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In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, the size of the multiplier depends on the

Select one:

a. 45-degree line.

b. height of the consumption function.

c. slope of the aggregate demand curve.

d. slope of the aggregate expenditures curve.

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Question 2

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A factor that has been associated with the increase in income inequality in the United States is the:

Select one:

a. decrease in households headed by single women.

b. reduction in the percentage of the population over the age of 65.

c. smaller gap between the wages of skilled and unskilled workers.

d. way that technological change has affected labor demand.

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Question 3

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The poverty line is described by which of the following?

Select one:

a. It is a dollar figure. When a household income is equal to or less than this figure, the household is not considered to be poor.

b. It is a dollar figure above which a household's income is considered to be in the poor category.

c. In 2010 in the United States, the poverty line for a family of four was an income of $22,314.

d. The poverty line is the same for all family sizes.

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Question 4

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Suppose your firm is considering an investment project that will generate an expected return of 15%. The project costs $200,000. Suppose further that your firm has $100,000 of retained earnings. If the market interest rate is 10%, your firm should

Select one:

a. loan the retained earnings out at 5%.

b. loan the retained earnings out at 10%.

c. loan the retained earnings out at 15%.

d. invest the $100,000 of retained earnings in the project and borrow the remaining $100,000 at the interest rate of 10%.

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Question 5

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An indexed payment is a payment for which:

Select one:

a. the nominal value does not change with the rate of change in the price level.

b. the nominal value is constant.

c. the nominal value changes with the rate of change in the price level.

d. the nominal value is equal to the real value, when inflation is positive.

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Question 6

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Changes in net exports caused by changes in the domestic price level

Select one:

a. shift the aggregate demand curve in the same direction as the price change.

b. shift the aggregate demand curve in the opposite direction of the price change.

c. do not shift the aggregate demand curve.

d. will not affect aggregate demand.

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Question 7

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Which of the following individuals benefits from inflation?

Select one:

a. Ben, who borrowed $1,000 from a friend and agreed to pay the same amount one year later

b. Mark, who lent his friend $1,000 and agreed to accept repayment of the same amount one year later

c. Randall, who lives on a fixed income of $800 per month

d. Asuza, who keeps her savings in the form of cash in a safe at home

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Question 8

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Suppose households become more future-oriented and decide to save more at each income level. All other things unchanged, this will

Select one:

a. shift the aggregate demand curve to the right.

b. shift the aggregate demand curve to the left.

c. not affect aggregate but rather aggregate supply because firms will now produce less.

d. shift both the aggregate demand curve and the aggregate supply curve to the left.

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Question 9

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In addition to purchasing-power-adjusted per capita real GDP, the Human Development Index includes two dimensions related to the quality of life. What are these dimensions?

Select one:

a. Life expectancy, educational attainment

b. Access to health care, nutrition

c. Life expectancy, infant mortality rate

d. Nutrition, life expectancy

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Question 10

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China's transition to market capitalism has been characterized by:

Select one:

a. gradual change.

b. free market exchanges for all production.

c. very slow economic growth.

d. increasingly centralized decision making.

Question 11

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Suppose an economy is operating with an inflationary gap. In this case, policymakers would seek to move the economy

Select one:

a. back down the Phillips curve, trading a reduction in unemployment for an increase in inflation.

b. up the Phillips curve, trading a reduction in unemployment for an increase in inflation.

c. back down the Phillips curve, trading a reduction in inflation for an increase in unemployment.

d. up the Phillips curve, trading a reduction in inflation for an increase in unemployment.

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Question 12

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Which of the following is considered investment?

Select one:

a. The individual who is innovative, takes risks, raises capital and organizes production

b. The hiring of a college graduate to work in a firm's "Investment" division

c. $200 million of financial capital owned by Bethlehem Steel

d. A brand new robot purchased for use on an automobile assembly line

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Question 13

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Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (YP) in the long run?

Select one:

a. If the money supply grows at a faster rate than growth in YP, there will be inflation.

b. If the money supply grows at a slower rate than growth in YP, there will be a decrease in the inflation rate.

c. If the money supply grows at the same rate as growth in YP, the price level will fall and there will be deflation.

d. If the money supply grows at the same rate as growth in YP, the price level will also increase at the same rate as growth in YP.

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Question 14

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The skills, training, and education possessed by workers contribute to economic growth

Select one:

a. by increasing saving.

b. by increasing the quality of labor.

c. by increasing the quantity of labor.

d. by increasing real wages.

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Question 15

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The text concludes that poor people, from their own perspective, would be better off with _______ than with _______ .

Select one:

a. noncash aid; cash grants

b. TANF; cash grants

c. cash grants; noncash aid

d. welfare payments; social security

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Question 16

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Figure 14-1

Refer to Figure 14-1. Given that the economy is on curve A, it is least likely to achieve curve C or beyond if it allocates resources to produce at

Select one:

a. point m.

b. point n.

c. point p.

d. point q.

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Question 17

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According to the text, it is generally agreed that in the United States since World War II, the distribution of income has:

Select one:

a. become more equal.

b. become less equal.

c. stayed about the same.

d. changed first toward greater equality and then, after 1968, toward greater inequality.

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Question 18

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The _______ demand for money is holding money in expectation that bond prices and the prices of other assets might change.

Select one:

a. speculative

b. exchange

c. transactions

d. precautionary

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Question 19

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Consider the following statement: "President Carter expressed concern about reports of rising inflation but insisted the economy is on the right course. He pointed to recent reductions in unemployment as evidence that his economic policies are working." Which of the following could have caused this phenomenon?

Select one:

a. Increase in government spending that shifted the aggregate demand curve to the right.

b. Increase in money supply which lowered interest rates and shifted the short-run aggregate supply curve to the right.

c. Economic agents revising their expectations about the price level resulting in the short-run aggregate supply curve shifting to the left.

d. Expansionary fiscal and monetary policies that shifted the long-run aggregate supply curve to the right.

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Question 20

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Contractionary monetary policy by the Fed could include

Select one:

a. lowering the discount rate.

b. decreasing government transfer payments.

c. decreasing reserve requirements.

d. selling government securities in the open market.

Question 21

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All of the following are obstacles in a country's ability to rely on a general strategy of import substitution in its development efforts except

Select one:

a. a shortage of managerial talent and skilled labor.

b. a corrupt bureaucracy.

c. a lack of capital goods.

d. a lack of natural resources.

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Question 22

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Setting a specific income level and then defining a person (or household) as poor if his or her (or its) income falls below that income level is called a(n):

Select one:

a. means-tested test.

b. relative income test.

c. absolute income test.

d. nominal income test.

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Question 23

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Money held for contingencies reflects the _______ demand for money.

Select one:

a. speculative

b. exchange

c. transactions

d. precautionary

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Question 24

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Dependency theory assumes that export industries in a poor country have small multiplier effects throughout the rest of the economy. Which of the following is a policy implication of this assumption?

Select one:

a. Trade based on comparative advantage cannot benefit poor nations.

b. Governments of poor nations should take whatever steps are necessary to prevent the repatriation of profits earned by multinational corporations operating in their countries.

c. Production should be undertaken by the public sector and not the private sector.

d. These countries should pursue policies of self-reliance such as import-substitution policies rather than export-led policies.

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Question 25

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The multiplier effect indicates that

Select one:

a. the aggregate demand curve is downward sloping.

b. a change in any autonomous component of aggregate expenditure is buffered by the multiplier effect

c. a change in income causes a magnified change in investment.

d. a change in any autonomous component of aggregate expenditure brings about a magnified change in income.

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Question 26

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What is an automatic stabilizer?

Select one:

a. It refers to a discretionary policy that is triggered when actual output is not equal to potential output to improve the economy's performance.

b. It refers to a stabilization program that keeps inflation in check automatically.

c. It refers to any government program that tends to reduce fluctuations in GDP automatically.

d. It refers to a government program that is automatically triggered when the economy enters a recession.

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Question 27

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Each point on a Phillips curve is a different combination of

Select one:

a. aggregate output and the unemployment rate.

b. the inflation rate and the unemployment rate.

c. aggregate output and the inflation rate.

d. saving and disposable income.

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Question 28

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In the initial stages of the Great Depression, fiscal authorities responded to the decline in output by

Select one:

a. increasing government purchases to stimulate aggregate demand.

b. raising taxes to increase government revenue.

c. lowering taxes to encourage spending.

d. subsidizing private production to create jobs.

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Question 29

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The model of aggregate demand and long-run aggregate supply predicts that, all other things unchanged, improved technology will

Select one:

a. reduce employment.

b. lower real wages.

c. increase the demand for labor and boost real wages.

d. increase the supply of labor and boost real wages.

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Question 30

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After adjusting for noncash aid, the poverty rate in the United States is:

Select one:

a. unchanged.

b. higher.

c. lower.

d. in some regions lower, but in most regions higher.

Question 31

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All other things unchanged, rapid advances in technology and the introduction of new products tends to

Select one:

a. have no effect on the level of investment.

b. shift the investment demand curve to the left.

c. have no effect on the investment demand curve.

d. shift the investment demand curve to the right.

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Question 32

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If gross private domestic investment exceeds depreciation, then

Select one:

a. net private domestic investment is zero.

b. net private domestic investment is negative.

c. the capital stock is declining.

d. the capital stock is increasing.

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Question 33

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During the Great Depression, capital stock in the United States was reduced since

Select one:

a. gross investment was negative.

b. gross investment was above depreciation.

c. gross investment was below depreciation.

d. gross investment was equal to depreciation.

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Question 34

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Which of the following explain why the Malthusian trap did not occur?

I. rising agricultural productivity

II. increases in the amount of capital per worker

III. slower population growth worldwide

IV. slower population growth in high-income countries

Select one:

a. all of the above

b. I and II only

c. I, II, and III only

d. I, II, and IV only

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Question 35

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Prior to the 1970s, the model of choice was the aggregate expenditures model. According to this model, if the economy was in equilibrium at an income greater than the full employment level, then the primary economic problem would be

Select one:

a. excessive bank lending.

b. potential crises in financial markets.

c. inflation.

d. excess aggregate demand.

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Question 36

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Between 1965 and 1980, the world population grew at an annual rate of 2%. Using the rule of 72, population is expected to double in

Select one:

a. 144 years.

b. 36 years.

c. 24 years.

d. 18 years.

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Question 37

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Over a 10-year period, country A has real GDP and population growth rates of 5% and 7%, respectively; country B has real GDP and population growth rates of 3% and 1%, respectively. All other things unchanged, per capita real GDP has increased

Select one:

a. more in country A.

b. more in country B.

c. about the same in both countries.

d. in neither country.

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Question 38

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Figure 14-1

Refer to Figure 14-1. An decrease in investment is illustrated by moving from

Select one:

a. point m to point n on curve A.

b. point q to point p on curve A.

c. point v on curve C to point s on curve B.

d. point w on curve C to point r on curve B.

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Question 39

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Figure 14-1

Refer to Figure 14-1. A movement from point n to point p on curve B is likely to cause the economy to shift from

Select one:

a. curve B to curve A.

b. curve A to curve B.

c. curve B to curve C.

d. curve C to curve A.

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Question 40

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What are the three types of monetary policy lags?

Select one:

a. the recognition lag, the identification lag, and the implementation lag

b. the recognition lag, the inflation lag, and the impact lag

c. the recognition lag, the implementation lag, and the government lag

d. the recognition lag, the implementation lag, and the impact lag