M1 is larger than M2.
Banks can obtain funds to make loans by borrowing reserves from other banks through
the federal funds market.
Fred wants to trade peanut butter for bread. Sally wants to trade bread for jelly. Fred
and Sally have a double coincidence of wants.
Inflation increases the future purchasing power of money when money is used as a store
of value.
The equilibrium price under an import quota is above the price that occurs with an
import ban.
As output exceeds potential output, wages and prices throughout an economy will rise
above previous inflation rates.
An increase in Germany’s interest rate and an increase in Germany’s price level relative
to U.S. price level have the same effect on the exchange rate between the two countries.
An expansionary fiscal policy shifts the aggregate demand curve to the left.
To an economist, “investment” in the GDP accounts means purchases of new final
goods and services by firms.
Both real GDP and real GDP per capita vary widely from country to country.
The amount of money banks can loan out is determined by the discount rate.
According to the Classical model, an excess supply of labor would drive up wages to a
new equilibrium level and therefore unemployment would not persist.
The absence of clear property rights inhibits investment and economic growth.
In the long-run, reduced money growth results in ________ while having no effect on
the level of output.
A) lower inflation and lower unemployment
B) lower interest rates and lower inflation
C) lower interest rates and less purchasing of durable goods
D) higher interest rates and no change in inflation
Table 13.4 Refer to Table 13.4. First Charter Bank will have zero excess reserves if the
required reserve ratio is:
A) 10%.
B) 15%.
C) 20%.
D) 30%.
The quantity supplied of pounds is likely to ________ when the price of pounds
(dollars per pound) ________.
A) fall; rises
B) fall; falls
C) rise; falls
D) not change; falls
Capital stock will increase as long as
A) capital deepening decreases.
B) depreciation exceeds real GDP.
C) gross investment exceeds depreciation.
D) net investment equals zero.
Corporate taxes are:
A) taxes levied on the revenue of corporations.
B) taxes levied on the capital owned by corporations.
C) taxes levied on the dividends paid by corporations to their stockholders.
D) taxes levied on the earnings of corporations.
In 1986, the U.S. net international investment position was $136 billion. This means
that the amount of:
A) U.S. holdings of foreign assets exceeded the foreign holdings of U.S. assets by $136
billion.
B) U.S. holdings of foreign assets was less than the foreign holdings of U.S. assets by
$136 billion.
C) U.S. holdings of foreign assets was $136 billion.
D) the foreign holdings of U.S. assets was $136 billion.
Suppose that in the time it takes for him to bake a cake, Bob can sew 5 pairs of jeans. In
the time it takes for Joe to bake a cake, he can sew 8 pairs of jeans day. In this example,
Bob has ________ advantage over Joe in cake baking.
A) an absolute
B) an absolute and a comparative
C) a comparative
D) neither an absolute nor a comparative
In 2010, which of the following countries had the highest share of consumption
spending in GDP?
A) China
B) the United States
C) Germany
D) France
Firms react to unplanned inventory reductions by:
A) reducing output.
B) increasing output.
C) reducing planned investment.
D) increasing consumption.
As a result of an increase in the personal income tax rate, consumers are likely to
A) spend less.
B) spend more.
C) save more.
D) earn more money.
Figure 4.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is
$15, there is an
A) excess demand of 8 t-shirts.
B) excess supply of 8 t-shirts.
C) excess demand of 10 t-shirts.
D) excess supply of 10 t-shirts.
A major freeze in Florida has reduced the orange yield this winter. What will be the
effect of this freeze on the price and quantity in the orange market and also in the peach
market? (Assume that oranges and peaches are substitutes.)
Explain how the marginal principle can be applied to a firm’s decision about how much
labor to hire.
Assume the money market is initially in equilibrium. Now, suppose that the price level
falls. Graphically illustrate and explain what effect this reduction in the aggregate price
level will have on the money market.
Describe the field of economics known as macroeconomics.
What is the GATT?
What does an increase in population do to the demand for a product?
Why must the current account and the financial account sum to zero? (Assume the
capital account is zero.)