Crowding out refers to a(n)
a. decrease in the amount of goods produced after too many goods have crowded onto
the market
b. business tactic used to steal a competitor’s customers
c. increase in one sector’s spending caused by an increase in another sector’s spending
d. decrease in the price level after too many goods have crowded onto the market
e. decline in one sector’s spending caused by an increase in another sector’s spending
If a lender charged a 9 percent nominal interest rate and the expected inflation rate is 4
percent, what is the difference between the real rate the lender received and the real rate
the lender expected when actual inflation ended up being 2 percent?
a. 2 percent
b. 4 percent
c. -4 percent
d. 1 percent
e. 0 percent
In the factor payments approach, owners of land receive
a. wages
b. user fees
c. rent
d. interest
e. profit
Left to itself, a natural monopoly will produce
Robbery reduces economic efficiency by
Which of the following lines has a slope equal to the marginal propensity to consume?
a. The demand for loanable funds curve
b. The labor demand curve
c. The consumption function
d. Inventory line
e. The 45-degree line
A society is saving lives (productively) efficiently if
If money demand decreases due to greater use of credit cards, which of the following
would most likely happen under a neutralization policy?
a. The money supply would decrease, real GDP would not change, and neither would
the interest rate.
b. The money supply would increase, real GDP would not change, and neither would
the interest rate.
c. The money supply would decrease, real GDP would increase, and the interest rate
would decrease.
d. The money supply would increase, real GDP would not change, and the interest rate
would decrease.
e. The money supply would decrease, real GDP would decrease, but the interest rate
would not change.
If government spending decreases, which of the following would occur?
a. An increase in GDP, an increase in the price level, an increase in money demand, and
an increase in the interest rate
b. An increase in GDP, a decrease in the price level, an increase in money demand, and
a decrease in the interest rate
c. A decrease in GDP, a decrease in the price level, a decrease in money demand, and a
decrease in the interest rate
d. A decrease in GDP, a decrease in the price level, an increase in money demand, and
an increase in the interest rate
e. An increase in GDP, an increase in the price level, a decrease in money demand, and
a decrease in the interest rate.
Which of the following would decrease the likelihood that foreign business firms will
invest in a country?
a. A low corporate profit tax rate
b. Political stability
c. A well-established legal system
d. Good law enforcement
e. Political corruption
In Figure 5-5, the slope of the demand curve
If there is an excess supply of money in the money market, there must be an excess
supply of bonds in the bond market.
The cross-price elasticity of demand is
Due to a scarcity of resources,
The supply of a good is more price elastic,
What is the major cost of slowing down an ongoing inflation?
a. Output must rise above potential.
b. The Fed must sell bonds at lower prices than those at which the bonds were
purchased.
c. Output must fall below potential.
d. The Fed must purchase bonds from the public.
e. The Fed must lend additional money to member banks at below-market interest rates.
Recessions are associated with budget deficits.
For a given supply curve, the more inelastic the demand for a good,
Cecilia’s Cafe is a monopolistic competitor. If Cecilia’s is currently producing at the
output level at which her average total cost is minimized and the cafe is earning an
economic profit, then, in the long run, output will
