The precautionary demand for money:
a. varies inversely with the income level.
b. varies inversely with the price level.
c. is used as an insurance agent against unexpected needs.
d. states that nominal income must exceed real income.
e. is a classical concept in monetary theory.
As the marginal propensity to consume (MPC) decreases, the spending multiplier:
a. increases.
b. decreases.
c. remains constant.
d. becomes undefinable.
In general, supply curves slope upward because:
a. increases in the price of a good result in lower opportunity costs.
b. rising prices provide producers with a greater profit incentive.
c. consumers buy a greater quantity.
d. technology improves the ability of firms to produce more at each possible price.
The law of demand refers to the:
a. tendency of prices to increase as more units of a product are demanded.
b. increase in price that results from an increase in demand for a good with a limited
supply.
c. inverse relationship between the price of a good and the quantity of the good
demanded.
d. increase in the quantity of a good available as the price of the good increases.
According to rational expectations theory, which of the following is the best approach
to lower the inflation rate?
a. Preannounced stable government policies.
b. Unpredictable government policies.
c. First predictable and then unpredictable government policies.
d. None of these.
The economy shown in Exhibit 9-6 has a recessionary gap of:
a. $1 trillion.
b. $2 trillion.
c. $3 trillion.
d. $5 trillion.
Demand curves are negatively sloped when people buy:
a. less as the price decreases.
b. more as the price increases.
c. the same amount as the price changes.
d. more as the price decreases.
e. less as incomes decrease.
Which of the following institutions is responsible for supervising the banking system of
the United States?
a. The Federal Reserve System.
b. The Open Market Committee.
c. The U.S. Treasury.
d. The Federal Deposit Insurance Corporation.
A leftward shift of a supply curve is called a(n):
a. decrease in demand.
b. increase in supply.
c. decrease in supply.
d. increase in quantity supplied.
e. decrease in quantity supplied.
Of the four groups listed below, the highest unemployment rate is typically experienced
by:
a. females as a group.
b. males as a group.
c. teenagers.
d. persons who completed 1-3 years of high school.
“Countries are poor because they cannot afford to save and invest” is called the:
a. vicious circle of poverty.
b. savings-investment trap.
c. LDC trap.
d. cycle of insufficient credit.
Which of the following is not a resource?
a. Land.
b. Labor.
c. Money.
d. Capital.
If MPC = 0.9, equilibrium real GDP is $1,000, and full-employment real GDP is
$2,000, then how much should government spending change to bring about full
employment?
a. +1,000.
b. -100.
c. +900.
d. +100.
e. -0.9.
The process through which an economy’s production possibilities curve shifts outward
is:
a. full-employment management.
b. investment.
c. resource renewal.
d. out-resourcing.
The amount of earnings distributed to stockholders can be found in the income
statement.
a. True
b. False