When the economy is experiencing high inflation and high unemployment at the same
time, then it is experiencing:
a. stagnation.
b. deflation.
c. reflation.
d. stagflation.
e. innation.
A movement along the consumption function is caused by a change in:
a. consumption.
b. expectations.
c. aggregate supply.
d. disposable income.
Assuming gasoline and oil to be complementary goods, the effect on the oil market of
an increase in the price of gasoline (other things being equal) would best be described
as a(n):
a. increase in the demand for oil.
b. decrease in the demand for oil.
c. increase in the quantity of oil demanded. d. increase in the quantity of oil demanded.
Which of the following best describes the term “retained earnings”?
a. The amount of total profits earned by a business since it began operations.
b. The amount of interest or claim that the owners have on the assets of the business.
c. The future economic resources of a business entity.
d. The cumulative profits earned by the business less any dividends distributed.
Given aggregate demand, a decrease in aggregate supply creates:
a. a higher price level and a higher GDP level.
b. a lower price level and a higher GDP level.
c. cost-push inflation.
d. demand-pull inflation.
Which of the following characterizes the classical view of the economy?
a. The economy is inherently unstable.
b. Prices and wages are not flexible.
c. The economy will ‘self-adjust” to full employment.
d. None of these.
A legally mandated minimum wage is an example of:
a. the invisible hand principle.
b. a price floor.
c. a price ceiling.
d. a fringe benefit.
The economic system characterized by private ownership of resources and market is:
a. capitalism.
b. communism.
c. fascism.
d. socialism.
A drought destroys much of the peach crop. As a result, consumer surplus in the peach
market:
a. increases.
b. decreases.
c. remains unchanged.
d. equals the deadweight loss increase.
Coke and Pepsi are an example of:
a. inferior goods.
b. unrelated goods.
c. substitutes.
d. complements.
The central bank of the United States is the:
a. Federal Reserve Banking System.
b. First National Bank.
c. Comptroller’s Bank.
d. United States National Bank.
e. U.S. Treasury Bank.
Which of the following owns the largest proportion of the national debt?
a. Foreigners.
b. Federal, state, and local governments and the Federal Reserve.
c. Private individuals, banks, and corporations.
d. None of these.
The three forms of business entities are:
a. Government, cooperatives, and philanthropic organizations
b. Financing, investing, and operating
c. Sole proprietorships, partnerships, and corporations
d. Wholesaler, manufacturer, and retailer
Exhibit 1A-8 Straight line relationship
What is the slope of the line shown in Exhibit 1A-8?
a. -1.
b. -1/2.
c. -1/4.
d. 0.
Net exports:
a. will increase if exports of goods decline.
b. will increase if imports of goods rise.
c. in our GDP accounts permit estimation of foreign ownership of American businesses.
d. include budgetary outlays of the federal government.
e. is the net effect of the foreign trade sector on GDP.
Which of the following is a characteristic of capitalism?
a. Government ownership of all capital.
b. Government decision-making is preferred to decentralized decision-making.
c. Market determination of prices and quantity.
d. Equality of income.
If M stand for the money supply, V for the velocity of money, P for the average selling
price, and Q for the output of goods and services, the equation of exchange is MV =
PQ.
An increase in fiscal deficit spending financed by borrowing will not affect the national
debt but decrease interest rates.
Karl Marx predicted that the exploitation of workers would cause capitalism to
self-destruct.
The basic characteristics of a pure capitalist system include the private ownership of the
means of production and economic activity being coordinated through a system of
markets and prices.
GDP per capita provides a reasonably accurate measurement of a country’s income
distribution.
During the 1970s, the inflation rate and the unemployment rate were inversely related.
The presence of the automatic stabilizers means an increase in the budget deficit will be
automatically experienced during a recession whereas a budget surplus will be
automatically experienced during an economic expansion.
In the United States, currency in circulation is the largest component of the M1 money
supply.