Assume that full-employment real GDP is Y = $1,200 billion, the current equilibrium
real GDP is Y = $800 billion, and the MPC is 0.50. What level of aggregate
expenditures will close the recessionary gap?
a. $50 billion.
b. $80 billion.
c. $140 billion.
d. $200 billion.
e. $400 billion.
John paints the exterior of his house and, as a result, his neighbor Christine is able to
sell her home for $5,000 more than she could have before. John’s house painting:
a. creates a negative externality for Christine.
b. shows John is a free rider.
c. results in an efficient market outcome for both.
d. creates a positive externality for Christine.
e. was poorly done.
A policy to do nothing and allow the economy to self-correct or adjust without
interference from the federal government is also called a(n) ____ policy.
a. Nonintervention
b. Active
c. Stabilization
d. fixed rule
Which of the following corresponds to the definition of the supply curve?
a. It depicts a positive relationship between income and quantity supplied.
b. It depicts a positive relationship between technology and prices.
c. It depicts a positive relationship between prices and quantity supplied.
d. It depicts a negative relationship between prices and quantity supplied.
e. It depicts a proportional relationship between prices and quantity supplied.
Assume Congress enacts a $500 billion increase in spending and a $500 billion tax
increase to finance the additional government spending. The result of this
balanced-budget approach is a:
a. $500 billion decrease in aggregate demand.
b. $500 billion increase in aggregate demand.
c. $1,000 billion increase in aggregate demand.
d. $1,000 billion decrease in aggregate demand.
Property rights allowing individuals to own goods, services, and factors of production
are most important in:
a. socialistic economies.
b. planned economies.
c. capitalistic economies.
d. command economies.
A direct relationship exists when:
a. there is no association between two variables.
b. one variable increases and there is no change in the other variable.
c. one variable increases and the other variable increases.
d. one variable increases and the other variable decreases.
Exhibit 5-1
Use the information below to answer the following question(s). National income
accountBillions of
dollars
Personal consumption expenditures $900
Personal taxes 180
Government consumption and gross investment 300
Interest income 60
Exports 40
Imports 75
Depreciation 60
Gross investment 200
Refer to Exhibit 5-1. What is this country’s gross domestic product?
a. $1,225.
b. $1,305.
c. $1,365.
d. $1,440.
Which of the following is a shortcoming of GDP?
a. GDP measures used goods and services.
b. GDP includes changes in inventories.
c. GDP includes the value of net exports.
d. GDP does not make an allowance for leisure time.
Assume a simplified banking system in which all banks are subject to a uniform reserve
requirement of 20 percent and checkable deposits are the only from of money. A bank
that received a new checkable deposit of $10,000 would be able to extend new loans up
to a maximum of:
a. $2,000.
b. $8,000.
c. $9,000.
d. $10,000.
What is the difference between the federal budget deficit and the national debt?
a. The budget deficit is the amount by which expenditures exceed revenues in a
particular year, while the national debt is the cumulative effect of all past budget
deficits and surpluses.
b. The budget deficit is the cumulative effect of all prior national debts.
c. The national debt includes all outstanding bonds, while the budget deficit excludes
bonds held by government agencies.
d. This is a trick question because there is no difference between the budget deficit and
the national debt.
The main explanation for why the cheap foreign labor argument is a poor reason for
restricting international trade is that:
a. workers who get paid less tend to have lower productivity than those who get paid
more.
b. all firms and workers gain when there are no restrictions on international trade.
c. infant industries such as steel and automobiles need to be protected.
d. specialization and free trade usually raise the prices of all the traded goods, so that
the workers can get paid more.
e. labor costs tend to be the same worldwide in the long run because of worker mobility.
Exhibit 15-2 Balance Sheet of Springfield National Bank AssetsLiabilities
Total reserves $500 Demand deposits $1,000
Loans $500 In Exhibit 15-2, if Springfield National’s customers write checks for $200
and the required reserve ratio is 20 percent, then its required reserves fall to:
a. $0.
b. $40.
c. $160.
d. $460.
e. $260.
As shown in Exhibit 8-6, the marginal propensity to consume (MPC) is:
a. 0.33.
b. 0.50.
c. 0.67.
d. 0.75.
Exhibit 16A-2 Macro AD/AS Models
In Panel (a) of
Exhibit 16A-2, an expansionary Keynesian government stabilization policy designed to
move the economy from Y1 to Y would shift the:
a. aggregate demand curve (AD) to the left.
b. aggregate demand curve (AD) to the right.
c. SRAS rightward.
d. LRAS rightward.
Select the positive statement that completes the sentence: If wages rise more rapidly
than productivity:
a. profits will fall.
b. workers will earn 3/4 of GDP.
c. the rate of inflation increases.
d. all of these.
Exhibit 2-15 Production possibilities curve
In Exhibit 2-15, the economy will experience
the most future economic growth if it chooses what point now?
a. J.
b. K.
c. M.
d. N.
e. P.
If the nominal interest rate is 5 percent and there is no inflation, then the real interest
rate:
a. exceeds 5 percent.
b. is less than 5 percent.
c. is 5 percent.
d. is zero.
Exhibit 8-5 Aggregate expenditures function
As shown in Exhibit 8-5,
this economy is in macro equilibrium at:
a. $2 trillion.
b. $4 trillion.
c. $6 trillion.
d. $8 trillion.
The GDP of a country can be derived by summing the:
a. expenditures on final goods and services produced domestically during the year.
b. payments to employees and owners of capital resources and then subtracting
depreciation and indirect business taxes.
c. market value of all goods and services produced domestically during the period and
then subtracting net exports from that figure.
d. income payments to the resource suppliers and net exports.