Which of the following will decrease the money supply?
a. an increase in the discount rate (relative to the federal funds rate)
b. an increase in the required reserve ratio
c. an open market purchase by the Fed
d. a and b
e. a, b, and c
The foreign exchange market is the market in which
a. foreigners buy U.S. real estate.
b. foreign stocks and bonds are bought and sold.
c. ideas from different countries are exchanged.
d. currencies of different countries are bought and sold.
e. none of the above
According to classical economists, Say’s law applies to a barter economy, but it does
not apply to a money economy.
a. True
b. False
The more firms that pay efficiency wages, the
a. more likely the economy will get stuck in a recessionary gap.
b. less likely the economy will get stuck in a recessionary gap.
c. more likely the economy will get stuck in an inflationary gap.
d. more likely (over time) the economy will produce Natural Real GDP.
e. b and c
Look at the following data: personal income = $4,900 billion; personal taxes = $900
billion; transfer payments = $980 billion. What is disposable income?
a. $3,200 billion
b. $4,000 billion
c. $4,980 billion
d. $1,880 billion
e. There is not enough information to answer the question.
If the Fed _____________________, the money supply will ultimately __________.
a. raises the discount rate relative to the federal funds rate; decrease
b. lowers the discount rate relative to the federal funds rate; increase
c. lowers the discount rate relative to the federal funds rate; decrease
d. raises the discount rate relative to the federal funds rate; increase
e. a and b
Exhibit 11-1
The economy is currently at point 1. In this situation, Keynesian economists would
most likely propose
a. an increase in government purchases.
b. a decrease in government purchases.
c. an increase in taxes.
d. a and c
e. b and c
The economy is in long-run equilibrium when there is an incorrectly anticipated
increase in aggregate demand brought about by expansionary monetary policy.
Specifically, aggregate demand increases by less than people anticipate (bias upward).
According to new classical theory, the price level will __________ and Real GDP will
__________ in the short run. In the long run, the price level will be __________ than it
was before aggregate demand increased.
a. rise; rise; lower
b. rise; fall; higher
c. rise; fall; higher
d. fall; rise; lower
e. rise; rise; higher
Exhibit 32-2
Two candidates are competing for an electorate consisting of 3 voters labeled A, B, and
C shown positioned with respect to their ideological stands on issues. The median voter
theory would predict that candidates will assume the ideological position(s)
a. of voter B.
b. of voters C and A, respectively.
c. halfway between voter C and voter A.
d. halfway between voter B and voter A.
e. halfway between voter C and voter B, for one candidate, and of voter A for the other.
To limit political influence on Fed policy, the terms of the Fed Board of Governors are
staggered so that one new appointment is made every four years to coincide with the
presidential elections.
a. True
b. False
Theories should be judged based upon how consistently and precisely they predict and
how well they explain things.
a. True
b. False
Those who think that a popular investment is necessarily a good investment often find
themselves earning low returns.
a. True
b. False
Exhibit 3-10
At a price of $10, __________ units of the good will be exchanged.
a. 100
b. 200
c. 300
d. none of the above
A shift of the supply curve for farm products to the right in a price inelastic region of
the demand curve for farm products
a. reduces price and total revenue.
b. increases price and reduces total revenue.
c. reduces price and increases total revenue.
d. increases prices and total revenue.
Exhibit 34-12
PW is the price that exists in a free world market. With the imposition of a quota that
limits imports to Q4 – Q3, consumers lose more than producers and importers gain. The
result of the quota is a (net) loss represented by the area(s)
a. LGK + JHI.
b. KGHJ.
c. GCH + JHI.
d. LGK.
e. none of the above
According to Keynesian economists, monetary policy is __________ effective at
changing the price level and Real GDP.
a. always
b. sometimes
c. never
d. There is no Keynesian position with respect to monetary policy.