If the consumption function is C = 100 + 0.8Y, then the Savings Function is:
A) S = 100 + 0.8 Y.
B) S = -100 + 0.8Y.
C) S = -100 + 0.2Y.
D) S = 100 + 0.2Y.
In 2003, the Bush administration revised the tax bill to include provisions to
A) delay tax increases from the 2001 bill.
B) decrease the child tax credit.
C) lower taxes on dividends.
D) increase taxes on capital gains.
In the United States economy, what is the basic measure of money?
A) wealth
B) M1
C) disposable income
D) commodities
What does an upward-sloping labor supply curve mean?
A) An increase in wages causes a large income effect.
B) Workers choose to work less when wages are high.
C) An increase in the wage leads to an increase in the quantity of labor supplied.
D) A higher wage rate results in a higher income for all workers.
If the marginal propensity to consume is 0.8, the value of the marginal propensity to
save is:
A) 5.
B) 1.25.
C) 0.2.
D) 0.8.
Recall Application 2, “The Confucius Curve?” to answer the following questions:
According to the application, if an economy experiences a recession, it should:
A) cut taxes.
B) increase spending.
C) increase money supply.
D) devalue the currency.
If the velocity of money is 2 and nominal GDP is $10 trillion, then the money supply is
A) $0.2 trillion.
B) $5 trillion.
C) $8 trillion.
D) $12 trillion.
If the labor force is 250,000 and the total population 16 years of age or older is 300,000,
the labor-force participation rate is:
A) 79.5%.
B) 83.3%.
C) 45.4%.
D) 80.9%.
Hyperinflation occurs because of:
A) excessive consumption.
B) excessive investment.
C) excessive growth in the money supply.
D) excessive interest rates.
Microeconomics is best described as the study of:
A) the choices made by individual households, firms, and governments.
B) inflation, unemployment, gross national product, and the nation’s economy as a
whole.
C) how markets interact in the aggregate economy.
D) marginal changes in the economy.
An increase in taxes or a decrease in spending will cause:
A) the aggregate demand curve to the left.
B) the aggregate demand curve to the right.
C) the SR aggregate supply curve to the left.
D) the SR aggregate supply curve to the right.
Suppose your bank pays you 5 percent interest per year on your savings account. If
prices increase by 5 percent per year over that time, approximately how much real value
do you gain by keeping $100 in the bank for a year?
A) $0
B) $1
C) $3
D) $6
If the government were to experience a budget deficit in the next three years, the
government’s total debt would:
A) decrease over the next three years.
B) stay the same over the next three years.
C) increase over the next three years.
D) would increase only on the third year.
As the result of unanticipated inflation, workers are better off while firms are worse off
if the actual inflation rate
A) is equal to the expected inflation rate.
B) exceeds the expected inflation rate.
C) is less than the expected inflation rate.
D) Neither firms nor workers are better off as the result of unanticipated inflation.
An increase in supply of a product results when:
A) more companies produce the product.
B) the companies that produce the product have reduced input costs.
C) technological innovations are introduced in the manufacturing.
D) all of the above.
The extra benefit resulting from a small increase in some activity is called the:
A) marginal cost.
B) marginal benefit.
C) marginal value.
D) marginal equilibrium.
Returns on Investment
Table 12.2
Referring to Table 12.2, if the nominal interest rate is 8.5 percent and there is no
inflation, which investments will be undertaken?
A) E
B) D, E
C) C, E
D) none of the above
A market failure could be caused by:
A) competition.
B) imperfect information.
C) profit.
D) capitalism.
The level of full-employment output in an economy increases as:
A) the supply of labor increases.
B) the stock of capital increases.
C) the natural rate of unemployment decreases.
D) all of the above.