An advantage of automatic stabilizers is that this type of fiscal policy is not subject to:
a. imprecise knowledge of full-employment real GDP.
b. special interest groups.
c. lag time problems.
d. All of these are true.
The term “balance of trade” refers to the:
a. importing and exporting of goods.
b. importing and exporting of goods and services.
c. current account trade balance.
d. capital outflows minus inflows.
In the United States during the 1960s, government spending dramatically increased to
fight the Vietnam War, which resulted in:
a. demand-pull inflation.
b. cost-push inflation.
c. a disinflationary recession.
d. stagflation.
Exhibit 8-2 Consumption function
As shown in Exhibit 8-2, the marginal
propensity to save (MPS) is:
a. 0.25.
b. 0.50.
c. 0.75.
d. 0.90.
Canyon Corporation
The accountant for the Canyon Corporation prepared the following list from the
company’s accounting records for the year ended December 31, 2014:
Read the information for Canyon Corporation. Determine the following amounts for
Canyon Corporation: A) Stockholders’ equity at the end of 2014.
B) Retained earnings at the end of 2014.
_______________________ C) Name two events that might cause
stockholders’ equity to decrease.
Exhibit 11-8 Aggregate demand and supply curves
In Exhibit 11-8, supply-siders claimed that the
shift from AS1 to AS2 would occur if the government:
a. increased tax rates and increased the amount of government regulation.
b. increased tax rates and decreased the amount of government regulation.
c. increased tax rates and decreased the amount of government regulation.
d. decreased tax rates and decreased the amount of government regulation.
e. decreased tax rates and decreased the amount of government regulation.
You are a potential stockholder and are concerned that a particular company you are
ready to invest in might have too much debt. Which financial statement would provide
you information needed in order to evaluate your concern?
a. Balance sheet
b. Income statement
c. Statement of retained earnings
d. Statement of public accounting
The demand for money curve shows that there is an inverse relationship between the
quantity of money demanded and the:
a. quantity of money supplied.
b. gross domestic product (GDP).
c. price level.
d. interest rate.
Other things being equal, the effect of a decrease in the price of Coca-Cola would cause
which of the following?
a. A rightward shift in the demand curve for Coca-Cola.
b. A downward movement along the demand curve for Coca-Cola.
c. A leftward shift in the demand curve for Coca-Cola.
d. An upward movement along the demand curve for Coca-Cola.
The adaptive expectations hypothesis implies that people:
a. adjust their expectations quickly to policy changes.
b. expect the next period to be pretty much like the recent past.
c. will always be correct in their forecast for the next period.
d. change their expectations about the future if policy changes.
The following information comes from the records of Morton Corporation. Assume no
additional investment by owners when answering the following questions:
A) What is the amount of owners’ equity at January 1, 2014? __________________ B)
What is the amount of liabilities at December 31, 2014? __________________ C)
Assume that the company declared and paid dividends of $22,000 during the year. How
much net income did it earn during the year? D) Assume that the company paid no
dividends during the year. Without looking at the income statement, how can you tell if
the company is profitable or not?
When the government levies a $100 million tax on people’s income and puts the $100
million back into the economy in the form of a spending program, such as new
interstate highway construction, the:
a. tax, then, generates a $100 million decline in real GDP.
b. level of real GDP expands by $100 million.
c. effect on real GDP is uncertain.
d. tax multiplier overpowers the income multiplier, triggering a rollback in real GDP.
Keynesian analysis stresses that a tax cut that increases the government’s budget deficit
or reduces its budget surplus:
a. is appropriate during a period of inflation.
b. will increase the money supply.
c. will stimulate aggregate supply and, thereby, promote employment.
d. will stimulate aggregate demand and, thereby, promote employment.
One way the consumer price index (CPI) differs from the GDP chain price index is that
the CPI:
a. uses current year quantities of goods and services.
b. includes separate market baskets of goods and services for both base and current
years.
c. includes only goods and services bought by typical urban consumers.
d. is bias free.
When the government levies a tax where everyone is taxed the same fixed percentage
of their incomes, this tax is known as a(n):
a. regressive tax.
b. progressive tax.
c. proportional tax.
d. excise tax.
e. luxury tax.