Exhibit 18-1 Production possibilities curves
In Exhibit
18-1, the production possibilities curves of wheat and corn for Nabia and Pada are
presented. In Pada the cost of producing one more unit of wheat is equal to:
a. 3 units of corn.
b. 1/3 unit of corn.
c. 1/3 unit of wheat.
d. 15 units of corn.
e. 30 units of corn.
The amount of assets that a bank must hold at all times is determined by the:
a. banks’ actual reserves.
b. required reserve ratio.
c. actual reserve requirement.
d. fractional reserve requirement.
e. excess reserve requirement.
Given a production possibilities curve, a point:
a. inside the curve represents unemployment.
b. on the curve represents full employment.
c. outside the curve is currently unattainable.
d. all of these.
Exhibit 16A-4 Macro AD/AS Models
As shown in Exhibit 16A-4, assume the marginal propensity to consume MPC equals
0.80. Using discretionary fiscal policy, federal government spending should be ____ in
order to restore the economy from E1 to full employment.
a. increased by $1.6 trillion
b. decreased by $1.6 trillion
c. increased by $.20 trillion
d. increased by $.20 trillion
e. increased by $.80 trillion
The supply curve reflects the:
a. inverse relationship between price and quantity offered.
b. positive relationship between demand and supply.
c. negative relationship between price and quantity bought.
d. positive relationship between price and quantity bought.
e. positive relationship between price and quantity offered.
If banks cannot lend all of their excess reserves:
a. the money multiplier increases.
b. the money multiplier decreases.
c. the money multiplier stays the same.
d. the amount of loans by the bank increases.
e. checkable deposits decrease.
If butter is a substitute for margarine, then an increase in the price of butter would be
most likely to cause:
a. a rightward shift of demand for margarine.
b. a leftward shift of demand for margarine.
c. the quantity demanded for margarine to increase.
d. the quantity demanded for margarine to decline.
e. a decline in the price of margarine.
Exhibit 2-2 Production possibilities curve
In Exhibit 2-2, the opportunity cost of coffee when moving from A to B is:
a. the same as moving from A to C.
b. the same as moving from A to D.
c. the same as moving from B to D.
d. the same as moving from B to C.
e. it is not possible to determine.
Retired persons are officially classified as:
a. unemployed.
b. self-employed.
c. underemployed.
d. not in the labor force.
Labor resources:
a. include only physical activities.
b. are only counted as a resource if used in the production of other resources.
c. include only skilled labor.
d. include both physical and mental activities.
e. include human effort involved in the production of goods, but not services.
On a Phillips curve diagram, an increase in the rate of inflation, other things being
equal, is represented by a(n):
a. upward movement along the Phillips curve.
b. downward movement along the Phillips curve.
c. upward shift of the Phillips curve.
d. downward shift of the Phillips curve.
A $500 increase in investment will shift the aggregate expenditures curve up by:
a. exactly $500 and will increase the equilibrium level of real GDP by exactly $500.
b. exactly $500 and will increase the equilibrium level of real GDP by less than $500.
c. exactly $500 and will increase the equilibrium level of real GDP by more than $500.
d. more than $500 and will increase the equilibrium level of real GDP by more than
$500.
e. less than $500 and will increase the equilibrium level of real GDP by less than $500.
Inflation is an increase in:
a. prices of all products in the economy.
b. homes, autos and basic resources.
c. the general price level of products.
d. none of these.
A major difference between a tariff and a quota is that a tariff:
a. will reduce imports, but a quota generally will not.
b. can easily be rescinded, but a quota cannot.
c. will reduce the ability of foreigners to obtain the purchasing power to buy a nation’s
export goods, but a quota will not affect the foreign demand for the nation’s exports.
d. typically generates tax revenue, while a quota does not.
Which of the following models emphasizes the importance of credible, predictable
government policies for maintaining full employment with low inflation?
a. The monetarist model.
b. The Keynesian model.
c. The supply-side model.
d. The rational expectations model.
A decrease in quantity demanded is given by a(n):
a. downward shift of the demand curve.
b. upward shift of the demand curve.
c. downward movement to the right along the demand curve.
d. upward movement to the left along the demand curve.
e. downward shift of both demand and supply curves.