Exhibit 15-1
A Keynesian monetary policy to eliminate a recessionary gap can be portrayed as a
move between points
a. A and B.
b. B and C.
c. C and D.
d. D and A.
You turn to the Treasury bond market page of a newspaper and look under the column
headed “Ask” and see that it says, “128:16” this indicates that
a. the price that the buyer is willing to pay for this bond is $128.16.
b. the price that the buyer is willing to pay for this bond is $1,280.16.
c. the price that the seller is willing to sell this bond for is $1,285.
d. the price that the seller is willing to sell this bond for is $128.16.
Which of the following Fed actions will decrease the money supply?
a. an open market purchase of Treasury bills
b. an increase in the required reserve ratio
c. a decrease in the discount rate relative to the federal funds rate
d. all of the above
e. none of the above
One unintended consequence of the various attempts to restrict farm acreage was that
a. output generally decreased, price increased, and farmers earned higher incomes.
b. individual farmers intensified their efforts to harvest crops from the land still under
cultivation.
c. farmers’ incomes remained constant in real terms.
d. the land that was set aside became less productive.
Economist A believes that the expansionary fiscal policy — in the form of increased
government spending — should be implemented to remove the economy from the
recessionary gap it is currently in.This economist probably believes that
a. crowding out will not present much of a problem.
b. crowding out will be a big problem.
c. crowding out is irrelevant to the degree of effectiveness of fiscal policy.
d. zero crowding out is unlikely.
e. c and d
Fiscal policy is
a. the money supply policy that the Fed pursues to achieve particular economic goals.
b. the spending and tax policy that the government pursues to achieve particular
macroeconomic goals.
c. the investment policy that businesses pursue to achieve particular macroeconomic
goals.
d. the spending and saving policy that consumers pursue to achieve particular
macroeconomic goals.
e. none of the above
Production functions used in economic growth theory are always limited to two inputs:
labor and capital.
a. True
b. False
The interest rate effect, the real balance effect, and the international trade effect all
begin with a change in the price level.
a. True
b. False
Two key assumptions of new Keynesian theory include:
a. (1) people hold rational expectations, and (2) wages and prices are not completely
flexible in the short run.
b. (1) people hold adaptive expectations, and (2) wages and prices are inflexible.
c. (1) people hold rational expectations, and (2) wages and prices are flexible.
d. (1) people hold neither adaptive nor rational expectations and (2) prices are
inflexible.
e. none of the above
The Cold War
a. hampered globalization because it created a political barrier between countries which
reduced the likelihood that those countries would engage in trade with one another.
b. enhanced globalization because it helped to encourage countries to engage in trade
with one another.
c. ended with the building of the Berlin Wall in the early 1960s.
d. a and c
If businesses are optimistic about future sales, the short-run aggregate supply curve will
shift leftward.
a. True
b. False
The supply of seats for an economics class at 10 a.m. is the same as the supply of seats
for the same class at noon. Every student who wants to attend this class at noon can, but
not every student who wants to attend the 10 a.m. class can. Tuition does not vary by
time. It follows that the demand for the 10 a.m. class is __________ the demand for the
noon class.
a. lower than
b. the same as
c. greater than
d. either a or b
e. none of the above
Public choice deals exclusively with business decisions.
a. True
b. False
Based on the given change, what word (rises or falls) should go in blank (11) and blank
(12), respectively, to summarize the resulting impact on short run equilibrium?
a. rises; rises
b. falls; falls
c. rises; falls
d. falls; rises
Which of the following statements is false?
a. In the case of a negative externality, the market equilibrium is inefficient.
b. In the case of a negative externality, when a tax is set equal to the marginal external
costs (MEC) efficiency can be achieved.
c. In the case of a negative externality, when a tax is set that is greater than the marginal
external costs (MEC) inefficiency will result.
d. In the case of a positive externality, when a tax is set equal to the marginal external
benefits (MEB) efficiency can be achieved.
A person in the civilian labor force falls into one of two categories:
a. a person who works in a service industry or a person who works in a manufacturing
industry.
b. unemployed or employed.
c. disemployed or unemployed.
d. a self-employed worker or a non-self-employed worker.
If reserves equal $59 million and vault cash equals $29 million, it follows that
a. bank deposits at the Federal Reserve equal $29 million.
b. currency in the hands of the public equals $29 million.
c. excess reserves equal $30 million.
d. bank deposits at the Federal Reserve equal $30 million.
e. There is not enough information to answer the question.
If the money supply is $3,000, velocity is 4 and the price level is $2, then Real GDP
is_____________ units of output. If the money supply doubled over a short time period
to $6,000, the simple quantity theory of money would predict that
______________________.
a. 3,000; the price level would double
b. 6,000; Real GDP would double
c. 625; the price level would be cut in half
d. 6,000; the price level would double
Exhibit 5-1
which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. A toll of
P1 creates __________ at 8 a.m. and __________ at 11 p.m.
a. a shortage; a surplus
b. a surplus; a shortage
c. equilibrium; a surplus
d. a shortage; equilibrium
Compensation of employees is the largest component of GDP when using the
expenditure approach to calculate GDP.
a. True
b. False