If a price ceiling of 4.00 per gallon is imposed on gasoline, and the market equilibrium price is 4.50, then the price ceiling is a binding constraint on the market.
a. True
b. False
Indicate whether the statement is true or false
Question 2Which of the following is an appropriate fiscal policy response to high inflation?
a. increase interest rates
b. increase government purchases
c. decrease taxes
d. none of the above
Question 3Excess reserves are equal to:
a. total reserves plus required reserves.
b. total reserves multiplied by required reserves.
c. total reserves minus loans.
d. total reserves minus required reserves.
e. required reserves minus loans.
Question 4If a price ceiling of 5 per gallon is imposed on gasoline, and the market equilibrium price is 4.50, then the price ceiling is a binding constraint on the market.
a. True
b. False
Indicate whether the statement is true or false
Question 5If unemployment is the most significant problem in the economy, which of the following actions would be an appropriate fiscal policy response?
a. decrease taxes
b. decrease government purchases
c. decrease the federal deficit
d. all of the above
Question 6In the United States, the reserve requirement is set by the:
a. Bank of America.
b. federal government.
c. U.S. Treasury.
d. Federal Reserve Board.
e. Department of Commerce.
Question 7A binding price ceiling causes a shortage in the market.
a. True
b. False
Indicate whether the statement is true or false
Question 8The federal government buys 10 million worth of aircraft engines from General Motors. If the MPC is .80 what will be the impact on aggregate demand, other things being equal?
a. Aggregate demand will increase 8 million.
b. Aggregate demand will increase 12.5 million.
c. Aggregate demand will increase 18 million.
d. Aggregate demand will increase 50 million.
Question 9For a depository institution, reserves are:
a. assets on the balance sheet.
b. loans to individuals and businesses.
c. borrowings from the central bank.
d. liabilities it owes to customers.
e. checkable deposits.
Question 10A price ceiling set above the equilibrium price causes a surplus in the market.
a. True
b. False
Indicate whether the statement is true or false
Question 11The main components of spending, which can cause changes in aggregate demand, are:
a. consumption, investment, government purchases, and net exports.
b. consumption, investment, government purchases, and imports.
c. investment, savings, replacement of depreciated equipment, and spending.
d. consumption, savings, government purchases, and exports.
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