According to the quantity theory of money, if M’s growth is lower than Q’s, then:
a. V falls.
b. V rises.
c. P stays the same
d. P falls.
e. P rises
People who often impose cost on the majority in order to benefit certain groups are
called:
a. laissez-faire groups.
b. encounter groups.
c. fair-interest groups.
d. special-interest groups.
e. none of these.
The interest rate that banks charge other banks for short-term loans is the:
a. discount rate.
b. prime rate.
c. treasury rate.
d. federal funds rate.
e. interbank rate.
Exhibit 8-2 Consumption function
As shown in Exhibit 8-2, autonomous
consumption is:
a. 0.
b. $2 trillion.
c. $4 trillion.
d. $6 trillion.
e. $8 trillion.
Suppose George’s income is $10,000 and he pays a tax of $1,000, but Laura’s income is
$50,000 and she pays a tax of $4,000. Such a tax is:
a. regressive.
b. progressive.
c. proportional.
d. flat.
Exhibit 8-7 Aggregate expenditures function
In Exhibit 8-7, aggregate
income will equal consumption plus investment and the economy will be in equilibrium
when real disposable income is:
a. $2 trillion.
b. $4 trillion
c. $6 trillion.
d. $8 trillion.
Assume that the equilibrium price for a good is $5. If the market price is $10, a:
a. shortage causes the price to decline toward $5.
b. surplus causes the price to rise above $10.
c. shortage causes the price to rise above $10.
d. surplus causes the price to decline toward $5.
The real balance effect (wealth effect), the interest rate effect, and the net exports effect
all help to explain the:
a. decrease in supply in the loanable funds market.
b. large federal budget deficit.
c. increase in short-run aggregate supply.
d. downward-sloping aggregate demand curve.
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 3 dollars per pound,
a. there is an excess supply of 110 pounds.
b. there is an excess demand of 110 pounds.
c. there is an excess supply of 110 dollars.
d. there is an excess demand of 110 dollars.
e. the market is in equilibrium.
Natural resources are:
a. not considered scarce because no one pays for them.
b. only desired for use in producing other goods.
c. included in the category of resources called land.
d. available in unlimited quantities.
The economy’s natural rate of unemployment consists of:
a. structural plus frictional unemployment.
b. cyclical plus frictional unemployment.
c. structural plus cyclical unemployment.
d. structural, frictional, and cyclical unemployment.
The balance of payments ____.
a. b and e
b. is always zero
c. is positive when the nation runs a trade surplus
d. is negative when the nation runs a trade deficit
e. is an itemized account of a nation’s foreign economic transactions
A bank currently has checkable deposits of $100,000, total reserves of $30,000, and
loans of $70,000. If the required reserve ratio is lowered from 20 percent to 15 percent,
this bank can increase its loans by:
a. $10,000.
b. $15,000.
c. $75,000.
d. $5,000.
e. $0.
Exhibit 8-9 Consumption function
In Exhibit 8-9, consumption and real
disposable income are equal at:
a. 500.
b. 100.
c. 400.
d. 200.
e. 600.
The three functions of money are medium of exchange,
a. measure of value, and standard of value.
b. measure of value, and store of value.
c. standard of value, and store of value
d. medium of value, and store of value.
e. measure of value, and deferred value.
In the case of negative externalities in production, the firm’s internal costs:
a. exceed the external costs.
b. are less than the external costs.
c. equal the external costs.
d. understate the true cost of producing the product.
e. overstate the true cost of producing the product.
Total GDP is the best way to identify a less-developed country
Another name for profits or earnings of a business is.
The concept that assumes that an entity is notin the process of liquidation is.
Contractionary fiscal policy is designed to combat demand-pull inflation and consists of
a decrease in government spending and/or an increase in taxes.
Discuss the three ranges of the aggregate supply (AS) curve. What could cause the AS
curve to shift to the left? What impact would a leftward shift of the AS curve have on
the economy?
If the marginal propensity to consume is 0.80, the value of the spending multiplier will
be 5.
Rational voter ignorance occurs because the marginal cost of obtaining information is
higher than the marginal benefit from obtaining the information.
The long-run Phillips curve is a vertical line at the natural rate of unemployment.
In general, GDP per capita is highly correlated with alternative measures of quality of
life.
Most of the Fed’s assets are held in the form of loans to its member banks.