Transfer payments, like Social Security, are known as entitlements since ________. A) they are locked up by earlier legislation B) the individuals who receive these payments are poor and deserve our support C) the individuals who receive these payments made payments to the federal government in excess of the monies they draw from the system […]
A shift in the LM curve to the left could be caused by a. an increase in the price level. b. a decrease in the money supply. c. an increase in the precautionary demand for money. d. all of the above. e. none of the above. ANSWER D
Firms discount future profits at the interest rate r because A) it is the interest rate on their debt. B) it is the same rate as for households. C) Ricardian equivalence holds. D) it has to equal the marginal productivity of capital in equilibrium. ANSWER B
Total planned expenditure is composed as a. planned investment. b. planned government spending and taxes. c. total investment, total consumption, and government spending. d. planned investment, planned government spending, and planned taxes. ANSWER D
When expectations are rational, a. a foreseen expansionary policy action does not alter output. b. there cannot be any inflation. c. a foreseen expansionary policy action changes output. d. there is zero unemployment. ANSWER A
Inflation interferes with the functions of money. Which of the three functions is impaired, even when the inflation rate is quite low? Considering higher rates of inflation, which function is affected next? Which function of money is the last to suffer substantial damage from inflation? ANSWER A consequence of even low inflation is to […]
In 2005 hurricane Katrina devastated large portions of the Gulf Coast economy. Many refineries went offline disrupting oil refining and distribution. What do you think was a likely result? A) the restricted supply constituted a cost push shock that would have shifted the long run AS curve to the right B) the restricted supply constituted […]
The major component of federal government consumption is spending on ________. A) Social Security, Medicare and Medicaid B) foreign aid C) capital goods, e.g. highways and schools D) national defense ANSWER D
With respect to the classical labor market analysis, it is not assumed that a. firms have complete information with respect to relevant prices. b. workers negotiate for unique wages individually. c. money wages adjust with a short lag. d. All of the above e. None of the above ANSWER A
Inventory investment is a. never positive. b. often negative. c. can be either negative or positive. d. always positive. ANSWER C
