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As the size of a nation's outstanding debt gets larger and larger relative to the size of the
economy:
a. eventually it will become difficult for the country to borrow in global credit markets.
b. the country will have to pay higher real interest rates in order to induce investors to
purchase its bonds.
c. at some point, the country will be more or less forced to bring spending into line with
revenues in order to maintain the confidence of investors.
d. all of these are correct.
Which of the following statements is true?
a. A tariff is a physical limit on the quantity of a good allowed to enter a country.
b. An embargo is a tax on an imported good.
c. A quota is a law that bars trade with another country.
d. When a nation exports more than it imports it is running a balance of trade surplus.
A supply curve:
a. has a negative slope.
b. is based on the assumption of a stable demand curve.
c. illustrates the negative relationship between price and quantity supplied.
d. illustrates the positive relationship between price and quantity supplied.
e. shifts about in random fashion.
Exhibit 9-3 Keynesian aggregate-expenditures model
As shown in Exhibit 9-3, if GDP is $6 trillion, the economy experiences unplanned
inventory:
a. depletion of $2 trillion.
b. depletion of $6 trillion.
c. accumulation of $2 trillion.
d. accumulation of $6 trillion.
e. none of these.
The proponents of rational expectations believe that:
a. there will be a substantial time lag before people anticipate the eventual effects of a
shift to a more expansionary macro-policy.
b. macro-policies that stimulate demand and place upward pressure on the general level
if prices will temporarily increase output and employment.
c. the inflationary side effects of expansionary policies will be anticipated quickly, and
therefore, even their short-run effects on real output and employment will be minimal.
d. discretionary changes in macro-policy can be made in a manner that will reduce the
economic ups and downs of a market economy.
A hurricane destroyed the peach crop in South Carolina. Shortly thereafter the price of
peaches rose significantly. These events suggest that a(n):
a. decrease in the supply of peaches caused the price of peaches to rise.
b. increase in the supply of peaches caused the price of peaches to rise.
c. increase in demand caused the price of peaches to rise.
d. decrease in demand caused the price of peaches to rise.
A decrease in supply means that:
a. demand will increase by the same amount.
b. the quantity demanded will increase.
c. there is a movement down and to the left along the supply curve.
d. the quantity supplied at every price will decrease.
e. the supply curve will shift out and to the right.
Jose pays a tax of $24,000 on his income of $60,000, while Richard pays a tax of
$3,000 on his income of $30,000. This tax is:
a. a flat tax.
b. progressive.
c. proportional.
d. regressive.
Exhibit 17-1 Inflation and unemployment rates
The name of the graph in Exhibit
17-1 is the:
a. Laffer curve.
b. aggregate supply curve.
c. aggregate demand curve.
d. Keynesian curve.
e. Phillips curve.
Exhibit 10-6 Aggregate supply curve
In Exhibit 10-6, when the
economy moves from a GDP of $1,000 billion to a GDP of $1,100 billion,
a. higher wages will lower the cost of producing goods.
b. real GDP and employment both increase, but only under conditions of constant
prices.
c. real GDP increases and employment decreases, but only under conditions of price
level increases.
d. real GDP and employment both increase, but only under conditions of price level
increases.
e. the economy has reached full employment.
Assume a fixed demand for money curve and the Fed increases the money supply. The
result is a temporary:
a. excess quantity of money demanded.
b. excess quantity of money supplied.
c. new equilibrium interest rate.
d. decrease in the demand for loans.
On January 1, 2015, A-Best Company's balance in retained earnings was $70,000. At
the end of the year, December 31, 2015, the balance in retained earnings was $94,000.
During 2015, the company earned net income of $40,000. How much were dividends?
a. $16,000
b. $24,000
c. $40,000
d. $64,000
The perpetual state of insufficiency of resources to satisfy people's unlimited wants is:
a. apparent only in poor countries.
b. completely unrealistic.
c. present in modern economies, but not in the past.
d. the definition of scarcity.
The interest-rate effect is the impact on real GDP caused by the ____ relationship
between the price level and the interest rate.
a. direct
b. independent
c. linear
d. inverse
South Corporation has been in the business of delivering small packages for local
companies within the city of Atlanta, Georgia, since 1960. The following information
concerning financial activities during 2015 is available at December 31, 2015:
A. Prepare an income statement for the year ended December 31, 2015.
B. If you were a bank loan officer and South Corporation wanted to borrow
$100,000 from your bank, would you lend the money? Explain.
C. Calculate retained earnings at December 31, 2015.
How will an increase in the world price of crude oil influence the
economy of an oil-importing country such as the United States?
a. Aggregate supply will decrease, leading to a decrease in real GDP.
b. Aggregate supply will increase, leading to an increase in real GDP.
c. Aggregate supply will increase, leading to an increase in prices and smaller GDP.
d. A change in the price of an imported good will not affect the domestic economy of an
oil-importing country.
If real GDP declines for at least one-half year, the economy is experiencing a:
a. depression.
b. decline.
c. recession.
d. growth recession.
e. deflation.
