The aggregate expenditures function (AE) is the total spending in an economy at a
given:
a. rate of interest.
b. level of disposable income.
c. level of autonomous investment.
d. price level.
SeveralitemsfromthefinancialstatementsofStandardTiresarelistedbelow.Usethefollowing
answerchoicestoidentifythetypeofaccountforeachitemlisted.Placeyouranswersinthespac
eprovided.
a. Assets
b. Liabilities
c. Revenues
d. Expenses
e. Owners’ equity Sale of tires
Supply-side economics calls for:
a. lower taxes on businesses and individuals.
b. regulatory reforms to increase productivity.
c. government subsidies to promote technological advance.
d. All of these.
Exhibit 8-14 Disposable income and consumption data Disposable income
(Y)Consumption
(C)
MPC
MPS
Saving
$5,000 $4,750
$6,000 $5,500
$7,000
In Exhibit 8-14, the MPC when Y increases from $5,000 to $6,000 is:
a. 0.20. .
b. 0.80.
c. 0.25
d. 0.75.
While waiting in line to buy one cheeseburger for $1.50 and a medium drink for $1.00,
Sally notices that she could get a value meal that contains both the cheeseburger and
medium drink and also a medium order of fries for $2.75. She thinks to herself, “Is it
worth the extra 25 cents to get the medium fries?” To an economist, Sally’s decision is
an example of:
a. marginal analysis.
b. basing decisions on total, rather than marginal, value.
c. an unintended consequence.
d. the fallacy of composition.
Exhibit 1A-5 Straight line
In Exhibit 1A-5, as X increases along the
horizontal axis, corresponding to points C-D on the line, the Y values decrease. The
relationship between the X and Y variables is:
a. direct.
b. inverse.
c. independent.
d. variable.
Which of the following can bring about a change in the quantity demanded?
a. Change in supply.
b. Change in quality.
c. Change in income.
d. Change in product price.
e. Change in taste.
Exhibit 12-3 Income for two persons NameIncome
Meredith $124,000
Hillary $ 45,000 In Exhibit 12-3, if the income tax system is currently proportional, we
know that:
a. Meredith would probably prefer a progressive income tax system while Hillary
would probably prefer a regressive income tax system.
b. Meredith and Hillary would both probably prefer a regressive income tax system.
c. Meredith and Hillary would both probably prefer a progressive income tax system.
d. Meredith would probably prefer a regressive income tax system while Hillary would
probably prefer a progressive income tax system.
e. Meredith would probably prefer a progressive income tax system while Hillary
would probably prefer a head tax.
Foreachstatementprovided,choosetheletteroftheappropriatetermfromthelistthateachstate
mentbestdescribes.Sometermsmaybeusedmorethanonce,whileothersarenotusedatall.
a. Capital stock
b. Asset
c. Owners’ equity
d. Time period
e. Dividends
f. Economic entity concept
g. Expense
h. Retained earnings
i. Cost principle
j. Creditor
k. Liability
l. Revenue
m. Going concern
n. Monetary unit
o. Corporation
The assumption that an entity is notin the process of liquidation and that it will continue
indefinitely.
On a Phillips curve diagram, a decrease in the rate of inflation, other things being equal,
is represented by a(n):
a. upward movement along the Phillips curve.
b. downward movement along the Phillips curve.
c. upward shift of the Phillips curve.
d. downward shift of the Phillips curve.
To help close an inflationary gap, the government could:
a. run budget deficits.
b. decrease taxes.
c. increase government spending.
d. run budget surpluses.
e. do nothing.
If the economy is experiencing demand-pull inflation, then the appropriate government
policy would be to shift the:
a. aggregate demand curve by using a tax increase coupled with spending cuts.
b. aggregate demand curve by using a tax increase coupled with more spending.
c. aggregate demand curve by using a tax cut coupled with spending cuts.
d. aggregate demand curve by using a tax cut coupled with more spending.
e. aggregate supply curve by using a tax cut coupled with spending cuts.
If Country A has an absolute advantage over Country B in the production of every
commodity:
a. mutual gains from trade between Country A and Country B would be impossible.
b. Country B would be able to gain from trade but not country A.
c. the joint output of the two countries could not be increased through specialization and
exchange.
d. mutual gains from trade would still be possible.
If the opportunity cost of producing cheese is higher in Greece than it is in Italy, then:
a. Greece should specialize in producing cheese.
b. Italy should specialize in producing cheese.
c. both Greece and Italy should produce cheese.
d. Greece gives up fewer goods to produce cheese than Italy does.
e. Italy has a better economy than Greece.
When the consumption of a good generates an external benefit:
a. the private benefit consumers receive from the good will be higher than the true
social benefit.
b. too much of the good will tend to be produced from the viewpoint of economic
efficiency.
c. the community generally suffers an exactly offsetting external cost from the
production of the good.
d. the market demand curve will understate the total benefits derived from consumption
of the good, and as a result, too little of it will be produced and consumed.
An outward shift of an economy’s production possibilities curve is caused by:
a. an increase in capital.
b. an increase in labor.
c. an advance in technology.
d. all of these.