Suppose Congress increases income taxes. This is an example of
a. expansionary fiscal policy.
b. expansionary monetary policy.
c. contractionary fiscal policy.
d. contractionary monetary policy.
When we speak of expansionary fiscal policy, we are talking about policymakers
__________ government spending, or __________ taxes, or both.
a. decreasing; decreasing
b. increasing; increasing
c. increasing; decreasing
d. decreasing; increasing
Exhibit 34-1
Considering the data, which of the following terms of trade would both countries agree
to?
a. 1 unit of X for 2 units of Y
b. 1 unit of X for 3 units of Y
c. 1 unit of X for 1 unit of Y
d. 1 unit of X for 1.50 units of Y
e. all of the above
It is argued that certain industries should be protected from foreign competition because
they are needed to secure the United States from foreign aggression. This argument is
called the __________ argument.
a. saving domestic-jobs
b. low foreign wages
c. foreign export subsidies
d. national defense
Politicians will usually
a. prefer to discuss means rather than ends.
b. prefer to discuss the issues in specific terms rather than in general terms.
c. not like to be perceived as either an extreme “right-winger” or an extreme
“left-winger.”
d. refer to their opponents as “middle-of-the-roaders.”
Here is a consumption function: C = C0 + MPC(Yd). If C0 = $200, then we know that
a. if Yd is zero, C will be $200.
b. when Yd rises, C rises by $200.
c. when Yd falls, C falls by MPC times C0.
d. C will always equal C0.
Which of the following statements is true?
a. Monetarists believe that the government should be very involved in managing and
directing the economy.
b. Monetarists believe that the economy is self-regulating.
c. There is very little difference between monetarist and Keynesian thought.
d. Monetarists hold that velocity is constant.
e. a and c
When there is economy-wide equilibrium, there is a tendency for
a. total output to rise.
b. total output to fall.
c. total output to remain unchanged.
d. prices to fall.
e. prices to rise.
Which of the following is not a result of a reduction in the federal budget deficit?
a. a higher real interest rate
b. a depreciation of the currency
c. a rise in exports
d. a rise in the price of foreign inputs
Persons who are retired or engaged in own-home housework are considered to be in
which of the following categories?
a. in the civilian labor force
b. not in the labor force
c. employed
d. unemployed
Suppose the real exchange rate of 10 Mexican pesos to the dollar changes to 9 pesos to
the dollar. In this situation, the dollar has __________________, making American
goods __________ expensive for Mexicans.
a. appreciated; less
b. appreciated; more
c. depreciated; less
d. depreciated; more
Saying that it takes twice as many dollars to buy one ticket for a concert than two
tickets for a movie refers to the use of money as a
a. medium of exchange.
b. unit of account.
c. store of value.
d. means of achieving the double coincidence of wants.
To decrease the money supply, the Fed may
a. buy government securities in the open market.
b. decrease the discount rate.
c. increase the required reserve ratio.
d. b and c
e. all of the above
The economy is in the horizontal portion of the AS curve, there is no liquidity trap and
investment is sensitive to changes in the interest rate. According to the Keynesian
transmission mechanism, if the money supply increases the interest rate will
__________, investment spending will __________, the AD curve will shift to the
__________, and Real GDP will __________.
a. fall; rise; right; not change
b. fall; rise; left; rise
c. rise; rise; right; rise
d. fall; rise; right; fall
e. fall; fall; left; fall
Which of the following statements is true?
a. Indirect business taxes are a component of national income because when added to
the other components of national income, the sum must equal GDP.
b. Indirect business taxes must be subtracted from national income to yield a figure
equal to GDP.
c. Indirect business taxes are a part of national income because they are considered a
payment to a factor of production.
d. Indirect business taxes are not part of national income because they are not
considered a payment to a factor of production.
It is necessary for government officials to analyze cost data to determine what their
country should specialize in producing.
a. True
b. False
Inflation does the greatest harm to money’s function as a
a. medium of exchange.
b. unit of account.
c. store of value.
d. liquid asset.
Inventory levels unexpectedly rise and as a result firms reduce the level of production.
Which of the following is consistent with these two occurrences?
a. TP is greater than TE.
b. TP is less than TE.
c. TP is equal to TE.
d. TP is equal to TE minus the rise in inventories above the optimum inventory level.
e. none of the above
Exhibit 8-4
A shift in short-run aggregate supply from SRAS1 to SRAS2could have been the result
of
a. a decrease in the price level.
b. an increase in the price level.
c. an adverse supply shock.
d. a beneficial supply shock.
Exhibit 17-1Production Function Real GDP = T (L, K), such that Real GDP = T(L + K)
Assume that the technology coefficient is equal to 0.40.
If this production function is graphed with Real GDP on the vertical axis and labor on
the horizontal axis, and the technology coefficient rises from 0.40 to 0.50, it would
cause a
a. shift upward in the production function to a higher level of Real GDP.
b. shift downward in the production function to a lower level of Real GDP.
c. movement down along the same production function to a lower level of Real GDP.
d. movement up along the same production function to a higher level of Real GDP.