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The beginning balance of retained earnings was $630,000, and the ending balance was
$650,000. The company declared and paid dividends of $60,000. A) Determine the
amount of net income for the year. B) What information would one find on the income
statement in addition to net income?
Exhibit 17-1 Inflation and unemployment rates
In Exhibit 17-1, when the
unemployment rate goes from 3 percent to 9 percent,
a. the level of inflation is unaffected.
b. the inflation rate goes from 8 percent to 14 percent.
c. the inflation rate goes from 8 percent to 3 percent.
d. the inflation rate goes to 0 percent.
e. deflation occurs.
The likely result of an economy operating at full employment is:
a. cost-push inflation.
b. demand-pull inflation.
c. a lower rate of growth.
d. hyperinflation.
Exhibit 4-3 Supply and demand curves
Initially the market shown in Exhibit 4-3 is in equilibrium at P3, Q3 (E3). Changes in
market conditions result in a new equilibrium at P2, Q2 (E2). This change is stated as a:
a. decrease in demand and an increase in supply.
b. decrease in demand and a decrease in quantity supplied.
c. decrease in quantity demanded and an increase in quantity supplied.
d. decrease in quantity demanded and an increase in supply.
Which of the following groups believes that government policy is undermined by
people's incorporation of the anticipated consequences of the policy into their present
decisions?
a. Classical school.
b. Keynesian school.
c. Neo-Keynesian school.
d. Rational expectations school.
e. Supply-side school.
If the price of potato chips increases, other things constant, demand for potato-chip dip
will:
a. not change; only quantity demanded will change.
b. increase, because the goods are substitutes.
c. decrease, because the goods are substitutes.
d. decrease, because the goods are complements.
e. increase, because the goods are complements.
The branch of economics that focuses on economywide variables like inflation and
unemployment is called:
a. macroeconomics.
b. microeconomics.
c. free-market economics.
d. aggregate economics.
Exhibit 18-3 Potatoes and wheat output (tons per day) Country PotatoesWheat
United States 4 2
Ireland 3 1 In Exhibit 18-3, the United States has a comparative advantage in
producing:
a. potatoes.
b. wheat.
c. both.
d. neither.
The spending multiplier is defined as:
a. the ratio of the change in equilibrium output to the initial change in spending.
b. the change in initial spending divided by the change in personal income.
c. 1 / (marginal propensity to consume).
d. 1 / (1 - marginal propensity to save).
An example of structural unemployment is a(n):
a. textile worker who quits one job and waits for the new job to begin.
b. engineer permanently laid off due to advances in technology.
c. computer programmer who becomes rich and leaves the labor force.
d. All of these.
Economic development encompasses which of the following measures?
a. Distribution of income.
b. Legal system.
c. Transportation structures.
d. All of these.
Exhibit 16-1 Money market demand and supply curves
As shown in Exhibit 16-1, assume the
money supply curve shifts leftward from MS1 to MS2 and the economy is operating
along the intermediate segment of the aggregate supply curve. The result will be a:
a. higher investment, lower real GDP, and lower price level.
b. lower investment, lower real GDP, and lower price level.
c. higher investment, higher real GDP, and higher price level.
d. higher interest rate and no effect on real GDP or the price level.
What type of economic analysis is limited to testable, verifiable statements?
a. Macroeconomics.
b. Entrepreneurial economics.
c. Positive economics.
d. Normative economics.
If the United Auto Workers union can obtain a substantial wage increase for auto
workers, there will be a(n):
a. decrease in the supply of automobiles, which is a shift to the right of the supply
curve.
b. decrease in the supply of automobiles, which is a shift to the left of the supply curve.
c. increase in the supply of automobiles, which is a shift to the right of the supply curve.
d. increase in the supply of automobiles, which is a shift to the left of the supply curve.
Which of the following changes in the exchange rate represents an appreciation of the
dollar?
a. 100 yen = $1 to 90 yen = $1
b. 1 yen = $.10 to 1 yen = $.08
c. 1 peso = $10 to 1 peso = $11
d. 200 francs = $10 to 190 francs = $10
Assume the economy is in recession and real GDP is below full employment. The
marginal propensity to consume (MPC) is 0.75, and the government follows Keynesian
economics by using expansionary fiscal policy to increase aggregate demand (total
spending). If an increase of $1,000 billion aggregate demand can restore full
employment, the government should:
a. increase spending by $250 billion.
b. decrease spending by $750 billion.
c. increase spending by $1,000 billion.
d. increase spending by $750 billion.
Exhibit 2-17 Production possibilities curve
In Exhibit 2-17, if countries A and B currently have the same production possibilities
curve (PPC) as given in the figure, but this year country A locates at point A on its PPC
and country B locates at point B on its PPC, then country A:
a. is better off than country B.
b. will grow at a faster rate than country B.
c. will grow at a slower rate than country B.
d. is producing more capital goods than country B.
e. is more efficient than country B.
Which of the following countries has the largest national debt as a percentage of GDP?
a. France.
b. Japan.
c. United States.
d. Canada.
e. Italy.
If the MPC = .75, the spending multiplier is:
a. 4.
b. 5.
c. 1.33.
d. 1.20.
e. .25.
