Archives: Quiz

The IS curve plots the relationship between the interest rate and ______ that arises in the market for ______. A) national income; goods and services B) the price level; goods and services C) national income; money D) the price level; […]

According to the Keynesian-cross analysis, when there is a shift upward in the government-purchases schedule by an amount DG and the planned expenditure schedule by an equal amount, then equilibrium income rises by: A) one unit. B) DG. C) DG […]

According to the traditional view of government debt (as in the Mundell”Fleming model), if taxes are cut without cutting government spending, then the short-run effects are a(n) ______ of the dollar and a(n) ______ in net exports. A) appreciation; increase […]

Some economists have advocated replacing government deposit insurance with 100-percent- reserve banking. Under this plan, banks would hold all deposits as reserves. Deposit insurance would no longer be necessary, because banks would always have the reserves to meet customer withdrawals. […]

Economists call the changes in the composition of demand among industries and regions: A) insider-outsider conflicts. B) sectoral shifts. C) moral hazard. D) adverse selection. The public policy implication of Goldin and Katz’s analysis of growing income inequality is that […]

Holding other factors constant, a decline in the real interest rate will ______ the price of housing and ______ the flow of residential housing investment. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease Which of the […]

The most prominent feature of the U.S. economy in the 1970s was: A) cost-push deflation. B) cost-push inflation. C) demand deflation. D) demand inflation. Financial intermediation is the process of: A) settling disputes between borrowers and lenders. B) advising corporations […]

Monetary neutrality, the irrelevance of the money supply in determining values of _____ variables, is generally thought to be a property of the economy in the long run. A) real B) nominal C) real and nominal D) neither real nor […]

Policy is conducted by rule if policymakers: A) announce in advance how policy will respond to various situations and commit themselves to following through on this announcement. B) are free to size up the situation case by case and choose […]

In the dynamic model of aggregate demand and aggregate supply, one period in time is connected to the next period through: A) the monetary policy rule. B) demand shocks. C) inflation expectation. D) the natural level of output. Fiscal policy […]

A period of falling prices is called: A) deflation. B) inflation. C) a depression. D) a recession. With planned expenditure and the equilibrium condition Y = PE drawn on a graph with income along the horizontal axis, if income exceeds […]

In 2007 in the United States among labor-force members ages 16 to 19, the highest unemployment rate was for: A) black females. B) black males. C) white females. D) white males. Tax cuts stimulate ______ by improving workers’ incentive and […]

Two interpretations of the IS“LM model are that the model explains: A) the determination of income in the short run when prices are fixed, or what shifts the aggregate demand curve. B) the short-run quantity theory of income, or the […]

Assume that a firm wants to build a factory that will cost $5 million. It believes that it can get a return of $600,000 in one year and then can sell the used factory for its original cost. The rate […]

A fixed-weight price index like the CPI ______ the change in the cost of living because it ______ take into account that people can substitute less expensive goods for ones that have become more expensive. A) underestimates; does not B) […]

Each of the following conditions will tend to reduce the sacrifice ratio except when: A) workers and firms set wages and prices based on rational expectations. B) policymakers make credible commitments to policy changes. C) announcements of policy changes are […]

Net capital outflow is equal to the amount that: A) foreign investors lend here. B) domestic investors lend abroad. C) foreign investors lend here minus the amount domestic investors lend abroad. D) domestic investors lend abroad minus the amount that […]

An estimate of what government spending and tax revenue would be if the economy were operating at its natural rate of output and employment is called the ______ budget. A) cyclically adjusted B) inflation-adjusted C) capital-asset D) generational accounting Assume […]

According to the classical dichotomy, when the money supply decreases, _____ will decrease. A) real GDP B) consumption spending C) the price level D) investment spending If there is a fixed-exchange-rate system, then in the long run: A) the nominal […]

Starting from long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, a temporary five-period tax increase causes output to _____ until returning to the natural level in the long run. A) remain continuously above the natural level […]

If the long-run aggregate supply curve is vertical, then changes in aggregate demand affect: A) neither prices nor level of output. B) both prices and level of output. C) level of output but not prices. D) prices but not level […]

Risk aversion is a dislike of: A) paying interest. B) lending. C) borrowing. D) randomness in economic circumstances. The balanced growth property of the Solow growth model with population growth and technological progress predicts which of the following sets of […]

According to the Phillips curve, other things being equal, inflation depends positively on: A) expected inflation. B) the unemployment rate. C) the rate of technological change. D) the quantities of capital and labor. An increase in income raises money ______ […]

Conventional monetary and fiscal policies used in a recession are aimed at: A) increasing aggregate supply. B) increasing aggregate demand. C) decreasing aggregate supply. D) decreasing aggregate demand The outside lag is the time: A) before automatic stabilizers respond to […]

The inventories of a company that manufactures snow blowers increase in the summer and decline in the winter. This example is most consistent with which of the following explanations for holding inventories? A) production smoothing B) inventories as factors of […]

An oil cartel effectively increases the price of oil by 100 percent, leading to an adverse supply shock in both Country A and Country B. Both countries were in long-run equilibrium at the same level of output and prices at […]

The neoclassical theory of distribution explains the allocation of: A) output between goods and services. B) output among consumption, investment, and government spending. C) income among factors of production. D) income between saving and investment. To the extent that low […]

Banks help mitigate the problem of adverse selection in lending by: A) developing expertise in evaluating the business prospects of loan applicants. B) making loans to many different types of borrowers. C) adjusting the amount of the loan to fit […]

Measuring the rate of inflation using a market basket that excludes food and energy prices is preferred by some analysts because this measure, called core inflation, A) provides a real, rather than a nominal, rate of inflation. B) gives a […]

In a small open economy with a floating exchange rate, the supply of real money balances is fixed and a rise in government spending: A) raises the interest rate, so that income must rise to maintain equilibrium in the money […]

The consumption decisions of individuals are not important for the: A) determination of the steady-state capital stock. B) determination of fiscal-policy multipliers. C) determination of aggregate demand. D) determination of sticky prices. Beginning at long-run equilibrium in the dynamic model […]

In the classical model with fixed income a decrease in the real interest rate could be the result of a(n): A) increase in government spending. B) increase in desired investment. C) increase in taxes. D) decrease in taxes. The factor […]

Between 1880 and 1896, the price level in the United States fell 23 percent. This movement was ______ for bankers of the Northeast and ______ for farmers of the South and West. A) bad; bad B) good; good C) good; […]

If MPC = 0.75 (and there are no income taxes but only lump-sum taxes) when T decreases by 100, then the IS curve for any given interest rate shifts to the right by: A) 100. B) 200. C) 300. D) […]

In the short run, a favorable supply shock causes: A) both prices and output to rise. B) prices to rise and output to fall. C) prices to fall and output to rise. D) both prices and output to fall. According […]

The real interest rate is the: A) rate of interest actually paid by consumers. B) rate of interest actually paid by banks. C) rate of inflation minus the nominal interest rate. D) nominal interest rate minus the rate of inflation. […]

Inventory investment will decrease when interest rates _____ and credit conditions are _____. A) decrease; tight B) decrease; easy C) increase; easy D) increase; tight If the short-run aggregate supply curve is assumed to be horizontal and international capital flows […]

The underground economy: A) is included in the latest GDP accounts. B) includes only illegal activities. C) includes domestic workers for whom Social Security tax is not collected. D) excludes the illegal drug trade. In the IS”LM model when M/P […]

People use money as a medium of exchange when they: A) hold money to transfer purchasing power into the future. B) use money as a measure of economic transactions. C) use money to buy goods and services. D) hold money […]

According to the permanent-income hypothesis, consumption depends primarily on ______ income. A) current B) nominal C) permanent D) transitory To make a trade in a barter economy requires: A) currency. B) a check. C) scrip. D) a double coincidence of […]

In a small open economy with a floating exchange rate, if the government imposes a tariff on foreign goods, then in the new short-run equilibrium: A) imports will decrease while exports remain constant, leading to a rise in net exports. […]

Along an aggregate demand curve, which of the following are held constant? A) real output and prices B) nominal output and velocity C) the money supply and real output D) the money supply and velocity In a small open economy, […]

The index of leading indicators compiled by the Conference Board includes 10 data series that are used to forecast economic activity about ______ in advance. A) one month B) six to nine months C) one to two years D) five […]

Economic research shows that ______ in explaining international differences in living standards. A) physical capital is more important than human capital B) human capital is at least as important as physical capital C) human capital is much more important than […]

Limited partnerships are required to file a/an ________ return with the IRS each year. In some states, a statute of limitations is called a statute of _______. Answer: Repose Answer: Information

Explain how the Health Care and Education Reconciliation Act will affect the U.S. health care system when its provisions take effect? The CEO of a major computer technology firm wants to form an organization for computer firms in order to […]

Mixed motives discrimination is analyzed using the ________ standard. The legal authority that a court must have to hear a case is called _______. Answer: Jurisdiction Justice of the Peace, municipal court, small claims court and local district courts are […]

Chapter 13 repayment plans are limited to ________ filing for bankruptcy. May a limited partner ever be held liable for partnership liabilities beyond the amount of their partnership contribution? Explain. Answer: The general rule is that a limited partner is […]

Which of the following is an equity instrument? A.debenture B.bond C.common stock D.promissory note If the offer specifies no time limit in which to accept: A.the offeree has 10 days to accept. B.the offeree has 30 days to accept. C.the […]

Evidence obtained from an illegal search may not be used against the defendant. This is called: A.flower of the unlawful fruit. B.fruit of the poisonous tree. C.bloom of the illegal bush. D.sticker of the criminal shrub. Which of the following […]