Question 1

A decrease in government spending would cause all but one of the following to happen.Which is the exception?

Accepted Answer

A)  The government's budget deficit would shrink. 
B)  The interest rate would decrease. 
C)  Consumption spending would increase. 
D)  Investment spending would increase. 
E)  Total output would decrease. 
A)  The government's budget deficit would shrink. 
B)  The interest rate would decrease. 
C)  Consumption spending would increase. 
D)  Investment spending would increase. 
E)  Total output would decrease. E

Question 2

Fiscal policy is a change in either government purchases or the money supply designed to change total spending in the economy,thereby influencing the levels of employment and output.

Accepted Answer

A) True 
 B)False  False

Question 3

It is possible for an economy to produce more than its potential level of output,at least for a short period of time.

Accepted Answer

A) True 
 B)False  True

Question 4

Households make their savings available to borrowers through

Accepted Answer

A)  resource markets 
B)  the loanable funds market 
C)  the labor market 
D)  the taxes 
E)  spending 
A)  resource markets 
B)  the loanable funds market 
C)  the labor market 
D)  the taxes 
E)  spending

Question 5

Which of the following is a definition of the aggregate production function?

Accepted Answer

A)  the relationship describing which inputs an economy can use with different quantities of labor 
B)  the relationship describing how much labor an economy can supply with different quantities of capital 
C)  the relationship describing how much output an economy can produce with different quantities of labor 
D)  the relationship describing what services an economy can produce with different quantities of capital 
E)  the relationship describing how much output a firm can produce with different quantities of capital 
A)  the relationship describing which inputs an economy can use with different quantities of labor 
B)  the relationship describing how much labor an economy can supply with different quantities of capital 
C)  the relationship describing how much output an economy can produce with different quantities of labor 
D)  the relationship describing what services an economy can produce with different quantities of capital 
E)  the relationship describing how much output a firm can produce with different quantities of capital

Question 6

What is the relationship between total taxes and net taxes?

Accepted Answer

A)  total taxes = net taxes / transfer payments 
B)  net taxes = total taxes + local taxes 
C)  net taxes = transfer payments / total taxes 
D)  total taxes = net taxes - transfer payments 
E)  total taxes = net taxes + transfer payments 
A)  total taxes = net taxes / transfer payments 
B)  net taxes = total taxes + local taxes 
C)  net taxes = transfer payments / total taxes 
D)  total taxes = net taxes - transfer payments 
E)  total taxes = net taxes + transfer payments

Question 7

-Refer to Figure 8-5.What is the equilibrium interest rate?

Accepted Answer

A)  4 percent 
B)  6 percent 
C)  8 percent 
D)  10 percent 
E)  It cannot be determined with the information given. 
A)  4 percent 
B)  6 percent 
C)  8 percent 
D)  10 percent 
E)  It cannot be determined with the information given.

Question 8

Say's Law is the idea that

Accepted Answer

A)  in the long run,the economy reaches full employment automatically 
B)  the aggregate production function,along with the labor market,determines the economy's level of output 
C)  total output will always exceed total spending 
D)  whenever a good or service is produced,an equal amount of income is created 
E)  markets always clear 
A)  in the long run,the economy reaches full employment automatically 
B)  the aggregate production function,along with the labor market,determines the economy's level of output 
C)  total output will always exceed total spending 
D)  whenever a good or service is produced,an equal amount of income is created 
E)  markets always clear

Question 9

According to classical economists,

Accepted Answer

A)  full employment means zero unemployment 
B)  as long as markets clear,no government action is needed to ensure full employment 
C)  even if all markets clear,government action is needed to correct labor market imperfections if the economy is to reach full employment 
D)  as long as markets clear and government provides jobs to those who need them,the economy will be at full employment 
E)  even if markets clear,cyclical unemployment will still persist in the long run 
A)  full employment means zero unemployment 
B)  as long as markets clear,no government action is needed to ensure full employment 
C)  even if all markets clear,government action is needed to correct labor market imperfections if the economy is to reach full employment 
D)  as long as markets clear and government provides jobs to those who need them,the economy will be at full employment 
E)  even if markets clear,cyclical unemployment will still persist in the long run

Question 10

Markets clear

Accepted Answer

A)  in the short run 
B)  when a depression occurs 
C)  when a recession occurs 
D)  roughly every ninety days 
E)  eventually 
A)  in the short run 
B)  when a depression occurs 
C)  when a recession occurs 
D)  roughly every ninety days 
E)  eventually

Question 11

If an economy's consumption spending is $5 trillion,investment is $2 trillion,government spending is $1 trillion,net taxes are $1 trillion and household saving is $2 trillion,total income is

Accepted Answer

A)  $3 trillion 
B)  $5 trillion 
C)  $7 trillion 
D)  $8 trillion 
E)  $11 trillion 
A)  $3 trillion 
B)  $5 trillion 
C)  $7 trillion 
D)  $8 trillion 
E)  $11 trillion

Question 12

In a labor market diagram,the point at which the labor supply curve crosses the labor demand curve is

Accepted Answer

A)  the point at which all workers are employed at the salary at which they would prefer to be employed 
B)  the point at which all jobs are filled at the wage employers prefer to pay 
C)  the point at which everyone who wants to work is able to find a job 
D)  a point at which we have excess labor supply,causing unemployment 
E)  the point at which excess demand for labor drives the wage rate upward 
A)  the point at which all workers are employed at the salary at which they would prefer to be employed 
B)  the point at which all jobs are filled at the wage employers prefer to pay 
C)  the point at which everyone who wants to work is able to find a job 
D)  a point at which we have excess labor supply,causing unemployment 
E)  the point at which excess demand for labor drives the wage rate upward

Question 13

Using the following information on a hypothetical economy in equilibrium,calculate total output for 2008.   Total output for 2008 is

Accepted Answer

A)  $5.2 trillion 
B)  $5.7 trillion 
C)  $8.4 trillion 
D)  $8.7 trillion 
E)  $13.9 trillion 
A)  $5.2 trillion 
B)  $5.7 trillion 
C)  $8.4 trillion 
D)  $8.7 trillion 
E)  $13.9 trillion

Question 14

-Refer to Figure 8-1.If the real hourly wage rate was $6,what would be the effect?

Accepted Answer

A)  There would be a shortage of 40 million workers and the wage rate would rise. 
B)  There would be a shortage of 20 million workers and the wage rate would rise. 
C)  There would be a surplus of 40 million workers and the wage rate would fall. 
D)  There would be a surplus of 20 million workers and the wage rate would fall. 
E)  There would be unemployment. 
A)  There would be a shortage of 40 million workers and the wage rate would rise. 
B)  There would be a shortage of 20 million workers and the wage rate would rise. 
C)  There would be a surplus of 40 million workers and the wage rate would fall. 
D)  There would be a surplus of 20 million workers and the wage rate would fall. 
E)  There would be unemployment.

Question 15

In the classical model,the quantity of loanable funds supplied is

Accepted Answer

A)  positively related to the level of income 
B)  negatively related to the price level 
C)  positively related to the price level 
D)  negatively related to the interest rate 
E)  positively related to the interest rate 
A)  positively related to the level of income 
B)  negatively related to the price level 
C)  positively related to the price level 
D)  negatively related to the interest rate 
E)  positively related to the interest rate

Question 16

The labor supply curve

Accepted Answer

A)  slopes upward to illustrate that more people will want to work as the real wage increases 
B)  slopes upward to illustrate that changes in the real wage are directly proportional to changes in the nominal wage 
C)  may slope either upward or downward,depending upon the real wage 
D)  slopes downward to illustrate that a decrease in the real wage decreases the number of individuals willing to work 
E)  slopes downward to illustrate that the availability of workers is directly proportional to the real wage 
A)  slopes upward to illustrate that more people will want to work as the real wage increases 
B)  slopes upward to illustrate that changes in the real wage are directly proportional to changes in the nominal wage 
C)  may slope either upward or downward,depending upon the real wage 
D)  slopes downward to illustrate that a decrease in the real wage decreases the number of individuals willing to work 
E)  slopes downward to illustrate that the availability of workers is directly proportional to the real wage

Question 17

Which of the following is an injection into the circular flow?

Accepted Answer

A)  household saving and government spending 
B)  business investment and household saving 
C)  net taxes and household saving 
D)  government spending and business investment 
E)  net taxes and government spending 
A)  household saving and government spending 
B)  business investment and household saving 
C)  net taxes and household saving 
D)  government spending and business investment 
E)  net taxes and government spending

Question 18

Household saving is the defined as consumption minus disposable income.

Accepted Answer

A) True 
 B)False

Question 19

Because financial markets clear,we know that leakages in the economy will equal injections and,therefore,there will be enough spending in the economy to purchase whatever amount of output level produced.

Accepted Answer

A) True 
 B)False

Question 20

In the loanable funds market,if the government is running a deficit

Accepted Answer

A)  it is a supplier of funds as it is taking in more than it is spending 
B)  it is a demander of funds as it is taking in more than it is spending 
C)  it is a supplier of funds as it is spending more than it is taking in 
D)  it is neither be a supplier or demander 
E)  it is a demander of funds as it is spending more than it is taking in. 
A)  it is a supplier of funds as it is taking in more than it is spending 
B)  it is a demander of funds as it is taking in more than it is spending 
C)  it is a supplier of funds as it is spending more than it is taking in 
D)  it is neither be a supplier or demander 
E)  it is a demander of funds as it is spending more than it is taking in.

Exam 20: The Classical Long-Run Model

A decrease in government spending would cause all but one of the following to happen.Which is the exception?

Fiscal policy is a change in either government purchases or the money supply designed to change total spending in the economy,thereby influencing the levels of employment and output.

It is possible for an economy to produce more than its potential level of output,at least for a short period of time.

Households make their savings available to borrowers through

Which of the following is a definition of the aggregate production function?

What is the relationship between total taxes and net taxes?

-Refer to Figure 8-5.What is the equilibrium interest rate?

Say's Law is the idea that

According to classical economists,

Markets clear

If an economy's consumption spending is $5 trillion,investment is $2 trillion,government spending is $1 trillion,net taxes are $1 trillion and household saving is $2 trillion,total income is

In a labor market diagram,the point at which the labor supply curve crosses the labor demand curve is

Using the following information on a hypothetical economy in equilibrium,calculate total output for 2008. Total output for 2008 is

-Refer to Figure 8-1.If the real hourly wage rate was $6,what would be the effect?

In the classical model,the quantity of loanable funds supplied is

The labor supply curve

Which of the following is an injection into the circular flow?

Household saving is the defined as consumption minus disposable income.

Because financial markets clear,we know that leakages in the economy will equal injections and,therefore,there will be enough spending in the economy to purchase whatever amount of output level produced.

In the loanable funds market,if the government is running a deficit

What Is Economics

Scarcity,choice,and Economic Systems

Scarcity, choice, and Economic Systems: Part A

Working With Supply and Demand

Elasticity

Consumer Choice

Production and Cost

How Firms Make Decisions: Profit Maximization

Perfect Competition

Perfect Competition: Part A

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

labor Markets: Part A

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

What Macroeconomics Tries to Explain

Production, income, and Employment

The Price Level and Inflation

Part A: The Classical Model in an Open Economy

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-Run Macro Model

Fiscal Policy

Money,banks,and the Federal Reserve

The Money Market and Monetary Policy

Feedback Effects From GDP to the Money Market

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Appendix-finding Equilibrium GDP Algebraically

Appendix: Capital and Leverage

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