Question 1

What is a medium of exchange?

Accepted Answer

A)  a stock exchange company 
B)  an item that makes transactions easier 
C)  a financial market 
D)  a stock or bond 
A)  a stock exchange company 
B)  an item that makes transactions easier 
C)  a financial market 
D)  a stock or bond

Question 2

You have two sets of estimates of national account numbers for a closed economy for next year. In the first set, government expenditures will be $30 billion, transfer payments will be $10 billion, and taxes will be $45 billion. Under the second set, GDP will be $200 billion, taxes will be $50 billion, transfer payments will be $20 billion, consumption will be $120 billion, and investment will be $40 billion. Based on these numbers, what are the respective estimated results?

Accepted Answer

A)  $15 billion surplus and a $10 billion surplus 
B)  $15 billion surplus and a $10 billion deficit 
C)  $5 billion surplus and a $10 billion surplus 
D)  $5 billion surplus and a $10 billion deficit 
A)  $15 billion surplus and a $10 billion surplus 
B)  $15 billion surplus and a $10 billion deficit 
C)  $5 billion surplus and a $10 billion surplus 
D)  $5 billion surplus and a $10 billion deficit

Question 3

World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs. What would we expect?

Accepted Answer

A)  This would raise the demand for existing shares of the stock, causing its price to rise. 
B)  This would decrease the demand for existing shares of the stock, causing its price to fall. 
C)  This would raise the supply of the existing shares of stock, causing its price to rise. 
D)  This would raise the supply of the existing shares of stock, causing its price to fall. 
A)  This would raise the demand for existing shares of the stock, causing its price to rise. 
B)  This would decrease the demand for existing shares of the stock, causing its price to fall. 
C)  This would raise the supply of the existing shares of stock, causing its price to rise. 
D)  This would raise the supply of the existing shares of stock, causing its price to fall.

Question 4

Joan uses some of her income to buy mutual fund shares. A macroeconomist would refer to Joan's purchase as investment.

Accepted Answer

A) True 
 B)False

Question 5

Which term refers to the fall in investment due to government borrowing?

Accepted Answer

A)  the Barro reduction 
B)  the vicious circle 
C)  the Ricardian principle 
D)  crowding out 
A)  the Barro reduction 
B)  the vicious circle 
C)  the Ricardian principle 
D)  crowding out

Question 6

If Parliament instituted an investment tax credit, the demand for loanable funds would shift right.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following identities shows that GDP is both total income and total expenditure?

Accepted Answer

A)  GDP = Y 
B)  Y = PI + DI + NX 
C)  GDP = GNP - NX 
D)  Y = C + I + G + NX 
A)  GDP = Y 
B)  Y = PI + DI + NX 
C)  GDP = GNP - NX 
D)  Y = C + I + G + NX

Question 8

Explain why the demand for loanable funds slopes downward and the supply of loanable funds slopes upward.

Accepted Answer

When the interest rate rises, investment

Question 9

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 3500, consumption is equal to 6500, and government expenditures are equal to 2000. What is private saving?

Accepted Answer

A)  0 
B)  500 
C)  1000 
D)  1500 
A)  0 
B)  500 
C)  1000 
D)  1500

Question 10

Which statement best describes the relationship between government deficit and government debt?

Accepted Answer

A)  If the government currently has a budget deficit, currently it must also have a debt. 
B)  If the government currently has a budget deficit, the debt is increasing. 
C)  If the government currently has a budget deficit, government expenditures must be less than taxes. 
D)  If the government currently has a budget deficit, national savings must be increasing. 
A)  If the government currently has a budget deficit, currently it must also have a debt. 
B)  If the government currently has a budget deficit, the debt is increasing. 
C)  If the government currently has a budget deficit, government expenditures must be less than taxes. 
D)  If the government currently has a budget deficit, national savings must be increasing.

Question 11

Fred is considering expanding his skateboard shop. What will happen if interest rates rise?

Accepted Answer

A)  He is less likely to expand. This illustrates why the supply of loanable funds slopes downward. 
B)  He is more likely to expand. This illustrates why the supply of loanable funds slopes upward. 
C)  He is less likely to expand. This illustrates why the demand for loanable funds slopes downward. 
D)  He is more likely to expand. This illustrates why the demand for loanable funds slopes upward. 
A)  He is less likely to expand. This illustrates why the supply of loanable funds slopes downward. 
B)  He is more likely to expand. This illustrates why the supply of loanable funds slopes upward. 
C)  He is less likely to expand. This illustrates why the demand for loanable funds slopes downward. 
D)  He is more likely to expand. This illustrates why the demand for loanable funds slopes upward.

Question 12

When opening a spa, you may need to buy tables, a sound system, and credit card processing equipment. What do economists call these expenditures?

Accepted Answer

A)  capital investment 
B)  investment in human capital 
C)  business consumption expenditures 
D)  inventories 
A)  capital investment 
B)  investment in human capital 
C)  business consumption expenditures 
D)  inventories

Question 13

When the government runs a budget deficit, national saving is reduced, interest rates rise, and investment falls.

Accepted Answer

A) True 
 B)False

Question 14

Country A has taxes of $40 billion, transfers of $30 billion, and government expenditures on goods and services of $30 billion. How much is Country A's deficit?

Accepted Answer

A)  $0 billion 
B)  $10 billion 
C)  $20 billion 
D)  $30 billion 
A)  $0 billion 
B)  $10 billion 
C)  $20 billion 
D)  $30 billion

Question 15

What is the "volume" as reported in stock tables?

Accepted Answer

A)  the number of shares traded 
B)  the percentage of shares outstanding traded 
C)  the number of shares traded times the price they sold at 
D)  the number of shares of a company traded divided by the shares of all companies traded 
A)  the number of shares traded 
B)  the percentage of shares outstanding traded 
C)  the number of shares traded times the price they sold at 
D)  the number of shares of a company traded divided by the shares of all companies traded

Question 16

What is public saving equal to?

Accepted Answer

A)  national saving 
B)  the total amount that consumers save 
C)  government spending plus transfers minus government revenue 
D)  government revenue minus government spending minus transfers 
A)  national saving 
B)  the total amount that consumers save 
C)  government spending plus transfers minus government revenue 
D)  government revenue minus government spending minus transfers

Question 17

Assuming that other things remain the same, what effect does a government budget deficit have on saving?

Accepted Answer

A)  It increases both private and national saving. 
B)  It increases public saving but reduces national saving. 
C)  It reduces both public and national saving. 
D)  It reduces private saving but increases national saving. 
A)  It increases both private and national saving. 
B)  It increases public saving but reduces national saving. 
C)  It reduces both public and national saving. 
D)  It reduces private saving but increases national saving.

Question 18

In a closed economy, what remains after paying for consumption and government purchases?

Accepted Answer

A)  national disposable income 
B)  national saving 
C)  public saving 
D)  private saving 
A)  national disposable income 
B)  national saving 
C)  public saving 
D)  private saving

Question 19

Suppose that you are a broker and people tell you the following about themselves. What sort of bond would you recommend to each
 Defend your choices.
a. "I am in a high federal income-tax bracket and I don't want to take very much risk."
b. "I want a high return and I am willing to take whatever risk necessary to get it."
c. "I want a decent return and I have enough deductions that I don't value tax breaks highly."

Accepted Answer

a. A federal bond, because generally the

Question 20

Identify each of the following actions as representing either saving or investment.
a. Fred uses some of his income to buy government bonds.
b. Julie takes some of her income and buys mutual funds.
c. Alex hires a contractor to add two additional examination rooms to his dental office using borrowed funds.
d. Elaine uses some of her savings to buy stock for her new clothing boutique.
e. Henrietta hires a builder to construct a new home using borrowed funds.

Accepted Answer

a. Fred is saving.
b. Julie is

What is a medium of exchange?

World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs. What would we expect?

Joan uses some of her income to buy mutual fund shares. A macroeconomist would refer to Joan's purchase as investment.

Which term refers to the fall in investment due to government borrowing?

If Parliament instituted an investment tax credit, the demand for loanable funds would shift right.

Which of the following identities shows that GDP is both total income and total expenditure?

Explain why the demand for loanable funds slopes downward and the supply of loanable funds slopes upward.

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 3500, consumption is equal to 6500, and government expenditures are equal to 2000. What is private saving?

Which statement best describes the relationship between government deficit and government debt?

Fred is considering expanding his skateboard shop. What will happen if interest rates rise?

When opening a spa, you may need to buy tables, a sound system, and credit card processing equipment. What do economists call these expenditures?

When the government runs a budget deficit, national saving is reduced, interest rates rise, and investment falls.

Country A has taxes of $40 billion, transfers of $30 billion, and government expenditures on goods and services of $30 billion. How much is Country A's deficit?

What is the "volume" as reported in stock tables?

What is public saving equal to?

Assuming that other things remain the same, what effect does a government budget deficit have on saving?

In a closed economy, what remains after paying for consumption and government purchases?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 8: Saving, Investment, and the Financial System

What is a medium of exchange?

World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs. What would we expect?

Joan uses some of her income to buy mutual fund shares. A macroeconomist would refer to Joan's purchase as investment.

Which term refers to the fall in investment due to government borrowing?

If Parliament instituted an investment tax credit, the demand for loanable funds would shift right.

Which of the following identities shows that GDP is both total income and total expenditure?

Explain why the demand for loanable funds slopes downward and the supply of loanable funds slopes upward.

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 3500, consumption is equal to 6500, and government expenditures are equal to 2000. What is private saving?

Which statement best describes the relationship between government deficit and government debt?

Fred is considering expanding his skateboard shop. What will happen if interest rates rise?

When opening a spa, you may need to buy tables, a sound system, and credit card processing equipment. What do economists call these expenditures?

When the government runs a budget deficit, national saving is reduced, interest rates rise, and investment falls.

Country A has taxes of $40 billion, transfers of $30 billion, and government expenditures on goods and services of $30 billion. How much is Country A's deficit?

What is the "volume" as reported in stock tables?

What is public saving equal to?

Assuming that other things remain the same, what effect does a government budget deficit have on saving?

In a closed economy, what remains after paying for consumption and government purchases?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters