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If the multiplier is 4, the marginal propensity to save is:
A) 3.
B) 0.80.
C) 0.75.
D) 0.25.
Which of the following is considered to be investing in a physical asset?
A) purchasing stock in IBM
B) selling stock in IBM
C) buying a bond issued by IBM
D) buying a new factory that produces IBM handheld devices
Which of the following is part of M1?
A) gold
B) shares of corporate stock
C) currency in a bank's vault
D) traveler's checks
Jim is being paid $7.25 an hour to work at a restaurant. In the circular flow this is an
example of a:
A) business selling goods and services in the product market.
B) household buying goods and services in the product market.
C) business buying resources in the factor market.
D) household buying a resource in the factor market.
After a revaluation, all other things equal, a country's balance of payments on the
current account will likely:
A) increase.
B) decrease.
C) remain the same.
D) fluctuate randomly.
Table: Real and Nominal Output
Look at the table Real and Nominal Output. The price index in year 1, using year 4 as
the base period, is:
A) 25.
B) 50.
C) 100.
D) 150.
All other things unchanged, a general increase in government borrowing will typically:
A) shift the loanable funds demand curve to the left and decrease interest rates.
B) shift the loanable funds demand curve to the right and increase interest rates.
C) have no effect on the loanable funds demand curve.
D) have no effect on the demand for loanable funds.
Which of the following is the index that includes the most companies and provides the
broadest measure of stock market performance?
A) the Dow Jones Industrial Average
B) the producer price index
C) the S&P 500
D) the NASDAQ
You are analyzing a trade-off when you compare the _____and _____ of doing
something.
A) direct costs; opportunity costs
B) marginal benefits; total benefits
C) costs; benefits
D) direct costs; total costs
Consider an economy that produces only DVDs and DVD players. Last year, 10 DVDs
were sold at $20 each and 5 DVD players were sold at $100 each, while this year 15
DVDs were sold at $10 each and 10 DVD players were sold at $50 each. Real GDP this
year using last year as the base year is:
A) $100.
B) $700.
C) $1,300.
D) $300
The marginal propensity to consume is 0.5, aggregate autonomous consumption is
$10,000, and aggregate disposable income is $40,000. If disposable income is expected
to increase, the aggregate consumption function might take the form of:
A) C= 10,000 + (40,000 0.5).
B) C= 12,000 + (40,000 0.5).
C) C= 10,000 + (40,000 0.7).
D) C= 10,000 + (42,000 0.5).
Countries A and B are important trading partners. Country A is in a recession. Country
B will be better insulated from the recession originating in country A if country _____
has a _____ exchange rate system.
A) B; fixed
B) B; floating
C) A; fixed
D) A; floating
All of the following are examples of fiscal policy EXCEPT:
A) increasing Medicaid reimbursements.
B) reducing the money supply to raise the interest rate.
C) increasing personal income tax deductions for home ownership.
D) reducing federal subsidies to state universities.
Look at the table Production Possibilities Schedule I. If the economy produces 24 units
of capital goods per period, it also can produce at most _____ units of consumer goods
per period.
A) 5
B) 4
C) 3
D) 2
Maturity transformation can be done by:
A) depository banks but not by shadow banks.
B) shadow banks but not by depository banks.
C) both depository banks and shadow banks.
D) neither depository banks nor shadow banks.
The average level of education, measured by the number of years the average adult has
spent in school, is higher in Argentina than it is in China.
A) True
B) False
Proponents of expansionary austerity cite the experience of _____ since 2005 as
evidence of its effectiveness.
A) Japan
B) China
C) the United States
D) Latvia
Scenario: Money Supply Changes II
Charlotte withdraws $8,000 from her checkable bank deposit to pay tuition this
semester. Assume that the reserve requirement is 20% and that banks do not hold excess
reserves.
Look at the scenario Money Supply Changes II. After the withdrawal, reserves _____,
and checkable deposits _____.
A) increase by $8,000; increase by $8,000
B) increase by $1,600; decrease by $1,600
C) decrease by $8,000; decrease by $8,000
D) decrease by $1,600; decrease by $1,600
If the target exchange rate of a fixed currency is above the equilibrium exchange rate, to
reach the target rate, the government should encourage capital inflows.
A) True
B) False
In constructing a model, economists:
A) might use a computer simulation.
B) avoid making any assumptions.
C) assume that all relevant factors are constantly changing.
D) are prohibited from using mathematics.
If the ratio of debt to GDP increases over time, it means that the government's burden of
paying the debt is decreasing and default is less likely.
A) True
B) False
According to the short-run Phillips curve, when actual real GDP is _____ potential
output, the price level _____ and the unemployment rate falls.
A) below; increases
B) above; decreases
C) below; decreases
D) above; increases
Figure: Monetary Policy and the AD"SRASModel
Look at the figure Monetary Policy and the AD"SRASModel. If the economy is in a
recessionary gap at point f, it could move to point gas a result of:
A) a decrease in the money supply.
B) a rise in the discount rate.
C) an increase in the money supply.
D) sales of government securities in the open market.
Figure: Circular-Flow Model
Look at the figure Circular-Flow Model. If the circular-flow model is in equilibrium
(the sum of money flowing into each box is equal to the sum of the money flowing out
of it), which of the following is likely to happen if there is a decrease in imports?
A) an increase in the nominal GDP
B) a decrease in the nominal GDP
C) an increase in the unemployment rate
D) an increase in the nominal GDP, a decrease in the nominal GDP, and an increase in
the unemployment rate
An economy is efficient if one person can be made better off by reallocating resources
without making anyone else worse off.
A) True
B) False
Which of the following is NOT included in the calculation of GDP?
A) your granny's monthly Social Security payment
B) the new textbook you purchase
C) a cup of coffee from a vendor
D) the wages you pay to the employee who cleans your house
A recessionary gap can be closed by _____ wages that shift the _____.
A) falling; SRAS curve rightward
B) falling; LRAS curve rightward
C) falling; SRAS curve leftward
D) rising; SRAS curve rightward
Table: Lemonade and Cookies
Look at the table Lemonade and Cookies. Assume that an economy produces only
lemonade and cookies. If 2013 is the base year, real GDP in 2013 was:
A) $400.
B) $420.
C) $425.
D) $445.
Figure: The Minimum Wage
Look at the figure The Minimum
Wage. What is the quantity of labor demanded at a binding minimum wage of P3?
A) Q1
B) Q2
C) Q3
D) Q4
An increase in supply with no change in demand will lead to _____ in equilibrium
quantity and _____ in equilibrium price.
A) an increase; an increase
B) an increase; a decrease
C) a decrease; an increase
D) a decrease; a decrease
During periods of high inflation, stores that publish catalogs find it necessary to revise
prices and publish new catalogs more frequently than before. This is an example of
menu costs.
A) True
B) False
One of the controversies surrounding the United States' energy markets is the trade-off
between energy production and clean air. Assuming clean air has value, the United
States will be on its production possibility frontier if and only if:
A) resources used to produce clean air and energy are not being fully used.
B) pollution is eliminated.
C) the price of energy is relatively low.
D) resources used to produce clean air and energy are being fully used.
If a government fixes the exchange rate below the market equilibrium rate, there will be
a surplus of its currency.
A) True
B) False
If the exchange rate is 200 per U.S. dollar, the U.S. price level is 120, and the Japanese
price level is 600, then the real exchange rate is:
A) 1.
B) 40.
C) 1,000.
D) 2,400.
