Autonomous aggregate expenditures decreases by $200 million, the marginal propensity to consume is 0.50, marginal propensity to invest is 0.25, and the marginal propensity to import is 0.10. Calculate the change in income. What will be an ideal response? ANSWER Δ Autonomous Expenditures × 1/[1-(marginal propensity to consume + marginal propensity to invest – […]
Prior to almost all recessions since 1950, there has been a drop in A) inflation. B) the money stock. C) the growth rate of the money stock. D) interest rates. ANSWER C
Other things being equal, a decrease in the default risk of corporate bonds shifts the demand curve for corporate bonds to the ________ and the demand curve for Treasury bonds to the ________. A) right; right B) right; left C) left; right D) left; left ANSWER B
Assume the market for used single-family homes is initially in equilibrium. All else constant, an increase in home foreclosures would cause equilibrium price and quantity to decrease. Indicate whether the statement is true or false ANSWER FALSE
If peanuts serve as a medium of exchange, a unit of account, and a store of value, then peanuts are A) bank deposits. B) reserves. C) money. D) loanable funds. ANSWER C
Applying a uniform markup to set the price of the various products sold by a firm is more profitable than varying the markup based on differences in the price elasticity of demand for the firm’s products. Indicate whether the statement is true or false ANSWER FALSE
You are given the following information on the macroeconomy: Consumption: 200 + 0.75Y Investment: 100 + 0.10Y Government Spending 500 Exports 100 Imports 50 + 0.25Y Compute the equilibrium level of income, the size of the multiplier, and the change in equilibrium income for an increase in autonomous consumption of $50 million. ANSWER Y […]
The perfectly competitive firm: A) makes its profit-maximizing decision only on the basis of output. B) faces a downward-sloping demand function. C) can influence market price only in a downward direction. D) cannot earn any economic profits because it faces a horizontal demand curve. ANSWER A
A(n) ________ in the riskiness of corporate bonds will ________ the price of corporate bonds and ________ the yield on corporate bonds, all else equal. A) increase; increase; increase B) increase; decrease; increase C) decrease; increase; increase D) decrease; decrease;decrease ANSWER B
In the foreign exchange market, a balance of payments deficit is represented by: A) excess supply of dollars. B) excess demand for dollars. C) equilibrium in the foreign exchange market. D) none of the above. ANSWER A
