macro

unit of account. The unit of account is used to compare prices

A $70 price tag on a sweater in a department store window is an example of money functioning as a a. unit of account. b. standard of deferred payments. c. store of value. d. medium of exchange.

a. Increase in the amount of money held as an asset

A decrease in the Interest Rate will cause a(n) a. Increase in the amount of money held as an asset b. Increase in the transaction demand for money c. Decrease in the transactions demand for money d. Decrease in the amount of money held as an asset

a. increases the interest rate and decreases aggregate demand.

A decrease in the money supply a. increases the interest rate and decreases aggregate demand. b. increases both the interest rate and aggregate demand. c. lowers the interest rate and increases aggregate demand. d. lowers both the interest rate and aggregate demand.

a. causes a surplus on the capital and financial account.

A deficit on the current account a. causes a surplus on the capital and financial account. b. normally causes a deficit on the capital and financial account. c. has no relationship to the capital and financial account. d. means that a nation is making international transfers.

d. buy enough bonds to increase the money supply by $100

Answer the question based on the information in the table. If the Fed wished to reduce the interest rate by 1 percentage point, in the open market it could a. sell enough bonds to increase the money supply by $200. b. sell enough bonds to decrease the money supply by $100 c. buy enough bonds to decrease the money supply by $200 d. buy enough bonds to increase the money supply by $100

a. is 5 tons of beans

Answer the question on the basis of the accompanying production possibilities tables for two countries, Latalia and Trombonia In Latalia the domestic opportunity-cost ratio of 1 ton of pork a. is 5 tons of beans b. is 3 tons of beans c. diminishes with the level of pork production d. is .20 ton of beans

a. 4 tons of beans.

Answer the question on the basis of the accompanying production possibilities tables for two countries, Latalia and Trombonia. Assume that before specialization and trade, Latalia produced combination C and Trombonia produced combination B. If these two nations now specialize completely based on comparative advantage, the total gains from specialization and trade will be a. 4 tons of beans. b. 1 ton of pork and 2 tons of beans. c. 4 tons of pork. d. 2 tons of pork and 4 tons of beans.

a. Latalia will produce beans, and Trombonia will produce pork.

Answer the question on the basis of the accompanying production possibilities tables for two countries, Latalia and Trombonia. If these two nations specialize on the basis of comparative advantage, a. Latalia will produce beans, and Trombonia will produce pork. b. Latalia will produce both beans and pork, and Trombonia will produce neither. c. Trombonia will produce both beans and pork. d. Trombonia will produce beans and Latalia will produce pork.

a. is 0.5 fish.

Answer the question using the accompanying opportunity-cost ratios for two products, fish (F) and chicken (C), in countries Singsong and Harmony. Assume that production occurs under conditions of constant costs and that these are the only two nations in the world. Singsong: 1F > 2C Harmony: 1F < 4C In Singsong the domestic opportunity cost of each chicken a. is 0.5 fish. b. is 2 fish. c. increases with the level of fish caught. d. decreases with the level of fish caught.

a. Both M1 and M2

Currency in Circulation is part of a. Both M1 and M2 b. Neither M1 or M2 c. M2 only d. M1 only

a. the South Korean won to depreciate and the Taiwanese dollar to appreciate.

Currency traders expect the inflation rate to be much higher in South Korea than in Taiwan. This will cause a. the South Korean won to depreciate and the Taiwanese dollar to appreciate. b. the South Korean won to appreciate and the Taiwanese dollar to depreciate. c. both the South Korean won and the Taiwanese dollar to appreciate. d. both the Taiwanese dollar and the South Korean won to depreciate.

Harmony will produce chicken and Singsong will catch fish.

Answer the question using the accompanying opportunity-cost ratios for two products, fish (F) and chicken (C), in countries Singsong and Harmony. Assume that production occurs under conditions of constant costs and that these are the only two nations in the world. Singsong: 1F ≡ 2C Harmony: 1F ≡ 4C If these two nations specialize based on comparative advantage, a. Harmony will produce chicken and Singsong will catch fish. b. Singsong will both produce chicken and catch fish. c. Harmony will both produce chicken and catch fish. d. Singsong will produce chicken and Harmony will catch fish.

d. the Brazilian real will depreciate.

Assume that Brazil and Mexico have floating exchange rates. Other things unchanged, if the price level is stable in Mexico, but Brazil experiences rapid inflation, a. the Brazilian real will appreciate. b. gold bullion will flow into Brazil. c. the Mexican peso will depreciate. d. the Brazilian real will depreciate.

b. decrease by $15 billion.

Assume that the MPC is 0.75 and that the price level is fully flexible. If the Federal Reserve increases the money supply and investment spending increases by $20 billion, then aggregate demand is likely to a. increase by $80 billion. b. decrease by $15 billion. c. increase by $20 billion. d. increase by $5 billion..

c. export more than it imports.

If the United States wants to regain ownership of domestic assets sold to foreigners, it will have to a. increase national debt b. increase domestic consumption. c. export more than it imports. d. import more than it exports.

a. $0.003.

If the exchange rate between the U.S. dollar and the Japanese yen is $1 = 300 yen, then the dollar price of yen is a. $0.003. b. $0.03. c. $3. d. $0.30.

a. neutral monetary policy.

If the inflation rate was on target at 2 percent and the unemployment rate was 3.4 percent, the Fed would likely adopt a(n) a. neutral monetary policy. b. easy money policy. c. expansionary monetary policy. d. restrictive monetary policy.

c. assets and currently produced goods and services

In international financial transactions, what are the only two things that individuals and firms can exchange? a. services and manufactured goods b. currency and real assets c. assets and currently produced goods and services d. currency and currently produced goods and services

current account entry.

In the balance of payments of the United States, U.S. goods imports are recorded as a a. current account entry. b. positive entry. c. capital account entry. d. financial account entry.

a. Protect it from political pressure Policies determined by the Fed do not require any government sanction and has the power to print and regulate money

The reason for the Fed being set up as an independent agency of government is to: a. Protect it from political pressure b. Allow it to earn profits like private firms C. Make it be managed and controlled by member banks D. Let it be able to compete with other financial institutions

a. $30 billion deficit

The table contains hypothetical data for the U.S. balance of payments. All figures are in billions of dollars. The U.S. balance on goods and services is a a. $30 billion deficit b. $30 billion surplus c. $20 billion deficit d. $10 billion deficit

a. $20 billion surplus.

The table contains hypothetical data for the U.S. balance of payments. All figures are in billions of dollars. The United States' balance on financial account is a a. $20 billion surplus. b. $15 billion surplus. c. $30 billion deficit. d. $20 billion deficit.

a. 20 tons of fish

The tables give production possibilities data for two countries, Alpha and Beta, which have populations of equal size. Suppose that before specialization and trade, Alpha chose production alternative C and Beta chose production alternative B. After specialization and trade, the gains will be a. 20 tons of fish b. 20 tons of chips c. 20 tons of fish and 20 tons of chips d. 240 tons of fish and 20 tons of chips

a. total international payments.

There must always be a balance of a nation's a. total international payments. b. goods exports and gold imports. c. imports and exports of goods and services. d. net transfers and net investment income.

a. increased current consumption and increased indebtedness to foreigners.

Two of the implications of large U.S. trade deficits for the United States are a. increased current consumption and increased indebtedness to foreigners. b. reduced current consumption and higher saving c. reduced budget deficits and decreased indebtedness to foreigners. d. decreased current consumption and decreased indebtedness to foreigners.

a. exchange rates are essentially flexible, but governments intervene to offset disorderly fluctuations in rates.

Under the managed-floating system of exchange rates, a. exchange rates are essentially flexible, but governments intervene to offset disorderly fluctuations in rates. b. all exchange rates vary with changes in the free-market prices of gold. c. industrialized nations meet once each year to negotiate readjustments in their exchange rates. d. exchange rates are adjusted at the discretion of the IMF.

c. A store of value Store of value is used to store the money

What function is money serving when you deposit money in a savings account? a. checkable deposits b. unit of account c. a store of value d. medium of exchange

a. unit of account The unit of account is used to compare prices

When a consumer wants to compare the price of one product with another, money is primarily a functioning as a a. Unit of account b. Checkable deposit c. Store of value d. Medium of exchange

a. the purchase of U.S. Treasury bonds by a foreign bank

Which of the following appears as a positive item on the balance of payments accounts for the United States? a. the purchase of U.S. Treasury bonds by a foreign bank b. the U.S. government sending aid to natural-disaster victims in Asia c. American tourists spending money in the other countries d. the payment of stock dividends by U.S. firms to foreign shareholders

a. the military self-sufficiency argument

Which of the following arguments contends that certain industries need to be protected in the interest of national security? a. the military self-sufficiency argument b. the diversification-for-stability argument c. the cheap foreign labor argument d. the increased domestic employment argument

a. the infant industry argument

Which of the following arguments for trade protection contends that new domestic industries need support to establish themselves and survive? a. the infant industry argument b. the increased domestic employment argument c. the cheap foreign labor argument d. the diversification-for-stability argument

b. the discount rate

Which policy tool of the Federal Reserve relies on banks borrowing from the Fed to be effective? a. the ON RRP b.he discount rate c. check collection d. open-market operations

a. surplus of 160 units, which it will export.

Refer to the diagram, which shows the domestic demand and supply curves for a specific standardized product in a particular nation. If the world price for this product is $1.60, this nation will experience a domestic a. surplus of 160 units, which it will export. b. shortage of 160 units, which it will meet with 160 units of imports. c. shortage of 160 units, which will increase the domestic price to $1.60. d. surplus of 160 units, which will reduce the world price to $1.00.

a. neither export nor import the product.

Refer to the diagram, which shows the domestic demand and supply curves for a specific standardized product in a particular nation. If the world price of this product is $1, this nation will a. neither export nor import the product. b. export all of the product. c. import all of the product. d. import some of the product and produce some of the product domestically.

b. decrease the money supply from $120 to $100

Refer to the diagrams. The numbers in parentheses after the AD1, AD2, and AD3 labels indicate the levels of investment spending associated with each curve. All figures are in billions. If aggregate demand is AD3 and the monetary authorities desire to reduce it to AD2, they should a. increase the interest rate from 3 percent to 9 percent b. decrease the money supply from $120 to $100 c. increase the money supply from $100 to $120 d. decrease the interest rate from 9 percent to 3 percent.

a. purchases of U.S. securities by the Fed in the open market

Refer to the diagrams. The numbers in parentheses after the AD1, AD2, and AD3 labels indicate the levels of investment spending associated with each curve. All figures are in billions. Which of the following would shift the money supply curve from MS1 to MS3? a. purchases of U.S. securities by the Fed in the open market b. an increase in the discount rate c. provide forward guidance on higher future fed funds rate d. an increase in the IORB and ON RRP

Nominal GDP is $800 Nominal GDP measures output using current prices, while real GDP measures output using constant prices.

Refer to the given market-for-money diagrams. If each dollar held for transaction is spent four times per year on the average, we can infer that a. Nominal GDP is $800 b. Real GDP is $800 c. The money supply must be $800 d. Nominal GDP is $1,200

a. S curve would shift rightward and the equilibrium interest rate would fall The money supply increased, so its the supply curve that shifts Expansionary monetary policy decreases interest rate

Refer to the given market-for-money diagrams. If the Federal Reserve increased the stock of money, the a. S curve would shift rightward and the equilibrium interest rate would fall b. S curve would shift leftward and the equilibrium interest rate would rise. c. D3 curve would shift leftward and the equilibrium interest rate would fall. d. D3 curve would shift leftward and the equilibrium interest rate would rise.

a. decrease the money supply from $225 to $150 billion

Refer to the graphs, in which the numbers in parentheses near the AD1, AD2, and AD3 labels indicate the level of investment spending associated with each curve. All figures are in billions. The interest rate in the economy is 4 percent. What should the Fed do to achieve a noninflationary, full-employment level of real GDP? a. decrease the money supply from $225 to $150 billion b. increase the money supply from $75 to $150 billion c. increase the money supply from $150 to $225 billion d. make no change in the money supply

a. use optimistic easing forward guidance.

Refer to the graphs, in which the numbers in parentheses near the AD1, AD2, and AD3 labels indicate the levels of investment spending associated with each curve. All figures are in billions. A shift in the aggregate demand curve from AD3 to AD2 can be achieved by Federal Reserve action to a. use optimistic easing forward guidance. b. use optimistic forward guidance. c. increase the policy rate. d. sell government securities in the open market.

a. product B.

Refer to the graphs. Stanville has a comparative advantage in producing a. product B. b. product A. c. both product A and B. d. neither product A nor B.

a. engaging in QE and QT

The Federal Reserve System changes the money supply by a. engaging in QE and QT b. using negative interest rates c. engaging in fiscal policy d. giving forward guidance

a. Independent agency of the government

The Federal Reserve System is an: a. Independent agency of the government b. Agency that is controlled by congress c. Agency that is under the direction o the president d. Agency run by popularly elected officials

a. reducing the three administered interest rates.

The Federal Reserve can increase aggregate demand by a. reducing the three administered interest rates. b. reducing the money supply. c. raising the policy rate target. d. selling government securities in the open market.

a. slopes downward because, at lower dollar prices for euros, Americans will want to buy more European goods and services.

The U.S. demand for euros a. slopes downward because, at lower dollar prices for euros, Americans will want to buy more European goods and services. b. slopes downward because, at higher dollar prices for euros, Americans will want to buy more European goods and services. c. slopes downward because the dollar price of euros and the euro price of dollars are directly related. d. slopes upward because a higher dollar price of euros makes European goods and services more attractive to Americans.

b. slopes upward because when the dollar price of yen rises (and the yen price of a dollar falls) it means that U.S. goods are cheaper to the Japanese.

The U.S. supply of Japanese yen a. slopes downward because a lower dollar price of yen means U.S. goods are cheaper to the Japanese. b. slopes upward because when the dollar price of yen rises (and the yen price of a dollar falls) it means that U.S. goods are cheaper to the Japanese. c. slopes upward because when the dollar price of yen falls (and the yen price of a dollar rises) it means that U.S. goods are cheaper to the Japanese. d. slopes downward because a higher dollar price of yen means U.S. goods are cheaper to the Japanese.

a. $7.

The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. The total amount of revenue collected from a $1-per-unit tariff on this product will be a. $7. b. $22. c. $8. d. $14.

a. 1 tea > 1 teapot to 1 tea < 3 teapots

The accompanying tables give production possibilities data for Gamma and Sigma. All data are in tons. Which of the following is the most accurate limits of the terms of trade between Gamma and Sigma? a. 1 tea > 1 teapot to 1 tea < 3 teapots b. 1 tea > 2 teapots to 1 tea < 6 teapots c. 1 tea > 3 teapots to 1 tea < 6 teapots d. 1 tea > 2 teapots to 1 tea < 3.5 teapots

C. Varies inversely with the rate of interest This is because when the interest rate is low, more people will expect a rise.

The asset demand for money a. Varies inversely with the level of real GDP b. Is unrelated with the rate of interest and the level of GDP c. Varies inversely with the rate of interest d. Varies directly with the level of nominal GDP

c. banks; other banks

The federal funds rate is the interest rate that _________ charge(s) ________. a. banks; their best corporate customers b. the Fed; banks c. banks; other banks d. banks; on federal student loans

a. consumption beyond domestic production possibilities.

The greatest benefit to an economy from international trade is a. consumption beyond domestic production possibilities. b. full employment of its labor force. c. the economic power it gives a nation over other countries. d. greater employment in the export sector of the economy.

a. discount rate.

The interest rate at which the Federal Reserve Banks lend to banks is called the a. discount rate. b. short-term rate. c. policy rate. d. federal funds rate.

a. A debt (liability) of the Federal Reserve System

The paper money, or currency, in the US essentially represents a. A debt (liability) of the Federal Reserve System b. An asset of the Federal Government c. A debt of the US Treasury d. A debt of commercial banks and savings institutions

Banks are vulnerable to "panics" or "bank runs" Too many people begin to withdraw too much money at once

Bank Loans will be equal to the amount of gold on deposit: a. Banks are vulnerable to "panics" or "bank runs" b. Banks can only lend an amount equal to their deposits c. Banks can hold a portion of their deposits in gold d. Banks are able to serve the withdrawals of all their deposits

a. Are a risk of fractional reserve banking, but are unlikely when banks are highly regulated and lend prudently

Bank Panics a. Are a risk of fractional reserve banking, but are unlikely when banks are highly regulated and lend prudently b. Occur frequently in a fractional reserve system c. Cannot occur in a fractional reserve banking system, d. Occur more frequently when the monetary system is backed by gold

a. The CPA can prepare the tax return in 2 hours and would charge $50 per hour, Mason would take 10 hours to prepare the tax return and sacrifice $15 per hour.

Mason, a professional house painter, needs his tax return prepared; in which situation below would he choose to hire Madison, the CPA, rather than sacrifice time (and income) from house painting? a. The CPA can prepare the tax return in 2 hours and would charge $50 per hour, Mason would take 10 hours to prepare the tax return and sacrifice $15 per hour. b. The CPA can prepare the tax return in 10 hours and would charge $50 per hour, Mason would take 10 hours to prepare the tax return and sacrifice $15 per hour. c. The CPA can prepare the tax return in 2 hours and charge $100 per hour; Mason would take 10 hours to prepare the tax return and sacrifice $15 per hour. d. Mason would not hire Madison in any of these situations described.

a. a vertical line

On a diagram where the interest rate and the quantity of money demanded are shown on the vertical and horizontal axes, respectively, the transactions demand for money can be represented by a. a vertical line b. a line parallel to the horizontal axis c. a downward-sloping line or curve from left to right d. an up-sloping line or curve from left to right.

a. quantitative easing.

Open-market operations include a. quantitative easing. b. the Fed communicating how it sees the current state of the economy c. paying interest on reserve balances held at Federal Reserve Banks d.changes in the discount rate.

d. increase consumption and increase aggregate demand

Other things equal, a reduction in income taxes will a. increase government spending and increase aggregate demand. b. reduce productivity and reduce aggregate supply c. increase the supply of money and reduce investment d. increase consumption and increase aggregate demand

a. The Fed purchases bond securities

Quantitative Easing occurs when a. The Fed purchases bond securities b. Increases money supply and lowers interest rates c. The Fed sells bond securities d. A bank makes a loan When the money supply gets smaller