Assume the economy is operating at a real GDP above full-employment real GDP.
Keynesian economists would prescribe which of the following policies?
a. Nonintervention
b. Fixed rule
c. Contractionary
d. Expansionary
The use of a dollar bill to buy a concert ticket represents the function of money as a:
a. medium of exchange.
b. unit of account.
c. store of value.
d. all of these.
Which of the following is not an interest-earning asset of commercial banks?
a. Required reserves.
b. Checkable deposits.
c. Customer savings accounts.
d. All of the above are interest-earning assets of commercial banks.
e. None of the above are interest-earning assets of commercial banks.
Exhibit 8-2 Consumption function
As shown in Exhibit 8-2, saving
occurs:
a. at 0 disposable income.
b. between $0 and $4 trillion disposable income.
c. at $4 trillion disposable income.
d. at a disposable income greater than $4 trillion.
Which of the following is the best example of an automatic stabilizer?
a. Welfare payments.
b. Foreign aid
c. Defense spending.
d. Highway construction.
A shift of the U.S. demand curve for Mexican pesos to the left and a decrease in the
pesos price per dollar would likely result from:
a. an increase in the U.S. inflation rate relative to the rate in Mexico.
b. a change in U.S. consumers’ tastes away from Mexican products and toward products
made in South Korea, India, and Taiwan.
c. U.S. buyers perceiving that domestically-produced products are of a lower quality
than products made in Mexico.
d. all of these.
The real balances effect occurs because a higher price level will reduce the real value of
people’s:
a. financial assets.
b. wages. c. unpaid debt.
d. physical investments.
Total spending by government is:
a. $600 billion.
b. $100 billion.
c. $200 billion.
d. $300 billion.
e. $800 billion.
People who are not currently employed, but say they want a job, are counted as
unemployed only if they:
a. have previously held a job.
b. are actively seeking employment.
c. are willing to accept a reasonable offer.
d. are between 16 and 65 years of age.
e. are willing to accept any offer of employment.
Which one of the following is part of the M2 definition of the money supply, but not
part of M1?
a. Checkable deposits.
b. Currency held in banks.
c. Currency in circulation.
d. Small time deposits of less than $100,000.
The spending multiplier also applies to investment spending by businesses.
The law of supply indicates that an increase in price will cause an increase in supply
which is reflected graphically as a rightward shift of the supply curve.
The spending multiplier effect is the result of a movement along the aggregate
expenditures (AE) line.
Why are all costs really “opportunity costs”?
A downward-sloping line has a negative slope.