The money market is in equilibrium when there is no excess supply of or excess
demand for bonds.
Refer to Figure 8-3. This figure is known as
a. the classical aggregate production function
b. the Keynesian aggregate production function
c. the full-employment model
d. the circular flow diagram
e. Say’s diagram
Which of the following describes the relationship between net investment and total
investment?
a. Net investment = total investment – depreciation
b. Total investment = net investment + private investment – depreciation
c. Net investment = government investment – private investment – depreciation
d. Total investment = net investment – depreciation
e. Net investment = government investment – depreciation
The social problem of resource allocation requires society to decide
a. all of the following
b. both d and e
c. how output should be produced
d. what goods and services should be produced
e. who gets what society produces
If a bank’s total assets are $150 million and total liabilities are $110 million, the bank’s
net worth is
a. $15 million
b. $260 million
c. $40 million
d. -$40 million
e. $5 million
After graduating from high school, Steve had the following three choices for his
immediate future, listed in order of preference: (1) attend our campus, (2) work in a
printed circuit board factory, or (3) attend a rival college. His opportunity cost of going
to college here includes which of the following?
a. The cost of books and supplies at the rival college
b. The income he could have earned at the printed circuit board factory plus the direct
cost of attending college here (tuition, textbooks, etc.)
c. The benefits he could have received from going to the rival college
d. Only the tuition and fees paid for taking classes here
e. Cannot be determined from the information given
Refer to Figure 7-1. Based on the figure,
a. the price level has fallen since 1965
b. the price level in 1985 was lower than in 1980
c. the price level fell from 1980 to 1990
d. the price level has not fallen since 1965
e. the base year is 1965
Social Security is indexed by the CPI. As a result
a. it is “over-indexed.”
b. it ignores inflation
c. it is “under-indexed.”
d. it is “un-indexed.”
e. it is “over-subscribed.”
If unemployment is below the natural rate, GDP is below potential output.
Investment, as defined for calculating GDP, consists of only two components: business
spending on plant and equipment and unsold inventories.
An excise tax on cigarettes
a. will cause both the market price and quantity to increase
b. will cause both the market price and quantity to fall
c. will cause the market price to rise and the market quantity to fall
d. will cause the market price to fall and the market quantity to rise
e. None of the above.
Net exports
a. are the second largest component of total spending
b. are already included in measures on consumption, investment, and government
spending
c. are a source of total spending on U.S. output
d. are always positive; i.e., total exports always exceed total imports
e. are always positive; i.e., total imports always exceed total exports
A negative supply shock causes stagflation in the short run.
If a society is operating on its production possibilities frontier, and then decides to
produce less health care,
a. its standard of living will fall
b. its standard of living will improve
c. some of its resources will become unemployed
d. it will be able to produce more of some other good or service
e. the opportunity cost of producing health care will rise
Suppose the economy includes two distinct groups of people: wage earners and goods
sellers. If the price level falls by 10 percent and nominal wages remain unchanged,
a. there will be no redistribution of purchasing power because all wage earners in the
U.S. economy receive indexed wages
b. income will be redistributed from wage earners to goods sellers
c. income will be redistributed from goods sellers to wage earners
d. real wages will fall by 10 percent
e. real wages will remain unchanged