The marginal propensity to consume is greater than zero but less than one.
The consumption function shows the relationship between real consumption spending
and
a. real wealth
b. the interest rate
c. expectations
d. real disposable income
e. debt
Which of the following units is used to measure nominal GDP in the United States?
a. U.S. dollars
b. gold
c. percentages
d. international monetary units
e. units of physical goods and services
In Figure 4-2, if the government imposes a price ceiling of $2, the result will be
a. equilibrium
b. excess supply
c. no different than before the price ceiling is imposed
d. excess demand
e. the demand shifts leftward and supply shifts rightward
If the price of a British pound increases, more Britons will be willing to supply pounds
to the foreign exchange market.
In what year was the Federal Reserve System created?
a. 1790
b. 1861
c. 1879
d. 1913
e. 1935
The aggregate demand curve
a. is a horizontal line if the economy is perfectly competitive
b. depicts the economy’s equilibrium output level at each possible price level
c. depicts the economy’s equilibrium output at each possible interest rate
d. shifts whenever the price level changes
e. can slope upward if the Fed changes the money supply
The characteristics that create a vicious cycle of poverty in less developed countries are
a. low levels of current production and a declining population
b. stagnant production, poor infrastructure, and a declining population
c. low current output per capita, high population growth rates, and poor infrastructure
d. inefficient governments, low current production, and low tax rates
e. political instability and low population growth
Suppose the same basket of goods costs $200 in the U.S. and 100 pounds in Britain and
that the exchange rate is $3 per pound. According to purchasing power parity, if the two
countries’ price levels do not change, what will happen to exchange rate?
a. The pound would appreciate until the exchange rate reaches $3 per pound.
b. The pound would depreciate until the exchange rate reaches $2 per pound.
c. The pound would depreciate until the exchange rate reaches $0.50 per pound.
d. The dollar price of a pound would remain at $10.
e. The pound would appreciate until the exchange rate reaches $4 per pound.
According to the classical model, if the government wanted to increase employment, it
could do so by increasing its own spending. That would lead firms to produce more
output, for which they would need to hire more workers.
Combinations of goods outside the production possibilities curve
a. are unattainable given society’s technology and resources
b. are combinations that have already been consumed
c. go beyond basic necessities
d. result from involuntary unemployment
e. are the result of economic recessions
The economy’s self-correcting mechanism is such that demand shocks are offset in the
long run by shifts of aggregate supply and supply shocks are offset by shifts of
aggregate demand.
In recent years, each 1 percent drop in output is associated with the loss of more than
a. five million jobs
b. one million jobs
c. half a million jobs
d. two hundred thousand jobs
e. one hundred thousand jobs
The expansion of 2002 and beyond was due, at least in part to
a. interest rate increases.
b. increases in housing wealth.
c. increases in investment spending.
d. large reductions in federal spending.
e. increases in taxes.
In the long run, the crowding-out effect of an increase in government purchases is
a. more complete than in the short run
b. canceled out by increases in infrastructure spending
c. less complete than in the short run
d. canceled out by improved consumer confidence
e. a multiple of the initial change in spending
Specialization of labor typically leads to higher levels of productive inefficiency in an
economy.
Refer to Figure 14-1. If the economy is currently at point X, an increase in the interest
rate will
a. increase the quantity of money demanded (moving the economy toward point A)
b. decrease the quantity of money demanded (moving the economy toward point B)
c. increase money demand (shifting the curve toward curve C)
d. decrease money demand (shifting the curve toward curve D)
e. leave the economy at point X