Which approach to calculating GDP is computed using compensation of employees,
rental income, profits, net interest, indirect business taxes, and depreciation?
a. The expenditure approach.
b. The income approach.
c. The product-market approach.
d. The circular-flow approach.
The expenditure approach for the calculation of GDP includes spending on:
a. consumption, investment, durable goods and exports.
b. consumption, gross private domestic investment, government spending for goods and
services, and exports.
c. consumption, gross private domestic investment, government spending for goods and
services, and net exports.
d. consumption, net private domestic investment, government spending for goods and
services, and net exports.
e. consumption, gross private domestic investment, all government spending including
transfer payments, and net exports.
Which of the following is a property of a public good?
a. A public good is free from externalities.
b. Many individuals benefit simultaneously.
c. A public good is not subject to free riders.
d. A public good is established by law.
The precautionary demand for money is the demand for money:
a. for normal transactions purposes.
b. for normal investment purposes.
c. for special stock purchases.
d. to protect against inflation.
e. to cover unexpected events.
Which of the following policy actions by the Fed would cause the money supply to
increase?
a. An open market sale of government securities.
b. An increase in required reserve ratios.
c. A decrease in the discount rate.
d. All of these.
If a tax rate falls as a person’s income rises, the tax is a:
a. proportional tax.
b. progressive tax.
c. regressive tax.
d. poll tax.
e. constant tax.
Which of the following would be most appropriate if the Federal Reserve wanted to
increase the money supply in order to stimulate the economy?
a. Buy U.S. government securities.
b. Force the Treasury to reduce the national debt.
c. Raise the discount rate.
d. Increase the reserve requirements.
When a tax is regressive, as a person’s income rises, the tax rate:
a. stays the same.
b. decreases.
c. increases.
d. increase and then decreases.
e. decreases and then increases.
A farmer is deciding whether or not to add fertilizer to his or her crops. If the farmer
adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to
$100 per acre. According to marginal analysis, the farmer should add fertilizer if it costs
less than:
a. $12.50 per pound.
b. $20 per pound.
c. $80 per pound.
d. $100 per pound.
A restriction on the quantity of a good that can be imported into a country is a(n):
a. tariff.
b. quota.
c. embargo.
d. restricted exchange rate.
If the inflation rate exceeds the nominal rate of interest,
a. the real interest rate is negative.
b. lenders lose.
c. savers lose.
d. all of these.
Exhibit 18-1 Production possibilities curves
In Exhibit
18-1, the production possibilities curves of wheat and corn for Nabia and Pada are
presented. In Nabia the cost of producing one more unit of wheat is equal to:
a. 4 units of corn.
b. 4 units of wheat.
c. 1/4 unit of corn.
d. 15 units of corn.
e. 60 units of corn.
Which of the following is true?
a. Keynesians advocate increasing the money supply during economic recessions but
decreasing the money supply during economic expansions.
b. Monetarists advocate increasing the money supply by a constant rate year after year.
c. Keynesians argue that the crowding-out effect is rather insignificant.
d. Monetarists argue that the crowding-out effect is rather large.
e. All of these.
Exhibit 16-4 Aggregate demand and supply model
In Exhibit 16-4, which one of the following actions could the Fed use to shift the AD
curve from AD3 to AD2?
a. Lower the legal reserve requirement.
b. Lower the discount rate.
c. Lower the federal funds rate.
d. Sell government securities.
e. Print currency.
Suppose that the consumer price index of a country was 160 at Year X and 168 at the
end of Year Y. What was the country’s inflation rate during Year Y?
a. 5 percent.
b. 8 percent.
c. 60 percent.
d. 68 percent.