If the marginal propensity to import is 0.2, then a $1,000 increase in income will:
A) increase imports by $20.
B) increase imports by $200.
C) increase exports by $20.
D) increase exports by $200.
Best Buy, a retailer of electronics, has 500 different products in inventory. Best Buy
reports its inventory is worth $10 million. This is an example of using money as a:
A) medium of exchange.
B) unit of account.
C) standard of deferred payment.
D) store of value.
Suppose that while vacationing in Switzerland, you won 9,375 Swiss francs, which is
the equivalent of $8,000. When you return to the United States, you deposit the $8,000
into your checking account. If the required reserve ratio is 15 percent, this would
increase your bank’s
A) liabilities by $8,000.
B) excess reserves by $8,000.
C) required reserves by $8,000.
D) assets by $1,200.
Let C = 800 + 0.6y and I = 100. Assume no government or foreign sectors. If
investment decreases by 40, the equilibrium output decreases by a total of
A) 800.
B) 480.
C) 100.
D) 25.
Recall the Application about the impact inflation has on your potential future
salary and the repayment of student loans to answer the following question(s).
According to this Application, if you earn a salary of $80,000 in the first year and all
prices decrease by half in the next 5 years, what will your nominal annual salary be in 5
years?
A) $8,000
B) $10,000
C) $20,000
D) $40,000
In a closed economy without a government, planned expenditures equal:
A) C + I.
B) I+G.
C) C + I + G.
D) NX + I.
Which of the following is a function of the Federal Reserve?
A) collects taxes
B) regulates banks
C) buys mortgages from banks
D) maintains U.S. exchange rate regime.
Suppose that there are only three consumers of a product. At a price of $6 per unit, the
first consumer would buy 12 units of the product, the second consumer would buy 8
units, and the third consumer would buy 3 units of the product. If you drew a market
demand curve for this product, the quantity demanded at a price of $6 would be
A) 23 units.
B) 20 units.
C) 12 units.
D) 11 units.
Let S =y – (100 + 0.75y). Assume no government or foreign sectors. At the equilibrium
level of income, y* = 400, the level of investment is
A) 0.
B) 75.
C) 300.
D) 400.
When the general price level rises:
A) consumption falls as a result of the wealth effect.
B) consumption increases as a result of the multiplier effect.
C) investment rises as a result of the wealth effect.
D) investment falls as a result of the consumption link effect.
Can the aggregate demand curve slope upwards?
A) No.
B) Yes, always.
C) Yes, if the economy experiences inflation.
D) Yes, if the aggregate supply curve is downward sloping.
An increase in the productivity of workers shifts the labor ________ curve to the
________.
A) supply; left
B) supply; right
C) demand; right
D) demand; left
Table 5.1
Refer to Table 5.1. Assume that this economy produces only two goods: Good X and
Good Y. If year 1 is the base year, then the percentage growth rate of real GDP between
year 2 and year 3 is:
A) about 37 percent.
B) about 27 percent.
C) about 45 percent.
D) about 54 percent.
Figure 18.2
Refer to Figure 18.2. The opportunity cost of producing spears in Macadamia is
A) 3/4 of a fishing pole.
B) 5/6 of a fishing pole.
C) 6/5 fishing poles.
D) 4/3 fishing poles.
Figure 4.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is
$7, there is an
A) excess demand of 8 t-shirts.
B) excess supply of 8 t-shirts.
C) excess demand of 10 t-shirts.
D) excess supply of 10 t-shirts.
Figure 2.1
On the production possibilities curve in Figure 2.1 as agricultural production increases
by 200 tons per year from 200 tons to 400 tons and then to 600 tons, the opportunity
cost in terms of tons of manufacturing goods:
A) rises.
B) falls.
C) is constant.
D) becomes negative.
Which of the following best defines a public good?
A) A public good is available for anyone to utilize, regardless on who pays and who
doesn’t.
B) A public good is a good that uses public funds to finance its production.
C) A public good is a good that is sold to other people in the market.
D) A public good is a good that requires government approval before it can be
produced.
Proponents of new growth theory believe that poor countries should invest more on:
A) basic education.
B) advanced higher education.
C) A and B.
D) neither A nor B.