1. Economic growth is best represented by an increase in

AD and LRAS.

AD and SRAS.

AD and the PPC.

LRAS and the PPC.

SRAS and the PPC.

2. Economic growth would increase as a result of all of the followingexcept

increase in labor productivity.

introduction of new technology in the manufacturing sector.

decrease in investment spending.

new factory construction in the northern states.

discovery of new sources oil and natural gas in Utah and Idaho.

3. The production possibilities curve would shift outward as a result of a(n)

decrease in labor productivity.

increase in absenteeism.

new integrated circuit that revolutionizes the defense industry.

increase in short run aggregate supply.

increase in aggregate demand.

4. An economy with government involvement in the provision of social welfare benefits combined with relatively free markets where buyers and sellers are allowed to interact with one another would be a

market economy.

command economy.

traditional economy.

normal economy.

mixed economy.

5. When a new Congress is elected, businesses become more confident that the economy will improve. As a result, we can expect the following changes in the loanable funds market (LF):

Demand for LF / Real Interest Rates

Increase / Increase

Increase / Decrease

Decrease / Increase

Decrease / Decrease

No change because supply of loanable funds will change

6. Suppose Aaron deposits $4,000 in a U.S. bank that he brought from another country. If the required reserve ratio is 10 percent, the amount the banking system can create is

$400.

$3,600.

$4,000.

$40,000.

$36,000.

7. If the Federal Reserve buys bonds on the open market then the money supply will

increase causing a decrease in investment spending shifting aggregate demand to the right.

increase causing an increase in investment spending shifting aggregate demand to the right.

decrease causing a decrease in investment spending shifting aggregate demand to the right.

decrease causing a decrease in investment spending shifting aggregate demand to the left.

increase causing a decrease in investment spending shifting aggregate demand to the left.

8. After saving money in his piggy bank for three years, Omar decided to deposit $2,500 of the money in the local bank. If the bank were fully loaned out and the reserve requirement was 20 percent, then the change in the dollar value of the total money supply would be

$500.

$2,000.

$10,000.

$12,500.

$25,000.

9, The U.S. funds deficit spending primarily through

personal income tax increases.

business tax increases.

borrowing from the International Monetary Fund.

borrowing from the World Bank.

selling bonds, bills, and notes.

10. If the government imposes an effective interest rate ceiling in the loanable funds market, how would quantity demanded and quantity supplied of loanable funds be impacted?

Quantity Demanded / Quantity Supplied

No change because demand will increase to meet supply

Increase / Increase

Increase / Decrease

Decrease / Increase

Decrease / Decrease

No change because supply will decrease to meet demand