An aggregate production function, when shown on a graph,
a. is linear and slopes upward
b. is linear and slopes downward
c. is horizontal
d. is vertical
e. slopes upward, and flattens out as more labor is used
The highest annual inflation rate experienced in the United States during the past 50
years has been around
a. 3 percent
b. 9 percent
c. 14 percent
d. 27 percent
e. 1,000 percent
The desire for goods and services is
a. created by a market economy
b. the ultimate explanation for all production
c. why it is so difficult to explain how our economy works
d. the cause of inflation
e. what causes the market wage for labor to continually increase
A shock that could trigger a recession is a
a. large military buildup
b. large increase in the price of oil
c. sudden unexplained increase in consumption
d. new technological breakthrough
e. large decrease in the price of oil
In an economy without international trade, we can expect total output to equal
a. consumption spending plus investment spending plus government purchases
b. consumption spending minus leakages
c. the sum of leakages and injections
d. consumption spending plus investment spending
e. total spending minus leakages and injections
A stock variable
a. measures a process that takes place over a period of time
b. is used often used to measure the quantity demanded of a good at various prices
c. is related to inventory controls
d. measures a quantity in existence at a moment in time
e. is a definition unique to economics
According to the information in Figure 2-11, Jill’s opportunity cost of sawing a board is
a. 5 pails of water
b. 1/2 of a pail of water
c. 4 pails of water
d. 2 pails of water
e. 8 pails of water
With the self-correcting mechanism, if a negative demand shock occurs,
a. a decrease in wage rates will lead to a decrease in the price level so that the economy
returns to full employment
b. the price level will increase, causing equilibrium GDP to return to its original level
c. the wage rate will eventually increase, restoring GDP to its full-employment level
d. the price level will remain constant
e. there will be no effect in the long run
In the classical model with an open economy, an increase in the trade deficit as a result
of a tax cut, causes a decline in the interest rate, attracting more loanable funds from
abroad.
Price floors and price ceilings
a. lead to the same prices and quantities that would be found in a competitive market
b. lead to technical efficiency
c. cause the demand curve to shift to the left
d. usually result from government intervention
e. cause the supply curve to shift to the right
Refer to Figure 9-5. An increase in the supply of loanable funds from S1 to S2 will,
everything else equal,
a. lower the interest rate to 6 percent and investment spending to $350 billion
b. leave the interest rate and investment spending unchanged
c. lower the interest rate to 6 percent and increase investment spending to $500 billion
d. lower the interest rate to 6 percent and increase investment spending to $550 billion
e. lower the interest rate to 6 percent and keep investment spending at $400 billion.
If an increase in a person’s income causes that person to buy more apples, then apples
are
a. neutral with respect to price
b. complements
c. inferior goods
d. normal goods
e. substitute goods
If this balance sheet depicts the only bank in the economy, how large is M1?
a. $5 million
b. $10 million
c. $15 million
d. $60 million
e. $65 million
If the Fed increases the money supply in response to positive demand shocks, it
a. lowers the interest rate
b. reduces each type of unemployment
c. adds its own positive demand shock
d. creates financial stability
e. crowds out private investment
If real income increases,
a. there will be a rightward movement along a stationary money demand curve
b. there will be a leftward movement along a stationary money demand curve
c. the demand for money curve will shift rightward
d. the demand for money curve will shift leftward
e. there will be no movement of the demand curve for money and no movement along it
The Fed prefers to change its interest rate target only rarely because
a. those targets affect productivity in the labor force
b. a fluctuating stock and bond market signals a recession
c. interest rates are greatly overrated as a measure of economic performance
d. it is so difficult to do so
e. the changes destabilize the financial markets
A rise in U.S. real GDP would cause
a. leftward shifts of the demand curves for foreign currencies
b. rightward shifts of the demand curves for foreign currencies
c. rightward movements along the demand curves for foreign currencies
d. no change in the demand curves for foreign currencies
e. initial rightward movements along the demand curves for foreign currencies,
followed by leftward shifts of those curves.
Refer to Figure 15-11. Suppose the economy is currently at point D where it is
producing its full-employment level of real GDP ($6.8 trillion). We would expect that,
in the long run,
a. the economy will return to point D unless a demand or supply shock occurred
b. wages will fall and aggregate demand will decrease
c. wages will rise and aggregate demand will increase
d. wages will fall and aggregate supply will increase as the economy moves to point C
e. the full-employment level of real GDP would fall to the equilibrium level of real
GDP.
The Fed can surely reduce the rightward shift of the AD curve, but
a. stock and bond prices may fall dramatically
b. inflation may rise sharply
c. inflation would change in an unpredictable fashion
d. recession may result
e. unemployment may fall to below the natural rate
Assume a bank currently holds $75 million in demand deposits, $10 million in vault
cash and $25million deposited at the Federal Reserve. If the required reserve ratio is 15
percent, how much must the bank hold in required reserves?
a. $15.0 million
b. $3.75 million
c. $11.25 million
d. $16.5 million
e. $12.75 million.