Which of the following is the best example of an action that imposes an external cost?
a. Wear and tear on your car as the result of frequent use.
b. Deterioration in the average quality of a house you own as the result of poor
maintenance.
c. Water pollution from an upstream factory that increases the cost of providing clean
water to downstream residents.
d. A rose garden on your property from which your neighbor gets much enjoyment.
When the Fed lowers the required reserve ratio, it:
a. lowers the cost of borrowing from the Fed, encouraging banks to make loans to the
general public
b. raises the cost of borrowing from the Fed, discouraging banks from making loans to
the general public.
c. increases the amount of excess reserves that banks hold, encouraging them to make
loans to the general public.
d. increases the amount of excess reserves that banks hold, discouraging them from
making loans to the general public.
e. decreases the amount of excess reserves that banks hold, discouraging them from
making loans to the general public.
A general mismatch between the skills of unemployed workers and the skills needed by
employers with job openings results in:
a. frictional unemployment.
b. structural unemployment.
c. cyclical unemployment.
d. a higher labor force participation rate.
Presented below are selected data from the balance sheet of Farmer Company for 2014.
The figures are expressed in millions.
A) Determine the amount of “Other assets” for Farmer’s 2014 balance sheet. (HINT:
you must use the accounting equation concept to determine your answer.) B) How
much of Farmer Company is financed by creditors? How much is financed by the
owners?
Which of the following is the most likely side effect of an increase in the relative size of
the underground economy with the passage of time?
a. The growth rate of real GDP will tend to understate the growth rate of total output.
b. The growth rate of real GDP will tend to overstate the growth rate of total output.
c. The GDP deflator will tend to overstate any increase in inflation.
d. The GDP deflator will tend to understate any increase in inflation.
The horizontal summation of all individual demands at different given prices results in
the:
a. market supply curve.
b. individual supply curve.
c. individual demand curve.
d. equilibrium demand and supply curves.
e. market demand curve.
Exhibit 11-6 Aggregate demand and supply model
In Exhibit 11-6, if the aggregate demand curve is at AD3, the government should:
a. raise taxes to move to AD1.
b. cut taxes to move to AD2.
c. cut taxes to move to AD1.
d. cut spending to move to AD2.
e. not change its behavior.
The classical economists argued that the production of goods and services (supply)
generates an equal amount of total income and, in turn, total spending. This theory is
called:
a. Keynes’ General Theory.
b. Say’s Law.
c. the “animal spirits” theory.
d. the law of autonomous consumption.
Taxes collected by businesses and sent to the government are:
a. indirect business taxes.
b. direct business taxes.
c. corporate income taxes.
d. personal income taxes.
In a market economy:
a. collective decision-making is more important than individual decision-making.
b. goods and services are distributed as if by an “invisible hand” to those who can not
afford them.
c. profit provides an incentive to be productive.
d. the distribution of wealth is equitably distributed.
Exhibit 2-10 Production possibilities curve data A B C D E
Capital goods 0 1 2 3 4
Consumption goods 25 23 19 13 0 Suppose an economy is faced with the production
possibilities table shown in Exhibit 2-10. As additional units of capital goods are being
produced, the number of consumption goods produced must ____, because ____.
a. increase; the production possibility table shows only the maximum efficiency points
b. increase; of the law of increasing costs
c. decrease; of the law of increasing costs
d. decrease; of the finite nature of the resource base
e. increase; capital goods will assist in the production of consumer goods
Exhibit 15-2 Balance Sheet of Springfield National Bank AssetsLiabilities
Total reserves $500 Demand deposits $1,000
Loans $500 In Exhibit 15-2, if Springfield National finds that it has excess reserves of
$300, then the required reserve ratio must be:
a. 30 percent.
b. 0.30 percent.
c. 0.80 percent.
d. 0.20 percent.
e. 20 percent.
Which fundamental economic question requires society to choose the technological and
resource mix used to produce goods?
a. The What to Produce question.
b. The Why to Produce question. c. The How to Produce question.
d. The For Whom to Produce question.