Recall Application 4, “Coping with the Financial Chaos Caused by the Mortgage
Crisis,” to answer the following questions:
According to Application 4, the solution that the Fed came up with to prevent the
collapse of Bear Stearns was to:
A) sell Bear Sterns to JP Morgan Chase and Co.
B) buy an 80 percent stake in the company.
C) take over the company.
D) buy commercial paper issued by Bear Sterns.
Stickiness of wages
A) is unrelated to stickiness of prices.
B) lessens the stickiness of prices.
C) reinforces stickiness of prices.
D) may or may not reinforce stickiness of prices.
At a fixed income level, an increase in consumption which is accompanied by a
decrease in savings is reflected by
A) an upward rotation of the consumption function.
B) a downward rotation of the consumption function.
C) an upward shift of the consumption function.
D) a movement up along the consumption function.
You rent a copy of a new action/adventure movie. The rental is for seven days and you
watch the movie on the first day. You tell a friend about the film and your friend asks to
come over and watch the movie with you before it is due back. What is your
opportunity cost of watching the movie a second time?
A) zero, because it won’t cost you any money to keep the movie for another day
B) one half the rental cost, because you have already watched the movie one time
C) The answer depends on how much you liked the movie in the first place.
D) The answer depends on what else you could do besides watching the movie.
Which of the following is the result of a sale of government bonds by the Fed?
A) an increase in the supply of money
B) a decrease in banks’ reserves
C) a decrease in the discount rate
D) an increase in the required reserve ratio
If the price of crude oil (an input to the production of gasoline) decreases, then we will
expect to see:
A) a movement along the supply curve for gasoline upwards.
B) a movement along the supply curve for gasoline downwards.
C) a shift in the supply of gasoline to the left.
D) a shift in the supply of gasoline to the right.
When consumers are willing to buy more than producers are willing to sell
A) there is excess supply of the product in the market.
B) there is excess demand for the product in the market.
C) the market is in equilibrium.
D) the demand curve will shift until the quantity supplied equals the quantity
demanded.
The real-nominal principle states that
A) people respond more to explicit, or real, costs than to implicit costs.
B) people respond more to implicit costs than to explicit costs.
C) what matters to people is the face value of money or income.
D) what matters to people is the purchasing power of money or income.
Which of the following is not included in the U.S. financial account?
A) change in private U.S. assets held abroad
B) change in foreign private assets held in the United States
C) Mexico’s debt to the U.S. that was forgiven
D) change in U.S. government assets held abroad
The lags associated with fiscal policy can:
A) magnify economic fluctuations.
B) stimulate output beyond full employment.
C) depress output below full employment.
D) all of the above
Figure 18.3
Refer to Figure 18.3. With an import ban, the equilibrium price is:
A) $0.
B) $12.
C) $10.
D) $8.
Figure 12.2 Refer to Figure 12.2 to answer the question. Which of the following
components of GDP most closely resembles Series B (countercyclical)?
A) investment
B) exports
C) government purchases
D) net exports
Income that flows to the private sector for services and production, is called
A) net income.
B) national income.
C) deficit income.
D) derived income.
Figure 4.3 illustrates the demand for tacos. A decrease in price of tacos would bring
about a movement from
A) point a to point c.
B) point c to point a.
C) D2 to D0.
D) D0 to D2.
Which of the following situations will arise in the domestic market following the
imposition of an import ban?
A) imports increase, domestic production increases, prices increase
B) imports increase, domestic production decreases, prices decrease
C) imports decrease, domestic production increases, prices increase
D) imports decrease, domestic production increases, prices decrease