The value of what a U.S.-owned McDonald’s produces in South Korea is included in
the U.S. ________ and the South Korean ________.
A) GDP; GDP
B) GNP; GDP
C) GDP; GNP
D) GNP; GNP
When a celebrity has the desire to have his image protected following his death, this is
best described as an example of the protection of
A) an invention.
B) a patent.
C) a trademark.
D) intellectual property.
When someone takes out a mortgage loan to buy a house, the mortgage lender can take
possession of the house and sell it if the borrower defaults by failing to make payments
on the loan because the house is being pledged as ________ for the loan.
A) goodwill
B) a liability
C) insurance
D) collateral
The principal-agent problem is a problem
A) caused by a person (principal) who hires an agent to act on his behalf but is
unwilling to delegate authority to the agent to carry out the task in the best possible
way.
B) caused by agents pursuing their own interests rather than the interests of the
principals who hired them.
C) of the power system of boss and subordinate where the boss (principal) exerts
influence over his subordinates (agents) using punishment or threat.
D) that exists when a person (principal) has more information about the task than the
agent he hires to perform the task.
A commercial bank like Comerica creates money by
A) printing paper money.
B) earning profits.
C) selling corporate bonds.
D) making loans.
Consider two countries, Alpha and Beta. In Alpha, real GDP per capita is $6,000. In
Beta, real GDP per capita is $9,000. Based on the economic growth model, what would
you predict about the growth rates in real GDP per capita across these two countries?
A) The growth rate of real GDP per capita will be lower in Alpha than it is in Beta.
B) The growth rate of real GDP per capita will be higher in Alpha than it is in Beta.
C) The growth rate of real GDP per capita in Alpha and Beta will be the same.
D) The economic growth model makes no predictions regarding differences in growth
rates of real GDP per capita across the two countries.
How does an increase in government spending affect the aggregate expenditure line?
A) It shifts the aggregate expenditure line upward.
B) It shifts the aggregate expenditure line downward.
C) It increases the slope of the aggregate expenditure line.
D) It decreases the slope of the aggregate expenditure line.
The aggregate expenditure model focuses on the ________ relationship between real
spending and ________.
A) short-run; real GDP
B) short-run; inflation
C) long-run; real GDP
D) long-run; inflation
Suppose the Fed increases the money supply. Which of the following is true?
A) At the original interest rate, the quantity of money demanded is equal to the quantity
of money supplied.
B) At the original interest rate, the quantity of money demanded is less than the quantity
of money supplied.
C) At the original interest rate, the quantity of money demanded is greater than the
quantity of money supplied.
D) The interest rate must rise for the money market to clear.
If currencies around the world are based on the gold standard, and Japan raises the
amount of gold for which the yen will trade, then holding all else constant,
A) the yen will depreciate against the dollar.
B) the yen will appreciate against the dollar.
C) the value of the yen relative to the dollar will stay constant.
D) the value of U.S. exports to Japan in terms of the yen will increase.
The formula for aggregate expenditure is
A) AE = C + I + G.
B) AE = C + I + G – NX.
C) AE = C + I + G + NX.
D) AE = C + I + depreciation – NX.
If aggregate expenditure is less than GDP, how will the economy reach macroeconomic
equilibrium?
A) Inventories will decline, and GDP and employment will decline.
B) Inventories will rise, and GDP and employment will decline.
C) Inventories will decline, and GDP and employment will rise.
D) Inventories will rise, and GDP and employment will rise.
Consider the following statements:
a. Consumers rent more DVDs from a video store that rents DVDs at a lower price than
other rival video stores in the area.
b. Department stores take steps to increase security since they believe it is more costly
to allow shoplifting than to install expensive security monitoring equipment.
c. Farmers produce more cotton when its selling price falls.
Which of the above statements demonstrates that economic agents respond to
incentives?
A) a only.
B) b only.
C) c only.
D) a and b.
E) a, b, and c.