ECON 201 FINAL EXAM

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Refer to the above table. Assuming that the opportunity costs are constant, the opportunity cost of producing a bicycle in the United States is ________ while the opportunity cost of producing a bicycle in Canada is ________. A. 8 computers; 10 computers B. 5 computers; 2 computers C. 4 computers; 10 computers D. 2 computers; 5 computers

D. 2 computers; 5 computers

If in the third quarter of 2016 total investment spending was $4,768 billion and depreciation was $3,292 billion, then net investment was equal to: a. $1,476 billion. b. $3,292 billion. c. $4,768 billion. d. $8,060 billion.

a. $1,476 billion.

If the consumption function is C = 25 + 0.9 y & income increases by $100, then savings will increase by a. $10. b. $25. c. $90. d. $115.

a. $10.

If the consumption function is C = 25 + 0.9 y and income increases by $100, then savings will increase by a. $10. b. $25. c. $90. d. $115.

a. $10.

Assume that GDP = $10,000 and the MPC... the MPC = 0.75. If policy makers want to increase GDP by 30 percent, by how much should they increase government spending? a. $300 b. $750 c. $1,000 d. $3,000

a. $300

Suppose that a sporting goods store had $800 of golf balls on its shelves at the beginning of 2016 & $1,300 at the end of 2016. The amount of inventory investment included in GDP would be a. $500 b. $800 c. $1,300 d. $2,100

a. $500

Suppose that a sporting goods store had $800 of golf balls on its shelves at the beginning of 2016 and $1,300 at the end of 2016. The amount of inventory investment included in GDP would be: a. $500. b. $800. c. $1,300. d. $2,100.

a. $500.

Let C = 120 + 0.8y. Assume no government or foreign sectors. At the equilibrium level of income, y* = 200, the level of saving is a. -80. b. -30. c. 96. d. 160.

a. -80.

Refer to Table 18.3. The opportunity cost of bicycles in Canada is _______, and the opportunity cost of bicycles in the U.S. is _______. a. 1/2 of a hang glider, 3 hang gliders. b. 2/3 of a hang glider, 4 hang gliders c. 2 hang gliders, 1/3 of a hang glider d. 4 hang gliders, ½ of a hang glider

a. 1/2 of a hang glider, 3 hang gliders.

Refer to Fig. 18.4. With free trade, what is the equilibrium quantity of gloves in Duckland? a. 100 b. 80 c. 60 d. 40

a. 100

We can see that consumers spent $100 in 2000 for the quantities they bought in 2000, they spent $160 for the goods they bought in 2005, and they spent $210 for the goods they bought in 2010. Using the information in the table, the inflation rate from 2005 to 2010 is about: a. 15% b. 31% c. 62% d. 110%

a. 15%

Suppose there are only 2 nations, Atlantis and Pacifica, and only two goods, surfboards and kayaks. If Atlantis produces only surfboards, it can make 50 per day. If Atlantis produces only kayaks, it can make 100 per day. If Pacifica produces only surfboards, it can make 100 per day. If Pacifica produces only kayaks, it can make 100 per day. The opportunity cost of surfboards in Atlantis is _____________, and the opportunity cost of surfboards in Pacifica is ______. a. 2 kayaks, 1 kayak b. 1/2 Kayak, 1 Kayak c. 1 Kayak, 2 Kayaks d. 1 Kayak, 1/2 kayak e. there is not enough information given to determine opportunity costs.

a. 2 kayaks, 1 kayak

The following table lists the basket of goods in the Consumer Price Index for the nation of Astro (assume 2014 is the base year). Using the information in Table 6.2, the inflation rate from 2014 to 2015 is about a. 26 percent b. 38 percent c. 42 percent d. 49 percent

a. 26 percent

Assuming that the opportunity costs are constant, the opportunity cost of producing a glove in Russia is ________ while the opportunity cost of producing a glove in Panama is ________. TABLE 18.1 a. 3 hats; ¾ of a hat. b. 1/3 of a hat, 4/3 of a hat. c. 6 hats; 1.5 hats. d. 1/6 of a hat; 2/3 of a hat.

a. 3 hats; ¾ of a hat.

Suppose there are only 2 nations, Atlantis and Pacifica, & only 2 goods, surfboards & kayaks. If Atlantis produces only surfboards, it can make 50 per day. If Atlantis produces only kayaks, it can make 100 per day. If Pacifica produces only surfboards, it can make 100 per day. If Pacifica produces only kayaks, it can make 100 per day. A trade that would make both countries better off would be if Atlantis trades _______ to Pacifica, and Pacifica trades _______to Atlantis. a. 3 kayaks, 2 surfboards b. 4 kayaks, 1 surfboard c. 2 surfboards, 3 kayaks d. 1 kayak, 2 surfboards e. none of the above trades will make both countries better of

a. 3 kayaks, 2 surfboards

Given the data in Table 6.1, the labor force participation rate of Metropolis is approximately a. 96 percent b. 91 percent c. 83 percent d. 78 percent

a. 96 percent

Refer to Fig. 11.4 (previous page). Which diagram illustrates the effect of a decrease in the income tax rate? a. A b. B c. C d. D

a. A

What happens to your purchasing power if inflation is less than you anticipated? a. It increases. b. It won't change much. c. It devalues your net worth. d. It decreases

a. It increases.

Which one of the following statements is TRUE of the Consumer Price Index? a. It measures changes in prices of a fixed basket of goods. b. It understates the true rate of inflation. c. It does not take account of the price of imported goods and services. d. It does not take into account the price of used goods.

a. It measures changes in prices of a fixed basket of goods.

Based on the data in Table 3.1 a. Jesse should specialize in painting kites and trade for snowboards. b. Jesse should specialize in painting snowboards and trade for kites. c. April should specialize in both goods. d. Jesse should specialize in both goods.

a. Jesse should specialize in painting kites and trade for snowboards.

Using this table, which of these trades would make both people better off? a. Jesse trades 6 kites to April for 1 snowboard b. April trades 6 kites to Jesse for 1 snowboard c. Jesse trades 10 kites to April for 1 snowboard d. Jesse trades 3 kites to April for 1 snowboard

a. Jesse trades 6 kites to April for 1 snowboard

Which of the following is a problem with the price system that can lead to a breakdown in the coordination of economic activity? a. Prices can be slow to adjust. b. The price system works silently in the background. c. Prices may be flexible. d. all of the above

a. Prices can be slow to adjust.

How does real gross domestic product (GDP) differ from nominal GDP? a. Real GDP controls for price changes, while nominal GDP does not. b. Nominal GDP can be used to directly compare the amount of output produced from year to year, while real GDP cannot be used for such comparison. c. Nominal GDP controls for price changes, while real GDP does not. d. There is no difference between nominal GDP and real GDP.

a. Real GDP controls for price changes, while nominal GDP does not.

How does real gross domestic product (GDP) differ from nominal GDP? a. Real GDP controls for price changes, while nominal GDP does not. b. Nominal GDP controls for price changes, while real GDP does not. c. Nominal GDP can be used to directly compare the amount of output produced from year to year, while real GDP cannot be used for such comparison. d. There is no difference between nominal GDP and real GDP.

a. Real GDP controls for price changes, while nominal GDP does not.

Suppose that in October the price of a cup of cafe latte was $2.50 & 400 lattes were consumed. In November the price of a latte was $2.00 & 600 lattes were consumed. What might have caused this change? a. The price of coffee beans (an input of production of cafe lattes) fell. b. The price of coffee beans (an input of production of cafe lattes) rose. c. The price of tea (a substitute for cafe lattes) fell. d. The price of tea (a substitute for cafe lattes) rose.

a. The price of coffee beans (an input of production of cafe lattes) fell.

Suppose that in 2011, 3 million plasma TVs were purchased at $950 each, while in 2012, 4 million plasma TVs were purchased at $800 each. What might have caused this change? a. There was an advance in plasma TV manufacturing technology. b. The price of LCD TVs (a substitute for plasma TVs) fell. c. There were fewer workers in plasma TV manufacturing. d. The price of LCD TVs (a substitute for plasma TVs) rose. Price , Quantity SUPPLY increase.

a. There was an advance in plasma TV manufacturing technology.

Decreases in taxes shift the aggregate demand curve to the right. a. True b. False

a. True

True/False: If the dollar appreciates against the peso it means that U.S. goods become more expensive in Mexico. a. True b. False

a. True

Which of these people are counted as unemployed: a. a 16 year old high school student without a job looking for part-time work after school b. a person who has looked for work in the last year, but has given up looking since they don't believe they can find work c. a retired person living on Social security who isn't working or looking for work d. None of the above people are counted as unemployed

a. a 16 year old high school student without a job looking for part-time work after school

Which of the following should be included in U.S. GDP? a. a 3D television manufactured in the United States and sold in Thailand b. a 3D television manufactured in Thailand and sold in the United States c. a 3D television manufactured in Thailand by a U.S. firm & sold in the U. S. d. a used 3D television manufactured in the United States and sold in Thailand

a. a 3D television manufactured in the United States and sold in Thailand

A decrease in the level of real GDP in the economy leads to a. a leftward shift in the demand for money curve. b. a rightward shift in the demand for money curve. c. a leftward movement along the demand for money curve. d. a rightward movement along the demand for money curve.

a. a leftward shift in the demand for money curve.

Which of the following increases the slope of the consumption function? a. an increase in the marginal propensity to consume b. a decrease in the value of consumer durables c. an increase in consumer confidence d. an increase in consumer wealth

a. an increase in the marginal propensity to consume

Referring to Figure 19.1,. if the exchange rate is currently 11 pesos per dollar, then we expect the dollar to ________ and the peso to ________. a. appreciate; depreciate b. depreciate; depreciate c. appreciate; appreciate d. depreciate; appreciate

a. appreciate; depreciate

The typical relationship between inflation and unemployment is: a. as unemployment falls, inflation increases. b. unemployment changes do not directly lead to changes in inflation, but inflation changes may cause changes in unemployment. c. as unemployment falls, nothing happens to inflation. d. as unemployment falls, inflation falls.

a. as unemployment falls, inflation increases.

Referring to Figure 19.2, the effect of a decrease in Japanese interest rates is represented by a movement from point FIGURE 19.2 a. b to a. b. a to b. c. b to c. d. a to d.

a. b to a.

Refer to Figure 19.3. At the exchange rate of 90 yen per dollar, the United States is experiencing a a. balance of payments surplus. b. balance of payments deficit. c. current account deficit. d. capital account surplus.

a. balance of payments surplus.

The money multiplier will be smaller when: a. bank customers prefer to hold a bigger amount of their money as cash (instead of in their checking account). b. banks prefer to lend out 9 percent of their excess reserves instead of 90 percent. c. when the marginal propensity to save declines. d. when the reserve ratio decreases.

a. bank customers prefer to hold a bigger amount of their money as cash (instead of in their checking account).

As the Federal Reserve ________ bonds, interest rates fall and the price of bonds ________. a. buys; rises b. sells; rises c. buys; falls d. sells; falls

a. buys; rises

Referring to Figure 19.2, an appreciation of the dollar is represented by a movement from point a. c to d. b. b to c. c. a to c. d. a to d.

a. c to d.

Use Figure 19.2 for this question. Referring to Figure 19.2, an appreciation of the dollar is represented by a movement from point: a. c to d. b. a to d. c. a to c. d. b to c.

a. c to d.

What is the largest component of GDP on the production side of the GDP? a. consumption expenditures b. private investment expenditures c. government purchases d. employee compensation e. none of the above are the largest components mm

a. consumption expenditures

Selling government bonds through open market operations allows the Fed. Reserve to __ a. decrease the money supply in the private sector. b. receive a high rate of interest on the bonds. c. decrease money in the Treasury. d. receive discounts on future sales. Fed sells bonds: they have the money, the public has the bond. Money goes down.

a. decrease the money supply in the private sector.

According to the theory of purchasing power parity, the exchange rate between two countries reflects: a. differences in the overall price levels in the two countries. b. the unemployment rates in the two countries. c. the interest rates in the two countries. d. government spending in the two countries.

a. differences in the overall price levels in the two countries.

According to the theory of purchasing power parity, the exchange rate between 2 countries reflects: a. differences in the overall price levels in the two countries. b. the unemployment rates in the two countries. c. the interest rates in the two countries. d. government spending in the two countries.

a. differences in the overall price levels in the two countries.

Which of the following benefits from a quota or VER? QUIZ 6 a. domestic producers b. the government c. consumers d. all of the above

a. domestic producers

A bank may make loans until its a. excess reserves are exhausted. b. required reserves are exhausted. c. total assets are exhausted. d. total liabilities are exhausted

a. excess reserves are exhausted.

The rate at which one currency can be traded for another is called the a. exchange rate. b. coupon rate. c. transfer rate. d. terms of trade.

a. exchange rate.

The efforts of nations to influence exchange rates are known as: a. foreign exchange market intervention. b. establishing terms of trade. c. open market operations. d. rate discrimination.

a. foreign exchange market intervention.

Refer to Table 18.1. Russia has a comparative advantage in a. hats. b. gloves. c. both hats and gloves. d. neither hats nor gloves.

a. hats.

The Laffer curve illustrates that: a. high tax rates could lead to lower tax revenues if economic activity is severely discouraged. b. lowering tax rates will always increase tax revenues. c. high tax rates would increase tax revenue and increase the labor supply as people work harder to maintain their standard of living. d. lowering tax rates will always decrease tax revenues.

a. high tax rates could lead to lower tax revenues if economic activity is severely discouraged.

In periods when GDP fails to grow at its normal rate, the actual unemployment rate will be ________ than the natural rate of unemployment. a. higher b. the same c. lower d. falling faster

a. higher

Recall the Application about the Fed increasing bank reserves during the financial crisis in 2008 to answer the following question(s). During the height of the financial crisis in September 2008, the Fed injected large amounts of reserves into banks, and in the next month, they started paying interest to banks on these reserves. Prior to this time, banks earned no interest on either required or excess reserves. According to this Application, the Fed injected large amounts of reserves into banks during the 2008 financial crisis. The Fed needs to make sure that, in the long run, banks do not loan out too many of these reserves or the result will be a. higher inflation. b. higher interest rates. c. additional unemployment. d. a smaller money multiplier.

a. higher inflation.

In order to ________, a government must increase spending and decrease taxation. a. increase aggregate demand b. decrease aggregate demand c. increase aggregate supply d. decrease aggregate supply

a. increase aggregate demand

Refer to Figure 9.2. A movement from point a to point c could be caused by a a. increase in government spending. b. decrease in the price of oil. c. increase in taxes. d. increase in short-run aggregate supply

a. increase in government spending.

Refer to Figure 9.2. A movement from point a to point c could be caused by a(n) a. increase in government spending. b. decrease in the price of oil. c. increase in taxes. d. increase in short-run aggregate supply.

a. increase in government spending.

Exports ________ GDP and imports ________ GDP. a. increase; decrease b. decrease; decrease c. decrease; increase d. increase; increase

a. increase; decrease

A(n) ________ in U.S. interest rates will cause an increase in the demand for U.S. dollars and a(n) ________ in the (per dollar) exchange rate. a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease

a. increase; increase

The fact that it takes time for government to identify and recognize a problem is one reason for the occurrence of: a. inside lags. b. outside lags. c. implementation lags. d. structural lags.

a. inside lags.

In the income-expenditure model, the 45 - degree line a. is the locus of all the points for which output equals expenditures. b. marks all equilibrium output levels. c. shows total expenditures at various price levels. d. is also called the planned expenditures line.

a. is the locus of all the points for which output equals expenditures.

When considering imports & exports, economists include the _____ as a component of the GDP. a. net exports b. total exports c. gross exports d. total imports

a. net exports

Assuming a long-run aggregate supply curve, a decrease in government spending results in ________ in output and ________ in price level.... a. no change; a decrease b. no change; an increase c. a decrease; a decrease d. an increase; no change

a. no change; a decrease

If Sam does not have a job and is NOT currently looking for work but has looked in the past, he is considered a. not in the labor force. b. unemployed and in the labor force. c. unemployed and not in the labor force. d. unemployed.

a. not in the labor force.

Transfer payments are excluded from government purchases in GDP accounting because a. nothing is being produced in return for the payment. b. they are a reward to individuals who have been productive their entire lives. c. they are already included as part of investment d. they are difficult to measure.

a. nothing is being produced in return for the payment.

A rancher raises sheep. Once a year he shears them and sells the raw wool to a processor who cleans it & spins it into yarn. The yarn is then sold to a knitting mill, which produces and sells sweaters. In calculating GDP we would count a. only the sweaters b. only the raw wool and the yarn. c. only the yarn and the sweaters. d. the raw wool, the yarn and the sweaters.

a. only the sweaters

The Consumer Price Index (CPI) relies on the calculation of a. prices of a fixed basket of goods that does not change often. b. the components of GDP that do not change frequently. c. the components of GDP that change annually d. prices of a variable basket of goods that changes frequently

a. prices of a fixed basket of goods that does not change often.

In addition to lowering the discount rate to increase the money supply, the Fed could also a. purchase bonds on the open market and lower reserve requirements. b. sell bonds on the open market and lower reserve requirements. c. sell bonds on the open market and raise reserve requirements. d. purchase bonds on the open market and raise reserve requirements.

a. purchase bonds on the open market and lower reserve requirements.

An open market ________ by the Fed decreases interest rates and ________ investment a. purchase; increases b. purchase; decreases c. sale; increases d. sale; decreases

a. purchase; increases

Import bans, import quotas, voluntary export restraints, and tariffs on goods all a. reduce imports and raise prices for consumers. b. increase imports and raise prices for consumers. c. increase imports and reduce prices for consumers. d. reduce imports and prices for consumers.

a. reduce imports and raise prices for consumers.

Refer to Table 2.4. The principle of diminishing returns sets in with the addition of the tank of fertilizer. a. second b. third c. fourth d. fifth

a. second

In modern economies a. some prices are very flexible while others are not. b. all prices are very flexible. c. no prices are very flexible. d. prices become less flexible as they increase.

a. some prices are very flexible while others are not.

When there is a recession (a fall in output) & prices are increasing, & this situation is caused by adverse supply shocks, the term economists use to describe it is a. stagflation. b. aggregate shifts. c. stagnation. d. inflation.

a. stagflation.

The rate at which nations will exchange goods and services is known as the a. terms of trade. b. transfer rate. c. terms of exchange d. exchange rate.

a. terms of trade.

The supply of money in the U.S. economy is determined primarily by a. the actions of the Federal Reserve and the banking system. b. decisions made by the Federal Reserve and the U.S. Treasury. c. consumers and the banking system. d. the demand for money in the economy.

a. the actions of the Federal Reserve and the banking system.

In the income - expenditure model of Chapter 11, if we keep the price level constant but raise planned expenditures (say government expenditures or investment increases), then: a. the aggregate demand curve shifts to the right. b. we move down along the aggregate demand curve c. we move up along the aggregate demand curve d. the aggregate demand curve shifts left e. none of the above

a. the aggregate demand curve shifts to the right.

If the demand for jelly decreases, and the price of grapes (used to make jelly) rises a. the equilibrium price of jelly might rise or fall, and the equilibrium quantity of jelly falls. b. the equilibrium price of jelly rises and the equilibrium quantity of jelly might rise or fall. c. the equilibrium price of jelly might rise or fall, and the equilibrium quantity of jelly rises. d. the equilibrium price of jelly falls and the equilibrium quantity of jelly might rise or fall. Demand Down [P Q ] , Supply Down from P(inputs) Up [P , Q ] P ~, Q

a. the equilibrium price of jelly might rise or fall, and the equilibrium quantity of jelly falls.

Depreciation is a. the wear and tear on private investment. b. what is left over from total new private investment after use for a year. c. the total amount of new private investment purchases. d. the total amount of private investment purchases, whether new or previously existing.

a. the wear and tear on private investment.

The existence of discouraged workers will lead to an official unemployment rate that is a. understated. b. overstated. c. either overstated or understated. d. unbiased.

a. understated.

When money is used to express the value of goods and services, it is functioning as a a. unit of account. b. store of purchasing power. c. store of value. d. medium of exchange.

a. unit of account.

Net investment is a. what is left over from total new private investment after depreciation. b. gross investment plus depreciation. c. the total amount of private investment purchases, whether new or previously existing. d. the total amount of new private investment purchases.

a. what is left over from total new private investment after depreciation.

Multiple Choice: Suppose a bank has $200,000 in deposits, a reserve ratio of 10 percent, and reserves of $45,000. This bank has excess reserves of: a. $155,000. b. $25,000. c. $10,000. d. $5,000.

b. $25,000.

Suppose Ariana deposits $75,000 in her bank. If the reserve ratio is 20%, this will lead to a maximum increase of ________ in checking account balances throughout all banks. a. $15,000 b. $375,000 c. $750,000 d. $1,500,000

b. $375,000

The formula for the tax multiplier is a. 1 / (1 - MPC). b. -MPC / (1 - MPC). c. - MPC / ( MPC+ 1). d. MPC/ (1 + MPC).

b. -MPC / (1 - MPC).

Using the information in Table 6.2, the Astro Consumer Price Index for 2014 is a. 24. b. 100. Because that is the base year. c. 124. d. 189.

b. 100. Because that is the base year.

The Federal Reserve was created in a. 1893 b. 1913 c. 1921. d. 1933

b. 1913

Kaitlyn and Larissa have formed a dog bathing and grooming business business. The number of dogs they can bathe or groom in any given day is depicted in Table 2.1. The opportunity cost of grooming the first dog in a day is bathing ________ dog(s). a. 1 b. 2 c. 24 d. 25

b. 2

Refer to Table 11.1. What is the value of the government spending multiplier? a. 1.67 b. 2.5 c. 3.33 d. 4

b. 2.5

If the banking system has a required reserve ratio of 25%, then the money multiplier is: a. 2 b. 4 c. 5 d. 10

b. 4

Table 2.1 Kaitlyn and Larissa have formed a dog bathing and grooming business. The number of dogs they can bathe or groom in any given day is depicted in Table 2.1. The opportunity cost of grooming the third dog in a day is bathing ________ dog(s). a. 3 b. 4 c. 5 d. 18

b. 4

Refer to Figure 11.2. Suppose that C a = 40, MPC = 0.8, I = 10. The value of autonomous consumption is a. 10. b. 40. c. 50. d. 80.

b. 40.

According to the principle of diminishing returns, an additional worker decreases total output. a. True b. False

b. False

The value of goods produced in a previous year but sold in the current year is added to the GDP for the current year. a. True b. False

b. False

True/False: The supply of money is determined by the Federal Reserve and is dependent on the demand for money. a. True b. False

b. False

Suppose there are only 2 nations, Atlantis and Pacifica, and only two goods, surfboards and kayaks. If Atlantis produces only surfboards, it can make 50 per day. If Atlantis produces only kayaks, it can make 100 per day. If Pacifica produces only surfboards, it can make 100 per day. If Pacifica produces only kayaks, it can make 100 per day. After trade begins, ________ will specialize in the production of surfboards and ________ will specialize in the production of kayaks. a. Pacifica; Pacifica b. Pacifica; Atlantis c. Atlantis; Atlantis d. Atlantis; Pacifica

b. Pacifica; Atlantis

The group of people who make decisions about monetary policy in the U.S. is: a. The 12 Federal Reserve Bank presidents b. The Federal Open Market Committee c. The U.S. Congress d. The President of the United States e. none of the above.

b. The Federal Open Market Committee

Suppose that you own a house. What is the opportunity cost of living in the house? a. There is no opportunity cost unless you could set up a business in the house. b. The opportunity cost is the rent you could have received from a tenant if you didn't live there. c. The opportunity cost is the cost of your monthly mortgage payment plus bills. d. There is no opportunity cost because you own the house.

b. The opportunity cost is the rent you could have received from a tenant if you didn't live there.

An increase in the level of real GDP in the economy leads to a. a leftward shift in the demand for money curve. b. a rightward shift in the demand for money curve. c. a leftward movement along the demand for money curve. d. a rightward movement along the demand for money curve.

b. a rightward shift in the demand for money curve.

The long-run aggregate supply curve is a. downward sloping. b. a vertical line at potential output. c. a horizontal line at the current price level. d. upward sloping.

b. a vertical line at potential output.

The long-run aggregate supply curve is: a. a horizontal line at the current price level. b. a vertical line at potential output. c. downward sloping. d. upward sloping.

b. a vertical line at potential output.

Referring to Figure 19.1, if the exchange rate is currently 11 pesos per dollar, then we expect the dollar to ________ and the peso to ________. a. appreciate; appreciate b. appreciate; depreciate c. depreciate; appreciate d. depreciate; depreciate

b. appreciate; depreciate

Loans are examples of a bank's a. liabilities. b. assets. c. balance sheet. d. net worth.

b. assets.

As the Federal Reserve _______ bonds, interest rates fall & the price of bonds _______. a. sells; falls b. buys; rises c. sells; rises d. buys; falls

b. buys; rises

Referring to Figure 19.2, the effect of an increase in U.S. interest rates is represented by a movement from point: a. a to d. b. c to b. c. a to b. d. d to c.

b. c to b.

The natural rate of unemployment a. tends to remain constant over time but at different levels for different countries. b. can vary over time and will differ across countries. c. tends to remain constant over time and is the same across countries. d. can vary over time but tends to be the same across countries.

b. can vary over time and will differ across countries.

The least-used Federal Reserve tool to affect the money supply is a. open market operations. b. changes in reserve requirements. It is too powerful a tool. c. changing the discount rate. d. changing the interest paid on bank reserves.

b. changes in reserve requirements. It is too powerful a tool.

If Italy can produce grapes at a lower opportunity cost than any other nation, Italy is said to have a(n) ________ in the production of grapes. a. comparative disadvantage b. comparative advantage c. absolute advantage d. autarky

b. comparative advantage

Economists say that the economy is at full employment when the: a. structural unemployment rate is zero. b. cyclical unemployment rate is zero. c. total unemployment rate is zero. d. frictional unemployment rate is zero.

b. cyclical unemployment rate is zero.

In the United States, the temporary tax surcharge of 1968 a. had no impact on consumer spending. b. decreased consumer spending by less than was originally estimated. c. decreased consumer spending by more than was originally estimated. d. actually increased consumer spending.

b. decreased consumer spending by less than was originally estimated.

Which of the following is a bank liability? a. required reserves b. demand deposit balances c. loans made to customers d. reserve deposits held at the Fed

b. demand deposit balances

Which of the following is a bank liability? a. loans made to customers b. demand deposit balances c. reserve deposits held at the Fed d. required reserves

b. demand deposit balances

In the United States during the 1930s, politicians a. relied on government spending and taxation to pull the economy out of the depression. b. did not believe in using government spending and taxation because they feared the consequences of budget deficits. c. knew that the depression would eventually subside because of automatic stabilizers. d. deliberately relied on government spending and taxation even though they knew the depression would continue.

b. did not believe in using government spending and taxation because they feared the consequences of budget deficits.

By raising the discount rate, the Federal Reserve ________ banks from borrowing more reserves. a. prohibits b. discourages c. encourages d. short-changes

b. discourages

The unemployment rate is the number of unemployed people a. divided by the number of people who are working. b. divided by the sum of the number of people who are working and the number of people who are looking for work. c. divided by the total working-age population. d. and the number of people working fewer than their desired number of hours, divided by the number of people who are working or looking for work

b. divided by the sum of the number of people who are working and the number of people who are looking for work.

People who are only working part-time, but want to be working full-time, are classified officially as a. unemployed and out of the labor force. b. employed and in the labor force. c. employed and out of the labor force. d. unemployed and in the labor force.

b. employed and in the labor force.

If the U.S. real exchange rate increases, U.S. exports will ________ and U.S. imports will _______ a. fall; fall b. fall; rise c. rise; fall d. rise; rise

b. fall; rise

Refer to Table 18.3. The United States has a comparative advantage in the production of Daily Output of Canada and U.S. a. bicycles. b. hang gliders. c. both bicycles and hang gliders. d. neither bicycles nor hang gliders.

b. hang gliders.

Russia has a comparative advantage in Daily Output of Russia and Panama a. gloves. b. hats. c. both hats & gloves. d. neither hats nor gloves.

b. hats.

31. A(n) ________ in U.S. prices will cause a decrease in the demand for U.S. dollars and a(n) ________ in the (per dollar) exchange rate. a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease

b. increase; decrease

A (n) ________ in U.S. prices will cause a decrease in the demand for U.S. dollars and a(n) ________ in the (per dollar) exchange rate. a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease

b. increase; decrease

An open market purchase by the Fed: a. does not change the total amount of reserves in the banking system. b. increases the total amount of reserves in the banking system. c. decreases the total amount of reserves in the banking system. d. causes the reserve requirement to fall.

b. increases the total amount of reserves in the banking system.

The supply-side motivated tax cuts of 1981 during the Reagan administration were aimed at a. increasing aggregate demand. b. increasing aggregate supply. c. decreasing aggregate supply. d. balancing the federal budget

b. increasing aggregate supply.

The supply-side motivated tax cuts of 1981 during the Reagan administration were aimed at a. increasing aggregate demand. b. increasing aggregate supply. c. decreasing aggregate supply. d. balancing the federal budget.

b. increasing aggregate supply.

M1 a. includes small time deposits. b. is the narrowest definition of the money supply. c. includes credit cards. d. is the sum of currency plus traveler's checks.

b. is the narrowest definition of the money supply.

Which of the following is a bank asset? a. demand deposits b. loans made to customers c. certificates of deposit held by the public d. savings account deposits

b. loans made to customers

The costs associated with recalculating prices and printing new price lists when there is inflation are known as a. shoe leather costs. b. menu costs. c. diminishing costs. d. chain-index costs.

b. menu costs.

Figure 4.5 illustrates a set of supply and demand curves for hamburgers. An increase in supply and an increase in quantity demanded are represented by a movement from a. point d to point b. b. point a to point b. c. point c to point d. d. point a to point c.

b. point a to point b.

Figure 4.5 illustrates a set of supply & demand curves for hamburgers. A decrease in demand and a decrease in quantity supplied are represented by a movement from a. point c to point a. b. point b to point c. c. point a to point c. d. point d to point b.

b. point b to point c.

The Consumer Price Index (CPI) relies on the calculation of a. the components of GDP that change annually. b. prices of a fixed basket of goods that does not change often. c. prices of a variable basket of goods that changes frequently. d. the components of GDP that do not change frequently

b. prices of a fixed basket of goods that does not change often.

In addition to lowering the discount rate to increase the money supply, the Fed could also... a. sell bonds on the open market and raise reserve requirements. b. purchase bonds on the open market and lower reserve requirements. c. purchase bonds on the open market and raise reserve requirements. d. sell bonds on the open market and lower reserve requirements.

b. purchase bonds on the open market and lower reserve requirements.

Which of the following is NOT a component of gross domestic product? a. net exports b. purchases by consumers of used goods c. purchases by consumers of finished goods d. government purchases

b. purchases by consumers of used goods

What would be a way for the Federal Reserve to slow down the economy when it is growing too quickly or is inflationary? a. encourage the stock market b. sell more government bonds c. buy back government bonds on the open market d. print more money

b. sell more government bonds

The rate at which nations will exchange goods and services is known as the: a. transfer rate. b. terms of trade. c. terms of exchange. d. exchange rate.

b. terms of trade.

For the purposes of GDP accounting, government purchases include a. welfare payments. b. the purchases of new military equipment. c. direct transfer payments by the government to other individuals. d. Social Security payments.

b. the purchases of new military equipment.

Suppose after the semester ends, you take a trip to a tropical island. Upon arriving at the island, you make a stop at one of the markets and notice that everyone is carrying around jars full of little turtles. You also notice the person in line in front of you just paid for a bottle of rum with 6 turtles. Someone else just bought a straw hat for two turtles. Thinking back to your economics class (as painful as that may be), you would conclude that: a. turtle soup is a delicacy. b. those little turtles are serving as money. c. this is a barter economy. d. turtles are valueless.

b. those little turtles are serving as money.

The fact that some quality changes of goods are not measured in the CPI means that the CPI goes up ______ each year, while the fact that the CPI uses a fixed market basket of goods means that the CPI goes up _______each year. a. too much, too little. b. too much, too much. c. too little, too little. d. too little, too much.

b. too much, too much.

Social Security payments are examples of a. durable goods. b. transfer payments c. nondurable goods d. services.

b. transfer payments

Entitlements and net interest are the ________ the U.S. federal budget. a. only two declining components of b. two fastest-growing components of c. two slowest-growing components of d. only two components with negative values in

b. two fastest-growing components of

If a large number of workers are classified as being out of the labor force when they are really looking for work, this will lead to an official unemployment rate that is a. overstated b. understated c. neither overstated or understated d. unbiased

b. understated

Automatic stabilizers: a. require explicit actions by policy makers to become active. b. work without the need for decisions from Congress or the White House. c. magnify fluctuations in the economy. d. increase taxes during recessions.

b. work without the need for decisions from Congress or the White House.

In Figure 11.3, the multiplier effect resulting from a change in investment spending is represented as the distance between points a. C0 and C1. b. y0 and y1. c. a0 and a1. d. a1 and y1.

b. y0 and y1.

If you take out a bank loan prior to unanticipated inflation a. your bank will gain at your expense. b. you will gain at the expense of your bank. c. it will be harder for you to repay the loan because of the inflated dollar. d. neither you nor your bank will be affected, because the loan was made prior to the inflation

b. you will gain at the expense of your bank.

If you negotiated a salary based on an anticipated inflation rate of 4 percent, and the actual inflation rate turned out to be 6 percent: a. the purchasing power of your real wages would be more than you anticipated. b. your employer would have gained at your expense. c. your real wage will increase, but your nominal wage will decrease. d. the purchasing power of your wages will not change, since purchasing power is based on your nominal wage

b. your employer would have gained at your expense.

If the banking system has a required reserve ratio of 40%, then the money multiplier is: a.2. b.2.5 c.4 d.8

b.2.5

SMALL TIME DEPOSITS $100 BILLION MONEY MARKET MUTUAL FUNDS $200 billion a. $502 billion. b. $752 billion. c. $1,002 billion. d. $1,202 billion. e.$2,302 billion.

c. $1,002 billion.

Suppose a bank has $300,000 in deposits, a reserve ratio of 5 percent, and bank reserves of $45,000. This bank can make new loans in the amount of a. $345,000. b. $45,000. c. $30,000. d. $15,000.

c. $30,000.

If in the 3rd quarter of 2016 total investment spending was $4,768 billion & depreciation was $3,292 billion, then the amount counted in GDP, which is known as gross investment, would be a. $1,476 billion. b. $3,292 billion. c. $4,768 billion. d. $8,060 billion.

c. $4,768 billion.

According to the information in Table 13.1, M1 is equal to: a. $620 billion. b. $672 billion. c. $842 billion.

c. $842 billion.

If the consumption function is C = 25 + 0.9 y & income increases by $100, then consumer spending will increase by a. $10. b. $25. c. $90. d. $115.

c. $90.

If the government decreased its purchases of goods and services by $4,000, & this resulted in an eventual decrease in GDP & income of $10,000, the MPC would be equal to a. 2.5. b. 1.5. c. 0.6. d. 0.4.

c. 0.6.

The table below shows these numbers of people in the different labor force groups in a country. There are 100 million people in the country. 25 million people (Group B) are not in the labor force. 25 million (Group A) are below the age of 16, or in institutions (such as prison). 5 million (Group C) are unemployed, and 45 million (Group D) are employed. What is the unemployment rate? a. 5% b. 6.67% c. 10% d. 11.1% e. none of the above are correct

c. 10%

Referring to Figure 19.1, Mexican goods will become more expensive in the United States if the exchange rate goes from ________ to ________ pesos to the dollar. a. 12; 13 b. 10; 13 c. 12; 11 d. 11; 13

c. 12; 11

The following table lists the basket of goods in the Consumer Price Index for the nation of Astro (assume 2014 is the base year). Using the information in Table 6.2, the Astro Consumer Price Index for 2016 is a. 87 b. 104 c. 131 d. 298

c. 131

Using the information in Table 6.2, the Astro Consumer Price Index for 2016 is a. 87. b. 104. c. 131. d. 298.

c. 131.

We can see that consumers spent $100 in 2000 for the quantities they bought in 2000, they spent $160 for the goods they bought in 2005, and they spent $210 for the goods they bought in 2010. If a price index for 2000 has a value of $100, then the price index for 2005 should have a value of: a. 133.33 b. 160.00 c. 140.00 d. 115.00 e. none of the above

c. 140.00

Given the following information about AAA bank: What is the reserve ratio? Bank Deposits $200,000 Loans 100,000 Required Reserves 40,000 Excess Reserves 60,000 a. 50% b. 40% c. 20% d. 10%

c. 20%

Given this information about AAA bank: What is the reserve ratio? Bank Deposits $200,000 Loans 100,000 Required Reserves 40,000 Excess Reserves 60,000 a. 50% b. 40% c. 20% d. 10%

c. 20%

Refer to Figure 11.2. Suppose that C a = 40, MPC = 0.8, I = 10. What is the value of consumption in equilibrium? a. 32 b. 80 c. 240 d. 320

c. 240

Refer to Fig. 11.2. Suppose that Ca = 40, MPC = 0.8, & I = 10. Equilibrium income is a. 40 b. 50. c. 250. d. 400.

c. 250.

Refer to Figure 11.2. Suppose that C a = 40, MPC = 0.8, I = 10. Equilibrium income is a. 40. b. 50. c. 250. d. 400.

c. 250.

Suppose an economy consists of 500,000 individuals 16 years & older, 260,000 are employed, & 21,000 are unemployed but actively seeking work. In this example the labor force is a. 239,000. b. 260,000. c. 281,000. d. 500,000

c. 281,000.

Refer to Table 18.1. The opportunity cost of a glove in Russia is ______, and the opportunity cost of a glove in Panama is _______. a. 1/6 of a hat; 2/3 of a hat. b. 1/3 of a hat; 4/3 of a hat. c. 3 hats, ¾ of a hat. d. 6 hats; 1½ hats.

c. 3 hats, ¾ of a hat.

In table 2.3, the principle of diminishing returns first occurs when how many workers are hired? a. 2 b. 3 c. 4 d. 5

c. 4

Let C = 550 + 0.8y and I = 75. Assume no government or foreign sectors. If investment increases by 100, the equilibrium output increases by a total of a. 60. b. 175. c. 500. d. 800.

c. 500.

Figure 4.4 illustrates the supply of tacos. An increase in the price of ground beef, which is used to make tacos, would most likely cause a movement from a. Point a to point b. b. Point c to point b. c. S2 to S1. d. S0 to S1.

c. S2 to S1.

Under a fixed exchange rate system, if the inflation rate of the United States exceeds the inflation rate of other nations, the a. dollar will depreciate. b. dollar will appreciate. c. United States will develop a trade deficit. d. United States will develop a trade surplus.

c. United States will develop a trade deficit.

The GDP equation is a. Y = C - I - G - NX. b. C + I = G + NX. c. Y = C + I + G + NX d. C + I = Y + G + NX

c. Y = C + I + G + NX

A discouraged worker is: a. a worker with a part - time job who is discouraged because they can't find a full - time job. b. a person without a job who has looked for work in the recent past, but has stopped looking because they can't find childcare for their children. c. a person without a job who has looked for work in the recent past, but has stopped looking because they don't believe they can find a job. d. all of the above. e. none of the above.

c. a person without a job who has looked for work in the recent past, but has stopped looking because they don't believe they can find a job.

An increase in Swiss interest rates will cause: a. an increase in the demand for U.S. dollars and an increase in the exchange rate of Swiss francs per dollar (the dollar appreciates). b. a decrease in the demand for U.S. dollars and a decrease in the exchange rate of Swiss francs per dollar (the dollar depreciates). c. an increase in the supply of U.S. dollars and a decrease in the exchange rate of Swiss francs per dollar (the dollar depreciates). d. a decrease in the supply of U.S. dollars & an increase in the exchange rate of Swiss francs per dollar (the dollar appreciates).

c. an increase in the supply of U.S. dollars and a decrease in the exchange rate of Swiss francs per dollar (the dollar depreciates).

Members of the Federal Reserve Board of Governors: a. are less independent of elected politicians than members of central banks in other countries. b. are appointed to 4 year terms. c. are members of the Federal Open Market Committee. d. are confirmed by the House of Representatives.

c. are members of the Federal Open Market Committee.

The federal funds rate is the interest rate that ... a. banks charge the Fed for using their reserves. b. the Fed charges to banks that borrow from it. c. banks charge each other for borrowed money. d. the Fed pays on bank reserves.

c. banks charge each other for borrowed money.

Checking account balances are included in a. M1 only. b. M2 only. c. both M1 and M2. d. neither M1 nor M2

c. both M1 and M2.

Checking account balances are included in: a. M1 only. b. M2 only. c. both M1 and M2. d. neither M1 nor M2.

c. both M1 and M2.

Checking account balances are included in: c. both M1 and M2.

c. both M1 and M2.

The natural rate of unemployment a. tends to remain constant over time but at different levels for different countries. b. can vary over time but tends to be the same across countries. c. can vary over time and will differ across countries. d. tends to remain constant over time and is the same across countries.

c. can vary over time and will differ across countries.

Based on the model of the money market, if prices in the economy decrease, the equilibrium interest rate should: a. stay the same. b. increase. c. decrease. d. increase to the same extent that the supply of money increases.

c. decrease.

A(n) ________ in U.S. prices will cause an increase in the demand for U.S. dollars & a(n)________ in the (per dollar) exchange rate. a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease

c. decrease; increase

When demand decreases & the demand curve shifts to the left, equilibrium price ________ & equilibrium quantity ________. a. increases; increases b. decreases; increases c. decreases; decreases d. increases; decreases

c. decreases; decreases

The rate of interest charged to commercial banks by the Fed for loans is called the ________ rate. a. prime b. commercial paper c. discount d. federal funds

c. discount

People who want to work but have stopped looking for work because they could not find jobs after actively searching are called a. unemployed b. employed c. discouraged workers d. empowered

c. discouraged workers

Which of these reasons are NOT reasons why a nation might impose a protectionist policy such as a tariff: a. help domestic firms establish a world monopoly in a particular market. b. protect an infant industry from foreign competitors. c. encourage specialization in the good in which the nation has a comparative advantage. d. protect domestic workers from foreign competition e. all of the above ARE reasons why a country might use import restrictions such as a tariff

c. encourage specialization in the good in which the nation has a comparative advantage.

Hector voluntarily left his job to search for a job in accounting, the field in which he has his bachelor's degree. Hector is considered a. not to be unemployed. b. cyclically unemployed c. frictionally unemployed d. structurally unemployed

c. frictionally unemployed

Which of the following situations will arise in the domestic market following the imposition of a tariff? a. imports decrease, domestic production increases, prices decrease b. imports increase, domestic production decreases, prices decrease c. imports decrease, domestic production increases, prices increase d. imports increase, domestic production increases, prices increase

c. imports decrease, domestic production increases, prices increase

Which of the following situations will arise in the domestic market following the imposition of an import quota? Q. 30, T3 a. imports decrease, domestic production increases, prices decrease b. imports increase, domestic production decreases, prices decrease c. imports decrease, domestic production increases, prices increase d. imports decrease, domestic production decreases, prices increase

c. imports decrease, domestic production increases, prices increase

If the Federal Reserve conducts an open market purchase, the a. interest rate will not change. b. interest rate will increase. c. interest rate will decrease. d. money supply is decreased.

c. interest rate will decrease.

An import quota a. limits the amount of a good that can be imported, thus decreasing prices. b. increases the amount of a good imported, thus increasing prices. c. limits the amount of a good that can be imported, thus increasing prices. d. increases the amount of a good imported, thus decreasing prices.

c. limits the amount of a good that can be imported, thus increasing prices.

Fig. 4.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $15, we would expect that a. supply will increase until quantity demanded equals quantity supplied. b. demand will decrease until quantity demanded equals quantity supplied. c. price will decrease until quantity demanded equals quantity supplied. d. there will be no change in the price since the market is in equilibrium.

c. price will decrease until quantity demanded equals quantity supplied.

Importers collect additional revenues from a ________, & governments collect additional revenues from ________. a. tariff; voluntary export restraints b. quota; import bans c. quota; tariffs d. voluntary export restraint; quotas

c. quota; tariffs

If a country's currency depreciates, the country will experience a ________ in exports and a ________ in imports. a. rise; rise b. fall; fall c. rise; fall d. fall; rise

c. rise; fall

The largest single component of M2 is a. demand deposits. b. money market mutual funds. c. savings deposits. d. currency held by the public.

c. savings deposits.

As depicted in the circular flow diagram, firms a. supply the resources that households demand in factor markets. b. demand the resources that households supply in product markets. c. supply the goods and services that households demand in product markets. d. demand the goods and services that households supply in product markets.

c. supply the goods and services that households demand in product markets.

A balance of payments surplus occurs if a. exports exceed imports. b. the S of a nation's currency exceeds the D for the currency at the current exchange rate. c. the D for a nation's currency exceeds the S of the currency at the current exchange rate. d. the S of a nation's currency is equal to the D for the currency at the current exchange rate.

c. the D for a nation's currency exceeds the S of the currency at the current exchange rate.

Suppose that a new advertising campaign extolling the virtues of apple juice is successful, & a major freeze destroys half of the country's apple crop. What happens to the price & quantity of apple juice? a. the equilibrium price of apple juice might rise or fall & the equilibrium quantity of apple juice falls. b. the equilibrium price of apple juice falls & the equilibrium quantity of apple juice might rise or fall. c. the equilibrium price of apple juice rises & the equilibrium quantity of apple juice might rise or fall. d. the equilibrium price of apple juice might rise or fall & the equilibrium quantity of apple juice rises. Demand UP, Supply Down. Ad campaign Demand UP Major Freeze Supply DOWN

c. the equilibrium price of apple juice rises & the equilibrium quantity of apple juice might rise or fall.

In the long run a. the level of output depends on the price level. b. price and output levels are mutually dependent. c. the level of output is independent of the price level. d. the price level depends on the level of output.

c. the level of output is independent of the price level.

Autonomous consumption is a. the sum of consumption that depends on the level of income and consumption that does not depend on income. b. the part of consumption that depends on the level of income. c. the part of consumption that does not depend on income. d. the relationship between consumption spending and the level of income.

c. the part of consumption that does not depend on income.

A balance of payments deficit occurs if a. the supply of a nation's currency is equal to the demand for the currency at the current exchange rate. b. the demand for a nation's currency exceeds the supply of the currency at the current exchange rate. c. the supply of a nation's currency exceeds the demand for the currency at the current exchange rate. d. exports exceed imports.

c. the supply of a nation's currency exceeds the demand for the currency at the current exchange rate.

Which of the following is NOT an example of private investment expenditure? a. new plants and equipment added during the year b. new houses built during the year c. using credit cards to purchase durable and nondurable goods d. increases in inventories on goods produced during the year

c. using credit cards to purchase durable and nondurable goods

According to the information in Table 13.1, M2 is equal to: a. $840 billion. b. $1,062 billion. c. $1,692 billion. d. $1,862 billion.

d. $1,862 billion.

According to the information in Table 13.1, M2 is equal to: a. $840 billion. b. $1,062 billion. c. $1,692 billion. d. $1,862 billion.

d. $1,862 billion.

Refer to Fig. 18.4. With an import ban, what is the equilibrium price of gloves in Duckland? a. $0 b. $8 c. $9 d. $12

d. $12

Referring to Figure 19.1, U.S. goods will become cheaper in Mexico if the exchange rate goes from ________ to ________ pesos to the dollar. a. 12; 13 b. 10; 14 c. 11; 13 d. 12; 11

d. 12; 11

Refer to the above table. Assuming that the opportunity costs are constant, the opportunity cost of producing a bicycle in the United States is ________ while the opportunity cost of producing a bicycle in Canada is ________. a. 8 computers; 9 computers. b. 5 computers; 2 computers. c. 4 computers; 9 computers. d. 2 computers; 3 computers.

d. 2 computers; 3 computers.

If the MPS = 0.2, the multiplier would be a. 0.5. b. 1. c. 2. d. 5.

d. 5.

Suppose an economy consists of 500,000 individuals 16 years & older, 260,000 are employed, & 21,000 are unemployed but actively seeking work. In this example the labor force participation rate is approximately a. 4 percent b. 48 percent c. 52 percent d. 56 percent

d. 56 percent

Kaitlyn and Larissa have formed a dog bathing and grooming business. The number of dogs they can bathe or groom in any given day is depicted in Table 2.1. The opportunity cost of grooming the sixth dog in a day is bathing ________dog(s). a. 0 b. 5 c. 6 d. 7

d. 7

In Figure 11.3, if the MPS is 0.25 and the distance between points C 0 and C 1 is 200, then the distance between points y 0 and y 1 must be a. 50. b. 200. c. 400. d. 800.

d. 800.

Economists believe that the CPI is biased upwards - it rises too much to be a completely accurate measure of inflation. A reason for this is: a. People buy less of goods whose prices rise, and the CPI doesn't adjust for that b. New goods are not introduced into the CPI until years after most people are buying them c. Higher qualities of goods are often not measured by the CPI d. All of the above are reasons why the CPI is biased upwards

d. All of the above are reasons why the CPI is biased upwards

Which of these statements about inflation are true: a. Since 1950, the U.S. had its highest inflation rate in the 1970's. b. During the Great Depression, the U.S. had a severe deflation. c. Banks that lent money will lose from unanticipated inflation d. All of the above statements are true.

d. All of the above statements are true.

What impact does the Fed's raising the interest rate have on the money supply and on the price level? a. An increase in interest rates lowers the money supply and raises the money demand, which will neutralize price increases. b. An increase in interest rates will increase investment spending & GDP, which will lower prices. c. An increase in interest rates raises the money supply and eventually reduces prices. d. An increase in interest rates reduces the money demand which will slow the growth in prices.

d. An increase in interest rates reduces the money demand which will slow the growth in prices.

Refer to Figure 11.4. Which diagram illustrates the effect of an increase in gov't spending? a. A b. B c. C d. D

d. D

Figure 4.3 illustrates the demand for tacos. Assume tacos are a normal good. An increase in income would bring about a movement from a. point a to point b. b. point c to point b. c. D 2 to D 1. d. D 0 to D 1.

d. D 0 to D 1.

Figure 4.3 illustrates the demand for tacos. An increase in the demand for tacos is represented by the movement from a. pt. a to pt. b. b. pt. c to pt. b. c. D2 to D1. d. D0 to D1.

d. D0 to D1.

The group responsible for deciding on monetary policy is the a. Board of Governors only. b. group of 12 Federal Reserve Bank presidents only. c. Federal Advisory Council. d. Federal Open Market Committee.

d. Federal Open Market Committee.

Which of these statements about trade & income inequality are not true? a. Inequality in wages has been growing in the U.S. since 1973. b. Increases in U.S. exports will tend to increase the demand for skilled labor. c. Developing countries tend to have a comparative advantage in products using unskilled labor. d. International trade will tend to reduce income inequality in the U.S.

d. International trade will tend to reduce income inequality in the U.S.

Figure 4.4 illustrates the supply of tacos. A technological advancement which makes tacos cheaper to produce would most likely cause a movement from a. point a to point c. b. point c to point a. c. S2 to S0. d. S0 to S2.

d. S0 to S2.

Steven lives in a big city where there is a shortage of parking. He has a parking spot in his driveway where he parks his car. Which of the following statements is most correct? a. The opportunity cost depends on how much Steven's mortgage payment is. b. Steven has a lower opportunity cost of owning a car than his neighbor, who must rent a parking spot. c. The opportunity cost of using the spot is zero, because Steven owns the house d. The opportunity cost of using the parking spot is the price he could charge someone else for using the spot.

d. The opportunity cost of using the parking spot is the price he could charge someone else for using the spot.

Suppose that a new study is released stating that consumption of orange juice (a substitute for apple juice) reduces the risk of cancer, and a major freeze destroys half of the country's apple crop. What happens to the price and quantity of apple juice? a. The price of apple juice might rise or fall and the quantity of apple juice rises. b. The quantity of apple juice might rise or fall, and the price of apple juice rises c. The price of apple juice falls and the quantity of apple juice falls. d. The price of apple juice might rise or fall and the quantity of apple juice falls.

d. The price of apple juice might rise or fall and the quantity of apple juice falls.

Which of the following statements is FALSE? a. The production possibilities curve shows the combinations of goods that can be produced by a nation after trade and specialization begins. b. The production possibilities curve shows the combinations of goods that can be consumed by a nation before trade begins. c. The production possibilities curve shows the combinations of goods that can be produced by a nation before trading begins. d. The production possibilities curve shows the combinations of goods that can be consumed by a nation after trade and specialization begins.

d. The production possibilities curve shows the combinations of goods that can be consumed by a nation after trade and specialization begins.

Under a fixed exchange rate system, if the inflation rate of the United States is less than the inflation rate of other nations, the a. United States will develop a trade deficit. b. dollar will depreciate. c. dollar will appreciate. d. United States will develop a trade surplus

d. United States will develop a trade surplus

A decrease in Swiss interest rates will cause a. an increase in the demand for U.S. dollars and an increase in the exchange rate of Swiss francs per dollar (the dollar appreciates). b. a decrease in the demand for U.S. dollars and a decrease in the exchange rate of Swiss francs per dollar (the dollar depreciates). c. an increase in the supply of U.S. dollars and a decrease in the exchange rate of Swiss francs per dollar (the dollar depreciates). d. a decrease in the supply of U.S. dollars & an increase in the exchange rate of Swiss francs per dollar (the dollar appreciates).

d. a decrease in the supply of U.S. dollars & an increase in the exchange rate of Swiss francs per dollar (the dollar appreciates).

An increase in Swiss prices will cause: a. an increase in the demand for U.S. dollars & an increase in the exchange rate of Swiss francs per dollar. b. a decrease in the demand for U.S. dollars and a decrease in the exchange rate of Swiss francs per dollar. c. an increase in the supply of U.S. dollars and a decrease in the exchange rate of Swiss francs per dollar. d. a decrease in the supply of U.S. dollars and an increase in the exchange rate of Swiss francs per dollar.

d. a decrease in the supply of U.S. dollars and an increase in the exchange rate of Swiss francs per dollar.

Which of the following appears in M2 and NOT M1? a. savings accounts b. money market mutual funds c. small time deposits d. all of the above are in M2 & NOT M1

d. all of the above are in M2 & NOT M1

Which of these statements about anticipated inflation are true? a. there are costs associated with changing prices b. people will incur additional costs to hold less cash c. the operation of our tax system will be distorted d. all of the above statements are true.

d. all of the above statements are true.

Which of these statements about Dumping are not true? a. dumping occurs when a firm charges a lower price to a foreign market than the price charged in its home market or lower than its production cost b. firms may charge higher prices to consumers at home and lower prices to consumers abroad c. firms may charge lower prices abroad to create a monopoly d. all of these statements are true.

d. all of these statements are true.

________ unemployment is NOT associated with economic fluctuations. a. Structural b. Cyclical c. Frictional d. both a & c

d. both a & c

Steel workers laid off from their jobs as the result of a recession are considered a. seasonally unemployed. b. frictionally unemployed. c. structurally unemployed. d. cyclically unemployed.

d. cyclically unemployed.

An increase in the income tax rate ________ the value of the tax multiplier a. has no effect on b. may increase or decrease c. increases d. decreases

d. decreases

Net exports include goods produced a. abroad that are sold domestically, less goods that are produced domestically that are sold abroad. b. domestically that are sold domestically, less goods produced domestically that are sold abroad. c. domestically that are sold abroad, less goods produced domestically that are sold domestically. d. domestically that are sold abroad, less goods that are produced abroad that are sold domestically.

d. domestically that are sold abroad, less goods that are produced abroad that are sold domestically.

If prices are sticky a. prices will quickly adjust to changes in demand. b. quantity supplied will always equal quantity demand. c. economic activity will be coordinated efficiently. d. economic activity will not be coordinated efficiently.

d. economic activity will not be coordinated efficiently.

People who are only working part-time, but want to be working full-time, are classified officially as a. unemployed and in the labor force. b. unemployed and out of the labor force. c. employed and out of the labor force. d. employed and in the labor force.

d. employed and in the labor force.

If a country's currency appreciates, the country will experience a ________ in exports and a ________ in imports. a. rise; rise b. fall; fall c. rise; fall d. fall; rise

d. fall; rise

Outside lags occur because a. once a problem is diagnosed, it still takes time to implement policy changes. b. it takes time to identify a problem. c. once changes are finally diagnosed and implemented, policies are immediately effective. d. firms must change investment plans before monetary policy can be effective.

d. firms must change investment plans before monetary policy can be effective.

Unemployment that naturally occurs during the normal workings of an economy as people change jobs and move across the country is called a. cyclical unemployment. b. natural unemployment. c. structural unemployment. d. frictional unemployment.

d. frictional unemployment.

The money multiplier tends to be greater when: a. individuals hold more cash. b. banks hold more excess reserves. c. the reserve ratio increases. d. individuals hold less cash.

d. individuals hold less cash.

Workers often have ________ contracts and so their wages are ________. a. short-term; sticky b. short-term; flexible c. long-term; flexible d. long-term; sticky

d. long-term; sticky

Money solves the dilemma of a double coincidence of wants by serving as a a. unit of account. b. store of value. c. symbol of value. d. medium of exchange.

d. medium of exchange.

When the Fed makes higher interest payments on bank reserves, banks will hold ________ reserves which will ________ the money supply. a. more; increase b. less; increase c. less; decrease d. more; decrease

d. more; decrease

Diminishing returns occurs because a. consumers don't buy enough of the products produced. b. not enough people have jobs c. two people have not satisfied their self-interests. d. one of the inputs in the production process is fixed.

d. one of the inputs in the production process is fixed.

The time it takes for a policy to actually work is known as: a. fiscal policy. b. crowding out. c. inside lags. d. outside lags.

d. outside lags.

Economists define the labor force to include a. all individuals of working age, regardless of whether they are working or looking for a job. b. only people who are working full time. c. people who are working. d. people who aren't working but are actively looking for a job, & people who are working.

d. people who aren't working but are actively looking for a job, & people who are working.

As interest rates fall, the a. price of bonds falls. b. promised payments of bonds fall. c. face values of bonds fall. d. price of bonds rises.

d. price of bonds rises.

Which of the following is NOT a component of private investment, for purposes of GDP accounting? a. additions to firms' stock of inventories b. newly built factories c. newly produced housing d. purchases by firms of used machinery

d. purchases by firms of used machinery

At higher interest rates the a. money supply is higher. b. money supply is indeterminate. c. quantity of money demanded is higher. d. quantity of money demanded is lower.

d. quantity of money demanded is lower.

Tariffs ________ prices for domestic consumers and import quotas ________ prices for domestic consumers. a. lower; raise b. raise; lower c. lower; also lower d. raise; also raise

d. raise; also raise

What would be a way for the Federal Reserve to slow down the economy when it is growing too quickly or is inflationary? a. encourage the stock market b. print more money c. buy back government bonds on the open market d. sell more government bonds

d. sell more government bonds

"Final goods and services" are those that are: a. double counted in the calculation of GDP. b. used in the production of other goods and services. c. produced outside the United States. d. sold to ultimate or final purchasers.

d. sold to ultimate or final purchasers.

When displaced workers require retraining before entering the labor force again, it is the result of ________ unemployment. a. frictional b. cyclical c. seasonal d. structural

d. structural

At full employment the unemployment rate equals the a. structural unemployment rate plus the cyclical unemployment rate. b. cyclical unemployment rate. c. structural unemployment rate. d. structural unemployment rate plus the frictional unemployment rate.

d. structural unemployment rate plus the frictional unemployment rate.

When money is used to express the value of goods and services, it is functioning as a ___ a. medium of exchange. b. store of value. c. store of purchasing power. d. unit of account

d. unit of account

Cyclical unemployment occurs a. naturally during the normal workings of an economy, as people change jobs, move across the country, etc. b. because of a mismatch between the jobs that are available in the economy and the skills of workers seeking jobs. c. because the government labels some people who aren't really in the labor force as unemployed. d. with economic fluctuations; it increases during bad times & decreases during good times.

d. with economic fluctuations; it increases during bad times & decreases during good times.

Which of these statements about trade & income inequality are not true? Q.32, T.3 a. Since 1973 in the United States, wages of skilled workers have risen more quickly than those of unskilled workers. b. The U.S. will tend to have a comparative advantage in products using skilled labor. c. Increases in imports will reduce the demand for unskilled labor d. Some of the increased wage inequality has been caused by international trade. e. All of the above statements are true.

e. All of the above statements are true.

29. Which of these statements about purchasing power parity & the law of 1 price are not true? a. According to purchasing power parity, the exchange rate between two countries reflects differences in overall price levels in the 2 countries. b. People have used the price of a Big Mac in different countries to predict exchange rates. c. purchasing power parity does not hold exactly between countries since many goods are not traded between countries d. if a group of goods costs 800 Euros in Europe and $1000 in the U.S., the exchange rate should be 0.8 Euros / $1. e. all of the above statements ARE true

e. all of the above statements ARE true

Which of these statements about Dumping are not true: Q. 31, Test 3 a. dumping occurs when a firm charges a higher price to a foreign market than the price charged in its home market b. dumping occurs when a firm charges a higher price to a foreign market than its production costs c. dumping may occur due to price discrimination: charging a different price to different customers buying the same product d. dumping may occur due to predatory pricing: cutting prices in an attempt to drive rival firms out of business. e. all of the above statements about dumping are true.

e. all of the above statements about dumping are true.

Which of these statements about the natural rate of unemployment are true? a. the natural rate of unemployment is the rate at which there is only frictional & structural unemployment. b. the natural rate of unemployment is higher in Europe than in the U.S. c. the actual unemployment rate can be higher or lower than the natural rate. d. if the actual unemployment rate falls below the natural rate, inflation will rise. e. all of these statements are true.

e. all of these statements are true.


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