The slope of the production function reflects
a. capital expenditures.
b. government expenditures.
c. Constant returns to labor.
d. Increasing returns to labor.
e. Diminishing returns to labor.
Characterizing a market involves
a. counting the number of demanders and measuring their quantity demanded
b. counting the number of suppliers and measuring their costs
c. equating the number of suppliers and the number of demanders
d. deciding which market best suits the problem being analyzed
e. deciding how to increase the degree of competition
Which of the following would be classified as private investment spending?
a. A family’s purchase of a new home
b. An automobile producer’s purchase of steel for use in building new cars
c. A paper company’s purchase of timber
d. A household’s purchase of AT&T stock
e. The government’s purchase of a new office building
In the classical model, beginning from an equilibrium in which the government is
running a budget surplus, an increase in government spending will
a. lower the wage rate
b. increase the supply of loanable funds
c. cause total spending to decline
d. cause total spending to increase
e. leave total spending unchanged
The opportunity cost of an economic action is
a. the value of the next best alternative that must be sacrificed
b. an issue in normative economic theory
c. the expense for the resources used plus the firm’s profit
d. the out-of-pocket cost
e. the option to pay a reduced fee for the action
A $10,000 federal subsidy per student in higher education would benefit
a. a student by exactly $10,000
b. a university by exactly
c. the student and the university in such a way that they would split the $10,000.
d. the student and the university in such a way that they would each get $10,000.
If real GDP is increasing at a 2 percent annual rate while the unemployment rate is 7
percent, the economy is
a. not achieving full economic potential
b. experiencing an increase of 2 percent in real annual per capita GDP
c. experiencing a slump
d. experiencing high prices and low inflation
e. producing along its production possibilities frontier
In a competitive market, when price is below the equilibrium level, the price will be
driven upward due to
a. excess supply
b. government intervention
c. competition among suppliers
d. excess demand
e. technical inefficiency
A key assumption of the classical model is that
a. government intervention is important to get markets to clear
b. prices adjust until quantity supplied equals quantity demanded
c. markets never clear in the long run
d. demand adjusts in order to meet supply
e. prices remain constant and supply and demand adjust
Refer to Figure 16-2. Suppose a supply shock shifts the aggregate supply curve from
AS1 to AS2, and decreases output below full employment. If the Fed then decreases the
money supply, it will
a. stabilize the price level, but cause a further decline in output
b. return output to its full-employment level, but at the expense of an increase in the
price level
c. increase both output and the price level
d. stabilize the price level and return output to its full-employment level
e. decrease the price level and shift the aggregate demand curve to the right until output
returns to its full-employment level
Say’s law will prevent recessions only if a critical assumption of the classical model
holds: That the interest rate adjusts until saving is equal to business and government
borrowing.
Credit cards
a. are considered money because they are a means of payment
b. are not considered money and thus are not of importance to the monetary authority
c. are not considered money but are important because they may affect how much
people hold in M1 and M2
d. are counted in the money supply as part of M3
e. are considered money when held by the public
Refer to Figure 9-6. Starting from a $200 billion deficit, the government reduces
spending and eliminates the deficit. Investment spending will
a. decrease by $100 billion
b. decrease by $200 billion
c. increase by $100 billion
d. increase by $200 billion
e. not be affected by government budget deficit
Households make their savings available to borrowers through
a. resource markets
b. the loanable funds market
c. the labor market
d. the taxes
e. spending