A tax system in which the tax rate on everyone’s first $10,000 of income is 10 percent,
the tax rate on everyone’s second $10,000 of income is 15 percent, and the tax rate on
all income over $20,000 is 25 percent is a(n):
a. proportional tax.
b. equitable tax.
c. head tax.
d. unit tax.
e. progressive tax.
The marginal propensity to consume is:
a. the change in income divided by the change in consumption.
b. consumption spending divided by income.
c. income divided by consumption spending.
d. the change in consumption divided by the change in income.
e. the change in consumption divided by income.
The horizontal summation of individual demand curves gives:
a. a supply curve.
b. a Phillips curve.
c. a market demand curve.
d. the quantity supplied.
e. a production function.
“Tax cuts, by providing incentives to work, save, and invest, will raise employment and
lower the price level.” This argument is made by the:
a. Keynesian economists.
b. supply-side economists.
c. classical economists.
d. monetarists.
Causality is clear and mechanical with the quantity theory of money. If M increases
because:
a. V and Q are variable, the price level, P, increases.
b. V and Q are variable, the price level, P, decreases.
c. V and Q are constant, the price level, P, increases.
d. V and Q are constant, the price level, P, decreases.
e. P and Q are constant, velocity, V, increases.
A good or service that is forgone by choosing one alternative over another is called
a(n):
a. explicit cost.
b. opportunity cost. c. historical cost.
d. accounting cost.
The law of increasing costs indicates that the opportunity cost of producing a good:
a. is proportional to the production of the good.
b. is constant to the production of the good.
c. increases as more of the good is produced.
d. decreases as more of the good is produced.
e. increases as less of the good is produced.
When the MPC gets smaller, the spending multiplier:
a. gets larger.
b. gets smaller.
c. stays the same.
d. gets smaller at low real GDP, and larger at high real GDP.
e. gets larger at low real GDP, and smaller at high real GDP.
Exhibit 10-1 Aggregate supply curve
In Exhibit 10-1, resources are fully employed,
and competition among producers for resources will lead to a higher price level in:
a. the segment labeled ab.
b. the segment labeled bc.
c. the segment labeled cd.
d. both segment bc and segment cd.
e. the entire curve.
Exhibit 10-4 Aggregate supply and demand curves
In Exhibit 10-4 which of the
following is not consistent with a shift in the aggregate demand curve from AD1 to
AD2?
a. A decrease in consumer spending.
b. An increase in investment.
c. An increase in government spending.
d. An increase in net exports.
Several amounts from Duggard Company at December 31, 2014 are listed below.
Answer the questions.
A) Calculate net income for 2014.
B) How much is Duggard Company’s retained earnings at the end of 2014?
C) What primary asset account is missing?
A discouraged worker is one who:
a. is underqualified for the current job.
b. dislikes the current job but is afraid to quit.
c. drops out of the civilian labor force because he/she cannot find a job.
d. quits his/her job because the possibility of advancement was very low.
e. is overqualified for the current job.
Exhibit 2-8 Production possibilities curve data A BCDEF
Capital goods 15 14 12 9 5 0
Consumer goods 0 2 4 6 8 10 As shown in Exhibit 2-8, a total output of 14 units of
consumer goods and 1 unit of capital goods is:
a. the result of maximum use of the economy’s labor force.
b. an efficient way of using the economy’s scarce resources.
c. unobtainable in this economy.
d. less than the maximum rate of output for this economy.
Public goods differ from private goods in that:
a. they produce negative externalities.
b. they are not scarce.
c. their benefits cannot be denied to anyone.
d. their consumption must be regulated by the government.
e. their benefits are very narrow.
The money supply will grow faster through deposit creation when the required reserve
ratio is:
a. high and banks hold excess reserves.
b. high and banks cannot find good customers to lend to.
c. low and banks are able to lend out all of their excess reserves.
d. low and banks are unable to loan out all of their excess reserves.
e. high and banks are not able to loan out all of their excess reserves.
If the price of a textbook rises and then students purchase fewer textbooks, an economic
model can show a cause-and-effect relationship only if which of the following
conditions holds:
a. students’ incomes fall.
b. tuition decreases.
c. the number of students increases.
d. everything else is constant.
e. the bookstore no longer accepts used book trade-ins.
Autonomous consumption spending is consumption spending:
a. that is dependent on changes in disposable income.
b. on durable goods.
c. that causes the MPC to rise.
d. that is independent of the level of disposable income.
e. that causes the MPC to fall.
In a simplified banking system with a 20 percent required reserve ratio, a $1,000
open-market sale by the Fed would cause the money supply to:
a. increase by $200.
b. decrease by $200.
c. decrease by $5,000.
d. increase by $5,000.
Imagine that Odyssey National is a brand new bank, and that its required reserve ratio is
10 percent. If it accepts a $1,000 deposit, then Odyssey National can increase the
money supply by:
a. $900.
b. $910.
c. $1,000.
d. $9,000.
e. $10,000.
The Monetarists advocate the monetary rule in order to stabilize the business cycle
which states that the money supply should be decreased by a constant rate year after
year.
During the period 1980-1986, the U.S. economy experienced disinflation.
If population grows faster than GDP, then per capita GDP must fall.
Higher milk prices reduce the demand for milk.
The statement “A tax cut would be the fairest way to stimulate the economy” is an
example of positive economic analysis.
consists of all activities necessary to provide the members of an economic system with
goods and services.
According to Keynesian economics, what impact would a balanced budget amendment
to our constitution have on our national economy?