The circular flow of income assumes that

| June 13, 2018

Question12Marks: 2The circular flow of income assumes thatChoose one answer.a. profit is not a cost of production.b. the national income accounting approach is not an adequate way to measure the economy’s performance.c. goods and services flow in one direction and money payments flow in the other.d. total income is the sum of the value of intermediate goods and final goods and services.Question13Marks: 2All of the following are incomes earned in the factor market EXCEPTChoose one answer.a. wages.b. prices of goods and services.c. profits.d. rents.Question14Marks: 2Profits are part of theChoose one answer.a. total income.b. monetary value of output.c. final consumer goods.d. factor services.Question15Marks: 2Services include all of the following EXCEPTChoose one answer.a. payment for a doctor’s visit.b. the purchase price of a share of stock.c. school tuition.d. payments for auto repair.Question16Marks: 2A consumer good that has a life span of more than three years is aChoose one answer.a. durable consumer good.b. nondurable consumer good.c. service.d. investment.Question17Marks: 2A capital good isChoose one answer.a. a good that lasts more than three years.b. a good that is used to make other goods and services.c. an intermediate product and therefore not part of GDP.d. a good that should increase in value over time.Question18Marks: 2The income that individuals have after personal income taxes have been paid is calledChoose one answer.a. gross domestic income.b. disposable personal income.c. personal income.d. national income.Question19Marks: 2Economic growth is best measured by increases inChoose one answer.a. nominal personal income.b. nominal Gross Domestic Product (GDP).c. per capita real Gross Domestic Product (GDP).d. per capita nominal Gross Domestic Product (GDP).Question20Marks: 2Countries are concerned about small changes in their average annual growth rates becauseChoose one answer.a. growth rates tend to decline over time.b. the power of compounding means small changes have large effects over time.c. the faster a country grows today, the less it will be able to consume in the future.d. growth rates are a factor in U.N. participation.Question21Marks: 2Which of the following would typically be considered a cost of economic growth?Choose one answer.a. increased illiteracyb. decreased levels of healthc. increased povertyd. urban congestionQuestion22Marks: 2Which resource is the main contributor to economic growth in the United States, Latin America, and South Asia?Choose one answer.a. growth in physical capitalb. growth in human capital (education)c. growth in labord. growth in landQuestion23Marks: 2There has been some concern in the United States that people are not saving enough. This is a concern becauseChoose one answer.a. decreases in saving lead to decreases in labor productivity.b. decreases in saving lead to decreases in investment.c. decreases in saving lead to increases in the capital stock.d. decreases in saving lead to increases in consumption in the future.Question24Marks: 2Which of the following are mentioned as forces of the new growth theory that influence economic growth?I. TechnologyII. ResearchIII. InnovationsChoose one answer.a. I onlyb. I and II onlyc. I and III onlyd. II and III onlye. I, II, and IIIQuestion25Marks: 2Which of the following will tend to cause an increase in technology?Choose one answer.a. an increase in research and development expenditures.b. the development of new ideas.c. increases in human capital.d. All of these.Question26Marks: 2According to the text, an open economy is likely to have all the following EXCEPTChoose one answer.a. high economic growth.b. relatively more trade barriers.c. high technological progress.d. relatively more rapid spread of ideas.Question27Marks: 2A government grant that gives an inventor the exclusive right or privilege to make, use, or sell his or her invention is known asChoose one answer.a. a positive externality.b. a negative externality.c. a protectionism clause.d. a patent.Question28Marks: 2In the absence of well-defined property rights, we would likely findChoose one answer.a. people with more incentives to take risks.b. people with less incentives to take risks.c. higher economic growth rates.d. increases in investment activity.Question29Marks: 2The long-run aggregate supply curveChoose one answer.a. shows that at higher prices, potential real Gross Domestic Product (GDP) increases.b. slopes up and to the right.c. shows that long-run aggregate supply equals potential real Gross Domestic Product (GDP).d. is very sensitive to changes in the price level.Question30Marks: 2An assumption on the LRAS curve isChoose one answer.a. technology remains unchanged.b. an increase in the average price level occurs.c. the economy is operating to the right of the production possibilities curve.d. labor productivity is increasing.Question31Marks: 2If the price level increases,Choose one answer.a. the buying power of your checking account falls.b. the buying power of your checking accounts rises with it.c. there is no effect on buying power.d. the economy tends to grow faster.Question32Marks: 2All of the following are components of aggregate demand EXCEPTChoose one answer.a. consumption spending.b. government purchases.c. the level of technology.d. net foreign spending on domestic production.Question33Marks: 2A fall in the price levelChoose one answer.a. increases the real value of money balances, which causes borrowing to decrease, leading to a decrease in investment and total planned real expenditures.b. causes exports to rise and imports to fall, leading to an increase in total planned real expenditures.c. leads to an increase in total planned real expenditures because of the indirect effect.d. causes total planned real expenditures to increase as long as the fall is less than the fall in the price level in other countries.Question34Marks: 2The real-balance effect indicates that at higher price levelsChoose one answer.a. the real value of money holdings fall, resulting in decreased spending.b. the real value of money holdings increase, resulting in increased saving.c. the purchasing power of money will increase.d. the value of the dollar will increase.Question35Marks: 2Which of the following statements is correct?I. A drop in the foreign exchange value of the dollar would decrease aggregate demandII. A decrease in the amount of money in circulation would increase aggregate demandChoose one answer.a. I onlyb. II onlyc. Both I and IId. Neither I nor IIQuestion36Marks: 2Over the last twenty years, real GDP in the U.S. economy has increased and there has been inflation. This indicates thatChoose one answer.a. aggregate demand has increased while aggregate supply has been constant.b. aggregate demand has been constant while aggregate supply has increased.c. aggregate demand has increased more than aggregate supply.d. aggregate demand has increased less than aggregate supply.Question37Marks: 2Over the past several decades, what has been true about price levels in the United States?Choose one answer.a. Inflation rates have been consistently negative.b. The nation has experienced persistent deflation.c. Price levels have been very stable.d. Inflation rates have been consistently positive.Question38Marks: 2Which of the following can cause supply-side inflation?Choose one answer.a. an increase in human capitalb. increases in the money supplyc. tax cutsd. None of theseQuestion39Marks: 2Investment isChoose one answer.a. the purchasing of stocks and mutual funds.b. goods bought by households.c. spending by businesses on things which can be used to produce goods and services in the future.d. the production of goods for immediate satisfaction.Question40Marks: 2The Keynesian model is based on the idea thatChoose one answer.a. saving depends only on the interest rate.b. both consumption and saving are directly related to disposable income.c. consumption is unrelated to the level of real Gross Domestic Product (GDP).d. both consumption and saving are unrelated to the level of real Gross Domestic Product (GDP).Question41Marks: 2In economics, the term “autonomous” meansChoose one answer.a. existing independently.b. non-economic related.c. disposable income.d. cash payments.Question42Marks: 2The marginal propensity to consume explains how much of the next dollar of disposable incomeChoose one answer.a. a household will spend.b. a business will invest.c. the government will spend.d. foreign residents will use to purchase domestic exports.Question43Marks: 2Which of the following is negative for the “typical” consumer at some level of real disposable income?Choose one answer.a. Marginal propensity to save.b. Marginal propensity to consume.c. Average propensity to save.d. Average propensity to consume.Question44Marks: 2The marginal propensity to consume (MPC) isChoose one answer.a. the rate at which real consumption spending changes over time.b. the percentage of real disposable income saved.c. the percentage of real disposable income consumed.d. the percentage of an additional dollar of real disposable income that will go toward additional real consumption spending.Question45Marks: 2Compared to consumption spending, investment historically has tended to beChoose one answer.a. greater.b. more stable.c. stagnant.d. more variable.Question46Marks: 2Which one of the following statements is true?Choose one answer.a. Over the years, real consumption spending has been more volatile than real investment spending.b. Over the years, real investment spending has been more volatile than real consumption spending.c. Domestic real investment in the United States was highest during the Great Depression.d. In the Keynesian model, changes in the volume of real investment spending are fully explained by changes in the real interest rate.Question47Marks: 2If we observe that interest rates rise but real investment spending still increases, what must have happened to the function relating investment to the interest rate?Choose one answer.a. It shifted to the right.b. It shifted to the left.c. There was a movement up the function relating investment to the interest rate.d. There was a movement down the function relating investment to the interest rate.Question48Marks: 2When money provides a yardstick that allows individuals to compare the relative values of goods and services, it is functioning as aChoose one answer.a. medium of exchange.b. unit of accounting.c. store of value.d. standard of deferred payment.Question49Marks: 2Which of the following is NOT a function of money?Choose one answer.a. medium of exchangeb. form of creditc. store of valued. standard of deferred paymentQuestion50Marks: 2Suppose you are offered a new iPod in exchange for thirty hours of your work in your friend’s garden. This is an example ofChoose one answer.a. money as a medium of exchange.b. money as a store of value.c. barter.d. money as a standard of deferred payment.Question51Marks: 2A fiduciary monetary system is dependent onChoose one answer.a. acceptability and predictability of value.b. precious metals backing fiat money.c. Congressional monetary support.d. a negative inflation rate.Question52Marks: 2Thrift institutionsChoose one answer.a. receive most of their funds from the public’s savings deposits.b. include commercial banks and investment firms.c. include credit unions but not savings and loan associations.d. do not offer transaction deposits.Question53Marks: 2The M1 measure of money is suggested by the ________ approach to measuring money.Choose one answer.a. investmentb. liquidityc. transactionsd. securityQuestion54Marks: 2A checking account balance in a commercial bank isChoose one answer.a. part of the currency supply.b. a time deposit.c. not liquid enough to be considered money.d. an asset readily usable for most transactions.Question55Marks: 2The potential for a financial breakdown at large institutions to spread throughout the financial system is calledChoose one answer.a. a systemic risk.b. a too-large-to-fail problem.c. an averse selection problem.d. a moral hazard.Question56Marks: 2Which of the following is true about product markets?Choose one answer.a. Goods and services flow from households to firms.b. Goods and services flow from firms to households.c. Factors (land, labor, capital, and entrepreneurial ability) flow from households to firms.d. Factors (land, labor, capital, and entrepreneurial ability) flow from firms to households.Question57Marks: 2Total reserves of private banks areChoose one answer.a. all customer deposits.b. deposits held at the Fed and vault cash.c. the minimum amount banks need to hold against time deposits.d. federal reserve notes.Question58Marks: 2The term “unemployment” is best described as the total number ofChoose one answer.a. people not working.b. people who have been laid off and have stopped looking for work.c. adults who work fewer hours than they wish to work.d. adults who are looking for work but have not found a job.Question59Marks: 2All of the following would shift the LRAS curve to the right EXCEPTChoose one answer.a. an increase in the size of the labor force.b. a net inflow of human capital.c. an increase in the overall price level.d. an improvement in technology.Question60Marks: 2In a barter system, we would expect to seeChoose one answer.a. many different units of money.b. money and goods exchanged for each other.c. wide-spread financial institutions.d. goods traded directly for other goods and services.

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