Fundamentals of Economics Pre-Test Questions
Course Introduction
Fundamentals of Economics provides an introduction to the core principles and concepts of economics, including the analysis of supply and demand, market equilibrium, opportunity cost, and the role of incentives in decision making. The course covers both microeconomic and macroeconomic perspectives, exploring how individuals, firms, and governments allocate resources, interact in markets, and address issues such as efficiency and equity. Students will also learn about economic systems, the measurement of economic performance, and the impact of government policies on the economy, enabling them to apply economic reasoning to everyday problems and public policy debates.
Recommended Textbook
Economics Principles and Applications 6th Edition by Robert
E. Hall
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Chapter 1: What Is Economics
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Sample Questions
Q1) A simplifying assumption
A) affects the important conclusions of an economic model
B) increases the level of detail in an economic model
C) makes an economic model a more concrete representation of reality
D) eliminates unnecessary details from an economic model
E) limits the validity of an economic model's conclusions
Answer: D
Q2) Microeconomics is the branch of economics that concerns
A) the overall health of the economy
B) the behavior of individual households,firms,and governments
C) the overall level of trade between nations
D) local governments only
E) the general level of output
Answer: B
Q3) Simplifying assumptions always affect the conclusions derived from an economic model.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Scarcity,choice,and Economic Systems
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Sample Questions
Q1) When individuals concentrate on a limited number of productive activities,this is known as
A) shirking
B) productive inefficiency
C) exchange
D) specialization
E) an economic system
Answer: D
Q2) The law of increasing opportunity cost says that
A) wages increase as employment increases
B) interest rates rise as inflation increases
C) the cost of increasing employment opportunities increases with specialization
D) the more of something we produce,the less expensive it becomes
E) the more of something we produce,the greater is the opportunity cost of producing an additional unit
Answer: E
Q3) An economy's production possibilities frontier is fixed in the long run.
A)True
B)False
Answer: False
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Chapter 2: Scarcity, choice, and Economic Systems: Part A
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Sample Questions
Q1) A decrease in both equilibrium price and quantity could be produced by a(n)
A) decrease in supply,with demand constant
B) increase in supply,with demand constant
C) decrease in demand,with supply constant
D) increase in demand,with supply constant
E) improvement in technology
Answer: C
Q2) In Figure 3-8,using the supply and demand curves denoted S<sub>1</sub> and D<sub>2</sub>,respectively,the equilibrium price and quantity are
A) $100 and 50,000
B) $100 and 100,000
C) $150 and 50,000
D) $150 and 75,000
E) $150 and 100,000
Answer: D
Q3) If the demand for new automobiles falls when income falls,automobiles are said to be normal goods.
A)True
B)False
Answer: True
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Chapter 4: Working With Supply and Demand
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Sample Questions
Q1) Whether a subsidy for a certain good is given to a demander or supplier is irrelevant because
A) in either case,the price that the demander has to pay will decrease;while the price the supplier receives will increase
B) in either case,the price that the demander has to pay will increase;while the price the supplier receives will decrease
C) either situation will create excess demand
D) either situation will create excess supply
E) none of these are correct
Q2) Which of the following would be an example of a flow variable?
A) The amount of money needed to buy a car
B) The amount of money a person has in her or her wallet
C) The amount of income a person earns each week
D) The amount of money a person has in a savings account
E) None of these are flow variables
Q3) Both a price floor and a price ceiling will reduce that amount of a good that is traded in the market.
A)True
B)False
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Page 6
Chapter 5: Elasticity
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Sample Questions
Q1) If the price of food falls by 10 percent and the quantity sold increases by 5 percent,then the price elasticity of demand in that range equals
A) 2,and demand is elastic
B) 0.5,and demand is elastic
C) 2,and demand is inelastic
D) 0.5,and demand is inelastic
E) 15,and demand is elastic
Q2) If the cross-price elasticity of demand is positive,then the A) two goods are complements
B) two goods are substitutes
C) two goods have no relationship to each other
D) price is below the equilibrium
E) price is above the equilibrium
Q3) If a 5 percent increase in income leads to a 15 percent increase in the quantity demanded of a service,then the income elasticity of demand for that service equals 0.33.
A)True
B)False
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Chapter 6: Consumer Choice
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Sample Questions
Q1) As Reba consumes four slices of pizza,her total utility rises from 0 to 18,to 24,to 28,and to 30,respectively.What is her marginal utility of the first slice of pizza?
A) 18
B) 24
C) 2
D) 7
E) 8
Q2) A family on a trip budgets $800 for restaurant meals and fast food.The family can buy 16 restaurant meals if they don't buy any fast food.What is the price of a fast-food meal for the family?
A) $5
B) $16
C) $20
D) $50
E) it is impossible to tell from the information given
Q3) Marginal utility is the extra utility a consumer derives from consuming an extra unit of a good.
A)True
B)False
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Page 8
Chapter 7: Production and Cost
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Sample Questions
Q1) Average Fixed Cost is the
A) horizontal distance (at any particular cost level)between ATC and AVC
B) vertical distance (at any particular quantity)between ATC and AVC
C) vertical distance (at any particular quantity)between ATC and the horizontal axis
D) vertical distance (at any particular quantity)between AVC and the horizontal axis
E) horizontal distance (at any particular cost level)between ATC and the vertical axis
Q2) If minimum average cost is the same over a large range of output,
A) the market will evolve into a natural monopoly
B) minimum efficient scale is large as well
C) only a few large firms will survive in the long run
D) smaller firms have a cost advantage over larger firms
E) firms of varying sizes can coexist
Q3) Marginal product is the change in output divided by the change in the amount of an input used.
A)True
B)False
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9
Chapter 8: How Firms Make Decisions: Profit Maximization
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Sample Questions
Q1) A firm's total cost of production
A) always increases as it produces more output
B) can increase or decrease as it produces more output
C) increases at a decreasing rate as long as it produces more output
D) is fixed in the short run,because inputs are fixed in the short run
E) can be minimized by producing where the firm's demand curve crosses the horizontal axis
Q2) The additional revenue received by a firm from selling one more unit of output is known as
A) total revenue
B) price
C) average revenue
D) marginal cost
E) marginal revenue
Q3) When there are implicit costs of production,
A) accounting and economic profit are equal
B) opportunity costs of production are zero
C) explicit costs of production are small
D) accounting profit will exceed economic profit
E) economic profit will exceed accounting profit
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Chapter 9: Perfect Competition
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Sample Questions
Q1) If one firm sets the market price
A) the market is perfectly competitive
B) the market is not perfectly competitive
C) there are a large number of buyers who can buy from a wide range of competitors
D) there is free entry into the market
E) its product must be a standardized commodity,produced by many competitors
Q2) In a perfectly competitive market equilibrium,
A) each firm's marginal cost is equal to the market price
B) each consumer's marginal utility is equal to the market price
C) each firm's marginal cost is equal to each consumer's marginal utility
D) price equals minimum marginal cost
E) price equals minimum average total cost
Q3) In perfect competition,as the long run approaches,economic profit will cause
A) the entry of new firms,shifting the market supply curve to the right
B) the emergence of powerful monopolistic corporations
C) inflation
D) technological innovation
E) government regulation
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Chapter 9: Perfect Competition: Part A
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Sample Questions
Q1) Which of the following is not a characteristic of a perfectly competitive market
A) buyers and sellers are well informed about the market
B) standardized product
C) many buyers and few sellers
D) easy exit out of the industry
E) easy entry into the industry
Q2) In perfect competition,technological advances will allow economic profits for A) all firms.
B) only the firm developing the new technology.
C) early adopters.
D) none of the firms,as the advance will be immediately adopted by all of them.
Q3) Diminishing marginal returns are the reason why some industries have positively-sloped long-run average cost curves.
A)True
B)False
Q4) In a perfectly competitive market,a technological advance allows all firms to earn higher economic profits in the long run.
A)True
B)False
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Chapter 10: Monopoly
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Sample Questions
Q1) Economies of scale act as a barrier to entry because
A) one large firm can supply the market at a higher average cost than many small firms could
B) firms are not allowed by law to sell output below average cost
C) large firms can hire inputs at a higher price than smaller firms could
D) firms will not compete with a larger firm when there are differences in marginal cost
E) one large firm can produce the market output at a lower average cost than many small firms
Q2) A monopolist will always enlarge its revenues by selling more output.
A)True
B)False
Q3) If average total cost per unit is minimized when a single producer supplies the entire market,this indicates
A) the presence of limit pricing
B) that the single producer is a perfect monopoly
C) the presence of substantial economies of scale
D) that the market has been narrowly defined
E) the existence of a single-price monopoly
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13
Chapter 11: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) Cheating on a collusive agreement is more likely when
A) a price floor is in effect
B) firms are located in the same state
C) it is easy to observe the other firms' prices
D) there is a small number of firms
E) market demand is unstable
Q2) A cartel
A) has one firm that acts as the price leader
B) is a group of firms engaged in price discrimination
C) acts like a monopoly
D) involves competition between rival firms
E) prices its output equal to marginal cost
Q3) In which market structure do firms consider the actions of their rivals when setting prices and output?
A) monopoly
B) oligopoly
C) perfect competition
D) both monopoly and perfect competition
E) monopolistic competition
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Page 14
Chapter 12: Labor Markets
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Sample Questions
Q1) In a perfectly competitive labor market,the supply of labor curve facing a firm will be
A) horizontal
B) vertical
C) upward sloping
D) downward sloping
E) equal to its marginal revenue product curve
Q2) The marginal revenue product (MRP)of labor is the
A) total revenue generated when one more worker is hired
B) change in average revenue when one more worker is hired
C) total revenue per worker when one more worker is hired
D) change in total revenue when one more worker is hired
E) change in employment when total revenue changes by one dollar
Q3) Each of the following,except one,would lead to a rightward shift of the labor supply curve in a particular industry.Which is the exception?
A) increased preference for this type of work
B) increases in the demand for the good produced by labor
C) increases in the size of the population
D) reductions in the wage rates offered in alternative labor markets
E) reductions in the costs of acquiring human capital
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Page 15
Chapter 12: labor Markets: Part A
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Sample Questions
Q1) If neither employers nor consumers are prejudiced,
A) discrimination cannot occur
B) all wages will be equal for all workers
C) there will be no non-ability-based wage differentials between different groups of workers
D) statistical discrimination may still occur
E) all equally qualified potential workers have an equal chance of employment and advancement
Q2) The more dangerous of two jobs currently pays $3 more per hour.The jobs are equivalent in all other respects.If labor is migrating from the higher-risk job to the lower-risk job,then
A) the equilibrium compensating wage differential is less than $3 per hour
B) the wage rate will drop for the more dangerous job
C) the wage rate will rise for the less dangerous job
D) the equilibrium compensating wage differential is greater than $3 per hour
E) equilibrium is unattainable in the two labor markets
Q3) Wage differentials are due exclusively to differences in market structure.
A)True
B)False
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Page 16
Chapter 13: Capital and Financial Markets
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Sample Questions
Q1) The supply curve for a particular bond is horizontal.
A)True
B)False
Q2) Which of the following is not a financial asset?
A) a corporate bond
B) a piece of real estate
C) an IOU
D) a share of Coca-Cola stock
E) a Treasury bond
Q3) A firm's choice about how much physical capital to employ differs from its choice of how much labor to employ because
A) the firm has to pay for its capital
B) the productivity of labor depends on the firm's production function
C) firm must compare the marginal costs and benefits of acquiring more capital
D) firms do not own the labor they employ,but they frequently purchase capital outright
E) labor is productive but capital is not
Q4) The supply curve for a particular bond is vertical.
A)True
B)False
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Chapter 14: Economic Efficiency and the Competitive Ideal
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Sample Questions
Q1) If a firm changed its fringe benefit program so that no employee suffered a loss in benefits and some employees enjoyed an increase in benefits,then
A) this could not be a Pareto improvement
B) the firm's policies are economically efficient
C) this could be a Pareto improvement
D) the firm's policies are fair
E) the firm is losing money
Q2) Market consumer surplus at any price
A) is the area above the market supply curve and below the market demand curve
B) is the area below the market supply curve and above the market demand curve
C) is the area under the demand curve and above the market price
D) is that price multiplied by the number of units demanded
E) is the number of units demanded multiplied by the cost of producing them.
Q3) If 20 smoothies are sold at a market price of $5.50 each,then
A) there must not be an excess supply of smoothies
B) selling the 21st smoothie would be a Pareto improvement
C) the market must be perfectly competitive
D) the value to some individual of the 20th smoothie is $5.50
E) there must be an excess demand for smoothies
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Page 18
Chapter 15: Governments Role in Economic Efficiency
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Sample Questions
Q1) Single-price monopoly is inefficient because
A) side payments are not made
B) a monopoly firm charges a price that exceeds its marginal cost
C) a monopoly firm charges a price equal to its marginal cost
D) a monopoly firm produces the quantity at which P = MR = MC.
E) a monopoly firm produces the quantity at which MR = MC.
Q2) If a monopoly arises as a natural monopoly
A) using anti-trust law to break it up is a poor remedy
B) anti-trust law should be used to break it up
C) that is most likely due to a patent or copyright
D) it will evolve into a perfectly competitive market in the long run
E) it should be encouraged,because it is "natural"
Q3) One way in which antitrust law fosters economic efficiency is by
A) defining property rights for firms
B) encouraging voluntary trade
C) prohibiting firms from colluding to raise prices
D) enforcing contracts between firms
E) encouraging mergers that increase market power
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Chapter 16: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) One reason why there may be a bias against free trade is that
A) those harmed by trade have a powerful incentive to lobby against it
B) people prefer domestically-produced goods to foreign-produced goods
C) people prefer foreign-produced goods to domestically-produced goods
D) the terms of trade are too low
E) the exchange rate is too high
Q2) For each watch Switzerland produces,it gives up the opportunity to produce 50 pounds of cheese.Germany can produce one watch at a cost of 100 pounds of cheese.Which of the following is true?
A) The opportunity cost of producing watches is greater in Switzerland.
B) The opportunity cost of producing cheese is greater in Switzerland.
C) The opportunity cost of producing cheese is the same in both countries.
D) It is impossible to compare costs because the two countries use different technologies.
E) In the two countries combined,the cost of producing one watch is 150 pounds of cheese.
Q3) A quota decreases the volume of imports,whereas a tariff typically has no impact on the volume of imports.
A)True
B)False
Page 20
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Chapter 17: What Macroeconomics Tries to Explain
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Sample Questions
Q1) If the unemployment rate is 6 percent,that means that 6 percent of A) the population is not working
B) potential workers do not have jobs
C) the workforce is searching for work but has not found a job at that time
D) the individuals who are looking for work cannot find jobs
E) the population is not looking for a job
Q2) An understanding of macroeconomics is valuable because it can help
A) in making purchase decisions
B) us to understand the forces that determine how fast the economy grows
C) us to understand why some firms earn more economic profit than others
D) to minimize the amount of tax an individual owes
E) minimize the opportunity cost of making poor decisions
Q3) If real GDP is increasing at a 2 percent annual rate while the unemployment rate is 7 percent,the economy is
A) not achieving full economic potential
B) experiencing an increase of 2 percent in real annual per capita GDP
C) experiencing a slump
D) experiencing high prices and low inflation
E) producing along its production possibilities frontier
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Page 21
Chapter 18: Production, income, and Employment
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Sample Questions
Q1) Private investment expenditure,adds to the nation's existing stock of capital.
A)True
B)False
Q2) If GDP is $1,000,consumption is $750,interest payments are $200,rent payments are $400,and profits are $200,what must wages and salaries equal?
A) $800
B) $400
C) $250
D) $0
E) $200
Q3) All types of unemployment are harmful to the economy.
A)True
B)False
Q4) GDP can be used to measure both short-term changes (i.e. ,over several months)and long-term changes in economic activity.
A)True
B)False
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Chapter 19: The Price Level and Inflation
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Sample Questions
Q1) When the value of a payment is adjusted in proportion to changes in the CPI,economists refer to that as
A) nominalization
B) realization
C) indexation
D) stabilization
E) depreciation
Q2) Which of the following would be example(s)of the resource cost of inflation?
A) Shopping several web sites to check prices
B) Changing price tags
C) Re-printing menus
D) The wear and tear on your car from additional trips to the bank
E) All of the above
Q3) The price of a typical basket of goods and services in one period divided by the price of the same basket in a different year is a(n)
A) price index
B) TV-violence index
C) employment index
D) output index
E) unemployment index
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Chapter 20: The Classical Long-Run Model
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Q1) In the classical model,we assume there is no ongoing inflation,so there is no need to distinguish between the nominal interest rate and the real interest rate.
A)True
B)False
Q2) The economist that gave us the proposition that "supply creates its own demand" was
A) Adam Smith
B) Jean Baptiste Say
C) Marc Lieberman
D) John Maynard Keynes
E) Robert Hall
Q3) Transfer payments,such as unemployment insurance and welfare,are included in the circular flow as part of
A) government purchases
B) household saving
C) net taxes
D) planned investment spending
E) household consumption
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Chapter 20: Part A: The Classical Model in an Open Economy
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Q1) When a country runs a trade deficit,
A) it must be running a budget surplus.
B) its imports will become injections instead of leakages.
C) its exports will become leakages instead of injections.
D) foreigners will demand loanable funds from the country.
E) foreigners will supply loanable funds to the country equal to its trade deficit
Q2) In the classical model with an open economy,an increase in government purchases can affect a country's exchange rate,causing its imports and exports to change.
A)True
B)False
Q3) In the classical model with an open economy,an increase in the trade deficit as a result of a tax cut,causes a decline in the interest rate,attracting more loanable funds from abroad.
A)True
B)False
Q4) In the classical model,even when a country runs a trade deficit,Say's law holds.
A)True
B)False
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Chapter 21: Economic Growth and Rising Living Standards
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Sample Questions
Q1) In the U.S.over the past century,increases in labor
A) supply have outpaced increases in labor demand,causing the average wage rate to fall
B) supply have outpaced increases in labor demand,causing the average wage rate to rise
C) demand have outpaced increases in labor supply,causing the average wage rate to fall
D) demand have outpaced increases in labor supply,causing the average wage rate to rise
E) demand have occurred at the same pace as increases in labor supply,so the average wage rate has remained unchanged
Q2) The total stock of capital will always increase when
A) depreciation is zero.
B) investment is greater than depreciation.
C) investment is greater than population growth.
D) investment is positive.
E) depreciation is greater than investment.
Q3) Investment spending is a stock variable.
A)True
B)False
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Chapter 22: Economic Fluctuations
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Sample Questions
Q1) A student seeking a job right after graduation should be especially attentive to
A) long-run growth patterns in the economy
B) what is the current phase of the business cycle
C) technological change
D) sales of durable goods
E) the duration of strikes
Q2) As the economy goes through an expansion,
A) fluctuations in GDP become more severe
B) unemployment finally stabilizes
C) investment stabilizes
D) the classical model becomes a better predictor
E) unemployment falls.
Q3) Which of the following is the main weakness of the classical model?
A) It assumes that the labor supply curve is vertical.
B) It assumes that the labor supply curve is horizontal.
C) It assumes that the labor market clears.
D) It assumes that the labor demand curve is horizontal.
E) It assumes that the labor demand curve is vertical.
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Chapter 23: The Short-Run Macro Model
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Sample Questions
Q1) The marginal propensity to consume is always
A) a negative number
B) larger than 1.0
C) larger than 10
D) greater than zero and less than 0.5
E) greater than zero and less than 1.0
Q2) What is the main difference in the classical model as compared to the short-run macro model?
A) In the classical model the economy automatically operates at potential GDP while in the short run model the economy can operate at a different level of GDP
B) In the short run model the economy automatically operates at potential GDP while in the classical model the economy can operate at a different level of GDP
C) Fiscal policy has no effect in the short run model but is very effective in the classical model
D) There is no difference in the predictions of the two models
E) The classical model does a better job in predicting recessions than the short-run macro model
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Chapter 24: Fiscal Policy
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Sample Questions
Q1) Countercyclical fiscal policy refers to
A) any fiscal policy that cycles between budget surpluses and budget deficits
B) the use of taxes and government spending to keep the economy close to potential GDP in the short run
C) any fiscal policy that is employed during a business cycle
D) the use of open market purchases of bonds to keep the economy close to potential GDP in the short run
E) the use of changes in tax rates to keep the economy at potential output in the long run
Q2) Which of the following is true?
A) The federal budget deficit is a flow and so is the national debt.
B) The national debt is both a stock and a flow.
C) The federal budget deficit is a stock and the national debt is a flow.
D) The federal budget deficit is a flow and the national debt is a stock.
E) The federal budget deficit is a stock and so is the national debt.
Q3) In a recession,tax payments tend to increase and transfer payments tend to decrease.
A)True
B)False
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Page 29
Chapter 25: Money,banks,and the Federal Reserve
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Q1) If a bank's total assets are $150 million and total liabilities are $110 million,the bank's net worth is
A) $15 million
B) $260 million
C) $40 million
D) -$40 million
E) $5 million
Q2) The least liquid of the following assets is
A) cash in the hands of the public
B) time deposits
C) savings accounts
D) travelers' checks
E) demand deposits
Q3) In any monetary system,the means of payment must be the same as the unit of value.
A)True
B)False
Q4) All items on a bank's balance sheet are stock variables.
A)True
B)False
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Chapter 26: The Money Market and Monetary Policy
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Sample Questions
Q1) Which of the following determines how much money an individual will decide to hold?
A) Investment spending
B) Income taxes
C) The price level
D) The supply of money
E) Real GDP
Q2) An excess supply of money in the economy implies an excess demand for
A) stocks
B) mortgages
C) consumer nondurables
D) consumer durables
E) bonds
Q3) If there is an excess demand for money in the economy,
A) there is also an excess supply of money.
B) there is also an excess demand for bonds.
C) there is also an excess supply of bonds.
D) the interest rate will fall.
E) there is also an excess supply of housing.
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Chapter 26: Feedback Effects From GDP to the Money
Market
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Sample Questions
Q1) If the federal government announces a tax cut,which of the following is most likely in the short run?
A) A decrease in output,an increase in money demand,and an increase in the interest rate
B) An increase in output,a decrease in money demand,and a decrease in the interest rate
C) A decrease in output,a decrease in money demand,and a decrease in the interest rate
D) An increase in output,an increase in money demand,and a decrease in the interest rate
E) An increase in output,an increase in money demand,and an increase in the interest rate.
Q2) In the short-run macro model,an increase in government spending
A) may reduce real GDP
B) partially crowds out private investment spending
C) usually crowds out exports
D) usually crowds out spending on services
E) requires an increase in taxes
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Chapter 27: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) If the Fed had not changed the money supply after the recession in the early 1990s,then the long run effects would have been
A) a return to the original output and price level
B) increased long run GDP equilibrium and price level
C) unchanged long run output,but an increased price level
D) a decreased long run output and price level
E) a return to the original long run output,but a decreased price level
Q2) Refer to Figure 15-6.Short-run macroeconomic equilibrium occurs at a price level of
A) 120 and real GDP of $5.5 trillion
B) 140 and real GDP of $5.5 trillion
C) 120 and real GDP of $6.5 trillion
D) 120 and real GDP of $7.5 trillion
E) 140 and real GDP of $7.5 trillion
Q3) In the short run,the price level will rise whenever there is an economy-wide decrease in unit costs.
A)True
B)False
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Chapter 28: Inflation and Monetary Policy
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Sample Questions
Q1) The AD curve shifts to the right when
A) the Fed alters its fiscal policy rules
B) any economic shock disrupts the economy
C) the AS curve does not shift
D) new trade legislation is passed
E) positive demand shocks occur
Q2) There is uncertainty about the precise level of the natural rate of unemployment.
A)True
B)False
Q3) If the inflation rate is higher than expected,real income is redistributed from lenders to borrowers.
A)True
B)False
Q4) Which of the following is an opportunity cost of cyclical unemployment?
A) A higher wage rate
B) A lower interest rate
C) Lower taxes paid by the employed
D) Costs of updating prices
E) Lost earnings of the unemployed
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Chapter 29: Exchange Rates and Macroeconomic Policy
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Sample Questions
Q1) In the market for euros,Americans want to buy euros
A) only to buy goods from European firms
B) primarily to buy services from European firms
C) only to buy European assets
D) only to buy European goods and assets
E) to buy European goods,services,and assets
Q2) A decrease in the price of a foreign currency is represented graphically as
A) rightward movement along the demand curve for that currency
B) an upward shift of the demand curve
C) a downward shift of the demand curve
D) a horizontal line
E) a vertical line
Q3) If the British price level rose relative to the Swiss price level,there would be
A) a rightward movement along the supply of Swiss francs curve in the pound-franc market
B) a leftward movement along the supply of Swiss francs curve in the pound-franc market
C) an increased supply of Swiss francs to the pound-franc market
D) a decreased supply of Swiss francs to the pound-franc market
E) no change of the supply of Swiss francs curve in the pound-franc market
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Chapter 30: Appendix-finding Equilibrium GDP
Algebraically
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Sample Questions
Q1) If autonomous consumption is $1,000,the MPC is 0.75,net taxes are $500,investment spending is $800,and government purchases equals $500,and NX = $0,what is equilibrium GDP?
A) $1,800
B) $1,925
C) $2,566.7
D) $7,200
E) $7,700
Q2) If I = $2,000,G = $4,000,T = $1,000,NX = $0,autonomous consumption = $1,000 and the marginal propensity to consume is 0.6,what is the equilibrium value of output?
A) $16,000
B) $7,000
C) $6,400
D) $3,840
E) $8,000
Q3) If net taxes are included in the model,the equation that shows consumption at each level of income is: C = a + b(Y - T)or C = a + bY - bT.
A)True
B)False
Page 36
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Chapter 31: Appendix: Capital and Leverage
Resources
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Sample Questions
Q1) The simple leverage ratio is defined as:
A) Depreciation of an asset / Value of an asset
B) Current assets / current liabilities.
C) Equity of an asset / Value of an asset
D) Value of an asset / Equity of an asset.
E) Equity of an asset / Original cost of an asset.
Q2) A financial institution's leverage ratio is defined as:
A) Profit / Revenue.
B) Total Assets / Shareholders' Equity.
C) Shareholders' Equity / Total Assets.
D) Value of Delinquent Loans / Value of All Loans.
E) Total Debt / Total Revenue.
Q3) It was the rapid and system-wide deleveraging that contributed to the downward spiral of the 2008 financial crisis.
A)True
B)False
Q4) In the aftermath of the 2008 financial crisis,everyone agreed that lower leverage ratios would be a good thing.
A)True
B)False
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