Refer to Figure 9-4. Which of the following policies would most likely shift the supply
of loanable funds curve from S1 to S2?
a. Introduction of an investment tax credit
b. Cutting the corporate profits tax rate
c. Increasing personal income tax rates
d. Eliminating taxes on interest income
e. Decreasing the government’s budget deficit
In order to eliminate unnecessary details and highlight the essential features of an
economic model, an economist makes
a. critical assumptions
b. macroeconomic assumptions
c. normative assumptions
d. positive assumptions
e. simplifying assumptions
Refer to Figure 14-2. If the interest rate is 8 percent,
a. there is an excess supply of money equal to $100 billion
b. there is an excess demand for money
c. there is an excess supply of money equal to $400 billion
d. the Fed will decrease the money supply
e. the interest rate will tend to rise
Suppose that Colleen’s nominal wage rate was $20 per hour in 1998, the base year for
the CPI. If the CPI in 2003 was 120.0 and her nominal wage had risen to $22 per hour,
what was her real wage in 2003?
a. $16.67
b. $18.33
c. $22.00
d. $26.40
e. her real wage for 2003 cannot be determined with the information given
If the government passed a law designating sea shells as money, sea shells
a. would not be legal tender
b. would not function as money because they would be unable to serve as a unit of
account
c. would not function as money because they would be unable to serve as a means of
payment
d. would not function as money because they would be unable to serve as a store of
wealth
e. would function as money as long as they were accepted in exchange for goods and
services
If the economy is producing a combination of goods inside its production possibilities
frontier, then
a. workers are on vacation
b. a significant number of workers have little education
c. some resources are being wasted
d. technology must improve before output can increase
e. the opportunity cost of producing more output is greater than the value of the
additional output that could be produced
How many members are there on the Board of Governors of the Federal Reserve?
a. 12
b. 50
c. 7
d. 4
e. 14
Society has to establish priorities among its goals because of
a. lazy politicians
b. manipulative politicians
c. uneducated voters
d. a scarcity of resources
e. too many bosses and not enough workers
“Senior citizens deserve an income that will allow them to live in comfort for their
remaining years.” This is
a. neither a normative nor a positive statement
b. both a positive and a normative statement
c. strictly a macroeconomic issue
d. a positive statement
e. a normative statement
In the short run,
a. spending determines income, but not the other way around
b. income determines spending, but not the other way around
c. spending determines the interest rate, but not the other way around
d. spending determines income, and income determines spending
e. spending determines the productivity, and productivity determines spending.
One explanation for the drop in the standard of living in the Soviet Union during World
War II is that
a. the war led to a movement along its production possibilities frontier away from
civilian goods and towards military goods
b. the war led to an outward shift in the production possibilities frontier due to a rise in
the level of technology
c. prior to the war, there was much productive inefficiency in the Soviet Union
d. the opportunity cost of producing military goods was zero in their economic system
e. resources used to produce civilian goods were equally capable of producing military
goods
The focus of the short-run macro model is on the role of
a. spending in explaining economic fluctuations
b. labor in explaining economic fluctuations
c. financial markets in explaining economic fluctuations
d. output in explaining economic fluctuations
e. resources in explaining economic fluctuations.