ECONOMICS TO THE MAX
Refer to the above diagram for the milk market. In this market, the equilibrium price is ____ and equilibrium quantity is ____. A) $1.50 per gallon; 28 million gallons B) $1.50 per gallon; 30 million gallons C) $28 per gallon; 150 million gallons D) $1.00 per gallon; 35 million gallons
A) $1.50 per gallon; 28 million gallons
Answer the question on the basis of the following sequence of events involving fiscal policy: (1) The composite index of leading indicators turns downward for three consecutive months, suggesting the possibility of a recession; (2) Economists reach agreement that the economy is moving into a recession; (3) A tax cut is proposed in Congress; (4) The tax cut is passed by Congress and signed by the President; (5) Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover. Refer to the above information. The recognition lag of fiscal policy is reflected in events: A) 1 and 2 B) 2 and 3 C) 3 and 4 D) 4 and 5
A) 1 and 2
If the Consumer Price Index rises from 300 to 333 in a particular year, the rate of inflation in that year is: A) 11 percent B) 33 percent C) 91 percent D) 10 percent
A) 11 percent
(Advance analysis) Answer the question on the basis of the following information for a mixed open economy. The letters Y, Ca, Ig, Xn, G, and T stand for GDP, consumption, gross investment, net exports, government purchases, and net taxes respectively. Figures are in billions of dollars. Refer to the information. The multiplier for this economy is: A) 4 B) 3 C) 3 D) 2.33
A) 4
suppose there are 5 million unemployment workers seeking jobs. after a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. as a result of this, the official unemployment rate would: A) Decline B) Increase C) Increase in the short run but eventually decline D) be unchanged
A) Decline
Refer to the diagram. If the initial aggregate demand and supply curves are AD0 and AS0, the equilibrium price level and level of real domestic output will be: A) F and C, respectively B) G and B, respectively C) F and A, respectively D) E and B, respectively
A) F and C, respectively
Refer to the above information. Which individual is frictionally unemployed? A) Mollie B) George C) Jeanette D) Ricardo
A) Mollie
A fundamental difference between the command system and laissez-faire capitalism is that, in command systems: A) The divisions of output is decided by central planning rather than by individuals operating freely through markets B) all economic decisions are made by the government, whereas there is no government in laissez-faire capitalism C) scarcity does not exist, whereas it does in laissez-faire capitalism D) money is not used, whereas it is in laissez-faire capitalism
A) The divisions of output is decided by central planning rather than by individuals operating freely through markets
The economizing problem is: A) The need to make choices because economic wants exceed economic means B) How to distribute resources equally among all members of society C) That people mean's often exceed their D) That people do not know how to rationally allocate resources
A) The need to make choices because economic wants exceed economic means
The total amount of debt owned by the Federal government is represented by the total value of the outstanding: A) U.S. government securities B) Federal Reserve notes C) Bank loans and deposits D) Stock and bonds
A) U.S. government securities
Two major virtues of the market system are that it: A) allocates resources efficiently and allows economic freedom. B) results in an equitable personal distribution of income and always maintains full employment C) results in price level stability and a fair personal distribution of income D) eliminates discrimination and minimizes environmental pollution
A) allocates resources efficiently and allows economic freedom.
As disposable income increases, consumption: A) and saving both increase B) and saving both decrease C) decreases and saving increases D) increases and saving decreases
A) and saving both increase
If government increases its taxes by $15 billion and the MPC is 2/3, then we would expect the equilibrium GDP to: A) decrease by $30 billion B) decrease by $45 billion C) decrease by $35 billion D) decrease by $55 billion
A) decrease by $30 billion
The following information is for a closed economy: Refer to the information. If government spends $80 billion at each level of GDP, and imposes a lump-sum tax off $100: A) equilibrium GDP will now be $350 B) equilibrium GDP will now be $400 C) equilibrium GDP will now be $300 D) the equilibrium GDP cannot be determined
A) equilibrium GDP will now be $350
Use the following graph to answer question 38. The graph above depicts an economy: A) in an inflationary gap B) in a recessionary gap C) at a full employment equilibrium D) on its long-rib aggregate supply curve
A) in an inflationary gap
The invisible hand promotes society's interests because: A) individuals pursuing their self-interest will try to produce goods and services that people in society want and are willing to purchase. B) individuals will produce goods for other out of concern for their fellow human beings C) it makes sure that everyone wins from competition in the market D) government regulation pushes business into producing the right mix of goods and services
A) individuals pursuing their self-interest will try to produce goods and services that people in society want and are willing to purchase.
Answer the question on the basis of the following before-tax consumption schedule for a closed economy: Refer to the data. If a lump-sum tax (the same tax amount at each level of GDP) of $40 is imposed in this economy, the tax system: A) is regressive B) is proportional C) is progressive D) may be either proportional or progressive
A) is regressive
A nation's gross domestic product (GDP): A) is the dollar value of all final output produced within the borders of the nation during a specific period of time B) is the dollar value of all final output produced by its citizens, regardless of where they are living. C) Can be founded by summing C+In+S+Xn D) is always some amount less than C+Ig+G+Xn
A) is the dollar value of all final output produced within the borders of the nation during a specific period of time
If the economy is initially in equilibrium at full employment real GDP (QN), and a stock market crash reduces households wealth and lowers investor confidence, ceteris paribus, the aggregate demand curve will shift to the ______ resulting in an _____ price level (P), ______ output/real GDP level (Q) and _____ unemployment level (U) A) left, lower, lower, higher B) left, higher, higher, lower C0 right, lower, higher, lower D) right, higher, lower, higher
A) left, lower, lower, higher
If investment decrease by $20 billion and the economy's MPC is a.5, the aggregate demand curve will shift: A) leftward by $40 billion at each price level B) rightward by $20 billion at each price level C) rightward by $40 billion at each price level D) leftward by $20 billion at each price level
A) leftward by $40 billion at each price level
If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium: A) output would necessarily rise B) output would necessarily fall C) price level would necessarily fall D) price level would necessarily rise
A) output would necessarily rise
Refer to the given graph. A movement form b to a along C1might be caused by a(n): A) recession B) wealth effect of an increase in stock market prices C) decrease in income tax rates D) increasing in saving
A) recession
In a competitive market illustrated by the diagram above, a price ceiling of $25 per unit will result in: A) the market stays at equilibrium price $15 B) A surplus of 200 units C) A shortage of 299 units D) A shortage of 150 units
A) the market stays at equilibrium price $15
The most basic practice premise of the aggregate expenditures model is that: A) the total output produced in the economy depends directly on the level of total spending B) the level of employment in the economy depends inversely on the real wage rare C) the total output produced depends mostly on the total capacity of firms to produce D) the unemployment level in the economy is inversely related to the inflation rate
A) the total output produced in the economy depends directly on the level of total spending
Which of the following statements is true about risk management in market systems versus command systems? A)Market systems manage risk better because entrepreneurs taking risks bear the costs of poor decisions, where in command systems government decision makers don't bear those costs. B) neither systems government is better than the other in terms of risk management; both systems are equally susceptible to natural disasters and changes in consumer preferences C) Command systems manage risk better because the government controls most economic activity and can therefore eliminate risk D) Market systems face risk because of the possibility of profits and losses; command systems don't face risk because they are not profit driven
A)Market systems manage risk better because entrepreneurs taking risks bear the costs of poor decisions, where in command systems government decision makers don't bear those costs.
In constructing models, what do economists do? A)make simplifying assumptions B) Include all available information C) must use mathematical equations D) attempt to duplicate the real world
A)make simplifying assumptions
Refer to the above diagram. If society is currently producing 9 units of bicycles and 4 units of computers and it now decides to increase computer output to 6, the cost: A. will be 4 units of bicycles. B. will be 2 units of bicycles. C. will be zero because unemployed resources are available. D. of doing so cannot be determined from the information given.
A. will be 4 units of bicycles.
Refer tot he above information, which individual is structurally unemployed? A) Mollie B) George C) Jeanette D) Ricardo
C) Jeanette
(The following national income data are in billions of dollars.) Refer to the above data. Gross domestic product in this economy is: A) $1,049 billion B) $1,079 billion C) $1,090 billion D) $1,101 billion
B) $1,079 billion
The following information is for a closed economy: Refer to the information. If both government spending and taxes are zero, the equilibrium level of GDP is: A) $200 B) $300 C) $400 D) $500
B) $300
(Advance analysis) Answer the question on the basis of the following information for a mixed open economy. The letters Y, Ca, Ig, Xn, G, and T stand for GDP, consumption, gross investment, net exports, government purchases, and net taxes respectively. Figures are in billions of dollars. Refer to the information. The equilibrium level of GDP for this economy is: A) $600 B) $530 C) $415 D) $400
B) $530
Consider the supply and demand curves depicted in the diagram above. If the government imposed a price ceiling of $15, then buyers will be intending to buy ___, but they will be able to legally buy _____. A) 30 units; 24 units B) 36 units; 24 units C) 36 units; 30 units D) 24 units; more than 24 units
B) 36 units; 24 units
If the market price is above the equilibrium price: A) A shortage will occur and producers will produce more and lower prices B) A surplus will occur and producers will produce less and lower prices C) A surplus will result and consumers will bid prices up D) Producers will make extremely high profits
B) A surplus will occur and producers will produce less and lower prices
Which of the following is associated with macroeconomics? A) An examination of the incomes of Harvard Business School graduates B) An empirical investigation of the general price level and unemployment rates since 1990 C) A study of the trend of pecan prices since the Second World War D) A case study of pricing and production in the textbook industry
B) An empirical investigation of the general price level and unemployment rates since 1990
Refer to the above diagram, which shows three demand curves for coffee. Which would cause the change in the demand for coffee illustrated by the shift from D1 to D2? A) A decrease in the price of tea B) An increase in consumer incomes C) An increase in the prices of cream and sugar D) A decrease in the price of coffee
B) An increase in consumer incomes
Refer to the figure above, which shows three supply curves for corn. Which of the following would cause the supply of born to shift from S1 to S3? A) A decrease in the cost of equipment used in corn farming B) An increase in the price of soybeans C) A decrease in the price of corn D) An increase in the number of acres of farmland allocated to corn
B) An increase in the price of soybeans
Use the following diagrams for the U.S. economy to answer the following question. Which of the diagrams best portrays the effects of a dramatic increase in energy prices? A) A B) B C) C D) D
B) B
Increasing the share of your income that you save is good for you. Therefore it would be good for the whole economy if everyone saved more. This exemplifies the: A) post hoc fallacy B) Fallacy of composition C) Use of loaded terminology D) Confusion between correlation and causation
B) Fallacy of composition
Suppose that a university decides to spend $1 million to upgrade personal computers and scientific equipment for faculty rather than spend $1 million to expand parking for students. This example illustrates: A) distorted priorities B) Opportunity costs C) increasing opportunity costs D) productive
B) Opportunity costs
Which phase of the business cycle would be mostly closely associated with an economic contraction? A) peak B) Recession C) Trough D) Recovery
B) Recession
Competition means that: A) sellers can manipulate market price by causing product scarcities B) There are independently acting buyers and sellers in each market C) A product can be purchased at number of different prices D) There is more than one seller in a market
B) There are independently acting buyers and sellers in each market
the aggregate cost of unemployment can be measure by the: A) amount by which actual GDP exceeds potential GDP B) amount by which potential GDP exceeds actual GDP C) excess of real GDP over nominal GDP D) excess of nominal GDP over real GDP
B) amount by which potential GDP exceeds actual GDP
Ceteris paribus, a decrease in the price level leads to: A) a decrease in the purchasing power of real GDP B) an increase in the quantity-demanded of real GDP C) an increase in the demand for real GDP D) a decrease in the quantity-demanded of real GDP
B) an increase in the quantity-demanded of real GDP
The amount by which government expenditures exceed revenues during a particular year is the: A) public debt B) budget deficit C) full employment D) GDP gap
B) budget deficit
Economists refer to a budget deficit that exists when the economy is achieving full employment as a: A) cyclical deficit B) cyclically adjusted deficit C) natural deficit D0 nonrecurring deficit
B) cyclically adjusted deficit
Other things being equal, a decrease in an economy's exports will: A) increase domestic aggregate expenditures and the equilibrium level of GDP B) decrease domestic aggregate expenditures and the equilibrium level of GDP C) have no effect on domestic GDP because imports will offset the change win exports D) increase the amount of imports consumed by the private sector
B) decrease domestic aggregate expenditures and the equilibrium level of GDP
In the aggregate expenditures model, we note that an increase in government purchases G and an increase in lump-sum taxes of T of the same amount will have: A) the same magnitudes of impact on equilibrium GDP, though in the opposite directions B) different effects on GDP, with the change in G having a larger impact than the change in T C) different effects on GDP, with the change in T having a larger impact than the change in G D) essentially the same effect of equilibrium GDP, both in magnitude and in direction
B) different effects on GDP, with the change in G having a larger impact than the change in T
Answer the question on the basis of the following data. All figures are in billions of dollars The economy characterized by the data is: A) experiencing inflation because disposable income exceeds personal income B) experiencing declining production capacity because net investment is negative C) in a depression because personal income exceeds disposable income D) experiencing expanding production capacity because net private domestic investment is positive
B) experiencing declining production capacity because net investment is negative
If government increases its purchases by $15 billion and the MPC is 2/3, then we would expect the equilibrium GDP to: A) increase by $30 billion B) increase by $45 billion C) decrease by $35 billion D) increase by $50 billion
B) increase by $45 billion
Refer to the graph above. Which of the following would shift the investment demand curve from ID2 to ID1? A) raising real interest rates B) increasing business taxes C) lower acquisition cost of capital goods D) higher expected rates of return investment
B) increasing business taxes
value added can be determined by: A) summing the profits of all enterprises in the economy B) subtracting the purchase of intermediate products from the value of the sales of final products C) calculating the year-to-year changes in real GDP D) deflating nominal GDP
B) subtracting the purchase of intermediate products from the value of the sales of final products
Which of the following activities is excluded from GDP, causing GDP to understate a nation's well-being A) the services of used-car dealers B) the child-care services provided by stay-at-home parents C) the construction of new houses D) government expenditures on military equipment
B) the child-care services provided by stay-at-home parents
in a competitive market economy, firms select the least-cost production technique because: A) such choices will result in full employment of available resources B) to do so will maximize the firm's profit C) this will prevent new firms from entering the industry D) "Dollar voting" by consumers mandate such choice
B) to do so will maximize the firm's profit
refer tot he figure. The consumption schedule indicates that: A) consumers will maximize their satisfaction where the consumption schedule and 45º line intersect B) up to a point consumption exceeds income but then falls below income C) the MPC falls as income increases D) households consume as much as they earn
B) up to a point consumption exceeds income but then falls below income
Refer to the given graph. A shift of the consumption schedule from C1 to C2 might be caused by a(n): A) recession B) wealth effect of an increase in stock market prices C) increase in income tax rates D) increase in saving
B) wealth effect of an increase in stock market prices
If aggregate demand increases and aggregate supply decreases, the price level: A) will decrease, but real output may increase, decrease, or remain unchanged B) will increase, but real output may increase, decrease, or remain unchanged C) and real output will both increase D) and real output will both decrease
B) will increase, but real output may increase, decrease, or remain unchanged
Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that: A)Ben's statement is normative, but Holly's is positive B)Holly's statement is normative, but Ben's is positive C) Both statements are normative D) Both statements are positive
B)Holly's statement is normative, but Ben's is positive.
Suppose an economist says that "Other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that: A)the quantity of bananas purchased determines the price of bananas B)all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant. C) economists can conduct controlled laboratory experiments D) one cannot generalize about the relationship between the price of bananas and the quantity of purchased
B)all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant.
Refer to the above data. In view of the indicated resource prices, the economically most efficient production technique(s) is (are) technique(s): A. #1. B. #2 and #4. C. #3. D. #1 and #3.
B. #2 and #4.
Refer to the above diagram. The combination of computers and bicycles shown by point F: A. is unattainable, given currently available resources and technology. B. is attainable, but implies that the economy is not using all its resources. C. is irrelevant because it is inconsistent with consumer preferences. D. suggests that opportunity costs are constant.
B. is attainable, but implies that the economy is not using all its resources.
Which of the following will not produce an outward shift of the production possibilities curve? A. an upgrading of the quality of a nation's human resources B. the reduction of unemployment C. an increase in the quantity of a society's labor force D. the improvement of a society's technological knowledge
B. the reduction of unemployment
Refer to the above diagram. The combination of computers and bicycles shown by point G is: A. attainable, but too costly. B. unattainable, given currently available resources and technology. C. attainable, but involves unemployment. D. irrelevant because it is inconsistent with consumer preferences.
B. unattainable, given currently available resources and technology.
(The following national income data are in billions of dollars.) Refer tot he above data. Net domestic product equals: A) $1,039 billion B) $1,044 billion C) $1,054 billion D) $1,076 billion
C) $1,054 billion
The table shows a consumption schedule Refer to the data above. If disposable income is $550, we should expect consumption to be: A) $430 B) $450 C) $460 D) $470
C) $460
(Advance analysis) Answer the question on the basis of the following consumption schedule C=20+.9Y, where C is consumption and y is disposable income. Refer to the given data. At an $800 level of disposable income, the level of saving is: A) $180 B) $740 C) $60 D) $18
C) $60
Answer the question on the basis of the following national income data. All figures are in billions Refer tot he data. Disposable income is: A) $83 B) $73 C) $75 D) $77
C) $75
The table shows a consumption schedule Refer to the data above. The marginal prosperity to consume is. A) .80 B) .75 C) .60 D) .40
C) .60
If the total population is 200 million, the labor force is 100 million, and 92 million workers are employed, then the unemployment rate would be: A) 4 percent B) 6 percent C) 8 percent D) 10 percent
C) 8 percent
In a competitive market illustrated by the diagram above, for a price floor to be effective and alter the market situation, it must be set: A) At $15 B) Below $15 C) Above $15 D) At $10
C) Above $15
Use the following diagrams for the U.S. economy to answer the following question. Which of the diagrams best portrays an improvement in expected rates of return on investment? A) A B) B C) C D) D
C) C
(Advance analysis) Answer the question on the basis of the following data: Which of the following equations correctly represents the given data? A) Yd=40+.6C B) C=60+.4Yd C) C=40+.6Yd D) C=.6Yd
C) C=40+.6Yd
Refer to the four graphs above. Select the graph above that best shows the changes in demand and supply in the market specified in the following situation: In the market for music CDs sold in stores, if more consumers switch to music-downloads from the Internet, and the cost of making music CDs decreases because of technological improvement in production. A) Graph A B) Graph B C) Graph C D) Graph D
C) Graph C
An increase in demand for oil along with a simultaneous increase in supply of oil will: A) Decrease price and increase quantity B) Increase price and decrease quantity C) Increase quantity, but whether it increases price depends on how much each curve shifts D) Increase price, but whether it increase quantity depends on how much each curve shifts
C) Increase quantity, but whether it increases price depends on how much each curve shifts
In Year 1, the price level was 120 and the average nominal income was $30,000. In Year 2, the price level was 125 and the average nominal level of income was $32,000. What happened to real income from Year 1 to Year 2? A) It fell by $400 B) It rose by $400 C) It rose by $600 D) It rose by $2,000
C) It rose by $600
Refer tot he above information. Which individual(s) would be included in the calculation of the natural unemployment rate? A) Mollie only B) George only C) Mollie and Jeanette D) George and Ricardo
C) Mollie and Jeanette
The aggregate supply curve (short run) is upsloping because: A) wages and other resource prices match changes in the price level B) the price level is flexible upward but inflexible downward C) Per-unit production costs rise as the economy moves toward and beyond its full-employment real output D) Wages and other resource prices are flexible upward but inflexible downward
C) Per-unit production costs rise as the economy moves toward and beyond its full-employment real output
Which of the following best describes the built-in stabilizers as they function in the United States? A) The size of the multiplier varies inversely wight the level of GDP B) Personal and corporate income tax collections automatically fall and transfers and subsidies automatically rise as GDP rises C) Personal and corporate income tax collections and transfers and subsides all automatically vary inversely with the level of GDP D) Personal and corporate income tax collections automatically rise and transfers and subsidies automatically decline as GDP rises.
C) Personal and corporate income tax collections and transfers and subsides all automatically vary inversely with the level of GDP
Refer to the above diagram for the milk market. If the price were $2 per gallon, then there would be a: A) Shortage of 20 million gallons B) Shortage of 10 million gallons C) Surplus of 10 million gallons D) Surplus of 30 million gallons
C) Surplus of 10 million gallons
other things being equal, the law of demand suggests that as: A) The demand for iPads increases, this will cause the price to increase B) Income increases, the quantity of iPads demanded will increase C) The price of iPads decreases, the quantity demanded will increase D) the price of iPads decreases, the quantity demanded will decrease
C) The price of iPads decreases, the quantity demanded will increase
In the diagram, a shift from AS1 to AS2 might be caused by: A) stricter government regulations B) an increase in the prices of imported resources C) a decrease in the prices of domestic resources D) an increase in business taxes
C) a decrease in the prices of domestic resources
The investment demand curve will shift to the right as a result of: A) the availability of excess production capacity B) an increase in business taxes C) businesses becoming more optimistic about future business conditions D) an increase win the real interest rate
C) businesses becoming more optimistic about future business conditions
National income is the sum of employee compensation, profits, and the following items, except: A) rent B) interest C) depreciation or consumption of fixed capital D) taxes on production and imports
C) depreciation or consumption of fixed capital
The investment demand slopes downward and to the right because lower interest rates: A) expand consumer borrowing, making investments more profitable B) host expected rates of returns on investment C) enable more investment projects to be undertaken profitably D) create tax incentives to invest
C) enable more investment projects to be undertaken profitably
which of the following is not a typical characteristics of a market system? A) private property B) freedom of enterprise C) government ownership of most property resources D) competition in product and resource markets
C) government ownership of most property resources
Refer to the tables. Opportunity costs are: A) constant in both Duckistan and Herbania B) larger in Duckistan than in Herbania C) increasing in both Duckistan and Herbania D)Increasing in Duuckistan and constant in Herbania
C) increasing in both Duckistan and Herbania
An increase in aggregate expenditures resulting from a decrease in the price level is equivalent to a: A) rightward shift of the aggregate demand curve B) leftward shift tot the aggregate demand curve C) movement downward along a fixed aggregate demand curve D) decrease in aggregate supply
C) movement downward along a fixed aggregate demand curve
(Advance analysis) Answer the question on the basis of the following information for a mixed open economy. The letters Y, Ca, Ig, Xn, G, and T stand for GDP, consumption, gross investment, net exports, government purchases, and net taxes respectively. Figures are in billions of dollars. Refer to the information. If government desired to raise the equilibrium GDP to $650, it could: A) raise G by $45 and reduce T by $10 B) raise G by $40 and reduce T by $40 C) raise G by $30 or reduce T by $40 D) raise both G and T by $40
C) raise G by $30 or reduce T by $40
in the short-run equilibrium level of real GDP (QE) is less than the full employment real GDP (QN), then the economy is a(n) ____ gap with unemployment (U) that is _____ the natural rate of unemployment (UN) A) inflationary; above B) inflationary; below C) recessionary; above D) recessionary; below
C) recessionary; above
Refer tot he diagram, in which Qf is the full-employment output. If aggregate demand curve AD1 describes the current situation, appropriate fiscal policy would be to: A) increase taxes and reduce government spending to shift the aggregate demand curve rightward to AD2 B) reduce taxes on businesses to shift the aggregate supply curve leftward C) reduce taxes and increase government spending to shift the aggregate demand curve from AD1 to AD2 D) do nothing since the economy appears to be achieving full-employment real GDP
C) reduce taxes and increase government spending to shift the aggregate demand curve from AD1 to AD2
A production possibilities curve shows: A) that resources are unlimited B) that people prefer one of the goods more than the other C) the maximum amounts of two goods that can be produced assuming the full use of available resources. D) combinations of capital and labor necessary to produce specific levels of output
C) the maximum amounts of two goods that can be produced assuming the full use of available resources.
Suppose there are 10 million part-time workers and 90 million full-time workers in an economy. Five million of the part-time workers switch to full-time work. As a result: A) the official unemployment rate will fall B) the official unemployment rate will rise C) the official unemployment rate will remain unchanged D) the size of the labor force will increase
C) the official unemployment rate will remain unchanged
In the aggregate expenditures model, technological progress will shift the investment schedule: A) downward and increase aggregate expenditures B) downward and decrease aggregate expenditures C) upward and increase aggregate expenditures D) upward and decrease aggregate expenditures
C) upward and increase aggregate expenditures
If an unintended increase in business inventories occurs: A) we can expect aggregate production to be unaffected B) we can expect businesses to increase the level of production C) we can expect businesses to lower the level of production D) aggregate expenditures must exceed the domestic output
C) we can expect businesses to lower the level of production
The following information is for a closed economy: Refer to the information. If government now spends $80 billion at each level of GDP and taxes remain at zero, the equilibrium GDP: A) will rise to $700 B) will rise to $600 C) will rise to $500 D) may either rise or fall
C) will rise to $500
Which of the following is incorrect? A. As the U.S. price level rises, U.S. goods become relatively more expensive so that U.S. exports fall and U.S. imports rise. B. As the price level falls, the demand for money declines, the interest rate declines, and interest-rate sensitive spending increases. C. When the price level increases, real balances increase, businesses and households find themselves wealthier and therefore increase their spending. D. Given aggregate demand, an increase in aggregate supply increases real output and, assuming downward flexible prices, reduces the price level.
C. When the price level increases, real balances increase, businesses and households find themselves wealthier and therefore increase their spending.
Answer the question on the basis of the following national income data. All figures are in billions Refer to the data, U.S. imports are: A) $26 B) $16 C) $24 D) $14
D) $14
Answer the question on the basis of the following national income data. All figures are in billions Refer tot he data. Personal income is: A) $229 B) $253 C) $274 D) $243
D) $243
With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6%. But if the rate of inflation was anticipated to be 4%, the bank would most likely charge the firm an annual interest rate of: A) 2 percent B) 4 percent C) 6 percent D) 10 percent
D) 10 percent
Refer to the graph above, which of the following factors will shift the AD1 to AD3? A) An increase in expected returns on investment B) An increase win productivity C) A decrease in real interest rates D) A decrease in consumer wealth
D) A decrease in consumer wealth
Refer tot he diagram, in which Qf is the full-employment output. A contractionary fiscal policy would be most appropriate if the economy's present aggregate demand curve were at: A) AD0 B) AD1 C) AD2 D) AD3
D) AD3
Examples of command economies are: A) the United States and Japan B) Sweden and Norway C) Mexico and Brazil D) Cuba and North Korea
D) Cuba and North Korea
Use the following diagrams for the U.S. economy to answer the following question. Which of the diagrams best portrays the effects of declines in the incomes of U.S. trading partners? A) A B) B C) C D) D
D) D
In a open mixed economy, the inflationary expenditure gap may be described as the: A) excess of GDP over Ca+Ig+Xn+G at the full-employment output B) excess of Sa+M+T over Ig+x+G at the full-employment GDP C) extra consumption that occurs when investment increases is a full-employment economy D) Excess of Ca+Ig+Xn+G at the full-employment GDP
D) Excess of Ca+Ig+Xn+G at the full-employment GDP
Refer to the diagram. If aggregate supply is AS1 and aggregate demand is AD0, then: A) at any price level above G a shortage of real output would occur B) F represents a price level that would result in a surplus o real output of AC C) A surplus of real output of GH would occur D) F represents a price level would result in a shortage of real output of AC
D) F represents a price level would result in a shortage of real output of AC
Refer to the four graphs above. Select the graph that best shows the changes in demand and supply in the market specified in the following situation: In the market for beef, if a new diet fad favoring beef consumption becomes hugely popular, while cattle producers see steeply rising costs of cattle feed. A) Graph A B) Graph B C) Graph C D) Graph D
D) Graph D
Refer to the above diagram of three demand curves for coffee. An increase in the price of coffee factors constant, would cause a: A) Shift from D1 to D3 B) Shift from D1 to D2 C) Movement from point a to boing b D) Movement from point b to point a
D) Movement from point b to point a
An example of intermediate goods would be: A) Bricks bought by a homeowner for constructing a patio B) Sacks of groceries bought by a dentist for his family C) Cars bought by a car-rental company D) Paper and ink bought by a publishing company
D) Paper and ink bought by a publishing company
Refer to the diagram above. The phases of the business cycle from points A to D are, respectively: A) Peak, recession, expansion, trough B) Trough, recovery, expansion, peak C) Expansion, recession, trough, peak D) Peak, recession, trough, expansion
D) Peak, recession, trough, expansion
Which of the following transaction would be included in GDP? A) Mary buys a used book for $5 at a garage dale B) Nick buys $5,000 worth of stock in Microsoft C) Olivia receives a tax refund of $500 D) Peter buys a newly constructed house
D) Peter buys a newly constructed house
Refer to the figure above, which shows three supply curves for corn. Which of the following would cause the supply of corn to shift from S1 to S2? A) An increase in the price of fertilizer B) A change in consumer tastes away from cornbread C) A decrease in consumer incomes, assuming corn is a normal good D) The development of a more effective insecticide against corn root worm
D) The development of a more effective insecticide against corn root worm
When inflation occurs: A) all prices are rising B) Each dollar of income will buy more output than before C) The purchasing power of money increases D) The purchasing power of money decreases
D) The purchasing power of money decreases
Assume the current equilibrium level of income is $200 billion as compared to the full-employment income level of $240 billion. If the MPC is .625 what change in aggregate expenditures is needed to achieve full employment? A) a decrease of $12 billion B) an increase of $25 billion C) an increase of $10 billion D) an increase of $15 billion
D) an increase of $15 billion
refer to the diagrams. Suppose that the government undertakes fiscal policy designed to increase aggregate demand from AD1 to AD2 and thereby to increase GDP from X to Z. In terms of graph B, which of the following might explain why GDP increases to Y rather than to Z? A) depreciation of the dollar B) reduction in tariffs imposed by our trading partners C) decrease in the saving schedule D) crowding-out effect
D) crowding-out effect
If at some level of GDP the economy is experiencing an untended decrease in inventories: A) the aggregate level of saving will decline B) The price level will fall C) the business sector will lay off workers D) domestic output will increase
D) domestic output will increase
A change in interest rates would shift the consumption schedule and the saving schedule _____; a change in taxes would shift these two schedules ____. A) in the same direction; also in the same direction B) in the same direction; in opposite directions C) in opposite directions; also in opposite directions D) in opposite directions; in the same direction
D) in opposite directions; in the same direction
In a recessionary expenditure gap, the equilibrium level of real GDP is: A) less than planned aggregated expenditures B) greater than planned aggregated expenditures C) greater than full-employment GDP D) less than full-employment GDP
D) less than full-employment GDP
In the figure are two linear production possibilities curves for countries Alpha and Beta. We can conclude that: A)different value systems make it impossible to compare opportunity costs in the two countries B) the opportunity cost of shelter is greater in Beta than it is in Alpha C) the opportunity cost of food is greater in Alpha than it is in Beta D) the opportunity cost of shelter is greater in Alpha than it is in Beta
D) the opportunity cost of shelter is greater in Alpha than it is in Beta
Which of the following best illustrates the circular flow model in action? A. Bobbie goes to work and builds cars, and uses the income she receives to buy food at the grocery store. B. Evan buys a new couch; the owner of the furniture store uses some of the money from the sale to pay her supplier, and uses the rest to take her family out to dinner. C. Boeing experiences a surge in orders for new airplanes, prompting the company to hire more workers. D. All of the above.
D. All of the above.
Which statement is true about supply? A. There is an inverse relationship between price and quantity supplied B. Supply refers to the amount of inventory that sellers have in their warehouses C. As price decreases, producers are willing to put more of the good on the market for sale D. To entice producers to offer more of a good on the market for sale, price must rise
D. To entice producers to offer more of a good on the market for sale, price must rise
Which of the following lists includes only capital resources (and therefore no labor or land resources)? A. an ice arena; a professional hockey player; hockey uniforms. B. the owner of a new startup firm; a chemistry lab; a researcher. C. a hydroelectric dam; water behind the dam; power lines. D. autos owned by a car rental firm; computers at the car rental agency; the vans that shuffle rental customers to and from the airport.
D. autos owned by a car rental firm; computers at the car rental agency; the vans that shuffle rental customers to and from the airport.