Reference no: EM1399785

1. The "brain drain" problem in the developing countries refers to the fact the best-educated workers

A. often emigrate to industrialized countries.
B. are reluctant to work in the public sector.
C. are concentrated in rural areas where their skills are underutilized.
D. are reluctant to become entrepreneurs.

2. The mainstream view is that macro instability is caused by

A. government interference in the economy.
B. erratic growth of the nation's money supply.
C. significant changes in investment spending.
D. consumption "booms" and "busts."

3. The mainstream view of macro instability is that

A. bursts of innovation put the economy on an unsustainable growth path, eventually producing recession.
B. changes in investment shift the aggregate demand curve and thus cause changes in real GDP.
C. changes in the money supply directly cause changes in aggregate demand and thus cause changes in real GDP.
D. changes in technology and resource availability are the two main sources of fluctuations of real GDP.

4. Which one of the following statements about the World Bank is correct?

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

5. Which one of the following statements about foreign trade is correct?

A. In recent years, the United States has exported more services abroad than it has imported.
B. In recent years, the United States has fallen to third behind Japan and Germany in the list of leading export nations (absolute
volume basis).
C. In recent years, the United States has had a large goods trade surplus with the rest of the world.
D. In recent years, the United States has had a small goods trade surplus with Japan.

6. When the actual rate of inflation is less than the expected rate,

A. the unemployment rate will temporarily fall.
B. firms will increase their output to recoup their falling profits.
C. the unemployment rate will temporarily rise.
D. firms will experience rising profits and thus increase their employment.

7. A market in which the money of one nation is exchanged for the money of another nation is a

A. resource market.
B. stock market.
C. bond market.
D. foreign exchange market.

8. 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.

9. Suppose the United States sets a limit on the number of tons of sugar that can be imported each year.

This is an example of a(n)
A. protective tariff.
B. voluntary export restriction.
C. revenue tariff.
D. import quota.

10. Which one of the following statements about stagflation is correct?

A. Stagflation is a simultaneous increase in real output and the price level.
B. Stagflation is a simultaneous reduction in real output and the price level.
C. Stagflation is an increase in inflation accompanied by decreases in real output and employment.
D. Stagflation is a decline in the price level accompanied by increases in real output and employment.

11. Which one of the following statements about efficiency wages is correct?

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

12. Over recent years, economists holding monetarist views have replaced their call for a monetary rule with a call for

A. inflation targeting.
B. inflationary and recessionary gap analysis.
C. nominal GDP targeting.
D. artful Fed management of interest rates.

13. The Bretton Woods system of exchange rates relied on

A. fixed exchange rates with no mechanism for changing them.
B. freely floating exchange rates.
C. the United States to set and periodically review worldwide exchange rates.
D. fixed or pegged exchange rates, with occasional orderly adjustments to the rates.

14. The Laffer Curve is a central concept in

A. monetarism.
B. welfare economics.
C. supply-side economics.
D. Keynesianism.

15. As of the year 2006, which one of the following countries had the largest share of total world exports?

A. United States
B. Japan
C. Germany
D. China

16. When most consumers and firms reduce spending only because they expect other consumers and firms to reduce spending, and a recession results,

A. an adverse aggregate supply shock has occurred.
B. a real-business-downturn has occurred.
C. a self-correction has occurred.
D. a coordination failure has occurred.

17. A government may be able to reduce the international value of its currency by

A. selling its currency in the foreign exchange market.
B. buying its currency in the foreign exchange market.
C. increasing its domestic interest rates.
D. selling foreign currencies in the foreign exchange market.

18. Which one of the following does not correlate positively with economic growth?

A. Life expectancy
B. Output per capita
C. The literacy rate
D. The percentage of the population engaged in agriculture

19. Suppose the domestic price (no-international-trade price) of wheat is $3.50 a bushel in the United States while the world price is $4.00 a bushel. Assuming no transportation costs, the United States will

A. have a domestic shortage of wheat.
B. import wheat.

C. neither export nor import wheat.
D. export wheat.

20. In the absence of unexpected shocks, the economy will tend to experience

A. no changes in output or prices.
B. positive growth with mild amounts of deflation.
C. positive growth with mild amounts of inflation.
D. positive, noninflationary growth.