Of the following, which is true of the relationship between the quantity of a good
supplied and its price?
a. As price increases, the quantity supplied usually decreases.
b. As price increases, the quantity supplied usually increases.
c. As price increases, supply increases.
d. When demand increases, so will supply.
e. They always meet at the point of equilibrium in the market.
Which case represents the largest increase in the real national debt?
a. The price level increases by 500 percent and nominal debt increases by 500 percent.
b. The price level increases by 200 percent and nominal debt increases by 600 percent.
c. The price level decreases by 50 percent and nominal debt increases by 300 percent.
d. The price level increases by 400 percent and nominal debt increases by 200 percent.
e. The price level decreases by 90 percent and nominal debt increases by 200 percent.
In the classical model, a falling demand for labor will
a. not cause unemployment because the labor market always clears
b. cause a recession with lower employment and a lower real wage
c. cause a recession with lower employment and an increasing real wage
d. cause a recession with lower unemployment and a lower real wage
e. cause a recession with higher employment and an increasing real wage.
A newspaper headline announces that “more college graduates than ever are in the labor
force.” This is an example of
a. microeconomic analysis
b. an abstraction
c. a value judgment
d. a positive statement
e. macroeconomic analysis
Which of the following sequences results from an increase in the price level?
a. the money demand curve shifts leftward, the interest rate decreases, investment
spending and autonomous consumption increase, the aggregate expenditure line shifts
downward and there is a leftward movement along the aggregate demand curve.
b. the money demand curve shifts rightward, the interest rate increases, investment
spending and autonomous consumption decrease, the aggregate expenditure line shifts
downward and there is a leftward movement along the aggregate demand curve.
c. the money demand curve shifts leftward, the interest rate increases, investment
spending and autonomous consumption increase, the aggregate expenditure line shifts
downward and there is a leftward movement along the aggregate demand curve.
d. the money demand curve shifts leftward, the interest rate drops, investment spending
and autonomous consumption decrease, the aggregate expenditure line shifts downward
and there is a leftward movement along the aggregate demand curve.
e. the money demand curve shifts rightward, the interest rate increases, investment
spending and autonomous consumption increase, the aggregate expenditure line shifts
downward and there is a rightward movement along the aggregate demand curve.
If at an interest rate of 7 percent, planned investment is $2 trillion, government
spending is $3 trillion, net taxes are $2.8 trillion, and household saving is $2.2 trillion,
what is the quantity of funds demanded at an interest rate of 7 percent?
a. $1.8 trillion
b. $2.2 trillion
c. $2.8 trillion
d. $5.0 trillion
e. $5.8 trillion
Growth in employment can result from either an increase in labor supply or an increase
in labor demand.
The statement that “at 10 percent, the interest rate is too high for families to buy a home
they could have afforded when the interest rate was below 7 percent ,” is a(n)
a. positive statement
b. normative statement
c. morally ambiguous philosophical position
d. affront to the American dream
e. value judgment
The Fed has decreased the money supply. The formula for calculating the resulting
change in demand deposits is
a. (1/RRR) minus the change in reserves
b. (1/RRR) multiplied by the change in reserves
c. the change in reserves divided by [1 – (1/RRR)]
d. RRR minus the change in reserves
e. [1 – (1/RRR)] multiplied by the change in reserves
If the Federal Reserve sells $1,500 in bonds and the resulting money supply change is
$7,500, what is the required reserve ratio?
a. 5.0
b. 0.2
c. 0.1
d. 0.4
e. 0.8
Rapid economic growth is important because it
a. makes some people richer
b. eliminates scarcity
c. makes the unemployment rate zero
d. allows the average person to consume more goods and services
e. reduces interest rates
The Federal Reserve System is under the strict control of
a. the executive branch
b. the legislative branch
c. the judicial branch
d. the International Monetary Fund
e. none of the above
If a new insect invasion devastates crops all across the United States, which of the
following would most likely occur in the short run?
a. Unit costs would decrease and the economy would move upward along the aggregate
supply curve.
b. Unit costs would increase and the aggregate supply curve would shift downward.
c. Unit costs would increase and there would be movement along the aggregate supply
curve.
d. Unit costs would decrease and the aggregate supply curve would shift upward.
e. Unit costs would increase and the aggregate supply curve would shift upward.
A physician’s knowledge and skills are referred to by economists as
a. human capital
b. labor
c. physical capital
d. entrepreneurship
e. intellectual raw materials
Cash in a commercial bank’s vault is not part of the money supply.
If the marginal propensity to consume is 0.5, the income tax rate is 10%, and income
rises by $20,000, by how much will consumption spending increase?
a. $15,000
b. $10,000
c. $5,000
d. $9,000
e. $1,000
If a bank holds $2000 in demand deposits and the required reserve ratio is 0.15, how
much can the bank lend out?
a. $2,000
b. $1,700
c. $300
d. $150
e. $2,300