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Which of the following is not a characteristic of capitalism?
a. Private ownership of resources.
b. Decentralized decision-making using markets.
c. Representative democracy.
d. Consumer sovereignty.
Exhibit 3-3 Demand curves
Assume that crackers and soup are complementary goods. Which of the graphs in
Exhibit 3-3 depicts the effect of a promotional discount that decreases the price of
crackers on the demand for soup?
a. Graph A.
b. Graph B.
c. Graph C.
d. Graph D.
Prior to the Great Depression, classical economists believed that a recessionary
downturn would be reversed by:
a. higher wages and prices.
b. lower wages and prices.
c. an expansionary monetary policy on the part of the Federal Reserve System.
d. an increase in government spending that would stimulate aggregate demand.
Exhibit 15-1 Balance sheet of First Iliad State Bank AssetsLiabilities
Required reserves $ 1,000,000 Demand deposits $10,000,000
Excess reserves 0
Loans $
In Exhibit 15-1, if the required reserve ratio is raised to 18 percent, then First Iliad State
will:
a. have to convert loans worth $800,000 to required reserves.
b. have to convert loans worth $200,000 to required reserves.
c. be able to make additional loans worth $800,000.
d. be able to make additional loans worth $200,000.
The velocity of money is the:
a. rate at which the price index for consumer goods rises.
b. multiple by which an increase in government expenditures will cause output to
expand.
c. average number of times a dollar is used to buy goods and services included in GDP.
d. number of times a dollar is taken out of the country during a year.
The change in saving divided by the change in disposable income is the:
a. propensity to save.
b. saving function.
c. average propensity to save.
d. extra propensity to save.
e. marginal propensity to save.
Which of the following is false?
a. The national debt's size decreased steadily after World War II.
b. The national debt increases in size whenever the federal government has a surplus
budget.
c. The size of the national debt currently is about the same size as it was during World
War II.
d. All of the above are true.
e. All of the above are false.
The transactions demand for holding money is when people hold money:
a. instead of near money.
b. to transact purchases they expect to make.
c. as insurance against unexpected expenses.
d. to speculate in the stock market.
e. to take advantage of changes in interest rates.
The Yankee Candle Company, in Hatfield, Massachusetts, makes thousands of scented
candles each day. The factory emits the odor of the candles it produces, some of which
smell quite nice. On days when they make strawberry candles the townspeople really
enjoy the smell. On days when they make potpourri scented candles, people close their
windows and don't go outside. What can we infer about the scented candle market?
a. b and c.
b. Strawberry candles are more expensive than is socially optimum.
c. Potpourri candles are priced too low to be socially optimum.
d. Candle production generates only negative externalities.
e. Candle production technologies are inefficient.
A price floor would be established in cases where the government believed the market
equilibrium price would:
a. result in a surplus.
b. be too high.
c. result in a shortage.
d. be too low.
e. yield excess profits.
Owners of corporations are called ____________________.
Intermediate goods are included and final goods are not included in calculating gross
domestic product.
Starting from equilibrium in the money market, suppose the money supply increases.
Other things being equal, this will cause an excess demand for money, leading people to
sell bonds.
Cost-push inflation is caused by a leftward shift of the aggregate demand curve.
Any item can successfully serve as money.
A preannounced contractionary money policy is more likely to create unemployment
when people have rational, rather than adaptive, expectations.
