If the Fed lowers the reserve requirement, then this
A) increases excess reserves, encourages banks to make more loans, and increases the
money supply.
B) decreases excess reserves, causes banks to reduce their loans, and decreases the
money supply.
C) decreases excess reserves, causes banks to reduce their loans, and increases the
money supply.
D) increases excess reserves, causes banks to reduce their loans, and increases the
money supply.
Which of the following would result in GDP for an economy equal to $10 trillion?
A) C = $6 trillion
I = $2 trillion
G = $1.5 trillion
NX = -$2 trillion
B) C = $7 trillion
I = $2 trillion
G = $4 trillion
NX = $3 trillion
C) C = $5 trillion
I = $5 trillion
G = $2 trillion
NX = -$2 trillion
D) C = $4 trillion
I = $3 trillion
G = $2 trillion
NX = -$1 trillion
The income effect of a price change refers to the impact of a change in
A) income on the price of a good.
B) demand when income changes.
C) the quantity demanded when income changes.
D) the price of a good on a consumer’s purchasing power.
An increase in the money supply will
A) increase the interest rate.
B) decrease the interest rate.
C) have no affect on the interest rate.
D) decrease the equilibrium quantity of money in the economy.
Presently, GDP is ________ to compensate for the costs of environmental damage.
A) fully adjusted
B) partially adjusted
C) adjusted on a chain-weight basis
D) not adjusted
Which of the following would be a consequence of substitution bias in the CPI?
A) Social Security payments would not adequately compensate retired workers for
inflation.
B) Businesses would overcompensate employees for inflation when giving the cost of
living rises.
C) The inflation rate based on the CPI would underestimate the true level of inflation.
D) Judges would award child support payments that would not adequately keep up with
the true cost of inflation.
The output of Mexican citizens who work in Texas would be included in the
A) gross domestic product of Mexico.
B) gross national product of Mexico.
C) gross national product of the United States.
D) net national product of the United States.
Equilibrium in the loanable funds market determines
A) the nominal interest rate.
B) the current interest rate.
C) the real interest rate.
D) the expected interest rate.
One reason Zimbabwe suffered from hyperinflation is that the government had decided
to pay for all of its expenses by
A) selling Treasury bonds to foreign governments.
B) selling its government-run oil company to a private company, which then defaulted
on its payment.
C) raising interest rates to attract foreign direct investment, then nationalizing the
foreign-owned facilities.
D) printing more and more money.
Investment, as defined by economists, would not include which of the following? Ford
A) buys a new robotic machine (from a plant in Ohio) to assemble cars.
B) adds 1,000 new cars to inventories.
C) builds another assembly plant in the United States.
D) buys U.S. government bonds.