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4.     Assuming a Keynesian aggregate supply curve, a massive crop failure results in ___________ in output and ___________ in prices.
     a.     a decrease; an increase
     b.     an increase; a decrease
     c.     an increase; an increase
     d.     an increase; no change
     e.     a decrease; no change

5.     In the short run, real GDP is determined by:
     a.     supply.
     b.     demand.
     c.     prices.
     d.     All of the above.
     e.     None of the above.

6.     One of the essential functions that a bank performs is that of:
     a.     purchasing government bonds.
     b.     creating deposits by lending required reserves.
     c.     transferring money from savers to lenders.
     d.     owning assets like real estate.
     e.     All of the above.

7.     If a project costs $100 today and pays a return of $109 next year, what is the highest interest rate at which the project should be undertaken?
     a.     10.5%
     b.     8%
     c.     9%
     d.     10%
     e.     9.5%

8.     For most firms the most important cost of doing business is wages.
     a.     True
     b.     False

9.     If the supply of money increases, the classical model suggests that prices will not change but output will.
     a.     True
     b.     False

10.     If the level of output exceeds demand, inventories will pile up and firms will cut production.
     a.     True
     b.     False

11.     An increase in autonomous consumption will shift the consumption function up.
     a.     True
     b.     False

12.     Consumers will spend a higher proportion of a one-time bonus than they would of a permanent salary increase.
     a.     True
     b.     False

13.     If the MPC is 0.8, GDP will decrease by $40 billion if taxes are increased by $20 billion.
     a.     True
     b.     False

14.     Money solves the problem of double coincidence of wants that would regularly occur under a system of credit.
     a.     True
     b.     False

15.     Because we measure all prices in monetary units, money serves as a unit of account.
     a.     True
     b.     False

16.     The United States is the only country with a large amount of currency per capita outstanding.
     a.     True
     b.     False

17.     Banks are required by law to keep most of their assets as reserves.
     a.     True
     b.     False

18.     Investment spending tends to be closely related to the current pace of economic growth.
     a.     True
     b.     False

19.     The rate of interest offered by your bank is the real rate of interest.
     a.     True
     b.     False

20.     If inflation is five percent, a nominal interest rate of eight percent translates into a real interest rate of three percent.
     a.     True
     b.     False

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4. Assuming a Keynesian aggregate supply curve, a massive crop failure results in ___________ in output and ___________ in prices.
a. a decrease; an increase
b. an increase; a decrease
c. an increase; an increase
d. an increase; no change
e. a decrease; no change

5. In the short run, real GDP is determined by:
a. supply.
b. demand.
c. prices.
d. All of the above.
e. None of the above.

6. One of the essential functions that a bank performs is that of:
a. purchasing government bonds.
b. creating deposits by lending required reserves.
c. transferring money from savers to lenders.
d. owning assets like real estate.
e. All of the above.

7. If a project costs $100 today and pays a return of $109 next year, what is the highest interest rate at which the project should be undertaken?
a. 10.5%
b. 8%
c. 9%
d. 10%
e. 9.5%

8. For most firms the most important cost of doing business is wages.
a. True
b. False

9. If the supply of money increases, the classical model suggests that prices will not change but output will.
a. True
b. False

10. If the level of output exceeds demand, inventories will pile up and firms will cut production.
a. True
b. False

11. An increase in autonomous consumption will shift the consumption function up.
a. True - ?
b. False

12. Consumers will spend a higher proportion of a one-time bonus than they would of a permanent salary increase.
a. True
b. False

13. If the MPC is 0.8, GDP will decrease by $40 billion if taxes are increased by $20 billion.
a. True
b. False

14. Money solves the problem of double coincidence of wants that would regularly occur under a system of credit.
a. True
b. False - ?

15. Because we measure all prices in monetary units, money serves as a unit of account.
a. True
b. False

16. The United States is the only country with a large amount of currency per capita outstanding.
a. True
b. False

17. Banks are required by law to keep most of their assets as reserves.
a. True
b. False

18. Investment spending tends to be closely related to the current pace of economic growth.
a. True
b. False

19. The rate of interest offered by your bank is the real rate of interest.
a. True
b. False

20. If inflation is five percent, a nominal interest rate of eight percent translates into a real interest rate of three percent.
a. True
b. False

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