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Reading Quizes

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Taylor Morris
Quiz by Taylor Morris, updated more than 1 year ago
Taylor Morris
Created by Taylor Morris over 9 years ago
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Question 1

Question
Equilibrium GDP on the demand side occurs when total spending
Answer
  • equals total production, and inventories are zero.
  • equals total production, and firms are unable to adjust inventories.
  • exceeds total production, and inventories are rising.
  • equals total production, and inventories remain at desired levels.
  • is less than total production, and inventories are falling.

Question 2

Question
The expenditure schedule will shift upward when
Answer
  • net exports decrease.
  • net exports increase.
  • total imports increase.
  • total exports decrease.

Question 3

Question
If total spending exceeds total output, then
Answer
  • inventory levels will rise.
  • inventory levels will remain constant.
  • inventory levels will fall.
  • output will eventually decrease.

Question 4

Question
The aggregate demand curve
Answer
  • slopes upward.
  • slopes downward.
  • is perfectly vertical.
  • is perfectly horizontal.

Question 5

Question
In the income-expenditure model, at equilibrium GDP
Answer
  • either unemployment or inflation may occur.
  • inflation can occur but unemployment cannot.
  • unemployment can occur but inflation cannot.
  • both unemployment and inflation are impossible.

Question 6

Question
John Maynard Keynes concluded that investment spending is determined by
Answer
  • business confidence.
  • economic expectations.
  • psychological perceptions about the economy.
  • All of the above are correct.

Question 7

Question
Government stabilization policy
Answer
  • cannot influence investment spending
  • can stimulate aggregate demand and thereby induce businesses to invest, but the amount is not totally predictable.
  • can stimulate aggregate demand, but investment spending will not be affected.
  • can stimulate aggregate demand, but only in the long run.

Question 8

Question
Given the slope of the aggregate demand curve, real GDP demanded will decrease when
Answer
  • real income rises.
  • real income falls.
  • the price level falls.
  • the price level rises.

Question 9

Question
A level of GDP cannot be at equilibrium when aggregate demand exceeds output because firms will notice that
Answer
  • inventory stocks are building up.
  • inventory stocks are being depleted.
  • their profits are negative.
  • many of their workers have little to do.

Question 10

Question
45° line diagrams show how
Answer
  • investment varies with income.
  • expenditures vary with income.
  • investment spending rises when GDP rises.
  • GDP is affected by government purchases.

Question 11

Question
Writing during the Great Depression, Keynes naturally focused on problems of
Answer
  • hyperinflation.
  • budget deficits.
  • trade deficits.
  • unemployment

Question 12

Question
At the equilibrium level of income it must be true that total
Answer
  • income equals total spending.
  • product equals total output.
  • output equals total inventory.
  • income equals total saving.

Question 13

Question
When equilibrium real GDP falls short of potential GDP, there is a(n)
Answer
  • inflationary gap.
  • potential gap.
  • recessionary gap.
  • precautionary gap.

Question 14

Question
In the circular flow diagram saving
Answer
  • is a leakage and investment is an injection.
  • and investment are both injections.
  • is an injection and investment is a leakage.
  • and investment are both leakages.

Question 15

Question
In the 2007-2009 period, the expenditure level in the United States intersected the 45-degree line below potential GDP, causing
Answer
  • hyperinflation.
  • a growing trade deficit.
  • a government budget surplus.
  • unemployment.

Question 16

Question
A rising price level should shift the expenditure schedule
Answer
  • upward and decrease equilibrium real GDP .
  • downward and increase equilibrium real GDP .
  • downward and decrease equilibrium real GDP .
  • upward and increase equilibrium real GDP .

Question 17

Question
When businesses are cutting back production, then it probably true that
Answer
  • total spending is greater than total output.
  • total output is greater than total income.
  • total spending is less than total output.
  • inventory levels are decreasing.

Question 18

Question
Each C + I + G + (X − IM) expenditure schedule is drawn assuming a specific
Answer
  • income level.
  • spending level.
  • production level.
  • price level.

Question 19

Question
The federal government could stimulate investment spending by
Answer
  • A) phasing out the depreciation allowance on corporate income taxes.
  • B) enacting an investment tax credit.
  • C) reinstating the windfall profits tax.
  • D) reducing the tax rate on capital gains.
  • E) Both b and d are correct.

Question 20

Question
If the price level rises, the effect on the expenditure schedule and equilibrium real GDP is to
Answer
  • increase both.
  • decrease both.
  • shift the expenditure schedule upward and decrease equilibrium real GDP.

Question 21

Question
Stagflation" refers to the unwelcome combination of
Answer
  • inflation and rising prices.
  • deflation and unemployment.
  • inflation and unemployment.
  • inflation and expansion.

Question 22

Question
To calculate a firm's per unit of output profit, it is necessary to subtract
Answer
  • price from cost per unit.
  • price from resource costs.
  • cost per unit from product price.
  • cost per unit from cost of resources.

Question 23

Question
Increases in the availability of natural resources will affect the aggregate supply curve such that it
Answer
  • shifts inward and becomes flatter.
  • shifts inward.
  • shifts outward.
  • becomes flatter.
  • becomes steeper.

Question 24

Question
In contrast to changes in government spending, tax changes affect spending
Answer
  • directly.
  • in the same proportion.
  • by a greater amount.
  • indirectly.

Question 25

Question
How does a tax cut affect the expenditure schedule?
Answer
  • It causes movement to the left along the schedule.
  • It causes the schedule to shift upward.
  • It causes movement to the right along the schedule.
  • It causes the schedule to shift downward.

Question 26

Question
How will a cut in a fixed tax affect the consumption schedule?
Answer
  • It will shift downward.
  • It will shift upward.
  • It will become flatter.
  • It will become steeper.

Question 27

Question
In 2009, President Obama and Congress stimulated aggregate demand by
Answer
  • increasing taxes and government spending.
  • decreasing taxes and government spending.
  • increasing taxes and decreasing government spending.
  • decreasing taxes and increasing government spending.

Question 28

Question
For conservatives, the United States needs
Answer
  • an expanded public sector to protect consumers.
  • a smaller public sector and less regulation.
  • a larger tax rate and more government spending.
  • more public goods and services, such as national health care.

Question 29

Question
The slope of the aggregate supply curve increases as output increases because
Answer
  • the cost of resource-use increases as potential is reached.
  • consumers are willing to pay more as output expands.
  • firms substitute capital for labor as prices increase.
  • firms substitute capital for labor as capacity is reached.

Question 30

Question
"Fiscal Policy" is the federal government's plan for
Answer
  • international trade, designed to balance exports and imports.
  • spending and taxes, designed to influence the level of aggregate demand.
  • manipulating the money supply and the control of interest rates.
  • All of the above are correct.

Question 31

Question
If the price level in Figure below were 120,
Image:
69dd83b7-dd1a-44f6-a472-51d695472cc2 (image/jpg)
Answer
  • there would be excess goods on the market.
  • firms would have to raise their prices.
  • inventories would be disappearing.
  • aggregate quantity demanded would exceed aggregate quantity supplied.

Question 32

Question
When government spending is added to the basic macroeconomic model, the multiplier for G would
Answer
  • be higher than the multiplier for autonomous spending.
  • be lower than the multiplier for autonomous spending.
  • be equal to the multiplier for autonomous spending.
  • have no relationship to the autonomous spending multiplier.

Question 33

Question
An increase in wages will cause the aggregate supply curve to
Answer
  • shift outward.
  • shift inward.
  • become flatter.
  • become steeper.

Question 34

Question
If wealthy U.S. consumers save most of their tax cut, this means that, compared to government spending changes,
Answer
  • tax changes would have a higher multiplier effect.
  • tax changes would have a weaker multiplier effect.
  • government spending would have a weaker multiplier effect.
  • U.S. consumers would spend all of their tax cut.

Question 35

Question
The existence of an inflationary gap or an recessionary gap depends on the
Answer
  • aggregate supply only.
  • expenditure schedule.
  • leakages schedule.
  • injections schedule.
  • aggregate demand and aggregate supply schedules.

Question 36

Question
In 2009, the U.S. economy was experiencing a(n)
Answer
  • recessionary gap.
  • inflationary gap.
  • balance of trade deficit.
  • hyperinflation.

Question 37

Question
To eliminate an inflationary gap, the aggregate demand curve should
Answer
  • shift outward.
  • become vertical.
  • become horizontal.
  • shift inward.

Question 38

Question
If resource prices are fixed and the selling price rises, then
Answer
  • profits will decrease.
  • profits will increase.
  • profits will remain constant.
  • both profits and output will decrease.

Question 39

Question
Economists generally assume that there is a short-run trade-off between
Answer
  • output and employment.
  • inflation and employment.
  • deflation and unemployment.
  • inflation and unemployment.
  • output and growth.

Question 40

Question
The slope of the aggregate supply curve is
Answer
  • perfectly vertical.
  • perfectly horizontal.
  • upward.
  • downward.

Question 41

Question
The president has influence on Federal Reserve policy because
Answer
  • he can veto any Fed policy.
  • he appoints the board members and the chair.
  • he can fire the chair.
  • he can replace board members at any time.

Question 42

Question
If the Fed buys a T-bill from a commercial bank, how will it pay for the T-bill?
Answer
  • It will give the bank new reserves.
  • It will write the bank a check.
  • It will transfer cash to the bank's vault.
  • It will take reserves from another bank.

Question 43

Question
Technically, the Federal Reserve district banks are corporations whose stockholders are the
Answer
  • state governments in each district.
  • citizens of the United States.
  • Departments of Treasury and Commerce.
  • member banks.

Question 44

Question
The Federal Open Market Committee meets
Answer
  • once a month.
  • eight times a year.
  • four times a year.
  • semi-annually.

Question 45

Question
Agraria sends wheat to Cyberia in exchange for computers and technology goods. This is an example of
Answer
  • unidirectional trade.
  • joint venture.
  • barter.
  • monetary exchange.

Question 46

Question
The principal difference between income and money is that income is a ____ and money is a ____.
Answer
  • schedule, curve
  • point, line
  • stock, flow
  • flow, stock

Question 47

Question
The Federal Open Market Committee consists of
Answer
  • the president and the Board of Governors.
  • Congresspeople, Senators, and the Board of Governors.
  • the Secretary of the Treasury and the Board of Governors.
  • the Board of Governors and five district bank presidents.

Question 48

Question
The immediate impetus for the establishment of the Federal Reserve System came from
Answer
  • severe outbreaks of inflation in the early 1900s.
  • four severe banking panics between 1873 and 1907.
  • the discovery of gold in Alaska.
  • the desire to copy the founding of the Bank of England.

Question 49

Question
Nowadays, most observers believe that monetary policy
Answer
  • is less important than fiscal policy.
  • is more important than fiscal policy.
  • and fiscal policy are equally important.
  • and fiscal policy are both unimportant.

Question 50

Question
The central bank of the United States is known as the
Answer
  • Internal Revenue Service.
  • Federal Reserve System.
  • Federal Deposit Insurance Corporation.
  • Department of Commerce.

Question 51

Question
Agraria uses bushels of wheat to quote prices. In this case, bushels of wheat act as a
Answer
  • medium of exchange.
  • store of value.
  • commodity value.
  • unit of account.

Question 52

Question
One advantage of a money system compared to a barter system is that
Answer
  • barter never works.
  • money creates the need for banks.
  • money is more efficient.
  • everyone has money.

Question 53

Question
Critics of Fed independence argue that
Answer
  • monetary policy and fiscal policy are necessarily inconsistent.
  • political control ensures low rates of inflation.
  • monetary policy run by specialists is inherently inflationary.
  • unelected officials are undemocratic.

Question 54

Question
Fiat money is money
Answer
  • backed by land.
  • backed by gold or silver.
  • that can be converted to gold or silver.
  • because a government says it is.

Question 55

Question
Which of the following is included in M1?
Answer
  • savings accounts
  • money market deposit accounts
  • money market mutual funds
  • certificates of deposit
  • None of the above are included.

Question 56

Question
Fiat money is
Answer
  • always backed by gold or silver.
  • useful in buying Italian cars.
  • only backed by government decree.
  • not as liquid as precious metals.

Question 57

Question
Barter is a system of
Answer
  • trade without the use of money.
  • trading one good for another.
  • the double coincidence of wants.
  • All of the above are correct.

Question 58

Question
People are often heard saying, "She makes good money." An economic interpretation of this statement would be that
Answer
  • she has an honest job.
  • she makes money that is not counterfeit.
  • she has a high income.
  • there is little inflation.

Question 59

Question
The primary feature of money is that it serves as
Answer
  • barter value.
  • a medium of exchange.
  • intrinsic value.
  • commodity value.

Question 60

Question
If depositors become worried about the safety of their deposit accounts, they may trigger a
Answer
  • deposit surplus.
  • bank run.
  • fiscal policy crisis.
  • required reserve increase.
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