Which of the following items is included when computing M1?
a. Checking accounting entries.
b. Currency in circulation.
c. All of the above.
d. None of the above.
The equilibrium level of real GDP is $5,000 billion, the full employment level of real
GDP is $6,000, and the marginal propensity to consume (MPC) is 0.90. Which of the
following statements is true?
a. A recessionary gap exists equal to $100 billion.
b. The full employment target could be reached if government increased its spending by
$100 billion.
c. Both of the above statements are true.
d. Neither of the above statements are true.
The account which records a nation’s foreign economic transactions is called the:
a. Trade Account.
b. T account.
c. Exchange Market.
d. Balance of Payments.
Which if the following is the best example of a public good?
a. Bread.
b. Fish in the ocean.
c. Scrambled satellite broadcasts.
d. National defense.
Suppose a market basket of goods and services costs $400 in the base year and the
consumer price index (CPI) is currently 125. This indicates the price of the market
basket of goods is now:
a. $275.
b. $425.
c. $500.
d. $525.
City streets, sewage systems, and police protection are all examples of:
a. public goods.
b. private goods.
c. exclusive goods.
d. rival goods.
e. consumer goods.
Microeconomics deals with the analysis of all the following questions except how:
a. the wages of carpenters are determined.
b. high did unemployment rise during the Great Depression.
c. does Ford decide how to price its cars.
d. does a college student decide how to spend her income.
e. do monopolies and competitive markets differ.
Exhibit 4-3 Supply and demand curves
The market shown in Exhibit 4-3 is initially in equilibrium at E4. Changes in market
conditions result in a new equilibrium at E3. This change is stated as a(n):
a. increase in supply and an increase in quantity demanded.
b. increase in supply and a decrease in demand.
c. decrease in supply and a decrease in quantity demanded.
d. increase in demand an increase in supply.
Which of the following best describes the idea of a political business cycle?
a. Politicians have a bias to cut taxes and increase government spending.
b. Special interests result in alternating federal deficits.
c. Politicians will use fiscal and monetary policy to cause output, real incomes, and
employment to be rising prior to elections.
d. Good intentions of politicians influence the business cycle.
The exchange rate is:
a. the rate at which goods will exchange for each other in the international market.
b. the number of units of one currency required in exchange for one unit of another
currency.
c. set by the International Trade Commission.
d. established by the ratio of the values of gold to silver.
e. set by each individual country.
Which of the following actions by the Fed would increase the money supply?
a. Increasing the required reserve ratio.
b. Selling government bonds in the open market.
c. Increasing the discount rate.
d. Reducing the required reserve ratio.
Exhibit 2-2 Production possibilities curve
In Exhibit 2-2, the slope of the production possibilities curve indicates that the
opportunity cost of:
a. coffee is constant.
b. coffee is increasing.
c. coffee is decreasing.
d. corn is increasing.
e. corn is decreasing,
Each point on the Phillips curve represents a combination of the:
a. consumption rate and the unemployment rate.
b. savings rate and the inflation rate.
c. interest rate and the savings rate.
d. inflation rate and the unemployment rate.
If a Japanese stereo priced at 1,000,000 yen can be purchased for $1,000, the exchange
rate is:
a. 1,000 yen per dollar.
b. 1,000 dollars per yen.
c. 0.001 dollars per yen.
d. none of these.
An economic model is:
a. a plastic scaled version of the economy.
b. a complete depiction of reality.
c. an abstraction from reality.
d. applicable to consumer behavior but not to producer behavior.
e. not an accepted tool of the economics profession.
Suppose seller X is willing to sell one good X for $5, a second good X for $10, a third
for $16, a fourth for $25, and the market price is $20. What is seller X’s producer
surplus?
a. $15
b. $20
c. $22
d. $29