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Computer programs or software are an example of:
a. land.
b. labor.
c. capital.
d. none of these.
By definition, M1 includes:
a. savings accounts.
b. money market mutual accounts.
c. small denomination time deposits.
d. checkable deposits.
Exhibit 16A-2 Macro AD/AS Models
In Panel (a) of
Exhibit 16A-2, the economy is initially in short-run equilibrium at real GDP level Y1
and price level P2. If the federal government or Fed decides to intervene, it would most
likely:
a. increase taxes.
b. decrease the money supply.
c. increase the level of government spending for goods and services.
d. decrease the level of government spending for goods and services.
When the Federal Reserve System wants to increase the money supply, which of the
following actions would the Fed choose?
a. It purchases U.S. government securities.
b. It increases the discount rate.
c. It increases the required reserve ratio.
d. It sells bonds on the open market.
According to the principle of comparative advantage, total output and consumption
levels will be highest when goods are produced in nations according to which of the
following conditions?
a. Opportunity costs are lowest.
b. Absolute advantages are highest.
c. Opportunity costs are equal.
d. Absolute advantages are lowest.
Exhibit 11-6 Aggregate demand and supply model
In Exhibit 11-6, if the aggregate demand curve is at AD2, the government should:
a. raise taxes to move to AD1.
b. cut taxes to move to AD3.
c. cut taxes to move to AD3.
d. cut spending to move to AD3.
e. not change its policy.
Which of the following policy actions by the Fed would cause the money supply to
decrease?
a. An open market purchase of government securities.
b. A decrease in required reserve ratios.
c. A decrease in the discount rate.
d. An open-market sale of government securities.
A direct exchange of fish for corn is an example of:
a. storing value.
b. a modern exchange method.
c. barter.
d. a non-coincidence of wants.
Which one of the following people would not be considered a part of the labor force?
a. A steel worker who was laid off last week and is seeking work.
b. A steel worker who was laid off last year and is no longer seeking work.
c. A student who also works part-time.
d. A member of the U.S. Navy.
e. A retired college professor paid to teach a summer course.
If people expect the price of packaged coffee to rise next week, coffee demand will:
a. decrease now.
b. increase now.
c. stay the same now and increase next week.
d. stay the same now and decrease next week.
e. stay the same now and next week.
A country is said to have a comparative advantage in the production of a good when it:
a. has the lower opportunity cost of producing the good.
b. can produce the good using fewer resources than another country.
c. requires fewer labor hours to produce the good.
d. all of these.
At the equilibrium level of real GDP, total production equals total:
a. saving.
b. investment.
c. net exports.
d. spending.
Exhibit 8-4 Consumption function
As shown in Exhibit 8-4, the marginal
propensity to save (MPS) is:
a. 0.25.
b. 0.50.
c. 0.75.
d. 0.90.
Given the strict quantity theory of money, if the quantity of money were decreased by
50 percent, prices would:
a. fall by 50 percent.
b. rise by 50 percent.
c. increase by 100 percent.
d. decrease by 100 percent.
On a production possibilities curve diagram, greater entrepreneurship:
a. causes the curve to shift outward.
b. keeps the economy on the curve.
c. prevents movement along the curve.
d. keeps the economy at the corners of the curve.
If the Fed uses its tools to expand the money supply, bond prices will be bid down and
interest rates will rise.
In the aggregate expenditures model, if an economy operates below equilibrium GDP,
there will be unplanned inventory depletion.
In traditional economies, people base economic decisions on the precedents established
by previous generations.
The aggregate supply curve is vertical at the level of real GDP that corresponds to the
natural rate of unemployment.
The aggregate demand curve slopes downward because of the real balances,
interest-rate, and net exports effects.
The tax multiplier is greater than the spending multiplier regardless of the value of the
marginal propensity to consume (MPC).
Investment is an economic term for the act of increasing the stock of money available
for business loans.
The three major revenue sources for the federal government in order of decreasing
percentages are individual income taxes, corporate taxes, and social security insurance.
GDP per capita is about 10 times higher in industrially advanced countries (IACs) than
in the poorer less-developed countries (LDCs).
According to the Keynesian model, the government can increase spending or cut taxes
to close a recessionary gap.
