Ch. 23 & 24 True False – Flashcards

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question
Through world trade, an economy can reach a point beyond its domestic production possibilities curve
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true
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Higher unemployment rates are linked with higher crime rates and higher rates of physical and mental illness.
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true
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Barriers to free trade impair efficiency in the international allocation of resources
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true
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An increase in incomes in the United States would tend to cause the dollar price of the Japanese yen to fall
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false
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Prices tend to be stickier in the shorter run than in the longer run
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true
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In the short run, firms are more likely to respond to demand shocks by altering inventory levels than by changing how much they produce
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true
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The "sticky price" model is the only one used by macroeconomists
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false
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Disposable income measures the before-tax income received by resource suppliers
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false
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At the end of the summer driving season, the demand for gasoline typically declines. This is an example of a negative demand shock
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False
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Banks and other financial institutions provide the link between savers and economic investors in the macroeconomy
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true
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In determining GDP by the expenditures method it is appropriate to use net investment rather than gross investment as a measure of investment spending
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false
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Personal income usually exceeds disposable income.
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True
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The expenditures and income approaches to GDP are expected to yield identical results because goods that are not sold in one year will be sold in some following year.
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false
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The simplest way to calculate GDP is to sum the total sales of all business firms.
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false
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A demand shock occurs when large numbers of consumers unexpectedly reduce their purchases of goods and services.
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true
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Negative demand shocks have a more significant impact on output and employment when prices are flexible.
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false
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The business cycle reflects both short-run fluctuations in output and long-run economic growth.
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True
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Interest on the public debt is included as a part of government purchases in determining GDP by the expenditures method.
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false
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Gross private domestic investment exceeds depreciation in an economy that experiences expanding production capacity.
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true
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The amount of investment in an economy is ultimately limited by the amount of savings in that economy.
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True
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When the dollar depreciates relative to the value of the currencies of the trading partners of the United States, then goods imported into the United States will tend to become more expensive.
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true
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When the dollar price of yen rises, the dollar appreciates in value relative to the yen.
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False
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If a farmer purchases 10 acres of farmland from a neighboring farmer, this would be considered an economic investment.
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False
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Within the circular flow model, the level of total resource income and total spending on output will be approximately equal.
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true
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A price index is 100 times the ratio of real GDP to nominal GDP.
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false
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Economists believe that expectations have little impact on macroeconomic outcomes
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false
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Welfare payments to low-income families are included in national income.
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false
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A nation has a comparative advantage in some products when it can produce that good at a lower domestic opportunity cost than can a potential trading partner.
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true
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Shocks occur when actual events do not match expectations.
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true
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The economic integration of nations creates larger markets for firms within the nations that integrate and makes it possible for these firms and their customers to benefit from the economies of large-scale (mass) production.
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true
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NDP can be determined by adding taxes on production and imports to GDP.
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false
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All expenditures on new construction are included as investment in calculating GDP.
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true
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Output per person has grown steadily since the beginning of the Roman Empire.
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false
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Nominal GDP measures a nation's output in current year prices.
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true
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Prices tend to be sticky because sellers know that consumers prefer stable prices.
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true
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Economists and policymakers are generally more concerned about nominal GDP than real GDP
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false
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Any person without a job is considered to be unemployed.
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False
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Exports are subtracted from imports in calculating U.S. GDP because exports are not available for domestic consumption.
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false
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The Smoot-Hawley Tariff Act of 1930 reduced tariffs in the United States to the lowest level ever in an attempt to pull the nation out of the Great Depression.
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false
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Mexican importers are suppliers of pesos in the foreign exchange market.
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true
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In 2007, unemployment rates in the United States exceeded the rates in Germany, India, and Poland.
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false
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Modern economic growth refers to any situation where a nation's output increases.
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false
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The purchase of Wal-Mart stock is a part of gross investment, but not of net investment
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false
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A nation that wants to invest in more newly created capital in the present must be willing to forgo present consumption.
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true
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China's GDP per person in 2007 was a little more than one-tenth of U.S. GDP per person in the same year.
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false
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If real GDP is 50 and nominal GDP is 100, the GDP price index is 200.
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true
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Import quotas are taxes or duties on imported products.
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false
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In order to achieve modern economic growth, a nation's output must grow faster than its population.
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true
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In the very short run, firms tend to respond to demand shocks by changing their prices.
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false
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A nation that realizes a 3 percent increase in its output per person is experiencing modern economic growth.
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True
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Milk prices tend to be stickier than gasoline prices.
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True
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If nominal GDP is 150 and the GDP price index is 200, real GDP is 75
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true
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The term "economic investment" refers only to money spent purchasing newly created capital goods such as factories, tools, and warehouses.
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true
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The United States exports a higher U. S. dollar volume of goods to Canada than to any other nation.
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true
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Real GDP measures the change in the price level over time.
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false
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"Supply shocks" occur any time there is a change in the supply of goods and services.
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false
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Increasing investment in the present means forgoing future consumption.
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False
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Economists refer to purchases of stocks and bonds as "investment."
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false
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Prices tend to be more flexible when there are only two or three rival firms rather than a large number of sellers in the market.
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false
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Demand shocks cause problems in the macroeconomy primarily because prices are sticky.
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true
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In the very short run, demand shocks will tend to change the level of output but have little effect on prices.
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True
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Economists believe that most short-run fluctuations in output are the result of supply shocks.
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false
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Specialized production and international trade increase a nation's productivity and increase the availability of goods and services.
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true
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Inflation reduces the purchasing power of a person's income and savings.
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true
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Demand shocks may be positive or negative.
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true
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One reason that trade restrictions get public support is that the alleged benefits of the restrictions are often immediate and clear-cut, but the adverse affects are often obscure and dispersed over the economy.
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true
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If Ford Motor Company purchases factory equipment previously used by General Motors, this would be considered an economic investment.
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false
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