Compared to a barter economy, using money increases efficiency by reducing:
a. transaction costs.
b. the need to exchange goods.
c. the need to specialize.
d. inflation.
If the long-run Phillips curve is vertical, then any government policy designed to lower:
a. unemployment will not change the unemployment rate and only increase the inflation
rate.
b. unemployment will work leaving the inflation rate unchanged.
c. inflation will cause employment to rise.
d. unemployment will work causing the inflation rate to fall.
e. unemployment will work causing inflation to rise.
The Fed’s principal decision-making body, which directs buying and selling U. S.
government securities, is known as the:
a. Federal Deposit Insurance Corporation.
b. District Board of Governors.
c. Federal Open Market Committee.
d. Reserve Requirement Regulation Conference.
The opportunity cost of an action is:
a. the monetary payment the action required.
b. the total time spent by all parties in carrying out the action.
c. the value of the best opportunity that must be sacrificed in order to take the action.
d. the cost of all alternative actions that could have been taken, added together.
Which of the following states the definition of supply?
a. More of a good is supplied at a lower price.
b. There is a positive relationship between the price of a good and the quantity that
buyers purchase.
c. There is a positive relationship between the price of a good and the quantity offered
for sale by suppliers.
d. There is a negative relationship between the price of a good and the quantity offered
for sale by suppliers.
Exhibit 18-6 Dollars per British pound Quantity
DemandedDollars
per PoundQuantity
Supplied
200 5 600
240 4 480
300 3 410
360 2 360
390 1 330 In Exhibit 18-6, when the exchange rate is 1 dollar per pound,
a. the market is in equilibrium.
b. there is a surplus of 30 pounds.
c. there is a surplus of 60 pounds.
d. there is a shortage of 30 pounds.
e. there is a shortage of 60 pounds.
Exhibit 2-7 Production possibilities curve
For the economy shown in Exhibit 2-7 to operate at point C, it must:
a. be willing to lower the price of grain.
b. use its given resources more efficiently than it would at point A.
c. experience resource unemployment.
d. experience an increase in its resources and/or an improvement in its technology.
Given full-employment output = $2,800, equilibrium real GDP = $2,500, and MPS =
0.25, which of the following changes would most likely bring the economy to a
full-employment level of real GDP?
a. $300 decrease in taxes.
b. $75 increase in government spending.
c. $75 decrease in taxes.
d. $300 increase in government spending.
e. $75 decrease in government spending.
The various combinations of goods and services that can be produced, when an
economy uses its available resources and technology efficiently, is called:
a. scarcity.
b. opportunity cost.
c. unlimited production.
d. capital accumulation.
e. production possibilities.
The velocity of money is:
a. money supply divided by prices.
b. spending divided by output.
c. required monetary reserves divided by income.
d. GDP divided by the money supply.
Suppose the economy is on the classical range of the aggregate supply curve and has a
problem with inflation. According to Keynesian theory, which of the following is an
appropriate discretionary fiscal policy to use in this situation?
a. A reduction in the money supply.
b. Less government regulation.
c. Increase federal spending.
d. Higher taxes.
Exhibit 9-7 Keynesian aggregate-expenditures model
In Exhibit 9-7, the value of the
MPS is:
a. .80.
b. .75.
c. .50.
d. .25.
e. .20.
In an economic expansion, people used their charge cards to purchase many goods.
Now the economy is in a recession and people must use much of their reduced incomes
to pay back debts. If employees manufacturing the goods people used to buy are laid
off, they will suffer from:
a. cyclical unemployment.
b. structural unemployment.
c. permanent unemployment.
d. frictional unemployment.
e. underemployment.
Which of the following would cause a rightward shift in the investment demand curve?
a. An increase in the interest rate.
b. An increase in the rate of capacity utilization.
c. An increase in households’ disposable income;
d. An increase in business taxes.
The inflow of assets resulting from the sale of products and services is called a(n)
a. asset
b. liability
c. revenue
d. expense
When economists say scarcity, they mean:
a. there are only a limited number of consumers who would be interested in purchasing
goods.
b. the human desire for goods exceeds the available supply of time, goods and
resources.
c. most people in poorer countries do not have enough goods.
d. goods are so expensive that only the rich can afford it.
If the spending multiplier is equal to 5, then a $1 initial increase in investment spending
will lead to a:
a. 5 percent decrease in real GDP.
b. 5 percent increase in real GDP.
c. $5 decrease in real GDP.
d. $5 increase in real GDP.
e. 0.05 percent increase in real GDP.
“The government should provide health care for all citizens.” This statement is an
illustration of:
a. positive economic analysis.
b. correlation analysis.
c. fallacy of association analysis.
d. normative economic analysis.
If the marginal propensity to consume is 0.80, the value of the spending multiplier will
be 5.
M1 is actually a smaller amount than M2.
The economic cost of unemployment is the loss of potential output which can never be
realized.
Who is hurt and who benefits from inflation? Why?
Direct relationships are illustrated using upward-sloping lines and curves.