If a bank has assets of $100 million, according to practice, its liabilities should NOT
exceed:
A) $7 million.
B) $70 million.
C) $93 million.
D) $107 million.
Look at the table The Production Possibilities for Tractors and Crude Oil. In the United
States the opportunity cost of producing 40 tractors is _____ barrels of crude oil.
A) 80,000
B) 60,000
C) 40,000
D) 20,000
If the marginal propensity to consume is 0.75 and government purchases of goods and
services decrease by $30 billion, real GDP will:
A) increase by $30 billion.
B) increase by $22.5 billion.
C) decrease by $30 billion.
D) decrease by $120 billion.
The reserve ratio is the:
A) bank’s holdings of gold.
B) government’s holdings of gold at Fort Knox.
C) fraction of deposits that banks hold in their vaults plus their deposits at the Federal
Reserve.
D) ratio of gold to the paper money in the economy.
Look at the table Kenya’s Economy in 2010. During 2010, assuming no changes in the
price level, aggregate output per capita in Kenya grew at a rate of:
A) 0.6%.
B) 2.6%.
C) 5.2%.
D) 7.8%.
Figure: Cold Drinks Sold and Temperature
Look at the figure Cold Drinks Sold and Temperature. If we move from point B to point
C in the figure, the outside temperature has ______ degrees and the number of cold
drinks sold has ______.
A) decreased by 30; decreased by 30
B) increased by 20; increased by 20
C) increased by 30; increased by 30
D) increased by 40; increased by 40
Figure: The Minimum Wage
Look at the figure The Minimum
Wage. By how much does the quantity of labor supplied rise when the government
imposes a binding minimum wage of P3?
A) Q4 ” Q1
B) Q3 ” Q2
C) Q2 ” Q1
D) Q4 ” Q2
Other things being equal, investment spending _____ when _____.
A) decreases; firms expect sales to fall
B) increases; firms have excessive production capacity
C) increases; the rate of growth of real GDP is low
D) decreases; the obsolete or worn out physical capital increases
If the economy is at potential output and the Fed increases the money supply, in the
long run the price level will likely increase.
A) True
B) False
A decrease in the price of a good will result in:
A) an increase in demand.
B) an increase in supply.
C) an increase in the quantity demanded.
D) more being supplied.
All of the following factors will shift the money demand curve EXCEPT:
A) changes in inflation.
B) changes in the real GDP.
C) changes in the aggregate price level.
D) changes in the interest rate.
A very low rate of inflation during a recession can lead to:
A) a liquidity trap, which makes monetary policy ineffective.
B) a liquidity trap, which makes monetary policy effective.
C) government budget deficits.
D) government budget surpluses.
Net capital inflow equals:
A) national savings.
B) imports minus exports.
C) consumption.
D) consumption plus government spending.
The unemployment rate is the:
A) percent of the labor force that is unemployed.
B) number of people unemployed.
C) the labor force minus the number of people unemployed.
D) average length of time someone is unemployed.
Vanessa tells people she is consuming more now and probably will continue to do so for
some time, but she believes her consumption will smooth out over her lifetime.
Vanessa’s consumption pattern mirrors the _____:
A) multiplier hypothesis.
B) life-cycle income hypothesis.
C) relative income hypothesis.
D) accelerator principle.
The World Trade Organization:
A) is the primary member of the North American Free Trade Agreement.
B) resolves disputes between member nations arising from alleged violations of
previous agreements dealing with international trade.
C) is a world government with its own army.
D) lends money to developing countries.
Cyclical unemployment is a result of recessions and economic downturns and is not
considered a part of the natural rate of unemployment.
A) True
B) False
Keynesians argue that low levels of spending:
A) are irrelevant.
B) can lead to prolonged recessions.
C) are not helped by monetary or fiscal policy efforts.
D) are evident only during expansions.
All assets that are included in M1 are also included in M2.
A) True
B) False
The Republic of Livonia has an adult population of 100 million; 60% of Livonia’s
population is employed, and 10% of the people are unemployed. The labor force
participation rate in Livonia is:
A) 70%.
B) 60%.
C) 7%.
D) 10%.
The balance between spending flowing into a country from other countries and
spending flowing out of that country to other countries is the:
A) singular account.
B) euro”dollar account.
C) universal exchange account.
D) balance of payments.
Greece’s economy accounts for _____ of European GDP.
A) less than 3%
B) approximately 10%
C) approximately 20%
D) almost 30%
Look at the table market Basket of School Supplies. It shows the prices of three
common school supplies in 2010 and 2011 and the quantities of each school supply that
consumers bought in 2010, the base year. A school supply index for 2011 would be:
A) 81.8,
B) 100,
C) 122.2,
D) 124,
Labor productivity growth can be attributed to:
A) improvement in technology.
B) a decline in university attendance.
C) an increase in population growth.
D) a decline in the physical capital per worker.
Figure: AD”ASModel I
Look at the figure AD”AS Model I. If the economy is at point X, nominal wages _____,
and the _____ curve shifts _____ until the economy reaches long-run equilibrium.
A) fall; aggregate demand; left
B) rise; aggregate demand; right
C) fall; short-run aggregate supply; right
D) fall; short-run aggregate supply; left
A bank’s capital is the:
A) sum of its total assets and total liabilities.
B) difference between its total assets and its total liabilities.
C) difference between its total assets and its total required reserves.
D) sum of its liabilities.
Increases in total output realized when individuals specialize in particular tasks and
trade are known as:
A) the gains from trade.
B) the profits obtained from sales of a good or service.
C) marginal analysis.
D) a trade-off.
When future disposable income rises, current consumption:
A) falls.
B) rises.
C) is unaffected.
D) is autonomous.
In the circular-flow diagram, firms:
A) demand goods.
B) demand services.
C) supply resources.
D) demand resources.
Grades are low in class and your professor makes available a 10-point extra credit
assignment. Most of the students turn in the assignment. This statement best represents
this economic concept:
A) The real cost of something is what you must give up to get it.
B) “How much” is a decision at the margin.
C) People usually exploit opportunities to make themselves better off.
D) There are gains from trade.
If the multiplier is 4 and autonomous government spending decreases by $100 billion,
real GDP will:
A) increase by $400 billion.
B) decrease by $400 billion.
C) increase by $100 billion.
D) increase by $25 billion.
If the economy is at potential output and the Fed increases the money supply, in the
LONG run real GDP will likely:
A) fluctuate randomly.
B) remain the same.
C) decrease.
D) increase.