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In the short run,
a. spending depends on income and income depends on spending
b. spending depends on income, but income does not depend on spending
c. income depends on spending, but spending does not depend on income
d. spending and income are independent of one another
e. spending is the only determinant of how much income an economy will produce
Assume that markets clear. If in the labor market there is
a. an excess supply of labor, wages will rise
b. an excess demand for labor, wages will fall
c. an excess demand for labor, wages will rise
d. an excess supply of labor, wages stay constant
e. a decline in labor demand, wages will rise
If autonomous consumption decreases, which of the following is the most likely effect
in the short run?
a. a decrease in output, an increase in money demand, and an increase in the interest
rate
b. an increase in output, a decrease in money demand, and a decrease in the interest rate
c. a decrease in output, a decrease in money demand, and a decrease in the interest rate
d. an increase in output, an increase in money demand, and a decrease in the interest
rate
e. an increase in output, an increase in money demand, and an increase in the interest
rate
When the Federal Reserve increases the money supply, it has the immediate effect of
creating wealth.
Reserves that the Fed injects into the banking system are ultimately
a. converted into loans that banks make to other banks
b. distributed among different banks in the system as required reserves
c. end up in just two or three banks
d. ineffective at increasing money supply
e. important to banks that want more customers
In the short-run macro model, an increase in government spending
a. may reduce real GDP
b. partially crowds out private investment spending
c. usually crowds out exports
d. usually crowds out spending on services
e. requires an increase in taxes.
A decrease in income taxes can help growth and harm growth at the same time.
The short-run macro model
a. relies on the market-clearing assumption
b. is used primarily for long-run analysis
c. is used primarily for short-run analysis
d. focuses on the supply of and demand for resources
e. focuses on fluctuations in the financial markets to explain fluctuations in real GDP
To an American, the demand curve for euros tells
a. that Americans do not want to purchase euros
b. how many euros Americans would want to buy in a given time period, at each
different exchange rate
c. the real interest rate on foreign currency over time
d. how many Americans are willing to buy euros
e. how many euros have been purchased during a given time period
This year, Tom sold his 1998 minivan to Honest John's Used Car Emporium for $5,000.
Honest John then sold the van to Bob for $7,000. How much would be recorded in GDP
this year from these transactions?
a. $0
b. $2,000
c. $5,000
d. $7,000
e. $12,000
The largest component of aggregate expenditure is
a. consumption spending
b. government purchases
c. net exports
d. capital expenditures
e. investment spending
In Figure 4-5, if the government imposes a price floor of $2, the result will be
a. equilibrium
b. no different than before the minimum price is imposed
c. a shortage
d. that the demand curve will shift leftward
e. a surplus
What would happen to a production possibilities frontier (with capital goods measured
on the vertical axis and consumption goods on the horizontal axis) if there is an increase
in the labor force?
a. The entire frontier would shift outward.
b. The upper part of the frontier would shift outward while the lower part would shift
inward.
c. Nothing, there would be no movement of the frontier.
d. The entire frontier would shift inward.
e. The lower part of the curve would shift outward while the upper part would shift
inward.
If two economists completely agree about the magnitude of employment effects of a
proposed change in government policy, but disagree about whether the change is a good
idea. The difference in opinion
a. must be normative in nature
b. is both positive and normative in nature
c. is more likely to be normative than positive
d. is more likely to be positive than normative
e. would be neither positive nor normative in nature
If the quantity of money demanded exceeds the quantity of money supplied at a given
interest rate, what will happen to restore the market to equilibrium?
a. The public will try to buy bonds, the price of bonds will increase, and the interest rate
will fall until equilibrium is attained where the money demand and supply curves
intersect at the market interest rate.
b. The public will try to sell bonds, the price of bonds will decrease, and the interest rate
will rise until equilibrium is attained where the money demand and supply curves
intersect at the market interest rate.
c. The public will try to sell bonds, the price of bonds will increase, and the interest rate
will fall until equilibrium is attained where the money demand and supply curves
intersect.
d. The public will try to buy bonds, the price of bonds will increase, and the interest rate
will rise until equilibrium is attained where the money demand and supply curves
intersect.
e. The public will try to buy bonds, the price of bonds will decrease, and the interest
rate will fall until equilibrium is attained where the money demand and supply curves
intersect.
