As the marginal propensity to consume (MPC) decreases, the spending multiplier:
a. increases.
b. decreases.
c. remains constant.
d. becomes indefinable.
The sum of past federal budget deficits increases the:
a. GDP debt.
b. trade debt plus debt.
c. national debt.
d. Congressional debt.
Which one of the following statements is true?
a. Resources flow from the government to firms.
b. Taxes flow from foreign economies to the government.
c. Goods and services flow from households to foreign economies.
d. Resources flow from households to firms.
e. Resource payments flow from households to the government.
“As soon as a mayor announced his/her ‘get tough on crime’ policy on New Year’s day,
criminals got scared and the crime rate went down.” Suppose that the lower crime rate
was actually caused by freezing cold temperatures in January¾it was just too cold for
anybody to be out robbing other people. Which fundamental hazard of the economic
way of thinking did the mayor make?
a. believing that what’s good for one person is good for the whole group (the fallacy of
composition)
b. failing to take into account the benefits of crime (the payoff fallacy)
c. believing that association is the same as causation
d. failing to understand the difference between positive and normative economics.
Comparative advantage explains why a nation will benefit from trade when:
a. it exports more than it imports.
b. its trading partners are experiencing offsetting losses.
c. it exports goods for which it is a high-opportunity cost producer, while importing
those for which it is a low-opportunity cost producer.
d. it exports goods for which it is a low-opportunity cost producer, while importing
those for which it is a high-opportunity cost producer.
Price floors are instituted because the government wants to:
a. help consumers.
b. help producers.
c. raise tax revenue.
d. prevent imports.
e. increase demand.
The average National Basketball Association player is over 6 feet tall. The average
horse jockey is shorter than 5 1/2 feet tall. This is because height provides NBA players
with:
a. d and e.
b. an absolute advantage for horse racing.
c. an absolute disadvantage for other sports in general.
d. a comparative disadvantage in horse racing.
e. a comparative advantage in basketball.
Which of the following is the most important protection against fears of bank collapse?
a. The Federal Reserve.
b. The Federal Reserve Open Market Committee.
c. The Federal Deposit Insurance Corporation.
d. The gold and silver that backs Federal Reserve notes.
What stage of the business cycle immediately follows the trough?
a. Peak.
b. Recovery.
c. Recession.
d. Depression.
When the Fed lowers the discount rate, it makes it:
a. cheaper for banks to borrow from each other.
b. cheaper for banks to obtain additional reserves by borrowing from the Fed.
c. more difficult for banks to accept deposits.
d. more difficult for banks to extend loans.
In general, GDP per capita is not highly correlated with alternative measures of quality
of life.
If X and Y are complementary goods, the demand curve for X will shift to the right
when the price of Y increases.
Why is it important to distinguish nominal GDP from real GDP?
Internal ownership of the debt refers to the portion of the national debt owned by
government agencies.
The supply curve for chicken will shift to the right, if production costs increase.