The coupon rate is equal to the annual coupon payment
a. divided by the face value of the bond.
b. divided by the price paid for the bond.
c. multiplied by the price paid for the bond.
d. divided by the current market value of the bond.
Exhibit 9-4
Assume the economy is self-regulating and currently is in long-run equilibrium with the
price level equal to P5. If something happens that shifts the AD curve to the AD1
position, the economy will eventually settle down at a long-run equilibrium point of
__________.
a. P5, Q3.
b. P4, Q4.
c. P3, Q3.
d. P3, Q5.
e. P4, Q2.
Economists who believe that the economy is self-regulating are more likely to be
nonactivists than activists.
a. True
b. False
In the Keynesian transmission mechanism, if the money market is in the liquidity trap,
an increase in the money supply will
a. cause total expenditures and aggregate demand to increase.
b. cause total expenditures and aggregate demand to decrease.
c. have no impact on total expenditures and aggregate demand.
d. cause total expenditures to increase and aggregate demand to decrease.
e. cause total expenditures to decrease and aggregate demand to increase.
If Japanese real interest rates fall relative to real interest rates in the U.S., the yen will
likely appreciate and the dollar will likely depreciate.
a. True
b. False
Which economist said, “This focus on distribution makes the significance of
distributional issues (transfer issues) in political life relatively greater and the
significance of widespread common interest in political life relatively smaller.”?
a. John Maynard Keynes
b. Milton Friedman
c. David Friedman
d. Mancur Olson
e. David Ricardo
Which of the following statements is true?
a. In a price support program, consumers end up paying the price support.
b. In a target price system, consumers end up paying the target price.
c. In a target price system, the per-unit deficiency payment is equal to the difference
between the quantity demanded at the market price and the quantity supplied at the
market price.
d. Acreage allotment programs directly (as opposed to indirectly) raise agricultural
product prices.
e. b and d
Which of the following illustrates a barter transaction?
a. A bushel of oranges is traded for a bushel of apples.
b. Someone buys a pizza for the special price of $4.
c. Someone buys a house for $100,000.
d. b and c
e. a, b, and c
Exhibit 15-1
A Keynesian would say that natural market forces work so slowly in a recessionary gap
in taking the economy between point __________ that an activist monetary policy is
called for.
a. B and point D
b. B and point C
c. C and point B
d. B and point A
Keynesians believe
a. in laissez-faire.
b. that equilibrium may exist at less than full employment.
c. in the use of fiscal policy to stabilize the economy.
d. b and c
e. all of the above
Which of the following is not an example of crowding out?
a. Government purchases rise, the budget deficit rises, the federal government’s demand
for loanable funds rises, the interest rate rises, and investment falls.
b. Government spends more on X, prompting individuals to spend less on X.
c. Taxes decline, the budget deficit rises, the federal government’s demand for loanable
funds rises, the interest rate rises, the demand rises for U.S. dollars, the dollar
appreciates, and net exports decline.
d. Business firms spend more on X, prompting households to spend less on Y.
e. none of the above
Which of the following is always a characteristic of the contraction phase ofthe
business cycle?
a. lower unemployment rates
b. a decline in Real GDP
c. higher inflation rates
d. a decline in GDP
e. all of the above
Suppose the money market is in the liquidity trap and that the economy is experiencing
a recessionary gap. A Keynesian economist would most likely advocate
a. expansionary monetary policy.
b. contractionary monetary policy.
c. expansionary fiscal policy.
d. contractionary fiscal policy.
Exhibit 7-5Economic Data for Country Z
What was Country Z’s economic growth rate between year 2 and year 3?
a. -3.0%
b. 2.6%
c. 14.0%
d. -2.2%
When World War II ended, the new era of globalization began.
a. True
b. False
Suppose a Mexican consumer wants to buy an American television for $500 and an
American wants to buy a Mexican raincoat for 700 pesos. If the exchange rate is $0.10
= 1 peso, then the price of the television in pesos will be __________ and the price of
the raincoat in dollars will be __________.
a. 5000 pesos;$70
b. 50 pesos;$7,000
c. 500 pesos;$7
d. 5 pesos;$7,000
As the interest rate increases, the opportunity cost of holding money __________ and
individuals choose to hold __________ money.
a. rises; more
b. falls; less
c. rises; less
d. falls; more
Open market operations are the
a. buying and selling of Federal Reserve Notes in the open market.
b. means by which the Fed supplies the economy with currency.
c. means by which the Fed acts as the government’s banker.
d. buying and selling of government securities by the Fed.
e. buying and selling of government securities by the Treasury.