14.3 The Business Cycle 1) Which of the following explains the cause of the change in the unemployment rate at the end of a recession? A) Firms are hesitant to rehire laid off workers as they continue to operate below capacity. B) Firms rapidly hire new workers at the first sign of on an increase in demand for their goods. C) Discouraged workers […]
81. Given the formula for each of the following ratios and then explain what each ratio measures. a. Return on Investment b. Quick Ratio c. Gross Margin Ratio d. Return on Owners’ Equity PROBLEMS 82. Using the financial statements from the (instructor supplies the income statement and balance sheet of a company and insert name here) calculate each of the following ratios and briefly […]
11) If the exchange rate changes from 1.00 euro per dollar to 1.10 euros per dollar, the euro has A) depreciated against the euro. B) appreciated against the euro. C) fallen inversely in value. D) appreciated against the dollar. E) depreciated against the dollar. 12) If the exchange rate changes from 1.10 euros per dollar to 1.00 euro per dollar, the dollar […]
21) Burger King is paying $9 an hour to its workers. If the expected inflation rate equals the actual inflation rate and both are 10 percent a year, then to keep the real wage rate constant in a year the money wage rate must A) rise to $9.90 an hour. B) fall to $8.10 an hour. C) stay at $9.00 an hour. D) […]
11) As pointed out by the “big tradeoff,” government action that redistributes incomes so that everyone has the same income leads to A) fairness according to the “fair rules” approach. B) efficient markets. C) resources being allocated according to a command system. D) a smaller total output E) lower taxes on the rich than on the poor so that the rich do not lose […]
71.Which of the following was responsible for the World Bank shifting its focus from Europe to third world nations? A. The Great Depression B. The Jamaica agreement C. World War II D. The Marshall Plan E. The Bretton Woods agreement 72.Which of the following is true according to the provisions of the Marshall plan? A. The United States lent money directly to European nations to help them rebuild their […]
32) Intel and AMD are a duopoly that produces CPU chips. Intel and AMD can conduct R&D or they cannot conduct R&D. The table above shows the payoff matrix for the two firms. If AMD is playing a tit-for-tat strategy, then if Intel conducted R&D last period, AMD A) definitely conducts R&D this period. B) definitely does not conduct R&D this period. C) might […]
SHORT-ANSWER ESSAY QUESTIONS S-A E 218 The master budget and flexible budgets are important aids to management in performing the management functions of planning and control. Briefly describe how planning and control are facilitated by preparing a master budget and flexible budgets. How are these two types of budgets interrelated with planning and control? S-A E 219 Brad Ventura is confused about […]
33) The Lucas supply function, ________ the assumption that expectations are rational, implies that anticipated monetary policy changes and anticipated fiscal policy changes will have ________ on real output. A) in combination with; a positive effect B) in combination with; no effect C) in contrast to; a negative effect D) in contrast to; a positive effect 34) The Lucas supply function, ________ the assumption […]
61) If an import quota is imposed on imports of shrimp into the United States, U.S. producer surplus from shrimp will ________ and U.S. total surplus from shrimp will ________. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease E) increase; not change 62) A quota ________ a deadweight loss and a tariff ________ a deadweight loss. A) creates; creates […]
21) If a tax cut increases aggregate demand more than aggregate supply, real GDP ________ and the price level ________.
A) increases; rises
B) increases; falls
C) decreases; rises
D) decreases; falls
E) increases; does not change
22) How could an expansionary fiscal policy increase real GDP and lower the price level?
A) if aggregate supply decreases more than aggregate demand increases
B) if aggregate supply increases more than aggregate demand increases
C) if the aggregate supply increases equals the aggregate demand increase
D) if aggregate supply decreases more than aggregate demand decreases
E) if aggregate supply decreases less than aggregate demand decreases
23) When taxes are cut, aggregate demand ________ and aggregate supply ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) increases; does not change
24) The quantity of employment is determined in the ________ market and that quantity, along with the ________, determines potential GDP.
A) loanable funds; production function
B) goods and services; labor market
C) labor market; tax rate
D) labor market; production function
E) labor market; tax wedge
25) Increasing the income tax rate ________ the ________.
A) decreases; demand for labor
B) increases; supply of labor
C) decreases; supply of labor
D) does not change; supply of labor
E) increases; demand for labor
26) Increasing the income tax rate ________ the before-tax real wage rate and ________ the after-tax real wage rate.
A) raises; raises
B) does not change; raises
C) lowers; lowers
D) lowers; raises
E) raises; lowers
27) If the income tax rate is 20 percent and the tax rate on consumption expenditure is 15 percent, then the tax wedge is
A) 2 percent.
B) 5 percent.
C) 35 percent.
D) 300 percent.
E) None of the above answers is correct.
28) The supply-side effects of an income tax cut ________ potential GDP and ________ aggregate supply.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) increases; do not change
29) An income tax on labor income decreases the ________ of potential GDP, and a tax on interest income decreases the ________ of potential GDP.
A) level; growth rate
B) growth rate; level
C) level; level
D) growth rate; growth rate
E) None of the above answers is correct.
30) If the nominal interest rate is 10 percent, the inflation rate is 6 percent, and the tax rate on interest income is 25 percent, what is the after-tax real interest rate?
A) 4.0 percent
B) 6.0 percent
C) 3.0 percent
D) 1.5 percent
E) 3.5 percent
31) An income tax cut ________ aggregate demand and ________ aggregate supply.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) does not change; increases
32) If fiscal stimulus creates a large budget ________, then in the long run economic growth ________.
A) surplus; increases
B) surplus; decreases
C) deficit; increases
D) deficit; decreases
E) None of the above answers is correct.
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