As shown in Exhibit 7-2, the rate of inflation for Year 2 is:
a. 5 percent.
b. 10 percent.
c. 20 percent.
d. 25 percent.
A technological improvement in producing good A would be a shift in the:
a. supply curve for A to the right.
b. supply curve for A to the left.
c. demand curve for A to the right.
d. demand curve for A to the left.
Exhibit 17-2 Aggregate demand and aggregate supply curves
As shown in Exhibit 17-2, if people behave according to adaptive expectations theory,
an increase in the aggregate demand curve from AD1 to AD2 will cause:
a. labor to adjust nominal wages sluggishly.
b. the aggregate supply curve to shift from SRAS1 to SRAS2
c. the price level to eventually rise from 100 to 110.
d. All of these.
Protective tariffs help a nation reach which of the following goals?
a. Decreased domestic consumer prices.
b. Increased domestic employment.
c. Increased amount of goods for consumers to purchase.
d. Increased competition among domestic and foreign producers.
e. None of these.
The popular theory prior to the Great Depression that the economy will automatically
adjust to achieve full employment in the long run is:
a. supply-side economics.
b. Keynesian economics.
c. classical economics.
d. mercantilism
Which of the following sayings best reflects the concept of opportunity cost?
a. “You can’t teach an old dog new tricks.”
b. “There is no such thing as a free lunch.” c. “I have a baker’s dozen.”
d. “There’s no business like show business.”
The Federal Deposit Insurance Corporation:
a. has eliminated bank failures.
b. insures all demand deposits without limit.
c. insures all demand deposits up to $100,000.
d. insures all demand deposits up to $10,000.
e. insures all savings and loan deposits up to $100,000.
The economic system that is generally considered to be the most efficient at answering
the What to produce and the How to produce questions is the:
a. market economy.
b. command economy
c. soviet economy.
d. traditional economy.
Which of the following is a public good?
a. Pencil.
b. Apple.
c. Light house.
d. Gun.
The circular flow of economic activity is a model of the:
a. flow of goods, resources, payments, and expenditures between the sectors of the
economy.
b. influence of government on business behavior.
c. influence of business on consumers.
d. role of unions and government in the economy.
The production possibilities curve demonstrates the basic economic principle that:
a. market-based economies are more efficient.
b. supply will determine demand in the economy.
c. the production of more capital goods this year will cause the economy to produce less
consumption goods next year.
d. to produce more of any one thing, assuming full employment, the economy must
produce less of something else.
e. to produce more consumption goods this year requires the production of more capital
goods this year.
Though many assets can be used as a store of value, money is a particularly attractive
method to store value because:
a. it increases in value as prices rise.
b. its purchasing power does not decline when prices rise.
c. it is the most liquid of all assets.
d. it is backed by gold.
Deadweight loss results from too few or too many resources used in a given market.
According to Keynesian economics, fiscal policy should create a deficit during
economic contractions.
The Keynesian range of the aggregate supply curve applies when the economy is at or
near full employment.
Credit cards are money because they serve the three functions of money.
The size of the spending multiplier depends on the marginal propensity to consume
(MPC).
Checkable deposits are not classified as money because they fail to provide a store of
value.