The sum of public and private saving in an economy is equal to
A) Y – C – T.
B) T – TR – G.
C) Y – C – G.
D) I – C – G.
Figure 12-2
Refer to Figure 12-2. If the U.S. economy is currently at point N, which of the
following could cause it to move to point K?
A) Households expect future income to rise.
B) Household wealth falls.
C) The firm’s cash flow rises as profits rise.
D) Government expenditures increase.
The Federal Open Market Committee consists of
A) the seven member Board of Governors of the Federal Reserve.
B) the 12 Federal Reserve Bank Presidents.
C) five of the Federal Reserve Bank Presidents.
D) the Board of Governors plus five of the Federal Reserve Bank Presidents.
Suppose China decides to sell a vast majority of their large holdings of U.S. Treasury
bonds. If you are thinking of refinancing your house, how would China’s action affect
your decision to refinance?
A) You would want to refinance as soon as possible as interest rates should rise.
B) You would want to wait to refinance as interest rates should rise.
C) You would want to wait to refinance as interest rates should fall.
D) China’s actions should not affect your decision to refinance in any way.
The Federal Reserve responded to the 2008 financial crisis in several ways. Which of
the following is one of the ways the Fed responded?
A) The Fed banned investment banks from obtaining discount loans.
B) The Fed lent investment banks Treasury securities in exchange for mortgage-backed
securities.
C) The Fed lowered the required reserve ratio on demand deposit accounts in order to
increase the amount of bank reserves.
D) The Fed helped Citibank to acquire General Motors and Chrysler.
Consumption spending is $5 million, planned investment spending is $8 million,
unplanned investment spending is $2 million, government purchases are $10 million,
and net export spending is $2 million. What is GDP?
A) $15 million
B) $23 million
C) $25 million
D) $27 million
If the exchange rate changes from $1.45 = 1 euro to $1.37 = 1 euro, then
A) both the euro and dollar have appreciated.
B) both the euro and dollar have depreciated.
C) the euro has appreciated and the dollar has depreciated.
D) the euro has depreciated and the dollar has appreciated.
Suppose that you deposit $2,000 in your bank and the required reserve ratio is 10
percent. The maximum loan your bank can made as a direct result of your deposit is
A) $200.
B) $1,800.
C) $2,000.
D) $20,000.
Suppose real GDP is $12.6 trillion and potential GDP is $12.4 trillion. To move the
economy back to potential GDP, Congress should
A) lower government purchases by an amount less than $200 billion.
B) lower government purchases by $200 billion.
C) raise taxes by $200 billion.
D) lower taxes by $200 billion.
E) raise taxes by an amount more than $200 billion.
An increase in the price level in the United States will have what effect on the aggregate
expenditure line?
A) Aggregate expenditure will shift downward.
B) Aggregate expenditure will become steeper.
C) Aggregate expenditure will shift upward.
D) Aggregate expenditure will not be affected by an increase in the price level in the
United States.
As a percentage of GDP, imports are greater than exports for which of the following
countries?
A) Germany
B) Japan
C) the Netherlands
D) the United States
What is human capital?
A) a slang term for the underground labor market
B) manufactured goods that are used to produce other goods
C) accumulated knowledge and skills acquired by a worker
D) the manager or owner of a business
The study of the problems due to asymmetric information was begun when economists
analyzed which type of market?
A) the market for citrus fruit
B) the market for insurance
C) farmers’ markets
D) the market for automobiles
In 18th century Europe, governments gave guilds legal authority to limit production of
goods. This authority obstructed the market mechanism because the guild’s actions
prevented the forces of ________ from coordinating the self-interested decisions of
producers and consumers.
A) absolute advantage
B) demand and supply
C) opportunity cost
D) nature