Econ Exam 2

consumption vs disposable income graph Saving is equal to zero at a disposable income of _____. multiple choice 0 $2,000 billion $4,000 billion $6,000 billion $8,000 billion

$4,000 billion

Twenty years from now our disposable income will rise from $30 trillion to $31 trillion. On the basis of past trends in saving habits of American consumers, what would be your best guess regarding the increase in consumption during this period? multiple choice $50 billion $1.05 trillion $950 billion $500 billion

$950 billion

When disposable income is 1,000, saving is Multiple Choice 500. 400. −500. −400.

-500.

When disposable income is 1,000, C + I is Multiple Choice 1,900. 400. 1,500. 500. 400.

1,900

If the APS is −0.2, the APC is Multiple Choice 0 0.2 0.8 1.2.

1.2

United States China Possibility Radios Rice Radios Rice A 200 0 300 0 B 100 500 150 300 C 0 1,000 0 600 In the absence of trade between the two countries, the price of rice in China in terms of radios would be Multiple Choice 1/2. 2. 150. 300.

1/2

When disposable income is 2,000, C + I is Multiple Choice 1,400. 2,000. 2,400. 2,800.

2,400.

A business begins a year with 4,500 office machines and finishes the year with 5,500 machines while writing off the value of 750 machines as depreciation. What is the amount of net investment that this firm has undertaken during this time period? Multiple Choice 1,000 machines 750 machines 250 machines 1,750 machines

250 machines

When disposable income is 1,000, I is Multiple Choice 1,900. 400. 1,400. 500.

400

When disposable income is 2,000, I is Multiple Choice zero. −400. 2,000. 400. 2,400.

400.

When savings is zero, I is Multiple Choice 500. 400. −400. 2,000. 2,400.

400.

When saving is zero, I is _______ and disposable income is _______. Multiple Choice 250; 1,000 500; 1,000 250; 2,000 500; 2,000 2,000; 500

500; 2,000

Approximately what percentage of GDP is consumption? Multiple Choice 24 percent 51 percent 69 percent 96 percent

69 percent

If the APC is 0.9, we consume Multiple Choice 9 percent of our income. 10 percent of our income. 90 percent of our income. 100 percent of our income.

90 percent of our income.

At the core of the American trade problem is that Multiple Choice Americans spend too much on consumption. the dollar is too low. the Japanese are excluding American products by means of high protective tariffs. American manufacturers are too quality conscious and should instead concentrate on reducing costs.

Americans spend too much on consumption.

Which of the following statements is true? Multiple Choice Both proprietorships and partnerships have disadvantages. Neither proprietorships nor partnerships have disadvantages. Only proprietorships have disadvantages. Only partnerships have disadvantages.

Both proprietorships and partnerships have disadvantages.

Suppose California and Wisconsin produce wine and cheese. Making a bottle of wine costs $3 in California, but $12 in Wisconsin. On the other hand, making a pound of cheese costs $8 in California, and $4 in Wisconsin. Under these conditions Multiple Choice California should export wine and Wisconsin should export cheese. California should export cheese and Wisconsin should export wine. California should export both wine and cheese. the two states cannot gain from trade with each other until a third state starts to export bottle openers.

California should export wine and Wisconsin should export cheese. Total world output can increase without the addition of resources if

The world's largest exporter is Multiple Choice the U.S. Japan. Germany. China.

China

United States China Possibility Radios Rice Radios Rice A 200 0 300 0 B 100 500 150 300 C 0 1,000 0 600 From these figures we can conclude that Multiple Choice China has a comparative advantage in rice. China has a comparative advantage in radios. the U.S. has a comparative advantage in radios. neither has a comparative advantage in these two goods.

China has a comparative advantage in radios.

Which of the following is NOT a part of gross private domestic investment? Multiple Choice Residential construction Shopping centers Changes in business inventories Corporate stock purchased from a broker

Corporate stock purchased from a broker

Which of the following would NOT be an impact of tariffs imposed on foreign cars? Multiple Choice Sales of foreign cars decline. Domestic car prices decline. American jobs are protected. Tax revenue is generated for the government.

Domestic car prices decline.

Which statement is false? Multiple Choice Foreign aid is a large share of the federal budget. Spending on Medicare and Medicaid has more than doubled in the last 49 years. The share of federal spending on interest payments is expected to rise significantly. Spending on Social Security has decreased in the last 10 years.

Foreign aid is a large share of the federal budget.

If U.S. imports of goods and services exceed exports Multiple Choice GDP in the U.S. will be less than the sum of consumption, investment, and government purchases. GDP in the U.S. will exceed the sum of consumption, investment and government purchases. net exports for the U.S. are positive. None of these is true.

GDP in the U.S. will be less than the sum of consumption, investment, and government purchases.

Which of these equations is correct? Multiple Choice APC − APS = 1 MPC + APS = 1 MPC + MPS = 1 1 + MPC = MPS

MPC + APS = 1

Which of these relations is correct? Multiple Choice APC − APS = 1 MPC + MPS = 1 APC + MPC = 1 1 + MPC = MPS

MPC + MPS = 1

Which of the following relations is not correct? multiple choice 1 − APS = APC MPC + MPS = 1 1 − MPC = MPS APC + APS = 1 MPS = MPC + 1

MPS = MPC + 1

Which statement is false? Multiple Choice Only a very small percentage of corporations actually sell stock. Nearly all large companies are corporations. Nearly all corporations are small companies. None of these is false.

None of these is false.

Which statement is false? Multiple Choice Residential home building fluctuates considerably from year to year. Investment is the most volatile sector in our economy .Inventory investment can be negative. None of these is false.

None of these is false.

Which statement is true? Multiple Choice At high levels of disposable income, induced consumption is zero. At low levels of disposable income, induced consumption will be greater than autonomous consumption. Autonomous consumption will generally equal induced consumption. None of these is true.

None of these is true.

The NAFTA agreement affects our trade with Multiple Choice Asia. North America. Correct Africa. the OPEC nations. the European Common Market

North America

Which statement is true? Multiple Choice Stockholders and bondholders are both owners of a corporation. Neither stockholders or bondholders are owners of a corporation. Only stockholders are owners of a corporation. Only bondholders are owners of a corporation.

Only stockholders are owners of a corporation.

Which one of the following statements about tariffs and quotas is correct? Multiple Choice Only the tariff produces revenues for the government. Only the quota will cause domestic production to increase. Only the quota will cause domestic prices paid by consumers to increase. Only the quota will cause the quantity of imports to decrease.

Only the tariff produces revenues for the government

Which one of these would NOT constitute a business investment? Multiple Choice Someone buys 100 shares of Exxon-Mobil. Exxon-Mobil purchases 20 new oil rigs. General Motors builds a new assembly plant. Macy's remodels its stores.

Someone buys 100 shares of Exxon-Mobil.

Which one of these would NOT constitute a business investment? Multiple Choice Someone buys 100 shares of Exxon-Mobil. Exxon-Mobil purchases 20 new oil rigs. General Motors builds a new assembly plant. Macy's remodels its stores.

Someone buys 100 shares of Exxon-Mobil.

Which statement is true? Multiple Choice Xn has always been positive. Xn has always been negative. Xn had been positive from 1900 until the 1970s. Xn had been negative from 1900 until the 1970s.

Xn had been positive from 1900 until the 1970s.

An import quota is Multiple Choice a tax on imported goods. revenue producing for state governments but not the federal government. a limit on the quantity of foreign goods that can be sold in a nation's domestic market. deflationary.

a limit on the quantity of foreign goods that can be sold in a nation's domestic market.

A tariff can best be described as Multiple Choice an excise tax on an imported good. a government payment to domestic producers to enable them to sell competitively in world markets. an excise tax on an exported good.

an excise tax on an imported good.

Economists define investment to include Multiple Choice any increase in business inventories. the addition of cash to a savings account. the purchase of common or preferred stock. the purchase of any durable good (e.g., an automobile or a refrigerator).

any increase in business inventories.

Induced consumption expenditures _____. multiple choice are always equal to autonomous consumption expenditures fall as income rises plus saving equals total consumption expenditures represent consumption that is independent of income are influenced mainly by income

are influenced mainly by income

The minimum amount that people will spend even if disposable income is zero is called ______ consumption. multiple choice total autonomous induced

autonomous

As disposable income grows, Multiple Choice both autonomous C and induced C rise. both autonomous C and induced C fall. autonomous C falls and induced C rises. autonomous C stays the same and induced C rises.

autonomous C stays the same and induced C rises.

The APS in the U.S. is generally Multiple Choice below .01 between .01 and .07. between .15 and .25. between .7 and .75.

between .01 and .07.

Investment will tend to be low when the Multiple Choice capacity utilization rate is high and the interest rate is high. capacity utilization rate is high and the interest rate is low. capacity utilization rate is low and the interest rate is low. capacity utilization rate is low and the interest rate is high.

capacity utilization rate is low and the interest rate is high.

Most economists Multiple Choice favor both tariffs and quotas. consider tariffs less of an evil than quotas. consider quotas and tariffs of equal evil.

consider tariffs less of an evil than quotas.

The largest component of GDP is _____. multiple choice investment net exports consumption government purchases

consumption

Each of the following is an indirect tax except the _____ tax. Multiple Choice gasoline telephone corporate income excise

corporate income

A business firm with limited liability would be a Multiple Choice proprietorship. partnership. corporation.

corporation.

Total world output can increase without the addition of resources if Multiple Choice countries specialize in the product in which they have an absolute advantage and trade for products in which they have an absolute disadvantage. countries specialize in the product in which they have a comparative advantage and trade for products in which they have a comparative disadvantage. countries impose tariffs on the goods in which they have a comparative advantage. countries replace tariffs with quotas.

countries specialize in the product in which they have a comparative advantage and trade for products in which they have a comparative disadvantage.

We run a trade ______ on goods and a trade ______ on services. Multiple Choice deficit; deficit surplus; surplus surplus; deficit deficit; surplus

deficit; surplus

Gross investment will equal net investment when Multiple Choice depreciation is positive. depreciation is negative. depreciation is zero.

depreciation is zero.

The expected rate of profit is calculated by Multiple Choice expected profits/money invested. money invested/expected profits. money invested + expected profits. money invested × expected profits.

expected profits/money invested.

The expected rate of profit is found by Multiple Choice expected profits × money invested expected profits/money invested. money invested/expected profits. None of these is true.

expected profits/money invested.

Net exports are equal to Multiple Choice exports + imports. exports - imports. imports - exports. GNP - GDP.

exports - imports.

During recessions the capacity utilization rate tends to Multiple Choice rise. fall. stay about the same.

fall.

Under the principle of comparative advantage total output is greatest when each product is made by the country that Multiple Choice enjoys an absolute advantage. has the lowest opportunity cost. has the lowest wage rates. has the lowest degree of specialization.

has the lowest opportunity cost.

People tend to spend more money the ______ the amount of credit available and the ______ the stock of liquid assets in the hands of consumers. Multiple Choice higher; higher lower; lower higher; lower

higher; higher

A balance-of-trade surplus exists Multiple Choice if the dollar value of exports exceeds the dollar value of imports. if the dollar value of imported capital exceeds the dollar value of exports. only if there is relative price inflation domestically. only if full employment exists domestically.

if the dollar value of exports exceeds the dollar value of imports.

The largest source of federal tax revenue comes from Multiple Choice individual income taxes. social insurance receipts. corporation income taxes. excise taxes.

individual income taxes.

As disposable income rises, _____. multiple choice autonomous C rises induced C rises induced C falls autonomous C falls

induced C rises

A person earning $300,000 would pay Social Security tax on Multiple Choice none of her income. all of her income. nearly all of her income. less than half of her income.

less than half of her income.

The main advantage to incorporating is Multiple Choice you are your own boss. limited liability. a corporation cannot be sued. there is no fee to apply for a corporate charter.

limited liability.

A low rate of investment could be explained by a Multiple Choice low rate of saving and low interest rates. low rate of saving and high interest rates. high rate of saving and low interest rates. high rate of saving and high interest rates.

low rate of saving and high interest rates.

If more international tourists visited the U.S., this would Multiple Choice lower the U.S. merchandise trade imbalance. lower the U.S. overall trade imbalance. raise the U.S. merchandise trade imbalance. raise the U.S. overall trade imbalance.

lower the U.S. overall trade imbalance.

Each of these is a determinant of the level of I EXCEPT the Multiple Choice margin rate. sales outlook. interest rate. expected profit rate.

margin rate.

A firm with three owners Multiple Choice must be a partnership. may be a partnership. cannot be a partnership.

may be a partnership.

Whenever the level of depreciation exceeds the gross private domestic investment for the economy, Multiple Choice net investment is negative. net foreign investment is negative. real gross national product is falling. None of these is true.

net investment is negative.

Americans generally spend over ______ of their income on consumption. Multiple Choice one-third one-half two-thirds nine-tenths

nine-tenths

Most poor families pay _____ federal personal income tax. Multiple Choice no a little a substantial part of their incomes in

no

The infant industry argument for protection makes sense if the infant industry is Multiple Choice able to compete against foreign firms now, but not in the future. not able to compete against foreign firms now but will be able to in the future. not be able to compete now or in the future. able to compete now and in the future.

not able to compete against foreign firms now but will be able to in the future.

Each of the following is a basic economic role of the government EXCEPT Multiple Choice tax collection. spending money. regulation of the economy. owning most of the means of production.

owning most of the means of production.

Autonomous consumption is always Multiple Choice positive. zero. negative.

positive

If gross investment is greater than depreciation, then net investment is _____ and the economy is _____. Multiple Choice positive; expanding positive; shrinking negative; expanding negative; shrinking

positive; expanding

Most business firms in the U.S. are Multiple Choice proprietorships. partnerships. corporations.

proprietorships

One thing we can do to reduce trade imbalance in the U.S. would be to Multiple Choice push down the value of the dollar relative to other currencies. raise the prices of U.S. exports. raise consumption in the U.S. lower savings in the U.S.

push down the value of the dollar relative to other currencies.

The consumption function tells us that, as income rises, consumption _____. multiple choice remains the same declines rises more quickly than income rises more slowly than income

rises more slowly than income

Our consumption spending tends to rise as the stock of liquid assets in the hands of consumers ______ and credit availability ______. multiple choice falls, falls falls, rises rises, falls rises, rises

rises, rises

The most important source of state tax revenue is the _____ tax. Multiple Choice property income excise sales

sales

To increase capital we need to Multiple Choice save more and consume more. save more and consume less. save less and consume less. save less and consume more.

save more and consume less.

The largest component of C is _____. multiple choice nondurable goods durable goods services

services

Based upon the number of businesses (greatest number to least number), the business population is composed of Multiple Choice sole proprietorships, corporations, and partnerships. sole proprietorships, partnerships, and corporations. partnerships, corporations, and sole proprietorships. corporations, partnerships, and sole proprietorships.

sole proprietorships, corporations, and partnerships.

The basis for international trade is Multiple Choice self-sufficiency. specialization. amassing national wealth at the expense of trading partners. maximizing your exports and minimizing your imports.

specialization

The principle of comparative advantage Multiple Choice applies only when the gold standard is in effect. is the basic reason that the U.S. has been running trade deficits. states that it is advantageous to export more than you import. states that total output is greatest when each product is made by the country that has the lowest opportunity cost.

states that total output is greatest when each product is made by the country that has the lowest opportunity cost.

Each of the following could be considered a determinant of the level of investment EXCEPT Multiple Choice stock prices. the capacity utilization rate. the interest rate. the expected profit rate.

stock prices.

A corporation is owned by its Multiple Choice board of directors. officers. stockholders. bondholders.

stockholders.

A tariff shifts the _____ curve to the _____. Multiple Choice demand; right demand; left supply; right supply; left

supply; left

A tariff is a Multiple Choice subsidy to workers harmed by U.S. trade with foreign countries. limit on the quantities of a good that can be imported each year. tax on exports that tends to make them cheaper for foreigners to buy. tax on imports that raises their prices and makes them less attractive to domestic consumers.

tax on imports that raises their prices and makes them less attractive to domestic consumers.

If yesterday the U.S. dollar traded for 100 Japanese yen and today 101 yen for the U.S. dollar, we would say Multiple Choice that the dollar rose in value relative to the yen. that the U.S. dollar fell in value relative to the yen. the dollar stayed the same value relative to the yen.

that the dollar rose in value relative to the yen.

When there is dissaving Multiple Choice both the APC and APS are positive. both the APC and APS are negative. the APC is positive and the APS is negative. the APC is negative and the APS is positive.

the APC is positive and the APS is negative.

When the APC is greater than one, Multiple Choice the APS is negative. the APS is zero. the APS is positive. the APS may be positive, zero, or negative.

the APS is negative.

The North American Free Trade Agreement (NAFTA) created a free trade area including Multiple Choice the U.S., Cuba, and Peru. the U.S., Mexico, and Brazil. the U.S., Mexico, and Canada. the U.S., Mexico, and Cuba.

the U.S., Mexico, and Canada.

The MPC is equal to ______ divided by ______. Multiple Choice consumption; income the change in consumption; the change in income the APC; the APS savings; consumption

the change in consumption; the change in income

We have run merchandise trade deficits since Multiple Choice the mid-1960s. the mid-1970s. the mid-1980s. the mid-1990s.

the mid-1970s.

Net exports are Multiple Choice the smallest component of GDP. income after taxes. the largest component of GDP. included in government spending.

the smallest component of GDP.

When the relative opportunity costs of producing goods do not differ among nations Multiple Choice the benefits resulting from trade are increased. there are no gains from specialization and trade. there must be an absolute advantage. each should try and specialize in the production of a particular commodity.

there are no gains from specialization and trade.

The reason U.S. workers were better paid than foreign workers during the 1950s and 1960s is Multiple Choice U.S. workers were better trained and educated. U.S. workers worked harder. we had more capital (plant and equipment) per worker. the U.S. dollar was the world's strongest currency.

we had more capital (plant and equipment) per worker.

At the point where C line crosses the 45-degree line, saving is Multiple Choice positive. negative. zero. There is not enough information to answer this.

zero

When income is equal to consumption, saving is _____. multiple choice negative impossible to calculate because there is insufficient information positive zero

zero

When the C line crosses the 45-degree line, saving is _____. multiple choicenegativepositiveimpossible to calculate because there is not enough information to knowzero

zero