Which of the following is an example of a Federal Reserve action that increases the
money supply?
A) an increase in the required reserve ratio
B) a decrease in the discount rate
C) an increase in the federal funds rate
D) the Fed selling government bonds in the open market
Recall Application 3, “Sources of Growth in China and India,” to answer the following
questions:
According to the application, why did China grow much faster than India from 1978 to
2004?
A) China invested more in physical capital and was able to increase technological
progress faster than India.
B) China invested less in physical capital and was able to increase technological
progress slower than India.
C) China had a faster population growth rate than India, causing faster technological
progress.
D) China had better government induced growth policies than India.
If an economy is represented by a point inside its production possibilities curve,
A) it can produce more of one product even if it does not produce less of another
product.
B) it can produce more of one product only if it produces less of another product.
C) it cannot produce more of one product unless it stops producing the other product
entirely.
D) it cannot possibly produce more of one product, even if it produces less of another
product.
Suppose nation A produces only two goods, apples and oranges. If nation A produces
only apples, it can make 20 apples per day. If nation A produces only oranges, it can
make 15 oranges per day. If the country has a constant production trade-off between
apples and oranges, then the opportunity cost of one apple in nation A is:
A) 1.33 oranges.
B) 15 oranges.
C) 20 oranges.
D) .75 oranges.
According to supply-side economics, a(n) ________ in the tax rate tends to increase the
labor supply and ________ aggregate output.
A) decrease; increase
B) increase; decrease
C) decrease; decrease
D) increase; increase
Figure 19.3 Refer to Figure 19.3. The market equilibrium for yen is currently at Point
A. An increase in income in the U.S. causes a movement to Point ________.
A) E
B) D
C) C
D) B
Recall the Application about how the collapse of the housing boom and the worldwide
recession of 2007 led to problems for some countries in the Euro-zone to answer the
following question(s). When the euro was launched in 1999, the vision of its founders
was to use the monetary union to further unify Europe economically and politically.
They envisioned a large economic market, comparable to the United States with
integrated goods and financial markets. They believed that by moving to a single
currency with agreements on a number of fiscal rules that they could achieve economic
stability and growth.
Recall the Application. The European nations that adopted the euro as a common
currency no longer have their own central banks and are therefore no longer able to
conduct their own independent
A) fiscal policy.
B) monetary policy.
C) international investment.
D) trade policy.
As the result of unanticipated inflation, borrowers are better off while lenders are worse
off if the actual inflation rate
A) exceeds the expected inflation rate.
B) is equal to the expected inflation rate.
C) is less than the expected inflation rate.
D) Neither borrowers nor lenders are better off as the result of unanticipated inflation.
A market failure could be caused by:
A) imperfect production.
B) many firms competing against each other for customers.
C) profit.
D) imperfect competition.
Economics is best defined as the study of
A) financial decision-making.
B) how consumers make purchasing decisions.
C) the choices made by people faced with scarcity.
D) inflation, unemployment, and economic growth.
The consumption possibilities curve shows the combinations of goods that can be
A) consumed by a nation before trade begins.
B) consumed by a nation after trading begins.
C) produced by a nation before trading begins.
D) produced by a nation after trade begins.
To think at the margin means to consider
A) how nothing remains constant over time.
B) how a small change in one variable affects another variable.
C) how people behave in their own self-interest.
D) how people will decide what to purchase.
Scenario 12.1: Jennifer has decided to give up her pack-a-day smoking habit and invest
the money she would have spent on cigarettes in a retirement account. At $6.00 a pack,
Jennifer is currently spending $2,190 per year on cigarettes. Jennifer is 25 years old and
plans to retire in 35 years, at age 60. She has chosen a retirement account that will earn
a long-term average return of 5 percent per year. Jennifer is currently earning $40,000
annually. Assume that the average annual inflation rate will be 5 percent per year, that
the cost of cigarettes will increase with inflation, and that Jennifer’s income will also
rise with the inflation rate.Refer to Scenario 12.1. By what approximate percentage will
Jennifer’s income increase from age 25 to age 60?
A) 287 percent
B) 400 percent
C) 452 percent
D) 561 percent
Refer to Figure 11.2. Suppose that Ca = 40, MPC = 0.8, I = 10. The value of
autonomous consumption is
A) 10.
B) 40.
C) 50.
D) 80.