Recall Application 2, “Increased Political Independence for the Bank of England
Lowered Inflation Expectations,” to answer the following questions:
According to the application, there is evidence that supports the conjecture that:
A) more central bank independence is associated with lower inflation.
B) more central bank independence is associated with higher real GDP.
C) less central bank independence is associated with higher real GDP.
D) less central bank independence is associated with lower inflation.
First National Bank has liabilities of $1 million and owners’ equity of $300,000. First
National Bank’s assets are:
A) $100,000.
B) $700,000.
C) $900,000.
D) $1.3 million.
Recall the Application about the relationship between economic growth and inequality
to answer the following question(s).
According to this Application, Berg and Ostrey found that
A) levels of equality or inequality had no direct bearing on long periods of growth.
B) inequality promoted longer periods of growth than did equality.
C) when there was more equality, spells of growth within a country tended to last
longer.
D) when there was more equality, any signs of growth were short-lived.
The relationship between the level of prices and the total quantity of goods and services
that firms supply in the short run is:
A) similar in the long run and in the short run due to the existence of sticky prices.
B) marginally decreasing.
C) positive.
D) negative.
GDP calculations tend to exclude all of the following EXCEPT
A) illegal transactions.
B) environmental quality.
C) work that people do for themselves in their own homes.
D) salaries paid to government employees.
Which of the following is a problem of subsidizing an industry to help it establish a
world monopoly?
A) All monopolies create deadweight losses.
B) A nation may pick the wrong industry to subsidize.
C) If both the domestic firm and the foreign firm enter the market, nations might end up
subsidizing two money losing firms.
D) both B and C
A country’s currency depreciates relative to a foreign currency if:
A) it takes more of the home currency to buy the foreign currency.
B) it takes less foreign currency to buy the home currency.
C) the prices of goods in the home country increases faster than in the foreign country.
D) A and B are correct.
In 2009, approximately 52 percent of the U.S. public debt was held by
A) private companies.
B) foreigners.
C) investment firms.
D) individuals.
If the quantity equation holds, then a country operating under a gold standard will
experience ________ when its residents discover large gold deposits underground.
A) inflation
B) disinflation
C) deflation
D) All of the above are correct.
Given the following information about Gotham Bank:
Reserve Requirement 20 percent Gotham Bank is holding ________ in excess reserves.
A) $22,000
B) $12,000
C) $2,000
D) -$2,000
Refer to Figure 15.2. Adjustment from a short-run equilibrium to the long-run
equilibrium is represented by a movement from point ________ to point ________.
A) ; e
B) c;
C) ; c
D) c; d
Suppose Venezuela experiences economic growth in 2013, yet its unemployment rate is
15 percent, which is above the South American average. This indicates that Venezuela’s
2013 output is
A) below potential output.
B) above potential output.
C) above actual output.
D) below actual output.
The reason why the budget deficit increases during recessions is:
A) higher welfare payments.
B) higher tax revenues.
C) lower tax rates.
D) Both A and C are correct.
Recall the Application about the increase in political independence for the Bank of
England and its effect on anticipated inflation to answer the following question(s). In
1997, the Bank of England became more independent from the government. Although
the government still retained the authority to set overall policy goals, the Bank of
England was free to pursue its policy goals without direct political control. Federal
Reserve economist Mark Spiegel compared interest rates on two different types of
long-term bonds, those that are automatically adjusted for inflation and those that are
not, to see how the British bond market reacted to this policy change.In this
Application, according to some economists, the move toward more political
independence for the Bank of England would tend to
A) lend to its credibility in fighting inflation.
B) reduce anticipated inflation but increase unanticipated inflation.
C) make it less credible with respect to conducting monetary policy.
D) decrease the need and accuracy of rational expectations.