If consumption is $25,000 when income is $26,000, and consumption increases to
$25,900 when income increases to $28,000, the marginal propensity to consume is:
A) 0.59.
B) 0.65.
C) 0.55.
D) 0.45.
Most econometric models predict that an interest rate cut will take at least ________
before most of its effects are felt.
A) 2 years
B) 5 years
C) 3 quarters
D) 5 months
In the event of excess supply in the coffee market
A) the price of coffee will increase.
B) the price of coffee will decrease.
C) the supply of coffee will decrease (supply will shift to the left) to meet the demand.
D) the demand for coffee will increase (demand will shift to the right) to meet the
supply.
If the marginal propensity to consume is 0.2, the value of the multiplier is:
A) 5.
B) 1.25.
C) 2.
D) 0.8.
When economists construct economic models:
A) all but the essential features of the environment are eliminated.
B) all the essential features of the environment are eliminated.
C) only mathematical equations are used.
D) every detail found in reality must be included.
Recall the Application about the number of homeowners in the year 2012 who owed
more on their homes than their homes were worth to answer the following question(s).
To assist homeowners who are behind on their payments and may eventually lose their
homes to foreclosure, many in Congress have advocated for reduction on the amount of
money they actually owe€or principal reduction. The hope is that with a reduction in
the amount they owed they would start making timely payments on their mortgages and
avoid a messy default.According to this Application, for approximately 12 million
homeowners in 2012, the amount owed on mortgages was higher than the actual value
of the homes. These homeowners used borrowed funds to purchase their homes, a
practice known as
A) securitization.
B) leverage.
C) liquidity.
D) acceleration.
The U.S. saving rate is
A) higher than that of most major countries.
B) low.
C) rapidly increasing.
D) negative.
Table 3.1
Table 3.1 illustrates Willy and Blythe’s hourly production for apples and carrots. From
the table, we can conclude that:
A) Willy has a comparative advantage in producing apples but not carrots.
B) Willy has a comparative advantage in producing carrots but not apples.
C) Willy has a comparative advantage in producing both goods.
D) Willy does not have a comparative advantage in producing either good.
The decrease in investment caused by an increase in government borrowing is called:
A) the reshuffle effect.
B) Ricardian equivalence.
C) monetizing the debt.
D) crowding out.
The example about London’s congestion problem illustrates which of the following
economic ways of thinking?
A) isolate variables€ceteris paribus
B) use of assumptions to simplify
C) thinking at the margin
D) all of the above
There are ________ Federal Reserve Banks located in different parts of the United
States.
A) 10
B) 12
C) 15
D) 50
One efficient solution to congestion is to:
A) impose a congestion tax on drivers who use the road during the rush hour.
B) prevent cars from using the roads during the rush hour.
C) give subsidies to drivers who use the road during the rush hour.
D) lower gasoline taxes.
Recall Application 7, “Lack of Property Rights Hinders Growth in Peru,” to answer the
following questions:
According to the application, the lack of clear ownership of land prevents development
because:
A) owners of land are more willing to make long term investments on the land that is
not clearly theirs.
B) owners of the land cannot use the land as collateral when borrowing.
C) land without clear property rights less more valuable.
D) land without clear property rights are harder for the government to tax.
Assume that the short-run AS is upward sloping. If the government chooses to increase
government expenditure or to decrease taxes, according to the Aggregate Supply –
Aggregate Demand model:
A) the price level will fall and GDP will increase.
B) the price level will rise and GDP will increase.
C) the price level will fall and GDP will decrease.
D) the price level will rise and GDP will decrease.
Which of the following will not cause the price level to increase in the long run?
A) a decrease in the money supply
B) a decrease in income taxes
C) an increase in government spending
D) a decrease in the interest rates
Which of the following causes a movement along the aggregate demand curve?
A) a fall in wages
B) an increase in the price level
C) an increase in government spending
D) an increase in the money supply
In practice, increases in government spending in an open economy can crowd out
A) consumption.
B) investment.
C) net exports.
D) all of the above
The application shows that high inflation results in fewer years to pay back student
loans because:
A) when inflation is high, the nominal value of the loan increases.
B) when inflation is high, the nominal value of wages decreases.
C) when inflation is high, the nominal value of the loan decreases.
D) when inflation is high, the nominal value of the wages decrease.