Durable and nondurable goods and services lumped together in the expenditure
approach to measuring GDP are called:
a. Personal consumption.
b. Gross private domestic investment.
c. Government spending.
d. Inventory.
e. Employee compensation.
Which of the following people would be officially counted as unemployed?
a. A person who works only 5 hours per week for pay.
b. A full-time college student who chooses not to have a paying job.
c. A family member who works 20 hours per week without pay.
d. A jobless high-school graduate who is actively looking for work.
If a bank receives a new deposit of $10,000, and the required reserve ratio is 25 percent,
then the new money that can be created by the banking system, including the initial
deposit, is:
a. $25,000.
b. $2,500.
c. $4,000.
d. $40,000.
e. $10,000.
Jan has an income of $30,000 and pays $4,500 in taxes. When Jan’s income rises to
$40,000, her tax bill rises to $6,500. What is Jan’s marginal tax rate?
a. 5 percent.
b. 15 percent.
c. 16.25 percent.
d. 20 percent.
The income that people earn in resource or factor markets is called:
a. national income.
b. personal income.
c. disposable personal income.
d. transfer payments.
e. net national product.
The sum of consumption and investment is:
a. total production.
b. aggregate supply.
c. aggregate disposable demand.
d. aggregate expenditures.
In which of the following years was inflation in the United States the highest?
a. 1960.
b. 1970.
c. 1980.
d. 1990.
e. 2007.
If every person is willing to accept money in payment, rather than goods and services,
money serves as a:
a. medium of exchange.
b. unit of account.
c. store of value.
d. coincident exchange.
The aggregate demand curve slopes downward indicating that:
a. an increase in the general price level will reduce the aggregate quantity of goods and
services demanded.
b. an increase in the general price level will increase the aggregate quantity of goods
and services demanded.
c. a change in the interest rate will alter the aggregate quantity of goods and services
demanded.
d. consumers substitute between domestic-made and foreign-made goods as their
relative prices change.
The term used to refer to an asset’s original cost is “historical cost.”
a. True
b. False
An increase in the price level caused by a rightward shift of the aggregate demand
curve is called:
a. cost-push inflation.
b. supply shock inflation.
c. demand shock inflation.
d. demand-pull inflation.
Exhibit 9-1 GDP and consumption data GDP
ConsumptionAggregate ExpendituresUnplanned inventory
$0 $0.5
1 1.0
2 1.5
3 2.0
4 2.5
5 3.0
6 3.5
7 4.0
8 4.5
As shown in Exhibit 9-1, if investment is $0.5 trillion, government spending is $1
trillion, net exports are -$0.5 trillion, and GDP is $7 trillion, then:
a. inventory depletion is -$1.0 trillion.
b. inventory accumulation is $1.0 trillion.
c. inventory depletion is -$2.0 trillion.
d. inventory accumulation is $2.0 trillion.
If a decrease in the price of good Y causes the demand for good Z to decrease, this
indicates that:
a. Y and Z are complements.
b. Y and Z are substitutes.
c. Y and Z are unrelated.
d. Y is a normal good and Z is an inferior good.
The equilibrium level of real GDP is $1,000, the target level of real GDP is $1,250, and
the marginal propensity to consume (MPC) is 0.60. The target can be reached if
government spending is:
a. increased by $60 billion.
b. increased by $100 billion.
c. increased by $250 billion.
d. held constant.
Which of the following provides the best explanation of why low-income countries
generally remain poor?
a. Their political environment and policies often discourage productive activity and
reduce the potential gains from specialization and exchange.
b. They are oppressed by developed nations that benefit from the cheap goods available
from countries with low wage rates.
c. They are poorly endowed with natural resources, which are essential for long-term
rapid growth.
d. When the average income level is low, workers have little incentive to earn higher
incomes.
Inflation is defined as an increase in:
a. real wages of workers.
b. real GDP.
c. the average price level.
d. all consumer products.
A recessionary gap is the amount by which aggregate expenditures ____ the amount
required to achieve full-employment equilibrium GDP.
a. exceed
b. equal
c. fall short of
d. are greater than
Scarcity:
a. is a problem only in the poorer countries of the world.
b. can be solved by rapid advances in technology.
c. is a problem that exists in every economy.
d. is not a problem for the very rich.