In the aggregate expenditures model, if an economy operates above equilibrium GDP,
there will be:
a. unplanned inventory accumulation.
b. a decrease in GDP.
c. a decrease in employment.
d. all of the above.
Which of the following is a correct characterization of socialism?
a. Tradition answers the basic economic questions.
b. Markets are used exclusively to answer the basic economic questions.
c. Central planning is seldom used to answer the basic economic questions.
d. Government ownership of many resources and centralized decision-making answers
the basic economic questions.
A balanced budget is present when:
a. the economy is at full employment.
b. the actual level of aggregate spending equals the planned level of spending.
c. public sector spending equals private sector spending.
d. government revenues equal government expenditures.
The school of economic thought which argues that through tax reductions, and
deregulation, government creates the proper incentives for the private sector to increase
aggregate supply is known as the:
a. rational expectations school.
b. neo-Keynesian school.
c. supply-side school.
d. new classical school.
e. classical school.
People are forced to make choices because of:
a. unlimited wants and unlimited resources.
b. limited wants and unlimited resources.
c. unlimited wants and limited resources.
d. limited wants and limited resources.
e. irrational wants and limited resources.
Exhibit 8-10 Consumption function
In Exhibit 8-10, the shift from C to C’ could be caused by a(n):
a. increase in disposable income.
b. expectation of inflation.
c. increase in interest rates.
d. increase in the level of saving.
e. decrease in household wealth.
Which statement summarizes the income earned and the dividends paid?
a. Statement of cash flows
b. Statement of retained earnings
c. Balance sheet
d. Income statement
Exhibit 1A-9 Multi-curve graph
Exhibit 1A-9 represents a three-variable relationship. As the annual income of
consumers falls from $50,000 (line A) to $30,000 (line B), the result is a:
a. rightward movement along each curve.
b. leftward movement along each curve,.
c. leftward shift in curve A to curve B.
d. rightward shift in curve A to curve B.
If real interest rates in the United States are higher than those of our trading partners,
what will tend to happen to the foreign exchange value of the dollar and the U.S.
current account deficit or surplus?
a. The dollar will depreciate; the current account will move toward a deficit.
b. The dollar will depreciate; the current account will move toward a surplus.
c. The dollar will appreciate; the current account will move toward a deficit.
d. The dollar will appreciate; the current account will move toward a surplus.
The statement, “John buys more of good X as his income increases, Ceteris paribus,”
means:
a. John’s income is being held constant.
b. John’s purchases of good X are being held constant.
c. John’s income and purchases of this good are being held constant.
d. the price of this good is being allowed to change.
If quantity demanded is greater than quantity supplied, then according to the market
process:
a. an excess supply exists.
b. the market is in equilibrium.
c. the price will rise.
d. the supply curve must be vertical.
e. there will be no tendency for the situation to change.
A bank’s required reserves are either held as vault cash or:
a. used to purchase Treasury bonds.
b. deposited with the Fed.
c. invested in the stock market.
d. loaned out to other commercial banks.
Discuss the determinants of a nation’s exchange rate value for its currency in foreign
exchange markets. What happens to a nation’s balance of trade if the nation’s currency
appreciates? Why?
If the money supply increases this will cause the interest rate to rise, investment to fall
and GDP to fall.
Total consumer surplus is measured by the total area under the market demand curve
and below the equilibrium price.
The consumer price index (CPI) includes only a market basket of goods and services
purchased by the typical urban consumer.
Unlike the GDP deflator, the CPI does not consider goods and services purchased by
business and government.
In a market without government interference, the price is free to move the equilibrium.
Since the 1950s, total expenditures in the United States nearly tripled to about 60
percent of GDP.
The Phillips curve represents a direct relationship between the inflation rate and the
unemployment rate.
Rational expectations theory is the concept that only unanticipated or surprise policies
can influence inflation.
In economics, the term ‘shortage” means that the quantity demanded is greater than the
quantity supplied at the existing price.