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Exhibit 15-1 Balance sheet of First Iliad State Bank AssetsLiabilities
Required reserves $ 1,000,000 Demand deposits $10,000,000
Excess reserves 0
Loans $
In Exhibit 15-1, if the required reserve ratio is lowered to 8 percent, then First Iliad
State will:
a. have to convert loans worth $800,000 to required reserves
b. have to convert loans worth $200,000 to required reserves.
c. be able to make additional loans worth $800,000.
d. be able to make additional loans worth $200,000.
e. not have to act.
A $2,000 decrease in investment will shift the aggregate expenditures curve down by:
a. exactly $2,000 and will decrease the equilibrium level of real GDP by exactly $2,000.
b. exactly $2,000 and will decrease the equilibrium level of real GDP by less than
$2,000.
c. exactly $2,000 and will decrease the equilibrium level of real GDP by more than
$2,000.
d. less than $2,000 and will decrease the equilibrium level of real GDP by less than
$2,000.
A side effect of a price floor set above the equilibrium price is:
a. the new price is below equilibrium price.
b. an excess supply of the good is created.
c. an excess demand for the good is created.
d. the supply of the good decreases.
e. the demand for the good increases.
Whom does the Bureau of Labor Statistics include in the discouraged workers group?
a. All those between 16 and 65 who are neither disabled nor in an institution and are
also neither employed nor seeking employment.
b. Civilian labor force members who have chosen early retirement because they dislike
their work or think the pay is too low.
c. Members of the noninstitutional population who say they want to be employed but
aren't searching for a job.
d. Members of the civilian labor force who are looking for a job but cannot find one.
e. Anyone in the population who is not working.
Assuming that shoe repair services are an inferior good, an increase in consumer
income, other things being equal, will cause a(n):
a. leftward shift in the demand curve.
b. downward movement along the demand curve.
c. rightward shift in the demand curve.
d. upward movement along the demand curve.
Assume that the real rate of interest is 5 percent and a lender charges a nominal interest
rate of 15 percent. If a borrower expects that the rate of inflation next year will be 10
percent and the actual rate of inflation next year is 12 percent:
a. neither the borrower nor the lender benefits from inflation.
b. both the borrower and the lender lose from inflation.
c. the borrower benefits from inflation, while the lender loses from inflation.
d. the lender benefits from inflation, while the borrower loses from inflation.
Which of the following statements is false?
a. The largest source of state and local governments tax revenue is sales and excise
taxes.
b. The largest source of federal government tax revenue is individual income taxes.
c. A sales tax on food is a regressive tax.
d. A proportional tax is equal to a fixed dollar amount.
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 $400 billion, the marginal propensity to consume (MPC) is:
a. 0.00.
b. 0.25.
c. 0.75.
d. 1.00.
An economic model is defined as:
a. a value judgment.
b. a presentation of all possible relevant real-world variables.
c. a simplified representation of the way in which facts are related.
d. data adjusted for irrational actions.
Which one of the following statements is true?
a. Money flows from households to firms for resources.
b. Money flows from households to foreign economies for exports.
c. Money flows from government to firms for resources.
d. Money flows from foreign economies to firms for imports.
e. Money flows from firms to households for resources.
Suppose you place $10,000 in a retirement fund that earns a nominal interest rate of 8
percent. If you expect inflation to be 5 percent or lower, then you are expecting to earn
a real interest rate of at least:
a. 1.6 percent.
b. 3 percent.
c. 4 percent.
d. 5 percent.
What does the GDP gap measure?
If a vacation in Paris is a normal good, other things being equal, an increase in
consumer income will increase the demand for travel to Paris.
According to the law of demand, if the price of a good increases, other things being
equal, the quantity demanded will decrease.
If autonomous consumption is greater than zero and the marginal propensity to
consume is greater than zero, but less than one, the consumption function will first be
above and then below the 45 degree line.
Real income is the purchasing power of nominal (money) income.
