An increase in the demand for money with no change in supply will lead to _____ in
the equilibrium quantity of money and _____ in the equilibrium interest rate.
A) no change; a rise
B) no change; a fall
C) a decrease; a rise
D) an increase; a fall
Look at the table Production Possibilities Schedule I. If the economy produces 10 units
of capital goods per period, it also can produce at most _____ units of consumer goods
per period.
A) 5
B) 4
C) 3
D) 2
The Federal Reserve’s main assets are:
A) currency in circulation and bank reserves.
B) the facilities of the 12 district banks.
C) corporate stocks and bonds.
D) U.S. Treasury bills.
The Panic of 1907 lasted only a little longer than a week, but the result was a four-year
recession during which output fell and unemployment rose.
A) True
B) False
When planned investment is less than actual investment, there must be:
A) unplanned inventory investment.
B) unplanned inventory disinvestments.
C) unplanned depreciation.
D) unplanned technological progress.
Taxes increase as GDP rises. This is an example of an automatic stabilizer.
A) True
B) False
If the actual interest rate is 6% and the target rate is 4%, the Fed should sell Treasury
bills.
A) True
B) False
If housing prices rise nationwide, there will be a(n):
A) increase in consumer spending at any given level of disposable income.
B) decrease in wealth as consumers spend more income on mortgage payments.
C) decrease in overall aggregate expenditures.
D) drop in investment spending.
When the price of lamps increases, the:
A) supply increases.
B) quantity supplied increases.
C) supply decreases.
D) quantity supplied decreases.
The production possibility frontier illustrates:
A) the maximum quantity of one good that can be produced given the quantity of the
other good produced.
B) that when markets don’t achieve efficiency, government intervention can improve
society’s welfare.
C) the inverse relation between price and quantity of a particular good.
D) that people usually exploit opportunities to make themselves better off.
In most years since 1970, the actual budget deficit has been more than 25% of GDP.
A) True
B) False
The euro was established in:
A) 1865.
B) 1933.
C) 1999.
D) 2008.
Fiscal policy entails:
A) setting the money supply.
B) setting levels of taxation and/or government spending.
C) setting interest rates in specific markets.
D) correcting only recessionary problems.
Suppose that supply increases and demand decreases. What is the most likely effect on
price and quantity?
A) The price will increase, but quantity may increase, decrease, or stay the same.
B) The price will decrease, but quantity may increase, decrease, or stay the same.
C) The price will decrease and quantity will decrease.
D) The price will increase and quantity will increase.
A $200 million increase in investment spending will increase real GDP by more than
$200 million.
A) True
B) False
Infrastructure includes:
A) the water supply system.
B) government bonds.
C) corporate stock.
D) the water supply system, government bonds, and corporate stock.
If the multiplier is 4 and investment spending falls by $100 billion, the change in real
GDP will be:
A) “$400 billion.
B) $400 billion.
C) $25 billion.
D) “$25 billion.
According to the savings”investment spending identity:
A) savings equals investment spending.
B) government spending equals tax receipts.
C) total income equals consumption spending plus savings.
D) savings equals investment spending plus consumption spending.
Nearly all economists agree that increases in money supply can _____ aggregate _____.
A) increase; supply
B) decrease; supply
C) decrease; demand
D) increase; demand
A business will be likely to borrow to fund projects if:
A) the rate of return on the project is less than the interest rate on the loan.
B) the project will produce a good or service that is in high demand.
C) the rate of return on the project is at least as high as the interest rate on the loan.
D) the minimum efficient scale will be attained.
In Thailand, the land, labor, and capital in society are used to exploit all opportunities to
make everyone better off. This statement best represents this economic concept:
A) Markets move toward equilibrium.
B) Resources should be used as efficiently as possible to achieve society’s goals.
C) Markets usually lead to efficiency.
D) When markets don’t achieve efficiency, government intervention can improve
society’s welfare.
In the circular-flow diagram, the places where resources, especially capital and labor,
are bought and sold are the:
A) product markets.
B) factor markets.
C) households.
D) firms.
When individuals act in their own self-interest:
A) efficiency is always achieved.
B) equity is always achieved.
C) society may be worse off in some cases.
D) all opportunities have been taken to make some people better off without making
other people worse off.
Figure: AD”ASModel and the Short-Run Phillips Curve
Look at AD”AS Model and the Short-Run Phillips Curve. If the central bank increases
the money supply so that aggregate demand shifts from AD1 to AD2, then the inflation
rate will be:
A) zero.
B) 2%.
C) 4%.
D) 6%.
Figure: Monetary Policy I
Look at the figure Monetary Policy I. If the economy is initially in equilibrium at E1and
the central bank chooses to sell Treasury bills, _____shift to the _____ a(n) _____ gap.
A) AD2will; right, causing; inflationary
B) AD2may; AD1, causing; recessionary
C) AD1may; AD2, closing; recessionary
D) AD1will; left, closing; recessionary
The GDP deflator is used to calculate the official estimate of inflation that is used to
index Social Security payments.
A) True
B) False
Greenhouse gas emissions are an example of:
A) a negative externality.
B) a public good.
C) a positive externality.
D) a private good.
The bank runs in 1930, 1931, and 1933 were caused primarily by:
A) sharp decreases in farm commodity prices.
B) excessive speculation in real estate.
C) high energy prices.
D) the failure of the Knickerbocker Trust.
If real GDP grows at an average rate of 3% per year, it will double in approximately
_____ years.
A) less than 10
B) 20
C) 23
D) 36
Look at the table Production Possibilities for the United States and Canada. _____ has
(have) an absolute advantage in producing lumber.
A) Both the United States and Canada
B) Neither the United States nor Canada
C) The United States
D) Canada
If the economy is at potential output and consumption spending suddenly decreases
because of a fall in consumer confidence, the appropriate fiscal policy is:
A) a decrease in government transfers.
B) an increase in government spending.
C) a decrease in government spending.
D) an increase in the money supply to decrease interest rates.