When the opportunity cost of producing carrots increases as more carrots are produced,
then:
a. no more carrots will be produced.
b. resources are equally suited to the production of carrots and to other goods.
c. the production possibilities curve is a straight line.
d. the production possibilities curve becomes positively sloped.
e. the law of increasing costs is present.
Which of the following is an interest-earning asset of banks?
a. Required reserves.
b. Checkable deposits.
c. Excess reserves.
d. None of these are interest-earning assets of banks.
Exhibit 10-3 Aggregate supply and demand curves
The shift from AS1 to AS2 in Exhibit 10-3 could be caused by a(n):
a. sudden increase in the price of oil.
b. increase in input prices for most firms.
c. increase in workers’ wages.
d. all of these.
If no fiscal policy changes are made, suppose the current aggregate demand curve will
increase horizontally (shift rightward) by $1,000 billion and cause inflation. If the
marginal propensity to consume is 0.90, federal policymakers could follow Keynesian
economics and restrain inflation by decreasing:
a. government spending by $100 billion. c. taxes by $1,000 billion.
b. taxes by $100 billion.
c. taxes by $1,000 billion.
d. government spending by $1,000 billion.
Exhibit 18-1 Production possibilities curves
In Exhibit
18-1, the production possibilities curves of wheat and corn for Nabia and Pada are
presented. In Pada the cost of producing one more unit of corn is equal to:
a. 3 units of wheat.
b. 3 units of corn.
c. 1/3 unit of wheat.
d. 15 units of wheat.
e. 30 units of wheat.
A bank creates money when it:
a. gets new checkable deposits which the depositor formerly held as cash.
b. has a loan paid off, which creates excess reserves for the bank.
c. makes a loan from its excess reserves.
d. holds back excess reserves because of an increase in the required reserve ratio.
e. gets more excess reserves because of a decrease in the required reserve ratio.
Exhibit 10-5 Aggregate demand curves
In Exhibit 10-5, which one of the following
could cause the U.S. aggregate demand curve to move from AD3 to AD2?
a. Greater resource availability.
b. Nonfluctuating resource availability.
c. A recession in Japan.
d. An increase in government grants for AIDS awareness programs.
e. An expectation that future income will rise.
Suppose you are traveling from the United States to Djibouti on vacation. You would be
better off on your vacation if:
a. exchange rates did not change after you bought Djiboutian francs.
b. you had purchased Djiboutian francs in Djibouti and not in New York.
c. the Djiboutian franc became more powerful with respect to the U.S. dollar.
d. the exchange rate increased.
e. the exchange rate decreased.
The change in consumption divided by a change in income is defined as:
a. the marginal propensity to consume.
b. autonomous consumption.
c. the consumption function.
d. Keynes’ absolute income hypothesis.
e. transitory consumption.
The currency of the United States is:
a. backed dollar for dollar by gold.
b. backed by a gold cover of 50 percent.
c. not backed by any precious metal.
d. backed by the government’s silver reserves.
e. backed by the government’s gold and silver reserves.
Socialism is an economic system characterized by:
a. private ownership of resources and market decision-making.
b. government ownership of resources and centralized decision-making.
c. cooperation, sharing, and little central government.
d. a complex structure of rules and traditions that dictates decision-making.
A lawyer once said, “I could paint my house and fix my plumbing if I just had some
technical training and good tools. But, I would rather hire a painter and a plumber.”
When it comes to fixing a leaking sink, the plumber:
a. d and e.
b. charges more per hour than the lawyer does.
c. charges less per hour than the lawyer does.
d. is more efficient.
e. has a comparative advantage.
Economists refer to the simple relationship between consumption and disposable
income as:
a. autonomous consumption.
b. the marginal propensity to consume.
c. the absolute disposable income hypothesis.
d. disposable income.
e. the consumption function.
If the MPC = 1, the spending multiplier is:
a. infinite.
b. zero.
c. 10.
d. 100.
e. 1.
If there is an increase in income, which of the following is true?
a. The demand for complementary goods decreases.
b. The demand for substitute goods decreases.
c. The demand for normal goods decreases.
d. The demand for normal goods increases.
e. The supply for all goods decreases.