The AD curve is derived by adding up demand curves for all goods and services.
If inflation is higher than anticipated and benefits are not indexed, which group loses
purchasing power?
a. Borrowers and lenders
b. Lenders and retirees
c. Borrowers and retirees
d. Only borrowers
e. Only lenders
An assumption that makes an economic model simpler without affecting its conclusions
in important ways is
a. an indication of a positive assumption
b. an efficient assumption
c. useful in disguising the valid conclusions
d. a simplifying assumption
e. a critical assumption
Which of the following is an example of a stock variable?
a. The amount of cereal in a person’s pantry
b. The amount of cereal a person buys each week
c. The amount of cereal a child consumes each month
d. The amount of cereal produced each day
e. None of these are stock variables
What is the relationship between total taxes and net taxes?
a. total taxes = net taxes / transfer payments
b. net taxes = total taxes + local taxes
c. net taxes = transfer payments / total taxes
d. total taxes = net taxes – transfer payments
e. total taxes = net taxes + transfer payments
The largest component of GDP is
a. tax revenue
b. government purchases of goods and services
c. the nation’s capital stock
d. private investment spending
e. private consumption expenditures
Suppose that the Council of Economic Advisers tells the President that “the
unemployment rate is 4 percent.” The President responds, “That rate is still too high.”
The President’s statement is
a. a normative statement
b. a positive statement
c. empirically verifiable by checking economic data
d. an indisputable statistical fact
e. an incorrect positive statement
In the short-run macro model, rising GDP and a falling interest rate are most likely to
be the result of a(n)
a. increase in the money supply
b. decrease in the money supply
c. increase in government purchases
d. decrease in government purchases
e. decrease in taxes
If the Federal Reserve sells bonds, the required reserve ratio is 0.25 and the money
supply decreases by $10,000, how did the Fed accomplish this change?
a. The Fed sold $10,000 in bonds.
b. The Fed sold $7, 500 in bonds.
c. The Fed sold $2,500 in bonds.
d. The Fed sold $7,518 in bonds.
e. The Fed sold $40,000 in bonds.
Suppose there are no firms, only the government and households. What would the total
demand for funds curve look like in such a world?
a. Downward sloping
b. Perfectly horizontal
c. Upward sloping
d. There would be no such curve
e. Perfectly vertical
Refer to Figure 17-1. Assume the equilibrium exchange rate is $0.008 per yen at point
A. If U.S. consumers decide to purchase more automobiles from Japan, then
a. nothing will happen
b. the supply curve will shift to S’ and the demand curve will shift to D’
c. the supply curve will shift to S’
d. the exchange will rise to $0.012 per yen
e. exchange rate will return to $0.008 as soon as the market adjusts.
Referring to Figure 2-13, if you had to choose how to allocated $5 million and your
objective was to save the most lives, you would
Figure 2-13
Total Lives Saved
a. allocate all $5 million to Procedure 1
b. allocate all $5 million to Procedure 2
c. allocate $1 million to Procedure 1 and $4 million to Procedure 2
d. allocate $2 million to Procedure 1 and $3 million to Procedure 2
e. allocate $3 million to Procedure 1 and $2 million to Procedure 2
People and organizations have to make choices about how to allocate time and money
because
a. government requires it
b. corporations control our lives
c. time and money are both scarce
d. religious values conflict with economics
e. there are unlimited resources
Recessions typically last longer than expansions.
Which of the following is a reason why the labor demand curve would shift rightward?
a. A decrease in the amount of capital equipment
b. An increase in educational attainment of the population
c. A shift to earlier retirement
d. An increase in population
e. An increase in the number of two-family households
Suppose that in 2009, private investment spending was $500 billion, government
investment was $300 billion, and depreciation was $250 billion. How much did the
capital stock increase in 2009 (assume there were no other changes that affect the
capital stock)?
a. $300 billion
b. $500 billion
c. $550 billion
d. $800 billion
e. $1.05 trillion
The vertical aggregate supply curve is consistent with
a. the classical model
b. the short run macro model
c. a typical firm’s supply curve
d. a positive demand shock
e. a negative demand shock
If the demand for money decreases, a constant interest rate policy requires the Fed to
a. consult with leaders in the financial markets to see whether it should introduce credit
controls
b. watch to see whether the investment spending decreases
c. move quickly to prevent a recession
d. decrease the supply of money
e. decrease the interest rate.
Commercial banks can increase the money supply by
a. accepting demand deposits
b. loaning out required reserves
c. loaning out excess reserves
d. selling bonds to the public
e. buying bonds from the Fed
As of 2009, M2 had a value of more than ______ dollars.
a. $8 trillion.
b. $1 trillion.
c. $5 trillion.
d. $3 trillion.
e. $14 trillion.