Problem Set Q's
Excluding cases where banks had accumulated a lot of non-deposit liabilities that are not covered by FDIC insurance, would analysts generally agree that deposit insurance has been successful in preventing bank runs? A. Yes, deposit insurance has eliminated any chance that a bank run or bank failure can occur. B. Yes, since bank runs and bank failures have been relatively rare since the advent of deposit insurance. Your answer is correct. C. No, bank runs and bank failures still occur at an alarmingly high rate in countries with deposit insurance programs. D. No, since institutional bank runs are resistant to the preventive effect of deposit insurance.
B. Yes, since bank runs and bank failures have been relatively rare since the advent of deposit insurance.
In the standardized test example we discussed in lecture, which method produced the highest average increase in student's performance on a standardized exam? A. Giving students $20 if they performed better on the exam Your answer is not correct. B. Giving students nothing C. Giving students $20, and threatening to take it back if they did not perform better on the exam This is the correct answer. D. Giving students $1 if they performed better on the exam
C. Giving students $20, and threatening to take it back if they did not perform better on the exam
The great disparity in economic prosperity between North and South Korea can best be explained by the _____________. A. Culture hypothesis B. Fundamental prosperity hypothesis C. Institutions hypothesis Your answer is correct. D. Geography hypothesis
C. Institutions hypothesis
What is stockholders' equity? A. The appraised value of a bank's outstanding shares of stock. B. The difference between a bank's total reserves and total demand deposits. C. The difference between a bank's total assets and total liabilities. Your answer is correct. D. A bank's revenues less its operating costs.
C. The difference between a bank's total assets and total liabilities.
Which of the following is not true regarding the natural rate of unemployment? A. The natural rate of unemployment does not include cyclical unemployment. B. The natural rate includes both frictional and structural unemployment. C. The natural rate of unemployment is 0 percent when the U.S. economy is not in a recession. Your answer is correct. D. The natural rate is calculated by averaging the unemployment rate over an extended time period.
C. The natural rate of unemployment is 0 percent when the U.S. economy is not in a recession.
What is meant by herding? A. Influencing others with our opinions or ideologies. B. Helping others. C. Sacrificing to promote equality. D. Conforming our decisions to the behavior of others.
D. Conforming our decisions to the behavior of others.
A bank run is ____________. A. an extraordinarily large volume of withdrawals from all banks driven by a concern that inflationary forces are poised to diminish the purchasing power of money. B. a sudden desire on the part of a bank's shareholders to sell their bank stock. C. an unexpected attempt of one bank to initiate a hostile takeover of another, usually smaller, bank. D. an extraordinarily large volume of withdrawals driven by a concern that a bank will run out of liquid assets with which to pay withdrawals.
D. an extraordinarily large volume of withdrawals driven by a concern that a bank will run out of liquid assets with which to pay withdrawals.
When the value of a U.S. bank's assets become less than its liabilities, the government, through the FDIC, ___________. A. shuts the bank down and makes payouts to its depositors. B. searches for a healthy bank to take over its operations. C. lets the "chips fall where they may." D. presses Congress for bailout money. E. A and B are the usual responses. Your answer is correct. F. C and D represent the standard operating procedures.
E. A and B are the usual responses.
Two countries, Baltonia and Polonia, have aggregate production functions in the form Y = A × K1/3 × H2/3, where Y denotes total output, A denotes the level of technology, K denotes the physical capital stock, and H denotes the number of efficiency units of production. Both countries have the same number of efficiency units of labor and use the same technology. However, Baltonia has a smaller physical capital stock than Polonia does. Which of the following is likely to be true in this case? A. The poverty rate in Baltonia is lower than that in Polonia. B. The GDP of Baltonia is lower than that of Polonia. Your answer is correct. C. The GDP of Baltonia is higher than that of Polonia. D. The Human Development Index of Baltonia is higher than that of Polonia.
B. The GDP of Baltonia is lower than that of Polonia.
Assume a government expenditure multiplier of 1.2. Fiscal policy could theoretically fix a recessionary output gap of $800.4 billion with a ____________. A. $667 billion increase in government spending. Your answer is correct. B. $960.5 billion increase in government spending. C. $67 billion increase in consumption. D. $67 billion decrease in consumption.
. $667 billion increase in government spending.
Other than open market operations, what tools does the Federal Reserve use to manipulate interest rates in the economy? (Check all that apply.) A. Changing the reserve requirement. Your answer is correct. B. Changing the interest rate paid on reserves deposited at the Fed. Your answer is correct. C. Changing the magnitude of federal transfer payments. D. Quantitative easing. Your answer is correct. E. Lending from the discount window.
A. Changing the reserve requirement. Your answer is correct. B. Changing the interest rate paid on reserves deposited at the Fed. D. Quantitative easing. Your answer is correct. E. Lending from the discount window.
In the 1990s, Uganda received a sizable amount of foreign aid from the international community for education. However, only 13 percent of schools in Uganda actually received the grants funded by the aid. What might explain why so few Ugandan primary schools benefited from the foreign aid? A. It was stolen by government officials for their own use. Your answer is correct. B. It was instead used to invest in physical capital. C. It was instead used by rebels to destabilize the government. D. It was needed first to develop inclusive economic institutions.
A. It was stolen by government officials for their own use.
Who bears the risk that a bank faces when stockholders' equity is greater than zero? A. Depositors with accounts greater than $250,000. B. The bank's stockholders. Your answer is correct. C. The FDIC. D. Taxpayers.
B. The bank's stockholders.
The prisoners' dilemma is ____________ with a ____________ equilibrium that is not the best outcome for both players. A. an extensive-form game; submissive strategy. B. a simultaneous move game; dominant strategy. Your answer is correct. C. a simultaneous move game; submissive strategy. D. an extensive-form game; dominant strategy.
B. a simultaneous move game; dominant strategy.
The Taylor rule states that ___________. A. central banks should set the quantity of their actual money stocks according to a formula that incorporates a fixed price for gold and an index of the country's exchange rate. B. central banks should set their policy rates (in the United States, the federal funds rate) according to a formula that incorporates the long-term target for the policy rate, the output gap, and the deviation of inflation from its target. Your answer is correct. C. central banks should set their policy rates (in the United States, the federal funds rate) according to a formula that incorporates the long-term target for the policy rate, the inflation rate, and the unemployment rate. D. central banks should set their money supply growth rates according to a formula that incorporates the real GDP growth rate and the rate of change in the velocity of money.
B. central banks should set their policy rates (in the United States, the federal funds rate) according to a formula that incorporates the long-term target for the policy rate, the output gap, and the deviation of inflation from its target.
The BLS officially classifies a person as being employed ____________. A. if that person holds a paid job or may not be working but has looked for work in the previous week. B. if that person holds either a part-time or full-time paid job. Your answer is correct. C. only if that person has worked full time over the previous week. D. when a person has worked at the same job for one year continuously.
B. if that person holds either a part-time or full-time paid job.
Physical capital accumulation is driven by ____________. A. the marginal product of capital. B. investment. Your answer is correct. C. the growth rate of GDP. D. government purchases.
B. investment.
The term efficiency units of labor is the ____________. A. number of workers that can be used in a production process before diminishing marginal product of labor sets in. B. product of the number of workers and the level of human capital. Your answer is correct. C. slope of the production function at the steady-state equilibrium point. D. number of workers that can efficiently work in a production process, given current levels of technology and physical capital.
B. product of the number of workers and the level of human capital.
Suppose that a goalie is playing a mixed strategy between diving to the left and the right. A player decides which strategy to employ when playing a game with mixed strategies by choosing ____________. A. based on the dominant strategy. B. randomly. Your answer is correct. C. based on the Nash equilibrium. D. the Fibonacci sequence.
B. randomly.
The culture hypothesis states ____________. A. prosperity may affect a country's cultural beliefs. B. societal values are responsible for differences in prosperity. Your answer is correct. C. societal values are proximate causes of prosperity. D. shared experiences are reducing differences in prosperity.
B. societal values are responsible for differences in prosperity.
What is deposit insurance? A. A type of insurance that a bank's depositors can purchase either from the bank itself or from the government that protects deposits. B. A program implemented in most countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its withdrawals. Your answer is correct. C. A system of protection for banks in the event that depositors seek to make large and simultaneous withdrawals. D. A bailout program funded by taxpayers for financial intermediaries deemed too big to fail.
B. A program implemented in most countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its withdrawals.
The dominant strategy for a bidder in an English auction is to bid ___________. A. until the price is slightly below your maximum willingness-to-pay value. Your answer is not correct. B. until the price reaches your maximum willingness to pay for the item. This is the correct answer. C. your willingness to pay multiplied by the number of competitors divided by the total number of bidders. D. until the price is slightly above your maximum willingness-to-pay value.
B. until the price reaches your maximum willingness to pay for the item.
Using the chart above, what were the two highest rates of unemployment since 1948? When did they occur? A. 10.8% in 2001 and 15% in 2009. B. 10.8% in 1982 and 10% in 2009. Your answer is correct. C. 9% in 1975 and 10.8% in 1982. D. 2.5% in 1955 and 3.5% in 1969.
B. 10.8% in 1982 and 10% in 2009.
Which of the follow is NOT an example of a statistical method economists use? Difference-in-difference B. Most-squared error modeling Your answer is correct. C. Structural modeling D. Instrumental variables estimation
B. Most-squared error modeling
In April 2012, the Bazanian Daily, a leading newspaper in the country of Bazania, carried a report titled "20,000 jobs added in the last quarter; unemployment rate shoots up from 5 percent to 6.7 percent." How could the unemployment rate in Bazania increase even when new jobs were created? A. The new jobs may have made discouraged workers optimistic enough to start applying for jobs, thus re-entering the labor force and being counted as unemployed, which causes the overall unemployment rate to increase. Your answer is correct. B. Only government jobs are counted in the official unemployment rate. So, if the 20,000 new jobs were not government jobs, then they will not have any impact on the overall unemployment rate. C. Since the unemployment rate equals the number of unemployed multiplied by the labor force, when 20,000 new jobs are added, it causes the labor force to increase, which increases the unemployment rate. D. Government jobs are not counted in the official unemployment rate. So, if the 20,000 new jobs were government jobs, then they will not have any impact on the overall unemployment rate.
A. The new jobs may have made discouraged workers optimistic enough to start applying for jobs, thus re-entering the labor force and being counted as unemployed, which causes the overall unemployment rate to increase.
Suppose you are comparing the income per capita in the United States and Ghana. You try two approaches. In the first approach, you convert the Ghana values into U.S. dollars using the current exchange rate between the U.S. dollar and the Ghanaian cedi. In the second approach, you also convert both values to U.S. dollars using the purchasing power parity-adjusted exchange rate. Which approach is likely to give you a more accurate picture of the living standards in both countries? A. The second approach, because it takes into account the relative costs for each country. Your answer is correct. B. The second approach, because it's the total dollars that matter. C. The first approach, because the United States is the world's leader and the dollar is the global reserve currency. D. The first approach, because it's the total dollars that matter.
A. The second approach, because it takes into account the relative costs for each country.
What does it mean to say that an economic fluctuation involves the co-movement of many aggregate macroeconomic variables? A. These variables grow or contract together during booms and recessions. Your answer is correct. B. Economic fluctuations in one period lead to movement of these variables in the next period. C. Real variables move in the same direction as the economic fluctuation, whereas nominal variables move opposite. D. These variables grow during booms and contract during recessions.
A. These variables grow or contract together during booms and recessions.
How do increases in technology affect the aggregate production function? A. With increases in technology, the aggregate production function shifts up, indicating more output is produced from the same amount of inputs. Your answer is correct. B. As technology increases, diminishing marginal product sets in such that each unit of technology produces less output. C. With better technology, the aggregate production function shifts down because fewer workers are needed. D. Even with technology increases, the aggregate production function will remain constant unless the technology increases are matched by increases in the physical capital stock.
A. With increases in technology, the aggregate production function shifts up, indicating more output is produced from the same amount of inputs.
Firms, households, and governments use the credit market for borrowing. The credit demand curve shows the relationship between the quantity of credit demanded and the real interest rate. The credit demand curve slopes downward because ____________. A. a lower real interest rate raises a borrowing firm's profit and hence its willingness to borrow. Your answer is correct. B. government borrowing increases when budget deficits increase, and vice versa. C. a lender's ability to make loans falls as the real interest rate rises. D. households seek to borrow more when their outlook for the future improves. A shift in the credit demand curve can be caused by ___________. A. changes in household preferences or expectations. B. changes in government policy. C. changes in perceived business opportunities for firms. D. all of the above. Your answer is correct. E. A and B only.
A. a lower real interest rate raises a borrowing firm's profit and hence its willingness to borrow. D. all of the above.
Under a flexible exchange rate, an increased demand for domestic products by foreign buyers causes ____________. A. a rightward shift of the demand curve for dollars and an increase in the equilibrium nominal exchange rate. Your answer is correct. B. a leftward shift of the demand curve for dollars and a decrease in the equilibrium nominal exchange rate. C. a movement down the demand curve for dollars and a decrease in the equilibrium nominal exchange rate. D. a movement up the demand curve for dollars and an increase in the equilibrium nominal exchange rate.
A. a rightward shift of the demand curve for dollars and an increase in the equilibrium nominal exchange rate.
According to the aggregate production function, GDP increases when a nation ____________. (Check all that apply.) A. increases the human capital of its workers, H. Your answer is correct. B. increases its stock of physical capital, K. Your answer is correct. C. increases its consumption, C. D. improves its technology, A.
A. increases the human capital of its workers, H. Your answer is correct. B. increases its stock of physical capital, K. D. improves its technology, A.
Terms of trade are determined ____________. A. on the basis of opportunity costs. Your answer is correct. B. by buyers. C. on the basis of absolute advantage. D. by sellers.
A. on the basis of opportunity costs.
Private property rights foster economic development by ____________. A. providing incentives to borrow money. Your answer is correct. B. redistributing income to those less fortunate. C. removing the need for costly contracts. D. replacing the law.
A. providing incentives to borrow money.
The owners' and the players' union are negotiating over a contract for the upcoming hockey season. In October, the owners will make an offer to the union. If they reach an agreement, they will share $50 of revenues. So, for example, if the owners offer the players $10 in October and the players accept, then the players receive $10 and the owners keep the remaining $40. If the players reject the offer, then they go on strike and negotiations resume in November. In November, the players will make an offer to the owners. If they reach an agreement, they will share just $20 of revenues (revenues have fallen because of the strike). So, for example, if the players offer the owners $10 in November and the owners accept, then the owners receive $10 and the players keep the remaining $10. If the owners reject the November offer, then the strike continues for the rest of the season and the players and the owners both receive zero. What would you expect to happen in November if there is a strike in October? A. The players will refuse to negotiate and stay on strike. B. The players will capitulate and offer to take 50 percent of the remaining value. C. The players will offer the owners zero and keep all $20 for themselves. Your answer is correct. D. The players will capitulate and offer to take 25 percent of the remaining value. Use backward induction to find what would happen in October. For simplicity, assume that if someone is indifferent between accepting or rejecting an offer, they will accept the offer. A. The owners will earn a payoff of $40. B. The owners will earn a payoff of $0. C. The owners will earn a payoff of $30. Your answer is correct. D. The owners will earn a payoff of $10.
C. The players will offer the owners zero and keep all $20 for themselves. C. The owners will earn a payoff of $30.
A pure strategy involves ____________. A. choosing ethical actions over Nash strategies. B. choosing ethical actions over dominant strategies. C. choosing one particular action for a situation. Your answer is correct. D. choosing different actions randomly.
C. choosing one particular action for a situation.
The geography hypothesis states ____________. A. climate is a proximate cause of prosperity. B. ecology has a common effect on prosperity in all countries. C. climate is responsible for differences in prosperity. Your answer is correct. D. prosperity may affect a country's ecology.
C. climate is responsible for differences in prosperity.
The idea of leaving all the money in an account and earning interest not only on the original deposit but also on the past interest earned is called ____________. A. rate multiplication. B. expansion. C. compounding. Your answer is correct. D. interest reduction.
C. compounding.
The tragedy of the commons can be modeled as a prisoners' dilemma game when the __________. A. common resource equilibrium is the dominant strategy for public goods. B. Nash equilibrium is equal to the common resource equilibrium. C. dominant strategy equilibrium leads to the destruction of a common resource. Your answer is correct. D. Nash equilibrium is greater than the dominant strategy equilibrium.
C. dominant strategy equilibrium leads to the destruction of a common resource.
In a game with mixed strategies, does either of the players have a dominant strategy? Why or why not? A. no, because dominant strategies involve picking random strategies. B. yes, because dominant strategies involve picking random strategies. C. no, because the best choice in a mixed strategy game is to pick a random strategy. Your answer is correct. D. yes, because the best choice in a mixed strategy game is to pick a random strategy.
C. no, because the best choice in a mixed strategy game is to pick a random strategy.
Economists include the word final in the definition of GDP because we ____________. A. only seek to value the end product in a chain of production. B. must avoid the error of double counting. C. cannot accurately measure the value of intermediate or component goods. D. A and B only. Your answer is correct. E. all of the above.
D. A and B only.
How do expansionary policies differ from contractionary policies? A. Expansionary policies seek to shift the labor demand curve to the right, while contractionary policies seek to shift it to the left. B. Expansionary policies seek to increase economic growth and increase employment, while contractionary policies seek to reduce the risk of excessive price inflation. C. Expansionary policies seek to reduce the severity of recessions, while contractionary policies seek to slow down the economy when it grows too fast. D. All of the above. Your answer is correct. E. Only A and C are correct.
D. All of the above.
Suppose that a mutual fund, Washington Peak Strategic Bond Fund, believes it has hit upon a winning investment strategy. Its strategy involves betting on the fact that the spread, or the difference between, the interest rate on bonds issued by the U.S. government and the British government will not exceed two percentage points. Based on historical data for the past 15 years, the traders at Washington Peak have decided to invest all of the fund's money in exploiting this apparent ceiling on the interest rate spread. According to Washington Peak's prospectus, investors need to pay fees of 2% annually. Based on the historical success of this investment strategy, the strategy is projected to generate annual returns (once fees are paid) of 8%. A friend is considering investing in Washington Peak and asks you for investment advice. What would you suggest? A. The strategy is backward looking in that it is rooted in historical trends that may or may not continue into the future. B. The investment strategy used by Washington Peak lacks diversification and could pose problems. Your answer is not correct. C. The annual fees of 2% are above average for mutual funds and will substantially reduce the net annual return. D. All of the above.
D. All of the above.
Julia and Alina face a choice between 5 hours of shopping a year from now or 3 hours of shopping today, noting that an hour of shopping generates 120 units of utility. Suppose Julia's discount weight equals 4/5 and Alina's discount weight equals 1/5. Which of the following statements about Julia and Alina's preferred option is true? A. Both of them prefer 5 hours of shopping in a year to 3 hours of shopping right now. B. Julia prefers 3 hours of shopping right now and Alina prefers 5 hours of shopping in a year. Your answer is not correct. C. Both of them prefer 3 hours of shopping right now to 5 hours of shopping in a year. D. Julia prefers 5 hours of shopping in a year and Alina prefers 3 hours of shopping right now.
D. Julia prefers 5 hours of shopping in a year and Alina prefers 3 hours of shopping right now.
Is a player's best response in a game the same as his dominant strategy? A. No, the key concept of game theory is finding a best response in each game, so that each best response leads to a Nash equilibrium. B. Yes, if a player has a dominant strategy, then it is his best response, and every best response is always a dominant strategy. C. Yes, if a player's best responses depend on the strategy choices of other players, then a player's best response will be the same as his dominant strategy. D. Not necessarily. If a player has a dominant strategy, then it is his best response; however, every best response is not always a dominant strategy.
D. Not necessarily. If a player has a dominant strategy, then it is his best response; however, every best response is not always a dominant strategy.
Consider a three-person version of the ultimatum game: The Responder does not receive any money but instead decides whether to accept on behalf of a third-party bystander. Otherwise the structure is like the ultimatum game in which the Proposer first decides how to split $10.00. Suppose that in this version you observe that the Responder typically only accepts equal splits of $5.00 each and typically rejects all other offers. Given this information, which of the following is true of the behavior of the Responder when faced with an offer of an even split? A. The Responder is indifferent between accepting and rejecting the offer. B. The Responder has strong desire to help others receive higher payoffs. C. The Responder has a weak desire to punish unfair offers. D. The Responder accepts the offer as she values fairness highly.
D. The Responder accepts the offer as she values fairness highly.
What are the automatic and discretionary components of fiscal policy? A. The automatic components are limited to government expenditures, while the discretionary components entail changes in both taxes and expenditures. B. The automatic components stimulate the economy, while the discretionary components serve purposes unrelated to the health of the overall economy. C. The automatic components are those fiscal actions that require accommodation from monetary policy, while the discretionary components do not. D. The automatic components do not require deliberate action on the part of the government, while the discretionary components do.
D. The automatic components do not require deliberate action on the part of the government, while the discretionary components do.
How are the proximate causes of prosperity different from the fundamental causes of prosperity? A. The fundamental causes of prosperity are the factors that result from the proximate causes of prosperity. B. The fundamental causes of prosperity are the factors that measure the proximate causes of prosperity. C. The fundamental causes of prosperity are the factors that evaluate the effects of the proximate causes of prosperity. D. The fundamental causes of prosperity are the factors that explain the levels of the proximate causes of prosperity.
D. The fundamental causes of prosperity are the factors that explain the levels of the proximate causes of prosperity.
Which of the following would not be counted in a nation's gross domestic product (GDP)? A. Computers produced within the nation and purchased by its citizens B. The inventoried computers that were produced in the current year but not sold C. Computers produced within the nation but purchased by foreigners D. The processor inside your smart phone
D. The processor inside your smart phone
Two gas stations, A and B, are locked in a price war. Each player has the option of raising its price (R) or continuing to charge the low price (C). They will choose strategies simultaneously. If both choose C, they will both suffer a loss of $−50. If one chooses R and the other chooses C, (i) the one that chooses R loses many of its customers and earns $0, and (ii) the one that chooses C wins many new customers and earns $500. If they both choose R the price war ends and they each earn $250. Does either player have a dominant strategy? Explain. A. The stations have a dominant strategy, which is for Station A to pick R and Station B to pick C because this maximizes their joint payoff. B. The stations have a dominant strategy, which is to pick C because this is a best response regardless of what the other station does. C. The stations have a dominant strategy, which is to pick R because this maximizes their joint payoff. D. The stations do not have dominant strategies because what works best depends on what the other station does. Your answer is correct. E. The stations have a dominant strategy, which is for Station A to pick C and Station B to pick R because this is a best response regardless of what the other station does. What is the Nash equilibrium? A. The Nash equilibrium is for both stations to pick R. B. The Nash equilibria are for Station A to pick C and Station B to pick R and for Station A to pick R and Station B to pick C. Your answer is correct. C. The Nash equilibria are for both stations to pick R and for both stations to pick C. D. The Nash equilibrium is for both stations to pick C. E. The game does not have a Nash equilibrium.
D. The stations do not have dominant strategies because what works best depends on what the other station does. B. The Nash equilibria are for Station A to pick C and Station B to pick R and for Station A to pick R and Station B to pick C.
Countercyclical monetary and fiscal policies both work by shifting the labor demand curve. The adjacent graph shows the initial labor supply curve (LS1), initial labor demand curve (LD1), and the initial labor market equilibrium in an economy (E1). Suppose the economy now experiences an economic boom due to a technological breakthrough. This shifts the labor demand curve to LD2 and the economy to E2. Using the multi-point curve drawing tool, show the shift in the appropriate curve if the government now carries out a countercyclical policy. Carefully follow the instructions above and only draw the required objects. Use the fewest points possible in achieving the desired outcome. Which of the following is not a reason why policymakers might implement growth-reducing contractionary policies during a boom? A. To cool off an economy before it overheats. B. To bring the inflation rate down to the target level. C. To prevent unsustainable economic expansions from leading to a severe downturn. D. To bring the unemployment rate down to the target level.
D. To bring the unemployment rate down to the target level.
In an English auction, ____________. A. the bidder with the highest bid wins the good. B. the price increases until there is only one standing bid. C. bidders bid publicly against each other. D. all of the above. Your answer is correct. E. A and B only.
D. all of the above.
Expansionary monetary policy would include ____________. A. an increase in the supply of reserves, a reduction in the federal funds rate, a decrease in lending capacity (reserves) of the banks, and an increase in liabilities (bonds) for the Fed. Your answer is not correct. B. an increase in reserve demand, a reduction in the federal funds rate, an increase in lending capacity (reserves) of the banks, and a decrease in liabilities (bonds) for the Fed. C. a decrease in reserve demand, an increase in the federal funds rate, an increase in lending capacity (reserves) of the banks, and an increase in liabilities (bonds) for the Fed. D. an increase in the supply of reserves, a reduction in the federal funds rate, an increase in lending capacity (reserves) of the banks, and an increase in liabilities (bonds) for the Fed.
D. an increase in the supply of reserves, a reduction in the federal funds rate, an increase in lending capacity (reserves) of the banks, and an increase in liabilities (bonds) for the Fed.
Terms of trade is the ____________. A. legal document that trading partners sign. B. time required to produce a good or service that is traded. C. benefit received from trade. D. exchange rate of goods for goods.
D. exchange rate of goods for goods.
To say that private property rights are well-enforced in an economy means that ____________. A. governments are authorized to tax property. B. businesses are owned by shareholders. C. government assets are public property. D. individuals can securely hold assets.
D. individuals can securely hold assets.
Households play a role in physical capital accumulation because ____________. A. the population growth rate determines the number of efficiency units of labor and therefore output. B. households provide the human capital that produces the physical capital. C. the interest rate on investment is determined by households. D. it is households that determine their level of consumption and therefore the rate of saving.
D. it is households that determine their level of consumption and therefore the rate of saving.
Diversification is the practice of ____________. A. putting investment funds into all possible assets. B. structuring an investment portfolio to hold equal amounts of each available asset. C. eliminating risk by splitting an investment across many assets. D. reducing risk by spreading an investment across more than one asset.
D. reducing risk by spreading an investment across more than one asset.
The demand curve for dollars shows the relationship between ____________. A. the exchange rate and the foreign inflation rate. B. how many dollars the government supplies and how many dollars domestic consumers demand. C. the exchange rate and the domestic inflation rate. D. the quantity of dollars demanded and the exchange rate.
D. the quantity of dollars demanded and the exchange rate.
The institutions hypothesis explains the difference in prosperity among nations is due to ____________. A. geographic variation in climate. B. proximate factors, such as human capital. C. differences in a society's values. D. the way societies provide public goods
D. the way societies provide public goods.
Potential workers are classified as being unemployed when ____________. A. they do not have a paid job and are currently not available for work. B. they want a full-time job and instead have a part-time job or are not working at all. C. they do not have a paid job, have looked for work in the previous 4 months, and are available for work. D. they do not have a paid job, have looked for work in the previous 4 weeks, and are available for work.
D. they do not have a paid job, have looked for work in the previous 4 weeks, and are available for work.
As long as you receive the same amount, is a sum of money worth the same today and one year later? A. Yes, as long as you receive the same amount today and one year later, it is the same regardless of the interest rate. B. Yes, receiving the same amount today or in the future is the same as long as the interest rate is positive. C. No, if there is a positive interest rate the same amount of money is worth more in the future than receiving it today. D. No, if there is a positive interest rate the same amount of money is worth more today than receiving it in the future.
D. No, if there is a positive interest rate the same amount of money is worth more today than receiving it in the future.
Suppose that the GDP in current dollars for Polonia is higher than Ruritania's GDP. However, using purchasing power parity-adjusted dollars, Ruritania's GDP is higher than Polonia's GDP. Based on this information, you can conclude ___________. A. Polonia's standard of living is likely to be better than Ruritania's. B. Ruritania's standard of living is falling and Polonia's is rising. C. Ruritania's standard of living is rising and Polonia's is falling. D. Ruritania's standard of living is likely to be better than Polonia's.
D. Ruritania's standard of living is likely to be better than Polonia's.
Economists often analyze decisions that involve up-front costs and delayed benefits. When economists value rewards that will be experienced in the future, they multiply the reward by a ____________ factor that is ____________ one to capture the idea that future rewards are worth less than current rewards. A. positive; greater than. B. negative; less than. C. negative; greater than. D. positive; less than.
D. positive; less than.
An English auction is conducted to sell a soccer ball signed by an Argentinian player, Messi. There are three bidders whose private valuations are given in the following table. Bidder Value Sheldon $1,500 Ross $1,700 Joey $1,200 The winner of this English auction will pay $15001500 (or slightly more) and gain a consumer surplus of $200200 (or slightly less). Read the statements carefully and fill in the following blanks. A painting by Mr. M.F Hussain is sold in a Dutch auction which is an open-outcry descending price auction. The bidders' risk preferences participating in a Dutch auction are assumed to be risk neutral in order to optimize their strategy in the auction. Which of the following factors influence the bidder's decision making in a Dutch auction? A. Bidder's private valuation for the auctioned item. B. The number of bidders competing in an auction. Your answer is not correct. C. Neither option A nor option B. D. Both option A and option B. This is the correct answer. Suppose Samuel participated in two Dutch auctions. The first auction was to sell an antique flute, and the second auction was to sell an antique clock. There are a total of 500 bidders for the first auction and only 5 bidders for the second auction. Which of the following statements is true in the above case? A. Samuel will bid much closer to his individual value in the first auction than in the second auction. This is the correct answer. B. Samuel will bid less aggressively in the first auction. C. Samuel will bid much closer to his individual value in the second auction than in the first auction. D. Samuel will bid more aggressively in the second auction.
Which of the following factors influence the bidder's decision making in a Dutch auction? A. Bidder's private valuation for the auctioned item. B. The number of bidders competing in an auction. Your answer is not correct. C. Neither option A nor option B. D. Both option A and option B. This is the correct answer. Suppose Samuel participated in two Dutch auctions. The first auction was to sell an antique flute, and the second auction was to sell an antique clock. There are a total of 500 bidders for the first auction and only 5 bidders for the second auction. Which of the following statements is true in the above case? A. Samuel will bid much closer to his individual value in the first auction than in the second auction. This is the correct answer. B. Samuel will bid less aggressively in the first auction. C. Samuel will bid much closer to his individual value in the second auction than in the first auction. D. Samuel will bid more aggressively in the second auction.
