Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
|
|
|
1.
|
Which
of the following is an example of active fiscal policy? a. | Government
expenditures rise during a recession because unemployment insurance benefits
increase. | b. | The government runs a budget deficit during a recession because
income tax collections fall. | c. | Congress passes a tax cut after the beginning of a recession
with the aim of stimulating the economy. | d. | all of the above | e. | none of the
above
| | |
|
|
|
2.
|
Negative net exports means that a. | the country sells more goods abroad than it buys from other
countries. | b. | the country buys more goods from other countries than it sells
to other countries. | c. | the country has a closed economy. | d. | the
country’s tariffs are too low. | e. | both c and d
| | |
|
|
|
3.
|
Which
of the following is not an example of an automatic stabilizer? a. | the increase in
unemployment insurance payments during a recession | b. | the increase in
welfare payments during a recession | c. | the reduction in income tax revenues during a
recession | d. | the passage of a stimulus package to respond to a
recession | e. | All of these are automatic
stabilizers.
| | |
|
|
|
4.
|
To
decrease the money supply, the Fed would a. | buy government bonds. | b. | increase the
discount rate. | c. | decrease the reserve requirement. | d. | any of the
above | e. | none of the above
| | |
|
|
|
5.
|
The
aggregate supply-aggregate demand model predicts that an unexpected increase in government spending
will have what short-run effects? a. | A decrease in the price level and an increase in real
output. | b. | A decrease in the price level and no effect on real
output. | c. | An increase in the price level and a decrease in real
output. | d. | A decrease in both the price level and real
output. | e. | An increase in both the price level and real
output.
| | |
|
|
|
6.
|
Which
of the following would be included in Gross National Product (GNP) but not in Gross Domestic
Product (GDP) of the United States? a. | the earnings of an American-owned factory in
Germany | b. | the income of a Texan employed in
Oklahoma | c. | the earnings of a Japanese-owned factory in the
U.S. | d. | the income of
American government employees working in Washington, D.C. | e. | the income of
employees of foreigners working in foreign embassies in the U.S.
| | |
|
|
|
7.
|
According to the following information, what is the unemployment rate? (Round to
the nearest tenth of a percent.)
Number of Employed:
10,000
Number of Unemployed:
500
Not in the Labor Force:
3,000
a. | 5.0% | b. | 4.8% | c. | 3.7% | d. | 30.0% | e. | none of the
above
| | |
|
|
|
8.
|
In
economics, “National Saving” is calculated by a. | Subtracting
private consumption and investment from total income. | b. | Subtracting
credit card debt from the total value of stock market investments. | c. | Combining the
total value of savings accounts with stock market investments. | d. | Subtracting
private and government consumption from total income. | e. | None of the
above.
| | |
|
|
|
9.
|
Which
of the following is NOT one of the components of aggregate demand? a. | Consumption
spending. | b. | Investment spending. | c. | Government
purchases of goods and services. | d. | Money supply. | e. | Net
exports.
| | |
|
|
|
10.
|
In
the long-run, higher saving leads to a. | permanently faster growth. | b. | permanently
slower growth. | c. | temporarily faster growth. | d. | temporarily
slower growth. | e. | none of the above.
| | |
|
|
|
11.
|
Which
of the following is not included in a country’s Gross Domestic Product
(GDP)? a. | the value of
final goods sold | b. | the value of final services sold | c. | the value of
investment | d. | the value of government expenditures | e. | the value of
household production in the economy
| | |
|
|
|
12.
|
Which
of the following statements are correct? a. | Economists using the classical dichotomy distinguish between
variables measured in monetary units from those measured in physical units. | b. | Real variables
are variables measured in monetary units. | c. | Nominal variables are variables measured in physical
units. | d. | a is false, but b and c are both
correct. | e. | a, b, and c are all correct.
| | |
|
|
|
13.
|
The
quantity equation relates a measure of the money supply (M), to the velocity of money (V), the GDP
deflator (P) and real GDP (Y). Which of the following expression accurately describes the
quantity equation? a. | MY = PV | b. | MP =
VY | c. | MV =
PY | d. | M/P =
V/Y | e. | None of the
above describes the quantity equation.
| | |
|
|
|
14.
|
An
increase in the minimum wage will likely: a. | increase structural unemployment. | b. | decrease
structural unemployment. | c. | increase frictional unemployment. | d. | decrease
frictional unemployment. | e. | increase cyclical unemployment.
| | |
|
|
|
15.
|
According to the loanable funds framework, if businesses reduce their willingness to
spend money on new capital equipment, a. | inflation will increase | b. | interest rates
will increase. | c. | interest rates will decrease. | d. | interest rates
will not change. | e. | none of the above are true.
| | |
|
|
|
16.
|
Governments can increase the likelihood of economic development by a. | instituting
policies to see that everyone shares equally. | b. | supporting
smooth transitions from one set of office-holders to another. | c. | encouraging
banks to lend to politically favored borrowers at below-market interest
rates. | d. | adopting policies that specifically benefit those in
office. | e. | heavily taxing profits from new
inventions.
| | |
|