Suppose that the government reduces income taxes. Which of the following is the most
likely result?
a. An increase in human capital investment
b. A decrease in consumption
c. An increase in government spending
d. A decrease in government spending
e. A decrease in human capital investment
If investment spending increases due to increased optimism in the business sector,
which of the following would occur?
a. an increase in GDP, an increase in the price level, an increase in money demand, and
an increase in the interest rate
b. an increase in GDP, a decrease in the price level, an increase in money demand, and a
decrease in the interest rate
c. a decrease in GDP, a decrease in the price level, a decrease in money demand, and a
decrease in the interest rate
d. a decrease in GDP, a decrease in the price level, an increase in money demand, and
an increase in the interest rate
e. an increase in GDP, an increase in the price level, a decrease in money demand, and a
decrease in the interest rate
The real interest rate on a loan
a. is the amount that the consumer agrees to pay
b. is always the same as the nominal rate
c. is always greater than the nominal rate
d. is only of concern when serious inflation occurs
e. is the percentage increase in the lender’s purchasing power that results from making
the loan
Which of the following occurs during an expansion?
a. Output rises, employment rises and unemployment falls.
b. Output falls, employment rises and unemployment falls.
c. Output rises, employment falls and unemployment falls.
d. Output rises, employment rises and unemployment rises.
e. Output rises, employment rises and tax revenues fall.
Which of the following would lead to a decrease of the U.S. demand for euros?
a. A decrease in the U.S. interest rate, with no change in the European interest rate
b. An increase in U.S. GDP
c. Resurgence of interest in European precision tools
d. Expectations of a rise in the dollar price of the euro
e. A sudden increase in anti- European sentiment.
Which of the following would be considered a component of government purchases?
a. Both d and e
b. All of the following
c. Welfare payments
d. Police salaries
e. Social security payments
In the long run, those who are hurt by the minimum wage are
Which of the following is a weakness in trying to get the wealthy to bear more of the
burden of increasing growth in a less developed country?
a. The wealthy do not have significant political power.
b. The wealthy can move their savings to other countries.
c. The wealthy do not have much money to tax.
d. The wealthy have large homes in their country and so are less likely to leave.
e. The wealthy have powerful businesses that they are unable to relocate.
As Reba consumes four slices of pizza, her total utility rises from 0 to 18, to 24, to 28,
and to 30, respectively. What is her marginal utility of the first slice of pizza?
In the long run, the Fed can change the inflation rate but not the unemployment rate.
The law of increasing opportunity cost is based on the idea that