Problem 1: Since World War II, the US national debt as a percentage of GDP
a. rose especially in the last ten years.
b. rose, mainly as a result of wars.
c. remained constant on average over the whole period.
d. fell, rose, fell, and is rising again.
Problem 2: Suppose that the current marginal propensity to consume equal .75. What will be the impact on equilibrium NDP of an investment of $1 billion?
a. $.75 billion
b. $1.33 billion
c. $4 billion
d. It cannot be determined from the information given.
Problem 3. It is argued that measures taken to reduce inequality are likely to decrease economic efficiency because
a. poor people are inherently unproductive
b. it will lead to opportunities for poor people to gain advanced education and training
c. it is more efficient to produce the goods and services that rich people buy
d. it will increase savings at the expense of consumption and thereby lower output
e. people will have less incentive to produce if their income is unrelated to their productivity
Problem 4. When money is held for the purpose of making future purchases, it is serving as a
a. medium of exchange
b. store of value
c. standard of value
d. price index
e. required reserve
Problem 5: The advantage of trade, both for individuals and nations
a. always nets out to zero
b. disappears when one has an absolute advantage over the other
c. is that trade permits specialization and specialization increases output
d. is increased when tariffs are imposed
e. can only benefit one party in the transaction