Which of the following statements is true?
a. National income accountants consider the portion of corporate profits that is used to
pay corporate profits taxes to be income earned by households but not received.
b. Net domestic product (NDP) is a smaller dollar amount than GDP.
c. Personal income includes transfer payments.
d. b and c
e. a, b, and c
In a self-regulating economy, inflationary and recessionary gaps produce shifts of the
a. AD curve that maintain the short-run equilibrium point.
b. AD curve that move the economy to a long-run equilibrium point.
c. SRAS curve that maintain the short-run equilibrium point.
d. SRAS curve that move the economy to a long-run equilibrium point.
If the demand for a good increases by more than the supply of the good increases, then
the good€s equilibrium price will __________ and its equilibrium quantity will
__________.
a. rise; fall
b. rise; rise
c. fall; fall
d. fall; rise
Smith drives his car numerous places.Sometimes he drives his car around his residential
neighborhood and sometimes he drives it on the highway.Occasionally, Smith gets
peeved with the way other people drive and makes a rude gesture to them.Based on one
of the theories discussed in the textbook, he is
a. more likely to make a rude gesture to another driver on the highway than in his
residential neighborhood.
b. less likely to make a rude gesture to another driver on the highway than in his
residential neighborhood.
c. equally likely to make a rude gesture to another driver on the highway as in the
residential neighborhood.
d. There is not enough information provided to answer this question.
Exhibit 11-5
Assume that the farmer grows wheat and sells it to the miller, the miller turns the wheat
into flour and sells it to the baker, and the baker turns the flour into bread and sells it to
the final consumer.Which summarizes the situation prior to the value added tax
(VAT).If the government imposes a VAT rate of 10 percent, the miller must pay
___________ in VAT tax and will need to raise the price he charges the baker to
_______________.
a. $0.06; $0.66
b. $0.08; $0.88
c. $0.08; $1.54
d. $0.60; $1.20
For saving to increase, consumption must decrease, ceteris paribus.
a. True
b. False
How is scarcity related to competition?
a. Competition is an effect of scarcity.
b. Scarcity is an effect of competition.
c. Both scarcity and competition are effects of a rationing device.
d. Both scarcity and competition are effects of opportunity cost.
e. Scarcity produces disutility and competition produces utility.
The economy is in long-run equilibrium when there is an incorrectly anticipated
increase in aggregate demand brought about by expansionary monetary policy.
Specifically, aggregate demand increases by more than people anticipate (bias
downward). According to new classical theory, the price level will __________ and
Real GDP will __________ in the short run. In the long run, the price level will be
__________ than it was before aggregate demand increased.
a. rise; fall; higher
b. rise; rise; higher
c. fall; rise; lower
d. fall; rise; higher
e. rise; rise; lower
Consumption expenditures in the U.S. usually account for approximately __________
percent of GDP.
a. 40
b. 50
c. 60
d. 70
e. 80
A bank has $200 million in assets and $230 million in liabilities.The bank’s net worth is
_____________ million and the bank is ____________.
a. -$215; insolvent
b. -$30; insolvent
c. $15; solvent
d. $30; solvent
Exhibit 5-6
Under law 1 a renter has 30 days to vacate an apartment after being served with an
eviction notice.Under law 2, the renter has 90 days to vacate after being served with an
eviction notice.This graph shows that the supply of apartments is____________ under
law 1 than under law 2, and thus apartment rent is _______________ under law 1 than
under law 2.
a. less; lower
b. less; higher
c. greater; lower
d. greater; higher
Suppose we are at a long-run equilibrium point in an AD-AS model. Then the money
supply increases. In the short run, is there any difference between what happens in the
simple quantity theory of money (SQTM) version and the monetarist version of the
model?
a. There is no difference.
b. In the SQTM version, the price level rises; in the monetarist version, it does not.
c. In the monetarist version, the price level falls; in the SQTM version, it does not.
d. In the monetarist version, the Real GDP rises; in the SQTM version, it does not.
e. In the SQTM version, Real GDP falls; in the monetarist version, it does not.
The members of the Board of Governors of the Federal Reserve are
a. elected by a vote of the Federal Reserve District Bank presidents.
b. appointed by the President of the United States with approval by the Senate.
c. appointed by the Congress with approval by the President of the United States.
d. elected by a general election of the citizens of the United States.
If consumption changes because of a change in the price level, then the
a. economy moves from one point on an AD curve to another point on the same curve.
b. AD curve shifts.
c. economy moves from one point on a SRAS curve to another point on the same curve.
d. SRAS curve shifts.
e. none of the above
When there is an inflationary gap, (actual) Real GDP is __________ Natural Real GDP,
and the (actual) unemployment rate is __________ the natural unemployment rate.
a. greater than; less than
b. greater than; greater than
c. less than; greater than
d. less than; less than
e. less than; equal to
The Phillips curve that Samuelson and Solow fitted to their data was
a. upward sloping.
b. downward sloping.
c. vertical.
d. horizontal.
The original Phillips curve depicted the relationship between
a. price inflation and unemployment.
b. price inflation and employment.
c. wage inflation and unemployment.
d. wage inflation and employment.
Due to their belief in interest rate flexibility, the classical economists argued that saving
is matched by an equal amount of investment.
a. True
b. False
The productivity of the agriculture sector (of the economy) increases dramatically. A
likely consequence is:
a. increased resources flowing into the agriculture sector.
b. an increase in the supply of foodstuffs and lower prices for foodstuffs.
c. an increase in the total revenue (farmers’ receive) from selling foodstuffs, assuming
the demand for their products is elastic.
d. a decrease in the total revenue (farmers’ receive) from selling foodstuffs, assuming
the demand for their products is inelastic.
e. none of the above