Schaum Outline Principles of Economics (Chapter 8-14) Useful Book

Schaum Outline Principles of Economics

The book “Theory and Problems of Principles of Economics” is also known as Schaum Outline Principles of Economics. The authors of this book are as under:-

  • Dominick Salvatore, Ph.D., Professor of Economics, Fordham University
  • Eugene A. Diulio, Ph.D., Associate Professor of Economics, Fordham University

Each chapter of ” Schaum Outline Principles of Economics ” includes the following main headings:-

  • Chapter Summary
  • Important Terms
  • Outline of Cahpter (with examples)
  • Solved Problems
  • Multiple Choice Questions
  • True or False Questions
  • Answers of MCQs and True or False Questions
Schaum Outline Principles of Economics
Schaum Outline Principles of Economics

Chapter-Wise Solved MCQs ~ Schaum Outline Principles of Economics

You can explore the Solved MCQs of following Chapter 1 to Chapter 6 of Schaum Outline Principles of Economics here.

Solved MCQs of the following chapters of “Schaum Outline Principles of Economics” are as follow:-

  • Chapter 8: Fiscal Policy
  • Chapter 9: Money and Banking
  • Chapter 10: The Federal Reserve & the Money Supply
  • Chapter 11: Monetary & Fiscal Policy
  • Chapter 12: Inflation, Unemployment, Deficits & Debt
  • Chapter 13: Economic Growth & Productivity
  • Chapter 14: Demand, Supply, and Elasticity

Chapter 8: Fiscal Policy (Solved MCQs)

  • When there is an increase in lump-sum taxes, the consumption function
    • Shifts upward by the increase in taxes, ceteris paribus
    • Shifts downward by the increase in taxes, ceteris paribus
    • Shifts upward by the MPC times the increase in taxes, ceteris paribus
    • Shifts downward by the MPC times the increase in taxes, ceteris paribus
  • Which of the following statements is true?
    • An increase in lump-sum taxes increases personal disposable income, ceteris paribus
    • A decrease in welfare payments increases personal disposable income, ceteris paribus
    • An increase in social security payments increases personal disposable income, ceteris paribus
    • An increase in the income tax rate increases personal disposable income, ceteris paribus
  • An increase in government spending, ceteris paribus, shifts the aggregate spending line
    • Upward by the increase in government spending
    • Downward by the increase in government spending
    • Upward by the increase in government spending times the expenditure multiplier
    • Downward by the increase in government spending times the expenditure multiplier
  • In the leakages-injection approach to income determination, an increase in lump-sum taxes, ceteris paribus, shifts
    • The investment plus government spending line upward
    • The investment plus government spending line downward
    • The saving plus taxes line to the right
    • The saving plus taxes line to the left
  • An inflationary gap can be eliminated by
    • Equal increases in net tax revenues and government spending
    • An increase in government spending and a decrease in lump-sum taxes
    • Equal decreases in net tax revenues and government spending
    • A decrease in lump-sum taxes
  • Suppose the full-employment level of output is $680, the equilibrium level of output is $600, the MPC is 0.80, and there is no income tax. Full-employment output can be achieved by a $16 increase in government spending or which of the following changes in net lump-sum tax revenues?
    • A $20 decrease
    • A $20 increase
    • A $16 increase
    • A $16 decrease
  • Suppose the full-employment level of output is $680, the equilibrium level of output is $600, the MPC is 0.80, and there is a 0.25 income tax. Full-employment output can be achieved by a
    • $20 increase in government spending
    • $25 increase in government spending
    • $30 increase in government spending
    • $32 increase in government spending
  • Which of the following situations results in a $50 increase in the equilibrium level of output when the MPC is 0.80 and there is no income tax?
    • A $10 increase in both net lump-sum tax revenues and in government spending
    • A $12.50 increase in both net lump-sum tax revenues and in government spending
    • A $12.50 increase in net lump-sum tax revenues and a $10 increase in government spending
    • A $12.50 increase in net lump-sum tax revenues and a $20 increase in government spending
  • A discretionary fiscal action involves
    • Automatic changes in net tax revenues that result from the income tax structure
    • Payment of unemployment insurance
    • A Congressionally mandated change in the level of government spending or net tax revenues
    • Payment of social security to retired individuals
  • Built-in stabilizers are
    • Discretionary fiscal actions available to the President
    • Increased government spending on public works projects
    • A change in the income tax rate
    • Changes in net tax revenues that are the result of a change in the level of economic activity
0

Chapter 8: Fiscal Policy

Quiz with Answers

Principles of Economics Schaum’s Outline

1 / 10

When there is an increase in lump-sum taxes, the consumption function

2 / 10

Which of the following statements is true?

3 / 10

An increase in government spending, ceteris paribus, shifts the aggregate spending line

4 / 10

In the leakages-injection approach to income determination, an increase in lump-sum taxes, ceteris paribus, shifts

5 / 10

An inflationary gap can be eliminated by

6 / 10

Suppose the full-employment level of output is $680, the equilibrium level of output is $600, the MPC is 0.80, and there is no income tax. Full-employment output can be achieved by a $16 increase in government spending or which of the following changes in net lump-sum tax revenues?

7 / 10

Suppose the full-employment level of output is $680, the equilibrium level of output is $600, the MPC is 0.80, and there is a 0.25 income tax. Full-employment output can be achieved by a

8 / 10

Which of the following situations results in a $50 increase in the equilibrium level of output when the MPC is 0.80 and there is no income tax?

9 / 10

A discretionary fiscal action involves

10 / 10

Built-in stabilizers are

Chapter 9: Money and Banking (Solved MCQs)

  • Money as a measure of value provides
    • Its holder with perfect liquidity
    • A common denominator for measuring value
    • A mechanism for allocating resources and distributing output
    • A medium for exchanging final output
  • In the United States, paper currency issued by the Federal Reserve
    • Is backed by gold but is not convertible into gold
    • Has no intrinsic value but is backed by gold
    • Has no intrinsic value
    • Has no value in exchange
  • In the United States, the M1 money supply consists of
    • Paper currency and coins
    • Paper currency, coins, and check-writing deposits
    • Paper currency, coins, check-writing deposits, and savings deposits
    • Paper currency, coins, check-writing deposits, savings deposits, and certificates of deposit
  • Reserve requirements are imposed on banks
    • To control the amount of check-writing deposits in the economy
    • To regulate bank profits
    • To encourage the use of check-writing deposits
    • To discourage the use of check-writing deposits
  • When the banking system receives $400 in additional reserves and the reserve requirement is 0.20, maximum check-writing deposit expansion is
    • $2000
    • $1200
    • $320
    • $80
  • Which of the following is not a good store of nominal value?
    • Checking deposit
    • Savings deposit
    • A 2-year bond
    • A 3-month CD
  • When a bank makes a loan to a customer, the bank’s
    • Asset account loans increases and its asset account currency decreases
    • Asset account loans decreases and its asset account currency increases
    • Asset account loans increases and its liability account checking deposit increases
    • Asset account loans increases and its liability account checking deposit decreases
  • A bank’s net worth is $2000 when it has
    • Reserves of $1000, check-writing deposits of $10,000, loans of $19,000, and savings deposits of $8000
    • Reserves of $1000, check-writing deposits of $10,000, loans of $19,000, and savings deposits of $12,000
    • Reserves of $4000, check-writing deposits of $10,000, loans of $19,000, and savings deposits of $8000
    • Reserves of $1000, check-writing deposits of $10,000, loans of $16,000, and savings deposits of $8000
  • When c = 0.05 and r = 0.20, a $100 increase in the monetary base will result in a maximum increase in the M1 money supply of
    • $100
    • $400
    • $420
    • $500
  • Which of the following financial assets is not included in the M2 money supply?
    • Savings deposits
    • Large-denomination CDs
    • Check-writing deposits
    • Overnight repurchase agreements (RPs)
0

Chapter 9: Money and Banking

Quiz with Answers

Principles of Economics Schaum’s Outline

1 / 10

Money as a measure of value provides

2 / 10

In the United States, paper currency issued by the Federal Reserve

3 / 10

In the United States, the M1 money supply consists of

4 / 10

Reserve requirements are imposed on banks

5 / 10

When the banking system receives $400 in additional reserves and the reserve requirement is 0.20, maximum check-writing deposit expansion is

6 / 10

Which of the following is not a good store of nominal value?

7 / 10

When a bank makes a loan to a customer, the bank’s

8 / 10

A bank’s net worth is $2000 when it has

9 / 10

When c = 0.05 and r = 0.20, a $100 increase in the monetary base will result in a maximum increase in the M1 money supply of

10 / 10

Which of the following financial assets is not included in the M2 money supply?

Chapter 10: The Federal Reserve & the Money Supply (Solved MCQs)

  • Suppose banks hold no excess reserves and reserves total $1200. When the reserve requirement is lowered from 0.12 to 0.10, check-writing deposits
    • Increase from $ 1000 to $ 1200
    • Increase from $ 10,000 to $ 12,000
    • Decrease from $ 1200 to $ 1000
    • Decrease from $12,000 to $10,000
  • When the reserve requirement is 0.10 and the Federal Open Market Committee purchases government securities valued at $1000 from banks, ceteris paribus, banks
    • hold excess reserves of $ 100
    • hold excess reserve of $ 1000
    • increase check-writing deposits by a maximum of $1000
    • increase check-writing deposits by a maximum of $5000
  • A decrease in the Federal Reserve’s discount rate lowers the cost of borrowing
    • for banks from the Federal Reserve
    • for banks from the Federal Reserve
    • for banks from the Federal Reserve
    • for banks in the fed funds market
  • An increase in the discount rate usually occurs when
    • the Federal Reserve no longer is willing to make loans to banks
    • short-term market rates are due to increase
    • short-term market rates, such as the fed funds rate, have risen
    • the Federal Reserve is lowering the reserve requirement
  • When the Federal Reserve is expanding the money supply, ceteris paribus,
    • bank lending should increase and interest-sensitive spending should decrease
    • bank lending should decrease and interest-sensitive spending should decrease
    • bank lending should decrease and interest-sensitive spending should increase
    • bank lending should increase and interest-sensitive spending should increase
  • The velocity of money measures
    • the use of each unit of money in purchasing final output
    • the average use of money in purchasing final output
    • the average use of money by consumers in purchasing consumer goods
    • the average use of money by the business sector
  • In the equation of exchange, GDP equals
    • $4000 when Ml is $ 100 and the average use of money is 4
    • $1000 when Ml is $100 and the average use of money is 5
    • $500 when Ml is $100 and the average use of money is 5
    • ($400 when Ml is $100 and the average use of money is 2
  • In the flexible version of the quantity theory of money,
    • changes in nominal GDP are closely associated with changes in the money supply
    • changes in V are closely associated with changes in the money supply
    • changes in the price level are closely associated with changes in the money supply
    • changes in nominal GDP are proportional to changes in velocity
  • If the Ml money supply is $400, velocity is 4, and there is a 10% growth in the money supply and a 25% increase in velocity, nominal GDP should increase from
    • $1200 to $1600
    • $1600 to $1760
    • $1600 to $1760
    • $1760 to $2200
  • In the rigid version of the quantity theory of money,
    • changes in nominal GDP are proportional to changes in the money supply
    • changes in nominal GDP are proportional to changes in velocity
    • changes in velocity are proportional to changes in the money supply
    • changes in the price level are proportional to changes in the money supply
Fiscal Policy Schaum Outline Principles of Economics
Fiscal Policy ( Schaum Outline Principles of Economics)
0

Chapter 10: The Federal Reserve & the Money Supply

Quiz with Answers

Principles of Economics Schaum’s Outline

1 / 10

Suppose banks hold no excess reserves and reserves total $1200. When the reserve requirement is lowered from 0.12 to 0.10, check-writing deposits

2 / 10

When the reserve requirement is 0.10 and the Federal Open Market Committee purchases government securities valued at $1000 from banks, ceteris paribus, banks

3 / 10

A decrease in the Federal Reserve’s discount rate lowers the cost of borrowing

4 / 10

An increase in the discount rate usually occurs when

5 / 10

When the Federal Reserve is expanding the money supply, ceteris paribus,

6 / 10

The velocity of money measures

7 / 10

In the equation of exchange, GDP equals

8 / 10

In the flexible version of the quantity theory of money,

9 / 10

If the Ml money supply is $400, velocity is 4, and there is a 10% growth in the money supply and a 25% increase in velocity, nominal GDP should increase from

10 / 10

In the rigid version of the quantity theory of money,

Chapter 11: Monetary & Fiscal Policy (Solved MCQs)

  • Crowding out occurs when
    • a change in the rate of interest affects the quantity of money demanded
    • a stimulative fiscal policy pushes up the rate of interest, which lowers investment spending
    • a stimulative fiscal policy changes the velocity of money
    • a stimulative fiscal policy increases equilibrium output by ke∆G
  • When ke is 4, increased government spending is $ 10, and rising interest rates cause investment spend­ing to decrease $6, there is a net increase in equilibrium output of
    • $80
    • $104
    • $56
    • $16
  • An increase in the money supply has a small effect upon equilibrium output when
    • the demand for money and investment spending is interest-insensitive
    • the demand for money and investment spending is interest-sensitive
    • the demand for money is interest-sensitive and investment demand is interest-insensitive
    • the demand for money is interest-insensitive and investment demand is interest-sensitive
  • An increase in the money supply has a small effect upon nominal GDP when
    • government spending is also increasing
    • velocity is unchanged
    • velocity is decreasing
    • velocity is increasing
  • Monetarists contend that an increase in the money supply has
    • a predictable effect upon nominal GDP, as do Keynesians
    • a predictable effect upon nominal GDP, while Keynesians contend that the effect is uncertain
    • an unpredictable effect upon nominal GDP, as do Keynesians
    • an unpredictable effect upon nominal GDP, while Keynesians contend that the effect is certain
  • Which of the following would not be consistent with a Keynesian view about the effectiveness of monetary policy?
    • Velocity is relatively stable
    • The demand for money is unstable
    • The demand for money is interest-sensitive
    • Investment demand is unstable
  • When ke is 5 and government spending increases $20, aggregate demand and therefore output increase
    • $100 when there is no crowding out and aggregate supply is horizontal
    • $100 when there is crowding out and aggregate supply is horizontal
    • $100 when there is no crowding out and aggregate supply is positively sloped
    • $100 when there is no crowding out and aggregate supply is vertical
  • A positively sloped aggregate supply curve indicates that
    • an increase in aggregate demand will be associated with an increase in the price level and no change in equilibrium output
    • an increase in aggregate demand will be associated with an increase in both the price level and equilibrium output
    • an increase in aggregate demand will be associated with an increase in equilibrium output and no change in the price level
    • none of the above
  • Which statement is false?
    • Increased government spending affects aggregate spending more quickly than does an increase in the money supply
    • Increased government spending affects aggregate supply less quickly than does an increase in the money supply
    • It takes Congress longer to authorize an increase in government spending that it takes for the Federal Reserve to increase the money supply
    • Monetary policy can be changed quickly by the Federal Reserve
  • Which statement is false?
    • Many Keynesians are politically liberal
    • Monetarists advocate policies which interfere least with the market
    • Monetarists contend that increased government spending has no crowding-out effect
    • Keynesians contend that an increase in the money supply has an unpredictable effect upon nom­inal GDR
0

Chapter 11: Monetary & Fiscal Policy

Quiz with Answers

Principles of Economics Schaum’s Outline

1 / 10

Crowding out occurs when

2 / 10

When ke is 4, increased government spending is $ 10, and rising interest rates cause investment spending to decrease $6, there is a net increase in equilibrium output of

3 / 10

An increase in the money supply has a small effect upon equilibrium output when

4 / 10

An increase in the money supply has a small effect upon nominal GDP when

5 / 10

Monetarists contend that an increase in the money supply has

6 / 10

Which of the following would not be consistent with a Keynesian view about the effectiveness of monetary policy?

7 / 10

When ke is 5 and government spending increases $20, aggregate demand and therefore output increase

8 / 10

A positively sloped aggregate supply curve indicates that an increase in aggregate demand will be associated with

9 / 10

Which statement is false?

10 / 10

Which statement is false?

Chapter 12: Inflation, Unemployment, Deficits & Debt (Solved MCQs)

  • An increase in the cost of producing output, ceteris paribus,
    • increases the price level and real output
    • increases the price level and decreases real output
    • increases the price level and has no effect upon real output
    • has no effect upon the price level or real output
  • When there is a Keynesian aggregate supply curve, an increase in aggregate demand results in pro­portional increases in
    • real output, as long as output is below its full-employment level
    • the price level, as long as output is below its full-employment level
    • the price level, as long as output is below its full-employment level
    • the price level, as long as output is below its full-employment level
  • An increase in aggregate demand results in an increase in output
    • and in the price level when there is a Keynesian aggregate supply curve
    • and no change in the price level when aggregate supply is vertical
    • and in the price level when aggregate supply is positively sloped
    • and no change in the price level when aggregate supply is positively sloped
  • The Phillips curve shows that
    • high unemployment rates are associated with low inflation rates
    • high unemployment rates are associated with high inflation rates
    • high unemployment rates are associated with a large increase in the nominal wage
    • high inflation rates are associated with a small increase in the nominal wage
  • In the short run, increases in the nominal wage are associated with
    • movement up a Phillips curve
    • an outward shift of the Phillips curve
    • a decrease in the rate of unemployment
    • increased likelihood of demand-pull inflation
  • The existence of a natural rate of unemployment suggests that
    • there is no inflation-unemployment trade-off in the long run
    • nominal wage increases lag price increases in the long run
    • nominal wage increases lead price increases in the long run
    • the short-run Phillips curve is steeper than the long-run Phillips curve
  • A federal deficit exists when
    • government expenditures are greater than gross tax revenues plus government transfers
    • government expenditures plus government transfers are greater than gross tax revenues
    • gross tax revenues less government transfers are greater than government expenditures
    • gross tax revenues plus government transfers are greater than government expenditures
  • What happens to the structural deficit and the cyclical deficit when the unemployment rate is above the natural unemployment rate?
    • The structural deficit increases; there is no change in the cyclical deficit
    • The structural deficit and the cyclical deficit increase
    • The cyclical deficit increases; there is no change in the structural deficit
    • The cyclical deficit increases, while the structural deficit decreases
  • The public debt imposes a burden on future generations when
    • the government balances the budget over the business cycle
    • it is completely owed to citizens of the issuing country
    • it is largely owed to foreigners
    • taxes do not have to be increased in the future to cover higher interest payments on the debt
  • The federal deficit increased during the 1980s because
    • federal outlays increased at a faster rate than federal transfers
    • federal outlays increased at a faster rate than net tax receipts
    • federal outlays increased at a faster rate than federal revenues
    • government expenditures increased at a faster rate than federal transfers
0

Chapter 12: Inflation, Unemployment, Deficits & Debt

Quiz with Answers

Principles of Economics Schaum’s Outline

1 / 10

An increase in the cost of producing output, ceteris paribus,

2 / 10

When there is a Keynesian aggregate supply curve, an increase in aggregate demand results in proportional increases in

3 / 10

An increase in aggregate demand results in an increase in output

4 / 10

The Phillips curve shows that

5 / 10

In the short run, increases in the nominal wage are associated with

6 / 10

The existence of a natural rate of unemployment suggests that

7 / 10

A federal deficit exists when

8 / 10

What happens to the structural deficit and the cyclical deficit when the unemployment rate is above the natural unemployment rate?

9 / 10

The public debt imposes a burden on future generations when

10 / 10

The federal deficit increased during the 1980s because

Chapter 13: Economic Growth & Productivity (Solved MCQs)

  • There is an increase in the economy’s potential output when there is
    • an increase in government spending
    • a decrease in government spending
    • an increase in the economy’s capital stock
    • an increase in the economy’s depreciation rate
  • There is an increase in output per capita when a 10% increase in the population is associated with a
    • 10% increase in output
    • 20% increase in output
    • 20% increase in output
    • 20% increase in output
  • According to the law of diminishing returns, continuous increases in population size with no change in other resources or technology
    • eventually result in an increase in real output per capita
    • eventually result in a decrease in real output per capita
    • have no effect upon an economy’s ability to produce food
    • eventually increase an economy’s ability to produce food
  • According to Malthusian population theory, in the long run output per capita
    • tends toward the subsistence level
    • increases at an increasing rate
    • increases at a decreasing rate
    • does not increase
  • Capital deepening occurs when there is
    • an increase in the stock of capital
    • an equal increase in the stock of capital and the labor supply
    • a greater increase in the labor supply than in the stock of capital
    • a greater increase in the stock of capital than in the labor supply
  • Capital deepening ceases
    • as a result of population growth
    • when there is no additional increase in the population
    • when the rate of return from capital is equal to the real rate of interest
    • when the real rate of interest falls, ceteris paribus
  • Which of the following does not result in an increase in output per capita?
    • Capital widening
    • Capital deepening
    • Technological advance
    • Better-educated workers
  • Which of the following proposals would not be supported by supply-side economists?
    • A decrease in the personal income tax rate
    • Improved welfare benefits
    • A decrease in the capital gains tax rate
    • A decrease in the corporate income tax rate
  • Which of the following proposals would increase labor productivity?
    • Improve the educational system
    • Reduce job discrimination
    • Retrain workers
    • All of the above
0

Chapter 13: Economic Growth & Productivity

Quiz with Answers

Principles of Economics Schaum’s Outline

1 / 9

There is an increase in the economy’s potential output when there is

2 / 9

There is an increase in output per capita when a 10% increase in the population is associated with a

3 / 9

According to the law of diminishing returns, continuous increases in population size with no change in other resources or technology

4 / 9

According to Malthusian population theory, in the long run output per capita

5 / 9

Capital deepening occurs when there is

6 / 9

Capital deepening ceases

7 / 9

Which of the following does not result in an increase in output per capita?

8 / 9

Which of the following proposals would not be supported by supply-side economists?

9 / 9

Which of the following proposals would increase labor productivity?

Chapter 14: Demand, Supply & Elasticity (Solved MCQs)

  • The elasticity of demand is measured by
    • the slope of the demand curve
    • the inverse of the slope of the demand curve
    • the percentage change in price for a given percentage change in quantity
    • the percentage change in quantity for a given percentage change in price
  • If total revenue remains unchanged when price changes, the demand curve is
    • elastic
    • unitary elastic
    • inelastic
    • any of the above
  • If total revenue rises when price falls, the demand curve is
    • elastic
    • unitary elastic
    • inelastic
    • any of the above
  • If total revenue rises when price rises, the demand curve is
    • elastic
    • unitary elastic
    • inelastic
    • any of the above
  • The demand curve for a commodity is more elastic
    • the greater the number of good substitutes available
    • the greater the proportion of income spent on the commodity
    • the longer the period of time considered
    • all of the above
  • When harvests are bad,
    • the supply of farm products decreases
    • farm prices rise
    • farmers’ incomes usually rise
    • all of the above
  • The burden on consumers of a per-unit tax collected from producers is greater
    • the more elastic the demand curve
    • the more inelastic the demand curve
    • the more inelastic the supply curve
    • none of the above
0

Chapter 14: Demand, Supply, and Elasticity

Quiz with Answers

Principles of Economics Schaum’s Outline

1 / 7

The elasticity of demand is measured by

2 / 7

If total revenue remains unchanged when price changes, the demand curve is

3 / 7

If total revenue rises when price falls, the demand curve is

4 / 7

If total revenue rises when price rises, the demand curve is

5 / 7

The demand curve for a commodity is more elastic

6 / 7

When harvests are bad,

7 / 7

The burden on consumers of a per-unit tax collected from producers is greater

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