A decrease in the interest rate reduces the opportunity cost of holding money.
Open market sales of bonds by the Federal Reserve reduce the money supply and
a. reduce aggregate expenditures
b. increase real aggregate expenditures
c. are helpful in monetizing the federal debt
d. stimulate purchases of consumer durables
e. stimulate spending at many levels
If the MPC is 0.8 and net taxes increase by $100 billion, what is the effect on
equilibrium output?
a. There is no effect; equilibrium output is not affected by a change in net taxes.
b. Equilibrium output will fall by $80 billion.
c. Equilibrium output will fall by $125 billion.
d. Equilibrium output will fall by $400 billion.
e. Equilibrium output will fall by $500 billion.
The economist that gave us the proposition that ‘supply creates its own demand” was
a. Adam Smith
b. Jean Baptiste Say
c. Marc Lieberman
d. John Maynard Keynes
e. Robert Hall
Which of the following occurs during a recession?
a. Output rises, employment rises and unemployment falls.
b. Output falls, employment falls and unemployment rises.
c. Output rises, employment falls and unemployment falls.
d. Output rises, employment rises and unemployment rises.
e. Output rises, employment rises and tax revenues fall..
Movement from point K on the production possibilities curve for food and clothing in
Figure 2-10, to point J inside the curve could be the result of
Figure 2-10
a. an increase in opportunity costs
b. supply and demand
c. greater efficiency
d. a decrease in the population
e. an increase in unemployment
The government budget deficit is
a. the difference between government purchases and government revenues from bonds
and taxes
b. caused by a lack of business sector investment
c. created when the government expenditures exceed net taxes
d. caused by leakages in the economy
e. is created by government injections
An economy with a government planning commission that provides explicit
instructions for resource allocation is an example of
a. a command economy
b. a communal economy
c. a traditional economy
d. a market economy
e. market socialism
In the short run, the impact of a $50 billion tax package on GDP will be
a. greater than $50 billion because of the multiplier effect
b. less than $50 billion because of the tax code
c. greater than $50 billion because of the tax code
d. exactly $50 billion
e. greater than $50 billion because of crowding out.
If a variable other than the price level changes, the AD curve shifts.
If Johanna purchases a bond for $4,500 that promises to pay her $5,000 one year later,
what is the interest rate on the bond?
a. 5.3 percent
b. 5.6 percent
c. 10.0 percent
d. 11.1 percent
e. 10.5 percent
In some developing countries, labor productivity has remained stagnant or fallen
because
a. the capital stock has grown at about the same rate or more slowly than the population
b. the capital stock has grown faster than the population
c. the population has decreased
d. foreign labor has been utilized
e. wages have dropped
Half of American recessions since the early 1950s have been caused at least in part by
rapid increases in oil prices.
Which of the following is not true about the Consumer Price Index (CPI)?
a. The U.S. income tax system is indexed based on the CPI.
b. The majority of labor union contracts have wages indexed by the CPI.
c. The CPI can be used to transform nominal variables into real variables.
d. The CPI can be used to measure the inflation rate.
e. Social security benefits are indexed by the CPI.
In one year, a weapons plant can manufacture either 1,000 more guns or 50 more tanks.
The plant’s opportunity cost of an extra gun is approximately
a. 50 tanks
b. 20 guns
c. 20 tanks
d. 1/20 of a tank
e. 1/50 of a tank
Refer to Figure 15-4. If the economy is currently at point X, an increase in output will
a. move the economy to point A
b. move the economy to point B
c. shift the aggregate supply curve up to curve AS2
d. shift the aggregate supply curve down to curve AS3
e. have no effect on the price level and there will be no movement away from point X.
The dominant forces causing changes in exchange rates in the very short run are
a. changes in relative interest rates
b. changing expectations regarding future exchange rates
c. economic fluctuations
d. the erratic spending patterns of tourists
e. changes in relative interest rates and in expectations of future exchange rates
Economic growth in less-developed countries comes at the cost of
a. higher taxes
b. lower current consumption
c. lower taxes
d. lower government spending
e. lower future consumption.
The money market achieves equilibrium when
a. individuals no longer want to spend their money
b. the price of bonds rises by an appropriate amount
c. buyers and sellers agree on a price for commodities
d. speculative balances are reduced to a minimum
e. individuals who hold bonds are satisfied with what they are holding