Supply-siders feel that high levels of government spending:
a. assist private sector investing by creating infrastructure.
b. have no impact on private sector investment.
c. complement private spending.
d. cause private sector investment to decline because of crowding out.
e. cause private sector spending to decrease because of increases in corporate taxes to
finance the government spending.
The process of accumulating capital is called:
a. capitalization.
b. loanable funds.
c. investment.
d. debt management.
According to adaptive expectations theory, expansionary monetary and fiscal policies to
reduce the unemployment rate are:
a. useless in the long run.
b. useless in the short run.
c. ineffective on the price level.
d. None of these.
Exhibit 11-2 Aggregate demand and supply model
Suppose the economy in Exhibit 11-2
is in equilibrium at point E1 and the marginal propensity to consume (MPC) is 0.75.
Following Keynesian economics, the federal government can move the economy to full
employment at point E2 by:
a. decreasing government spending by $750 billion.
b. decreasing government spending by $100 billion.
c. increasing government spending by $25 billion.
d. decreasing government spending by $25 billion.
e. None of these.
Keynesians reject the influence of monetary policy on the economy. One argument
supporting this Keynesian view is that the:
a. money demand curve is horizontal at any interest rate.
b. aggregate demand curve is nearly flat.
c. investment demand curve is nearly vertical.
d. money demand curve is vertical.
Economists use models to:
a. abstract from the complexities of the world.
b. understand economic behavior.
c. explain and help predict human behavior.
d. do all of these.
According to the law of demand, if:
a. product price increases, quantity demanded will decrease.
b. consumer income increases, quantity demanded will increase.
c. product price increases, quantity demanded will increase.
d. consumer income increases, quantity demanded will decrease.
e. supply increases, demand will increase.
The real balances effect predicts that higher prices:
a. make people worse off by reducing the value of their wealth, leading them to save
more and spend less.
b. make people worse off by reducing the value of their wealth, leading them to save
less and spend more.
c. make people better off by increasing the value of their wealth, leading them to save
less and spend more.
d. increase borrowing, leading to higher interest rates and less investment.
e. make domestic goods relatively more expensive, increasing the demand for domestic
goods and decreasing the demand for foreign goods.
The “other things being equal” clause in the law of demand does not allow which of the
following factors to change?
a. Consumer income.
b. The prices of other goods.
c. Consumer tastes and preferences.
d. All of these.
When the interest rate falls,
a. the opportunity cost of holding money rises.
b. people shift out of holding interest-yielding bonds into holding money.
c. the quantity of money people will hold decreases.
d. investment spending decreases.
e. real GDP will decrease.
The lower portion of the circular flow model contains factor markets in which
households provide:
a. output of all final goods and services produced.
b. savings, spending, and investment.
c. labor, money, and machines.
d. none of these.
The government is pursuing an expansionary policy if it:
a. decreases its spending and increases its tax revenues.
b. increases its spending or increases its tax revenues.
c. decreases its spending or reduces its tax revenues.
d. increases its spending and/or reduces its tax revenues.
Economists usually use the term “recession” to refer to:
a. any slowdown in the growth of real GDP.
b. zero real GDP growth.
c. two or more consecutive quarters of declining real GDP.
d. a reduction in nominal GDP lasting more than six months.
Which of the following is a property of a public good?
a. It is established by legislation.
b. Free riders are excluded.
c. Users collectively consume benefits.
d. It is determined by positive economics.
SeveralitemsfromthefinancialstatementsofStandardTiresarelistedbelow.Usethefollowing
answerchoicestoidentifythetypeofaccountforeachitemlisted.Placeyouranswersinthespac
eprovided.
a. Assets
b. Liabilities
c. Revenues
d. Expenses
e. Owners’ equity Accounts payable
If the marginal propensity to consume (MPC) is 0.75, a $50 decrease in government
spending, other things being equal, would cause equilibrium real GDP to:
a. increase by $50.
b. decrease by $50.
c. increase by $200.
d. decrease by $200.
Reserves of banks appear on their balance sheet as liabilities.
Capital goods, like factories and machinery, are classified as intermediate goods.
Describe appropriate discretionary fiscal policy according to Keynesian economics to
smooth out the business cycle.
The points along the demand curve represent the maximum willingness of consumers to
purchase a product.
Producer surplus measures the value between the actual selling price and the
profit-maximization price.
Presented below are condensed data from the financial statements of Toro Factory for
2015 and 2014. The figures are expressed in thousands. Use this information to answer
the questions that follow.
The unemployment rate is the percentage of the civilian labor force that is unemployed
but actively seeking work.
The civilian labor force excludes anyone not actively seeking a job.