Noise pollution is a serious problem. One major contributor is the recent development
of very powerful amplification equipment for automobile radios. Many people
complain that the windows in their home vibrate when some cars drive by. Others
complain that loud car radios set off very sensitive alarms in nearby parked cars. What
do we know about the drivers of cars with loud stereos?
a. b, c, and e.
b. It would be very expensive for them to engage in this behavior if individuals had a
right to a nonvibrating home.
c. The cost of their own hearing loss is less than the benefit they receive from cranking
it up.
d. They realize that there are no ordinances prohibiting loud noise.
e. Their private costs fall short of the social costs.
How does the national debt as a percentage of GDP in the United States compared to
the United Kingdom?
a. U.S. national debt ratio is smaller.
b. U.S. national debt ratio is slightly larger.
c. U.S. national debt ratio is substantially larger.
d. U.S. national debt ratio is substantially smaller.
If the cost of fertilizer rises, then the price of corn will:
a. rise.
b. fall.
c. remain unchanged.
d. react unpredictably.
Which of the following is emphasized by supply-side economics?
a. The impact of budget deficits on interest rates and aggregate demand.
b. The impact of government spending on aggregate demand, output, and employment.
c. The impact of marginal tax rates on aggregate supply.
d. The impact of budget deficits on the rate of taxation in the future.
In a two-asset economy with money and T-bills, the quantity of money that people will
want to hold, other things being equal, can be expected to:
a. increase as the real GDP interest rate increases.
b. decrease as the real GDP interest rate increases.
c. decrease as real GDP increases.
d. none of these.
In order for barter to occur, traders must have a:
a. unit of account.
b. coincidence of wants.
c. medium of exchange.
d. central banking facility.
Suppose the Fed purchases $100 million of U.S. securities from security dealers. If the
reserve requirement is 20 percent, the currency holdings of the public are unchanged,
and banks have zero excess reserves both before and after the transaction, the total
impact on the money supply will be a:
a. $100 million decrease in the money supply.
b. $100 million increase in the money supply.
c. $200 million increase in the money supply.
d. $500 million increase in the money supply.
Global Inc. had net income for 2015 of $24,000. It declared and paid a $13,000 cash
dividend in 2015. If the company’s retained earnings for the end of the year was
$39,600, what was the company’s retained earnings balance at the beginning of 2015?
a. $28,600
b. $50,600
c. $76,600
d. $2,600
A community in a Southeastern state passed a beautification ordinance (law) prohibiting
the placement of indoor furniture outside of homes (i.e., no couches on the porch). The
law represents a conflict between ____ and ____.
a. the rich; the poor
b. third parties; market participants
c. victims; criminals
d. public goods; private goods
e. residents; visitors
When economists use the term Ceteris paribus, they are indicating that:
a. the relationship between two economic variables cannot be determined.
b. the analysis is true for the individual but not for the economy as a whole.
c. all other variables except the ones specified are assumed to be constant.
d. their conclusions are based on normative economics rather than positive economic
analysis.
The Keynesian cause-and-effect sequence predicts that an increase in the money supply
will cause interest rates to:
a. fall, boosting investment and shifting the AD curve rightward, leading to an increase
in real GDP.
b. fall, boosting investment and shifting the AD curve rightward, leading to a decrease
in real GDP.
c. rise, cutting investment and shifting the AD curve rightward, leading to an increase in
real GDP.
d. rise, boosting investment and shifting the AD curve rightward, leading to an increase
in real GDP.
e. fall, cutting investment and shifting the AD curve leftward, leading to a decrease in
real GDP.
Exhibit 9-2 Keynesian aggregate-expenditures model
As shown in Exhibit 9-2, if
GDP is $7 trillion, the economy experiences unplanned inventory:
a. depletion of $1 trillion.
b. depletion of $2 trillion.
c. accumulation of $1 trillion.
d. accumulation of $2 trillion.
Which of the following would be most likely to improve the standard of living of the
residents of a less-developed country?
a. The development of strong labor unions.
b. A sharp increase in the legal minimum wage.
c. An increase in expenditures on education and capital investment.
d. Rapid growth rate of the money supply.
Keynesians believe that an increase in the money supply will lead to:
a. both c and d.
b. all of the following.
c. an increase in the price level.
d. a decrease in nominal GDP.
e. an increase in real GDP.
Exhibit 8-10 Consumption function
In Exhibit 8-10, the value of the marginal propensity to consume is:
a. high for C’ than for C. c. lower for C” than for C’.
b. lower for C” than for C. d. the same for C, C’, and C”.
In the aggregate expenditures model, an increase in government spending causes a(n):
a. upward shift in the aggregate expenditures curve.
b. downward shift in the aggregate expenditures curve.
c. shift in the 45-degree line.
d. rightward movement along the aggregate expenditures curve.
e. leftward movement along the aggregate expenditures curve.