Exhibit 16A-3 Macro AD/AS Models
As shown in Exhibit 16A-3, assume
the marginal propensity to consume MPC equals 0.75. Using discretionary fiscal policy,
federal government spending should be ____ in order to restore the economy from E1 to
full employment.
a. increased by $1 trillion
b. increased by $2 trillion
c. decreased by $2 trillion
d. increased by $.50 trillion
e. increased by $.80 trillion
Exhibit 3-2 Demand curves
In Exhibit 3-2, the shift in the demand
curve from D1 to D2 could have been caused by which of the following?
a. Decrease in price. c. Increase in the price of a complement.
b. Increase in expected future prices. d. Decrease in income if it is a normal good.
The Laffer curve is representative of which of the following schools?
a. Supply-side school.
b. Rational expectations school.
c. Keynesians.
d. Neo-Keynesians.
e. Classical school.
In the United States, the money supply (M1) consists of:
a. paper currency and coins.
b. coins, paper currency, checkable deposits, and traveler’s checks.
c. paper currency, coins, checkable deposits, and savings deposits.
d. government bonds, currency, checkable deposits, and traveler’s checks.
Last year the Olsen family earned $70,000. This year their income is $77,000. In an
economy with an inflation rate of 8 percent, we can conclude that the Olsen’s nominal
income:
a. and real income both increased.
b. and real income both decreased.
c. increased, but their real income decreased.
d. decreased, but their real income increased.
Crowding out occurs when the federal government:
a. raises taxes to finance a budget deficit.
b. refinances maturing U.S. Treasury bonds.
c. borrows by selling bonds to finance a deficit.
d. uses a budget surplus to pay off part of the national debt.
Which would be least likely to cause the production possibilities curve to shift to the
right?
a. An increase in the labor force.
b. Improved methods of production.
c. An increase in the education and training of the labor force.
d. A decrease in unemployment.
Exhibit 17-4 Short-run and long-run Phillips curves
Suppose the economy in Exhibit
17-4 is at point E1, and the Fed increases the money supply. If people have adaptive
expectations, then the economy will move:
a. to point A in the short run and point B in the long run.
b. directly to point B.
c. to point C in the short run and point D in the long run.
d. directly to point D.
When the required reserve ratio is 20 percent, the money multiplier is:
a. 0.2.
b. 1.2.
c. 2.
d. 2.5.
e. 5.
Assume a simplified banking system subject to a 25 percent required reserve ratio. If
there is an initial increase in excess reserves of $100,000, the money supply:
a. increases $100,000.
b. increases $400,000.
c. increases $125,000.
d. decreases $500,000.
Martin Shore lost his job when General Motors closed down its local plant. He has been
visiting the personnel offices of the other factories in the area, looking for a new job. He
is:
a. a member of the civilian labor force who is employed.
b. a member of the civilian labor force who is unemployed.
c. a member of the civilian labor force who is underemployed.
d. a discouraged worker who is not a member of the labor force.
e. not a member of the labor force.
Adam Smith argued that government should actively intervene in market to improve
economic performance.
Centralized planning agencies are a key feature of command economies.
In 2002, Congress passed theAct to bring reform to corporate accountability and
stewardship in the wake of a number of major corporate scandals.
Banks create money when they make loans.
Under socialism, no markets can operate at all.
Assuming an inflationary gap exists, classical economists believe that flexible wages
will restore full employment.
Assume demand is held constant and supply increases. The result is a decrease in the
equilibrium price and an increase in the equilibrium quantity of the item bought and
sold.
Industrial production is not a coincident indicator.
The balanced budget multiplier is always equal to 1.
An equilibrium price is unaffected by nonprice factors.