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Investment is "crowded out" by an increase in government spending when
A) an increase in government spending causes output and prices to rise, which in turn
causes interest rates to rise.
B) an increase in government spending causes output and prices to fall, which in turn
causes interest rates to rise.
C) an increase in government spending causes output and prices to rise, which in turn
causes interest rates to fall.
D) an increase in government spending causes output and prices to fall, which in turn
causes interest rates to fall.
If the Federal Reserve conducts an open market purchase, the
A) interest rate will not change.
B) interest rate will increase.
C) interest rate will decrease.
D) money supply is decreased.
Suppose the public expects a 7 percent inflation rate, and both the money supply and
money demand grow at 7 percent a year. The Federal Reserve decides to keep the the
money growth rate to be 7 percent. In the short run, we expect that investment spending
by firms will ________ and consumer durable spending will ________.
A) increase; decrease
B) decrease; increase
C) increase; increase
D) None of the above; there will be no change in the level of investment spending by
firms and consumer durable spending by households.
Assume that butter and margarine are substitutes. When the price of butter increases:
A) the demand for margarine increases.
B) the demand for margarine decreases.
C) the supply of margarine increases.
D) the supply of margarine decreases.
Recall Application 1, "Money with Faces of Rodents," to answer the following
questions:
Based on what you learned from the Application, how would the money supply change
as more towns issue their own currency to spur the growth of local commerce.
A) The money supply would not change.
B) The money supply will increase.
C) The money supply would decrease.
D) The money supply will equal zero.
The Bank of Texas has $1 million in deposits and $200,000 in reserves. If excess
reserves are equal to $150,000, the required reserve ratio is:
A) 15%.
B) 10%.
C) 8%.
D) 5%.
Table 3.1
Consider two individuals, Jesse and April, who hand paint kites and snowboards. Table
3.1 shows how much of each good Jesse and April can paint in one hour. Jesse's
opportunity cost of painting one kite is painting
A) 1/12 of a snowboard.
B) 1/8 of a snowboard.
C) 1/3 of a snowboard.
D) 3 snowboards.
_______________________
Suppose:
C = 100 + .75 (y-T)
I = 200
G = 300
T = 300
_______________________
Table 11.5
Refer to Table 11.5. If both G and T increase by 100, equilibrium output will:
A) stay the same.
B) increase by 200.
C) increase by 100.
D) decrease by 100.
Table 11.3 Refer to Table 11.3. At an aggregate output level of $4,000 million, the
unplanned inventory change is:
A) 0.
B) $200 million.
C) -$200 million.
D) -$20 million.
The ________ states that goods that are easily tradable across two countries should sell
at the same price, expressed in a common currency.
A) price feedback effect
B) trade feedback effect
C) balance of trade effect
D) law of one price
In the circular flow diagram, the different payments made by firms to households are:
A) wages and salaries.
B) interest on borrowed money.
C) rent on office and factory buildings.
D) all of the above.
Chain-weighted price indices are constructed such that
A) prices in different economies can be directly compared with one another.
B) prices in different years can be directly compared with one another.
C) all years' levels of GDP are directly related to a base year level of GDP.
D) prices of one good can be directly compared with prices of other goods.
Refer to Figure 11.5. An increase in the level of investment is best illustrated by
diagram
A) A.
B) B.
C) C.
D) D.
Which of the following is an example of an investment, as described in Chapter 12 of
your textbook?
A) A firm builds a new plant.
B) A student attends college.
C) The government builds a dam to have a source of hydroelectric power.
D) all of the above
Recall Application 2, "Elections, Political Parties, and Voter Expectations," to answer
the following questions:
According to the application, economic growth is expected to be ________ when a
________ is president.
A) higher; Democrat
B) higher; Republican
C) lower; Democrat
D) higher; Libertarian
Table 11.3 Refer to Table 11.3 At an aggregate output level of $4,000 million, what will
change in order to bring the economy to equilibrium?
A) Output must decrease.
B) Investment must increase.
C) Inventories must decrease.
D) Consumption must increase.
If a bond was to pay off one year from now for $321 and the interest rate is 7 percent,
what is the price of the bond?
A) $147
B) $279
C) $300
D) $342
Recall the Application about the causes of oil price increases to answer the following
question(s). Economist Lutz Kilian examined the importance of supply disruptions to
the U.S. oil market by constructing measures of supply disruptions in oil producing
countries based on a detailed examination of prior trends in demand and specifications
in oil contracts.According to this Application, oil price increases may be caused by
A) increases in world demand.
B) increases in world supply.
C) increase in the U.S. supply of money.
D) beneficial supply shocks for the U.S. consumer.
If expectations regarding inflation change, an expansionary fiscal policy causes:
A) the long-run Phillips curve to shift.
B) the short-run Phillips curve to shift.
C) the short-run Phillips curve to remain constant.
D) a movement along the short-run Phillips curve.
