An externality is:
a. always a benefit to the recipient.
b. always a detriment to the recipient.
c. an activity that occurs in a business which is unknown to management.
d. unintended benefits or costs imposed on third parties as a result of economic activity.
e. an act, caused by a firm located in this country, which has an effect on a person in a
foreign country.
Exhibit 18-7 Foreign exchange market for U.S. dollars and British pounds
Which of the following could cause the dollar-pound exchange rates to change as
shown in Exhibit 18-7?
a. American goods become more popular in Great Britain.
b. British incomes rise, while U.S. incomes remain unchanged.
c. The U.S. price level rises, while the British price level remains unchanged.
d. The U.S. real interest rate rises, while the British real interest rate remains
unchanged.
The demand curve for investment in the economy as a function of interest rates is:
a. vertical.
b. horizontal.
c. upward sloping.
d. downward sloping.
e. elliptical.
The production possibilities curve for the nation of Economagic shifts to the left. This
could have been caused by:
a. an increase in Economagic’s labor supply.
b. innovation in the production of goods in Economagic.
c. a war that destroyed some of Economagic’s resource base.
d. unemployment among Economagic’s workers.
e. Economagic’s choice of more consumption and less capital last period.
How does total taxes as a percentage of GDP in the United States compare to those of
Western European countries, such as the United Kingdom, Germany, and Sweden?
a. U.S. taxation is smaller.
b. U.S. taxation is about the same.
c. U.S. taxation is slightly larger.
d. U.S. taxation is substantially larger.
Suppose nominal GDP equaled $10,988 billion while the M2 money supply was $6,063
billion. What was the velocity of the M2 money stock?
a. 0.45
b. 0.55
c. 1.81
d. 2.36
Suppose the index of leading economic indicators begins to decline for several months.
Which of the following economic events will likely follow?
a. A recession.
b. Severe inflation.
c. Greater employment.
d. Higher investment.
Which of the following is closest to the definition of demand?
a. People’s willingness to supply goods at specific prices.
b. People’s willingness to buy goods and services at given prices.
c. People’s expectations of lower prices of goods and services.
d. Producer’s expectations of selling more goods.
e. The interaction of people’s willingness to buy and sell goods.
The marginal propensity to save is
a. the change in saving divided by the change in income.
b. the change in income divided by the change in saving.
c. saving divided by income.
d. income divided by saving.
e. saving divided by consumption.
If, for a given disposable income level, the disposable income line lies above the
consumption curve, saving:
a. equals consumption.
b. equals disposable income.
c. is less than zero.
d. is equal to zero.
e. is greater than zero.
Exchange rates are for currency what:
a. c, d and e.
b. discounts are for sales.
c. interest is for capital.
d. prices are for apples.
e. wages are for labor.
According to the theory of rational expectations,
a. workers’ experience tells them that government action to lower unemployment will
not affect inflation.
b. consumers and investors generally behave so that rationally formed government
attempts to stimulate aggregate demand have their desired effects.
c. policy goals can be achieved easily in the short run.
d. workers’ wage demands include anticipated inflation.
e. expansionary monetary policy will lead to permanent interest rate declines.
Exhibit 2-16 Production possibilities curve
In Exhibit 2-16, which of the following
points on the production possibilities curve are unattainable with the resources and
technology currently available?
a. A, B, C, U
b. A, B, C, D, U
c. E and W
d. B, C, D, U
e. A, B, C, D
Exhibit 4-4 Supply and demand curves for good X
An
increase in the price of a complementary good would be represented in which of the
graphs in Exhibit 4-4?
a. Graph A.
b. Graph B.
c. Graph C.
d. None of these.
When a household takes extra (unbudgeted) money on a trip, economists would classify
this money as held for a(n):
a. speculative demand.
b. transactions demand.
c. emergency motive.
d. precautionary demand.
e. inflationary motive.
With regard to the national debt, to whom does the federal government owe money?
a. Taxpayers.
b. Federal government workers.
c. The Federal Reserve System.
d. Investors who buy U.S. Treasury bills, bonds, and notes.
Other things being equal, an increase in the rate of interest causes a(n):
a. upward movement along the demand for money curve.
b. downward movement along the demand for money curve.
c. rightward shift of the demand for money curve.
d. leftward shift of the demand for money curve.