Archives: Quiz

As the marginal propensity to consume (MPC) decreases, the spending multiplier: a. increases. b. decreases. c. remains constant. d. becomes indefinable. The sum of past federal budget deficits increases the: a. GDP debt. b. trade debt plus debt. c. national […]

Exhibit 1A-5 Straight line In Exhibit 1A-5, the slope for straight line CD is: a. 5. b. 1. c. -1. d. -5. Deadweight loss is the net loss of: a. consumer surplus. b. producer surplus. c. disequilibrium surplus. d. both […]

Which one of the following is notan external user of financial statements? a. Suppliers b. Creditors c. Investors d. The company’s controller Exhibit 10-8 Aggregate demand and supply In Exhibit 10-8, if aggregate demand shifts from AD4 to AD5, real […]

Suppose all of the major computer manufacturers announced that beginning next month there would be major price reductions on their computers. This would cause the current demand for computers to: a. increase. c. remain unchanged. b. decrease. d. increase and […]

In 1960, U.S. nominal GDP was $527 billion and the GDP chain price index is 23.3. Real GDP in 1996 dollars is: a. $1,228 billion. b. $2,262 billion. c. $3,000 billion. d. $3,262 billion. Carroll Corporation began the year with […]

Ceteris paribus, which of the following would cause a decrease in the demand for HD TVs? a. decline in the price of HD TVs. c. increase in consumers’ income. b. increase in the price of HD TVs. d. decrease in […]

Which one of the following people is not a member of the labor force? a. A full-time student who devotes all her time to her classes. b. A person who works 30 hours a week at Burger King and goes […]

Suppose the official unemployment rate is 10 percent. We can conclude without question that: a. the same 10 percent of the people in the economy were out of work for the entire ear. b. one of every 10 people in […]

Exhibit 16A-1 Policy Alternatives In Panel (a) of Exhibit 16A-1, the economy is initially in short-run equilibrium at real GDP level Y1 and price level P2. Classical theory argues: a. the federal government must shift AD1 to AD2 as shown […]

The total quantity of goods and services demanded by households, firms, foreigners, and government at varying price levels is: a. gross domestic product. b. aggregate demand. c. aggregate expenditure. d. total demand. e. total expenditure. The Monetary Control Act of […]

The aggregate demand curve indicates the relationship between: a. the real wage rate and the quality of resources demanded by producers of goods and services. b. the interest rate and the amount of loanable funds demanded by borrowers. c. the […]

If the rate of inflation in a given time period turns out to be higher than lenders and borrowers anticipated, then the effect will be: a. no change in the distribution of wealth between lenders and borrowers. b. a net […]

Exclusion of which of the following tends to understate the true level of unemployment in the economy? a. Children. b. Retired persons. c. Students. d. People who do not want to work. e. Discouraged workers. A movement along the demand […]

Exhibit 9-5 Keynesian aggregate-expenditures model where the MPC is 0.75 To eliminate the GDP gap shown in Exhibit 9-5, the government should cut its spending by: a. $0.5 trillion. b. $1 trillion. c. $1.5 trillion. d. $2 trillion. Answer: A […]

Exhibit 1A-4 Straight line Straight line A-D in Exhibit 1A-4 shows that: a. increasing value for X will increase the value of Y. b. increasing value for X will decrease the value of Y. c. increasing values for X do […]

A tax system in which the tax rate on everyone’s first $10,000 of income is 10 percent, the tax rate on everyone’s second $10,000 of income is 15 percent, and the tax rate on all income over $20,000 is 25 […]

Exhibit 16A-1 Policy Alternatives Assume that the economy depicted in Panel (b) of Exhibit 16A-1 is in short-run equilibrium where AD1 equals SRAS1. Keynesian theory argues: a. nominal wages will fall as long as employment remains above the natural level […]

Exhibit 16-2 Money market demand and supply curves As shown in Exhibit 16-2, assume the money supply curve shifts rightward from MS1 to MS2 and the economy is operating along the intermediate segment of the aggregate supply curve. The result […]

As shown in Exhibit 7-2, the rate of inflation for Year 2 is: a. 5 percent. b. 10 percent. c. 20 percent. d. 25 percent. A technological improvement in producing good A would be a shift in the: a. supply […]

In the circular flow model, money flows from the business sector to the household sector through the: a. product market. b. capital market. c. goods market. d. services market. e. resource market. Matchthefollowingbusinessformswiththeircharacteristicsbelow. a. Sole proprietorship b. Partnership c. Corporation […]

If an economy is operating at a point inside the production possibilities curve, a. its resources are not being used efficiently. b. the curve will begin to shift inward. c. the curve will begin to shift outward. d. This is […]

To finance medical care, the federal government raises the tax per pack paid by sellers of cigarettes. Other things being equal, the price of cigarettes rises because of a(n): a. upward movement along the supply curve for cigarettes. b. rightward […]

Economic indicators, like unemployment claims and the average workweek, which change before real GDP changes, are called: a. leading. b. lagging. c. coincident. d. structural. Automatic stabilizers are government programs that: a. exaggerate the ups and downs in aggregate demand […]

Voluntary recycling is available in many parts of the country. If citizens of these areas have collected recyclable material at home, they can bring it to a recycling center. These materials reduce landfill space, reduce the need for virgin material […]

Which of the following policy actions by the Fed would cause the money supply to decrease? a. An open-market purchase of government securities. b. A decrease in required reserve ratios. c. An increase in the discount rate. d. A decrease […]

The government’s chief forecasting gauge for business cycles is the: a. unemployment rate. b. real GDP. c. personal income index. d. index of leading indicators. The largest component of GDP is: a. personal consumption expenditures. b. government spending. c. durable […]

According to rational expectations theory, what information do businesses and workers use when they form their expectations regarding inflation? a. Recent events and data. b. Keynesian and monetarist models. c. Forecasts by public-and private-sector economists. d. All the relevant information […]

When the Fed buys government securities, it: a. lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public. b. raises the cost of borrowing from the Fed, discouraging banks from making loans to […]

John Steinbeck’s Cannery Row describes a character who takes his own life because of poor job prospects. If he was an unemployed person who gave up looking for work, he would be considered: a. chronically unemployed. b. a discouraged worker. […]

If the marginal propensity to consume (MPC) is 0.96, the value of the spending multiplier is: a. 25. b. 40. c. 96. d. 100. Front Corporation’s endÂofÂyear balance sheet consisted of the following amounts: What is Front’s owners’equitybalance at the […]

Lakeland Corporation’s endÂofÂyear balance sheet consisted of the following amounts: What is Lakeland’s retainedearningsbalance at the end of the current year? a. $13,000 b. $34,000 c. $76,000 d. $173,000 Scarcity can be eliminated if: a. people satisfy needs rather than […]

The required reserve ratio is the: a. actual amount of reserves that banks must hold. b. excess amount of reserves that a bank must hold. c. minimum amount of reserves the Fed requires a bank to hold. d. total amount […]

Exhibit 16-2 Money market demand and supply curves Beginning from an equilibrium at E1 in Exhibit 16-2, an increase in the money supply from $400 billion to $600 billion causes people to: a. sell bonds and drive the price of […]

The primary purpose of WTO is to: a. protect the United States from cheap foreign labor. b. foster trade among nations. c. promote the dumping of foreign products. d. increase worldwide tariffs. e. form a union of European nations. If […]

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. […]

Which of the following would generate positive externalities? a. Flu vaccinations. b. Farmers’ use of pesticides. c. Cigarette smoking in elevators. d. Litter left at the beach. e. An unkept front yard. Althea, a brilliant new Ph.D. in economics, has […]

A nation’s trade deficit will expand when its: a. currency appreciates. b. economy is shrinking. c. investment environment is less attractive to foreigners. d. all of these are true. A worker would be hurt least by inflation when the: a. […]

Which of the following is the correct date format for the financial statement heading? a. Balance sheet for the year ended June 30, 2015 b. Income statement at December 31, 2015 c. Balance sheet at December 31, 2015 d. Statement […]

Externalities are unintended costs or benefits that are imposed on unsuspecting people and that result from: a. poor planning. b. intentional damages. c. excessive costs. d. excessive losses. e. the economic activity of others. In the aggregate expenditures model, if […]

Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specializes and then trades with the other. If the price starts at four hats per […]

The largest component of household consumption spending is expenditures on: a. services. b. durable goods. c. nondurable goods. d. food. e. transportation. Which of the following does not hinder economic development? a. Lack of education b. Poor agricultural productivity c. […]

Exhibit 1A-4 Straight line In Exhibit 1A-4, the slope of the straight line A-D is: a. 0. b. 1. c. 1/2. d. -1. The recent growth records of Japan and Hong Kong during the last 50 years indicate that a […]

Exhibit 3-3 Demand curves Which of the graphs in Exhibit 3-3 depicts the effect of an increase in income on the demand for DVDs (a normal good)? a. Graph A. b. Graph B. c. Graph C. d. Graph D. A […]

Currently, total private sector expenditures in the United States: a. remained close to one third of GDP. b. fell by half to 50 percent of GDP. c. fell by half to 65 percent of GDP. d. remained close to 60 […]

When full employment is present in the United States: a. the rate of unemployment will fall to zero. b. the actual rate of unemployment will be less than the natural rate of unemployment. c. approximately 95 percent of the adult […]

In the aggregate expenditures model, if an economy operates above equilibrium GDP, there will be: a. unplanned inventory accumulation. b. a decrease in GDP. c. a decrease in employment. d. all of the above. Which of the following is a […]

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 […]

Other things being equal, the effects of an increase in the price of computers would best be represented by which of the following? a. A movement up along the demand curve for computers. b. A movement down along the demand […]

All of the following are examples of capital except: a. the robot used to help produce your car. b. a computer used by your professor to write this exam. c. the factory that produces the costume jewelry you buy. d. […]

Matchthefollowingbusinessformswiththeircharacteristicsbelow. a. Sole proprietorship b. Partnership c. Corporation Single owner During a period of inflation, the Fed is likely to: a. sell government securities to banks in order to reduce the amount of loanable funds. b. buy government securities from […]