True or false questions about Central bank policies, interest rates.
1) All else constant, if the central bank wants to slow the pace at which the economy is expanding, it should increase interest rates.
a) True
b) False
2) All else constant, a decrease in the level of economic activity in foreign countries could be expected to have an adverse effect on the domestic economy.
a) True
b) False
3) According to the circular flow model, the level of income in the economy is independent of tax and spending policies of the federal government.
a) True
b) False
4) If government spending exceeds the amount of taxes collected from households and businesses, the government simply finances the difference by printing more money.
a) True
b) False
5) When market price is less than the equilibrium price, a surplus will form. This will because quantity demanded to decrease and quantity supplied to increase until equilibrium is re established.
a) True
b) False
6) Suppose the government decides to impose a new tax on sellers of gasoline, which is, sellers are required to pay the government an additional fee for each gallon of gas they sell. In the market for gas, this would have the effect of causing a decrease in the supply of gas.
a) True
b) False
7) Suppose a national brewing organization undertakes a successful ad campaign. Suppose also which the organization's workers go on strike and are able to negotiate a hefty wage increase. The combination of these two changes would cause the equilibrium price and quantity of the company's product to increase.
a) True
b) False
8) Suppose the demand function for a particular good can be written as P = 150 - 6Q. When P = 12, the point elasticity of demand equals 2.08.
a) True
b) False