When an economy is operating at its full employment rate of output:
a. the rate of unemployment will be zero.
b. output will exceed the economy’s maximum sustainable rate.
c. the actual rate of unemployment will equal the natural rate.
d. the economy’s potential rate of output will exceed actual GDP.
Which of the following will shift the consumption function upward?
a. An increase in consumer wealth.
b. An increase in the interest rate.
c. An increase in personal income taxes.
d. A decrease in the MPC.
e. An increase in disposable income.
Real income in Year X is equal to:
a.
b.
c.
d. Year X nominal income ´ CPI.
The federal funds rate is the interest rate charged by:
a. banks for loans to other banks.
b. the Fed for overnight loans.
c. the Fed for borrowed reserves.
d. the federal government on loans to member banks.
Foreachstatementprovided,choosetheletteroftheappropriatetermfromthelistthateachstate
mentbestdescribes.Sometermsmaybeusedmorethanonce,whileothersarenotusedatall.
a. Capital stock
b. Asset
c. Owners’ equity
d. Time period
e. Dividends
f. Economic entity concept
g. Expense
h. Retained earnings
i. Cost principle
j. Creditor
k. Liability
l. Revenue
m. Going concern
n. Monetary unit
o. Corporation
The owners’ claims on the assets of an entity.
In Exhibit 5-9, personal disposable personal income (DI) equals:
a. $2,882 billion.
b. $3,101 billion.
c. $2,794 billion.
d. $3,701 billion.
e. $4,588 billion.
Which of the following policy options would not be used to eliminate an inflationary
gap?
a. Decrease government spending.
b. Decrease consumption.
c. Increase investment.
d. Decrease taxes.
Best National Bank operates with a 20 percent required reserve ratio. One day a
depositor withdraws $500 from his or her checking account at this bank. As a result, the
bank’s excess reserves:
a. fall by $500.
b. fall by $400.
c. rise by $100.
d. rise by $500.
Which of the following will cause the demand curve for a good to shift to the right?
a. Decrease in income for a normal good.
b. Increase in the price of a complementary good.
c. Decrease in the price of the good.
d. Increase in the price of a substitute good.
e. Expectation of a future price decline.
The spending multiplier is:
a. 1 / (1 – MPC).
b. 1 – MPC.
c. MPC.
d. MPC / (1 – MPC).
When a nation’s political environment is more favorable, it will:
a. attract more physical investment.
b. encourage individuals to invest more heavily in human capital.
c. encourage the development and efficient use of natural resources.
d. do all of these.
Exhibit 16-5 Money, investment and product markets
In Exhibit 16-5, a shift in aggregate demand from AD1 to AD2:
a. cannot raise real GDP because the economy is at full employment.
b. cannot raise real GDP because the aggregate supply curve is upward sloping at
GDP2.
c. will raise real GDP because the economy is operating below the full-employment
level.
d. will cause the interest rate to increase from i2 to i1.
e. will raise real GDP but will also significantly raise the price level.
Within the Keynesian aggregate expenditure-output model, if an economy operates
below full employment:
a. a reduction in wage rates and resource prices will soon restore full-employment
equilibrium.
b. a reduction in the real interest rate will soon restore full-employment equilibrium.
c. an increase in the real interest rate will soon restore full-employment equilibrium.
d. the economy may remain below full employment unless aggregate expenditures
increase.
When crowding out occurs, higher government spending results in higher interest rates,
which in turn results in:
a. higher inflation.
b. less consumption and investment.
c. a larger debt ceiling.
d. more tax revenues.
A phase in the business cycle in which the economy’s real GDP declines is known as:
a. a depression.
b. a recession.
c. a downtick.
d. disequilibrium.
e. limited demand.
Exhibit 2-19 Production possibilities curves
In Exhibit 2-19, the production
possibilities curves for a country are shown for the years Year X and Year Y. Which of
the following could have caused a shift for Year X to Year Y in production possibilities
curves?
a. An increase in unemployment.
b. A decline in technology.
c. An increase in the stock of capital goods.
d. A natural disaster.
e. More efficient production.
Ramos Corp. started business at the beginning of the year, with assets of $600,000 and
stockholders’ equity of $240,000. By the end of the year, assets increased by $80,000
and liabilities increased by $60,000. Other than net income or loss, the only change in
stockholders’ equity was dividends declared and paid of $55,000. A) What was the
amount of Ramos Corp. stockholders’ equity at the end of the year? B) What was the
amount of Ramos Corp. net income or net loss for the year?
The Secretary of Labor states that wage rates in the country have risen by 2 percent this
past year. The head of a local labor union states that wage gains should have been
higher. The Secretary’s statement is a (n) ____ economic statement, and the labor head’s
statement is a (n) ____ economic statement.
a. normative; normative
b. normative; positive
c. positive; normative
d. positive; positive
e. proper; improper
The main purpose of the International Monetary Fund is to manage and distribute U.S.
foreign aid.
In the Keynesian model, investment spending is an autonomous expenditure.
The tax multiplier equals 1 – spending multiplier.
If the required reserve ratio is 4 percent, then $100 of reserves can support up to $2,500
of checkable deposits.
The statement “Cutting government spending is the best way to boost consumer
confidence” is an example of normative economics.
The chairman of its Board of Governors is appointed by the president; the Fed operates
without independence from the executive branch of the government.
Other things being equal, an increase in the price of gasoline will decrease the quantity
demanded for gasoline.
Tariffs help consumers by lowering the price of imported goods.
The results of majority voting sometimes, but not always, agree with the results of
benefit-cost analysis.
If consumers reduce the purchase of goods whose relative prices rise (substitution bias),
the consumer price index (CPI) will tend to have an upward bias over time (overstates
inflation).