Which of the following events is the most likely to create stagflation?
a. An increase in the money supply.
b. A reduction in the amount spent on national defense.
c. A doubling of oil prices.
d. A decrease in investment spending.
If a person is taxed $100 on an income of $1,000, taxed $200 on an income of $2,000,
and taxed $300 on an income of $3,000, this person is paying a(n):
a. progressive tax.
b. poll tax.
c. regressive tax.
d. excise tax.
e. proportional tax.
Which of the following would occur if the government imposed a price floor (support
price) of $4 per bushel in the wheat market shown in Exhibit 4-11?
a. Buyers would want to purchase more wheat than is supplied.
b. Buyers would not purchase all of the wheat grown.
c. Shortage of wheat would increase the price of wheat.
d. Farmers would grow less wheat.
The effect of an increase in aggregate supply is a(n):
a. increase in the general level of prices and a decrease in real output.
b. increase in the general level of prices and an increase in real output.
c. decrease in the general level of prices and a decrease in real output.
d. decrease in the general level of prices and an increase in real output.
Which of the following would be most likely to cause the production possibilities curve
for computers and education to shift outward?
a. A choice of more computers and less education.
b. A choice of more education and less computers.
c. A reduction in the labor force.
d. An increase in the quantity of resources.
Three of the four events described below might reasonably be expected to shift the
demand curve for beef to a new position. One would not shift that demand curve. The
single exception is a(n):
a. change in people’s tastes for beef.
b. increase in the money incomes of beef consumers.
c. fall in the price of beef.
d. change in the price of a product competitive with beef (e.g. pork).
If an economy’s population grows at 3 percent and real GDP grows at 3 percent, then:
a. per capita real GDP is declining.
b. the economy’s standard of living is increasing.
c. per capita real GDP is negative.
d. per capita real GDP is constant.
e. the economy is experiencing unemployment.
A tariff is a:
a. tax on an exported product.
b. limit on the number of goods that can be exported.
c. limit on the number of goods that can be imported.
d. tax on an imported product.
e. subsidy on an imported product.
If disposable income is $400 billion, consumption spending is $380 billion, and MPC is
0.5, what is the level of saving?
a. $20 billion.
b. $210 billion.
c. $380 billion.
d. $590 billion.
e. $780 billion.
Exhibit 16-4 Aggregate demand and supply model
In Exhibit 16-4, which one of the following actions could the Fed use to shift the AD
curve from AD1 to AD2?
a. Lower the legal reserve requirement.
b. Lower the federal funds rate.
c. Print currency.
d. Raise the discount rate.
e. Sell government securities.
One of the problems created by price floors set above the equilibrium is:
a. consumers complain about high prices.
b. firms don’t have incentives to reduce costs.
c. the creation of surplus.
d. how to cope with the shortages.
e. the impact on firm profitability.
Since 1970, the composition of federal expenditures has:
a. been virtually unchanged, but federal spending as a share of GDP has declined
substantially.
b. been virtually unchanged, but federal spending as a share of GDP has increased
sharply.
c. shifted away from national defense and toward spending on income security.
d. shifted away from income security income transfers and toward spending on national
defense.
Which one of the following events involves a liability for a business?
a. Loans to be repaid to banks
b. Inventories purchased for cash
c. Amounts invested by the owners
d. Stock sold to the general public
Use the aggregate expenditures model and assume the marginal propensity to consume
(MPC) is 0.90. An increase in government spending of $1 billion would result in an
increase in GDP of:
a. $0.
b. $0.9 billion.
c. $1.0 billion.
d. $9.0 billion.
e. $10.0 billion.
An upward shift in the consumption function, other things being equal, could be caused
by households:
a. becoming optimistic about the state of the economy.
b. becoming pessimistic about the state of the economy.
c. expecting future income and wealth to decline.
d. None of these.
Which of the following is true of the business cycle record of the United States?
a. Recessions have been lengthier during the last two decades than was true prior to
1980.
b. Real GDP contracted throughout most of the 1950s.
c. Real GDP in 2000 was approximately the same as 1950.
d. Since 1950, the fluctuations in GDP have been less severe than before 1950.
To which of the following entities must a company report if it sells its stock on the
organized stock market?
a. American Institute of Certified Public Accountants (AICPA)
b. American Accounting Association (AAA)
c. International Accounting Standards Board (IASB)
d. Securities and Exchange Commission (SEC)
The Laffer curve represents the relationship between real GDP and various possible tax
rates.
The current account balance tabulates the value of a country’s exports of goods and
services minus the value of its imports of goods and services.
A nation can accelerate economic growth by increasing its production of consumer
goods.
What generally causes the business cycle? What are the four phases of a single business
cycle? What are the problems associated with the business cycle?
Starting from equilibrium in the money market, suppose the money supply increases.
Other things being equal, this will cause an excess supply of money, leading people to
buy bonds.
Unused lines of credit on credit cards are part of M2.
If consumption is $800 when income is $1,000, the marginal propensity to consume
(MPC) must be 0.80.
The size of the spending multiplier depends on the level of real GDP.