In the short run, an increase in the price level induces firms to expand production because A) they can increase profits by increasing maintenance costs. B) higher prices allow firms to hire more inputs by offering higher prices for inputs, which increases productivity and profits. C) each firm must keep its production level up to […]
If the government increases spending while holding taxes constant, we expect A) a decrease in real saving as consumers follow suit and also increase borrowing. B) planned real investment spending by businesses to increase. C) an increase in investment spending by businesses too, as they anticipate future economic growth. D) interest rates to rise. […]
The public debt is A) an excess of government spending over government revenues during a given time period. B) all federal government debt irrespective of who owns it. C) a situation in which the government’s spending is exactly equal to the total taxes and other revenues it collects during a given time period. D) the […]
If the nominal interest rate in an economy is 6%, and the rate of inflation in the economy is 4%, the real interest rate in the economy is: A) 10%. B) 24%. C) 1.5%. D) 2%. ANSWER D
According to the text, the main reason for people to hold money is A) because they are irrational. B) to use it for different reasons. C) to tell other people how rich they are. D) to enjoy looking at the pictures of past leaders. ANSWER B
The aggregate demand curve will shift to the left if A) government expenditures increase. B) people are more optimistic about their future. C) the nation’s exports decrease. D) a reduction in the price level pushes down borrowing costs. ANSWER C
The relationship between the price level and the real Gross Domestic Product (GDP) without full adjustment or full information is represented by A) the distance between the long-run aggregate supply curve and the short-run aggregate supply curve. B) the short-run aggregate supply curve. C) the long-run aggregate supply curve. D) the aggregate demand curve. […]
At tax rates higher than the tax rate that maximizes tax revenues along a Laffer curve A) an increase in tax rates increases tax revenues. B) any variation in tax rates has no effect on tax revenues. C) a reduction in tax rates increases tax revenues. D) a reduction in tax rates reduces tax revenues. […]
When Annie puts her money in her sock drawer for purchases later on, money is acting as a A) unit of accounting. B) standard of deferred payment. C) store of value. D) medium of exchange. ANSWER C
What is the most common reason people demand money? A) Each bill and coin is a reflection of important people and events in a nation’s history. B) Since very few of us engage in a flow of transactions, money is our financial safety net. C) People desire to use money as a medium of exchange […]
