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1 | |
In the absence of government participation and foreign trade, the circular flow model shows that: |
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| | A) | Firms supply both the resources and output used in production. |
| | B) | Households demand both resources and outputs. |
| | C) | Firms supply resources and households demand outputs. |
| | D) | Households supply resources and firms supply output. |
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2 | |
The simple circular flow model shows that: |
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| | A) | Firms demand resources and supply outputs. |
| | B) | Households demand outputs and supply resources. |
| | C) | Firms generate the income necessary for households to consume. |
| | D) | Households generate the revenue necessary for firms to produce. |
| | E) | All the above. |
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3 | |
A primary difference between microeconomics and macroeconomics is that: |
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| | A) | Macroeconomics studies the operation and performance of the economy as a whole. |
| | B) | Microeconomics studies the aggregate level of income and employment. |
| | C) | In formulating and implementing government policy, microeconomics shows the effects of policy variables on the entire economy. |
| | D) | Macroeconomics studies the operation and performance of individual economic units. |
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4 | |
Which of the following conditions would not be studied by the macroeconomist? |
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| | A) | The level of national unemployment during 2004. |
| | B) | The effect of government economic policy on the inflation rate during 2004. |
| | C) | The effect of changing petroleum prices on the demand for coal. |
| | D) | The effect of lower income taxes on the rate of economic growth. |
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5 | |
By using the expenditures (aggregate demand) approach, GDP may be defined as: |
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| | A) | GDP = C + I + (G - NX) |
| | B) | GDP = (C - I) + G + NX |
| | C) | GDP = C + I + G + NX |
| | D) | GDP = C + (I - G) + NX |
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6 | |
In a macroeconomic model without foreign trade or government spending, aggregate demand is the sum of: |
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| | A) | Personal saving and private investment. |
| | B) | Personal saving and personal consumption. |
| | C) | Personal consumption and personal income. |
| | D) | Personal consumption and private investment. |
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7 | |
In the simple circular flow model of a closed, private economy: |
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| | A) | There is assumed to be no foreign sector. |
| | B) | There is assumed to be no government intervention in the economy. |
| | C) | All spending comes from households and businesses. |
| | D) | Businesses demand the factors of production supplied by households. |
| | E) | All of the above. |
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8 | |
With respect to the circular flow of economic activity, taxes represent: |
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| | A) | Leakage |
| | B) | An injection |
| | C) | Transfer payments |
| | D) | A stock |
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9 | |
With respect to the circular flow of economic activity, government purchases are: |
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| | A) | An injection, like savings |
| | B) | An injection, like investment |
| | C) | A leakage, like savings |
| | D) | A leakage, like investment |
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10 | |
An increase in the economy's stock of physical productive capital is called: |
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| | A) | Saving |
| | B) | Inventory adjustment |
| | C) | Investment |
| | D) | Crowding out |
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11 | |
The relationship between inflation and aggregate demand is negative. |
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| | A) | TRUE |
| | B) | FALSE |
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12 | |
A 5% increase in product prices with no increase in nominal wages will lead to an increase in aggregate supply. |
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| | A) | TRUE |
| | B) | FALSE |
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13 | |
If real wages remain constant, an increase in aggregate demand will increase both equilibrium GDP and inflation. |
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| | A) | TRUE |
| | B) | FALSE |
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14 | |
Producing income normal and income inferior goods is a form of business cycle risk reduction. |
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| | A) | TRUE |
| | B) | FALSE |
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15 | |
In a closed economy with no government sector, leakages must equal injections. |
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| | A) | TRUE |
| | B) | FALSE |
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16 | |
The difference between government spending and tax receipts is ________. |
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| | A) | The Current Account |
| | B) | The Balance of Payments |
| | C) | Leakages |
| | D) | The Budget Deficit |
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17 | |
An increase in aggregate supply will lead to __________ in inflation and ________ in GDP. |
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| | A) | An increase, a decrease |
| | B) | An increase, an increase |
| | C) | A decrease, a decrease |
| | D) | A decrease, an increase |
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18 | |
A reduction in aggregate demand will lead to _______ in inflation and ________ in GDP. |
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| | A) | An increase, a decrease |
| | B) | An increase, an increase |
| | C) | A decrease, a decrease |
| | D) | A decrease, an increase |
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19 | |
An increase in government spending will _______ aggregate ________. |
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| | A) | Increase, Supply |
| | B) | Increase, Demand |
| | C) | Decrease, Supply |
| | D) | Decrease, Demand |
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20 | |
Following an improvement in labour productivity, aggregate _______ will shift to the _________. |
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| | A) | Demand, Right |
| | B) | Demand, Left |
| | C) | Supply, Right |
| | D) | Supply, Left |