In the Keynesian aggregate expenditures model, “aggregate expenditures” refer to:
a. the amount of GDP that could be produced if unemployment were zero.
b. the combined expenditures of consumers, businesses, governments, and foreigners
(net exports).
c. the amount of demand for consumer goods that would arise if all citizens had all the
income they wanted.
d. consumer spending measured in constant prices.
Critics of Keynesian fiscal policy argue that deficit spending will not stimulate the
economy, because higher interest rates will discourage consumption and investment.
This argument is known as the:
a. deficit-substitution effect.
b. multiplier effect.
c. burden-of-debt effect.
d. crowding-out effect.
Suppose hypothetically that the consumer price index (CPI) was 150 in Year 1 and was
180 in Year 2. What would be the inflation rate for this period?
a. 12 percent.
b. 16.7 percent.
c. 20 percent.
d. 30 percent.
According to the net exports effect, as the price level falls relative to the rest of the
world,
a. foreigners buy fewer goods.
b. foreigners buy more U.S. goods.
c. the aggregate demand curve shifts to the left.
d. the aggregate demand curve shifts to the right.
e. the supply of U.S.-made goods increases.
Which one of the following statements is true concerning assets?
a. They are recorded at market value and then adjusted for inflation.
b. They are recorded at market value for financial reporting purposes as historical cost
may be arbitrary.
c. Accountants use the term historical cost to refer to the original cost of an asset.
d. Assets are measured using the time-period approach.
Which of the following statements is true?
a. The United States today comes closer to the socialist form of economic organization
than it does capitalism.
b. When central planners set prices above equilibrium for goods and services they
create shortages.
c. According to Karl Marx, under capitalism, workers would be exploited and would
revolt against the owners of capital.
d. Adam Smith argued that government’s role in society would be to do absolutely
nothing.
Which of the following pairs is the most likely to exhibit an inverse relationship?
a. The amount of time you study and your grade point average.
b. People’s annual income and their expenditure on personal computers.
c. Baseball players’ salaries and their batting averages.
d. The price of a concert and the number of tickets people purchase.
Which of the following would be least likely to cause the production possibilities curve
to shift outward?
a. a decreased desire for leisure by workers in the economy.
b. an invention that requires fewer resources to produce a good.
c. a shift in consumer preferences that causes expansion in the output of one product
and a decline in output of other products.
d. an expansion in the man-made productive resources available to the economy as the
result of a high rate of investment.
The money that households might hold either as money or in interest-bearing assets,
depending on the interest rate, is called the:
a. precautionary demand.
b. transactions demand.
c. speculative demand.
d. liquidity motive.
e. investment motive.
If there is a recession, the Fed would most likely:
a. encourage banks to provide loans by lowering the discount rate.
b. encourage banks to provide loans by raising the discount rate.
c. restrict bank lending by lowering the discount rate.
d. restrict bank lending by raising the discount rate.
e. restrict bank lending by lowering the federal funds rate.
Producer surplus is the:
a. number of producers who are excluded from a market because of scarcity.
b. amount of a good that a producers will sell at a price below the equilibrium price.
c. amount consumers actually pay for a good minus the amount the sellers are willing to
sell the good.
d. amount consumers are willing to pay for a good minus the cost of producing the
good.
An increase in the money supply:
a. lowers the interest rate, causing a decrease in investment and an increase in GDP.
b. lowers the interest rate, causing an increase in investment and a decrease in GDP.
c. lowers the interest rate, causing an increase in investment and an increase in GDP.
d. raises the interest rate, causing an increase in investment and an increase in GDP.
e. raises the interest rate, causing a decrease in investment and a decrease in GDP.
An inverse 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.
Two goods, X and Y, are complementary goods if the demand for X:
a. increases when the price of Y increases.
b. increases when income increases.
c. decreases when the price of Y increases.
d. increases as the price of its substitute good increases.
e. decreases as the price of its substitute good decreases.
The ease with which an asset can be converted into a medium of exchange is known as:
a. volatility.
b. liquidity.
c. currency.
d. Gresham’s Law.
e. speculative exchange.
A tax that is structured so that people pay the same percentage of their income in taxes
is called a(n):
a. flat tax.
b. regressive tax.
c. progressive tax.
d. excise tax.
M2 is actually a smaller amount than M1.
An increase in demand is reflected as a rightward (outward) shift of the demand curve
and is caused by an increase in price.
The names of the four financial statements are ________________________________,
________________________________, ________________________________, and
________________________________.
Personal consumption expenditures is the smallest component of total spending.
Trade can increase the consumption possibilities of nations.
Cost-push inflation is caused by supply shocks like higher oil prices and poor weather
conditions.
Incomes policies are based on discretionary monetary and fiscal policies.