The Keynesian cause-and-effect sequence predicts that a decrease in the money supply
will cause interest rates to:
a. fall, boosting investment and shifting the AD curve rightward, leading to an increase
in real GDP.
b. fall, boosting investment and shifting the AD curve rightward, leading to a decrease
in real GDP.
c. rise, cutting investment and shifting the AD curve rightward, leading to an increase in
real GDP.
d. rise, boosting investment and shifting the AD curve rightward, leading to an increase
in real GDP.
e. rise, cutting investment and shifting the AD curve leftward, leading to a decrease in
real GDP.
If a box of Swiss chocolate priced at 100 francs can be purchased for $50, the exchange
rate is:
a. 0.50 francs per dollar.
b. 4.00 francs per dollar.
c. 0.50 dollars per franc.
d. none of these.
Exhibit 10-8 Aggregate demand and supply
In Exhibit 10-8, if aggregate
demand shifts from AD3 to AD4, real GDP will:
a. rise from $7.0 to $8.0, and the price level will rise from 120 to 140.
b. rise from $7.0 to $8.0, and the price level will rise from 120 to 170.
c. rise from $7.0 to $8.0, and the price level will rise from 100 to 140.
d. not change, and the price level will rise from 120 to 140.
e. rise from $4.0 to $8.0, and the price level will rise from 120 to 140.
Currently, total government expenditures in the United States:
a. are close to 40 percent of GDP.
b. fell by half, to 10 percent of GDP.
c. nearly doubled to one half of GDP.
d. nearly tripled to about 60 percent of GDP.
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 sale of goods or the performance of services.
If the economy spends 80 percent of any increase in real GDP, then an increase in
investment of $1 billion would result ultimately in an increase in real GDP of:
a. $0.
b. $0.8 billion.
c. $1.0 billion.
d. $5.0 billion.
When households’ marginal propensity to consume (MPC) increases, the size of the
spending multiplier:
a. also increases.
b. decreases.
c. remains unchanged.
d. reacts unpredictably.
If your bank receives a checkable deposit of $20,000, and the banking system makes
loans totaling $180,000, the maximum possible, then the required reserve ratio must be:
a. 0.10.
b. 0.20.
c. 0.25.
d. 0.40.
e. 0.50.
If goods imports are greater than goods exports, the nation is experiencing a:
a. negative balance on current account.
b. goods trade deficit.
c. capital account imbalance.
d. weakening of its currency.
e. growth in foreign reserves.
Exhibit 9-7 Keynesian aggregate-expenditures model
In Exhibit 9-7, the value of the
spending multiplier is:
a. 2.
b. 3.
c. 4.
d. 5.
e. 6.
If the quantity demanded of milk is 55,000 and the quantity supplied of milk is 80,000,
then:
a. there is an excess supply of 25,000 units of milk.
b. the price of milk will tend to rise to clear the market.
c. consumers get the milk they want so market equilibrium exists.
d. there is an excess demand of 25,000 units of milk.
e. this is the intersection of market supply and demand curves.
Autonomous consumption is consumption that:
a. varies directly with disposable income.
b. varies inversely with disposable income.
c. is independent of the level of disposable income.
d. is constant at first and then varies with disposable income.
Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss
As shown in Exhibit 3A-2, if the market price
falls from P2 to P3, then:
a. consumer surplus increases.
b. producer surplus increases.
c. deadweight loss increases.
d. all of the above are true.
e. none of the above are true.
In the U.S. economy, the effect on federal tax revenues and spending of a decrease in
employment is to:
a. cut tax revenues and raise expenditures.
b. cut spending and raise tax revenues.
c. raise both tax revenues and expenditures.
d. cut both spending and tax revenues.
GDP underestimates our economic well-being:
a. for of all the following reasons.
b. because it includes the value of work done by nannies.
c. because it ignores leisure.
d. because it includes the value of work done by householders.
e. because it includes the value of work done by illegal immigrants.