Competence Test 4

The quantity supplied of a good is the amount that

• sellers are willing and able to sell.

• buyers are willing and able to purchase.

• sellers are able to produce.

• buyers and sellers agree will be brought to market.

A demand schedule is a table that shows the relationship between

• quantity demanded and quantity supplied.

• price and quantity demanded.

• income and quantity demanded.

• price and income.

When conducting an open-market sale, the Fed

• sells government bonds, and in so doing increases the money supply

• buys government bonds, and in so doing decreases the money supply

• buys government bonds, and in so doing increases the money supply.

• sells government bonds, and in so doing decreases the money supply.

Suppose that a decrease in the price of good X results in fewer units of good Y being demanded. This implies that X and Y are

• inferior goods.

• complementary goods.

• normal goods.

• substitute goods

The price elasticity of demand measures

• the extent to which demand increases as additional buyers enter the market.

• how much more of a good consumers will demand when incomes rise.

• buyers' responsiveness to a change in the price of a good.

• the movement along a supply curve when there is a change in demand.

  
  

Cross-price elasticity of demand measures how

• the price of one good changes in response to a change in the price of another good.

• the quantity demanded of one good changes in response to a change in the quantity demanded of another good.

• strongly normal or inferior a good is.

• the quantity demanded of one good changes in response to a change in the price of another good.

Two goods are substitutes when a decrease in the price of one good

• increases the demand for the other good.

• decreases the demand for the other good.

• decreases the quantity demanded of the other good.

• increases the quantity demanded of the other good.

Suppose there was a large increase in net exports. If the Fed wanted to stabilize output, it could

• increase the money supply, which will reduce interest rates.

• decrease the money supply, which will increase interest rates

• decrease the money supply, which will reduce interest rates

• increase the money supply, which will increase interest rates.

Refer to Figure 4-7. At what price would there be an excess supply of 200 units of the good?

• $35

• $15

• $20

• $30

The multiplier effect states that there are additional shifts in aggregate demand from expansionary fiscal policy, because it

• reduces investment and thereby increases consumer spending.

• decreases income and thereby increases consumer spending.

• increases the money supply and thereby reduces interest rates.

• increases income and thereby increases consumer spending.