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Comparing how many dollars it takes to attend college each year to annual earnings on
a job represents the use of money as a:
a. medium of exchange.
b. unit of account.
c. store of value.
d. store of coincidence.
A good that provides external benefits to society has:
a. too few resources devoted to its production.
b. too many resources devoted to its production.
c. the optimal resources devoted to its production.
d. not provided profits to producers of the good.
Exhibit 2-7 Production possibilities curve
For the economy shown in Exhibit 2-7, which of the following is true when the
economy is at point A?
a. More cars are being produced than are needed.
b. There must be resources that are not being used fully.
c. Some car production must be forgone in order to produce more grain in the same
period.
d. Increased grain production would be impossible.
Foreachstatementprovided,choosetheletteroftheappropriatetermfromthelistthateachstate
mentbestdescribes.Sometermsmaybeusedmorethanonce,whileothersarenotusedatall.
a. Capital stock
b. Asset
c. Owners' equity
d. Time period
e. Dividends
f. Economic entity concept
g. Expense
h. Retained earnings
i. Cost principle
j. Creditor
k. Liability
l. Revenue
m. Going concern
n. Monetary unit
o. Corporation
An artificial segment on the calendar used as a basis for preparing financial statements.
Use the aggregate expenditures model and assume an economy is in equilibrium at $6
trillion which is $500 billion above full-employment GDP. If the marginal propensity to
consume (MPC) is 0.75, full-employment GDP can be reached if government spending:
a. decreases by $75 billion.
b. decreases by $125 billion.
c. decreases by $500 billion.
d. is held constant.
Assuming that wine is a normal good, an increase in consumer income, other things
being equal, will:
a. cause an upward movement along the demand curve for wine.
b. shift the demand curve for wine to the left.
c. cause a downward movement along the demand curve for wine.
d. shift the demand curve for wine to the right.
If the fractional reserve system did not exist,
a. the banking system could not create money.
b. there would be no effect on the ability of the banking system to create money.
c. banks would loan out its required reserves.
d. banks would be highly susceptible to bank runs.
e. the banking system would realize the money multiplier.
Gradual adjustment of prices and wages to an increase in the aggregate demand curve
implies that the aggregate supply curve is:
a. horizontal.
b. vertical.
c. upward sloping but not vertical.
d. downward sloping.
An economic system that answers the What, How, and For Whom questions using
prices determined by the interaction of the forces of supply and demand is a:
a. market economy.
b. command economy.
c. traditional economy.
d. none of these.
In a market economy, buyers and sellers communicate their intentions to one another
through:
a. government planners.
b. negotiations overseen by government agencies.
c. elected officials.
d. prices.
