1. If we assume that the MPC is 0.9, the multiplier will be
a) 5
b) 4
c) 10
d) 9
2. The economy is at full-employment and spending increases, which spurs inflation. This type of inflation would be called.
a) deflation
b) demand-pull inflation
c) core inflation
d) hyperinflation
e) cost-push inflation
3. If the interest rate rose, we would expect
a) prices to fall
b) investment to rise
c) consumption to rise
d) investment to fall
4. Which of these groups would be helped by inflation
a) lenders
b) borrowers
c) savers
d) workers
e) retirees
5. Bill receives a raise of $1000 per month. From this he spends an extra $800 and saves an extra $200. His MPC would be
a) 0.8
b) 0.25
c) 4
d) 0.2
e) 1.25
6. Which of the following scenarios best illustrates the concept of cyclical unemployment
a) Marian loses her job because of a recession
b) Sean quits his job to look for work that is more fun
c) Ellen is unqualified for most jobs because she dropped out of high school
d) Grace loses her job because of new automated machinery