Which of the following is responsible for controlling the money supply in the United
States?
a. The U.S. Congress.
b. The Board of Governors of the Federal Reserve System.
c. The U.S. Treasury.
d. The Council of Economic Advisors.
Exhibit 5-5 Gross domestic product data National income accountBillions of
dollars
Depreciation $ 500
Net interest 2,000
Compensation of employees 6,000
Profits 1,500
Rental income 200
Indirect business taxes 800
Social Security payments 1,000 As shown in Exhibit 5-5, national income (NI) is:
a. $9,000 billion.
b. $9,900 billion.
c. $10,500 billion.
d. $11,000 billion.
e. None of these.
The average number of times per year each dollar is used to transact an exchange is
known as the:
a. liquidity of money.
b. velocity of money.
c. quantity theory of money.
d. equation of exchange
e. rapidity index
Suppose the required reserve ratio is 3 percent, and currency and reserves total $10
million. The maximum money supply that can be supported is:
a. $13 million.
b. $30 million.
c. $97 million.
d. $333.3 million.
Those hurt by inflation include:
a. labor unions with COLA clauses.
b. borrowers.
c. savers.
d. owners of real estate.
e. owners of precious metals, antiques, and works of art.
Union contracts with built-in cost-of-living adjustments and home mortgages that vary
with the rate of inflation are:
a. inappropriate ways of combating inflation.
b. examples of bracket creep.
c. means of implementing fiscal policy.
d. steps that can be taken to decrease the adverse impacts of inflation.
e. examples of failed discarded policies of the 1970s.
The fraction of each added dollar of income that is used for consumption is called the:
a. average propensity to consumer (APC).
b. autonomous consumption rate (ACR).
c. marginal consumption propensity (MCP).
d. marginal propensity to consume (MPC).
If MPC = 0.9, equilibrium real GDP is $1,000, and full-employment real GDP is
$2,000, then how much should government spending change to bring about full
employment?
a. +1,000.
b. -100.
c. +900.
d. +100.
e. -0.9.
Which of the following is an example of a positive economic statement?
a. The economy’s real output increased at about 3 percent last year and the
unemployment rate decreased.
b. A central bank should not print too much money because inflation could result.
c. Congress should stabilize the social security system by raising taxes now.
d. The government farm products surplus should be distributed to the needy.
Keynes called the money people hold in order to buy bonds, stocks, or other nonmoney
financial assets the:
a. transactions demand for holding money.
b. precautionary demand for holding money.
c. speculative demand for holding money.
d. unit of account demand for holding money.
Greater entrepreneurship in the economy will shift the aggregate:
a. supply curve rightward.
b. supply curve leftward.
c. demand curve rightward.
d. demand curve leftward.
Exhibit 1A-5 Straight line
In Exhibit 1A-5, the slope of straight line
CD is:
a. positive.
b. zero.
c. negative.
d. variable.
Which of the following portions of the national debt impose a net interest burden on the
federal government?
a. treasury bonds held by government agencies
b. treasury bonds held by private investors
c. treasury bonds held by the Federal Reserve system
d. treasury bonds held in the Social Security Trust Fund
Which one of the following is a correct expression of the accounting equation?
a. Assets + Liabilities = Owners’ Equity
b. Assets = Liabilities  Owners’ Equity
c. Assets + Owners’ Equity = Liabilities
d. Assets = Liabilities + Owners’ Equity
If X is a normal good, a rise in consumer income will shift the:
a. demand curve for X to the right. c. supply curve for X to the right.
b. demand curve for X to the left. d. supply curve for X to the left.
Exhibit 18-1 Production possibilities curves
In Exhibit
18-1, the production possibilities curves of wheat and corn for Nabia and Pada are
presented. In Nabia the cost of producing one more unit of corn is equal to:
a. 4 units of wheat.
b. 4 units of corn.
c. 1/4 unit of wheat.
d. 15 units of wheat.
e. 60 units of wheat.
In the aggregate expenditures model, a tax increase causes a(n):
a. upward shift in the aggregate expenditures curve.
b. downward shift in the aggregate expenditures curve.
c. shift in the 45-degree line.
d. rightward movement along the aggregate expenditures curve.
e. leftward movement along the aggregate expenditures curve.
Exhibit 4-3 Supply and demand curves
Beginning from an equilibrium at point E2 in Exhibit 4-3, an increase in demand for
good X, other things being equal, would move the equilibrium point to:
a. E1.
b. E2.
c. E3.
d. E4.
If a person is taxed $100 on an income of $1,000, taxed $180 on an income of $2,000,
and taxed $220 on an income of $3,000, this person is paying a:
a. progressive tax.
b. poll tax.
c. proportional tax.
d. regressive tax.
e. retro tax.
Unemployment insurance payments act as automatic stabilizers by:
a. allowing for more consumer spending during prosperity.
b. making the unemployment rate worse during a recession.
c. allowing for more consumer spending during a recession.
d. changing the Phillips curve to a Laffer curve.
Keynesian economists believe monetary policy is more effective than fiscal policy in
stabilizing the business cycle.
The term “recovery” refers to the maximum point of the business cycle.
An economic justification for government providing public goods and services is that
many people can benefit regardless of whether they pay or not.
Explain how changes in wealth, the price level, interest rates, and expectations alter the
consumption curve.
A leftward shift in the aggregate supply curve along a fixed aggregate demand curve
will cause cost-push inflation.
Describe the vicious cycle of poverty. What are the consequences of this cycle?
In any year, nominal GDP divided by the GDP chain price index times 100 equals real
GDP.
If consumption is $800 when disposable income is $1,000, the marginal propensity to
consume (MPC) must be 0.80.
According to the adaptive expectations theory, after many years of rising prices, people
tend to ignore past experience in predicting the future rate of inflation.