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If real consumption spending increases by $400 billion each time real disposable
income rises by $1,000 billion, the marginal propensity to consume is
a. 40
b. 4
c. 0.4
d. 0.04
e. 0.004
Which of the following would lead to a rightward shift of the money demand curve?
a. A decrease in the price level
b. A decrease in output
c. An open market sale of bonds by the Fed
d. An increase in the price level
e. An open market purchase of bonds by the Fed.
For which of the following goods is demand most sensitive to interest rate changes?
a. Refrigerators
b. Shoes
c. Corn
d. Textbooks
e. Motor oil
Which of the following could cause the production function to shift upward?
a. A decrease in the capital stock
b. An increase in the capital stock
c. An increase in population
d. A decrease in population
e. An increase in transfer payments
If the supply of coffee falls due to bad weather conditions in coffee-exporting countries,
then the
a. price and quantity will rise
b. price and quantity will fall
c. price will fall and quantity will rise
d. price will rise and quantity will fall
e. quantity will fall, but price may rise or fall
The Federal Reserve
a. prints money for use by individuals during transactions.
b. is a nation's monetary authority, responsible for controlling the money supply.
c. issues government debt.
d. makes loans and takes deposits from individuals.
e. collects taxes from corporations only while the Treasury Department collects
personal income and Social Security taxes.
The phenomenon of wages in many industries changing very little or not at all for a
year or more after a change in output is referred by economists as
a. wage lag effect.
b. wage stickiness.
c. compensation inflexibility.
d. inertia.
e. reservation wage effect.
When there is a change in demand,
a. there is a rightward movement along the demand curve
b. there is a leftward movement along the demand curve
c. there is a shift of the supply curve
d. changes in price lead to different changes in quantity demanded
e. there is a shift of the demand curve
A decrease in the price of a foreign currency is represented graphically as
a. rightward movement along the demand curve for that currency
b. an upward shift of the demand curve
c. a downward shift of the demand curve
d. a horizontal line
e. a vertical line
What is the relationship between household saving and taxes?
a. taxes = income - consumption - household saving
b. household saving = income + taxes - consumption
c. taxes = income + consumption + household saving
d. household saving = consumption + income - taxes
e. taxes = household saving - income + consumption
A spending shock typically involves a dramatic reduction in spending in virtually all
sectors of the economy simultaneously.
If the Fed changes the interest rate, there will be
a. a movement along the aggregate expenditure line followed by a shift in the line
b. no movement along the aggregate expenditure line because the effect is on
investment
c. a shift in the aggregate supply curve
d. an increase in the money supply
e. a shift in the aggregate expenditure line
If the interest rate rises, the
a. quantity of loanable funds demanded by firms decreases
b. quantity of loanable funds demanded by government decreases
c. quantity of loanable funds demanded by firms increases
d. quantity of loanable funds demanded by government increases
e. demand for loanable funds curve shifts to the right
Which of the following is not among the factors that lead to economic growth?
a. Increases in employment
b. Increases in the capital stock
c. Improvements in technology
d. Government transfer programs
e. Political stability and an efficient legal system
The long-run aggregate supply curve
a. is vertical
b. is upward sloping
c. is downward sloping
d. is horizontal
e. can have a variety of shapes depending on fiscal policy
Mark is an 86-year-old watchmaker who works ten hours a week to supplement his
retirement income. In determining the U.S. unemployment rate, Mark would be
considered
a. employed
b. unemployed
c. an involuntary part-time worker
d. not in the labor force
e. a discouraged worker
A statement of opinion about which model best explains the economy is
a. an abstraction
b. a positive statement
c. a normative statement
d. a philosophical conundrum
e. empirically verifiable
