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Frictional unemployment refers to:
a. people who are out of work and have no job skills.
b. short periods of unemployment needed to match jobs and job seekers.
c. people who spend relatively long periods out of work.
d. unemployment related to the ups and downs of the business cycle.
According to the Keynesian aggregate expenditures model equilibrium and full
employment:
a. always occur at the same income level of real GDP.
b. may differ, but there is an automatic mechanism that directs the economy toward
full-employment equilibrium.
c. could never occur at the same level of real GDP.
d. do not necessarily occur at the same level of real GDP.
Macroeconomics deals with the analysis of all of the following questions except:
a. why do national economies grow.
b. what determines a nation's savings and investments.
c. how does a central bank influence inflation.
d. why does a country experience recessions.
e. how does Microsoft price its software packages.
Assume the marginal propensity to consume (MPC) is 0.75 and the government
increases taxes by $250 billion. The aggregate demand curve will shift to the:
a. left by $1,000 billion.
b. right by $1,000 billion.
c. left by $750 billion.
d. right by $750 billion.
If the consumer price index in Year 1 was 200 and the CPI for Year 2 was 230, the rate
of inflation was:
a. 15 percent.
b. 7.5 percent.
c. 30 percent.
d. 230 percent.
Which of the following pairs is the best example of complements?
a. Coffee and tea.
b. DVDs and tapes.
c. Hiking boots and athletic shoes.
d. Tortillas and salsa.
Exhibit 2-14 Production possibilities curve
In Exhibit 2-14, this economy was
located at point E but has now moved to point F.
a. This would be an impossible move because the economy does not have sufficient
resources.
b. The rate of unemployment in this economy would have increased.
c. Consumption goods production has increased, but capital goods production has
decreased.
d. The economy has decreased unemployment, but some degree of unemployment still
exists.
e. This economy has achieved full employment.
Which of the following is not a characteristic of less-developed countries?
a. High rates of illiteracy.
b. High unemployment.
c. Over half of the labor force in agriculture.
d. Low savings and investment rates.
e. Low infant mortality rates.
Assume that the Paris First National Bank is a thriving bank with deposits of $20
million. If the required reserve ratio is 20 percent and the bank is fully loaned out, the
bank will have outstanding loans totaling:
a. $2 million.
b. $4 million.
c. $10 million.
d. $16 million.
e. $20 million.
Which of the following could not be expected to shift the aggregate demand curve?
a. Net exports fall.
b. Consumption spending decreases.
c. An increase in government spending.
d. A change in real GDP.
For any given consumption function, autonomous consumption is equal to the level of
consumption associated with:
a. negative disposable income.
b. positive disposable income. c. zero disposable income.
d. unstable disposable income.
Persistent negative current account balances will lead to ____.
a. c and d
b. d and e
c. budget deficits
d. appreciation of foreign currency
e. depreciation of domestic currency
If the economy is experiencing inflation, then the most appropriate government policy
would be to:
a. shift the aggregate demand curve by using a tax increase coupled with spending cuts.
b. shift the aggregate demand curve by using a tax increase coupled with more
spending.
c. shift the aggregate demand curve by using a tax cut coupled with spending cuts.
d. shift the aggregate demand curve by using a tax cut coupled with more spending.
e. shift the aggregate supply curve by using a tax cut coupled with spending cuts.
Michelle Martelle, CEO of Michelle Enterprises, has five projects in hand and is
considering which, if any, to undertake. Their expected returns are: project A = 12
percent, project B = 7 percent, project C = 10 percent, project D = 9 percent, and
project E = 8 percent. If the interest rate is 8.5 percent, which, if any, investment
projects will she accept?
a. Only project A.
b. Projects A and C.
c. Projects A, C and D.
d. Projects A, C, D and E.
e. Projects A, B, C, D and E.
If people attempt to sell bonds because of excess money demand, then the interest rate
will:
a. rise.
b. fall.
c. remain unchanged
d. react unpredictably.
Substitute goods are goods that are:
a. jointly consumed.
b. competing for consumer spending.
c. used late in the game.
d. inferior.
e. normal.
Assume the marginal propensity to consume (MPC) is 0.80 and the government cuts
taxes by $100 billion. The aggregate demand curve will shift to the:
a. right by $80 billion.
b. left by $200 billion.
c. right by $400 billion.
d. left by $400 billion.
e. None of these.
Which of the following is not a coincident indicator?
a. Personal income.
b. Industrial production.
c. Manufacturing and trade sales.
d. All of these.
The market in which banks make loans of reserves for terms of over one year is called
the federal funds market.
The Keynesian theory focuses on aggregate supply, while the classical theory focused
on aggregate demand.
A bank can lend out its excess reserves but not its required reserves.
According to the text, Ireland and Israel are classified as less developed countries
(LDCs).
Explain how a decrease in the interest rate will affect investment.
From an ethical standpoint, if various alternatives are available to report a transaction,
what are some of the questions an accountant should ask about the alternatives?
A surplus means that the quantity supplied is greater than the quantity demanded at the
prevailing price.
An increase in the marginal propensity to consume (MPC) leads to a decrease in the
spending multiplier.
An increase in input prices will cause the aggregate supply curve to shift rightward.
