An upward shift in the consumption function
a. results if people decide they want to save more.
b. has the same kind of multiplier effect as an increase in investment.
c. occurs if people’s incomes rise.
d. raises the average propensity to save.
e. raises the marginal propensity to consume.
The transactions demand for money
a. reflects the need for money in the event of unpredictable occurrences.
b. is of major importance in a barter economy.
c. decreases as household income increases.
d. reflects expectations of lower stock and bond prices.
e. increases as real GDP rises.
The level of real national output produced at each price level is called a(n)
a. aggregate supply curve.
b. production possibilities curve.
c. aggregate production function.
d. capital output ratio.
e. product-price yield curve.
Currency in the United States is
a. convertible into gold at fixed rates.
b. fiat money.
c. issued by commercial banks based on their deposits.
d. another name for checking deposits and demand deposit accounts.
e. any interest-bearing government note.
When a country’s currency becomes LESS valuable relative to the currency of another
country, the country’s currency is said to have
a. deflated.
b. depleted.
c. deactivated.
d. depreciated.
e. debilitated.
The following questions are based on the following diagram:
If, with this shift, the amount of labor does NOT change,
a. total output will not change.
b. total output will fall.
c. total output will rise.
d. marginal product of labor will not change.
e. unemployment must result.
A more rapid rate of growth can often be achieved only if
a. consumers are willing to forego current consumption.
b. the government runs a budget deficit in perpetuity.
c. the level of current investment is diminished.
d. government involvement is eliminated.
e. private saving is discouraged.
Globalization
a. affects primarily goods-producing industries.
b. is solely a late twentieth-century phenomenon.
c. reduces the volume of international trade.
d. faces little opposition within developed countries of the world.
e. leads to greater integration of the world economy.
The Fed seldom exercises its power to change the legal reserve requirements because
a. it lacks the authority to do so without prior congressional approval.
b. such changes are limited to no more than one per year.
c. this policy tool has a minimal effect on bank reserves because the limits are quite
low.
d. most commercial banks manage their reserves responsibly without the Fed’s
intervention.
e. it is a drastic way to change bank reserves compared to open market operations.
Antitrust action is the responsibility of the
a. president of the United States.
b. Supreme Court.
c. Federal Commerce Commission.
d. Department of Justice.
e. FBI.
An input with a price-inelastic demand for its services
a. has few close substitutes.
b. has a backward-bending supply curve.
c. produces a product for which the demand is perfectly elastic.
d. has a high market price.
e. has a value of the marginal product curve that is horizontal.
The structural features of our economy that work to offset the effects of the business
cycle are called
a. tools of discretionary policy.
b. public works programs.
c. full-employment bills.
d. automatic stabilizers.
e. countercyclical propensities.
Unions try to shift the demand curve for labor to the right by
a. raising wages.
b. favoring legislation to shorten working hours.
c. featherbedding.
d. promoting right-to-work laws.
e. limiting union membership.
A competitive situation where two or more persons pursue their own interests and no
person can dictate the outcome is called a(n)
a. payoff.
b. externality.
c. contingency.
d. frolic.
e. game.
The main reason for the length of the term of office on the Federal Reserve Board is
that
a. this time period corresponds closely to the lag time between actions by the Fed and
their impact on the economy.
b. this term gives the individual governors the same job security as their peers in private
commercial banks.
c. many years of in-service education are required before board members can make
substantive contributions.
d. given the stringent requirements for membership, it has proven difficult to fill
positions any more frequently.
e. long appointments limit opportunities for political influence over the board.
According to the Keynesian view, the short-run aggregate supply curve is
a. horizontal.
b. downward sloping.
c. close to vertical.
d. shaped like a parabola.
e. dependent on the shape of the aggregate demand curve.
The number of Federal Reserve banks is
a. one.
b. seven.
c. 12.
d. 50.
e. 6,000.
The next question is based on the following schedule:
After some point, each additional unit of output requires more units of a variable input
than the previous unit, causing
a. marginal cost to rise.
b. fixed cost to rise.
c. total cost to rise at a decreasing rate.
d. total variable cost to rise at a decreasing rate.
e. output to rise at an increasing rate.
The demand curve for the output of an individual firm is highly price elastic when it
a. shifts to the left.
b. is horizontal.
c. slopes upward to the right.
d. has a value of 0.15.
e. decreases as price falls.
The following questions are based on the following diagram:
The recession phase of the cycle is best characterized by letter
a. A.
b. B.
c. C.
d. D.
e. E.
In addition to its fertility, the value of land as an economic resource may stem from its
a. location.
b. mobility.
c. omniscience.
d. gender.
e. conscience.
When the government finances a deficit by selling its securities to the Fed
a. it will have a smaller inflationary impact than if it sells securities to households and
firms.
b. interest rates will rise by greater amounts than if these securities are sold to
households and firms.
c. it is spared having to pay interest on the borrowed money, reducing borrowing costs.
d. there will be increases in the money supply, aggregate demand, and price level.
e. the value of these securities are not counted as part of the national debt because they
are held by a government agency.
The following questions are based on the following information. Five adolescents are
willing to buy the latest iPhone game at these prices:
A $1 price increase would reduce the quantity demanded in this market by
a. zero.
b. one.
c. two.
d. three.
e. four.
The Tennessee Valley Authority (TVA) represents a controversial example of the
government’s role in providing public goods because
a. flood control and navigation dams will be provided by private barge companies.
b. the dams would enable the government to provide hydroelectric power in
competition with private utilities.
c. the Tennessee Valley region was so economically depressed that it was unable to raise
the tax revenues needed for the project.
d. the benefits that would be generated from these projects would be significantly lower
than the costs of construction.
e. there were clear external diseconomies that would result from damming up rivers and
increasing barge traffic.
The slope of the saving function equals the
a. marginal propensity to save.
b. average propensity to save.
c. marginal efficiency of saving.
d. expected rate of return.
e. rate of interest.
If a worker costs $75 per day and adds 1,500 units to output, the firm should employ
that worker when the price of the product is at or above ________ per unit.
a. $.01
b. $.02
c. $.03
d. $.04
e. $.05
The unemployment rate
a. indicates the extent to which people are unemployed.
b. measures only cyclical unemployment.
c. uses a definition of unemployment that places attention on the serious cases of
joblessness.
d. measures the percent of the population that does not have a job.
e. is a measure of the jobless proportion of the labor force actively seeking
employment.
The term that best denotes anything a firm uses in its production process is
a. machine.
b. plant.
c. asset.
d. output.
e. input.
Most R&D funds provided by the federal government are spent on
a. national security and education.
b. space technology and defense.
c. education and medicine.
d. education and space technology.
e. subsidies to start up high-tech small businesses.