1. In economics, when discussing Tessa’s “demand for money,” we mean
A. how much cash Tessa would like to have.
B. the income that Tessa would need, per time period, to satisfy her minimum living requirements.
C.how much wealth Tessa would like to have.
D. the quantity of Tessa’s financial assets that she wishes to hold in non-interest-bearing form.
2. Each of the following might be a specific fiscal policy action EXCEPT
A.reducing interest rates to stimulate consumer demand.
B.increasing government spending on military hardware.
C.easing the eligibility requirements for welfare recipients.
D.imposing a national sales tax.
4. In Arboc, the income tax rate is 20% and the MPC is .75. The tax multiplier is
A.–1.5.
B.–1.875.
C.–3.75
D.–2.75.
5. Which statement is false? When the market interest rate is higher than normal,
A. households will expect the interest rate to decrease.
B.households will expect bond prices to increase.
C.the opportunity cost of holding money is lower than normal.
D.households will wish to buy more (interest-bearing) bonds.
6. When market interest rates are lower than normal,
A.bond prices are expected to increase.
B.bond prices are expected to decrease.
C.the demand for bonds is higher than normal.
D.the yield on bonds is higher than normal.
7. During the 1990s, the Arbocali federal budget deficit expanded sharply. Which of the following is not a likely cause of this expansion?
A.Government spending (as a percentage of GDP) rose during the 1990s.
B.Interest payments on the Arbocali federal debt (as a percentage of GDP) rose during the 1990s.
C.Personal income tax rates were reduced in 1991.
D.Transfer payments (as a percentage of GDP) fell during the 1990s.
8. When the government sector is added to the model, it must be true that in equilibrium
A. G = T.
B. S = I.
C. S + I = G + T.
D. S + T = I + G
A. how much cash Tessa would like to have.
B. the income that Tessa would need, per time period, to satisfy her minimum living requirements.
C.how much wealth Tessa would like to have.
D. the quantity of Tessa’s financial assets that she wishes to hold in non-interest-bearing form.
2. Each of the following might be a specific fiscal policy action EXCEPT
A.reducing interest rates to stimulate consumer demand.
B.increasing government spending on military hardware.
C.easing the eligibility requirements for welfare recipients.
D.imposing a national sales tax.
4. In Arboc, the income tax rate is 20% and the MPC is .75. The tax multiplier is
A.–1.5.
B.–1.875.
C.–3.75
D.–2.75.
5. Which statement is false? When the market interest rate is higher than normal,
A. households will expect the interest rate to decrease.
B.households will expect bond prices to increase.
C.the opportunity cost of holding money is lower than normal.
D.households will wish to buy more (interest-bearing) bonds.
6. When market interest rates are lower than normal,
A.bond prices are expected to increase.
B.bond prices are expected to decrease.
C.the demand for bonds is higher than normal.
D.the yield on bonds is higher than normal.
7. During the 1990s, the Arbocali federal budget deficit expanded sharply. Which of the following is not a likely cause of this expansion?
A.Government spending (as a percentage of GDP) rose during the 1990s.
B.Interest payments on the Arbocali federal debt (as a percentage of GDP) rose during the 1990s.
C.Personal income tax rates were reduced in 1991.
D.Transfer payments (as a percentage of GDP) fell during the 1990s.
8. When the government sector is added to the model, it must be true that in equilibrium
A. G = T.
B. S = I.
C. S + I = G + T.
D. S + T = I + G