A decrease in the level of business opportunity will generally _____ the loanable funds
demand curve.
A) not change
B) left-shift
C) cause a movement along
D) right-shift
Whenever planned aggregate spending exceeds real GDP, unplanned inventory
investment is:
A) negative.
B) zero.
C) positive.
D) unpredictable.
Long-run economic growth is:
A) higher in countries with a weak rule of law and excessive government intervention.
B) lower in countries with a strong government and independent judiciary.
C) lower in countries whose courts enforce property rights and whose government
protects its citizens.
D) higher in countries with a strong rule of law and political stability.
A recessionary gap occurs when:
A) potential output is below aggregate output.
B) potential output is receding.
C) aggregate output is below potential output.
D) aggregate output is above potential output.
Who gains when there is unexpected deflation?
A) real-asset owners
B) borrowers
C) lenders
D) real-asset owners, borrowers, and lenders
The discount window is the branch of the Federal Reserve that monitors banks to be
sure that they are meeting reserve and capital requirements.
A) True
B) False
Which one of the following is an example of consumption expenditure?
A) Samantha bought an oven for her cooking show on Food Network.
B) Stephanie bought a laptop for her brother.
C) Jim purchased 200 shares of Google stock.
D) Herman Smith spent $1,500 to buy a used car for his son.
The store-of-value function of money is:
A) necessary and distinctive.
B) not necessary but distinctive.
C) necessary but not distinctive.
D) not necessary and not distinctive.
The nominal exchange rate:
A) is adjusted for inflation.
B) always equals purchasing power parity.
C) is unadjusted for inflation.
D) affects the current account.
Because of trade, a country may:
A) consume outside its production possibility frontier.
B) consume inside its production possibility frontier.
C) find its production possibility frontier shifting outward.
D) avoid opportunity costs.
In the income”expenditure model, inventories are:
A) fixed and therefore provide little insight into the direction of the economy.
B) a long-run event that aids forecasters in understanding where long-run real GDP is.
C) constantly changing and provide insight into the future of the economy.
D) often positive, suggesting that additions to inventory stocks are a long-run goal.
When a corporation borrows money from a bank in exchange for a contract to repay it
on a schedule, the corporation is:
A) taking out a loan.
B) issuing bonds.
C) issuing stocks.
D) liquidating a bank deposit.
Britain, Sweden, and Switzerland chose not to adopt the euro in 1999.
A) True
B) False
Which of the following is NOT one of the main features designed to protect depositors
and the economy against bank runs?
A) deposit insurance
B) capital requirements
C) reserve requirements
D) interest rate ceilings on checkable deposits.
If a government’s debt is increasing but its GDP is increasing faster, the government’s:
A) total debt is falling.
B) ratio of debt to GDP is falling.
C) deficit is falling.
D) ability to pay is falling.
If wages and prices are perfectly flexible, a decrease in aggregate demand will cause
a(n) _____ in the price level and _____ in unemployment.
A) increase; an increase
B) decrease; a decrease
C) increase; no change
D) decrease; no change
Monetary policy:
A) can be made more effective with the presence of a liquidity trap.
B) is less hampered by the political process than fiscal policy.
C) has been proven to be an ineffective tool in controlling business cycles.
D) works well only if it is well coordinated with fiscal policy efforts.
Which of the following is NOT one of the five principles for understanding how
individual choices interact?
A) There are gains from trade.
B) Markets move toward equilibrium.
C) Resources should be used as efficiently as possible to achieve society’s goals.
D) Markets always lead to efficiency.
Expansionary monetary policy _____ the money supply, _____ interest rates, and
_____ consumption and investment spending.
A) increases; increases; increases
B) decreases; decreases; decreases
C) increases; decreases; increases
D) decreases; increases; decreases
The 2008 financial crisis made it clear that banks were overregulated.
A) True
B) False
After the price of oil increased in the 1970s, the growth rate of the United States
declined substantially.
A) True
B) False
Friedman favored:
A) activist monetary policy to stabilize the economy.
B) activist fiscal policy coupled with a neutral monetary policy.
C) a monetary policy rule.
D) interest rate targeting.
In 2013, the United States:
A) had a current account deficit.
B) operated on a fixed exchange rate.
C) also had a financial account deficit.
D) operated on the gold standard.
Look at the table The Market for Chocolate-Covered Peanuts. A surplus of 210 bags of
chocolate-covered peanuts exists if the price is _____ per bag.
A) $0.90
B) $0.80
C) $0.60
D) $0.40
We have to make choices because:
A) we have unlimited income.
B) resources are scarce.
C) resources are infinite.
D) with good planning, trade-offs can be avoided.
Reduction of inflation that is embedded in expectations is called:
A) disinflation.
B) deflation.
C) hyperinflation.
D) the natural rate of inflation.
Two points on a nonlinear curve have coordinates given by (5, 15) and (17, 13). The
average slope of the curve between these points is:
A) “1/6.
B) “6.
C) 1/4.
D) 2.5.
In 1798 the British economist Thomas Malthus predicted that Nazi Germany would
invade Poland.
A) True
B) False
Given an annual interest rate of 3%, the present value of a future payment of $2,080 to
be paid in one year is:
A) $1,904.76.
B) $2,000.00.
C) $2,019.42.
D) $2,080.00.
Table: Investment Projects
Look at the table Investment Projects. If the market interest rate is 9%, the amount of
planned investment spending is:
A) $1,800.
B) $2,000.
C) $4,000.
D) $5,500.
If the U.S. is in a recessionary gap, the appropriate policy is to _____ the money supply
to _____ interest rates.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
The total of the values added at every stage of production for a good yields:
A) the total cost of the labor used to produce the good.
B) the prices of the factors of production used to produce the good.
C) the final value of the good.
D) the intermediate value of the good.
If during 2011, the Republic of Sildavia recorded a GDP of $65 billion, interest
payments of $15 billion, imports of $13 billion, profits of $7 billion, exports of $15
billion, and rent of $7 billion, wages during 2011 in Sildavia were:
A) $36 billion.
B) $38 billion.
C) $51 billion.
D) $64 billion.
Which of the following would accurately characterize the portion of a firm’s profit paid
to the owner of one share of its stock?
A) interest
B) dividend
C) stock
D) bond