Which one of the following is notan external user of financial statements?
a. Suppliers
b. Creditors
c. Investors
d. The company’s controller
Exhibit 10-8 Aggregate demand and supply
In Exhibit 10-8, if aggregate
demand shifts from AD4 to AD5, real GDP will:
a. not change, and the price level will rise from 120 to 170.
b. increase from $7.0 to $8.0, and the price level will rise from 120 to 170.
c. not change, and the price level will rise from 140 to 170.
d. increase from $4.0 to $7.0, and the price level will not change.
e. not change, and the price level will rise from 100 to 170.
As the marginal propensity to consume (MPC) increases, the spending multiplier:
a. increases.
b. decreases.
c. remains constant.
d. becomes indefinable.
According to the Keynesian view, the prolonged unemployment of the Great
Depression:
a. was surprising because Keynesians believed that wage rates would decline and direct
the economy to full employment.
b. was surprising because Keynesians believed that lower interest rates would direct the
economy to full employment.
c. resulted because the total expenditures on goods and services were less than the
full-employment rate of output.
d. resulted because the federal government ran large budget deficits during the 1930s.
Which of the following groups of people are members of the labor force?
a. People in prison.
b. Full-time students.
c. People over 16 years of age who are employed.
d. Anyone not actively looking for work during the past 30 days.
Cerrato Company has assets of $350,000, liabilities of $130,000, and retained earnings
of $180,000. How much is
total owners’ equity?
a. $ 40,000
b. $ 170,000
c. $ 220,000
d. $ 350,000
If the government imposes a price ceiling, then:
a. producers must charge the ceiling price.
b. the price offered by producers must be at or above the ceiling price.
c. the price offered by producers must be at or below the ceiling price.
d. producers would be inclined to increase the quantity supplied.
e. the market supply curve will shift to the right.
Exhibit 15-5 Balance sheet of Tucker National Bank Assets Liabilities
Required reserves $ Checkable deposits $100,000
Excess reserves 5,000
Loans 70,000
Total $100,000 Total $100,000 In Exhibit 15-5, the bank could:
a. extend new loans by $5,000.
b. extend new loans by $20,000.
c. call in $5,000 existing loans.
d. call in $20,000 existing loans.
The civilian labor force consists of:
a. all civilians over the age of 16.
b. the employed plus the unemployed who are not in the military.
c. only individuals who are actually at work during a given week.
d. civilians who are not in prisons or mental hospitals.
Use the aggregate expenditures model and assume an economy is in equilibrium at $6
trillion which is $500 billion below full-employment GDP. If the marginal propensity to
consume (MPC) is 0.75, full-employment GDP can be reached if government spending:
a. increases by $75 billion.
b. increases by $125 billion. c. increases by $500 billion.
d. is held constant.
According to John Maynard Keynes:
a. aggregate expenditures (demand) can be forever inadequate to achieve full
employment.
b. aggregate output (supply) can be forever inadequate to achieve full employment.
c. the economy would automatically adjust to full employment in the long run.
d. neither aggregate demand nor aggregate supply is a determinant of full-employment
real GDP.
The value of consumption at each level of disposable personal income, all other
determinants of consumption unchanged, is shown by the:
a. aggregate dissaving curve.
b. consumption function.
c. investment schedule.
d. savings function.
The change in consumption divided by a change in disposable income is defined as:
a. the marginal propensity to consume.
b. autonomous consumption.
c. the consumption function.
d. Keynes’ absolute disposable income hypothesis.
e. transitory consumption.
Which of the following would an economist classify as capital?
a. 100 shares of Microsoft stock.
b. $50 bill.
c. credit card.
d. lawyer’s personal computer.
As prices rise, people will buy fewer goods and services because:
a. the interest rate has declined.
b. aggregate demand has increased.
c. the purchasing power of the fixed quantity of money has declined.
d. the income of households has increased.
A principal cause of the business cycle is the changes in total spending that occur in the
overall economy.
In economics, the term ‘surplus” means an excess quantity supplied.
All points on the production possibilities curve represent efficient levels of production.
In 2014, you invested $12,000 along with 5 other investors in a new theatre, Rock-On,
that offers Broadway play productions. Because you live out of state, you have notbeen
actively involved in the daily affairs of the theatre. On January 10, 2015, you are
excited because you received $12,000 as a dividend after the end of the 1st year of the
theatre’s existence. Included with your $12,000 check are financial statements and some
supplemental information regarding the accounting. The supplemental information
explains: (1) During the last three months of 2014, an aggressive advertising campaign
resulted in the sale of 600 season tickets for the 2015 productions. Each season ticket
cost $120 and the resulting $72,000 was included in 2014 income. (2) Along with the
advertising campaign, the general manager was able to secure pledges of $7,500 for
advertising by local merchants in the playbills for the first two productions for 2015.
This amount is included as advertising revenue in the 2014 financial statements.
REQUIRED: Are there any problems related to the supplementary disclosures? If so,
explain and indicate what effects (over- or understatements) these items will have on
the financial statements.
A tariff will decrease the supply of the product.