If Greg uses a special glue to make model planes that he sells and the price of his model
planes increases, then one would expect that the equilibrium price of the special glue
would _______ and the equilibrium quantity would _________.
a. increase; decrease
b. decrease; increase
c. increase; increase
d. decrease; decrease
e. increase; indeterminant
If Mary has an absolute advantage over Bill in performing each of two tasks, then
a. Mary must have a comparative advantage in both tasks
b. Mary cannot benefit by specializing in one and trading with Bill for the other
c. Mary should specialize in both tasks
d. Mary cannot have a comparative advantage in either task
e. Mary should specialize in the one in which she has a comparative advantage
A decrease in demand, with supply constant, results in a(n)
a. increase in equilibrium price and a decrease in equilibrium quantity
b. decrease in equilibrium price and a decrease in equilibrium quantity
c. increase in equilibrium price and an increase in equilibrium quantity
d. increase in equilibrium price and an ambiguous effect on equilibrium quantity
e. decrease in supply
According to the classical model, there is no need for government intervention in the
economy. if the economy is left alone, full employment output will eventually occur.
Which of the following would be most likely to increase the quantity of money
demanded?
a. A decrease in real income
b. An increase in real income
c. A decrease in the interest rate
d. An increase in the cost of converting other assets into money
e. An increase in the price level
Say’s Law states that by purchasing goods and services, buyers stimulate firms to
produce goods and services equal to what has been purchased: Demand creates its own
supply.
Rich lost his job six months ago because of budget cuts at the county landfill where he
worked. He tried finding another job, but has not actively searched for work for three
months. Rich would be considered by the Bureau of Labor Statistics to be
a. frictionally unemployed and would be counted in the official unemployment rate
b. seasonally unemployed and would be counted in the official unemployment rate
c. structurally unemployed and would be counted in the official unemployment rate
d. cyclically unemployed and would be counted in the official unemployment rate
e. a discouraged worker
The federal government’s revenue has declined steadily relative to GDP since 1960.
The most important factor that influences total spending is
a. the interest rate
b. real wealth
c. expectations regarding future income
d. the income tax rate
e. real disposable income
If the required reserve ratio is 0.2, what is the demand deposit multiplier?
a. 10.0
b. 0.4
c. 5.0
d. 2.5
e. 1.67
Government outlays consist of
a. all governmental purchases resulting from contracts with the private sector and
foreign organizations
b. government purchases, transfer payments, and interest on the national debt
c. any purchase by an organization that is not trying to earn a profit
d. government purchases and transfer payments minus the interest on the national debt
e. total receipts from all organizations doing business with any level of government
An increase in demand coupled with an increase in supply results in a(n)
a. increase in price and an ambiguous effect on equilibrium quantity
b. increase in equilibrium quantity and a decrease in equilibrium price
c. decrease in equilibrium quantity and an ambiguous effect on equilibrium price
d. increase in economic rent
e. ambiguous effect on equilibrium price and an increase in equilibrium quantity
A run on a bank occurs when everyone is trying to withdraw their funds simultaneously.
In the classical model, if the amount households wish to save exceeds the sum of the
amount businesses wish to invest plus the government’s budget deficit, the loanable
funds market
a. will be in disequilibrium, but this does not prevent equilibrium in the total economy
b. will be in disequilibrium, and we would expect the supply of funds to decrease
c. will be in disequilibrium, and we would expect the interest rate to rise
d. will be in disequilibrium, and we would expect the interest rate to fall
e. may be in equilibrium, because unplanned inventory changes have not been included
Macroeconomics is the study of
a. how wages are determined in a specific labor market
b. how to use the fewest natural resources to produce public goods
c. what is happening in the economy as a whole
d. how consumers and producers interact in individual markets
e. the price and the quantity exchanged in a market
Fiat money is
a. money with intrinsic value like gold coins.
b. anything that serves as a means of payment by government declaration.
c. any currency made of paper.
d. a tangible asset like a house.
e. money that is backed by gold.