GDP is:
A) a measure of all spending in the economy on foreign and domestic goods and
services.
B) the total market value of all final goods and services produced within a country in a
given year.
C) the value of all monetary transactions within a country in a given year.
D) all of the above.
A table that shows the price of a product and the quantity of that product that a seller is
willing to sell is called the:
A) supply schedule.
B) supply curve.
C) demand schedule.
D) demand curve.
Suppose the overall MPC is 0.75 and the marginal propensity to import is 0.25. A $4
billion increase in U.S. exports will lead to a ________ increase in GDP.
A) $6 billion
B) $8 billion
C) $12 billion
D) $16 billion
Figure 19.2
Referring to Figure 19.2, the effect of a decrease in U.S. interest rates is represented by
a movement from point
A) d to a.
B) c to .
C) c to d.
D) to c.
A currency system in which governments try to keep constant the values of their
currencies against another is called a ________ exchange rate system.
A) fixed
B) stable
C) consistent
D) flexible
Which component of federal spending is included in GDP?
A) net exports
B) transfer payments
C) government purchases
D) capital supply
Say’s Law is a doctrine which states
A) wages and prices rise together.
B) unemployment and prices self-adjust.
C) investment and prices increase together.
D) supply creates its own demand.
An increase in the price level causes an increase in money demand because
A) people need less money to purchase the same level of goods and services.
B) people have unlimited wants.
C) people need more money to purchase the same level of goods and services.
D) changes in the price level have no effect on money demand.
A good for which demand decreases when income increases is known as a(n) ________
good.
A) normal
B) inferior
C) complementary
D) substitute
Which of the following is a problem with the price system that can lead to a breakdown
in the coordination of economic activity?
A) The price system works silently in the background.
B) Prices can be slow to adjust.
C) Prices may be flexible.
D) all of the above
Which of the following is an example of scarcity?
A) If you choose to play video games you will not have as much time for exercise.
B) If a city uses an acre of land to build a park there will be less land for houses.
C) If I decide to buy a new car I may not have enough money to go away on vacation
this year.
D) All of the above are examples of scarcity.
Nobel laureate Franco Modigliani found that decreases in wealth cause:
A) increases in autonomous consumption.
B) decreases in autonomous consumption.
C) increases in the marginal propensity to consume.
D) decreases in the marginal propensity to consume.
If the equilibrium price of a good decreases and the equilibrium quantity of the good
decreases, we can conclude that
A) demand increased.
B) demand decreased.
C) supply increased.
D) supply decreased.
Recall Application 2, “Law of Supply and Woolympics,” to answer the following
questions:
According to the Application, which of the following is the result of the falling prices of
wool worldwide?
A) lower demand for wool.
B) higher demand for synthetic fibers.
C) higher demand for wool.
D) lower quantity supplied of wool.
If the dollar depreciates against the British pound, U.S. goods sold in ________ would
become less expensive and British goods sold in ________ would become more
expensive.
A) the United States; the United States
B) the United States; Great Britain
C) Great Britain; Great Britain
D) Great Britain; the United States
Table 5.4
Refer to Table 5.4. Suppose this economy produces only the two goods X and Y. If year
1 is the base year, Real GDP in year 3 is:
A) $296.
B) $328.
C) $374.
D) $404.
The phenomenon where private spending increases after a decrease in government
spending is known as:
A) crowding in.
B) crowding out.
C) Ricardian equivalence.
D) income effect.