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When the value of our goods exports is less than the value of our goods imports,
a. d and e.
b. the value of the dollar must fall.
c. there will be domestic unemployment.
d. there will be an unfavorable balance of trade.
e. foreign currency reserves must fall.
When there is a surplus of a product in a market the:
a. price will rise.
b. price must be above the equilibrium price.
c. producers will expand output and sales will rise.
d. price must be below the equilibrium price.
Exhibit 1A-6 Straight line
In Exhibit 1A-6, as X increases along the horizontal axis, corresponding to points A-D
on the line, the Y values remain unchanged at 20 units. The relationship between the X
and Y variables is:
a. direct.
b. inverse.
c. independent.
d. undefined.
The total accumulated debt of the federal government due to deficit spending is called
the:
a. federal deficit.
b. Congressional debt.
c. deficit debt ceiling.
d. national debt.
In the aggregate expenditures model, if aggregate expenditures (AE) equal $4 trillion
and GDP equals $3 trillion, then:
a. inventory depletion equals -$1 trillion.
b. inventory accumulation equals $1 trillion.
c. investment equals -$1 trillion.
d. investment equals $1 trillion.
Which of the following groups oversees and administers the Federal Reserve System?
a. The House of Representatives.
b. The President's Council of Economic Advisors.
c. The U.S. Treasury Department.
d. None of these, the Fed is an independent agency.
According to the quantity theory of money, a 10 percent increase in the money supply
leads to a 10 percent increase in:
a. velocity.
b. unemployment.
c. the price level.
d. real GDP.
Exhibit 18-4 Coffee and tea output (pounds per hour) Country CoffeeTea
Brazil 10 5
China 8 8 As shown in Exhibit 18-4, compared to Brazil, China has a comparative
advantage in the production of:
a. coffee.
b. tea.
c. both coffee and tea.
d. neither coffee nor tea.
Exhibit 10-8 Aggregate demand and supply
In Exhibit 10-8, if aggregate
demand shifts from AD2 to AD1, real GDP will:
a. fall from $4.0 to $3.0, and the price level will fall from 120 to 100.
b. fall from $4.0 to $3.0, and the price level will not change.
c. fall from $7.0 to $4.0, and the price level will not change.
d. not change, and the price level will not change.
e. fall from $4.0 to $3.0, and the price level will fall from 170 to 100.
If your disposable personal income increases from $40,000 to $48,000 and your
consumption increases from $35,000 to $39,000, your marginal propensity to consume
(MPC) is:
a. 0.20.
b. 0.40.
c. 0.50.
d. 0.80.
e. 1.00.
Exhibit 8-3 Disposable income and consumption data Disposable
income
Consumption
SavingMarginal propensity to consume (MPC)Marginal propensity to save (MPS)
0 $100
100 175
200 250
300 325
400 400
500 475
600 550 Note: All amounts are in billions of dollars per year. As shown in Exhibit 8-3,
if disposable income is $500 billion, the marginal propensity to save (MPS) is:
a. 0.00.
b. 0.25.
c. 0.75.
d. 1.00.
In the Keynesian model, if aggregate expenditures exceed aggregate output and
inventories of firms fall, then the aggregate output and the business sector could be
expected to:
a. increase output.
b. decrease output.
c. decrease investment.
d. hire fewer workers.
Which of the following would cause the money supply to increase?
a. An open market purchase by the Fed.
b. A reduction in the discount rate.
c. A reduction in required ratios.
d. All of these.
The effect of an increase in investment on real GDP will be greater, the larger the:
a. MPC.
b. APC.
c. MPS.
d. APS.
Which of the following events would produce an upward shift in the consumption
function, other things being equal?
a. An increase in consumer wealth.
b. A decrease in consumer wealth.
c. A decrease in autonomous consumption.
d. None of these.
Exhibit 2-9 Production possibilities curve
Movement along this production
possibilities curve shown in Exhibit 2-9 indicates:
a. that labor is not equally productive or homogeneous (nonhomogeneous).
b. decreasing opportunity costs.
c. all inputs are homogeneous.
d. all of these.
Monetarists believe that an increase in the money supply will lead to:
a. both c and d.
b. all of the following.
c. an increase in the price level.
d. an increase in nominal GDP
e. an increase in real GDP.
A shift in a curve represents a change in:
a. the variable on the horizontal axis.
b. the variable on the vertical axis.
c. a third variable that is not on either axis.
d. any variable that is relevant to the relationship being graphed.
Which of the following is the best example of a normative economic statement?
a. A rise in gasoline prices will cause gasoline purchases to fall.
b. The federal government should spend more on health care.
c. Raising the minimum wage will result in greater unemployment.
d. If more money is printed, then the economy's price level will rise.
Which of the following are not methods of dealing with externalities?
a. Relying on voluntary compliance.
b. Taxing the output of industries that pollute.
c. Creating legal environmental standards.
d. Increasing public spending on cleanup/reduction.
