Exhibit 16-2 Money market demand and supply curves
As shown in Exhibit 16-2, assume the
money supply curve shifts rightward from MS1 to MS2 and the economy is operating
along the intermediate segment of the aggregate supply curve. The result will be a:
a. higher interest rate and no effect on real GDP or the price level.
b. lower investment, lower real GDP, and lower price level.
c. higher investment, higher real GDP, and higher price level.
d. higher investment, lower real GDP, and lower price level.
Exhibit 17-2 Aggregate demand and aggregate supply curves
As shown in Exhibit 17-2, if
people behave according to adaptive expectations theory, an increase in the aggregate
demand curve from AD1 to AD2 will cause the price level to move:
a. directly from 100 to 110 and then remain at 110.
b. directly from 100 to 105 and then remain at 105.
c. from 100 to 105 initially and then eventually move back to 100.
d. from 100 to 105 initially and then eventually move to 110.
Exhibit 12-4 Marginal tax rate lines
In Exhibit 12-4, line B represents a:
a. regressive tax.
b. progressive tax.
c. proportional tax.
d. flat tax.
The “Four Tigers” of East Asia are the newly industrialized countries of Taiwan, South
Korea, Hong Kong, and:
a. Japan.
b. Singapore.
c. the Philippines.
d. Vietnam.
A business cycle is the:
a. period of time in which expansion and contraction of economic activity are equal.
b. period of time in which there are three phases: peak, depression, and recovery.
c. recurring growth and decline in real GDP.
d. period of time in which a business is established and ceases operations.
A positive statement is:
a. something good or desirable.
b. a call for improvement.
c. a statement of opinion.
d. a statement testable by facts.
e. a suggestion for policy.
Exhibit 16A-2 Macro AD/AS Models
As shown in
Panel (b) of Exhibit 16A-2, assume the economy adopts a classical nonintervention
policy. Which of the following would cause the economy to self-correct?
a. Competition among firms for workers increases the nominal wage and SRAS shifts
rightward.
b. Long-run equilibrium will be established at Y1 and P2.
c. Long-run equilibrium will be established at Y and P3.
d. Competition among unemployed workers decreases nominal wages and SRAS shifts
rightward.
Exhibit 16A-4 Macro AD/AS Models
As shown in Exhibit 16A-4, assume the marginal propensity to consume MPC equals
0.75. Using discretionary fiscal policy, federal government spending should be ____ in
order to restore the economy from E1 to full employment.
a. increased by $.25 trillion
b. decreased by $.25 trillion
c. decreased by $2 trillion
d. increased by $2 trillion
e. increased by $1 trillion
Speculative demand for money is a(n):
a. positive function of prices.
b. inverse function of prices.
c. positive function of interest rates.
d. inverse function of interest rates.
e. function of unexpected needs.
Which of the following people is counted in the labor force?
a. Jerry, who lost his job and last looked for work three months ago.
b. Bob, who holds an MBA in management but can only find part-time employment at a
fast-food restaurant.
c. Phil, who would like to work as a stockbroker but is now a househusband.
d. Mickey, who thinks he could easily become a millionaire, despite the opinion of the
psychiatrist at the state hospital where he is a patient.
e. Donna Jean, age 90, who is enjoying her retirement in Montana.
Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss
As shown in Exhibit 3A-1, if the quantity supplied is 2 million pounds of ground beef
per year, the result is a deadweight loss represented by area:
a. ABEC.
b. CEFD.
c. EGH.
d. BEF.
Exhibit 8-4 Consumption function
As shown in Exhibit 8-4, the marginal
propensity to consume (MPC) is:
a. 0.25.
b. 0.50.
c. 0.75.
d. 0.90.
Which of the following is not an example of an incomes policy?
a. Presidential jawboning.
b. Unemployment insurance.
c. Wage and price guidelines.
d. Wage and price controls.
John Maynard Keynes and his followers argued that the Great Depression was primarily
the result of:
a. excessive government spending.
b. large budget deficits.
c. the perverse monetary policies of the Fed.
d. insufficient aggregate spending on goods and services.
According to marginal analysis, you should spend more time studying economics if the
extra benefit from an additional hour of study:
a. is positive.
b. outweighs the extra cost.
c. exceeds the benefits of the previous hour of study.
d. will raise your exam score.
A public good may be defined as any good or service that:
a. must be provided to citizens who are most able to benefit from it.
b. must be distributed to all citizens in equal shares.
c. excludes free riders.
d. none of these.
A movement along in the consumption function is caused by a change in:
a. real disposable income.
b. can be caused by a change in the price level.
c. the marginal propensity to consume (MPC).
d. none of these.
The federal budget process begins when federal agencies submit their budget requests
to the:
a. Treasury Department.
b. Council of Economic Advisors (CEA).
c. Office of Management and Budget (OMB).
d. Congressional Budget Office (CBO).
Which of the following helps low-income countries grow rapidly relative to
high-income countries?
a. Low-income countries are in a better position to save a larger share of their income.
b. Low-income countries can employ technologies and practices that have been
successful in high-income countries.
c. Low-income countries generally have legal systems that protect property rights and
enforce contracts in a more evenhanded manner.
d. Low-income countries generally have more favorable weather conditions.
A concern about crowding out caused by increased government borrowing is that:
a. interest rates on private borrowing fall.
b. lower rates of economic growth can result from a decline in business investment
spending.
c. the federal government may default on its loans.
d. foreign lenders find it less attractive to help finance federal deficits.
Contrast the Keynesian and Monetarist views on the effectiveness of fiscal policy.
At all points to the right of the intersection of the aggregate output (Y) and aggregate
expenditures (AE) curves, there will be unplanned inventory accumulation.
What are the benefits and costs to a nation that participates in international trade? Do
the benefits outweigh the costs or do the costs outweigh the benefits?
Nominal gross domestic product is based on the existing prices at which final goods are
actually sold.
In the aggregate expenditures model, if aggregate expenditures (AE) equals $7 trillion
and GDP equals $8 trillion, then inventory accumulation equals $1 trillion.