Real consumption spending is inversely related to
a. real disposable income
b. the amount of common stock owned
c. the amount of real estate owned
d. expectations of future income
e. the interest rate
Microeconomics deals with which of the following?
a. the total output of an economy
b. the measurement of a nation’s inflation rate
c. how producers and consumers interact in individual markets
d. how tax policies influence economic growth
e. whether wage growth will outpace inflation in the coming year
All else equal, technological change will be more rapid if
a. the government enhances patent protection
b. interest rates are lower
c. the government increases research funding
d. all of the above
e. interest rates are higher.
If the Fed decreases the money supply, the interest rate
a. decreases and aggregate spending increases.
b. decreases and aggregate spending decreases.
c. increases and aggregate spending decreases.
d. increases and aggregate spending increases.
e. increases and money demand decreases.
Everything else equal, as increase in investment in physical and human capital will
mean lower living standards in the present, because the opportunity cost of investment
is foregone consumer goods.
If labor supply and labor demand both increase, employment
a. and the real wage rate will both increase
b. will increase but the real wage rate will fall
c. will increase but the real wage rate will remain constant
d. and the real wage rate will remain constant
e. will increase but the effect on the real wage rate will depend on the magnitude of the
shifts
Society’s core economic problem is
a. the role of government in the economy
b. a scarcity of land, labor, and machinery to produce goods and services
c. the federal budget deficit
d. an unequal distribution of income
e. low living standards
The consumer price index (CPI) excludes all of the following goods and services except
one. Which type of good is included in the CPI?
a. Raw materials
b. Imported goods purchased by consumers
c. Machinery purchased by firms
d. Goods purchased by the government
e. Intermediate goods
Refer to Figure 17-2. If the dollar price of the guilder is $0.70, we would expect
a. Dutch exports to be very attractive to Americans
b. a recession in the United States
c. a decrease in the exchange rate until it achieves equilibrium at $0.50 per guilder
d. the demand curve for guilders to shift to the right
e. the supply of guilders curve to shift to the left.
Suppose two economists disagree about who would be helped or hurt by certain
legislation. These disagreements
a. are positive in nature
b. are minor and rarely lead to different policies or conclusions
c. are normative in nature
d. occur as the result of a mistake made by an economist
e. occur because economic models are more complex, and subject to error, than the real
world
If labor supply increases, the wage rate increases.
By better utilizing existing resources, an economy can produce at a point outside of its
current production possibilities frontier.
Improvements in the quality of consumer goods and services over time
a. cause inflation as measured by the CPI to overstate the actual inflation rate
b. cause inflation as measured by the CPI to understate the actual inflation rate
c. are accounted for in the CPI
d. are insignificant and thus would not affect the CPI even if accounted for
e. improve the accuracy and consistency of the market basket
In a foreign exchange market, one country’s currency is exchanged for another’s.
Which of the following would shift the aggregate demand curve to the right?
a. An increase in government purchases
b. An increase in investment spending
c. An open market purchase of bonds by the Fed
d. All of the above
e. None of the above.
Economic models typically assume that decision makers face constraints because of
scarce resources.
If prices (as measured by the CPI) fell by one-half and nominal wages fell by one-third,
what would happen to real wages?
a. They would fall by one-third
b. They would remain unchanged
c. They would decrease
d. They would increase
e. They would fall by one-half
The increase in world oil prices in 1990 initially
a. caused the AS curve to shift upward as wage rates quickly adjusted
b. increased the level of GDP associated with high price levels
c. shifted the aggregate expenditure line upward
d. caused the AS curve to shift upward due to higher costs per unit of output
e. caused the AD curve to shift leftward due to an increasing interest rate
If the Federal Reserve sells $1,000 in bonds and, as a result, the money supply
decreases by $2,500, what is the required reserve ratio?
a. 0.4
b. 2.5
c. 0.5
d. 0.1
e. 0.2
The marginal propensity to consume (MPC) is typically
a. less than zero or greater than 1.0
b. equal to zero
c. equal to 1.0
d. between -1.0 and 1.0
e. between zero and 1.0