In the aggregate expenditures model, if an economy operates below equilibrium GDP,
there will be:
a. unplanned inventory depletion.
b. unplanned inventory accumulated.
c. a decrease in GDP.
d. a decrease in employment.
Over a ten year period, the monthly charge for cellular phone service decreased from
$120 per month to $30 per month. At the same time, the number of subscribers
increased from less than 10 million to more than 75 million. Which of the following
provides the best explanation for these changes?
a. An increase in consumer income over this ten year period
b. A reduction in the price of residential phone service, a substitute for cellular phone
service
c. An increase in the wages of workers in the cellular phone industry
d. Technological improvements that reduced the cost of supplying cellular phone
service
An itemized account of a nation’s foreign economic transactions is its:
a. gross domestic product.
b. goods exports.
c. goods imports.
d. balance of payments.
e. foreign exchange reserves.
If loans are $69,000, excess reserves are $1,400, and checkable deposits are $80,000,
then the required reserve ratio must be:
a. 1.75 percent.
b. 12 percent.
c. 13.75 percent.
d. 17.5 percent.
e. 0.12 percent.
Personal income equals disposable personal income plus:
a. personal income taxes.
b. transfer payments.
c. dividend payments
d. personal savings.
Which of the following is a microeconomics topic?
a. A price of a new home.
b. The inflation rate.
c. The economy’s growth rate.
d. The unemployment rate.
e. Forecasts of a recession next year.
Exhibit 5-11 GDP data (billions of dollars) Personal consumption expenditures
$4,750
Exports 810
Government spending 1,400
Social Security taxes 600
Depreciation 450
Indirect business taxes 550
Imports 850
Gross private domestic investment 900
Corporate income taxes 200
Personal taxes 800
Corporate profits 50
Transfer payments 700
In Exhibit 5-11, and using the expenditures approach, gross domestic product (GDP)
equals:
a. $7,010 billion.
b. $10,360 billion.
c. $9,660 billion.
d. $7,860 billion.
e. $12,060 billion.
When the production possibilities curve is bowed out, resources are:
a. equally well-suited to production of both goods.
b. not being used efficiently.
c. not equally suited to the production of both types of goods.
d. increasing as more of one good is produced.
e. of an inferior quality.
In the vertical segment of the aggregate supply curve,
a. different levels of GDP correspond with high unemployment.
b. competition among producers for already-employed resources can succeed only in
lowering the economy’s price level.
c. full employment is achieved.
d. producers are able to hire more workers at lower wages.
e. increases in GDP are due solely to production gains.
Assume that a computer is a normal good. An increase in consumer income, other
things being equal, would:
a. cause an upward movement along the demand curve for computers.
b. cause a downward movement along the demand curve for computers.
c. shift the demand curve for computers to the left.
d. shift the demand curve for computers to the right.
Minimum wage legislation:
a. sets a price ceiling above the market-clearing price.
b. has no impact if the minimum wage is above the market-clearing price.
c. has the same impact in all labor markets.
d. creates unemployment when the minimum wage is above the equilibrium wage.
e. is opposed by organized labor.
If the Fed wishes to increase the money supply then it should:
a. increase the required reserve ratio.
b. increase the discount rate.
c. buy government securities on the open market.
d. do any of these.