At December 31, 2015, the accounting records of Farmer Corporation contain the
following:
If Cash is $26,000, what is the December 31, 2015 capital stock balance? a. $272,000
b. $240,000
c. $220,000
d. $400,000
When households’ marginal propensity to consume (MPC) increases, the size of the
spending multiplier:
a. also increases.
b. decreases.
c. remains unchanged.
d. reacts unpredictably.
An exchange rate is the number of units of:
a. a nation’s money that is equal to one unit of another nation’s money.
b. a nation’s output that is equal to one unit of another nation’s output.
c. gold backing a nation’s money.
d. none of these.
The income statement is sometimes called the statement of financial position.
a. True
b. False
Third-party beneficiaries are called:
a. polluters.
b. property owners.
c. free riders.
d. efficient market.
e. losers.
Which national income account should be examined to discover trends in the after-tax
income that people have to save and spend?
a. Gross domestic product (GDP).
b. Personal income (PI).
c. National income (NI).
d. Disposable personal income (DI).
Mathematically, the value of the spending multiplier in terms of the marginal propensity
to consume (MPC) is given by the formula:
a. MPC – 1.
b. (MPC -1) / MPC.
c. 1 / MPC.
d. 1 / (1 – MPC).
The marginal propensity to consume (MPC) is computed as the change in consumption
divided by the change in:
a. GDP.
b. disposable personal income.
c. saving.
d. none of these.
Exhibit 2-15 Production possibilities curve
In Exhibit 2-15, inefficient resource use is
shown by which of the following points?
a. N.
b. J.
c. Q.
d. L.
e. P.
Exhibit 1A-5 Straight line
As shown in Exhibit 1A-5, the slope of
straight line CD:
a. decreases with increases in X.
b. increases with increases in X.
c. increases with decreases in X.
d. remains constant with changes in X.
Which of the following transactions would be recorded as a credit in the U.S. current
account?
a. A Japanese bank’s purchase of IBM stock.
b. A Japanese consumer’s purchase of an Apple computer.
c. An American tourist’s payment to a Japanese hotel.
d. An American consumer’s purchase of a Toshiba VCR.
Which of the following will increase the demand for motorcycles?
a. A fall in the price of motorcycles.
b. A fall in insurance rates for motorcycles.
c. A fall in the price of automobiles.
d. A fall in buyers’ incomes (assuming motorcycles are a normal good).
e. A fall in consumer preference for motorcycles.
Exhibit 8-8 Aggregate expenditures function
In Exhibit 8-8, what is the
households’ marginal propensity to consume (MPC)?
a. 0.5.
b. 0.67.
c. 0.75.
d. 0.80.
Since 1995, the net interest payment as a percentage of GDP has:
a. declined.
b. doubled.
c. tripled.
d. quadrupled.
If the interest rate rises, then firms’ investment spending:
a. falls.
b. also rises.
c. remains unchanged
d. reacts unpredictably.
A normative economic statement is:
a. a statement of fact.
b. a statement of opinion which advocates a particular position.
c. not acceptable in the economics profession.
d. the only acceptable manner to present economic information.
e. a statement based upon government-supplied information.
Suppose inflation is a threat because the current aggregate demand curve will increase
by $600 billion at any price level. If the marginal propensity to consume is 0.75, federal
policymakers can follow Keynesian economics and restrain inflation by:
a. decreasing tax revenues by $600 billion.
b. decreasing government spending by $200 billion.
c. increasing tax revenues by $200 billion.
d. increasing government purchases by $150 billion.
A classless society and economic system where all the factors of production are owned
by workers and people share production according to their needs describes:
a. capitalism.
b. communism.
c. the invisible hand.
d. a mixed economy.
Which of the following are inherent in classical theory?
a. Flexible prices.
b. Flexible wages.
c. Long-run full employment.
d. All of these.
The net exports effect is the ____ relationship between net exports and the price level of
an economy.
a. inverse
b. independent
c. direct
d. linear