest. 
A)  greater than expected inflation. 
B)  equal to expected inflation. 
C)  less than expected inflation. 
D)  greater than the nominal rate of interest.

Question 18

If the discouraged workers were included in the labor force,

Accepted Answer

A)  the unemployment rate would fall. 
B)  the labor force would decrease. 
C)  the employment rate would rise. 
D)  the unemployment rate would rise. 
A)  the unemployment rate would fall. 
B)  the labor force would decrease. 
C)  the employment rate would rise. 
D)  the unemployment rate would rise.

Question 19

Low inflation rates tend to accelerate into higher and higher rates of inflation.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following countries has not experienced hyperinflation in the twentieth century?

Accepted Answer

A)  Germany 
B)  Russia 
C)  Argentina 
D)  United States 
A)  Germany 
B)  Russia 
C)  Argentina 
D)  United States

Explain how the current U.S.tax system levies taxes on capital gains and earned interest.What does this mean for the costs of inflation?

When various firms fail because their output is not demanded by society,workers may suffer

The use of automated teller machines (ATMs)has caused some bank tellers to lose their jobs.This is an example of

When governments rapidly increase the supply of money,the usual result is

Economists and psychologists are often on opposite sides of the economic growth debate.The nature of the debate is such that

Someone who is out of work because they are between jobs is experiencing

If the nominal interest rate was 12 percent and the inflation rate was 10 percent in 1980,while the nominal interest rate was 7 percent and the inflation rate was 2 percent in 2001,then

Economists generally assume that ____ economic growth is better for society.

Since 1948,the history of real wage rates generally shows that

As inflation rates increase,borrowing and lending contracts tend to

If an investor had a $25,000 long-term capital gain on a $100,000 investment from 1984 to 2010,her real rate of return was most likely

Labor productivity times hours of work equals

A new technological innovation would increase

When the growth rates of actual and potential GDP diverge,they usually diverge because

In the United States,labor productivity is approximately

The difference between the purchase price of a financial asset and the sale price of the asset is called a(n)

After a particular loan has been paid off,neither the borrower nor the lender has lost purchasing power.Therefore,it must be true that actual inflation was

If the discouraged workers were included in the labor force,

Low inflation rates tend to accelerate into higher and higher rates of inflation.

Which of the following countries has not experienced hyperinflation in the twentieth century?

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters

Exam 6: The Goals Of Macroeconomic Policy

Explain how the current U.S.tax system levies taxes on capital gains and earned interest.What does this mean for the costs of inflation?

When various firms fail because their output is not demanded by society,workers may suffer

The use of automated teller machines (ATMs)has caused some bank tellers to lose their jobs.This is an example of

When governments rapidly increase the supply of money,the usual result is

Economists and psychologists are often on opposite sides of the economic growth debate.The nature of the debate is such that

Someone who is out of work because they are between jobs is experiencing

If the nominal interest rate was 12 percent and the inflation rate was 10 percent in 1980,while the nominal interest rate was 7 percent and the inflation rate was 2 percent in 2001,then

Economists generally assume that ____ economic growth is better for society.

Since 1948,the history of real wage rates generally shows that

As inflation rates increase,borrowing and lending contracts tend to

If an investor had a $25,000 long-term capital gain on a $100,000 investment from 1984 to 2010,her real rate of return was most likely

Labor productivity times hours of work equals

A new technological innovation would increase

When the growth rates of actual and potential GDP diverge,they usually diverge because

In the United States,labor productivity is approximately

The difference between the purchase price of a financial asset and the sale price of the asset is called a(n)

After a particular loan has been paid off,neither the borrower nor the lender has lost purchasing power.Therefore,it must be true that actual inflation was

If the discouraged workers were included in the labor force,

Low inflation rates tend to accelerate into higher and higher rates of inflation.

Which of the following countries has not experienced hyperinflation in the twentieth century?

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters