Which of the following would be directly counted in GDP in 2014?
A) kitchen cabinets purchased from Home Depot in 2014 to be installed in a house built
in 1997
B) kitchen cabinets built in 1887, extracted from the 1887 home, and installed in a
brand new country-style home
C) kitchen cabinets built in 1887, extracted from the 1887 home, and installed in a farm
house built in 1950
D) none of the above
If Southwest Airlines borrows $20 million from a bank to finance the renovation of
their corporate offices, this is an example of
A) a bond market transaction.
B) indirect finance.
C) a stock market transaction.
D) direct finance.
The circular flow diagram shows that
A) the value of total income is equal to the total value of expenditures on final goods
and services.
B) firms pay households wages, and households receive transfer payments from firms.
C) households spend all their income on goods and services.
D) GDP will be less than the total value of expenditures on final goods and services in
the economy.
The Federal Reserve does not target both the money supply and an interest rate because
A) it would be too confusing to Wall Street and would disrupt the financial markets.
B) it would be too easy for Wall Street to determine what policy the Fed is following
and this would destabilize the economy.
C) it would be illegal according to the Federal Reserve Act.
D) the Fed cannot achieve a target for both the money supply and an interest rate at the
same time.
The unattainable points in a production possibilities diagram are
A) the points within the production possibilities frontier.
B) the points along the production possibilities frontier.
C) the points of the horizontal and vertical intercepts.
D) the points outside the production possibilities frontier.
If the MPC is 0.95, then a $10 million increase in disposable income will
A) increase consumption by $200 million.
B) increase consumption by $9.5 million.
C) decrease consumption by $105 million
D) increase consumption by $950 million.
Table 8-19
Refer to Table 8-19. Given the information above, calculate the GDP deflator in 2012.
A) 87
B) 95
C) 105
D) 114
In a closed economy, what is the relationship between saving and investment?
A) Saving is greater than investment.
B) Investment is greater than saving.
C) Investment is equal to saving.
D) Investment may be greater or smaller than saving.
The money demand curve has a negative slope because
A) lower interest rates cause households and firms to switch from money to financial
assets.
B) lower interest rates cause households and firms to switch from financial assets to
money.
C) lower interest rates cause households and firms to switch from money to stocks.
D) lower interest rates cause households and firms to switch from money to bonds.
Figure 7-3
Since 1953 the United States has imposed a quota to limit the imports of peanuts.
Figure 7-3 illustrates the impact of the quota.
Refer to Figure 7-3. What is the value of consumer surplus after the imposition of the
quota?
A) $8 million
B) $26.25 million
C) $45.5 million
D) $72.25 million
Since 1900, real GDP per capita has ________ and this measure ________ the actual
growth in standards of living in the United States over this time.
A) increased; understates
B) increased; overstates
C) decreased; understates
D) decreased; overstates
Figure 19-5
Refer to Figure 19-5. The Chinese government pegs the yuan to the dollar, at one of the
specified exchange rates on the graph, such that it overvalues its currency. Using the
figure above, this would generate
A) a shortage of yuan equal to 500 million.
B) a shortage of yuan equal to 100 million.
C) a surplus of yuan equal to 200 million.
D) a surplus of yuan equal to 700 million.
Figure 17-9
Refer to Figure 17-9. Fed Chairman Paul Volcker’s response to the ________ of the
late 1970s is depicted in the figure above as a movement from C to D to A.
A) deflation
B) high unemployment
C) high inflation
D) appreciation of the dollar
If the Fed orders an expansionary monetary policy, describe what will happen to the
following variables relative to what would have happened without the policy:
a. The money supply
b. Interest rates
c. Investment
d. Consumption
e. Net Exports
f. The aggregate demand curve
g. Real GDP
h. The price level
Corporate governance involves the way in which
A) the government nationalizes corporations.
B) the government licenses corporations.
C) a corporation is subject to government regulations.
D) a corporation is structured.
Which of the following is true?
A) The money market model is essentially a model that determines the short-term
nominal rate of interest.
B) The money market model is essentially a model that determines the short-term real
rate of interest.
C) The loanable funds model is essentially a model that determines the short-term real
rate of interest.
D) The loanable funds model is essentially a model that determines the long-term
nominal rate of interest.