A persistent shortage of yen at a given fixed exchange rate (in dollars per yen) is
evidence that the yen is ________ versus the dollar. This shortage can be reduced or
eliminated through a ________ of the yen.
A) undervalued; devaluation
B) undervalued; revaluation
C) overvalued; revaluation
D) overvalued; devaluation
Figure 3-7
Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and
supply curves for ramen noodles, an inferior good. Which panel describes what happens
in this market as a result of an increase in income?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
A Big Mac costs $4.56 in the United States and 9.2 zlotys in Poland. If the exchange
rate is 3 zlotys per dollar, purchasing power parity predicts that
A) the dollar will appreciate as the demand for dollars rises in the long run.
B) the dollar will appreciate as the supply of dollars falls in the long run.
C) the dollar will depreciate as the demand for dollars falls in the long run.
D) the dollar will depreciate as the supply of dollars rises in the long run.
Inflation targeting refers to conducting ________ policy so as to commit the central
bank to achieving a ________.
A) fiscal; publicly announced level of inflation
B) fiscal; zero inflation rate
C) monetary; publicly announced level of inflation
D) monetary; zero inflation rate
How does an increase in the relative price of a country’s goods in terms of foreign
goods, or real exchange rate, affect its balance of trade?
A) An increase in the real exchange rate raises imports, reduces exports, and reduces
the balance of trade.
B) An increase in the real exchange rate reduces imports, raises exports, and reduces the
balance of trade.
C) An increase in the real exchange rate reduces imports, raises exports, and increases
the balance of trade.
D) An increase in the real exchange rate raises imports, reduces exports, and increases
the balance of trade.
If the United States lifted the embargo on Cuban products, what would happen in the
U.S. market for Cuban cigars?
A) The supply curve would shift to the left.
B) The supply curve would shift to the right.
C) The demand curve would shift to the right.
D) The demand curve would shift to the left.
The impact of crowding out may be the least
A) during a deep recession.
B) when real GDP is above but close to potential GDP.
C) during an expansion.
D) when real GDP is below but close to potential GDP.
Table 8-18
A very simple economy produces three goods: cameras, legal services, and books. The
quantities produced and their corresponding prices for 2008 and 2013 are shown in the
table above.
Refer to Table 8-18. What is real GDP in 2013, using 2008 as the base year?
A) $28,885
B) $11,790
C) $11,200
D) $10,275
In order to change inflationary expectations in 1979, the Fed’s monetary policy under
Paul Volcker’s leadership resulted in ________ and ________.
A) disinflation; high unemployment
B) steep inflation; low unemployment
C) disinflation; low unemployment
D) steep inflation; high unemployment
E) deflation; high unemployment
Which of the following is an example of a trade restriction?
A) Japan places a tax on all Korean automobiles.
B) Domestic wine is more expensive than wine imported from Chile.
C) The United States, Canada, and Mexico sign the NAFTA agreement.
D) Consumers prefer German beer to domestic beer.
Which of the following is common to both tariffs and quotas?
A) Tariffs and quotas are both used as a means to increase government revenue.
B) Tariffs and quotas both increase economic efficiency.
C) Tariffs and quotas are both designed to reduce foreign competition faced by
domestic firms.
D) Tariffs and quotas are both examples of voluntary export restraints.
Before a doctor decides to keep her office open on Saturdays, she should
A) make sure that the marginal cost of doing so will exceed the marginal benefit.
B) only consider the increase in total profit from doing so.
C) weigh the costs and benefits of staying open on Saturdays before deciding if she
should go through with this idea.
D) only look at the marginal benefit of doing so, because marginal cost will not change.
The purchase by a household in China of a CD produced in the United States is
included in U.S.
A) consumption expenditures.
B) investment expenditures.
C) government purchases.
D) net exports.