Refer to Figure 23-2. Suppose that the level of GDP associated with point K is potential GDP. If the U.S. economy is currently at point N,
A) firms are operating below capacity.
B) the economy is in an expansion.
C) the level of unemployment is above the natural rate.
D) the economy is at full employment.
Ques. 2Personal income is defined as
A) national income less retained earnings plus transfer payments and plus interest on government bonds.
B) national income less depreciation.
C) national income less personal taxes.
D) national income plus retained earnings less transfer payments and less interest on government bonds.
Ques. 3What actions should the Fed take if it believes the economy is about to experience a high rate of inflation?
What will be an ideal response?
Ques. 4Consider the following T-account for National City Bank:
Assets Liabilities
Reserves 10,000 Deposits 100,000
Loans 90,000
If the required reserve ratio is lowered to 8 percent, how much can National City loan out?
A) 10,000 B) 8,000 C) 2,000 D) 0
Ques. 5During a deflationary period
A) the nominal interest rate is less than the real interest rate.
B) the real interest rate is less than the nominal interest rate.
C) the nominal interest rate does not change.
D) the price level rises.
Ques. 6In equilibrium, what determines the price of capital and what determines the price of natural resources?
What will be an ideal response?
Ques. 7What actions should the Fed take if it believes the economy is about to fall into recession?
What will be an ideal response?
Ques. 8National income is defined as
A) gross domestic product less the consumption of fixed capital.
B) gross national product plus transfer payments.
C) gross domestic product less retained earnings plus transfer payments.
D) gross national product less retained earnings plus transfer payments.
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