C211 Comp 4

Which of the following increase when the Fed makes open market purchases? a. Currency and reserves b. Reserves but not currency c. Currency but not reserves d. Neither currency nor reserves

a. Currency and reserves

The Federal Reserve a. is the central bank of the United States. b. is only responsible for controlling the money supply. c. was created in 1896. d. is part of the executive branch of government.

a. is the central bank of the United States.

Cross-price elasticity of demand measures how a. the quantity demanded of one good changes in response to a change in the price of another good. b. the quantity demanded of one good changes in response to a change in the quantity demanded of another good. c. strongly normal or inferior a good is. d. the price of one good changes in response to a change in the price of another good.

a. the quantity demanded of one good changes in response to a change in the price of another good.

If the supply of a product increases, then we would expect equilibrium price a. to decrease and equilibrium quantity to increase. b. and equilibrium quantity to both increase. c. to increase and equilibrium quantity to decrease. d. and equilibrium quantity to both decrease.

a. to decrease and equilibrium quantity to increase.

When the Fed decreases the discount rate, banks will a. borrow less from the Fed and lend less to the public. The money supply decreases. b. borrow more from the Fed and lend more to the public. The money supply increases. c. borrow less from the Fed and lend more to the public. The money supply increases. d. borrow more from the Fed and lend less to the public. The money supply decreases.

b. borrow more from the Fed and lend more to the public. The money supply increases.

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the a. closer to the vertical axis the demand curve will sit. b. flatter the demand curve will be. c. steeper the demand curve will be. d. further to the right the demand curve will sit.

b. flatter the demand curve will be.

When conducting an open-market sale, the Fed a. buys government bonds, and in so doing increases the money supply. b. sells government bonds, and in so doing decreases the money supply. c. buys government bonds, and in so doing decreases the money supply. d. sells government bonds, and in so doing increases the money supply.

b. sells government bonds, and in so doing decreases the money supply.

Which of the following is not an example of a market? a. In Florida, there are many buyers and sellers of key lime pie. b. A small town has only one seller of electricity. c. In the United States, a sick person cannot legally purchase a kidney. d. The availability of Internet shopping has expanded the clothing choices for buyers who do not live near large cities.

c. In the United States, a sick person cannot legally purchase a kidney.

Which of the following is not a determinant of the price elasticity of demand for a good? a. The time horizon b. The definition of the market for the good c. The steepness or flatness of the supply curve for the good d. The availability of substitutes for the good

c. The steepness or flatness of the supply curve for the good

Demand is said to be price elastic if a. demand shifts substantially when income or the expected future price of the good changes. b. the price of the good responds substantially to changes in demand. c. buyers respond substantially to changes in the price of the good. d. buyers do not respond much to changes in the price of the good.

c. buyers respond substantially to changes in the price of the good.

If a seller in a competitive market chooses to charge more than the going price, then a. the owners of the raw materials used in production would raise the prices for the raw materials. b. the sellers' profits must increase. c. buyers will make purchases from other sellers. d. other sellers would also raise their prices.

c. buyers will make purchases from other sellers.

The price elasticity of demand measures a. the movement along a supply curve when there is a change in demand. b. how much more of a good consumers will demand when incomes rise. c. buyers' responsiveness to a change in the price of a good. d. the extent to which demand increases as additional buyers enter the market.

c. buyers' responsiveness to a change in the price of a good.

If the cross-price elasticity of two goods is negative, then the two goods are a. inferior goods. b. normal goods. c. complements. d. necessities.

c. complements.

Equilibrium quantity must decrease when demand a. increases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease. b. decreases and supply does not change, when demand does not change and supply increases, and when both demand and supply decrease. c. decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease. d. increases and supply does not change, when demand does not change and supply increases, and when both demand and supply decrease.

c. decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease.

Equilibrium price must decrease when demand a. decreases and supply does not change, when demand does not change and supply increases, and when demand increases and supply decreases simultaneously. b. increases and supply does not change, when demand does not change and supply decreases, and when demand increases and supply decreases simultaneously. c. decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously. d. increases and supply does not change, when demand does not change and supply decreases, and when demand decreases and supply increases simultaneously.

c. decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously.

Other things the same, if reserve requirements are increased, the reserve ratio a. decreases, the money multiplier decreases, and the money supply increases. b. increases, the money multiplier increases, and the money supply increases. c. increases, the money multiplier decreases, and the money supply decreases. d. decreases, the money multiplier increases, and the money supply increases.

c. increases, the money multiplier decreases, and the money supply decreases.

Goods with many close substitutes tend to have a. price elasticities of demand that are unit elastic. b. income elasticities of demand that are negative. c. more elastic demands. d. less elastic demands.

c. more elastic demands.

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of a. a necessity versus a luxury in determining the price elasticity of demand. b. the definition of a market in determining the price elasticity of demand. c. the availability of close substitutes in determining the price elasticity of demand. d. the time horizon in determining the price elasticity of demand.

c. the availability of close substitutes in determining the price elasticity of demand.

Demand is said to be inelastic if a. buyers respond substantially to changes in the price of the good. b. the price of the good responds only slightly to changes in demand. c. the quantity demanded changes only slightly when the price of the good changes. d. demand shifts only slightly when the price of the good changes.

c. the quantity demanded changes only slightly when the price of the good changes.

The price elasticity of supply measures how much a. the price of the good responds to changes in supply. b. sellers respond to changes in technology. c. the quantity supplied responds to changes in the price of the good. d. the quantity supplied responds to changes in input prices.

c. the quantity supplied responds to changes in the price of the good.

A key determinant of the price elasticity of supply is the a. price elasticity of demand. b. income of consumers. c. time horizon. d. importance of the good in a consumer's budget.

c. time horizon.

Which of the following policies can the Fed follow to increase the money supply? a. ​ Reduce the quantity of funds available through the Term Auction Facility b. ​ Increase reserve requirements for banks c. ​ Sell government bonds d. ​ Reduce the interest rate on reserves

d. ​ Reduce the interest rate on reserves

Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good? a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. b. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. c. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. d. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.

d. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.

Assume Lianna buys coffee beans in a competitive market. It follows that a. Lianna has a limited number of sellers from which to buy coffee beans. b. Lianna might have trouble finding coffee beans at his local store. c. Lianna will negotiate with sellers whenever he buys coffee beans. d. Lianna cannot influence the price of coffee beans even if he buys a large quantity of them.

d. Lianna cannot influence the price of coffee beans even if he buys a large quantity of them.

Which of the following is NOT an example of monetary policy? a. The Federal Reserve reduces the reserve requirement. b. The Federal Open Market Committee decides to buy bonds. c. The Federal Open Market Committee decides to sell bonds. d. The Federal Reserve facilitates bank transactions by clearing checks.

d. The Federal Reserve facilitates bank transactions by clearing checks.

A group of buyers and sellers of a particular good or service is called a. a competition. b. a coalition. c. an economy. d. a market.

d. a market.

If the demand for a product increases, then we would expect equilibrium price a. to decrease and equilibrium quantity to increase. b. and equilibrium quantity both to decrease. c. to increase and equilibrium quantity to decrease. d. and equilibrium quantity both to increase.

d. and equilibrium quantity both to increase.

If the Fed raised the reserve requirement, the demand for reserves would a. decrease, so the federal funds rate would fall. b. increase, so the federal funds rate would fall. c. decrease, so the federal funds rate would rise. d. increase, so the federal funds rate would rise.

d. increase, so the federal funds rate would rise.

The federal funds rate is the a. percentage of deposits that banks must hold as reserves. b. interest rate at which the Federal Reserve makes short-term loans to banks. c. percentage of face value that the Federal Reserve is willing to pay for Treasury Securities. d. interest rate at which banks lend reserves to each other overnight.

d. interest rate at which banks lend reserves to each other overnight.

A competitive market is a market in which a. an auctioneer helps set prices and arrange sales. b. the forces of supply and demand do not apply. c. there are only a few sellers. d. no individual buyer or seller has any significant impact on the market price.

d. no individual buyer or seller has any significant impact on the market price.