Exhibit 3-3 Demand curves
Which of the graphs in Exhibit 3-3 depicts the effect of an increase in income on the
demand for DVDs (a normal good)?
a. Graph A.
b. Graph B.
c. Graph C.
d. Graph D.
A depreciation of one’s currency means that:
a. the country’s exports will become more expensive.
b. it now requires less of this currency in exchange for one unit of another currency.
c. the country’s imports will become less expensive.
d. it now requires more of this currency in exchange for one unit of another currency.
e. it now requires more units of other currencies in exchange for one unit of this
currency.
Suppose business decision makers become more optimistic about the future and, as a
result, increase their investment spending by $20 billion. If the economy’s marginal
propensity to consume is 0.75, the equilibrium level of aggregate real GDP will increase
by:
a. $15 billion.
b. $20 billion.
c. $50 billion.
d. $80 billion.
The real interest rate is defined as the:
a. actual interest rate.
b. fixed-rate on consumer loans.
c. nominal interest rate minus the inflation rate.
d. expected interest rate minus the inflation rate.
Which of the following best describes the term “expenses”?
a. The amount of total profits earned by a business since it began operations.
b. The amount of interest or claim that the owners have in the business.
c. The future economic resources of a business entity.
d. The outflow of assets resulting from the sale of goods and services.
]Programs that automatically increase government spending (relative to revenue) during
a recession and automatically decrease government spending (relative to revenue)
during an economic boom are called:
a. discretionary fiscal policy.
b. supply-side programs.
c. automatic stabilizers.
d. tax credits.
People who enjoy the benefits of a public good without paying for them are called:
a. spillover parties.
b. external consumers.
c. free riders.
d. antitrust violators.
The Monetary Control Act of 1980 extended the Fed’s authority to:
a. impose required-reserve ratios on all depository institutions.
b. control the discount rate.
c. control the federal funds rate.
d. all of these.
A local restaurant offers an “all you can eat” Sunday brunch for $12. Susan eats four
servings, but leaves half of a fifth helping uneaten. Why?
a. Her marginal value of a serving of brunch has fallen below $12.
b. Her marginal value of a serving has fallen below $2.36 ($12 divided by 5 servings).
c. Her marginal value of food has fallen to zero.
d. The total value she places on brunch today exactly equals $12.
Which of the following would be most likely to cause the per capita income of
less-developed countries to rise?
a. Development of strong labor unions.
b. More rapid population growth.
c. Investment expenditures that enhance the human capital of labor force participants.
d. An international minimum wage law.
The sum of the marginal propensity to consume (MPC) and the marginal propensity to
save (MPS) always equals:
a. 1.
b. 0.
c. the interest rate.
d. the marginal propensity to invest (MPI).
If a country has a comparative advantage in oil, then this means that the opportunity
cost of producing oil is:
a. high.
b. low.
c. zero.
d. infinite.
e. equal to all other goods.
If your bank receives a checkable deposit of $20,000 cash, and the banking system
makes loans totaling $60,000, the maximum possible, then the money multiplier must
be:
a. 2.
b. 2.5.
c. 3.
d. 3.5.
e. 4.
What is the title of the John Maynard Keynes’s book published in 1936 that challenged
the classical self-correction economic theory?
a. In the Long-run We Are Dead.
b. Classical Economics Revised.
c. General Theory of Employment, Interest, and Money.
d. A Keynesian Approach to Economic Policy.
Exhibit 2-10 Production possibilities curve data A B C D E
Capital goods 0 1 2 3 4
Consumption goods 25 23 19 13 0 Suppose an economy is faced with the production
possibilities table shown in Exhibit 2-10. The second unit of capital goods production
will cost ____ units of consumption goods, and the third unit of capital goods
production will cost ____ units of consumption goods.
a. 4; 6
b. 25; 23
c. 23; 19
d. 1; 23
e. 2; 19
Which of the following best represents the effects of a decrease in the price of tomato
juice, other things being equal?
a. An upward movement along the demand curve for tomato juice.
b. A downward movement along the demand curve for tomato juice.
c. A rightward shift in the demand curve for tomato juice.
d. A leftward shift in the demand curve for tomato juice.
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 equilibrium GDP is $5 trillion, then the total of investment,
government spending, and net exports is:
a. $1 trillion.
b. $2 trillion.
c. $3 trillion.
d. $4 trillion.
e. $6 trillion.
The Phillips curve relates the inflation rate to the:
a. unemployment rate.
b. GDP.
c. disposable personal income.
d. interest rate.
A rightward shift in the money supply curve is likely to produce a rightward shift in the
money demand curve.
Cost-benefit analysis can be applied to individual decision-making and public choice
theory.
An increase in the value of the dollar in international exchange rate markets will cause
the relative price of U.S. produced goods to foreigners to rise, the relative price of
foreign produced goods to Americans to fall, causing U.S. exports to fall and U.S.
imports to rise.
Saving is disposable personal income not spent on consumption.
Examples of market failure include lack of competition, externalities, public goods, and
income inequality.
A country has a comparative advantage in producing a good when it has the lowest
opportunity cost of producing that good.
A price ceiling set below the equilibrium price creates a shortage.
The marginal propensity to save plus the marginal propensity to consume always equals
1.
Compensation of employees is the largest component of GDP using the income
approach.