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Inflation will generally redistribute purchasing power when
a. it is fully expected
b. it is completely unexpected
c. it is greater than 3 percent
d. it is greater than 5 percent
e. it is greater than 10 percent
Which of the following is not an example of a flow variable?
a. The amount of income that a person earns each month
b. The amount of interest that a savings account earns each week
c. The amount of money in a savings account
d. The amount of taxes that a person pays each year
e. All of these are flow variables
According to the aggregate supply-aggregate demand model, an expansionary fiscal
policy will, in the long run,
a. have the opposite effect of an expansionary monetary policy
b. increase both real GDP and the price level
c. increase real GDP and decrease the price level
d. increase real GDP and leave the price level unchanged
e. increase the price level and leave real GDP unchanged
The self-correcting mechanism is the reason that the economy will behave as the
classical model predicts in the long run.
In the classical model with an open economy, an increase in government purchases
always causes complete crowding out.
The national debt
a. is currently greater than the annual federal deficit
b. is reduced by the revenue generated from the federal deficit
c. decreases as the deficit is reduced
d. is a flow variable
e. varies depending on developments in the stock market
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 tank is approximately
a. 20 guns
b. 50 guns
c. 50 tanks
d. 1/50 of a tank
e. 1/50 of a gun
Which of the following policies would increase the demand for loanable funds and thus
investment spending?
a. A reduction in the investment tax credit.
b. An increase in the corporate profits tax.
c. A reduction in the capital gains tax.
d. An increase in the investment tax credit.
e. An increase in transfer payments.
If the money demand curve shifts rightward, the AD curve also shifts rightward.
In Figure 3-4, the equilibrium price is
a. $5
b. $4
c. $3
d. $1
e. $0
When a country runs a trade deficit,
a. it must be running a budget surplus.
b. its imports will become injections instead of leakages.
c. its exports will become leakages instead of injections.
d. foreigners will demand loanable funds from the country.
e. foreigners will supply loanable funds to the country equal to its trade deficit
Which of the following would not be considered a consumer durable?
a. A sofa
b. A personal computer
c. Dinner each month at a nice restaurant
d. An automobile
e. A refrigerator
