Which of the following is most likely to help the residents of a nation produce more
goods and services and achieve higher income levels?
a. Higher tax rates.
b. A higher rate of investment.
c. A smaller trade sector.
d. Greater use of taxation to transfer income from the rich to the poor.
The balance sheet is a statement that summarizes revenues and expenses for a period.
a. True
b. False
Gross domestic product is the sum of the purchase price multiplied by the quantity of:
a. goods and services exchanged during the period.
b. final goods and services produced domestically during the period.
c. goods and services produced domestically during the period minus the depreciation
of productive assets.
d. final goods and services plus intermediate goods produced domestically during the
period.
According to Keynesians, for monetary policy to have a stimulative effect on GDP,
a(n):
a. increase in the money supply lowers the interest rate in order to stimulate higher
levels of investment.
b. increase in the money supply lowers the interest rate in order to lower levels of
investment.
c. decrease in the money supply lowers interest rate in order to stimulate higher levels
of investment
d. decrease in the money supply causes the interest rate to rise in order to stimulate
higher levels of investment.
e. increase in the money supply causes the interest rate to rise in order to stimulate
higher levels of investment.
In Exhibit 4-2 an increase in supply would cause a movement from which equilibrium
point to another, other things being equal?
a. E1 to E2.
b. E1 to E3.
c. E4 to E1.
d. E3 to E4.
Microeconomics approaches the study of economics from the viewpoint of:
a. individual or specific markets.
b. the national economy.
c. government units.
d. economywide markets.
The aggregate supply curve will shift to the right when the:
a. amount of labor in the society decreases.
b. capital stock of the society shrinks.
c. amount of natural resources in the society gets smaller.
d. amount of labor in the society increases.
e. price level in the economy rises.
Compare two economies A and B that start out with identical production possibilities
curves. Economy A chooses an efficient point with 6 consumption goods and 3 capital
goods, while economy B also chooses an efficient point, but with 4 consumption goods
and 5 capital goods. In the future we can predict:
a. economy A will operate inefficiently.
b. economy B will operate inefficiently.
c. economy A and economy B will grow equally fast.
d. economy A will grow faster than economy B.
e. economy B will grow faster than economy A.
Exhibit 15-1 Balance sheet of First Iliad State Bank AssetsLiabilities
Required reserves $ 1,000,000 Demand deposits $10,000,000
Excess reserves 0
Loans $
In Exhibit 15-1, if the required reserve ratio is raised to 15 percent, First Iliad State will
have to convert loans worth:
a. $9,000,000 to required reserves.
b. $1,500,000 to required reserves.
c. $500,000 to required reserves.
d. $1,000,000 to required reserves.
e. $450,000 to required reserves.
The marginal propensity to save is:
a. the change in saving induced by a change in consumption.
b. (change in S) / (change in Y).
c. 1 – MPC / MPC.
d. (change in Y – bY) / (change in Y).
e. 1 – MPC.
When economists say the demand for a product has increased, they mean the:
a. demand curve has shifted to the right.
b. price of the product has fallen, and consequently, consumers are buying more of it.
c. cost of producing the product has risen.
d. amount of the product that consumers are willing to purchase at various prices has
decreased.
Exhibit 8-9 Consumption function
In Exhibit 8-9, when disposable
income is equal to zero, saving is equal to:
a. $0.
b. $100.
c. -$50.
d. -$100.
e. $50.
Juanita earned a B.S. in engineering and went to work for a large defense contractor in a
small town in California. When the government cut spending, Juanita and 99 others
were laid off. The only other business in the town is growing grapes to be made into
raisins, but the growers refuse to hire laid-off engineers, knowing they will leave at the
first opportunity. The unemployment Juanita is experiencing is:
a. cyclical.
b. structural.
c. permanent.
d. frictional.
e. voluntary.
Ceteris paribus, a change in the price of a good always results in a change in:
a. income.
b. tastes.
c. quantity demanded.
d. both income and tastes.
e. the price of other goods.
Comparing how many dollars it takes you to run your car each year to annual earnings
on a job instead of keeping track of costs in terms of gallons of gasoline and quarts of
oil represents the use of money as a:
a. means of payment.
b. unit of account.
c. store of purchasing power.
d. form of plastic money.
A bank’s “required reserves” are:
a. held as deposits with the Federal Reserve System.
b. equal to its checkable deposits.
c. equal to its transactions deposits.
d. none of these.
In the four-sector circular flow model, households will use their incomes to do all but
which one of the following?
a. Save.
b. Pay taxes.
c. Buy domestic goods and services.
d. Buy imported goods and services.
e. Invest.
If a major technological breakthrough occurs, then the:
a. investment demand curve will shift downward.
b. investment demand curve will shift upward.
c. consumption function will shift downward.
d. consumption function will shift upward.
e. economy will move to a new point along the existing investment demand curve.
The quantity of money demanded to satisfy transactions needs:
a. is intended for unexpected expenditures.
b. increases with the level of real GDP.
c. decreases with the level of real GDP.
d. is unrelated to either national income or the interest rate.
e. varies inversely with the liquidity demand for money.