Archives: Quiz

As uncertainty about the effects of policy on output decreases, we would expect that A) policy makers would be more frequently implement fine tuning policies. B) policy makers would implement more active policies. C) policy makers would implement less active […]

Which of the following is not believed to cause recent increases in wage inequality? A) international trade B) contractionary monetary policy C) skill-biased technological progress D) all of the above E) none of the above Which of the following will […]

Assume that an economy experiences both positive population growth and technological progress. Once the economy has achieved balanced growth, we know that the capital per worker ratio (K/N) is A) constant. B) growing at a rate of gA – gN. […]

For this question, assume that the aggregate production function is represented by Y = A. Which of the following represents the marginal cost of producing an additional unit of output? A) W B) W/A C) A/W D) (1 + A)W […]

Based on price setting behavior, which of the following will cause an increase in the price level? A) a reduction in productivity B) an increase in the nominal wage C) an increase in the markup D) all of the above […]

When a closed economy is in equilibrium, we know with certainty that A) I = S + (T – G). B) I = S. C) I = S + (G – T). D) G = T and S = I. […]

We will generally observe that the less open an economy A) the larger the effect of fiscal policy on output and the larger the effect of fiscal policy on the trade position. B) the larger the effect of fiscal policy […]

Under the Gold Standard, A) exchange rates could float. B) real interest rates were fixed. C) real exchange rates were fixed. D) nominal interest rates were fixed. E) none of the above In the wage-setting relation, the nominal wage tends […]

Assume that political business cycles do not exist. Given this assumption, we would expect, all else fixed, the output growth to be highest in which period? A) just prior to an election B) just after an election C) in the […]

The Ricardian equivalence proposition states that an increase in the deficit causes A) consumption to decrease. B) savings to decrease. C) investment to decrease. D) all of the above E) none of the above Which of the following expressions represents […]

When the Current Population Survey (CPS) was introduced in 1940, it was based on a survey of approximately 8,000 households. The CPS survey is now based on a survey of how many households? A) 8,000 B) 10,000 C) 12,000 D) […]

Human wealth is a function (i.e., affected by changes in) of which of the following variables? A) future expected income B) future expected taxes C) current interest rates D) all of the above E) none of the above The primary […]

Labor productivity is represented by which of the following? A) the ratio of output to employment B) workers per unit of capital C) capital per worker D) the ratio of output to population E) the ratio of output to the […]

Suppose that financial market participants expect that the central bank will pursue a monetary expansion in the future. Also assume that the yield curve is initially upward sloping. Given this information, we would expect which of the following to occur? […]

Because expected inflation is typically positive, we know that A) the nominal interest rate is generally less than the real interest rate. B) the real interest rate is generally less than the nominal interest rate. C) the nominal and real […]

During the 1980s and early 1990s, it was believed that the natural rate of unemployment in the U.S. was equal to A) 4%. B) 4.5%. C) 5%. D) 6.5%. E) 7%. A discount bond is a bond A) with no […]

Which of the following does not explain the relatively low price inflation compared to the higher wage inflation in the U.S. during the 1990s? A) the appreciation of the dollar B) a reduction in benefits paid to workers C) an […]

Which of the following would cause a reduction in M1? A) an increase in the required ratio of reserves to deposits B) a reduction in the discount rate C) an open market operation where the Fed sells bonds D) all […]

The difference between the official and correct measures of the deficit will be greater, A) the lower is government spending. B) the lower is the level of debt, B. C) the higher is inflation. D) none of the above Each […]

In the absence of technological progress, we know that the level of output per worker in the steady state will A) increase over time. B) remain constant. C) decrease as a result of decreasing returns to scale. D) increase or […]

Which of the following argued that a long-run trade-off between inflation and unemployment could not exist? A) Friedman and Phelps B) Hicks and Hansen C) Modigliani and Friedman D) Lucas and Sargent E) Tobin and Jorgenson The zero lower bound […]

Suppose there is a tax cut. This tax cut would have a direct effect on which of the following? A) financial wealth B) housing wealth C) human wealth D) none of the above The European Monetary System represented a A) […]

Which of the following would make the spending multiplier smaller? A) a reduction in marginal propensity to save B) a small initial trade deficit C) a reduction in the marginal propensity to import D) a real appreciation E) none of […]

From 2000 to 2007, which country had the highest nominal house price increase? A) Spain B) Portugal C) Greece D) Italy In the 1960s, the monetarist school of thought held that A) monetary and fiscal policy could explain most of […]

Suppose individuals decide to reduce their holdings of money market funds. Further assume that these decisions put funds into checkable deposits. Given this information, we know that A) the demand for M1 would increase and the demand for M2 would […]

The United States financed the additional government spending during World War II through A) an increase in the deficit. B) an increase in taxes. C) an increase in imports. D) increases in both the deficit and taxes. E) increases in […]

In recent years, the increasing relative wage of skilled labor has been mostly due to A) a decrease in the supply of skilled labor that exceeds the decrease in demand. B) an increase in the demand for skilled labor that […]

In 2010, output per capita in China was approximately equal to A) $2,100. B) $7,627. C) $22,100. D) $32,100. Which of the following statements about Keynes’ contribution to macroeconomics is correct? A) Although he published his most important ideas about […]

The leverage ratio is the ratio of a bank’s A) assets divided by its liabilities. B) income divided by its assets. C) assets divided by capital. D) capital divided by its total liabilities. Risk premiums on corporate bonds tend to […]

If consumers are very foresighted, we would expect actual consumption spending to A) increase during recessions. B) increase during episodes of stagflation. C) have no relation to wealth. D) resemble a “random walk.” E) be entirely predictable. The primary deficit […]

The golden rule level of capital refers to A) the level of capital that maximizes output per worker. B) the level of capital that maximizes the standard of living. C) the level of capital that maximizes consumption per worker in […]

When preparing a flexible budget income statement, ________ costs are constant at different levels of activity. A) variable B) step C) contributed D) fixed At 60,000 machine hours, Clark Company’s static budget for variable overhead costs is $180,000. At 60,000 […]

Murphy Company produces dolls. Each doll sells for $20.00. Variable costs per unit are $14.00 and total fixed costs for the period are $435,000. What is the break-even point in units? A) 21,750 B) 31,071 C) 51,176 D) 72,500 Janitors […]

In capital budgeting decisions, the riskiness of a project may be shown by ________. A) the size of the future cash inflows from the project B) the size of the future cash outflows from the project C) the timing of […]

Robert Company acquired 40% of the voting stock of Boulder Company for $40 million. At the end of Year 1, Boulder Company reports net income of $15 million and pays cash dividends of $5 million. At the end of Year […]

New Jersey Company is considering two investments. The relevant data follows: Project A Project B Cost $200,000 $300,000 Annual cash savings (end of year) $50,692 $60,995 Terminal salvage value $50,000 $70,000 Estimated useful life in years 5 5 Minimum desired […]

John Company has two service departments, Maintenance and Human Resources. John Company also has two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while Human Resources costs are allocated based on number of employees. The […]

Atlanta Senior Center is planning its annual fundraiser. The event committee has developed the following budget for the event. Ballroom rental $3,000 Entertainment $2,500 Printing $600 plus $9 per person Food $30 per person Decorations $700 plus $5 per person […]

How should Unearned Rent Revenue be classified on a balance sheet at December 31, 2013? The rental contract covers the period, January 1, 2013 through December 31, 2015. A) current liability only B) long-term liability only C) current and long-term […]

In the United States, Generally Accepted Accounting Principles are developed primarily by ________. A) International Accounting Standards Board B) Financial Accounting Standards Board C) Securities and Exchange Commission D) International Accounting Federation In a special order decision, which of the […]

When managers make decisions, the decision process used has the following steps in the order of occurrence: A) Historical and Other Information, Prediction Model, Prediction, Decision Model, Decision, Implementation, Feedback B) Historical and Other Information, Decision Model, Prediction Method, Implementation, […]

The following information is available for Arnett Company: Current assets $100,000 Current liabilities $75,000 Property, plant and Long-term liabilities 100,000 equipment 150,000 Stockholders’ equity 125,000 Other assets 50,000 Total liabilities and Total assets $300,000 stockholders’ equity $300,000 Invested capital is […]

When reconciling net income to net cash provided by operating activities, a(n) ________ is an addition to net income. A) increase in inventories B) increase in accounts receivable C) increase in wages payable D) decrease in taxes payable What will […]

What happens when the cost-driver activity level increases within the relevant range? A) Total fixed costs increase. B) Fixed costs per unit of cost driver decrease. C) Total variable costs decrease. D) Variable costs per unit of cost driver decrease. […]

For costs that accountants cannot directly trace to products or services, accountants use ________ or ________. A) ABC methods; payback method B) cost-budgeting methods; ignore remaining costs C) sensitivity analysis; financial planning models D) cost-allocation methods; leave costs unallocated When […]

Key Company has a targeted sales volume of 62,300 units. Total fixed costs are $31,200. The contribution margin per unit is $1.20. What is targeted net income? A) $31,200 B) $37,440 C) $43,560 D) $74,760 The following information is available […]

Which of the following is NOT a period expense in a merchandising firm? A) Selling Expense B) Administrative Expenses C) R&D Expenses D) Cost of Goods Sold Michael Company uses job-order costing. The company has gathered the following data: Direct […]

When the actual volume of production exceeds the expected volume of production, the production volume variance is ________ and fixed overhead is ________. A) favorable; underapplied B) favorable; overapplied C) unfavorable; underapplied D) unfavorable; overapplied The Foreign Corrupt Practices Act […]

The most important contributor to the variance between actual and applied overhead costs is ________. A) poor forecasting B) inefficient use of overhead items C) price changes in overhead items D) operating at a different level of volume than the […]

Selected items from the financial statements for Lorna Company are listed below: Paid in capital, December 31, 2014 $100,000 Retained earnings, December 31, 2014 $75,000 Common stock dividends declared in 2014 $75,000 Net income for the year ended December 31, […]