Exam #4

International trade is a positive sum game -- all countries involved in trade gain from it. a.) True b.)False

a.) True

Monetary policy is LEAST effective in reversing a)an adverse supply shock. b)a decrease in private spending. c)rapid growth in consumption expenditures. d)demand-pull inflation.

a)an adverse supply shock.

When the value of the dollar rises against foreign currencies, exports _____ and imports _____. Question 24 options: a)fall; rise b)rise; fall c)fall; fall d)rise; rise

a)fall; rise

Based on this table, which statement is TRUE? Cambodia - maize: 60 - rice: 20 Laos - maize: 30 - rice: 15 a.) Cambodia has a comparative advantage in maize production. b.) Laos has a comparative advantage in maize production. c.) Both countries have comparative advantages in maize production. d.) Neither country has a comparative advantage in maize production.

a.) Cambodia has a comparative advantage in maize production.

If the reserve requirement is 2.5%, the potential money multiplier is Question 25 options: a)0.025. b)40. c)4. d)2.5.

b)40.

When the Fed wants to decrease the money supply, it will a)lower taxes. b)sell bonds. c)buy bonds. d)lower the federal funds rate.

b)sell bonds.

Business cycles (the natural ups and downs in an economy) often lead to inflation and unemployment. The only way to deal with them is the use of fiscal policy. Monetary policy is not effective. a.) True b.) False

b.) False

Tariffs and quotas both result in deadweight loss (i.e., inefficiencies), but the deadweight loss from a tariff is larger. a.) True b.) False

b.) False

The Fed's inflation target is typically 5%. Right now in the US, inflation is higher than that. a.) True b.) False

b.) False

The central bank of the United States is a)the Congressional Budget Office. b)the Internal Revenue Service. c)the Federal Reserve System. d)the Treasury.

c)the Federal Reserve System.

The twin goals of monetary policy are economic growth with _____ interest rates. a)low unemployment and stable prices with moderate short-term b)low unemployment and falling prices with low long-term c)moderate unemployment and stable prices with low long-term d)low unemployment and stable prices with moderate long-term

d)low unemployment and stable prices with moderate long-term

If the reserve requirement is 25%, a new deposit of $1,000 leads to a potential increase in the money supply of a)$4,000. b)$250. c)$10,000. d)$5,000.

a)$4,000.

For most of the past half-century, the United States has imported more than it has exported, resulting in a trade deficit. a.) True b.) False

a.) True

Which of these is NOT a policy tool of the Federal Reserve? a)reserve requirements b)open market operations c)fiscal policy d)the discount rate

c)fiscal policy

Assume that the reserve requirement is 20%. A bank has $20 billion in demand deposits. How much money does the bank have to keep in reserves? a)$2 billion b)$20 billion c)$10 billion d)$4 billion

d)$4 billion

Expansionary monetary policy shifts the _____ curve to the _____. a)SRAS; right b)SRAS; left c)AD; left d)AD; right

d)AD; right

If the economy is facing inflationary pressures, the Federal Reserve will a)raise interest rates. b)lower interest rates. c)decrease government spending. d)raise taxes.

a)raise interest rates.

In the market for surfboards in the graph, with a $100 tariff per imported surfboard, the government collects a total of _____ in tariff revenues. a.) $4,000 b.) $7,000 c.) $16,000 d.) $28,000

a.) $4,000

Based on this table, the opportunity cost of one kilogram of coffee in Kenya is _____ of cocoa. a.) 0.33 kilogram b.) 3 kilograms c.) 30 kilograms d.) 40 kilograms

a.) 0.33 kilogram

Suppose Canada forms a free-trade agreement with the Netherlands and increases the quantity of tulips it imports. Canadian tulip consumers will be _____, and Canadian tulip producers will be _____. a.) better off; worse off b.) better off; better off c.) worse off; better off d.) worse off; worse off

a.) better off; worse off

When people choose to keep more money in cash rather than deposit it in a bank, a leakage in the money supply occurs because that money is not available to to be loaned to someone else a.) True b.) False

a.) true

In international trade, when we say that Brazil is "dumping" in the United States, this indicates that a.) Brazil is profiting from tariffs placed on U.S. goods. b.) Brazil's firms can produce goods at lower cost than U.S. firms can. c.) Brazil's firms are selling goods at prices below what they charge in Brazil or below their production costs. d.) Brazil's firms are selling goods at prices below the cost by which U.S. firms can produce those same goods.

c.) Brazil's firms are selling goods at prices below what they charge in Brazil or below their production costs.

An increase in the interest rate causes the aggregate _____ curve to shift _____. a)supply; leftward b)demand; rightward c)supply; rightward d)demand; leftward

d)demand; leftward

In times of economic downturn, the Federal Reserve will engage in _____ monetary policy by _____ bonds. a)contractionary; buying b)expansionary; selling c)contractionary; selling d)expansionary; buying

d)expansionary; buying

Which list represents monetary policy actions that are consistent with one another? a)sell government bonds, raise reserve requirements, lower the discount rate b)buy government bonds, raise reserve requirements, raise the discount rate c)buy government bonds, lower reserve requirements, raise the discount rate d)sell government bonds, raise reserve requirements, raise the discount rate

d)sell government bonds, raise reserve requirements, raise the discount rate