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If net taxes were lowered from $5,000 to $1,000, the marginal propensity to consume is
0.75, and autonomous consumption spending is $10,000, by how much would
consumption increase?
a. $3,000
b. $1,250
c. $7,500
d. $3,750
e. $750
Which of the following could explain the shift in the production possibilities frontier
from AB to AC in Figure2-7?
Figure 2-7
a. a productive improvement in petroleum production that has no effect on clothing
production
b. a productive improvement in clothing production that has no effect on petroleum
production
c. an increase in the size of the labor force that can produce either petroleum products
or clothing
d. oil drilling in Alaska is ended in order to protect the environment
e. major oil reserves are discovered off the coast of Africa
If the unemployment rate has reached an all-time low, the production of output is
probably
a. high
b. low
c. fluctuating
d. stable
e. inefficient
Referring to Figure 2-13, if you had to choose how to allocated $5 million and your
objective was to save the most lives, you would observe that there is
Figure 2-13
Total Lives Saved
a. constant opportunity cost between procedures
b. increasing opportunity cost between procedures
c. no opportunity cost between procedures because human lives are invaluable
d. no tradeoff between procedures because Procedure 1 is much better than Procedure 2
e. no tradeoff between procedures because Procedure 2 is much better than Procedure 1
In the long run, exchange rates
a. are determined by business cycle fluctuations
b. are determined by movements of hot money
c. will adjust until the price of a bundle of goods is the same in both countries
d. will reflect economic fluctuations in both countries
e. are still a mystery to most economists
The Fed's open market operations involve
a. buying and selling of government bonds
b. changes of the discount rate
c. setting the required reserve ratio
d. buying and selling corporate bonds
e. a policy of last resort used to avert a financial crisis
Suppose you recently took a pay cut of 2% at your job. You expect the price level to fall
by 3% during this year. What would be the impact on your real wage?
a. The real wage would fall by 3%
b. The real wage would rise by 3%
c. The real wage would fall by 1%
d. The real wage would rise by 1%
e. The real wage would be unchanged
An increase in the supply of labor will, everything else equal,
a. increase the full-employment level of output
b. decrease the full-employment level of output
c. move the economy from a recession toward full employment
d. reduce total employment
e. have no impact on total employment
Inflation reduces the average real income in the economy and redistributes purchasing
power.
The main tradeoff to be considered when judging pro-growth policies is
a. foregone current consumption versus the current benefits of technological progress
b. foregone current consumption versus the future benefits of technological progress
c. foregone future consumption versus the future benefits of technological progress
d. foregone future consumption versus the current benefits of technological progress
e. government surpluses versus deficits in the future.
Which of the following is not true of the demand deposit multiplier?
a. Its formula is 1/RRR.
b. It represents the change in demand deposits generated by a change in reserves.
c. It represents the change in demand deposits generated by a change in taxes.
d. It is a way to determine the effect on money supply from a given Federal Reserve
action.
e. It ignores changes in the behavior of the public and the banks.
Everything else equal, technological change will typically
a. move the economy along a fixed production function, increasing both productivity
and output
b. move the economy along a fixed production function, increasing output but lowering
productivity
c. cause the production function to shift upward, increasing both output and
productivity
d. cause the production function to shift upward, increasing output but lowering
productivity
e. cause the production function to shift upward, increasing output but leaving
productivity unchanged
In 2008, Computers, Inc. produced personal computers worth $20 million. If $16
million worth were sold and $4 million worth remained unsold at year end and were
added to inventories, how much did Computers, Inc. contribute to GDP in 2008?
a. $0
b. $4 million
c. $12 million
d. $16 million
e. $20 million
