In order to reduce the high inflation of the late 1970s, Paul Volcker
A) increased the growth of the money supply, thereby decreasing interest rates.
B) decreased the growth of the money supply, thereby decreasing interest rates.
C) decreased the growth of the money supply, thereby increasing interest rates.
D) increased the growth of the money supply, thereby increasing interest rates.
Figure 18.1 Refer to Figure 18.1. After trade and specialization begin, the maximum
amount of sunglasses that Duckland can consume is:
A) 90.
B) 100.
C) 150.
D) 40.
If the Federal Reserve conducts an open market sale, the
A) interest rate will not change.
B) interest rate will increase.
C) interest rate will decrease.
D) money supply is increased.
Recall the Application about why international trade may reduce measured inequality in
the United States to answer the following question(s). While it is conventional wisdom
now that inequality in the United States has increased in the last several decades, until
recently no one has taken a careful look at the actual living standards of different
income groups, taking into account the goods they purchase. Two economists from the
University of Chicago, Christian Broda and John Romalis, investigated the living
standards of low-income groups and high-income groups based on the goods these
groups purchase.
According to this Application, the poor consume ________ ratio of nondurable goods to
services ________.
A) a lower; than the rich
B) an equal; as the rich
C) a higher; than the rich
D) a negative; compared to the rich
As a large proportion of the population retire in the next few years, what would happen
to the federal revenue?
A) It would decrease, as social security tax revenues decrease.
B) It would increase, as social security payments increase.
C) It would decrease, as estate and excise taxes decrease.
D) It would increase, as corporate tax revenues increase.
Table 2.4 The firm depicted in
Table 2.4 is likely to face diminishing returns because:
A) the amount of fertilizer can only be increased to 5.
B) land and fertilizer are both fixed.
C) land and fertilizer are both variable.
D) land is fixed but fertilizer is variable.
In 1994, the velocity of money = 3 and the Money Supply = $700 billion. Based on this
information answer the following questions. Assume 1994 is the base year.
(a) What are the values of nominal and real GDP for 1994?
(b) If the money supply increases 10% in 1995, what is the effect on nominal GDP,
assuming the velocity is constant?
(c) Using the same data from Part (b), if the velocity of money also changes from 3 to
2, now what is the effect on GDP?
Recall the Application about the relationship between tax rates and tax revenues which
was proposed by Yu Juo, one of the twelve wise men who succeeded Confucius in
ancient China, to answer the following question(s).Recall the Application. The idea
regarding the relationship between tax rates and tax revenues proposed by Yu Juo is
very similar to the idea proposed by economist
A) Adam Smith.
B) Arthur Laffer.
C) David Ricardo.
D) Ben Bernanke.
All else equal, when the Fed purchases government bonds, the money supply curve
shifts to the ________ and the equilibrium interest rate ________.
A) left; rises
B) right; rises
C) right; falls
D) left; falls
Which of the following are most likely to be considered substitutes to pizzas?
A) hamburgers
B) cheese
C) pepperoni
D) soda
When the consumption function is expressed as C = 200 + .75(1-t)y where t =0.2, then
an increase in income y by 100 will result in an increase in consumption by:
A) 15.
B) 80.
C) 60.
D) 75.
Expansionary fiscal policy shifts:
A) the aggregate demand curve to the left.
B) the short run aggregate supply curve to the right.
C) the short run aggregate supply curve to the left.
D) the aggregate demand curve to the right.
In the following series of questions explain how the situations affect the United States’
balance of payments.
(a) A U.S. defense contractor sells its consulting services to a company in France.
(b) Your investment club decides to buy 100 shares of a promising Korean automobile
manufacturer.
(c) A consortium of European investors decides to build a large manufacturing facility
in Montana.
The multiplier represents the ratio of the total shift in aggregate demand to the
A) total shift in short-run aggregate supply.
B) initial shift in short-run aggregate supply.
C) initial shift in aggregate demand.
D) total shift in long-run aggregate supply.
Recall Application 1, “Global Warming, Rich Countries and Poor Countries,” to answer
the following questions:
Based on what you learned from the application, a one degree Celsius increase in
temperatures:
A) decreases a poor country’s exports by up to 5.7 percentage points.
B) decreases a rich country’s exports by up to 5.7 percentage points.
C) increases a rich country’s exports by up to 1.9 percentage points.
D) decreases a poor country’s exports by up to 1.9 percentage points.
Deposit insurance indirectly helped to create the savings and loan crisis in the United
States because
A) the government, without warning, eliminated deposit insurance for savings and
loans, thereby causing a run on these institutions.
B) depositors were not concerned with the types of investments made because they
were insured, while at the same time savings and loans were aggressively investing in
risky projects.
C) depositors were not concerned with the types of investment made because savings
and loans were making very conservative investments.
D) depositors, believing that the government would not secure their deposits, were very
concerned with the types of investments made at savings and loans.
An increased federal budget deficit resulting from a recession can actually help stabilize
an economy through transfer payments because an increased budget deficit will
________ transfer payments and thereby ________ the income of some households.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
The formula for an infinite sum is
A) 1 + + 2 + 3 + 4 + … = 1 / .
B) 1 + + 2 + 3 + 4 + … = 1 / (1 + ).
C) 1 + + 2 + 3 + 4 + … = 1 / (1 – ).
D) 1 + + 2 + 3 + 4 + … = / (1 – ).
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 Joe’s marginal cost of staying open per hour is $32. How many hours
should Joe stay open?
A) 4 hours
B) 5 hours
C) 6 hours
D) 7 hours