Which of the following can happen?
a. Prices are rising and the inflation rate is negative but rising.
b. Prices are falling and the inflation rate is positive and falling.
c. Prices are falling and the inflation rate is positive and rising.
d. Prices are rising and the inflation rate is positive but falling.
e. Prices are rising and the inflation rate is negative and falling.
Which of the following are examples of injections?
a. government purchases, net taxes and exports
b. government purchases, investment spending and exports
c. net taxes, imports and household saving
d. household saving, imports and government purchases
e. exports, imports and household saving
If the reserve requirement is 0.2 and demand deposits are $800 (assume no earlier
loans), the banks can lend out
a. $800
b. $80
c. $640
d. $160
e. $960
Which of the following would not enhance economic growth?
a. Subsidies for investments in physical capital
b. An increase in the corporate profits tax
c. Subsidies for investments in human capital
d. A tax cut that encourages saving
e. Subsidies for research and development expenditures
Leakages are
a. negative tax revenues
b. government spending on nonessential goods and services
c. amounts of income earned, but not spent, by the household sector during a given year
d. a sign that an economy’s total output is excessive
e. sums spent by sectors other than households
Capital is a stock variable.
Which of the following is a definition of value added? Revenue received by a firm for
its output
a. minus the cost of all the final goods bought
b. plus the cost of all the intermediate goods bought
c. minus the cost of all the intermediate goods bought
d. minus the cost of all interest payments
e. plus the cost of all the final goods bought
When households and businesses interact in product markets money
a. is not exchanged
b. is flowing toward businesses
c. is flowing toward households
d. is not used at all
e. is flowing to both businesses and households
What would be the effect of a reduction in the corporate profits tax?
a. Investment would decrease, the production function would shift downward,
productivity would decrease, and so would output.
b. Investment would increase, the production function would shift upward, productivity
would increase and output would decrease.
c. Investment would increase, the production function would shift upward, and both
productivity and output would increase.
d. Investment would decrease, the production function would shift downward, and both
productivity and output would increase.
e. Investment would increase, the production function would shift upward, productivity
would decrease and output would increase.
On a short-run macro model diagram, the impact of a decrease in government purchases
(G) is illustrated by
a. a downward shift of the aggregate expenditure line by the full amount of the change
in G
b. an upward shift of the aggregate expenditure line followed by an equal downward
shift of that line
c. a leftward shift of the money supply curve
d. a downward shift of the aggregate expenditure line by an amount less than the
change in G
e. the increase in real income
If the interest rate increased, which of the following would occur?
a. Nothing would occur.
b. The consumption-income line would shift downward.
c. The consumption-income line would shifts upward.
d. There would be an rightward movement along the consumption-income line.
e. There would be a leftward movement along the consumption-income line.
Transfer payments, such as unemployment insurance and welfare, are included in the
circular flow as part of
a. government purchases
b. household saving
c. net taxes
d. planned investment spending
e. household consumption
If the interest rate increases due to an increase in government purchases, the rise in real
GDP will be greater than what would have occurred if the interest rate had remained
stable.
Suppose that the Department of Transportation is compiling data on traffic accidents
and it wants to present the data in the form of an index. If there were 2,000 accidents in
the base year, 2007, and 2,100 accidents in 2008, what is the value of the index for
2008?
a. 95.2
b. 100
c. 105
d. 200
e. 210
Suppose that the inflation rate was 4 percent in 2002 and 3 percent in 2003. This would
mean that
a. the price level fell from 2002 to 2003
b. the price level fell at a faster rate in 2003 than in 2002
c. the price level rose at a faster rate in 2003 than in 2002
d. the price level rose at a slower rate in 2003 than in 2002
e. all prices in the economy rose at a rate of 3 percent in 2003
The national debt
a. will be zero when the federal budget is balanced.
b. has been shrinking in the last 30 years.
c. is equal to the government’s budget deficit.
d. can grow without negative economic effects.
e. is a flow measure while the deficit is a stock measure.
If the labor force in an economy is not fully employed, then
a. the economy is operating outside of its production possibilities frontier
b. the economy is operating on its production possibilities frontier
c. there must have been an increase in technology to compensate for the labor shortage
d. the opportunity cost of producing more of one good is negative
e. the economy is operating inside its production possibilities frontier
Suppose a report on the internet indicates that job prospects for graduates are bright
because full employment is achieved automatically. Economists are likely to
a. be disappointed in the degree of economic understanding possessed by the author of
the report
b. be excited about the earning potential of new entrants into the labor market
c. be anxious about inflationary indicators
d. anticipate a recession
e. encourage a tax cut to stimulate the economy
One way to describe the tax multiplier is that it equals the
a. the spending multiplier
b. the negative of the spending multiplier minus1.0
c. the GNP gap minus the GDP gap
d. the reciprocal of the marginal propensity to consume
e. the best estimate of the optimal tax rate