When the Fed buys government securities, it:
a. lowers the cost of borrowing from the Fed, encouraging banks to make loans to the
general public.
b. raises the cost of borrowing from the Fed, discouraging banks from making loans to
the general public.
c. increases the amount of excess reserves that banks hold, encouraging them to make
loans to the general public.
d. increases the amount of excess reserves that banks hold, discouraging them from
making loans to the general public.
e. decreases the amount of excess reserves that banks hold, discouraging them from
making loans to the general public.
Suppose Sam buys a good for $100 at a yard sale. If consumer surplus from the sale is
$75, Sam would have been willing to pay:
a. $100.
b. $175.
c. $25.
d. equal to the deadweight loss.
Exhibit 16A-1 Policy Alternatives
Assume that the economy depicted in Panel (a) of Exhibit 16A-1 is in short-run
equilibrium where AD equals SRAS1. If the economy is left to correct itself according
to classical theory:
a. wages will fall as long as real GDP is above Y.
b. lower wages will result in a shift from SRAS1 to SRAS2.
c. long-run equilibrium will be established at Y and P3.
d. all of these will take place.
Which of the following would eliminate scarcity as an economic problem?
a. Moderation of people’s competitive instincts.
b. Discovery of sufficiently large new energy reserves.
c. Resumption of steady productivity growth.
d. None of these.
Which of the following will most likely occur during the recovery phase of a business
cycle?
a. Real GDP rises, and unemployment falls.
b. Real GDP declines, and inflation rises.
c. Interest rates rise, and the number of business failures rise.
d. Inflation rises, and employment falls.
The M1 money supply is defined to be the sum of currency, traveler’s checks, and:
a. checkable deposits.
b. Treasury bonds.
c. savings accounts.
d. large time deposits.
Voters may choose to remain uninformed about an issue because of:
a. the special-interest effect.
b. rational ignorance.
c. bureaucratic inefficiency.
d. the shortsightedness effect.
The marginal propensity to save (MPS) is computed as the change in:
a. savings divided by the change in saving.
b. savings divided by the change in disposable personal income.
c. saving divided by the change in GDP.
d. None of these.
Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss
As shown in Exhibit 3A-1, if the quantity supplied is 2 million pounds of ground beef
per year, the result is:
a. deadweight loss.
b. inefficiency.
c. underproduction.
d. all of the above are true.
e. none of the above are true.
Which of the following assets is the most liquid?
a. Money market mutual fund shares.
b. Certificates of deposit.
c. Dollars.
d. Passbook savings deposits.
A direct relationship is expressed graphically as a:
a. positively sloped line or curve.
b. negatively sloped line or curve. c. horizontal line.
d. vertical line.
If the federal government runs a budget deficit, but the budget deficit as a percent of
GDP is less than the growth rate of real output, the:
a. national debt will decrease as a share of GDP.
b. national debt will remain a constant share of GDP.
c. national debt will increase as a share of GDP.
d. size of the national debt (in dollar value) will decline.
Macroeconomics studies economywide issues like inflation and unemployment.
The Federal Funds Committee executes the purchases and sales of government
securities decisions of the Federal Reserve.
According to the public choice theory, voters who choose to remain uninformed about
the issues are behaving irrationally.
A downward-sloping straight line exhibits a direct relationship between two variables.
An increase in the interest rate will stimulate firms’ investment spending.
A country’s imports of goods minus its exports of goods is reported in the goods
balance.
The civilian labor force includes only the employed.
Canyon Corporation
The accountant for the Canyon Corporation prepared the following list from the
company’s accounting records for the year ended December 31, 2014:
Read the information for Canyon Corporation. Using good form, prepare an income
statement for Canyon Corporation.
