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According to rational expectations theory, what information do businesses and workers
use when they form their expectations regarding inflation?
a. Recent events and data.
b. Keynesian and monetarist models.
c. Forecasts by public-and private-sector economists.
d. All the relevant information that is available.
Which of the following would cause a shift in the demand curve for a good?
a. An increase in consumers' income.
b. A decrease in the number of consumers.
c. The expectation that the price of a good will increase in the future.
d. All of these.
Exhibit 15-3 Balance sheet of Tucker National Bank Assets Liabilities
Required reserves $ 20,000 Checkable deposits $100,000
Excess reserves 0
Loans 80,000
Total $100,000 Total $100,000 Suppose Connie Rich deposits $100,000 into her
checking account in the bank shown in Exhibit 15-3. The result would be a:
a. $20,000 increase in excess reserves.
b. $20,000 increase in required reserves.
c. $100,000 increase in required reserves.
d. zero change in required reserves.
Which of the following is not an idea advocated by Adam Smith?
a. Businesspersons conspiring to fix prices are a threat to the price system.
b. Pursuit of private self interest with an invisible hand is the best way to promote the
public interest.
c. Government should control the economy.
d. The government should provide for national defense and little else.
Denise is thinking about setting up a butterfly garden in her backyard. She estimates
that it will cost her $2,000 to purchase and install special plants and an irrigation system
to attract butterflies. The benefit she expects to receive is $1,800. In addition, neighbor
Billy will receive a benefit of $150 and neighbor Sammy will receive a benefit of $100.
From this, we can conclude that:
a. butterflies are a negative externality for Billy and Sammy.
b. Denise will set up the butterfly garden without any help from her free-rider
neighbors.
c. if Sammy refuses to contribute to the butterfly garden, he will be unable to enjoy its
benefits if it is built.
d. if Billy refuses to contribute to the butterfly garden, Denise will not have one.
e. if Billy and Sammy contribute the amounts at which they value the butterfly garden,
Denise will set it up.
The long-run Phillips curve:
a. is horizontal.
b. is the same as the short-run Phillips curve.
c. displays a positive relationship rather than an inverse relationship.
d. is exponential.
e. is vertical.
In periods of high inflation,
a. people want to hold on to as much money as possible.
b. the purchasing power of money is decreasing.
c. nobody wants to work and earn income.
d. low nominal interest rates are likely to result.
e. nobody wants to buy goods and services.
Which of the following is the best example of a public good?
a. Cars.
b. Education.
c. Radios.
d. Air traffic control.
Under the adaptive expectations hypothesis, which of the following is the effect of a
shift to a more expansionary monetary policy?
a. In the short run, the real rate of output will be unaffected, but in the long run, it will
increase.
b. In the short run, the unemployment rate will decrease, but in the long run, it will self
correct to the natural rate of unemployment.
c. There will be a permanent increase in the real rate of output, but the inflation rate will
also be a little higher.
d. In the short run, the impact on the real rate of output is uncertain, but in the long run,
output will increase.
Exhibit 1A-1 Straight line
In Exhibit 1A-1, the slope of straight line
AB is:
a. positive.
b. zero. c. negative.
d. variable.
When economists speak of changes in GDP measured in constant dollars, they mean
that:
a. money GDP is constant.
b. the price level is constant.
c. a price index has been used to adjust money GDP for the effects of inflation.
d. the growth rate of money GDP has been adjusted for changes in population.
Cyclical unemployment refers to unemployment resulting from:
a. a mismatch of skills.
b. being in the wrong geographical location.
c. the time and monetary cost of finding the best job.
d. a recession.
A decrease in real GDP would affect the U.S. economy by:
a. cutting tax revenues and raising government expenditures.
b. cutting government expenditures and raising tax revenues.
c. raising both tax revenues and government expenditures.
d. cutting both government expenditures and tax revenues.
SeveralitemsfromthefinancialstatementsofStandardTiresarelistedbelow.Usethefollowing
answerchoicestoidentifythetypeofaccountforeachitemlisted.Placeyouranswersinthespac
eprovided.
a. Assets
b. Liabilities
c. Revenues
d. Expenses
e. Owners' equity Retained earnings
If autonomous consumption is greater than zero and the marginal propensity to
consume is greater than zero, but less than one, the consumption function will first be
below and then above the 45 degree line.
Demand curves slope downward to the right.
Excess reserves equal total reserves plus required reserves.
Banks that wish to borrow required reserves can turn to the federal funds market.
According to the text, Ireland and Israel are classified as industrially advanced countries
(IACs).
If some resources were used inefficiently, the economy would operate outside its
production possibilities curve.
