If an economy is operating at a point inside the production possibilities curve,
a. its resources are not being used efficiently.
b. the curve will begin to shift inward.
c. the curve will begin to shift outward.
d. This is a trick question because an economy cannot produce at a point inside the
curve.
Which of the following statements is true?
a. Fiscal policy is the manipulation of the nation’s money supply to influence the
nation’s output, employment and price level.
b. Discretionary fiscal policy is the deliberate use of changes in government spending
and taxes to stabilize the economy.
c. The tax multiplier is the change in aggregate demand resulting from an initial change
in government spending.
d. A budget deficit exists when government tax revenues exceed government spending.
If nation A has an absolute advantage over nation B in the production of a product, this
implies that:
a. it requires fewer resources in A to produce the good than in B.
b. the cost of producing the good in terms of some other good’s production that must be
sacrificed is lower in A than in B.
c. nation B could not benefit by engaging in trade with A.
d. nation A should acquire this product by trading with B.
e. nation A could not benefit by engaging in trade with B.
Which one of the following are the components of aggregate expenditures?
a. Household consumption, business investment, government spending for goods and
services, and net exports.
b. Household consumption, business investment, government transfer payments, and
net exports.
c. Household consumption, business investment, government spending for goods and
services, and exports.
d. Household consumption, business investment, government spending for goods and
services, and saving.
e. Household consumption, business inventories, government spending for goods and
services, and net exports.
Which one of the following is the largest component of the money supply (M1) in the
United States?
a. Checkable deposits.
b. Gold certificates.
c. Credit cards and traveler’s checks.
d. Federal Reserve notes.
Which of the following will not cause a shift in the demand curve for good X?
a. A change in the price of a complementary good.
b. A change in the price of good X.
c. A change in consumer tastes and preferences for good X.
d. An increase in consumer income.
Which of the following is a bank liability?
a. Required reserves.
b. Excess reserves.
c. Actual reserves.
d. Checkable deposits.
e. Loans.
In 1990, U.S. nominal GDP was $5,744 billion and the GDP chain price index is 93.6.
Real GDP in 1996 dollars is:
a. $6,137 billion.
b. $5,376 billion. c. $6,000 billion.
d. $6,376 billion.
Sally lost her job when her company went out of business because of a recession. This
is an example of:
a. frictional unemployment.
b. structural unemployment.
c. cyclical unemployment.
d. technological unemployment.
Jeff Kaufman decides to bank with Paris First National Bank (PFN). He opens a
checking account by depositing $1,000. According to the PFN balance sheet, after this
initial $1,000 checkable deposit, there are $1,000 in:
a. reserves and $1,000 in checkable deposits.
b. liabilities and $2,000 in checkable deposits.
c. checkable deposits and $0 in assets.
d. assets and $0 in liabilities.
e. reserves and $0 in liabilities.
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) Total assets at the end of 2014
B) Total liabilities at the end of 2014
C) Total equity at the end of 2014
Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss
As shown in Exhibit 3A-1, if the market price falls from $3.00 to $2.00, then:
a. total surplus increases.
b. deadweight loss increases.
c. overproduction increases.
d. underproduction decreases.
The cost to a member bank of borrowing from the Federal Reserve is called the:
a. reserve requirement.
b. price of securities in the open market.
c. discount rate.
d. yield on government bonds.
Which one of the following is an assumption made in the preparation of financial
statements?
a. Financial statements are prepared for a specific entity that is distinct from the entity
owners.
b. Financial statements are prepared assuming that inflation has a distinct effect on the
monetary unit
c. Preparation of financial statements for a specific time period assumes that the balance
sheet covers a period of time.
d. Market values are always assumed to be irrelevant when preparing financial
statements.
Which of the following is an organization that lends funds to a business entity and
expects repayment of the funds?
a. A partner
b. A stockholder
c. An owner
d. A creditor
In Exhibit 5-10, and using the expenditures approach, compute personal consumption
expenditures. Which of the following is correct?
a. $6,750 billion.
b. $6,600 billion.
c. $6,550 billion.
d. $6,100 billion.
e. $5,000 billion.
A tariff has the effect of:
a. raising the price of the exported product.
b. increasing the demand for the exported product.
c. increasing the demand for the imported product.
d. increasing the supply of the imported product.
e. raising the price of the imported product.
The world bank is the agency of the U.S. State Department that is in charge of U.S.
loans to foreign countries.
Most LDCs face the problems of low population growth and excessive saving.
If the marginal propensity to consume (MPC) is 0.80, the value of the spending
multiplier is 2.
Changes in the quality of some goods and services, such as electromechanical
calculators, are thought to give a downward bias to the consumer price index.
In the rational expectations model, only unexpected or unpredictable changes cause
unemployment to deviate from its natural rate.
Keynesian economists argue that the velocity of money is unstable and has
unpredictable variations.
Starting from equilibrium in the money market, suppose the money supply increases.
Other things being equal, this will cause an excess demand for money, leading people to
buy bonds.
Economic theories, or models, enable us to predict and to give reasonable explanations
regarding economic variables.