If the current account is in deficit and the capital account is zero, then
A) the financial account must be in surplus.
B) the balance of trade must be in surplus.
C) the balance of payments must be in surplus.
D) there is a capital outflow.
E) the balance of services must be in surplus.
National income =
A) Consumption + Saving – Taxes
B) Consumption – Saving – Taxes
C) Consumption – Saving +Taxes
D) Consumption + Saving + Taxes
Consumption expenditures do not include household purchases of
A) medical care.
B) education.
C) new houses.
D) durable goods.
How would the equilibrium quantity of loanable funds respond to a change from an
income tax to a consumption tax?
A) The equilibrium quantity of loanable funds would rise.
B) The equilibrium quantity of loanable funds would fall.
C) The equilibrium quantity of loanable funds would be unaffected.
D) The equilibrium quantity of loanable funds may rise or fall based on whether
household saving increases or decreases as a result of the change from an income tax to
a consumption tax.
Which of the following is a factor of production?
A) a sofa produced by a furniture manufacturer
B) 20 shares of Microsoft stock
C) the janitor at the local elementary school
D) $500 in cash
What is the primary difference between a sole proprietorship and a partnership?
A) Proprietorships have unlimited liability while partnerships have limited liability.
B) Partnerships can issue stocks and bonds while proprietorships cannot.
C) Partnerships have more owners than do proprietorships.
D) There is no real difference between the two types of firms.
Which of the following correctly describes how an increase in the price level affects
consumption spending?
A) An increase in the price level raises real wealth, which causes consumption to
increase.
B) An increase in the price level decreases the amount of money a household needs to
buy goods and raises the interest rate, which causes consumption to increase.
C) An increase in the price level increases the amount of money a household needs to
buy goods and raises the interest rate, which causes consumption to increase.
D) An increase in the price level lowers real wealth, which causes consumption to
decrease.
If the Federal Open Market Committee wants to decrease the money supply through
open market operations it will
A) buy U.S. Treasury Securities.
B) sell U.S. Treasury Securities.
C) increase the discount rate.
D) decrease the discount rate.
Reserves of a bank equal its
A) vault cash.
B) deposits with the Federal Reserve.
C) vault cash plus deposits with the Federal Reserve.
D) vault cash plus deposits of its customers.
Two of the firms involved in the accounting scandals of the early 2000s were
A) Arthur Anderson and NBC.
B) Western Digital and General Motors.
C) WorldCom and Enron.
D) DuPont and Lehman Brothers.
Interest rates in the economy have fallen. How will this affect aggregate demand and
equilibrium in the short run?
A) Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium
level of GDP will rise.
B) Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium
level of GDP will rise.
C) Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium
level of GDP will fall.
D) Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium
level of GDP will fall.
Which of the following is true?
A) National income = Consumption + Savings – Taxes
B) National income = Consumption – Savings – Taxes
C) National income = Consumption + Savings + Taxes
D) National income = Consumption – Savings + Taxes
If the price level rose in three consecutive years from 100 to 120 to 140, then the annual
inflation rate over those years would
A) increase.
B) remain the same.
C) decrease.
D) equal 20%.
What is the natural rate of unemployment?
A) the unemployment rate that exists when the economy is at potential GDP
B) the unemployment rate that exists when the economy is at a trough in a business
cycle
C) an unemployment rate of 0%
D) any unemployment rate that is above the inflation rate
If currencies around the world are based on the gold standard, and the EU lowers the
amount of gold for which the euro will trade, then holding all else constant,
A) the euro will depreciate against the dollar.
B) the euro will appreciate against the dollar.
C) the value of the euro relative to the dollar will stay constant.
D) the value of U.S. exports to EU countries in terms of the euro will decrease.
What would happen in the market for knee replacement surgery if insurance companies
started to cover a smaller portion of the cost of the surgery?
A) Demand will decrease, but this will not shift the supply curve.
B) Supply will decrease, but this will not shift the demand curve.
C) Demand and supply will both decrease.
D) Demand will decrease and supply will increase.
Figure 13-3
Refer to Figure 13-3. Suppose the economy is at point C. If government spending
decreases in the economy, where will the eventual long-run equilibrium be?
A) A
B) B
C) C
D) D
If the price of garlic is represented by equation P = 25 – QD, then the corresponding
quantity of garlic demanded is represented by the equation
A) QD = P – 25.
B) QD = P + 25.
C) QD = 25 – P.
D) QD = -25 + P.
From an initial long-run macroeconomic equilibrium, if the Federal Reserve anticipated
that next year aggregate demand would grow significantly slower than long-run
aggregate supply, then the Federal Reserve would most likely
A) increase income tax rates.
B) decrease income tax rates.
C) increase interest rates.
D) decrease interest rates.
________ occurs when one party takes advantage of having more information than
another party about the attributes of the good or service they will exchange.
A) A negative externality
B) Moral hazard
C) A transaction cost
D) Adverse selection