Chapter 9 Practice Quiz
The Keynesian Model
1. The net exports line can be
d. any of the above.
d. Because net exports equals exports minus imports (X-M), the sign of net exports
depends on the values of X
1. Contractionary fiscal policy is deliberate government action to influence aggregate
demand and the level of real GDP through
a. expanding and contracting the money supply.
b. encouraging business to expand or cont
Money and the Federal Reserve System
1. 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
Appendix to Chapter 3
Consumer Surplus, Producer Surplus, and Market Efficiency
1. If Bill is willing to pay $10 for one good X, $8 for a second, and $6 for a third, and
the market price is a $5, then Bills consumer surplus is
Market Supply and Demand
1. If the demand curve for good X is downward-sloping, an increase in the price will
a. an increase in the demand for good X.
b. a decrease in the demand for good X.
c. no change in the quantity d
Markets in Action
1. Suppose prices for new homes have risen, yet the number of new homes sold has also
risen. We can conclude that
a. the demand for new homes has risen.
b. the law of demand has been violated.
c. new firms have en
The Phillips Curve and Expectations Theory
1. The Phillips curve depicts the relationship between the
a. unemployment rate and the change in GDP.
b. inflation rate and the interest rate.
c. level of investment spending and the int
Appendix to Chapter 1
Applying Graphs to Economics
1. Straight line CD in Exhibit A-7 shows that
a. increasing the value of X will increase the value of Y.
b. decreasing the value of X will decrease the value of Y.
c. there is a direct relat
Economies in Transition
1. The economic system in which all of the basic decisions are made through a
centralized authority, such as a government agency, is termed a
a. market economy.
b. capitalistic economy.
c. command economy.
The Public Sector
1. Since 1975, total government expenditures as a percentage of GDP in the United States
a. grown from one-third to about 40 percent.
b. remained at about one-third.
c. grown from one-fourth to one-half.
1. Keynes gave which of the following as a motive for people holding money?
a. Transactions demand.
b. Speculative demand.
c. Precautionary demand.
d. All of the above.
d. These are the three motives for holdi
Growth and the Less-Developed Countries
1. An LDC is defined as a country
a. without large stocks of advanced capital.
b. without well-educated labor.
c. with a low GDP per capita.
d. that is described by all of the above.
1. With trade, the production possibilities for two nations lie
a. outside their consumption possibilities.
b. inside their consumption possibilities.
c. at a point equal to the world production pos
Policy Disputes Using the Self-Correcting Aggregate Demand
and Supply Model
1. Assume the economy is experiencing a recessionary gap. Classic economists would
support which of the following policies?
The Keynesian Model
1. 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 always
Federal Deficits, Surpluses and the National Debt
1. During the late 1998-2001, federal government budget deficits
a. were completely removed.
b. dropped significantly from a high of $300 billion.
c. remained fairly stable at abou
1. If a bank has total deposits of $100,000 with $10,000 set aside to meet reserve
requirements of the Fed, its required reserve ratio is
b. 10 percent.
c. 0.1 percent.
d. 1 percent.
b. Required res
1. Inflation is
a. an increase in the general price level.
b. not a concern during war.
c. a result of high unemployment.
d. an increase in the relative price level.
a. Inflation is always a concern and it is not cau
Business Cycles and Unemployment
1. The phases of a business cycle are
a. upswing and downswing.
b. full employment and unemployment.
c. peak, recession, trough, and recovery.
d. full employment, depression, expansion, and plateau.
Aggregate Demand and Supply
1. The aggregate demand curve is defined as
a. the net national product.
b. the sum of wages, rent, interest, and profits.
c. the real GDP purchased at different possible price levels.
d. the total doll
Appendix to Chapter 10
Aggregate Demand and Supply Model
1. An assumption of the short-run aggregate supply curve is that it is a period of time
a. knowledge is complete.
b. wages are fixed.
c. wages are constant fo
Gross Domestic Product
1. The dollar value of all final goods and services produced within the borders of a nation
a. GNP deflator.
b. gross national product.
c. net national product.
d. gross domestic product.
d. GDP i
Production Possibilities, Opportunity Cost and
1. Which of the following decisions must be made by all economies?
a. How much to produce? When to produce? How much does it cost?
b. What is the price? Who will produc
Introducing the Economic Way of Thinking
1. Scarcity exists
a. when people consume beyond their needs.
b. only in rich nations.
c. in all countries in the world.
d. only in poor nations.
c. No matter what economic system a cou