NEC preparation 7

If a person voluntarily quits her/her job and does not find another one for 5 months, this is an example of

• structural unemployment.

• frictional unemployment.

• short-duration unemployment.

• cyclical unemployment.

If the price index increases from 105 to 109, the rate of inflation is:

• 0.04

• 0.036

• 0.0038

• 0.01

Real GDP is nominal GDP

• plus depreciation.

• adjusted for changes in the price level.

• minus depreciation.

• minus taxes.

Which of the following is the opportunity cost of money?

• Money is a means of payment.

• The trouble of having to get money out of the bank.

• The interest forgone by holding money.

• The ability to purchase things at a moment􏰲s notice.

__________ is the use of government expenditures and taxes to promote full employment, stable prices, and economic growth

• Monetary policy

• Incomes policy

• Stabilization policy

• Fiscal policy

The government budget deficit is

• the difference between government purchases and government revenues from bonds and taxes.

• caused by a lack of business sector investment.

• created when the government expenditures exceed net taxes.

• caused by leakages in the economy.

Budget deficit shows:

• an excess of government spending over government receipts.

• an excess of government receipts over government spending.

• an excess of government investment spending over government tax revenues.

• an excess of government tax revenues over government investments.

Opportunity cost shows that:

• people face trade-offs.

• people respond to incentives.

• rational people think at the margin.

• markets are usually a good way to organize economic activity.

If government officials break a natural monopoly up into several smaller firms, then

• competition will force firms to attain economic profits rather than accounting profits.

• competition will force firms to produce surplus output, which drives up price.

• the average costs of production will increase.

• the average costs of production will decrease.

The Federal Reserve System:

• only acts when the economy is in crisis.

• is run by the government.

• pursues independent monetary policy.

• pursues independent fiscal policy.