If the rate of inflation in a given time period turns out to be higher than lenders and
borrowers anticipated, then the effect will be:
a. no change in the distribution of wealth between lenders and borrowers.
b. a net gain in purchasing power for lenders relative to borrowers.
c. a redistribution of wealth from borrowers to lenders.
d. a redistribution of wealth from lenders to borrowers.
Exhibit 4-3 Supply and demand curves
Initially the market shown in Exhibit 4-3 is in equilibrium at P2, Q2 (E2). Changes in
market conditions result in a new equilibrium at P2, Q4 (E4). This change is stated as
a(n):
a. increase in supply and an increase in demand.
b. increase in supply and a decrease in demand.
c. decrease in demand and a decrease in supply.
d. increase in demand with supply held constant at S2.
Consider two people, Sandy Smith, who earns $25,000, and Gary Carver, who earns
$50,000. If the government has decided to tax everyone’s first $25,000 at 20 percent and
everyone’s second $25,000 at 40 percent, then Gary pays:
a. $10,000 in taxes and Sandy pays $5,000 in taxes.
b. $10,000 in taxes and Sandy pays $10,000 in taxes.
c. $15,000 in taxes and Sandy pays $5,000 in taxes.
d. $15,000 in taxes and Sandy pays $10,000 in taxes.
e. $17,000 in taxes and Sandy pays $5,000 in taxes.
Imagine that Odyssey National is a brand new bank, and that its required reserve ratio is
10 percent. If it accepts a $1,000 deposit, then its loan balance can increase by a
maximum of:
a. $0.
b. $90.
c. $100.
d. $900.
e. $910.
When the Fed purchases government securities, it:
a. increases banks’ reserves and makes possible an increase in the money supply.
b. decreases banks’ reserves and makes possible a decrease in the money supply.
c. automatically raises the discount rate.
d. uses discounting operations to influence margin requirements.
e. has no effect on either the money supply or the discount rate.
Which of the following is true of inflation?
a. It is an increase in the general price level of goods and services.
b. The purchasing power of money increases as the result of inflation.
c. Inflation is similar to interest payments on future money income, such as pensions
and receipts from outstanding loans.
d. Inflation has no effect on real income.
The crowding-out effect can be:
a. zero.
b. partial.
c. complete.
d. any of these.
Sun City Corporation’s endÂofÂyear balance sheet consisted of the following amounts:
What amount should Sun City report on its balance sheet for totalassets?
a. $100,000
b. $95,000
c. $165,000
d. $200,000
Providedbelowisalistofimportantusersofaccountinginformation.Belowthelistaredescripti
onsofamajorneedofeachofthevarioususers.Fillintheblankwiththeoneusergroupthatismost
likelytohavetheneeddescribedtotherightoftheblank.Someusergroupsmaybeusedmorethan
onceornotatall.
a. Stockholder
b. Company management
c. Supplier
d. Banker
e. Internal Revenue Service
f. Securities and Exchange Commission
g. Labor union The financial status of a company issuing securities to the public for the
first time.
In the circular flow model,
a. money flows from the firms to the households through the product market.
b. money flows from the households to the firms through the product market.
c. money flows from the households to the firms through the resource market.
d. money flows from the households to the firms through both the product market and
the resource market.
e. resources flow to the households from the firms through the product market.
Which of the following is included in personal income but not in national income?
a. Compensation for workers.
b. Proprietors’ income.
c. Corporate profits.
d. Social Security payments.
e. Rent.
When the Fed wishes to reduce the economy’s money supply, it:
a. lowers the discount rate.
b. lowers the required reserve ratio.
c. reduces the margin requirement.
d. sells some of its government securities.
e. prints more money.
The opportunity cost to a city for using local tax revenues to construct a new park is
the:
a. best alternative foregone by building the park.
b. dollar cost of constructing the new park.
c. dollar cost of the old park.
d. increased taxes necessary to pay for maintenance of the new park.
Efficient production means producing:
a. less than feasible output for a given amount of resources.
b. more than feasible output for a given amount of resources.
c. the maximum feasible output for a given amount of resources.
d. no more than what is needed.
e. in excess of what is needed.
Workers who may be between jobs are considered:
a. frictionally unemployed.
b. structurally unemployed.
c. cyclically unemployed.
d. unemployable.
e. discouraged workers.
When there is a positive externality associated with the watering of one’s lawn, the free
market results in:
a. not enough lawn watering.
b. too much lawn watering.
c. the socially optimal level of lawn watering.
d. people watering each other’s lawns.
e. government subsidies for lawn watering.
Dina is driving to work on an interstate highway at 90 MPH, well in excess of the legal
speed of 65 MPH. Sandy is also driving to work at the same time, going 85 MPH. A
state trooper pulls Dina over and gives her a speeding ticket. Sandy continues driving,
but if Dina had not been speeding, the trooper would have ticketed Sandy instead. In
terms of externalities, this story shows that:
a. Sandy’s actions gave Dina a positive externality.
b. Dina’s actions gave Sandy a positive externality.
c. Sandy’s actions gave Dina a negative externality.
d. Dina’s actions gave Sandy a negative externality.
e. Dina’s and Sandy’s actions did not create any externalities.
Economics could be defined as the study of scarcity.
Interpret what an increase in demand and an increase in supply mean. Discuss the
causes of an increase in demand and an increase in supply. How are increases in
demand and supply expressed graphically?
The “WIN” button approach to breaking a wage-price spiral was proposed by President
Ford to a joint session of Congress.
The private sector group with authority to set accounting standards is the
__________________________________________________.
Graphically express a direct and an inverse or negative relationship. What could cause a
shift in a line or curve expressing a relationship between two variables?
Assuming supply is held constant, an increase in demand for a product will cause an
increase in the equilibrium price and the amount bought and sold.
Deadweight loss results from a misallocation of resources.
The amount of government expenditures on a project or program should continue to
increase for as long as the marginal benefits exceed the marginal costs.
When we speak of the national debt, we refer to the federal government debt only.