People react to an excess supply of money by:
a. selling bonds, thus driving up the interest rate.
b. selling bonds, thus driving down the interest rate.
c. buying bonds, thus driving up the interest rate.
d. buying bonds, thus driving down the interest rate.
Frictional unemployment refers to:
a. unemployment related to the ups and downs of the business cycle.
b. workers who are between jobs.
c. people who spend relatively long periods out of work.
d. people who are out of work and have no job skills.
If Congress fails to pass a budget before the fiscal year starts, then federal agencies may
continue to operate only if Congress has passed a:
a. balanced budget amendment.
b. deficit reduction plan.
c. conference resolution.
d. continuing resolution.
Exhibit 9-1 GDP and consumption data GDP
ConsumptionAggregate ExpendituresUnplanned inventory
$0 $0.5
1 1.0
2 1.5
3 2.0
4 2.5
5 3.0
6 3.5
7 4.0
8 4.5
As shown in Exhibit 9-1, if investment is $0.5 trillion, government spending is $1
trillion, and net exports are -$0.5 trillion, then equilibrium GDP is:
a. $2 trillion.
b. $3 trillion.
c. $4 trillion.
d. $5 trillion.
e. $6 trillion.
The money supply known as M2:
a. includes large denomination time deposits.
b. excludes interest-earning checking accounts in savings and loans.
c. does not include money market mutual accounts.
d. includes savings accounts and small denomination time deposits.
e. includes large denomination repurchase agreements.
This school of thought argues that because people anticipate the consequences of
announced government policy and incorporate these anticipated consequences into their
present decision making, people end up undermining the government policy. What is it?
a. Neo-Keynesian.
b. Keynesian.
c. Monetarist.
d. Supply-side.
e. Rational expectations.
A curve that depicts the relationship between price and quantity demanded is the:
a. supply curve. c. demand curve.
b. supply schedule. d. equilibrium price.
Which of the following statements would be true if you own stock in a company?
a. You are an owner of the retained earnings and capital stock of the company.
b. You have a claim to the assets of the business
c. You have the right to receive interest on an annual basis.
d. You have the right to a portion of the company’s revenues each accounting period.
A public good will:
a. be efficiently provided by the free market as long as its total benefits exceed its total
costs.
b. be efficiently provided by the free market as long as its marginal benefits exceed its
marginal costs.
c. be provided in less than efficient quantities by the free market.
d. be provided in efficient quantities by voluntary contributions.
e. not be provided by the government.
If the required reserve ratio is 10 percent, $1,000 cash deposited into a checkable
deposit account will generate, assuming willing borrowers, an increase in the money
supply of:
a. $900.
b. $1,100.
c. $9,000.
d. $10,000.
e. $11,000.
A tax is proportional if, as a person’s income rises, the:
a. tax rate is constant.
b. tax rate falls.
c. tax rate rises.
d. amount of the tax is constant.
e. amount of the tax falls.
Exhibit 5-7 GDP data (billions of dollars) Personal consumption expenditures $5,207
Interest 425
Corporate profits 735
Government spending 1,406
Depreciation 830
Rental income 146
Gross private domestic investment 1,116
Compensation of employees 4,426
Exports 870
Imports 965
Indirect business taxes 553
Proprietors’ income 520
Personal taxes 886
Social Security taxes 432
Transfer payments 376 In Exhibit 5-7, disposable personal income (DI) is:
a. $5,127 billion.
b. $5,608 billion.
c. $6,254 billion.
d. $6,495 billion.
e. $7,082 billion.
Exhibit 4-3 Supply and demand curves
The market shown in Exhibit 4-3 is initially in equilibrium at point E4. Union
negotiations result in a wage increase. Other things being equal, which of the following
is the new equilibrium after this wage increase is in effect?
a. E1.
b. E2.
c. E3.
d. E4.