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If V = 5, P = 100, and Q = 10, then M is:
a. 20.
b. 10.
c. 500.
d. 1,000.
e. 200.
A strength of the market economy is that:
a. it results in an equal distribution of wealth.
b. resources are used efficiently.
c. planners rather than consumers determine answers to the basic economic questions.
d. information for production and distribution decisions passes directly from the
government to buyers.
The inverse trade-off between inflation and unemployment is known as the:
a. Laffer curve.
b. aggregate supply curve.
c. Phillips curve.
d. aggregate demand curve.
e. Keynesian curve.
The Internal Revenue Service (IRS) recognizes the separate existence of a
proprietorship from its owner.
a. True
b. False
In Exhibit 4-2, which of the following might cause a shift from S1 to S2?
a. A decrease in input prices.
b. A decrease in consumer prices.
c. An increase in input prices.
d. An increase in consumer income.
A recessionary gap can be defined as:
a. an economy that is operating above its full-employment capacity.
b. an economy that is operating at full-employment capacity.
c. the amount by which aggregate expenditures exceeds the aggregate expenditures
level needed to generate equilibrium real GDP at full employment without inflation
d. the amount by which aggregate expenditures falls short of the level needed to
generate equilibrium real GDP at full employment without inflation.
e. the easiest way out of a depression.
Exhibit 4-1 Supply and demand data PriceQuantity
demandedQuantity
supplied
$1.00 500 50
1.50 450 150
2.00 400 250
2.50 300 300
3.00 150 350 In Exhibit 4-1, suppose that a reduction in the price of an important input
used to produce the good causes an increase in quantity supplied of 150 units at every
price level. Assuming that demand does not change, the new equilibrium price will be:
a. $1.00.
b. $1.50.
c. $2.00.
d. $2.50.
Proponents of a command economy argue that it promotes:
a. efficiency.
b. equity.
c. consumer sovereignty.
d. economic growth.
A progressive tax means the percentage of income paid as taxes:
a. increases as income increases.
b. decreases as income increases.
c. remains the same as income increases.
d. none of these.
Exhibit 1A-5 Straight line
Straight line CD in Exhibit 1A-5 shows
that:
a. increasing values for X increases the value of Y.
b. decreasing values for X decreases the value of Y. c. there is an inverse relationship
between X and Y.
d. all of these.
In the aggregate expenditures model, equilibrium occurs if:
a. aggregate expenditures (AE) are greater than GDP.
b. aggregate expenditures (AE) are less than GDP.
c. there is no unplanned inventory depletion or accumulation.
d. consumption equals investment.
Mikki decides to work five hours the night before her economics exam. She earns an
extra $75, but her exam score is 10 points lower than it would have been had she stayed
home and studied. Her opportunity cost is the:
a. five hours she worked.
b. $75 she earned.
c. 10 points she lost on her exam.
d. time she could have spent watching television.
e. guilt she feels about neglecting her economics studies.
Economic growth may be represented by a(n):
a. leftward shift of a production possibilities curve.
b. outward shift of a production possibilities curve.
c. movement along a production possibilities curve.
d. production possibilities curve that remains fixed.
A $1 million increase in investment spending will raise equilibrium output (real GDP)
by:
a. less than $1 million.
b. exactly $1 million.
c. between $0.5 and $1.5 million.
d. more than $1 million.
