Full employment occurs when the rate of unemployment consists of:
a. structural plus frictional unemployment.
b. cyclical plus frictional unemployment.
c. structural, frictional, and cyclical unemployment.
d. none of these.
In the United States, the Phillips curve in the 1960s:
a. shifted upward dramatically.
b. shifted upward moderately.
c. remained stable.
d. shifted downward moderately.
e. shifted downward dramatically.
If aggregate expenditures (AE) are less than aggregate output (real GDP), then firms
will:
a. have unplanned inventory accumulation.
b. earn above-average profits.
c. expand production and hire more workers.
d. be raising their prices.
Which of the following statements about crowding out is true?
a. It can completely offset the multiplier.
b. It is caused by a budget deficit.
c. It is not caused by a budget surplus.
d. All of these are true.
Suppose the exchange rate changes so that more Japanese yen are required to buy a
dollar. We could conclude that:
a. the Japanese yen has appreciated in value.
b. U.S. citizens will buy more Japanese imports.
c. Japanese will demand more U.S. exports.
d. U.S. citizens will buy less Japanese imports.
The International Accounting Standards Board (IASB) was created in order to develop
worldwide accounting standards that must be used for all financial statements prepared
regardless of country.
a. True
b. False
Which of the following answers best reflects the ability-to-pay philosophy of taxation?
a. Property tax.
b. Progressive income tax.
c. Excise tax on gasoline.
d. Excise tax on cigarettes.
Below are several accounts from Costello Company’s accounting records. Answer the
questions that follow.
A) How much is the balance of retained earnings at the end of the year? B) Show the
accounting equation for Costello Company at the end of the year with the respective
dollar amounts. C) If stockholders’ equity increases during the year, does that mean that
the company is profitable? Explain your answer.
If the multiplier is 3, equilibrium real GDP is $1,000 billion, and investment is $400
billion, what will happen if investment decreases to $380 billion? Real GDP will:
a. increase to $1,020 billion.
b. increase to $1,060 billion.
c. decrease to $980 billion.
d. decrease to $940 billion.
e. decrease to $970 billion.
According to the Bureau of Labor Statistics’ survey, which category represents the
largest expense for the typical urban family?
a. Housing.
b. Food and beverages.
c. Transportation.
d. Medical care.
Exhibit 16-3 Money market demand and supply curves
In Exhibit 16-3, assume an equilibrium at E2 with the money supply at $100 billion and
the interest rate at 15 percent. The Fed uses its policy tools to move the economy to a
new equilibrium at E1 with a money supply of 150 billion and an interest rate of 10
percent. As part of the adjustment to the new equilibrium, we would expect the:
a. price of bonds to rise.
b. price of bonds to remain unchanged.
c. price of bonds to fall.
d. none of these.
Which of the following could cause the supply of carrots to decrease?
a. Consumers’ incomes decrease.
b. There is a technological advance in carrot production.
c. Fertilizer costs increase.
d. The number of farmers growing carrots increases.
e. The price of carrots decreases.
In the aggregate expenditures model, if aggregate expenditures (AE) are greater than
GDP, then:
a. inventory is accumulated.
b. inventory is unchanged.
c. employment decreases.
d. employment increases.
The marginal propensity to consume (MPC) is computed as the change in consumption
divided by the change in:
a. GDP.
b. income.
c. saving.
d. none of these.
Given the strict quantity theory of money, if the quantity of money doubled, prices
would:
a. fall by half.
b. double.
c. remain constant.
d. increase somewhat but less than double.