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According to classical economists, if interest rates are flexible,
a. saving will equal investment.
b. saving may be greater than investment.
c. saving may be less than investment.
d. any of the above
If the money market is in the liquidity trap, then people
a. do not want to hold money because its value is at its lowest.
b. want to hold bonds because the interest rate is quite high.
c. do not want to hold bonds because their price is likely to decrease.
d. want to hold bonds because their price is high.
e. a, b and d
Which of the following conditions makes it most likely for a quota to be imposed?
a. The benefits of the quota are spread over many and the costs are concentrated on a
few.
b. The benefits of the quota are spread over many and the costs are spread over many.
c. The benefits of the quota are spread over few and the costs are spread over many.
d. The benefits of the quota are spread over few and the costs are spread over few.
e. There is not enough information to answer the question.
If tax rates are cut, tax revenues may rise, fall, or remain unchanged. What actually
happens is considered a(n)
a. theoretical issue.
b. corrective issue.
c. empirical issue.
d. self-regulating issue.
e. multiplier issue.
Suppose the economy is at a point below its institutional production possibilities
frontier. To improve this situation, Keynesian economists might propose that the
government should __________ expenditures, which will cause the aggregate demand
curve to shift to the __________ in an attempt to close this __________ gap.
a. decrease; left; inflationary
b. increase; right; inflationary
c. decrease; right; inflationary
d. increase; right; recessionary
e. decrease; left; recessionary
If labor productivity rises at the same time that there is a beneficial supply shock, what
is the effect on short-run aggregate supply (SRAS)?
a. SRAS rises.
b. SRAS falls.
c. SRAS remains constant.
d. SRAS may rise, fall, or remain constant.
The slope of a horizontal line is always equal to zero.
a. True
b. False
An increase in the number of sellers of a good will, ceteris paribus,
__________________for that good.
a. increase equilibrium price and quantity
b. increase equilibrium price and decrease equilibrium quantity
c. decrease equilibrium price and increase equilibrium quantity
d. decrease equilibrium price and quantity
e. increase demand
If an economy is operating __________ its institutional production possibilities frontier,
it is producing __________ output than it would be at full employment.
a. below; less
b. below; more
c. above; less
d. above; more
e. a and d
The equation of exchange is
a. an identity.
b. a theory.
c. an abstraction
d. a hypothesis.
e. a, b, and c
The term federal reserve notes refers to coins minted by the U.S. Treasury.
a. True
b. False
If the Fed lowers the discount rate at the same time it conducts an open market sale, it
follows that
a. the money supply will fall.
b. the money supply will rise.
c. the money supply will remain unchanged.
d. cash leakages will rise.
e. There is not enough information to answer this question.
Some economists believe that corporate bailouts are bad for the economy because they
________________ gains and they _____________ the costs, which ultimately lead to
_____________ companies needing to be bailed out.
a. privatize; socialize; fewer
b. socialize; privatize; fewer
c. privatize; socialize; more
d. socialize; privatize; more
Exhibit 2-2
The production possibilities frontiers shown in this exhibit depict
_______________ opportunity costs.
a. constant
b. increasing
c. decreasing
d. There is not enough information provided to answer this question.
Nonactivists favor
a. the use of fiscal policies to manage the economy.
b. the use of monetary polices to manage the economy.
c. fine-tuning.
d. rules for conducting monetary and fiscal policies.
Exhibit 3-6
If D1 is the relevant demand curve, a decrease in the price of good X may cause
a. demand to shift from D1 to D2.
b. demand to shift from D1 to D3.
c. a movement along D1 from point A to point B.
d. a movement along D1 from point A to point C.
Logrolling refers to
a. choosing political platforms to appeal to special interests.
b. trading votes to gain support for legislation.
c. choosing political platforms to appeal to the "middle-of-the-road" voter.
d. gathering votes by pretending to support policies that appeal to voters.
e. c and d
