According to the Keynesian transmission mechanism, an increase in the money supply
causes a(n) __________ in the interest rate and a(n) __________ in investment, which
in turn causes a(n) __________ in total expenditures and aggregate demand.
a. increase; decrease; decrease
b. increase; increase; decrease
c. decrease; increase; increase
d. decrease; decrease; increase
The risk of specializing (in the production of one good or service) is
a. lower in a barter economy than in a money economy.
b. lower in a money economy than in a barter economy.
c. the same in both a money and barter economy.
d. greater the less likely you and the person you want to trade with have a double
coincidence of wants.
e. b and d
The answer is: “A geographic area in which exchange rates can be fixed or a common
currency used without sacrificing domestic economic goals.”What is the question?
a. What is a flexible exchange rate system?
b. What is a managed float area?
c. What is a purchasing power parity area?
d. What is an optimal currency area?
Economist A believes the economy is self-regulating.Economist B believes that wages
and prices are inflexible downward.Economist C believes that the AS curve is
vertical.Economist D believes that crowding out is likely to be complete.Which
economist is most likely to advocate for expansionary fiscal policy in the in the form of
greater government spending to remove an economy from a recessionary gap?
a. Economist A
b. Economist B
c. Economist C
d. Economist D
Low voter turnouts that appear to be a result of voter apathy may instead be a result of
a. government intervention.
b. special interest group activity.
c. cost-benefit calculations.
d. a and b
e. a, b, and c
At the time of Kelsey’s 20 year high school reunion she was earning $50,000 and the
CPI was 120.Now that it is time for her to attend her 30 year high school reunion,
Kelsey’s income has risen to $97,000 and the CPI is 230.At her 30 year reunion, can
Kelsey rightfully brag that her real income has risen since the last time she saw her
former classmates ten years ago?
a. Yes, Kelsey’s real income rose during that 10 year period.
b. No, Kelsey’s real income fell during that 10 year period.
c. No, Kelsey’s real income remained constant during that 10 year period.
d. It is impossible to determine what happened to Kelsey’s real income.
As the interest rate falls, the quantity supplied of money falls and the quantity
demanded of money rises.
a. True
b. False
The law of increasing opportunity cost results from the varying ability of resources to
adapt to the production of different goods and it helps to explain why production
possibilities curves are typically bowed outward.
a. True
b. False
Which of the following statements is false?
a. Activists are more likely to advocate fine-tuning the economy than nonactivists.
b. Activists believe that monetary and fiscal policies can be and should be deliberately
used to smooth out the business cycle.
c. Nonactivists believe that monetary and fiscal policies cannot and should not be
deliberately used to (try to) smooth out the business cycle.
d. Nonactivists favor rules-based monetary policy.
e. none of the above
The concept of rational expectations first appeared on the economic scene in _______,
but it wasn€t until the _____________ that it received more significant notice in the
economics profession.
a. 1931; early 1970s
b. 1961; early 1970s
c. 1981; early 1990s
d. 1991; early 2000s
e. 1921; early 1980s
Exhibit 39-9
Under a target price system, with the target price set at P1, the per-unit deficiency
payment will be:
a. P2 – P4.
b. P1 – P3.
c. P2 – P3.
d. P1 – P2.
e. none of the above
Economist David Friedman has compared free international trade to
a. the Holocaust.
b. the Cold War.
c. a technology.
d. a revolution.