Which of the following would not cause market demand for a normal good to decline?
a. An increase in the price of a substitute.
b. An increase in the price of a complement.
c. A decline in consumer income.
d. Consumer expectations that the good will go on sale in the near future.
e. An announcement by the Surgeon General that the product contributes to premature
death.
Within the framework of the Keynesian Cross model, if an economy is operating at a
real GDP less than full-employment real GDP:
a. a recessionary gap exists
b. an inflationary gap exists
c. aggregate expenditures will rise
d. the general level of prices will rise
Exhibit 10-6 Aggregate supply curve
In Exhibit 10-6, the
economy’s employment potential is fully exhausted at:
a. GDP = $1,000 billion.
b. GDP = $1,100 billion.
c. GDP = $1,200 billion.
d. GDP slightly above $1,200 billion.
e. the employment potential is never fully exhausted.
Information must be timely to be relevant.
a. True
b. False
Which of the following can be classified as a regressive tax?
a. Federal corporate income tax.
b. Federal personal income tax.
c. Federal gasoline tax.
d. All of these.
M2 is equal to M1 plus:
a. savings deposits, money market deposit accounts, small time deposits, and
eurodollars.
b. savings deposits, money market deposit accounts, money market mutual funds, and
eurodollars.
c. small time deposits, money market deposit accounts, money market mutual funds,
and eurodollars.
d. savings deposits and small time deposits of less than $100,000.
e. money market mutual funds, money market deposit accounts, savings deposits, large
time deposits, and repurchase agreements.
Real investment spending is ____ real personal consumption.
a. equal to
b. greater than
c. stable compared to
d. highly volatile compared to
GATT stands for:
a. Good and Total Trade.
b. General Agreement on Tariffs and Trade.
c. Greater Agreements Toward Trade.
d. Gold and Trade Totals.
e. Greater Area Trade Transactions.
Using the expenditure approach, “gross private domestic investment” is the sum of:
a. newly produced capital goods.
b. fixed investment.
c. changes in business inventories.
d. all of these.
At the equilibrium price, deadweight loss is:
a. minimized.
b. zero.
c. maximized.
d. equal to the equilibrium price multiplied by the quantity exchanged.
A bank faces a required reserve ratio of 5 percent. If the bank has $200 million of
checkable deposits and $15 million of total reserves, then how large are the bank’s
excess reserves?
a. $0.
b. $5 million.
c. $10 million.
d. $15 million.
Exhibit 8-3 Disposable income and consumption data Disposable
income
Consumption
SavingMarginal propensity to consume (MPC)Marginal propensity to save (MPS)
0 $100
100 175
200 250
300 325
400 400
500 475
600 550 Note: All amounts are in billions of dollars per year. As shown in Exhibit 8-3,
if disposable income is $100 billion, saving is:
a. $100 billion.
b. $75 billion.
c. -$75 billion.
d. -$175 billion.
Under the natural rate hypothesis, expansionary monetary and fiscal policies can at best
produce a:
a. permanent change in the unemployment rate.
b. short-run change in the unemployment rate.
c. permanent change in the inflation rate.
d. short-run change in the long-run Phillips curve.
Find the tax multiplier if the MPC is 0.75.
a. -4.
b. -3.
c. 0.33.
d. 3.
e. 4.
Which one of the following changes is consistent with a change in an economy’s
consumption function from C = $500 billion + 0.80Y to C = $700 billion + 0.80Y?
a. An increase in disposable income taxes.
b. An increase in interest rates
c. A decrease in permanent disposable income.
d. An increase in wealth.
e. An increase in savings.
Which of the following statements best describes the term “revenues”?
a. Revenues represent an outflow of assets resulting from the sale of goods or services.
b. Revenues represent assets received from the sale of products or services.
c. Revenues represent assets used or consumed in the sale of products or services.
d. Revenues represent the dollar amount of bonds sold to the public.