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An advantage to floating exchange rates is that they help:
A) insulate countries from currency fluctuations.
B) insulate countries from recessions starting in other countries.
C) keep exports from replacing domestic jobs.
D) keep export prices down.
If Mega Corp. borrows $8,000 and agrees to pay the lender $9,000 in one year, the
annual interest rate on the loan is approximately:
A) 9.0%.
B) 10.5%.
C) 12.5%.
D) 11.8%.
The most important driver for economic growth appears to be:
A) increases in physical capital.
B) increases in human capital.
C) technological progress.
D) foreign investment.
According to the Great Moderation consensus:
I. fiscal policy should be the main stabilization tool.
II. the effectiveness of economic policy is limited by the political business cycle.
A) I only
B) II only
C) I and II
D) neither I nor II
Figure: Tom's Production Possibilities
Look at the figure Tom's Production Possibilities. Which point or points represent(s) a
combination of coconuts and fish that is efficient in production?
A) A only
B) A and B
C) B and C
D) D only
Which of the following best exemplifies the law of demand?
A) As income taxes rise, fewer new cars are purchased.
B) As the price of corn rises, more acres of corn are planted.
C) As the price of a car rental rises, fewer cars are rented.
D) As the population rises, more electricity is consumed.
Higher rates of interest tend to _____ the quantity of loanable funds demanded, and
lower rates of interest tend to _____ it.
A) increase; reduce
B) reduce; reduce
C) increase; increase
D) reduce; increase
Scenario: The Employment Rate
A group of 10 people includes 3 retirees, 2 part-time workers, 2 discouraged workers, 1
unemployed worker, and 2 full-time workers.
Look at the scenario The Employment Rate. The unemployment rate is:
A) 10%.
B) 30%.
C) 20%.
D) 50%.
Recessions are periods in which output and employment are falling.
A) True
B) False
Currency held in bank vaults and bank deposits held at the Federal Reserve are:
A) part of M1.
B) part of M2.
C) part of M3.
D) not part of the money supply.
Real business cycle theory argues that:
A) changes in inventories are the cause of the business cycle.
B) fluctuations in the rate of growth of total factor productivity cause the business
cycle.
C) aggregate demand is more important than aggregate supply in identifying the causes
of the business cycle.
D) changes in the money supply are the primary cause of the business cycle.
In the equation C= A+ MPC YD, _____ represents autonomous consumption.
A) C
B) A
C) MPC
D) YD
Table: Investment Projects
Look at the table Investment Projects. If the market interest rate is 11%, the amount of
investment demanded is:
A) $800.
B) $1,000.
C) $2,000.
D) $4,000.
A fixed exchange rate means that supply and demand of the currency determine its
exchange rate.
A) True
B) False
National savings is the sum of private savings and:
A) private consumption.
B) government tax revenue.
C) the budget balance.
D) trade surplus.
All other things equal, an expansionary monetary policy will cause the domestic
currency to appreciate.
A) True
B) False
Prior to the Civil War:
A) the U.S. government issued paper money but only in small quantities.
B) the U.S. government did not allow banks to issue private money.
C) the U.S. government did not issue paper money.
D) all private money issued by banks was of equal value.
A person who spends time looking for work is:
A) engaged in job search.
B) usually counted as a marginally attached worker.
C) counted as out of the labor force.
D) usually counted as a discouraged worker.
Natural resources are:
A) more important determinants of productivity today than ever before.
B) the reason behind the fast development of countries like Japan.
C) the reason behind the slow development of countries like Nigeria.
D) less reliable indicators of productivity today than they were a century ago.
Monetarists argued that fiscal policy was ineffective if the money supply increased.
A) True
B) False
The money demand curve shows the relationship between the _____ and the _____ of
money demanded.
A) money supply; quantity
B) aggregate price level; nominal quantity
C) interest rate; nominal quantity
D) real GDP; nominal quantity
Britain has changed from a fixed exchange rate regime to a floating exchange rate
regime.
A) True
B) False
An urbanized country has 100 million workers living on 100 square miles of land. A
country that is principally rural has 1 million workers living on 10 square miles of land.
From this information we know that the urbanized country is _____ relative to the rural
country.
A) land-abundant
B) labor-abundant
C) land-intensive
D) labor-intensive
The zero lower bound for interest rates is:
A) the fact that interest rates can't go below zero.
B) a theory that says that interest rates should have no bounds or limits.
C) a law that prohibits credit unions from paying interest on checkable deposits.
D) only a theory that never actually occurs in the real world.
Table: National Income Accounts
Trillions
Look at the table National Income Accounts. The value of national savings is:
A) $15.9 trillion.
B) $4.9 trillion.
C) $2.1 trillion.
D) $1.6 trillion.
If the price of an asset is expected to rise in the future:
A) asset owners will be more willing to sell it now.
B) it will be more in demand today.
C) the price of the asset will fall today.
D) the market is irrational.
The aggregate demand curve shows the relationship between the aggregate price level
and (the) aggregate:
A) productivity.
B) unemployment rate.
C) quantity of output demanded by households, businesses, the government, and the
rest of the world.
D) quantity of output demanded by businesses only.
Domestic savings and foreign savings are:
A) sources of funds for investment spending.
B) equal in terms of the composition of total savings.
C) used for investment spending only when there is unplanned investment spending.
D) not necessary for investment spending, since government funds this spending.
Look at the scenario Assets and Liabilities of the Banking System. Suppose that the
reserve ratio is 10% and the Federal Reserve buys $11,000 worth of U.S. Treasury bills
from the banking system. If the banking system does NOT want to hold any excess
reserves, _____ will be added to the money supply.
A) about $667,000
B) about 111,000
C) $250,000
D) $1 million
The belief that importing goods from low-wage countries will hurt the standard of
living of workers in the importing country is known as the:
A) Heckscher"Ohlin theory.
B) pauper labor fallacy.
C) sweatshop labor fallacy.
D) theory of absolute advantage.
Figure: The Market for Roses
Look at the figure The Market for Roses. Assume that PAis the autarky price and PWis
the world price. Consumer surplus with international trade would be area:
A) W+ X+ Y.
B) Z.
C) W+ X+ Z.
D) W.
