In the long-run AS-AD model,
a. the position of the AD curve determines output
b. the self-correcting mechanism of the economy is irrelevant
c. the AS curve shifts leftward whenever the economy is growing
d. the position of the AD curve determines the price level
e. output fluctuates a great deal
Refer to Figure 9-3. The elimination of an investment tax credit that decreases the
demand for loanable funds from D2 to D1 will decrease investment spending by
a. $400 billion and leave the interest rate unchanged
b. $100 billion and leave the interest rate unchanged
c. $100 billion and decrease the interest rate by 2 percentage points
d. $200 billion and leave the interest rate unchanged
e. $500 billion and decrease the interest rate by 2 percentage points
The organization responsible for creating and regulating the U.S. money supply is
a. the Department of Commerce
b. the Council of Economic Advisers
c. the U.S. Mint
d. the Federal Reserve System
e. the Department of the Treasury
Any pro-growth policy that increases investment requires
a. an eventual increase in GDP
b. increased production of consumption goods
c. decreased production of capital goods
d. a sacrifice of current consumption spending
e. reduced government spending
If there is an excess supply of money, there is an excess
a. demand for bonds and the price of bonds will decrease
b. supply of bonds and the price of bonds will decrease
c. supply of bonds but the price of bonds will not change
d. supply of bonds and the price of bonds will increase
e. demand for bonds and the price of bonds will increase
By December 2008, the federal funds rate was approaching the zero lower bound.
Production possibilities frontiers are typically concave (bowed out) from the origin
because
a. of the law of supply
b. there is usually a one-for-one trade-off in resources used in production
c. economies of scale enable firms to reduce the average costs of production as output
rises
d. the opportunity cost of a good rises as the quantity of the good produced increases
e. resources are often left idle in the firm
Suppose Mike agrees to borrow $100 from Renee for one year at a one-time interest
payment of 5%. They both expected the inflation rate to be 2% during the one-year
period. However, during that year the inflation rate was actually 1%. Which of the
following has occurred?
a. The unexpectedly low inflation rate has redistributed $1 from Mike to Renee
b. The unexpectedly low inflation rate has redistributed $5 from Mike to Renee
c. The unexpectedly high inflation rate has redistributed $1 from Mike to Renee
d. There have not been any redistribution costs to either party
e. The unexpectedly low inflation rate has redistributed $1 from Renee to Mike
The supply of bonds to the bond market
a. is positively related to the demand for stocks
b. is inversely related to the interest rate
c. is positively related to income
d. is positively related to the demand for bonds
e. only changes if new bonds are issued
Which of the following could cause the market demand curve for hot dogs to shift to
the left?
a. an increase in the price of hot dogs
b. a decrease in the price of hamburgers
c. an increase in the size of the population
d. an increase in the price of hot dog buns or rolls
e. an increase in the price of mustard
The Consumer Price Index (CPI) excludes goods imported from other countries and
consumed by residents of the United States.
What will be the effects of a decrease in government spending?
a. an increase in equilibrium GDP, a decrease in money demand, a decrease in the
interest rate, and an increase in investment spending
b. a decrease in equilibrium GDP, a decrease in money demand, an increase in the
interest rate, and a decrease in investment spending
c. an increase in equilibrium GDP, an increase in money demand, an increase in the
interest rate, and an increase in investment spending
d. a decrease in equilibrium GDP, a decrease in money demand, a decrease in the
interest rate, and an increase in investment spending
e. an increase in equilibrium GDP, an increase in money demand, an increase in the
interest rate, and a decrease in investment spending
Figure 3-1 shows the market demand schedule for compact disks. If the price per disk
rises from $10 to $12, the
a. demand will decrease by 2.2 million disks
b. quantity demanded will decrease by 2.2 million disks
c. supply will rise by 2.8 million disks
d. quantity demanded will decrease by 3.5 million disks
e. demand curve will shift to the left
If the U.S. government decides to distribute surplus cheese to food banks for the
homeless, the government is addressing the question of
a. which goods and services should be produced with society’s scarce resources
b. what production methods should be used to produce goods and services
c. how will output be allocated among the individuals in the society
d. what prices will be charged for goods and services
e. determining the optimal degree of specialization
The demand for money
a. is the same as the demand for bonds
b. is the same as the supply of bonds
c. increases whenever the price level falls
d. reflects the constraints that people face
e. shows the people always demand as much money as possible
Which of the following would shift the demand curve for the normal good regular
vanilla ice cream to the left?
a. reports of health risks as a result of eating vanilla ice cream
b. an increase in the price of frozen yogurt
c. a decrease in the price of hot fudge sauce
d. an increase in the price of regular vanilla ice cream
e. an increase in buyers’ incomes
Use the table below to determine the marginal propensity to consume (MPC).
a. 0.7
b. 0.8
c. 0.9
d. 1.0
e. 1.8.