An increase in government spending leads to a(n)
a. downward shift of the aggregate expenditure line and a leftward shift of the money
demand curve
b. upward shift of the aggregate expenditure line and a rightward shift of the money
demand curve
c. downward shift of the aggregate expenditure line and a rightward shift of the money
demand curve
d. upward shift of the aggregate expenditure line and a leftward shift of the money
demand curve
e. upward shift of the aggregate expenditure line but no shift of the money demand
curve
The demand curve for apples slopes downward
a. because supply and demand are equal in equilibrium
b. since producers supply more when consumers demand more
c. because people are assumed to be basically greedy
d. becausethe law of demand holds in the market for apples
e. because apples are preferred to all other goods
If an excise tax is imposed on restaurant meals,
a. fewer meals will be produced and sold
b. more meals will be produced and sold
c. the government’s tax revenue will fall
d. the market price of meals will decrease
e. restaurants will sell more meals, but at a lower price per meal
An increase in demand causes
a. a surplus
b. excess supply
c. an increase in supply
d. an increase in equilibrium price and equilibrium quantity
e. an improvement in technology
The terms “long-run view” and “classical view” can be used interchangeably.
The exchange rate is
a. the rate at which one currency is traded for another
b. always constant
c. the tax a foreign nation imposes to change its currency into dollars
d. irrelevant to those who do not travel to foreign countries
e. controlled by the Federal Reserve
Which of the following would most likely cause measured GDP to overstate the actual
output produced in a year?
a. Increased production in the underground economy
b. A decline in the quality of goods and services produced
c. Increased production for home use (non-market production)
d. A decline in population
e. Increased purchases of market produced services
The CPI includes the prices of
a. goods and services purchased by American consumers
b. goods and services purchased by all consumers (both foreign and domestic)
c. goods and services purchased by the government
d. investment goods purchased by businesses
e. exports purchased by foreign buyers
In the classical model,
a. markets do not automatically clear.
b. business demand for loanable fund exceeds business planned investment spending.
c. there is no government sector, only private consumption and planned investment.
d. businesses engage in interest-free borrowing.
e. the government’s demand for funds is vertical.
Which of the following would not be considered money in the hands of the public?
a. cash hidden under a mattress
b. a bank’s vault cash
c. cash in the cash register of a hardware store
d. cash stored in the hardware store’s vault
e. cash in your wallet
If Alicia limits the range of her productive activities rather than trying to be
self-sufficient, she is engaging in
a. specialization
b. exchange
c. absolute advantage
d. increasing opportunity costs
e. reducing her standard of living
Suppose the MPC is 0.85. If government purchases increase by $10 billion and net
taxes fall by $10 billion, equilibrium output will
a. fall by $10 billion
b. increase by $10 billion
c. increase by $20 billion
d. increase by $66.7 billion
e. increase by $123.3 billion
Under what condition can the U.S. government continue to pay interest on a rising debt
without eventually needing to increase the average tax rate?
a. If the national debt grows at the same rate as nominal GDP
b. If the nominal interest on the national debt grows faster than nominal GDP
c. If the total interest payments on the national debt grow faster than nominal GDP
d. If the national debt grows faster than nominal GDP
e. If the real interest on the national debt grows faster than real GDP.
The money market reaches equilibrium when
a. money demand equals money supply.
b. bond prices reach zero.
c. the quantity of money demanded equals the quantity of money supplied.
d. interest rates reach zero.
e. the growth of the money supply equals the rate of growth of the budget deficit.
Which of the following would be counted in U.S. GDP?
a. The salary of an American professor teaching in England
b. The value of a used U.S.-produced car purchased in the U.S.
c. The value of a new U.S.-produced car purchased by a French citizen
d. The value of a new French-produced car purchased by a U.S. citizen within in the
U.S.
e. The value of a General Electric corporate bond bought by a Japanese citizen
The decline in output at the onset of the Great Depression was caused primarily by
a. a positive demand shock
b. a negative demand shock
c. a positive supply shock
d. a negative supply shock
e. simultaneous shocks to supply and demand
Because the Fed increased the money supply after the recession in the early 1990s, the
a. AD curve shifted to the left
b. economy returned to equilibrium GDP at a price level that was lower than the
original price level
c. price level continued to increase after the recession ended
d. price level fell back to its original level
e. long-run equilibrium GDP decreased
One of the concepts that is illustrated by a downward sloping production possibilities
frontier is that
a. technology must change in order to produce more of a particular good
b. to produce more of one good, some of the alternative goods must be given up
c. opportunity cost generally declines as more of a good is produced
d. specialization leads to gains in overall utility for society
e. opportunity cost generally does not vary as more of a good is produced
If Bob has an absolute advantage over Pete in both typing and woodworking, then Bob
also has a comparative advantage over Pete in both activities.
