WorksheetsChapter 1+2+3 revision
Total questions: 25
Worksheet time: 13mins
Assume that the marginal propensity to consume is 0.90. As a result of an increase in the tax rates, the government collects an additional $20 million. What will be the impact on gross domestic product (GDP) ?
GDP will increase by a maximum of $200 million.
GDP will increase by a maximum of $180 million.
GDP will decrease by a maximum of $200 million
GDP will decrease by a maximum of $180 million
GDP will decrease by a maximum of $20 million.
Which of the following is true according to the circular flow model?
Firms are suppliers in both the product and factor markets.
Firms are demanders in the product markets and suppliers in the factor markets.
Households are demanders in both the product and factor markets
Households are demanders in the product markets and suppliers in the factor markets.
The government is a demander in the product market only.
Which of the following is most likely included in gross domestic product?
Matt gives his secondhand bicycle to his brother.
Sal paints his own bicycle.
Ali buys a new bicycle.
Mike buys a share of stock in a bicycle firm.
Daniel bikes to school every day.
Assume that Atlantic National Bank has demand deposits of $100,000 and no excess reserves, and that the reserve requirement is 10 percent. A customer withdraws $5,000 from the bank. To meet the reserve requirement, the bank must increase its reserves by
$500
$1,000
$2,000
$4,000
$4,500
Which of the following is a possible limitation of fiscal policy?
It affects only interest-sensitive spending.
Its outcome could be delayed because of implementation lags.
It is more effective during inflationary periods than during recessionary periods.
It is less effective in reducing the natural rate of unemployment than monetary policy.
It does not affect discouraged workers.
A major advantage of automatic stabilizers in fiscal policy is that they
reduce the public debt
increase the possibility of a balanced budget
stabilize the unemployment rate
go into effect without passage of new legislation
automatically reduce the inflation rate
In an economy, the price index in 2006 was 100 and the real gross domestic product (GDP) was $1,000. In 2010, the price index was 110 and the nominal GDP was $2,200. Based on that information, which of the following can be inferred about the economy’s nominal GDP in 2006 and real GDP in 2010
Nominal GDP in 2006 equals $2,000 ; Real GDP in 2010 equals $1,000
Nominal GDP in 2006 equals $1,000 ; Real GDP in 2010 equals $2,000
Nominal GDP in 2006 equals $1,100 ; Real GDP in 2010 equals $2,420
Nominal GDP in 2006 equals $1,000 ; Real GDP in 2010 equals $2,420
Nominal GDP
in 2006=$1,100; Real GDP in 2010=$2,200
Suppose that the economy is in the midst of a recession and government policy makers want to increase aggregate demand by $600 billion.If the economy’s marginal propensity to consume is 0.75 and there is no crowding out, the government should do which of the following?
Increase spending by $2,400 billion
Increase spending by $600 billion
Increase spending by $150 billion
Decrease taxes by $150 billion
Decrease taxes by $600 billion.
Suppose that personal income is $3,500 billion, personal taxes are $1,000 billion, and depreciation is $500 billion. Disposable income is equal to which of the following?
$1,500 billion
$2,000 billion
$2,500 billion
$3,000 billion
There is not enough information to answer the question.
The table shows a country 's macroeconomic data in 2021. The country's gross domestic product is
$220 billion
$282 billion
$304 billion
$309 billion
$347 billion
According to the data above, in which year was real gross domestic product (GDP) the largest?
1980
1990
2000
2010
2015
If in a specified year nominal gross domestic product grew by 11 percent and real gross domestic product grew by 4 percent, inflation for this year would be
–7%
7%
8%
11%
15%
If a worker’s nominal wage rate increases from $10 to $12 per hour and at the same time the general price level increases by 10 percent, the worker’s real wage has
approximately decreased by 10%
approximately decreased by 20%
approximately increased by 10%
approximately increased by 20%
not changed
The value of which of the following is counted in the United States gross domestic product?
Clean air
Child care a father provides for his child
An automobile produced in Sweden by a United States firm
A car produced in the United States and sold in Europe
Medical services not provided due to preventative health care
Assume that in a banking system in which banks hold no excess reserves, the public holds part of its money in cash and the rest in checking accounts. If the required reserve ratio is 10 percent, actual reserves are $10 million, and currency in circulation is equal to $20 million, M1 will be equal to
$20 million
$30 million
$90 million
$120 million
$150 million
Assume that the reserve requirement for demand deposits is 20 percent, that banks hold no excess reserves, and that the public holds no currency. If the banking system has limited reserves and the central bank sells $10,000 worth of government securities to commercial banks, the total money supply will
increase by $10,000
increase by $50,000
decrease by $10,000
decrease by $50,000
not change
Suppose that all banks keep only the minimum reserves required by law and that there are no currency drains. The legal reserve requirement is 10 percent. If Maggie deposits the $100 bill she received as a graduation gift from her grandmother into her checking account, the maximum increase in the total money supply will be
$10
$100
$900
$1,000
$1,100
Commercial banks can create money by
transferring depositors' accounts at the Federal Reserve for conversion to cash
buying Treasury bills from the Federal Reserve
sending vault cash to the Federal Reserve
maintaining a 100 percent reserve requirement
lending excess reserves to customers
A central bank can increase the money supply by
selling gold reserves to the banks
selling foreign currency holdings
buying government bonds on the open market
buying gold from foreign central banks
borrowing reserves from foreign governments
GDP does NOT account for which of the following?
The value added by all firms in the economy
The depletion of natural resources
Wages, rent, profit, and interest payments
The value of final goods and services produced domestically
Imports from foreign countries
Gross domestic product has been criticized as a measure of well-being because it fails to take into account which of the following?
The distribution of income
The value of services
The value of intermediate goods
The value of financial transactions and sales of used items
The value of government services
Which of the following is a fiscal policy action aimed at reducing unemployment?
Decreasing government expenditures
Decreasing income taxes
Decreasing tax credits
Increasing nominal interest rates
Increasing required reserves
Which of the following is an example of an automatic stabilizer?
Discretionary fiscal policy
Progressive income taxes
Autonomous consumption
The spending multiplier
Cyclical unemployment
Which of the following is an example of fiscal policy?
Increasing government expenditures to build highways
Increasing the money supply to increase income
Decreasing the discount rate to lower unemployment and inflation
Decreasing the policy rate to stimulate investment
Decreasing the reserve ratio to increase bank reserves
An appropriate fiscal policy to combat a recession would be to increase which of the following?
Interest rates
The money supply
Taxes
Government spending
The sales of government bonds
