To calculate GDP using the income approach, add:
a. indirect business taxes and Social Security taxes.
b. capital depreciation and Social Security taxes.
c. indirect business taxes and personal taxes.
d. indirect business taxes and depreciation.
e. compensation of employees, rents, profits, net interest, indirect business taxes, and
depreciation.
Any point inside the production possibility curve is:
a. efficient.
b. nonfeasible.
c. inefficient.
d. optimal.
While the classicists believed that both velocity and output are stable, Keynesians
believe:
a. velocity is stable and output is variable.
b. velocity and output are both variable.
c. output is stable and velocity is variable
d. the same as the classical economists that both output and velocity are stable
e. at low levels of income both velocity and output are stable, but at high levels of
income velocity becomes variable.
Assume that the real rate of interest is 5 percent and a lender charges a nominal interest
rate of 15 percent. If a borrower expects that the rate of inflation next year will be 10
percent and the actual rate of inflation next year is 10 percent,
a. the lender benefits from inflation, while the borrower loses from inflation.
b. the borrower benefits from inflation, while the lender loses from inflation.
c. neither the borrower nor the lender benefits from inflation.
d. both the borrower and the lender lose from inflation.
The WTO was:
a. formed shortly after World War II.
b. authorized in the American Constitution.
c. formed in 1995.
d. formed in 1876.
e. formed to unify the European continent.
Producer surplus measures the value between the actual selling price and the:
a. price sellers are willing to sell the product.
b. deadweight loss price.
c. lowest price sellers are willing to sell the product.
d. profit-maximization price.
The statement that Computech’s profits totaled $500 million last year represents the use
of money as a:
a. medium of exchange.
b. store of value.
c. unit of account.
d. means of coincidence.
Unemployment compensation is an example of a(n):
a. discretionary stabilizer.
b. countercyclical stabilizer.
c. procyclical stabilizer.
d. seasonal stabilizer.
e. automatic stabilizer.
Exhibit 8-13 Consumption function
In Exhibit 8-13, which of the following
could cause the shift from C1 to C2?
a. An increase in disposable income.
b. A decrease in disposable income.
c. Legislation tightening credit availability.
d. Legislation lowering tax rates.
e. Lower capacity utilization rates.
Which of the following would be counted as a final good for inclusion in GDP?
a. A piece of glass bought this year by a consumer to fix a broken window.
b. A sheet of glass produced this year by Ford for windows in a new car.
c. A tire produced this year and sold to a car maker for a new car sold this year.
d. None of these would be counted in GDP.
The most plausible reason why changes in the price of cotton can cause shifts in the
supply curve for tobacco is:
a. cigarette smokers often wear cotton shirts.
b. when incomes rise, people consume more cotton and tobacco.
c. firms can switch from growing tobacco to cotton and vice versa.
d. tobacco is an input in the production of cotton.
e. cotton and tobacco are unrelated markets in all ways.
The possibility of a free rider exists:
a. in the presence of external costs and benefits.
b. only in the presence of external costs.
c. only in the presence of external benefits.
d. only in the presence of internal costs.
e. only in the presence of a government-produced good.
If the market price is below the equilibrium price, then:
a. a surplus of product will result.
b. the quantity supplied will exceed the quantity demanded.
c. the market supply curve will shift to the right.
d. the quantity demanded will exceed the quantity supplied.
e. the market demand curve will shift to the left.
In economics, the term marginal refers to:
a. the change or difference from a current situation.
b. man-made resources as opposed to natural resources.
c. the satisfaction a consumer receives from a good.
d. holding everything else constant in the analysis.
The required reserve ratio is:
a. the minimum amount of reserves the Fed requires a bank to hold.
b. the interest rate that the Fed charges banks who borrow from it.
c. the interest rate on loans made by banks to other banks.
d. the maximum percentage of the cost of a stock that can be borrowed from a bank,
with the stock offered as collateral.
e. an appeal by the Fed to banks, asking for voluntary compliance with the Fed’s
wishes.