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.
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
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
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
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
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
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
Chapter 13: The Keynesian Perspective
The Building Blocks of Keynesian Analysis
Keynesian economics is based on two main ideas:
o Aggregate demand is more likely than aggregate supply to be
the primary cause of a short-run economic event li
Chapter 18: Government Budgets and Fiscal
An Overview of Government Spending
Fisc old fashioned word, defined as a nations treasury, the
department that handles the inflow of taxes and the outflow of
Both words fisc & fiscal
Chapter 17: Exchange Rates and International Capital Flows
How the Foreign Exchange Market Works
Dollarize When a country that is not the United States uses the U.S. dollar as its currency
Foreign Exchange Market Market in which people buy
Chapter 8: Economic Growth
The Relatively Recent Arrival of Economic Growth
Industrial Revolution Widespread use of power-driven machinery and the
economic and social changes that occurred in the first half of the 1800s
Chapter 7: The Macroeconomic Perspective
o Behavior that seems rational at the microeconomic level for individuals and firms that
can lead to unexpected or even counterproductive outcomes of the macroeconomic
Chapter 4: Demand and Supply
*Demand for Goods and Services*
Demand Schedule A table that shows the quantity demanded at different prices
Demand Curve Shows the relationship between quantity demanded and the price
Law of Demand Higher price usually leads
Chapter 14: The Neoclassical Perspective
The Building Blocks of Neoclassical Analysis
Neoclassical approach is based on 2 key building blocks
o Expansion of potential GDP due to economic growth will determine the size of
Chapter 9: Unemployment
Unemployment imposes high costs.
Unemployment individuals suffer from loss of income and from stress
An economy with high unemployment suffers an opportunity cost of
In or Out of the Labor Force?
Chapter 10: Inflation
Inflation Ongoing rise in the level of prices in an economy
The Changing Price of Basket of Goods
Basket of Goods and Services Hypothetical group of different items, with specified
quantities of each one, used as a bas
Chapter 12: The Aggregate Supply-Aggregate Demand Model
The macroeconomic model of aggregate supply and aggregate
How they reach a macroeconomic equilibrium
How shifts in aggregate demand or aggregate supply will affect that
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
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
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
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
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.
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
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
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
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
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?
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
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.
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.
Chapter(s)15 & 16
Chapter 15: Money and Banks
2 main categories of macroeconomic policy:
o Monetary Policy Focuses on money, banking and interest
o Fiscal Policy Focuses on government spending, taxes, and
Defining Money by I