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Economic
Q:
Which of the following items is NOT included in GDP?A) purchase of a hamburger at a fast -food restaurantB) sales at a grocery storeC) sale of Microsoft stockD) downloads of new music albums charged to a credit card
Q:
Which one of the following is true?A) Inflation increases the real value of money.B) In the base year, the value of a price index is 100.C) The consumer price index measures changes in the average income of consumers.D) The market basket defined for the consumer price index contains more items than does the market basket defined for the GDP deflator.
Q:
The rate of unemployment is found byA) dividing the number unemployed by the number of people in the labor force. B) dividing the number unemployed by the number employed.C) dividing the number employed by the number of people in the labor force. D) dividing the number employed by the number unemployed.
Q:
Economic growth is measured byA) the annual percentage change in nominal GDP.B) the annual percentage change in the unemployment rate.C) the annual percentage change in per capita nominal GDP. D) the annual percentage change in per capita real GDP.
Q:
The Phillips curve is thought to reflect the relationship betweenA) unemployment and real GDP. B) unemployment and inflation.C) inflation and real GDP. D) the price level and inflation.
Q:
According to the quantity theory of money, the price level decreases in equal proportion toA) an increase in the income velocity of money.B) a decrease in the nominal interest rate. C) an increase in the real interest rate.D) a decrease in the money supply.
Q:
When banks reduce the reserve ratio, the potential money multiplierA) increases. B) decreases.C) remains unchanged.D) sometimes increases, and sometimes decreases depending on the rate of inflation.
Q:
Small-denomination certificates of deposits areA) included in M1 but not M2. B) included in M1 and M2.C) included only in M1. D) included in M2 but not M1.
Q:
Historical evidence seems to indicate thatA) budget and trade deficits generally move in the same direction.B) budget and trade deficits generally move in the opposite direction.C) there is no consistent relationship between trade and budget deficits.D) trade and budget deficits decrease when the president is a Republican, and increase when the president is a Democrat.
Q:
The Laffer curveA) initially slopes upward as increasing tax rates lead to increasing tax revenue but eventually will slope downward as increasing tax rates lead to decreasing tax revenue. B) slopes downward throughout its range since increasing tax rates will always lead to decreases in tax revenue.C) slopes upward throughout its range since increasing tax rates will always lead to increases in tax revenue.D) is horizontal because tax revenue is independent of the rate of interest.
Q:
In the Keynesian model, whenever planned investment is greater than planned saving, A) the amount of planned investment will decrease, and real GDP will decrease.B) the amount of planned investment will decrease, and real GDP will remain unchanged. C) there will be an unplanned inventory decrease, and GDP will eventually increase.D) there will be an unplanned inventory increase, and GDP will eventually decrease.
Q:
The relationship between householdsʹ planned consumption expenditures and householdsʹ level of disposable real income is called
A) the consumption function.
B) the savings function.
C) the investment function.
D) the household aggregate demand function.
Q:
Keynes argued that an economy could be in equilibrium when the economy was
A) operating at maximum potential capacity.
B) operating with some unutilized productive capacity.
C) trying to operate at some output level beyond its potential capacity.
D) operating either at full productive capacity or at less than full capacity.
Q:
Which of the following statements is correct?I. When economists derive the aggregate demand curve, they are looking at the effect of the price level on one commodity only.II. Any non-price-level change that increases total planned real spending on domestic goods shifts the AD curve to the right.A) I only B) II only C) Both I and II D) Neither I nor II
Q:
Which one of the following does NOT appear to contribute to economic growth?
A) innovation
B) knowledge
C) protectionism
D) a system of well-defined property rights
Q:
Constant dollars areA) the same as current dollars.B) dollars corrected for general price level changes. C) what nominal GDP is measured in.D) when an individual does not receive a cost of living increase.
Q:
Which of the following items is included in GDP?A) The new car that James just bought B) The value of a stay-at-home momC) Proceeds for a garage sale D) Purchase of a government bond
Q:
An increase in inflation will cause a reduction in which of the following?A) the nominal value of money B) the Producer Price IndexC) the GDP deflator D) the real value of money
Q:
By definition, the labor force participation rate isA) the percentage of institutionalized working-age individuals who are employed or seeking employment.B) the percentage of noninstitutionalized working -age individuals who are employed or seeking employment.C) the annual rate of growth in the number of people who are either employed or searching for available jobs.D) the annual rate of growth in the number of people who are unemployed and searching for available government-provided unemployment benefits.
Q:
Which of the following best represents economic growth?
A) an increase in nominal GDP
B) an increase in real GDP
C) an increase in the per capita nominal GDP
D) an increase in the per capita real GDP
Q:
The trade-off between unemployment and inflation is known asA) the Keynesian mechanism. B) the Phillips curve.C) an expansionary gap. D) passive policy making.
Q:
The hypothesis that changes in the money supply lead to an equiproportional change in the price level is calledA) the quantity theory of money. B) the classical theory of money. C) the Keynesian theory of money. D) the fractional theory of money.
Q:
When people decide to increase the amount of currency they are currently holdingA) the potential money multiplier will increase. B) the potential money multiplier will decrease. C) the actual money multiplier will increase.D) the actual money multiplier will decrease.
Q:
The M2 money supply is equal to the M1 money supply plusA) small time deposits, savings deposits, and retail money market mutual fund shares. B) all credit card balances and retail money market mutual fund shares.C) large time deposits and retail money market mutual fund shares. D) every account held by commercial banks.
Q:
When foreign residents buy U.S. Treasury securities to finance the budget deficit, A) we can also anticipate an increase in the trade deficit.B) we can also anticipate a decrease in the trade deficit. C) the trade deficit will not be affected.D) the public debt will be reduced.
Q:
The government has decided to give every person in the U.S. a $5 coupon that they can use at the grocery store to purchase their choice of cheese. We would expect this policy to lead to
A) an increase in aggregate demand equivalent to the full impact of all of the coupons redeemable.
B) no increase in aggregate demand due to the Ricardian equivalence theorem.
C) no increase in aggregate demand because there would be no direct expenditure offset.
D) an increase in aggregate demand but not equivalent to the full impact of all of the coupons redeemed due to some direct expenditure offset.
Q:
Supposed actual investment is greater than planned investment at the current level of output in 2010. Given this information, we know thatA) GDP will tend to increase over time.B) firmsʹ stock of inventories must have increased unexpectedly in 2010. C) saving must be less than planned investment.D) saving must be equal to planned investment.
Q:
The consumption function showsA) a positive relationship between an individualʹs stock of wealth and his level of planned consumption.B) a positive relationship between disposable income and planned consumption. C) a negative relationship between planned consumption and aggregate saving. D) a negative relationship between disposable income and planned consumption.
Q:
The original Keynesian economic theory states thatA) the short-run aggregate supply (SRAS) curve is always vertical.B) many prices would not decline even when aggregate demand decreases.C) wages tend to fall more quickly than the overall price level.D) the economy naturally self-regulates so as to reach full employment quickly.
Q:
An aggregate demand curveA) shifts to the right when the price level increases and to the left when the price level falls.B) shifts to the right when any non-price-level factor increases total planned real spending. C) shifts to the right when population decreases and shifts to the left when population increases.D) does not shift, unlike individual or market demand curves.
Q:
Which of the following is a true statement?A) The most important sources of economic growth are the quantity and quality of the land and other natural resources a country controls.B) The most important source of economic growth is the rate of population growth since a growing population stimulates demand for goods and services, and provides the labor to produce the goods and services.C) The most important sources of economic growth are the new ideas generated by entrepreneurs in an economic system that permits them to capture the rewards of their entrepreneurial activities.D) The most important source of economic growth is the extent to which the government directly enters into decisions where research and development activities should be directed and who should be involved in research and development activity.
Q:
The real value of an economic variable isA) the consumer price index.B) the producer price.C) expressed in terms of actual market prices at which goods are sold.D) computed by taking the nominal value and dividing by the appropriate price index.
Q:
Which of the following is included in measuring GDP?A) The value added at each stage of production of a final productB) The buying and selling of securitiesC) The transfer of secondhand goodsD) Household services rendered by homemakers
Q:
Which of the following is NOT a measure of the general level of prices?A) Consumer Price Index B) Producer Price IndexC) GDP Deflator D) Personal Sales Deflator Index
Q:
Which of the following best fits the definition of unemployed?
A) Retired and not working
B) Working less than a full work week
C) Not working but looking for a job
D) Not working at a gainful pursuit, either in or out of the home
Q:
Political freedom seems to be important to growth than economic freedom.A) less B) more C) equally D) critically
Q:
The inflation rate has been constant for several years at 4 percent, and the unemployment rate has been stable at 6 percent over the same time period. Changes in government policy that cause the inflation rate to rise to 6 percent will
A) have no effect on the unemployment rate.
B) cause the unemployment rate to fall in the short run.
C) cause the unemployment rate to rise to 9 percent in the short run.
D) cause the unemployment rate to rise in the short run, but we cannot tell by how much.
Q:
Which of the following best represents the equation of exchange?A) M * P = V * Y B) M * V = P * Y C) M * Y = P * V D) M * Y * V = P
Q:
The potential money multiplier gives usA) the growth in real national income when the money supply increases. B) the growth in the money supply when income increases.C) the maximum potential change in the money supply due to a change in reserves. D) the maximum potential change in the money supply due to a change in income.
Q:
Which of the following is included in M2 but NOT in M1?A) small-denomination time deposits B) transaction depositsC) currencyD) travelerʹs checks
Q:
Which of the following is true about how trade deficits and government budget deficits are related?
A) The trade deficit leads to a reduction in investment that leads to a government budget deficit.
B) The trade deficit leads to a decline in imports relative to exports that leads to a government budget deficit.
C) The government budget deficit leads to higher interest rates that will lead to a trade deficit.
D) The government budget deficit leads to lower interest rates that will lead to a lower trade deficit.
Q:
Whenever government spending is a substitute for private spending
A) interest rates will rise.
B) the Ricardian equivalence theorem holds.
C) the effects of expansionary fiscal policy are dampened.
D) there is a direct multiplier effect.
Q:
For a closed economy with no government, we know that at every level of GDP actual investment equalsA) planned investment. B) planned saving.C) the difference between planned saving and actual saving.D) the difference between planned investment and actual saving.
Q:
The Keynesian model is based on the idea thatA) saving depends only on the interest rate.B) both consumption and saving are directly related to disposable income.C) consumption is unrelated to the level of real Gross Domestic Product (GDP).D) both consumption and saving are unrelated to the level of real Gross Domestic Product (GDP).
Q:
Keynes argued thatI. Capitalism did not always lead to full employment.II. Nominal prices were more important than relative prices.A) I only B) II onlyC) Both I and II D) Neither I nor II
Q:
Which of the following would cause aggregate demand to decrease?A) The government increases taxes on both business and personal income. B) A drop in the foreign exchange value of the dollarC) The Fed increases the amount of money in circulation.D) Businesses and households believe that the economy is headed for good times, so they begin to feel increased security about their jobs.
Q:
The federal government awards a patent holder the exclusive right to make, use, and sell an invention for a period ofA) 20 years. B) 17 years. C) unlimited period. D) 100 years.
Q:
The nominal value of an economic variable isA) the consumer price index.B) the producer price.C) expressed in terms of actual market prices at which goods are sold.D) computed by taking the nominal value and dividing by the appropriate price index.
Q:
Which of the following transactions is included in GDP?A) funds given to a college student by her parentsB) funds received by a college student for working in the college dining hallC) funds given to a family on welfareD) Social Security check received by an elderly couple
Q:
Inflation can be defined asA) an increase in the purchasing power of money.B) a decrease in the purchasing power of money. C) no change in the purchasing power of money. D) an increase in real income.
Q:
The labor force includes individuals who are: I. EmployedII. UnemployedIII. Discouraged workersA) I only. B) Both I and II. C) Both I and III. D) All I, II and III.
Q:
Economic freedom by its nature suggestsA) minimal government interference. B) zero government. C) a lack of laws and regulations. D) economic anarchy.
Q:
Refer to the above figure. Unexpected contractionary monetary policy has caused the aggregate demand curve to shift to AD2. In the long run,A) the unemployment rate will be the same rate as before the expansionary monetary policy. B) the unemployment rate will be larger than the rate before the expansionary monetary policy.C) the unemployment rate will be smaller than the rate before the expansionary monetary policy.D) the unemployment rate can increase or decrease depending upon how much the LRAS will shift.
Q:
According to the equation of exchange, if M = $400, P = 8, and Y = $200, thenA) net domestic product is $800. B) V is 4.C) the price level must fall. D) V cannot be determined.
Q:
The actual money multiplier multiplied by the change in total reserves is theA) federal funds rate. B) discount rate.C) potential money multiplier. D) actual change in the money supply.
Q:
Which of the following is NOT included in the M1 money supply?A) currency B) passbook savings accountsC) checkable and debitable accounts D) travelerʹs checks
Q:
A trade surplus occurs whenA) the value of imports is greater than the value of exports.B) government spending is less than total tax revenue. C) consumption is greater than disposable income.D) none of the above.
Q:
Direct expenditure offsets areA) the discretionary changing of government expenditures to achieve a higher employment level.B) the decrease in planned investment that occurs as the result of an increase in interest rates.C) the same as the Ricardian equivalence theorem.D) the decrease in spending in the private sector in areas in which the government is competing.
Q:
Refer to the above figure. At real GDP of $1 trillion, actual investment equalsA) planned investment of $1 trillion.B) planned saving of $1 trillion. C) actual saving of 0.D) unanticipated inventory adjustments of $1 trillion.
Q:
According to Keynesian theory, the most important determinant of saving and consumption is
A) the level of real disposable income.
B) the stock of liquid assets.
C) the stock of durable goods in the consumerʹs possession.
D) the level of consumer indebtedness.
Q:
Refer to the above figure. Suppose the current aggregate demand is represented by AD 2. If aggregate demand falls to line AD 3, thenA) the new equilibrium will be at j.B) the new equilibrium will be at k.C) the new equilibrium real Gross Domestic Product (GDP) will be x.D) a new price level will be established at a.
Q:
What are the three forces that cause the aggregate demand curve to slope down? Explain.
Q:
A government grant that gives an inventor the exclusive right or privilege to make, use, or sell his or her invention is known asA) a positive externality. B) a negative externality. C) a protectionism clause. D) a patent.
Q:
Which of the following represents how real GDP is calculated?A) nominal GDP multiplied by the GDP deflatorB) nominal GDP divided by the populationC) nominal GDP divided by the PPI, the producer price indexD) nominal GDP divided by the GDP deflator
Q:
Which of the following transactions would NOT be included in GDP?A) the purchase of 100 shares of newly issued Microsoft stockB) the purchase of a newly issued government bond C) the purchase of previously issued corporate bond D) all of the above
Q:
Using the above table, the following is the output of a two -product economy. The price index in this economy in Year 2, assuming Year 1 is the base year, isA) 113.0. B) 88.5. C) 107.1. D) 106.7.
Q:
The total civilian labor force is comprised ofA) the unemployed and the employed.B) only the employed.C) all individuals over 16 years of age, whether or not they work or are seeking work.D) only full-time employed individuals between the ages of 18 and 55.
Q:
A major contributor to a countryʹs real rate of economic growth is its real GDP growth relative to itsA) inflation. B) unemployment rate. C) money growth. D) none of the above.
Q:
Refer to the above figure. Unexpected contractionary monetary policy has caused the aggregate demand curve to shift to AD2. In the short run,A) the unemployment rate will be the same rate as before the expansionary monetary policy.B) the unemployment rate will be larger than the rate before the expansionary monetary policy.C) the unemployment rate will be smaller than the rate before the expansionary monetary policy.D) the unemployment rate can increase or decrease depending upon how much the LRAS will shift.
Q:
What effects does an expansionary monetary policy have on the trade balance? Why?
Q:
The formula 1 required reserve ratio is theA) federal funds rate. B) discount rate.C) potential money multiplier. D) actual change in the money supply.
Q:
Which one of the following is included in M2 but NOT in M1?A) coins and currency B) transaction depositsC) a savings deposit without a set maturity D) large-denomination time deposits
Q:
Historic data indicate that there is usually a relationship between trade deficits and federal government budget deficits.A) positive B) zero C) negative D) fluctuating
Q:
ʺExpansionary fiscal policy is always 100 percent effective when the short -run aggregate supply curve is horizontal.ʺ Is this statement true?A) Yes, because theoretically nothing else can offset the effects of fiscal policy. B) Yes, when the long-run aggregate supply curve is horizontal too.C) No, because crowding out could take place.D) No, because the increased spending may cause the price level to increase.
Q:
Refer to the above figure. If real GDP is $4 trillion, thenA) consumption expenditures are too low. B) unplanned inventories will decrease.C) unplanned inventories will increase.D) actual investment spending equals $1 trillion as planned investment spending plus unplanned inventory increases equal $1 trillion.
Q:
Which of the following is true?A) MPC - MPS = 1 B) MPC + MPS = 1C) MPC * MPS = 1 D) MPC / MPS = 1
Q:
The above figure presents the view of the economy according toA) Keynesian economics. B) classical economics. C) microanalysis. D) Ricardian economics.
Q:
What is the real-balance effect of an increase in the price level?
Q:
According to new growth theory, economic growth is driven byA) positive externalities. B) the division of labor. C) higher birth rates. D) new ideas.
Q:
The GDP deflator is equal to.A) nominal GDP divided by real GDP. B) nominal GDP multiplied by real GDP. C) nominal GDP minus real GDP. D) nominal GDP plus real GDP.