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Full download Economics 11th Edition Arnold Test Bank all chapter 2024 pdf
Full download Economics 11th Edition Arnold Test Bank all chapter 2024 pdf
Full download Economics 11th Edition Arnold Test Bank all chapter 2024 pdf
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Chapter 10—Keynesian Macroeconomics and Economic Instability: A Critique of the
Self-Regulating Economy
MULTIPLE CHOICE
2. If households purchase $60,000 worth of consumer goods and firms produce $50,000 worth of consumer
goods, then
a. inventory changes are -$10,000.
b. inventory changes are +$10,000.
c. new capital goods expenditures (by firms) are $10,000.
d. consumer goods expenditures are $10,000.
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
4. When total production is greater than total expenditures, __________ is produced than households want
to buy, which leads to __________ in inventory, which signals firms that they have __________, which
causes firms to cut back production.
a. less; decreases; underproduced
b. less; increases; overproduced
c. more; decreases; underproduced
d. more; increases; overproduced
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
8. When total expenditures are greater than total production, __________ is produced than households
want to buy, which leads to __________ in inventory, which signals firms that they have __________,
which causes firms to increase production.
a. less; decreases; underproduced
b. more; increases; underproduced
c. less; increases; underproduced
d. more; decreases; overproduced
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
10. If total production is greater than total expenditures, then business firms
a. have underproduced.
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
b. will step up production.
c. will lower production.
d. will experience decreases in inventory.
e. a and b
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Comprehension
11. The two major curves or lines in the TE-TP diagram are:
a. the total expenditure curve and the 45-degree line.
b. the supply and demand curves.
c. the total expenditures and national income curves.
d. the total production and national income curves.
ANS: A PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Knowledge
Exhibit 10-1
16. Refer to Exhibit 10-1. At Q3, there is a tendency for Real GDP to
a. rise.
b. fall.
c. remain unchanged.
d. There is not enough information to answer this question.
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
17. Refer to Exhibit 10-1. At Q2, there is a tendency for Real GDP to
a. rise.
b. fall.
c. remain unchanged.
d. There is not enough information to answer this question.
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
18. Refer to Exhibit 10-1. At Q1, there is a tendency for Real GDP to
a. rise.
b. fall.
c. remain unchanged.
d. There is not enough information to answer this question.
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
19. Consumption and disposable income are
a. indirectly related.
b. directly related.
c. not related.
d. sometimes directly and sometimes indirectly related, depending upon whether consumption
is planned or unplanned.
ANS: B PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Comprehension
20. The classical economists believed __________ determined savings, while Keynes said it was
__________.
a. interest rates; income
b. income; investment
c. investment; interest rates
d. interest rates; investment
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Knowledge
21. The horizontal investment curve used to derive the TE curve means investment is
a. directly related to Real GDP.
b. indirectly related to Real GDP.
c. independent of Real GDP.
d. sometimes directly and sometimes indirectly related to Real GDP, depending upon whether
it is planned capital or planned inventory investment.
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Comprehension
Exhibit 10-2
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
b. $1,500 billion.
c. $7,500 billion.
d. $4,000 billion.
e. $4,500 billion.
ANS: E PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic LOC: DISC: Equilibrium
KEY: Bloom's: Application
24. Refer to Exhibit 10-2. Which of the following is correct about point M?
a. TE is $4,500 billion and TP is only $1,500 billion.
b. TP is $4,500 billion and TE is only $1,500 billion.
c. TE is $7,500 and TP is only $5,500 billion.
d. TP is only $7,500 billion and TE is only $5,500 billion.
e. TE is $3,000 billion and TP is only $1,500 billion.
ANS: E PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
25. Refer to Exhibit 10-2. If autonomous consumption increases, the TE curve will shift ____________ and
the new level of equilibrium Real GDP will be ___________ than $4,500.
a. downward; greater
b. downward; less
c. upward; less
d. upward; greater
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
NOT: New
26. Refer to Exhibit 10-2. If autonomous investment decreases, the TE curve will shift ____________ and
the new level of equilibrium Real GDP will be ___________ than $4,500.
a. downward; greater
b. downward; less
c. upward; less
d. upward; greater
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
NOT: New
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
27. Total production
a. always equals total expenditures.
b. equals total expenditures in equilibrium.
c. is always greater than total expenditures.
d. is always less than total expenditures.
ANS: B PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Comprehension
29. John Maynard Keynes drew many economists ______________ the classical view. The classical view
held that a market economy __________ regulate itself to avoid periods of excessive unemployment.
a. toward; can
b. toward; cannot
c. away from; can
d. away from; cannot
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Comprehension
30. In a recessionary gap, the implications of downward wage inflexibility are that there will be
a. further leftward shifts of AD that worsen unemployment.
b. no further leftward shifts of AD, allowing the shifts in SRAS to close the gap.
c. no further leftward shifts of SRAS, allowing the shifts in AD to close the gap.
d. no rightward shifts of SRAS, allowing for persistent high unemployment.
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
31. The efficiency wage model is an explanation of wage __________ and thus a support for __________
macroeconomics.
a. flexibility; Keynesian
b. flexibility; classical
c. inflexibility; Keynesian
d. inflexibility; classical
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Comprehension
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
32. According to the efficiency wage model, firms tend to pay workers
a. the market-clearing wage that efficiently equates labor supplied and demanded.
b. in excess of the market-clearing wage to provide an incentive for productivity and
efficiency.
c. less than the market-clearing wage to assure themselves a pool of workers ready to replace
workers who quit.
d. less than the market-clearing wage to minimize labor cost per unit of production.
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
33. The efficiency wage model contains the assumption that labor productivity __________ the wage rate,
so that a firm maximizing its profits __________ pay workers an above-market wage rate.
a. is independent of; may
b. is independent of; will never
c. depends on; may
d. depends on; will never
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
34. Two economists, Smith and Jones, are discussing the currently high unemployment rate. Smith says that
something ought to be done quickly because the economy may not be able to restore itself to full
employment. Jones says that it is better to take a "hands-off" approach. Which of the following is most
likely to be true?
a. Smith and Jones are most likely both Keynesian economists with a few minor differences of
opinion.
b. Smith and Jones are most likely both classical economists with a few minor differences of
opinion.
c. Jones is likely to be a Keynesian economist and Smith is likely to be a classical economist.
d. Smith is likely to be a Keynesian economist and Jones is likely to be a classical economist.
e. none of the above.
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
35. Keynesian macroeconomists believe that the time it takes for falling wages and prices to eliminate a
recessionary gap is __________ enough to say that the economy is __________.
a. long; not self-regulating
b. long; self-regulating
c. short; not self-regulating
d. short; self-regulating
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Comprehension
36. Keynes’s major work, The General Theory of Employment, Interest and Money, was published during
the
a. late 1800s.
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
b. mid-1700s.
c. 1930s.
d. Panic of 1907.
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Knowledge
NOT: New
37. Who would be most likely to agree that "People do not always save more as interest rates rise"?
a. a classical economist
b. John Maynard Keynes
c. an efficiency wage theorist
d. a and b
e. a, b, and c
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
44. Which statement is consistent with what Keynes believed about consumption and disposable income?
a. Consumption depends upon disposable income and falls as disposable income rises.
b. Consumption rises by the same amount as disposable income rises.
c. Consumption rises by less than disposable income rises.
d. Disposable income depends upon consumption.
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Comprehension
45. If income rises from $1,000 to $1,400 and consumption rises from $800 to $1,168, the marginal
propensity to consume is __________ percent.
a. 8
b. 85
c. 15
d. 92
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
NOT: New
46. The consumption function is a function showing the relationship between consumption and
a. disposable income.
b. exports.
c. interest rates.
d. investment.
ANS: A PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Comprehension
47. According to the Keynesian consumption function, an increase in disposable income will result in
a. a decrease in consumption.
b. an increase in consumption.
c. a decrease in investment.
d. an increase in investment.
ANS: B PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Comprehension
48. The ratio of the change in consumption to the change in income is called the
a. marginal utility of consumption.
b. average utility of consumption.
c. marginal propensity to consume.
d. average propensity to consume.
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Knowledge
49. The marginal propensity to consume plus the marginal propensity to save is
a. equal to zero.
b. greater than zero but less than one.
c. equal to one.
d. greater than one.
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
50. If income rises from $1,000 to $1,400 and consumption rises from $1,100 to $1,440, the marginal
propensity to save (MPS) is
a. 0.15.
b. 0.85.
c. 0.25.
d. 0.20.
ANS: A PTS: 1 DIF: Difficulty: Challenging
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
NOT: New
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
51. Here is a consumption function: C = C0 + MPC(Yd). The C0 term is usually defined as
a. autonomous consumption.
b. point-zero consumption.
c. mandatory consumption.
d. propensitory consumption.
e. none of the above
ANS: A PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Knowledge
52. Here is a consumption function: C = C0 + MPC(Yd). If MPC is 0.80, then we know that
a. as Yd rises by $1, Co rises by $0.80.
b. as Yd rises by $1, C rises by $0.80.
c. Yd rises by $0.80.
d. as C0 rises by $0.80, Yd rises by $1.
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
54. If autonomous consumption rises by $20 and, as a result, Real GDP rises by $200, then the multiplier is
a. 4.
b. 5.
c. 6.
d. 10.
e. none of the above
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
55. If autonomous consumption rises by $60 and, as a result, Real GDP rises by $240, then the marginal
propensity to consume is
a. 0.25.
b. 0.75.
c. 0.05.
d. 0.95.
e. none of the above
ANS: B PTS: 1 DIF: Difficulty: Challenging
NAT: BUSPROG: Analytic
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
NOT: New
57. The total expenditure (TE) curve has the same slope as the __________ curve.
a. C (consumption)
b. I (investment)
c. G (government purchases)
d. NE (net exports)
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Comprehension
58. On a TE-TP diagram consider a level of Real GDP at which the vertical distance to the TE line exceeds
the vertical distance to the 45-degree line. This Real GDP is __________ its equilibrium level, with
__________.
a. above; TE > TP
b. above; TE < TP
c. below; TE > TP
d. below; TE < TP
ANS: C PTS: 1 DIF: Difficulty: Challenging
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
59. On a TE-TP diagram consider a level of Real GDP at which the vertical distance to the TE line is less
than the vertical distance to the 45-degree line. This Real GDP is __________ its equilibrium level, with
__________.
a. above; TE > TP
b. above; TE < TP
c. below; TE > TP
d. below; TE < TP
ANS: B PTS: 1 DIF: Difficulty: Challenging
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
60. Suppose the MPC = 0.60 and government purchases increase by $40 billion. In Keynesian theory, which
of the following is true?
a. The TE curve shifts downward by $40 billion and Real GDP decreases by $40 billion.
b. The TE curve shifts upward by $40 billion, and Real GDP increases by $40 billion.
c. The TE curve shifts downward by $40 billion, and Real GDP decreases by $100 billion.
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
d. The TE curve shifts upward by $40 billion, and Real GDP increases by $100 billion.
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
61. Considering both the Keynesian and the aggregate demand-supply frameworks, if households as a group
experience an increase in wealth at a given price level, then the TE curve shifts __________, the AD
curve shifts __________, and Real GDP __________.
a. downward; leftward; decreases
b. downward; rightward; decreases
c. upward; rightward; increases
d. upward; leftward; increases
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
66. A rise in MPC makes the total expenditures (TE) curve __________ and __________ the multiplier.
a. steeper; raises
b. steeper; lowers
c. flatter; raises
d. flatter; lowers
ANS: A PTS: 1 DIF: Difficulty: Challenging
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
Exhibit 10-3
Disposable
Consumption
Income
C
Yd
$2,000 $2,040
2,100 2,120
2,200 2,200
2,300 2,280
2,400 2,360
69. Refer to Exhibit 10-3. When disposable income equals $2,000, saving equals
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
a. -$20.
b. -$40.
c. 0.
d. $40.
e. $20.
ANS: B PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
70. Refer to Exhibit 10-3. When disposable income equals $2,300, saving equals
a. -$20.
b. -$10.
c. 0.
d. $10.
e. $20.
ANS: E PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
71.
Refer to Exhibit 10-3. The marginal propensity to consume (MPC) is
a. 0.75.
b. 0.80.
c. 0.90.
d. 1.00.
e. none of the above
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
76. If an economy consumes 75 percent of any increase in income, then an increase in autonomous
investment of $1 billion could result in an increase in Real GDP of as much as
a. $1.0 billion..
b. $4.0 billion.
c. $5.0 billion.
d. $1.8 billion.
e. $6.0 billion.
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
77. If we graph the consumption function such that it starts above the origin, this is because we are assuming
that
a. the MPC is positive.
b. the MPS is positive.
c. autonomous consumption is positive.
d. induced consumption is positive.
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
Exhibit 10-4
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
78. Refer to Exhibit 10-4. If the present level of disposable income is Yd1, autonomous consumption is equal
to
a. C0.
b. C1.
c. C2.
d. C1 - C0.
e. C2 - C1.
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
80. Refer to Exhibit 10-4. Let Yd1 denote the present level of disposable income. An increase in disposable
income is likely to, ceteris paribus, cause a movement to point
a. A.
b. B.
c. F.
d. D.
e. E.
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
Exhibit 10-5
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
81. Refer to Exhibit 10-5 above. The equilibrium level of Real GDP is
a. $200 billion.
b. $400 billion.
c. $600 billion.
d. $800 billion.
ANS: B PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
82. Refer to Exhibit 10-5 When TE is $700 billion, what state is the economy in?
a. TE < TP, individuals are buying less output than firms produce.
b. TE > TP, individuals are buying more output than firms produce.
c. TE = TP, the economy is in equilibrium.
d. TE < TP, individuals are buying more output than firms produce.
e. TE > TP, individuals are buying less output than firms produce.
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
83. Refer to Exhibit 10-5 When TE is $200 billion, what state is the economy in?
a. TE < TP, individuals are buying less output than firms produce.
b. TE > TP, individuals are buying more output than firms produce.
c. TE = TP, the economy is in equilibrium.
d. TE < TP, individuals are buying more output than firms produce.
e. TE > TP, individuals are buying less output than firms produce.
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
84. Refer to Exhibit 10-5. When TE is $700 billion, what will firms most likely do next?
a. Firms will increase production to increase inventories to their optimum levels.
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
b. Firms will neither increase nor decrease production since the economy is in equilibrium.
c. Firms will cut back production to reduce inventories to their optimum levels.
d. It is impossible to determine what firms are likely to do based on this information.
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
85. Refer to Exhibit 10-5. When TE is $300 billion, what will firms most likely firms do next?
a. Firms will increase production to increase inventories to their optimum levels.
b. Firms will neither increase nor decrease production since the economy is in equilibrium.
c. Firms will cut back production to reduce inventories to their optimum levels.
d. It is impossible to determine what firms are likely to do based on this information.
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
86. Refer to Exhibit 10-5. When TE is $300 billion, what happens to inventories?
a. Inventories are at their optimum levels.
b. Inventories will fall, then rise above their optimum levels.
c. Inventories will fall below optimum levels.
d. Inventories will rise above optimum levels.
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
87. Refer to Exhibit 10-5. When TE is $800 billion, what happens to inventories?
a. Inventories are at their optimum levels.
b. Inventories will fall, then rise above their optimum levels.
c. Inventories will fall below optimum levels.
d. Inventories will rise above optimum levels.
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Application
88. In the real world, we should expect the multiplier process to work itself out
a. almost instantaneously.
b. within a few days.
c. within about one month.
d. only over many months, perhaps even years.
ANS: D PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic
LOC: DISC: Understanding and applying economic models KEY: Bloom's: Knowledge
l’unité allemande