An unplanned increase in inventories results from
A) an increase in planned investment.
B) a decrease in planned investment.
C) actual investment that is greater than planned investment.
D) actual investment that is less than planned investment.
The marginal propensity to consume is defined as
A) consumption divided by disposable income.
B) disposable income divided by consumption.
C) the change in consumption divided by the change in disposable income.
D) the change in disposable income divided by the change in consumption.
Jeremy is thinking of starting up a small business selling NASCAR memorabilia. He is
considering setting up his business as a corporation. What is one advantage to Jeremy
of setting up his business as a corporation?
A) By setting up the business as a corporation, Jeremy would not face double taxation.
B) By setting up the business as a corporation, Jeremy would have the ability to share
risk with shareholders.
C) By setting up the business as a corporation, Jeremy would have both ownership and
control over the business.
D) All of the above would be advantages of setting up his business as a corporation.
Consumer surplus in a market for a product would be equal to the area under the
demand curve if
A) producer surplus was equal to zero.
B) marginal cost was equal to the market price.
C) the product was produced in a perfectly competitive market.
D) the market price was zero.
Doctors have ________ incentive to control their costs when consumers ________ for a
visit to the doctor’s office.
A) more; only pay a deductible
B) less; only pay a deductible
C) less; pay entirely out of pocket
D) more; have a third-party payer that pays
Which of the following is not an appropriate policy for a central bank to follow if the
economy is plagued with deflation?
A) increasing the target interest rate on overnight loans
B) using expansionary monetary policy to drive down interest rates
C) consistently pursuing policy to promote the credibility of the central bank
D) explicitly and credibly targeting inflation
When housing prices fall, as they did beginning in 2006 following the housing market
bubble, consumption spending on furniture, appliances, and home improvements
________ as many households found it ________ to borrow against the value of their
homes.
A) declined; easier
B) declined; harder
C) increased; easier
D) increased; harder
The multiplier is calculated as the change in ________ / change in ________.
A) real GDP; autonomous expenditure
B) autonomous expenditure; real GDP
C) nominal GDP; autonomous expenditure
D) real GDP; induced spending
The main result of the monetarist model is that
A) workers and firms have rational expectations.
B) the quantity of money should be increased at a constant rate.
C) productivity shocks explain fluctuations in real GDP.
D) the economy is slow to adjust to sticky wages and prices.
The GDP deflator is a measure of the
A) total production of the economy adjusted for inflation.
B) total production of the economy unadjusted for inflation.
C) average level of prices of final goods and services in the economy.
D) average level of prices of intermediate goods and services in the economy.
Tax reduction and simplification should ________ long-run aggregate supply and
________ aggregate demand.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
Which of the following will decrease aggregate expenditure in the United States?
A) a decrease in the value of the dollar
B) a decrease in the price level
C) a decrease in interest rates
D) a decrease in government purchases
What is the government purchases multiplier if the tax rate is 0.2 and the marginal
propensity to consume is 0.8? Assume the economy is closed.
A) 2.78
B) 5
C) 6.25
D) 100
If, as economist Alwyn Young has suggested, high growth rates in Singapore are not a
result of technological progress, how are growth rates in Singapore expected to change
over time?
A) Without technological progress, the high growth rates cannot be sustained.
B) As long as the labor force participation rate is rising, growth can still continue,
despite a lack of technological progress.
C) As long as the amount of capital per hour worked continues to expand, the growth
rate in Singapore will continue to rise at an increasing rate.
D) Agricultural workers will continue to expand their productivity, thereby allowing
Singapore to achieve growth rates above those of higher-income countries.