In the aggregate expenditures model, if aggregate expenditures (AE) equal $6 trillion
and GDP equals $7 trillion, then:
a. inventory depletion equals -$1 trillion.
b. inventory accumulation equals $1 trillion.
c. investment equals $1 trillion.
d. investment equals -$1 trillion.
The period of declining growth in real GDP between the peak of the business cycle and
the trough is called a(n):
a. recessionary phase.
b. recovery.
c. expansionary phase.
d. stationary phase.
A fall in the price of a good causes an increase in its:
a. quantity demanded.
b. demand.
c. quantity supplied.
d. supply.
In Exhibit 5-11, personal income (PI) is:
a. $9,210 billion.
b. $8,510 billion.
c. $6,560 billion.
d. $6,610 billion.
e. $10,910 billion.
Exhibit 8-1 Disposable income and consumption data Disposable Income
(Y)Change in
Disposable IncomeConsumption
(C)
0 500
1,000 1,000 1,400
2,000 1,000 2,200
3,000 1,000 2,900
4,000 1,000 3,500
5,000 1,000 4,000 In Exhibit 8-1, when disposable income (Y) is increased from $1,000
to $2,000, the marginal propensity to consume is:
a. 0.2.
b. 0.6.
c. 0.8.
d. 1.0.
e. 1.25.
Exhibit 10-7 Aggregate supply and demand curves
In Exhibit 10-7, the aggregate demand and supply curves reflect an economy in which:
a. full employment is at $1,000 billion GDP.
b. excess aggregate supply is created when there is a shift from AD1 to AD2.
c. excess aggregate demand forces prices up to P = 120.
d. excess aggregate demand causes prices to stabilize at P = 110.
e. a new equilibrium is found at point b.
The unemployment rate will increase whenever there is a(n):
a. increase in the number of persons classified as unemployed.
b. increase in the number of unemployed persons relative to the size of the labor force.
c. increase in the size of the U.S. population and there is no change in the number of
persons classified as employed.
d. reduction in the size of the labor force.
e. reduction in the size of the civilian labor force while the number of unemployed
decreases.
A good example of a price floor is:
a. rent controls on apartments in major cities.
b. general admission tickets to concerts.
c. the minimum wage law.
d. food stamp regulations.
e. rock concert tickets.
According to the quantity theory of money, if an economy produces 100 units of output
and has a money supply equal to $500, then if the money supply doubles while velocity
remains constant, the new price level will:
a. fall to half its initial level.
b. fall, but it will not fall all the way to half its initial level.
c. increase, but it will not double.
d. double.
e. more than double.
Which of the following would cause the money supply in the United States to decrease?
a. An increase in reserve requirements
b. A decrease in the discount rate
c. A purchase of U.S. government bonds by the Federal Reserve
d. An increase in the world supply of gold
All of the following are examples of retailers except:
a. Sports Authority
b. Boeing
c. Home Depot
d. Best Buy
In the aggregate demand/aggregate supply model, a country’s full-employment real
GDP is represented by:
a. prices.
b. aggregate demand.
c. aggregate supply.
d. an increase in the general level of prices.
The marginal propensity to save is:
a. the change in saving divided by the change in disposable income.
b. the change in disposable income divided by the change in saving.
c. saving divided by disposable income.
d. disposable income divided by saving.
e. saving divided by consumption.
As shown in Exhibit 8-6, autonomous consumption is:
a. 0.
b. $2 trillion.
c. $4 trillion.
d. $6 trillion.
e. $8 trillion.
If people become pessimistic about the state of the economy, the consumption function
shifts upward.
Suppose A and B are complementary goods. Other things being equal, the demand
curve for A will shift to the right when the price of B goes up.
A positive economic statement must be verifiable.
U.S. macroeconomic data show that a stable Phillips curve existed during the 1960s.
Disinflation and deflation mean a decrease in the average price level.
The vertical intercept of the consumption function is used to determine the break-even
level of real disposable income.
The major source of tax revenues collected by the Federal government is the corporate
income tax.
The following information is available from the records of Focus Seascapes, Inc. at the
end of the 2014 calendar year:
The classical economists believe that prices and wages quickly adjust to keep the
economy operating at full employment.
Describe the two basic philosophies of taxation fairness.