In 2000, financial experts announced that they:
A) would no longer be willing to buy or sell mortgage-backed securities.
B) were unable to predict expected income from mortgage-backed securities.
C) had overestimated the risk of loss from mortgage-backed securities.
D) had developed a model that could predict the risk of losing money on
mortgage-backed securities.
Table: Measuring GDP
Look at the table Measuring GDP. Government purchases of goods and services are:
A) $50 billion.
B) $100 billion.
C) $200 billion.
D) $300 billion.
In general, for the U.S. economy, the relation between unemployment and economic
growth is:
A) positive.
B) direct.
C) neutral.
D) negative.
If your disposable income increases from $10,000 to $15,000 and your consumption
increases from $9,000 to $12,000, your marginal propensity to consume is:
A) 0.2.
B) 0.4.
C) 0.6.
D) 0.8.
If the rate of unemployment is 10% and the labor force is 130 million, the number of
unemployed workers is:
A) 1.3 million.
B) 13 million.
C) 10 million.
D) 8 million.
Which question is the most appropriate to the study of MACROECONOMICS?
A) How does the aggregate price level affect overall consumer spending?
B) How does the level of interest rates affect Delta’s decision to buy a new airplane?
C) How much will Sony charge for the new game system to be introduced later this
year?
D) What determines whether Wachovia opens a new office in Beijing?
If demand decreases and supply increases, the direction of change in the equilibrium
quantity is unpredictable unless the relative magnitudes of the demand and supply
changes are known.
A) True
B) False
A government budget surplus would be contractionary because of all of the following
EXCEPT _____ are contractionary.
A) increases in government purchases
B) decreases in government purchases
C) increases in taxes
D) decreases in government transfers
In the product market, households buy goods and services.
A) True
B) False
In the short run, when there is an increase in aggregate demand, the aggregate price
level will _____ and the aggregate output level will _____.
A) rise; fall
B) rise; rise
C) fall; rise
D) fall; fall
The permanent income hypothesis suggests that consumer:
A) spending depends on income people expect over the long term rather than on current
income.
B) spending is smoothed each month in response to changes in their current disposable
income.
C) spending is made up of an autonomous amount and an amount dependent upon
disposable income.
D) savings depends on one’s lifetime income.
The Great Moderation consensus was shattered by:
A) the Great Recession.
B) the Great Depression.
C) World War II.
D) the Panic of 1907.
The belief that a higher rate of growth in real GDP will lead to higher planned
investment spending is known as:
A) the accelerator principle.
B) the multiplier effect.
C) fiscal policy with an emphasis on government spending.
D) unplanned investment spending.
If the marginal propensity to consume is 0.8 and government transfers decrease by $50
million, then equilibrium GDP will decrease by:
A) $40 million.
B) $50 million.
C) $200 million.
D) $250 million.
Figure: Supply and Demand in the Orange Juice Market
Look at the figure Supply and Demand in the Orange Juice Market. The market is in
equilibrium at point C. A reputable scientist asserts in a major scientific publication that
drinking orange juice will increase your life span. What will be the most likely new
equilibrium point in the orange juice market?
A) A
B) B
C) D
D) E
In return for injecting capital into banks, the U.S. government received:
A) deposits at the bank.
B) loans at an interest rate below the prime rate.
C) bonds issued by the bank.
D) shares of stock in the bank.
The national income and product accounts keep track of:
A) consumer debt.
B) sales and investment spending by businesses.
C) worker productivity.
D) unemployment rates.
In the short run in periods of low inflation, an increase in aggregate demand from a
position of full employment leads to:
A) higher prices and higher unemployment.
B) higher prices and higher output.
C) lower prices and higher output.
D) lower prices and higher unemployment.
Scenario: Consumption Spending
Suppose that the consumption function is C= $500 + 0.8 YD,where YD is disposable
income.
Look at the scenario Consumption Spending. The marginal propensity to save is:
A) $500.
B) 0.
C) 0.8.
D) 0.2.
The _____ interest rate _____.
A) nominal; can be negative
B) real; cannot be negative
C) real; can only be positive
D) real; can be zero, positive, or negative
The Panic of 1907 was caused by:
A) national banks issuing too much currency.
B) trusts’ memberships in the New York Clearinghouse.
C) trusts’ losses due to their unsuccessful stock market speculation.
D) excessive investment in collateralized debt obligations.
Physical capital includes:
A) a worker’s education or knowledge.
B) machine tools.
C) money.
D) shares of stock.
The real wage is the wage rate _____ the price level.
A) plus
B) minus
C) divided by
D) multiplied by
Thomas Malthus:
A) was President Reagan’s primary economic adviser.
B) successfully predicted the nationalization of the insurance company AIG.
C) predicted that limited land supplies would prevent large increases in real incomes
per capita.
D) wrote The Limits to Growth in 1972.
Since the short-run increase in the aggregate price level that follows a monetary
expansion is smaller than the ensuing long-run increase, it follows that:
A) money is neutral in the short run.
B) in the short run, the interest rate remains constant.
C) in the long run, the real money supply increases.
D) in the short run, the real money supply increases.
The monetary base is currency in circulation plus bank reserves.
A) True
B) False
If the marginal propensity to save is 0.25, investment spending is $600 million, and the
government increases its transfers by $100 million, then real GDP increases by:
A) $25 million.
B) $150 million.
C) $300 million.
D) $1,800 million.
Look at the table Peanut Butter and Jelly Economy. Nominal GDP in 2010 was:
A) $200.
B) $400.
C) $450.
D) $525.
When private lenders learned the size of Greece’s budget deficits and debt in 2009,
they:
A) promptly made loans to the Greek government to prevent a financial crisis.
B) refused to make further loans to Greece.
C) seized assets that belonged to the Greek government.
D) nationalized banks and the manufacturing industry in Greece.
Which of the following is NOT a determinant of consumer spending?
A) disposable income
B) expected disposable income
C) wealth
D) investment spending