Which of the following groups analyzes federal budgets proposals?
a. The Council of Economic Advisors.
b. The Office of Management and Budget.
c. The Congressional Budget Office.
d. The House and Senate Budget Committees.
Marcos Inc. had net income for 2014 of $40,000. It declared and paid a $3,500 cash
dividend in 2014. If the company’s retained earnings for the end of the year was
$38,200, what was the company’s retained earnings balance at the beginning of 2014?
a. $81,700
b. $74,700
c. $5,300
d. $1,700
How does inclusion of the current revenues and expenditures of the Social Security
trust fund into the budget calculation affect the reported budget deficit of the federal
government?
a. It increases the reported deficit.
b. It reduces the reported deficit.
c. It exerts no effect on the reported deficit.
d. It increases the deficit during an economic boom but reduces it during a recession.
Under the natural rate hypothesis, expansionary monetary and fiscal policies can at best
produce a:
a. permanent change in the long-run Phillips curve.
b. short-run change in the unemployment rate.
c. long-run change in the unemployment rate.
d. permanent change in the unemployment rate.
Assuming that bus travel is an inferior good, a decrease in consumer income, other
things being equal, will cause:
a. a downward movement along the demand curve for bus travel.
b. no change in the demand curve for bus travel.
c. an upward movement along the demand curve for air travel.
d. a rightward shift in the demand curve for bus travel.
A Phillips curve shows the relationship between the inflation rate and the:
a. wage rate.
b. unemployment rate.
c. real GDP growth rate.
d. population growth rate.
If the economy were left on its own without the interference of government or the Fed,
it would move toward an equilibrium rate of growth that would produce, with only
minor interruptions, full employment without inflation. What school supports this view?
a. Classical.
b. Keynesian.
c. Monetarism.
d. Supply-side.
e. Neo-Keynesian.
Exhibit 11-4 Aggregate demand and supply model
Suppose the economy in Exhibit 11-4 is in equilibrium at point E1 and the marginal
propensity to consume (MPC) is 0.75. Following Keynesian economics, the federal
government can move the economy to point E2 and reduce inflation by:
a. decreasing government tax revenue by $100 billion.
b. decreasing government tax revenue by $750 billion.
c. increasing government tax revenue by $100 billion.
d. increasing government tax revenue by approximately $33 billion.
e. decreasing government tax revenue by approximately $33 billion.
The income that people receive is called:
a. national income.
b. personal income.
c. disposable personal income.
d. transfer payments.
Demand-pull inflation occurs:
a. at or close to full employment.
b. because of excess total spending.
c. when “too much money is chasing too few goods.”
d. all of these.
The Department of Commerce sums the payments made to resources to arrive at GDP
in the form of wages, rents, interest, profits, indirect taxes, and depreciation. This
method of deriving GDP is called the:
a. opportunity cost approach.
b. income approach.
c. expenditure approach.
d. monetarist approach.
Total expenditures by businesses for fixed investment and inventories is:
a. $500 billion.
b. $50 billion.
c. $200 billion.
d. $15 billion.
e. $65 billion.
Which of the following is the objective of expansionary monetary policy?
a. An increase in employment.
b. A decrease in employment.
c. An increase in the velocity of money.
d. An increase in prices proportional to the rise in the money supply.
Which of the following factors would be most likely to encourage investment and
capital formation in a less-developed nation?
a. High and variable rates of inflation.
b. Tariffs and quotas that restrict international trade.
c. A legal system that provides for secure property rights and evenhanded enforcement
of contracts.
d. High marginal tax rates.
Gross domestic product is equal to the market value of all final goods and services:
a. exchanged during a period.
b. produced domestically during a period.
c. produced by the citizens of a nation during a period.
d. produced domestically during a period minus the depreciation of productive assets.
Which of the following would increase the supply of laptop computers?
a. Higher wage rates for the workers that produce laptop computers.
b. A technological improvement that lowers the cost of producing laptop computers.
c. An increase in the price of computer chips used to produce laptop computers.
d. All of these.
Assume the economy is in recession and real GDP is below full employment. The
marginal propensity to consume (MPC) is 0.90, and the government follows Keynesian
economics by using expansionary fiscal policy to increase aggregate demand (total
spending). If an increase of $1,000 billion aggregate demand can restore full
employment, the government should:
a. increase spending by $100 billion.
b. decrease spending by $790 billion.
c. increase spending by $1,000 billion.
d. increase spending by $250 billion.