One way to prove the Ricardian equivalence is true is to show that when the
government deficit increases, (the) ________ also increase(s).
A) private sector saving
B) country’s imports
C) consumption expenditures
D) money supply
A bank’s reserves
A) are the sum of its excess and required reserves.
B) can be held as cash in its vault.
C) can be held as deposits with the Federal Reserve.
D) all of the above
Suppose that ramen noodles are an inferior good. When income decreases, the
equilibrium quantity of ramen noodles will ________ and the equilibrium price of
ramen noodles will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
According to the U.S. Secret Service, approximately $2.6 billion of U.S. paper currency
in circulation is counterfeit. As long as counterfeit U.S. currency remains undetected
and in circulation, an increase in the U.S. inflation rate would essentially
A) decrease the real value of the counterfeit currency.
B) increase the real value of the counterfeit currency.
C) decrease the nominal value of the counterfeit currency.
D) increase the nominal value of the counterfeit currency.
Suppose the economy has been at full employment for the past two years with a 4
percent inflation rate, and both the money supply and money demand were growing at 4
percent a year. If the Federal Reserve unexpectedly increases the rate of money growth
to 6 percent, the following sequence of events occurs
A) real interest rates fall, investment spending increases, GDP increases, unemployment
falls, and prices rise.
B) real interest rates fall, investment spending decreases, GDP increases,
unemployment falls, and prices rise.
C) real interest rates rise, investment spending decreases, GDP decreases,
unemployment increases, and prices fall.
D) real interest rates rise, investment spending increases, GDP decreases,
unemployment increases, and prices fall.
A key result in accounting practices is that:
A) assets + liabilities = owners’ equity.
B) liabilities – owners’ equity = assets.
C) assets + owners’ equity = liabilities.
D) assets – liabilities = owner’s equity.
Which of the following is an assumption in the Solow Model?
A) no government
B) constant population
C) no foreign sector
D) All of the above are assumptions of the Solow Model.
Recall the Application which questions whether a standard real business cycle model
can be used to explain both the origin and severity of the Great Depression to answer
the following question(s).According to the Application, to help explain the behavior of
real wages during the Great Depression, economists Harold L. Cole and Lee E. Ohanian
extended the standard real business cycle model to include
A) government interventions that affected the labor market.
B) extended unemployment benefits that increased real wages.
C) exports to countries that were unaffected by the Great Depression.
D) calculating GDP using real instead of nominal values.
Assume there is no government or foreign sector. If the marginal propensity to save is
0.1, a $20 billion decrease in investment will cause equilibrium output to decrease by:
A) $200 billion.
B) $20 billion.
C) $1 billion.
D) $2 billion.
Figure 14.4 Refer to Figure 14.4. If the Fed wants to raise the economy’s market
interest rate from 6 percent to 8 percent, and the reserve ratio is 10 percent, then it
needs to ________.
A) sell $20 in government bonds
B) buy $20 in government bonds
C) sell $200 in government bonds
D) buy $200 in government bonds
Refer to Figure 15.1. At point a
A) unemployment is above the natural rate.
B) unemployment is below the natural rate.
C) GDP is equal to potential output.
D) GDP is below potential output.