Archives: Quiz

Figure: The Demand and Supply of Wheat Look at the figure The Demand and Supply of Wheat. What is the equilibrium price in this wheat market? A) $6 B) $4 C) $2 D) $8 Which of the following fiscal policies […]

Without banks, people would: A) hold more of their wealth as cash. B) hold less of their wealth as cash. C) invest most of their wealth in real estate. D) earn higher rates of return and enjoy more liquidity. Figure: […]

Which of the following was an argument AGAINST Britain’s adopting the euro? I. Using the same currency as many other European countries would discourage trade and decrease productivity. II. Using the euro would decrease the effectiveness of monetary policy. A) […]

Unemployment rates are usually higher in Europe than in the United States because: A) the minimum wage is higher in the United States than in Europe. B) U.S. economic policy is much more effective than European economic policy. C) there […]

When the government has a deficit, it will most likely finance the deficit by: A) cutting the salaries of the president and Congress. B) selling some military bases. C) borrowing the money. D) charging higher admission fees at national parks. […]

Unexpectedly rising commodity prices lead to a _____ shock. A) positive supply B) positive demand C) negative supply D) negative demand A reduction in the value of a floating currency is called a devaluation. A) True B) False Answer: B […]

A firm uses financial leverage when it: A) replaces labor with capital. B) borrows money from a bank to enlarge a factory. C) raises the price of a product when demand is inelastic. D) gets a volume discount from a […]

The classical model of the price level is most likely to be a good approximation of reality during periods of: A) recession. B) high unemployment. C) low inflation. D) high inflation. The recommendation that the government should avoid deficit spending […]

Most economists now agree that: A) the government should seek to balance its budget. B) fiscal policy can shift aggregate demand. C) fiscal policy can change the natural rate of unemployment. D) fiscal policy should be conducted by the Federal […]

Figure: Aggregate Expenditures I Look at the figure Aggregate Expenditures I. When real GDP is $700 billion, there will be a _____ in unplanned inventory investment. A) $125 million increase B) $125 million decline C) $200 million decline D) $200 […]

Figure: Inflationary and Recessionary Gaps Look at the figure Inflationary and Recessionary Gaps. At E3, the economy: A) is in equilibrium. B) has an inflationary gap. C) has a recessionary gap. D) is stagnating. Internet employment agencies have simplified the […]

When hyperinflation forces Emily to visit her bank very frequently to keep her cash holdings to a minimum, economists say that Emily has a: A) shoe-leather cost. B) menu cost. C) unit-of-account cost. D) Fisher effect. Figure: Seasonally Adjusted Unemployment […]

Figure: Classical Versus Keynesian Macroeconomics Look at the figure Classical Versus Keynesian Macroeconomics. According to the classical view, if this economy shifts from AD2 to AD1, perhaps because of a large increase in government spending, the price level will _____ […]

A decrease in aggregate demand will generate _____ in real GDP and _____ in the price level in the short run. A) an increase; no change B) a decrease; no change C) a decrease; a decrease D) no change; an […]

Improvements in information technology have: A) shifted the demand for cash to the right. B) decreased the demand for money. C) not affected the demand for money. D) increased the demand for money. Which of the following would NOT be […]

In 2000, financial experts announced that they: A) would no longer be willing to buy or sell mortgage-backed securities. B) were unable to predict expected income from mortgage-backed securities. C) had overestimated the risk of loss from mortgage-backed securities. D) […]

Suppose that immigration laws are relaxed and many workers from other nations enter the U.S. labor force. The _____ for labor will _____. A) demand; increase B) demand; decrease C) supply; decrease D) supply; increase Which of the following is […]

The aggregate demand curve is downward sloping because of: A) the inverse relationship between price and quantity demanded. B) changes in expectation of future prices. C) unexpected changes in commodity prices. D) the wealth effect of a change in aggregate […]

Much of the housing boom in Ft. Myers was due to speculators who bought homes not to live in themselves but to resell quickly at much higher prices. A) True B) False Which of the following statements is TRUE? A) […]

Fiscal and monetary policies: A) have no role in macroeconomic policies. B) have been used by the government for over 250 years. C) are most effective in microeconomic settings. D) are used to correct for short-term economic fluctuations. Which of […]

If the marginal propensity to consume is 0.8, then the multiplier is: A) 4. B) 5. C) 8. D) 10. In the circular-flow diagram, a person or a group of people who share income is a: A) government. B) factor. […]

Figure: Circular-Flow Model Look at the figure Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is a […]

The aggregate supply curve shows the relationship between the aggregate price level and the aggregate: A) output supplied. B) money supply. C) unemployment rate. D) employment. The benefits of fixed exchange rates served as one of the motivations for the […]

A reduction in government transfers _____, therefore shifting the aggregate demand curve to the _____. A) increases labor costs to companies, increasing investment; left B) decreases government purchases of goods and services, decreasing consumption; right C) increases the marginal propensity […]

Do economists believe that the budget should be balanced each fiscal year? A) Yes, a budget should be balanced annually; otherwise persistent budget deficits can cause havoc in the economy. B) Yes, as the law states that both the federal […]

Figure: The Market for Loanable Funds II Look at the figure The Market for Loanable Funds II. Other things being equal, if there is an increase in the interest rate above 8%, _____ quantity of loanable funds will be demanded. […]

The slope of the demand curve for money is: A) vertical. B) horizontal. C) positive. D) negative. If real GDP exceeds aggregate expenditures, the economy will: A) contract, reducing employment. B) expand, causing inflation. C) expand, increasing employment. D) neither […]

When the United States gives foreign aid to developing nations in Africa, the _____ account is affected. A) current B) financial C) reserve D) foreign exchange In the liquidity preference model, the money supply is represented by: A) a vertical […]

Greece’s financial difficulties following the crisis of 2008 were due primarily to a housing bubble. A) True B) False Table: Peanut Butter and Jelly Look at the table Peanut Butter and Jelly. Suppose a market basket consists of 20 jars […]

Because one person’s spending is another person’s income: A) if one group in the economy spends more, the incomes of other groups will decrease. B) if one group in the economy spends less, the incomes of other groups will increase. […]

A stimulus is an expansionary fiscal policy. A) True B) False The underlying motives behind capital flows reflect international differences in: A) savings. B) investment opportunities. C) technology. D) both savings and investment opportunities. Answer: D Which of the following […]

Figure: Classical Versus Keynesian Macroeconomics Look at the figure Classical Versus Keynesian Macroeconomics. According to the Keynesian view, if this economy shifts from AD2 to AD1, perhaps because of a large increase in government spending, the price level will _____ […]

Look at the table Pizza Economy II. GDP in this economy is: A) $74,000. B) $45,000. C) $29,000. D) $16,000. In an attempt to reduce shooting deaths, some cities have offered money to people who turn in illegal guns. This […]

If policy makers want to increase real GDP by $100 billion and the marginal propensity to consume is 0.75, they should increase government purchases of goods and services by $75 billion. A) True B) False Gains from trade arise because […]

When the aggregate price level falls, the purchasing power of assets rises, which leads to: A) an increase in the quantity of aggregate output demanded. B) a decrease in the quantity of aggregate output demanded. C) a shift in the […]

On a graph representing two variables: A) a positive slope of a curve means the variables are negatively related. B) a negative slope of a curve means the two variables are positively related. C) a line that is horizontal has […]

Scenario 21-1. Take the following information as given for a small, imaginary economy: When income is $10,000, consumption spending is $6,500. When income is $11,000, consumption spending is $7,300. Refer to Scenario 21-1. The marginal propensity to consume for this […]

In January the price of dark chocolate candy bars was $2.00, and Willy’s Chocolate Factory produced 80 pounds. In February the price of dark chocolate candy bars was $2.50, and Willy’s produced 110 pounds. In March the price of dark […]

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has a. $48 billion of imports and $40 billion of exports. b. $48 billion of exports and $40 billion of […]

Suppose a government that taxed all interest income changed its tax law so that the first $5,000 of a taxpayer’s interest income was tax free. This would shift the a. supply of loanable funds to the right, causing interest rates […]

The price elasticity of demand measures how much a. quantity demanded responds to a change in price. b. quantity demanded responds to a change in income. c. price responds to a change in demand. d. demand responds to a change […]

Table 16-1. The information in the table pertains to an imaginary economy. Refer to Table 16-1. What is the M2 money supply? a. $125 billion b. $296 billion c. $351 billion d. $431 billion Suppose there are only two people […]

Figure 7-5 Refer to Figure 7-5. If the government imposes a price floor of $120 in this market, then consumer surplus will decrease by a. $75. b. $125. c. $225. d. $300. Which of the following statements exemplifies a principle […]

Most economists view the United States’ experience with trade as a. one from which no firm conclusions about the virtues of free trade can be reached, due to the relatively short history of international trade in the U.S. b. one […]

When a tax is placed on the buyers of lemonade, the a. sellers bear the entire burden of the tax. b. buyers bear the entire burden of the tax. c. burden of the tax will be always be equally divided […]

The slow growth of U.S. incomes during the 1970s and 1980s can best be explained by a. unstable economic conditions in Eastern Europe. b. increased competition from abroad. c. a decline in the rate of increase in U.S. productivity. d. […]

If the natural rate of unemployment falls, a. both the short-run and long-run Phillips curves shift left. b. the short-run Phillips curve shifts left, the long-run Phillips curve is unchanged. c. the short-run Phillips curve is unchanged, the long-run Phillips […]

Which of the following is correct? In the 1990’s a. the Fed maintained low inflation because it had to follow a policy rule. b. the Fed maintained low inflation even without being required to follow a policy rule. c. the […]

A decrease in quantity supplied a. results in a movement downward and to the left along a fixed supply curve. b. results in a movement upward and to the right along a fixed supply curve. c. shifts the supply curve […]

Janelle earned a salary of $40,000 in 1996 and $65,000 in 2006. The consumer price index was 160 in 1996 and 266 in 2006. Janelle’s 2006 salary in 1996 dollars is a. $39,097.74. b. $43,062.50. c. $68,900.00. d. $108,062.50. For […]