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In order for a bank to earn as much profit as possible, its excess reserves should be:
a. equal to its required reserves.
b. as small as possible.
c. less than its vault cash.
d. growing at a constant rate.
Exhibit 2-12 Production possibilities curve
In Exhibit 2-12, suppose an economy
with the given production possibilities curve is currently located at point A in the figure.
Which of the following statements is false?
a. This economy could produce more of both capital and consumption goods.
b. This economy is experiencing full employment.
c. This economy could produce more capital goods while holding fixed the number of
consumption goods produced.
d. This economy could produce more consumption goods while holding fixed the
number of capital goods produced.
e. Not every resource in this economy is being utilized
People who often create benefits for the minority and impose the cost on the majority
are called:
a. fair-interest groups.
b. encounter groups.
c. laissez-faire groups.
d. special-interest groups.
Experience with the Phillips curve since the 1970s has shown that the:
a. curve can be used as a reliable model to guide public policy.
b. relationship between the inflation rate and the unemployment rate moves in a
clockwise direction.
c. curve is not stable.
d. inflation rate and the unemployment rate are equal.
Exhibit 8-4 Consumption function
As shown in Exhibit 8-4, dissaving
occurs:
a. at 0 disposable income.
b. between $0 and $2 trillion disposable income.
c. at $2 trillion disposable income.
d. at a disposable income greater than $2 trillion.
Disinflation means a decrease in:
a. the rate of inflation.
b. the general level of prices in the economy.
c. the prices of all products in the economy.
d. the circular flow.
An appreciation of one's currency means that:
a. the country's exports will become less expensive.
b. the country's imports will become more expensive.
c. the country's imports will become less expensive.
d. it now requires more of this currency in exchange for one unit of another currency.
e. it now requires less units of other currencies in exchange for one unit of this currency.
When reserve requirements are increased, the:
a. excess reserves of commercial banks will decrease.
b. excess reserves of commercial banks will increase.
c. U.S. Treasury will have to borrow additional funds.
d. money supply will rise.
If the MPC = .75, the spending multiplier is:
a. 4.
b. 5.
c. 1.33.
d. 1.20.
e. .25.
Using the aggregate supply and demand model, assume the economy is operating along
the intermediate portion of the aggregate supply curve. An increase in the money supply
will increase the price level and:
a. lower both the interest rate and real GDP.
b. raise both the interest rate and real GDP.
c. lower the interest rate and raise GDP.
d. raise the interest rate and lower real GDP.
Use the table below to answer the following question. Income Consumption
(Dollars) (Dollars)
60,000 58,000
66,000 62,000 What is the marginal propensity to consume?
a. 0.33.
b. 0.67.
c. 0.96.
d. 1.5.
