Taxes constitute the difference between GDP and disposable income.
a. True
b. False
An economist who claims that an increase in government spending would result mainly
in a higher price level believes the economy is operating where
a. the MPC is small.
b. the MPC is large.
c. aggregate supply curve is flat.
d. aggregate supply curve is steep.
Michigan recently did away with property taxes. Alternative funding for schools could
come from
a. a lottery system.
b. an increase in sales tax and income tax.
c. an increase in corporate taxes.
d. All of the above are correct.
An example of an abstraction used in macroeconomics is
a. the price level.
b. total costs.
c. the tax rate.
d. the treasury bill rate.
e. proprietor’s income.
If a U.S. citizen buys a car produced in Germany, this transaction will add to
a. U.S. aggregate demand.
b. U.S. aggregate supply.
c. German aggregate demand.
d. German imports.
Figure 20-7
In Figure 20-7, there are three aggregate expenditure functions (C + I + G + X − IM)
for an open economy. Which of the following would cause a movement from A to B?
a. a European economic expansion
b. a decrease in the money supply
c. an increase in the interest rate
d. an increase in the U.S. price level
With a negative income tax, the larger the difference between the break-even income
level and the guaranteed level,
a. the greater the tax rate (by definition).
b. the greater the incentive to work.
c. the smaller the number of people eligible to receive benefits.
d. the more inequitable the resulting distribution of income will be.
Which of the following statements is true?
a. Economic theory does not make unrealistic assumptions.
b. Economists should not ignore details while focusing on complex problems.
c. Abstraction forms an important part of economic analysis.
d. The word theory means same for both economists and laymen.
When the economy devotes more of its resources to investment goods, it must devote
fewer resources to consumer goods.
a. True
b. False
A firm’s production process shows constant returns to scale. It can produce 5,000
widgets at a total cost of $2,500 and 10,000 widgets at an average cost of
a. $10,000.
b. $5,000.
c. $2,000.
d. $0.50.
Money is almost always used to quote prices. This illustrates the function of money as a
a. medium of exchange.
b. store of value.
c. unit of account.
d. commodity value.
A rising price level should shift the expenditure schedule
a. upward and decrease equilibrium real GDP.
b. downward and increase equilibrium real GDP.
c. downward and decrease equilibrium real GDP.
d. upward and increase equilibrium real GDP.
The United States has greater inequality of income than
a. Japan.
b. Germany and Australia.
c. most industrialized nations.
d. all of the above.
The government uses fiscal and monetary policy to mitigate the effects of economic
fluctuations.
a. True
b. False
The money for Social Security payments to current retirees comes from
a. payroll taxes collected from those retirees when they were working.
b. income taxes collected from the current working population.
c. payroll taxes collected from the current working population.
d. only the interest earned now by the government on the invested Social Security trust
fund.
Recessionary gap arises when
a. inventory stock falls.
b. government spending increases.
c. when the general price level increases.
d. there is less spending than desired.
A stockholder who owns 1,000 shares of the corporation’s 100,000 shares is entitled to
what percentage of the vote in an election of corporate officers?
a. 1%
b. 2%
c. 5%
d. 10%
Tax loopholes increase the progressivity of the federal income tax.
a. True
b. False
Retained earnings are the same thing as “plowback.”
a. True
b. False
The factors of production include all goods and services produced in an economy.
a. True
b. False
When you subtract the expected rate of inflation from the nominal rate of interest, you
calculate the
a. real rate of interest.
b. real rate of inflation.
c. expected rate of interest.
d. expected rate of price increases.
Figure 5-12
In Figure 5-12, the move in the consumer equilibrium from A to B shows that
a. beer is an inferior good, but wine is a normal good.
b. wine is an inferior good, but beer is a normal good.
c. both beer and wine are normal goods.
d. both beer and wine are inferior goods.
Voluntary programs, direct controls, and emissions taxes are all equally effective ways
of controlling pollution.
a. True
b. False
The equation of exchange states that the money value of GDP must be equal to the
product of the money stock times its velocity.
a. True
b. False
If the rate of technical progress decreases, then the growth
a. of the labor force will decrease.
b. of the capital stock will decrease.
c. rate of potential GDP will decrease.
d. rate of unemployment will decrease.
A market economy provides solutions to almost all social ills such as poverty and
environmental damage.
a. True
b. False
The Federal Trade Commission was established in the 1930s under President Franklin
D. Roosevelt.
a. True
b. False
Critics of the unconventional monetary policies in 2009 and 2010 argued that by
deciding which financial institutions would fail and which would not, the Fed was
assuming authority that rightfully belonged to
a. the FDIC.
b. the U.S. Treasury.
c. the President.
d. Congress.
In the long run, more costs become fixed.
a. True
b. False
Which of the following will not lead to increase in the marginal revenue product?
a. MPP increases without any changes in the price.
b. Price of the product increases without any changes in MPP.
c. MPP and price of the product increases.
d. MPP remains the same and price of the product falls.