Excluding underground economy production from measured GDP causes errors in GDP growth estimates in the long run.

A) True

B) False

Discouraged workers cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness.

A) True

B) False

If a firm is employing the profit maximizing number of workers, and then output price rises, the firm will respond by laying off workers.

A) True

B) False

In a consumption function with income (Y) on the horizontal axis and consumption (C) on the vertical axis, a rise in stock market wealth, all else constant, will result in a movement along the consumption function.

A) True

B) False

Suppose the value of the US dollar changes from $1 = 1.2 euros to $1 = 1.30 euros. This being the case, imports from the US to Europe, have become less expensive to European citizens, all else constant.

A) True

B) False

The FOMC meets 8 times per year unless conditions warrant more frequent meetings.

A) True

B) False

Milton Friedman felt that high inflation was always caused by excessive money growth. In fact, he has been quoted as saying "Inflation is always and everywhere a monetary phenomenon."

A) True

B) False

A supply side economist would most likely support raising the corporate income tax.

A) True

B) False

Friedman and Phelps agreed that there is a trade-off between unemployment and inflation, but only in the long run.

A) True

B) False

In a closed economy, savings = investment is the same as the closed economy goods market equilibrium condition we know as Y = C + I + G.

A) True

B) False

1. Excluding underground economy production from measured GDP causes errors in GDP growth estimates in the long run this statement is true .

It is because the output and income generated from the underground economy do not get included in the estimation of GDP. Therefore, it will cause underestimation of GDP which would cause the error in GDP in the long run. Hence, it does not reflect the true picture of the economy.

2. Discouraged workers cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness this statement is true .

It is because workers get discouraged because of not getting a job due to the lesser demand of the workers and the lesser opportunities of employment reflect the situation of joblessness. Hence, it raises the unemployment rate.

3. If a firm is employing the profit-maximizing number of workers, and then output price rises, the firm will respond by laying off workers this statement is false .

It is because the firm would hire the workers upto the point where its marginal product equates with the price of a worker. When the price of output would rise, then it will be beneficial for the producer to produce more and sell more. As a result, for producing more output, the requirement of the worker would increase. Then, the firm will start hiring more workers upto the equality point of the marginal product of the worker and the marginal cost of the worker.

4. In a consumption function with income (Y) on the horizontal axis and consumption (C) on the vertical axis, a rise in stock market wealth, all else constant, will result in a movement along the consumption function this statement is false .

It is because the stock market wealth is the autonomous component for people which is independent of income levels. The rise in stock market wealth would rise the autonomous consumption of the people which would shift the consumption function.

5. Suppose the value of the US dollar changes from $1 = 1.2 euros to $1 = 1.30 euros. This being the case, imports from the US to Europe, have become less expensive to European citizens, all else constant this statement is false.

It is because the value of European currency gets depreciated in terms of the dollar as one dollar consists of more European currency than previous. So, it will make imports less expensive headed from Europe to the US, but the US goods will be expensive to the European citizens.

6. The FOMC meets 8 times per year unless conditions warrant more frequent meetings this statement is true .

It is because the FOMC holds eight meeting in a year as per the schedule but it also holds some unnecessary meetings also when it requires due to the need of reviewing the economic and financial developments.

7. Milton Friedman felt that high inflation was always caused by excessive money growth. In fact, he has been quoted as saying "Inflation is always and everywhere a monetary phenomenon." this statement is true .

It is because as per the theory of Milton Friedman, he pointed out the inflation a cause of the growth of money. An increasing quantity of money would kick up the aggregate demand of the goods and services in the economy which, in turn, raise the average price levels in the economy. Hence, inflation rates rise.

8. A supply-side economist would most likely support raising the corporate income tax this statement is false .

It is because the higher tax rates would discourage the producers to produce and invest more. Even it would also reduce government revenue via taxation.

9. Friedman and Phelps agreed that there is a trade-off between unemployment and inflation, but only in the long run , this statement is false .

It is because there is an existence of a trade-off between unemployment and inflation in the short run, while in the long run, the rate of unemployment comes back to its natural rate but inflation rises.

10. In a closed economy, savings = investment is the same as the closed economy goods market equilibrium condition we know as Y = C + I + G this statement is false .

It is because in the closed economy macroeconomics equilibrium, savings equates with investment but in the open economy the difference between savings and investment would cause the number of net exports that is, it determined the number of capital inflows and capital outflow.