If we observe a decrease in the price of a good and an increase in the amount of the
good bought and sold, this could be explained by a(n):
a. increase in the supply of the good.
b. increase in the demand for the good.
c. decrease in the demand for the good.
d. decrease in the supply of the good.
If the market supply increases and, simultaneously, market demand decreases, the new
equilibrium will show:
a. market price will decrease, and market quantity exchanged could increase, decrease,
or remain unchanged.
b. market price will increase, and market quantity exchanged will decrease.
c. market price will increase, and the quantity exchanged could increase, decrease, or
remain the same.
d. market price could increase, decrease, or remain the same, and quantity exchanged
will increase.
e. market price will increase, decrease, or remain the same, and quantity exchanged will
decrease.
Exhibit 16-4 Aggregate demand and supply model
In Exhibit 16-4, which one of the following actions could the Fed use to shift the AD
curve from AD3 to AD2?
a. Lower the discount rate.
b. Lower the federal funds rate
c. Raise the federal funds rate.
d. Raise the legal reserve requirement
e. Buy government securities.
Exhibit 5-8 GDP data (billions of dollars) Personal consumption expenditures $850
Interest 90
Corporate profits 150
Government spending 400
Depreciation 100
Rental income 70
Gross private domestic investment 120
Compensation of employees 830
Exports 120
Imports 70
Indirect business taxes 80
Proprietors’ income 120
Personal income taxes 110
Social Security taxes 50
Transfer payments 160 In Exhibit 5-8, personal income (PI) equals:
a. $1,280 billion.
b. $2,290 billion.
c. $1,310 billion.
d. $2,320 billion.
e. $1,400 billion.
Which of the following policy actions by the Fed would cause the money supply to
decrease?
a. An open-market purchase.
b. A decrease in required reserve ratios.
c. A decrease in the discount rate.
d. None of these.
If the consumer price index (CPI) in Year 1 was 200 and the CPI in Year 2 was 215, the
rate of inflation was:
a. 215 percent.
b. 15 percent.
c. 5 percent.
d. 7.5 percent.
e. 8 percent.
Which of the following is a macroeconomic subject?
a. Shipping rates.
b. Price of corporate stock.
c. Market price of Japanese cars.
d. Unemployment rate in the nation.
“Monetary instability has been the major cause of economic instability in this country.
Expansion in the money supply has been the source of every major inflation. Every
major recession has been either caused or perpetuated by monetary contraction.” Who
among the following would most likely adhere to this view?
a. Monetarists.
b. Keynesians.
c. Demand-side economists.
d. Quantity theorists.
Which of the following options could be used to eliminate a recessionary gap?
a. Decrease government spending.
b. Decrease consumption.
c. Decrease investment.
d. Decrease taxes.
Since 1929, real GDP in the United States has grown at an average annual rate of about:
a. 0.5 percent.
b. 1 percent.
c. 3 percent.
d. 7.5 percent.
If the equilibrium price of aspirins is $2.50 and a price ceiling is imposed at $3.00, the
eventual result after market adjustment will be a(n):
a. surplus.
b. shortage.
c. accumulation of inventories.
d. equilibrium.
Under socialism, factories, farms, mines, and natural resources are owned by:
a. laborers.
b. government.
c. private stockholders.
d. no one.
If consumer incomes go up and cars are a normal good, the effect on the demand for
cars ceteris paribus, will be a(n):
a. upward movement along the demand curve for cars.
b. downward movement along the demand curve for cars.
c. rightward shift in the demand curve for cars.
d. leftward shift in the demand curve for cars.
If your income increases from $40,000 to $48,000 and your consumption increases
from $35,000 to $39,000, your marginal propensity to consume (MPC) is:
a. 0.20.
b. 0.40.
c. 0.50.
d. 0.80.
e. 1.00.
Ceteris paribus, if consumer tastes change so that more people are eating broccoli, then
what will happen to the market equilibrium for cabbage, a substitute good for broccoli?
a. Price will increase, and quantity will increase.
b. Price and quantity will stay the same.
c. Price will decrease, and quantity will increase.
d. Price will increase, and quantity will decrease.
e. Price will decrease, and quantity will decrease.
Complementary goods are goods:
a. that are consumed jointly.
b. that are consumed one in place of the other.
c. for which demand increases when the price of its complementary goods increases.
d. for which demand decreases when the price of its complementary goods decreases.
e. that are inversely related.
All human wants cannot be satisfied because of the problem of scarcity.
Capital resources include money and other financial assets.
Government involvement has become so prevalent in the U.S. economy that the U.S.
economy is now generally considered to be a socialist economy.
The Federal Reserve System was created by an act of Congress in 1933 in an effort to
end a wave of bank failures brought on the Great Depression.
In the banking system of the United States, banks that wish to borrow to make up
reserve deficiencies must turn to the federal funds market.
According to Keynesian theory, changes in the money supply have a direct and
immediate impact on aggregate demand.
Assume a ceiling price is set above the equilibrium price. The final result is the
equilibrium price.
Monetarists argue that the Treasury’s conduct of fiscal policy is the most important
factor affecting real GDP and interest rates.