If the Federal Reserve purchases $1,000 in bonds and the reserve requirement ratio is
0.2, what will be the total change in reserves at all banks assuming there are no excess
reserves?
a. +$500
b. +$5,000
c. -$500
d. -$5,000
e. +$1,000
Private investment expenditure, which is a flow, affects the stock of capital.
Suppose the Consumer Price Index (CPI) increased by 5 percent over each of the last 5
years while the GDP price index increased by 12 percent annually. Which of the
following reasons could explain this difference?
a. Police unions across the country agreed to substantial salary cuts.
b. Import good prices increased relative to domestic good prices.
c. The price of used automobiles increased substantially relative to the prices of other
goods.
d. The price of fighter planes dropped due to increased competition in the aerospace
industry.
e. The price of investment goods purchased by businesses increased substantially
relative to the prices of all other goods.
In the classical long-run model,
a. we focus on labor resources, rather than capital or land
b. we study thousands of different resource markets
c. we concentrate our attention on three resource markets: land, labor, and capital
d. we focus on two markets: households and firms
e. the number of variables we include depends upon whether we are focusing on the
short run or the long run
Federal government outlays as a fraction of GDP tripled between 1959 and 2009.
Transfer payments provide benefits to
a. all those in need
b. those who have paid into governmental funds through their workplace
c. those who are eligible recipients
d. those who provide some service to the government
e. anyone transferring from one stage of their life to another
All else constant, if butter and margarine are substitute goods, then as the price of butter
rises,
a. the demand for margarine will fall
b. the quantity of butter demanded will fall
c. the demand for butter will fall
d. the demand for butter will rise
e. butter and margarine will become complementary goods, provided that butter is a
normal good
As China switches from catch-up growth to discovery-based growth, the pace of
worldwide discoveries will increase and this will raise living standards
a. in the countries that China trades with.
b. in China and its neighboring countries.
c. in the United States
d. in China
e. in all countries.
Which of the following is a stock variable?
a. The interest rate
b. Real GDP
c. Investment in physical capital
d. Physical capital
e. Investment in human capital.
If the Federal Reserve buys $1,000 in bonds and the reserve requirement ratio is 0.5,
what happens to the money supply and the net worth of all banks?
a. The money supply decreases by $2,000 and net worth increases by $1,000.
b. The money supply increases by $500 and net worth increases by $500.
c. The money supply increases by $2,000 and net worth does not change.
d. The money supply increases by $500 and net worth does not change.
e. The money supply increases by $2,000 and net worth increases by $2,000.
Since World War II, the U.S. economy has been characterized by
a. extremely high rates of inflation
b. decreases in the price level
c. ongoing inflation
d. zero inflation
e. a continually falling rate of inflation
The economic behavior of government is constrained by
a. limited budgets
b. the absence of prices on most government output
c. moral philosophy of the community
d. low voter participation rates
e. political self interest
Figure 2-3 shows the production possibilities frontier for a music processing plant that
can produce both compact disks and cassettes. The opportunity cost of moving from
point A to point E is
Figure 2-3
a. zero
b. 30 cassettes
c. 180 compact disks
d. cannot be determined because point E is unattainable under current technology and
resources
e. 80 cassettes
If income increased by $20,000, investment spending is fixed at $5,000, government
purchases are fixed at $10,000, net exports are fixed at $500, and aggregate expenditure
increases by $15,000, what is the marginal propensity to consume (MPC)?
a. 0.25
b. 0.75
c. 0.33
d. 0.50
e. 0.70