When the Federal Reserve decreases the money supply, at the previous equilibrium
interest rate households and firms will now want to
A) buy Treasury bills.
B) sell Treasury bills.
C) neither buy nor sell Treasury bills.
D) hold less money.
When the price of gasoline rises, some consumers begin riding their bikes more
frequently or riding the bus instead of driving their cars. The fact that the CPI does not
fully account for such changes in consumer behavior is called
A) outlet bias.
B) increase in quality bias.
C) substitution bias.
D) discrimination bias.
Household spending on goods and services is known as
A) consumption spending.
B) planned investment spending.
C) government purchases.
D) net exports.
Creative destruction means that
A) firms develop new products that replace old products in the economy, thereby
encouraging economic growth.
B) economic growth can only be sustained if capital depreciates rapidly.
C) knowledge capital can be created through a system of government subsidies for
education and research and development.
D) research and development should only be financed if research and development is
incremental (a result of making small changes to existing products).
How much is a bond that pays $20 in coupon payments for 4 years and $1,000 at the
end of the fourth year worth if the interest rate is 5%?
A) $822.70
B) $893.62
C) $1,070.92
D) $1,080
The impact of crowding out
A) is larger in a closed economy as compared to an open economy.
B) is larger in an open economy as compared to a closed economy.
C) is larger in an open economy as compared to a closed economy when fiscal policy is
contractionary.
D) is larger in a closed economy as compared to an open economy when fiscal policy is
contractionary.
Article Summary
Starting as a Chicago antique store that sold sandwiches on the side, Potbelly has grown
from this 1977 beginning into a company which today operates approximately 300
sandwich shops in the United States. In October 2013, Potbelly sold stock for the first
time through an initial public offering (IPO), with shares jumping in price from the
initial offering price of $14 to more than $32 on the same day. Since 2011, Potbelly has
seen an increase in both sales and revenue, and earned a profit of $2.8 million in the
first half of 2013.
Source: Matt Krantz, “Potbelly IPO shares more than double on open,” USA Today,
October 4, 2013.
When Potbelly sold stock to the public in its IPO, it did so through the NASDAQ
market. This was an example of Potbelly using ________ to raise funds.
A) indirect finance
B) direct finance
C) bonds
D) corporate governance
If workers leave a country to seek out better opportunities in another country, then this
will
A) shift the short-run aggregate supply curve of the original country to the left.
B) shift the short-run aggregate supply curve of the original country to the right.
C) move the original economy up along a stationary short-run aggregate supply curve.
D) move the original economy down along a stationary short-run aggregate supply
curve.
The best measure of the income households actually have available to spend is
A) personal income.
B) disposable personal income.
C) national income.
D) net national income.
The automatic budget surpluses and budget deficits that occur in the federal budget over
the business cycle
A) destabilize the economy.
B) stabilize the economy.
C) decrease potential GDP.
D) increase potential GDP.
Equilibrium GDP is equal to
A) autonomous expenditure times the marginal propensity to consume.
B) autonomous expenditure times the marginal propensity to save.
C) autonomous expenditure times the multiplier.
D) autonomous expenditure.
Under the gold standard, the government must have enough gold to back up any
A) increase in money demand.
B) increase in the money supply.
C) change in its currency’s exchange rate.
D) foreign currency deposits in its central bank.
If the number of unemployed workers is 200 million, and the number in the labor force
is 500 million, what is the unemployment rate?
A) 0.4%
B) 4%
C) 14%
D) 40%
Proponents of the real business cycle model argue that the short-run aggregate supply
curve is
A) flat.
B) positively sloped.
C) vertical.
D) negatively sloped.
The Pre-Existing Condition Insurance Plan is a federally administered part of the
Affordable Care Act, and is designed for people with pre-existing medical conditions to
obtain insurance.By offering health insurance to all U.S. citizens with pre-existing
medical conditions, the Pre-Existing Condition Insurance Plan
A) eliminates asymmetric information for the insurer, but not for the insured.
B) eliminates asymmetric information for the insured, but not for the insurer.
C) eliminates asymmetric information for both the insurer and the insured.
D) reduces, but does not eliminate,, asymmetric information for both the insurer and the
insured.
Technological improvements are more likely to occur if
A) the economy is centrally planned.
B) entrepreneurs are compensated with higher profits for taking risks.
C) economic decisions are made by politicians rather than entrepreneurs.
D) companies face little competition in their markets.
Which of the following is one explanation as to why the aggregate demand curve slopes
downward?
A) Increases in the price level lower the interest rate and decrease consumption
spending.
B) Increases in the price level lower the interest rate and decrease investment spending.
C) Increases in the U.S. price level relative to the price level in other countries lowers
net exports.
D) Increases in the price level raise real wealth and lowers consumption spending.
Investment spending includes spending on
A) stocks.
B) food.
C) changes in business inventories.
D) transfer payments.