Questions and Answers of Economics For Healthcare Managers

Which of the following items is not included when computing M1?a. Coins in circulationb. Currency in circulationc. Savings accountsd. Checking account entries
The M1 defi nition of the money supply consists ofa. coins and currency in circulation.b. coins and currency in circulation and checkable deposits.c. Federal Reserve notes, gold certifi cates, and
M1 refers toa. the most narrowly defi ned money supply.b. currency held by the public plus checking account balances.c. the smallest dollar amount of the money supply defi nitions.d. all of the above.
The easier it is to convert an asset directly into goods and services without loss, thea. less secure it is.b. more secure it is.c. more liquid it is.d. less liquid it is.
Which of the following is not a store of value?a. Dollarb. Money market mutual fund sharec. Checking account balanced. Credit card
Which of the following is not a characteristic of money?a. It provides a way to measure the relative value of goods and services.b. It is always backed by something of high intrinsic value, such as
Which of the following is a problem with barter?a. Individuals will not exchange goods.b. Individuals’ wants must coincide in order for there to be exchange.c. Goods can be exchanged, but services
Supply-side economists argue that less government spendinga. will contract the productive side of the economy.b. will result in more crowding out.c. causes higher rates of unemployment and infl
The national debt is unlikely to cause national bankruptcy because thea. national debt can be refi nanced by issuing new bonds.b. interest on the public debt equals GDP.c. national debt cannot be
When measured as a percentage of GDP, the U.S. national debt reached its highest levels as a result ofa. World War II.b. the Vietnam War.c. the Reagan defense buildup and tax cuts.d. the Bush
“Crowding in” refers to federal government defi citsa. used for public infrastructure, which will offset any decline in business investment.b. which reduce private business and consumption
Which of the following statements about crowding out is true?a. It can completely offset the multiplier.b. It is caused by a budget defi cit.c. It is not caused by a budget surplus.d. All of the
Which of the following statements about crowding out is true?a. It is caused by a budget surplus.b. It is not caused by a budget defi cit.c. It cannot completely offset the multiplier effect of defi
The portion of the U.S. national debt held by foreignersa. represents a burden because it transfers purchasing power from U.S. taxpayers to other countries.b. is an accounting entry that represents
Which of the following own a portion of the national debt?a. Federal, state, and local governmentsb. Private U.S. citizensc. Banksd. Foreignerse. All of the above
In 2009, approximately what percentage of the U.S. national debt was owed to foreigners?a. 2.5 percentb. 30 percentc. 20 percentd. 60 percent
Which of the following is true?a. The national debt’s size increased sharply after 1980.b. The national debt increases in size whenever the federal government has a budget defi cit.c. The national
Which of the following countries has the smallest national debt as a percentage of GDP in 2009?a. Italyb. Canadac. Australiad. Japane. France
In 2009, the national debt was approximatelya. $60 billion.b. $600 billion.c. $12 trillion.d. $20 trillion.4. The national debt to GDP ratio in 2009a. was about seven times its size in 1982.b. was
The federal government fi nances a budget bya. taxing businesses and households.b. selling Treasury securities.c. printing more money.d. reducing its purchases of goods and services.
During 1998–2001, federal government budget defi citsa. were completely removed.b. dropped signifi cantly from a high of $300 billion.c. remained fairly stable at about $150 billion per year.d.
According to the shortsightedness effect, politicians tend to favor projects witha. short-run benefi ts and short-run costs.b. short-run benefi ts and long-run costs.c. long-run benefi ts and
Which of the following statements relating to public choice is true?a. A low voter turnout may result when voters perceive that the marginal cost of voting exceeds its marginal benefi t.b. If the
Margaret pays a local income tax of 2 percent, regardless of the size of her income. This tax isa. proportional.b. regressive.c. progressive.d. a mix of (a) and (b).
A 5 percent sales tax on food is an example of aa. fl at tax.b. progressive tax.c. proportional tax.d. regressive tax.
The federal personal income tax is an example of a (an)a. excise tax.b. proportional tax.c. progressive tax.d. regressive tax.
Generally, most economists feel that a type of income tax is a fairer way to raise government revenue than a sales tax.a. regressiveb. proportionalc. fl at-rated. progressive
A tax that is structured so that people with higher incomes pay a larger percentage of their incomes for the tax than do people with smaller incomes is called a (an)a. income tax.b. regressive tax.c.
Which of the following statements is true?a. A sales tax on food is a regressive tax.b. The largest source of federal government tax revenue is individual income taxes.c. The largest source of state
Which of the following statements is true?a. The most important source of tax revenue for the federal government is individual income taxes.b. The taxation burden, measured by taxes as a percentage
Some cities fi nance their airports with a departure tax: Every person leaving the city by plane is charged a small fi xed dollar amount that is used to help pay for building and running the airport.
“The poor should not pay income taxes.”This statement refl ects which of the following principles of taxation?a. Fairness of contributionb. Benefi ts-receivedc. Inexpensive-to-collectd.
Which of the following countries devotes about the same percentage of its GDP to taxes as the United States?a. Swedenb. Italyc. United Kingdomd. Japan
Which of the following contributed the largest percentage of total federal government expenditures in 2009?a. Interest on the national debtb. Education and healthc. National defensed. Income security
Which of the following accounted for the second largest percentage of total federal government expenditures in 2009?a. Income securityb. National defensec. Interest on the national debtd. Education
Since 1975, total government expenditures as a percentage of GDP in the United States havea. grown from one-third to about 40 percent.b. remained fairly constant at about one-third.c. grown from
The marginal propensity to save isa. the change in saving induced by a change in consumption.b. (change in S) / (change in Y).c. 1 2 MPC / MPC.d. (change in Y 2 bY) / (change in Y).e. 1 2 MPC.
The sum of the marginal propensity to consume(MPC) and the marginal propensity to save(MPS) always equalsa. 1.b. 0.c. the interest rate.d. the marginal propensity to invest (MPI).
Which of the following statements is true?a. A reduction in tax rates along the downward-sloping portion of the Laffer curve would increase tax revenues.b. According to supply-side fi scal policy,
Supply-side economics is most closely associated witha. Karl Marx.b. John Maynard Keynes.c. Milton Friedman.d. Ronald Reagan.
Which of the following is not an automatic stabilizer?a. Defense spendingb. Unemployment compensation benefi tsc. Personal income taxesd. Welfare payments
If no fi scal policy changes are implemented, suppose the future aggregate demand curve will shift and exceed the current aggregate demand curve by $900 billion at any level of prices. Assuming the
Suppose infl ation is a threat because the current aggregate demand curve will increase by$600 billion at any price level. If the marginal propensity to consume (MPC) is 0.75, federal policymakers
If no fi scal policy changes are implemented, suppose the future aggregate demand curve will exceed the current aggregate demand curve by $500 billion at any level of prices. Assuming the marginal
If no fi scal policy changes are made, suppose the current aggregate demand curve will increase horizontally by $1,000 billion and cause infl ation.If the marginal propensity to consume(MPC) is 0.80,
Assume the marginal propensity to consume(MPC) is 0.75 and the government increases taxes by $250 billion. The aggregate demand curve will shift to thea. left by $1,000 billion.b. right by $1,000
Mathematically, the value of the tax multiplier in terms of the marginal propensity to consume(MPC) is given by the formulaa. MPC 2 1.b. (MPC 2 1)/MPC.c. 1/MPC.d. 1 2 [1/(1 2 MPC)].
Assume the economy is in recession and real GDP is below full employment. The marginal propensity to consume (MPC) is 0.80, and the government increases spending by $500 billion.As a result,
If the marginal propensity to consume (MPC) is 0.60, the value of the spending multiplier isa. 0.4.b. 0.6.c. 1.5.d. 2.5.
The spending multiplier is defi ned asa. 1/(1 2 marginal propensity to consume).b. 1/(marginal propensity to consume).c. 1/(1 2 marginal propensity to save).d. 1/(marginal propensity to consume
Contractionary fi scal policy is deliberate government action to infl uence aggregate demand and the level of real GDP througha. expanding and contracting the money supply.b. encouraging business to
Suppose workers become pessimistic about their future employment, which causes them to save more and spend less. If the economy is on the intermediate range of the aggregate supply curve, thena. both
An increase in the price level caused by a rightward shift of the aggregate demand curve is calleda. cost-push infl ation.b. supply shock infl ation.c. demand shock infl ation.d. demand-pull infl
Assuming a fi xed aggregate demand curve, a leftward shift in the aggregate supply curve causes a (an)a. increase in the price level and a decrease in real GDP.b. increase in the price level and an
Other factors held constant, a decrease in resource prices will shift the aggregatea. demand curve leftward.b. demand curve rightward.c. supply curve leftward.d. supply curve rightward.
Along the classical or vertical range of the aggregate supply curve, a decrease in the aggregate demand curve will decreasea. both the price level and real GDP.b. only real GDP.c. only the price
Macroeconomic equilibrium occurs whena. aggregate supply exceeds aggregate demand.b. the economy is at full employment.c. aggregate demand equals aggregate supply.d. aggregate demand equals the
Which of the following is not a range on the eclectic or general view of the aggregate supply curve?a. Classical rangeb. Keynesian rangec. Intermediate ranged. Monetary range
Classical economists believed that thea. price system was stable.b. goal of full employment was impossible.c. price system automatically adjusts the economy to full employment in the long run.d.
The popular theory prior to the Great Depression that the economy will automatically adjust to achieve full employment isa. supply-side economics.b. Keynesian economics.c. classical economics.d.
Which of the following will not shift the aggregate demand curve to the left?a. Consumers become more optimistic about the future.b. Government spending decreases.c. Business optimism decreases.d.
Which of the following will shift the aggregate demand curve to the left?a. An increase in exportsb. An increase in investmentc. An increase in government spendingd. A decrease in government spending
The net exports effect is the inverse relation ship between net exports and the of an economy.a. real GDPb. GDP defl atorc. price leveld. consumption spending
The real balances effect occurs because a higher price level reduces the real value of people’sa. fi nancial assets.b. wages.c. unpaid debt.d. physical investments.
When the supply of credit is fi xed, an increase in the price level stimulates the demand for credit, which, in turn, reduces consumption and investment spending. This effect is called thea. real
The aggregate demand curve is defi ned as thea. net national product.b. sum of wages, rent, interest, and profi ts.c. real GDP purchased at different possible price levels.d. total dollar value of
Use the aggregate expenditures model and assume an economy is in equilibrium at $5 trillion, which is $250 billion below full-employment GDP. If the marginal propensity to consume(MPC) is 0.60,
Using the aggregate expenditures model, assume the aggregate expenditures (AE) line is above the 45-degree line at full-employment GDP. This vertical distance is called a (an)a. infl ationary gap.b.
To close the recessionary gap and achieve fullemployment real GDP as shown in Exhibit 9, the government should cut taxes bya. $0.60 trillion.b. $1 trillion.c. $2 trillion.d. $3 trillion. Exhibit 9 10
To close the recessionary gap and achieve fullemployment real GDP as shown in Exhibit 9, the government should increase spending bya. $1 trillion.b. $1.2 trillion.c. $2.0 trillion.d. $2.5 trillion.
In Exhibit 9, the spending multiplier for this economy is equal toa. 12⁄3.b. 2½.c. 3.d. 5.
The equilibrium level of real GDP is $1,000 billion, the full-employment level of real GDP is$1,250 billion, and the marginal propensity to consume (MPC) is 0.60. The full-employ ment target can be
Keynes’s criticism of the classical theory was that the Great Depression would not correct itself. The multiplier effect would restore an economy to full employment ifa. government would follow a
If the marginal propensity to consume (MPC)is 0.90, a $100 billion increase in planned investment expenditure, other things being equal, will cause an increase in equilibrium output ofa. $90
If the marginal propensity to consume(MPC) is 0.75, a $50 billion decrease in government spending would cause equilibrium output toa. increase by $50 billion.b. decrease by $50 billion.c. increase by
If the marginal propensity to consume (MPC) is 0.80, the value of the spending multiplier isa. 2.b. 5.c. 8.d. 10.
If the value of the marginal propensity to consume(MPC) is 0.50, the value of the spending multiplier isa. 0.50.b. 1.c. 2.d. 5.
The spending multiplier is defi ned asa. 1/(1 2 marginal propensity to consume).b. 1/(marginal propensity to consume).c. 1/(1 2 marginal propensity to save).d. 1/(marginal propensity to consume 1
John Maynard Keynes proposed that the multiplier effect can correct an economic depression.Based on this theory, an increase in equilibrium output would be created by an initiala. increase in
There will be unplanned inventory investment accumulation whena. aggregate output (real GDP) equals aggregate expenditures.b. aggregate output (real GDP) exceeds aggregate expenditures.c. aggregate
The net exports line can bea. positive.b. negative.c. zero.d. any of the above.
As shown in Exhibit 12, the marginal propensity to save (MPS) isa. 0.33.b. 0.50.c. 0.67.d. 0.75.
As shown in Exhibit 12, saving occursa. at 0.b. between 0 and $4 trillion.c. where disposable income is greater than $4 trillion.d. at $2 trillion.
As shown in Exhibit 12, autonomous consumption isa. 0.b. $1 trillion.c. $2 trillion.d. $3 trillion.e. $6 trillion.
In Exhibit 11, aggregate disposable income will equal consumption plus investment (aggregate expenditures), and the economy will be in equilibrium when real disposable income isa. $2.33 trillion.b.
In Exhibit 11, what is the households’ marginal propensity to consume (MPC)?a. 0.50b. 0.67c. 0.75d. 0.80
The aggregate expenditures function (AE) represents which of the following?a. The consumption function onlyb. Autonomous consumption onlyc. The investment demand curve onlyd. All three of the above
Which of the following changes produces a leftward shift in the investment demand curve?a. A wave of optimism about future profi tabilityb. Technological changec. High plant capacity utilizationd. An
The investment demand curve represents the relationship between business spending for investment goods anda. GDP.b. interest rates.c. disposable income.d. saving.
An upward shift in the consumption schedule, other things being equal, could be caused by householdsa. becoming optimistic about the state of the economy.b. becoming pessimistic about the state of
Which of the following changes produces an upward shift in the consumption function?a. An increase in consumer wealthb. A decrease in consumer wealthc. A decrease in autonomous consumptiond. Both (b)
Above the break-even disposable income for the consumption function, which of the following occurs?a. Dissavingb. Savingc. Neither (a) nor (b)d. Both (a) and (b)
John Maynard Keynes’s proposition that a dollar increase in disposable income will increase consumption, but by less than the increase in disposable income, implies a marginal propensity to consume
The consumption function represents the relationship between consumer expenditures anda. interest rates.b. saving.c. the price level.d. disposable income.
Autonomous consumption isa. positively related to the level of consumption.b. negatively related to the level of consumption.c. positively related to the level of disposable income.d. independent of
The French classical economist Jean-Baptiste Say transformed the equality of production and spending into a law that can be expressed as follows:a. The invisible hand creates its own supply.b. Wages
Which of the following statements is true?a. Demand-pull infl ation is caused by excess total spending.b. Cost-push infl ation is caused by an increase in resource costs.c. If nominal interest rates
Suppose you place $10,000 in a retirement fund that earns a nominal interest rate of 8 percent.If you expect infl ation to be 5 percent or lower, then you are expecting to earn a real interest rate
Cost-push infl ation is due toa. excess total spending.b. too much money chasing too few goods.c. resource cost increases.d. the economy operating at full employment.
Demand-pull infl ation is caused bya. monopoly power.b. energy cost increases.c. tax increases.d. full employment.

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