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Explain how each of the following policy actions by the Federal Reserve would affect
the quantity of money supplied:
(a) a decrease in the required reserve ratio
(b) an increase in the discount rate
(c) the Fed purchases government bonds from the public
Quantity of Frozen Latte-On-A-Stick Supplied
Table 4.1
Refer to Table 4.1, which shows Flo's and Rita's individual supply schedules for frozen
latte-on-a-stick. Assuming Flo and Rita are the only suppliers in the market, what is the
market quantity supplied at a price of $1?
A) 0
B) 1
C) 3
D) 5
Figure 2.4 Joe runs a business and needs to decide how many hours to stay open.
Figure 2.4 illustrates his marginal benefit of staying open for each additional hour.
Suppose that we observe Joe staying open 3 hours per day. If he is following the
marginal principle, what must his marginal cost be?
A) $24
B) $32
C) $40
D) $48
One of the essential functions that a bank performs is
A) purchasing government bonds.
B) creating deposits by lending required reserves.
C) transferring money from savers to lenders.
D) owning assets like real estate.
Which of the following curves reflects the idea that in the long run, output is
determined only by the factors of production and given technology?
A) the aggregate demand curve
B) the market supply curve
C) the long-run aggregate supply curve
D) the Keynesian aggregate supply curve
Table 2.2
Krystal runs a nail salon and needs to decide how many hours to stay open. Table 2.2
illustrates her marginal costs of staying open for each additional hour. Suppose that we
observe Krystal staying open 4 hours per day. If she is following the marginal principle,
what must her marginal benefit be?
A) $12
B) $18
C) $24
D) $30
When economists use the term "marginal," they usually refer to:
A) small, incremental change.
B) large changes.
C) no changes.
D) average change.
A "bank run" occurs when panicky depositors simultaneously:
A) withdraw their funds from a bank they believe will fail.
B) deposit their funds in a bank offering high deposit interest rates.
C) chase a bank owner who has fled the country.
D) withdraw their funds in order to invest in Treasury bills.
The long-run aggregate supply curve is vertical because
A) in the short run, prices are flexible but output is equal to potential output.
B) in the long run, prices are flexible but output is equal to potential output.
C) in the short run, prices are fixed but output may be above, below, or equal to
potential output.
D) in the long run, prices are fixed and output is equal to potential output.
Which choice is true?
A) A higher interest rate causes lower investment, higher demand, and higher real GDP.
B) A lower interest rate causes lower investment, higher demand, and higher real GDP.
C) A higher interest rate causes higher investment, lower demand, and lower real GDP.
D) A higher interest rate causes lower investment, lower demand, and lower real GDP.
Figure 7.1 Please refer to Figure 7.1. Suppose the economy is at point D. A war that
destroys factories will:
A) move the economy to point B.
B) move the economy to point C.
C) move the economy to point A.
D) keep the economy at point D.
________ are the largest cost of production for most firms.
A) Wages
B) Rent
C) Interest payments
D) Depreciation
