The Fed’s management of public expectations is sometimes hindered by its own:
A) inside lags.
B) difficulty in communicating the direction of future policy actions.
C) internal disagreements about the course of future monetary policy.
D) inability to conduct effective open market operations.
Figure 19.1 Refer to Figure 19.1. The yen is currently at Point A. An appreciation of the
yen causes a movement to Point ________.
A) B
B) D
C) E
D) C
What does the Consumer Price Index (CPI) measure?
A) prices of durable goods
B) prices of non durable goods
C) the cost of living over time
D) the cost of replacing lost items
Which of the following is generally not procyclical?
A) investment
B) interest rates
C) consumption expenditures
D) unemployment
Suppose that the CPI in Thailand was 345 in 2011 and 388 in 2012. The inflation rate
between those two years was approximately
A) 11.2 percent.
B) 14.3 percent.
C) 12.5 percent.
D) 43 percent.
John Maynard Keynes argued that the fundamental problem which led to the world
depression was
A) negative net exports on goods and services.
B) a decreasing supply of goods and services.
C) insufficient demand for goods and services.
D) a shortage of goods and services.
If the government decreases its purchases of goods and services by $12,000 and the
MPS is 0.5, GDP and income will eventually decrease by
A) $2,400.
B) $6,000.
C) $24,000.
D) $60,000.
When there is a shift the aggregate supply curve caused by factors external to a nation’s
economy, it is called
A) trade imbalance.
B) government control.
C) supply shock.
D) economic anomaly.
Recall Application 4, “Trade, Consumption and Inequality,” to answer the following
questions:
According to the Application, what was the moral of the story concerning free trade?
A) Trade affects both employment and prices.
B) Everyone gets hurt from free trade.
C) Everyone benefits from free trade.
D) Trade amplifies a country’s income inequality.
Table 5.1
Refer to Table 5.1. Assume that this economy produces only two goods: Good X and
Good Y. If year 1 is the base year, the value for this economy’s GDP Deflator in year 2
is:
A) 100.0.
B) 112.8.
C) 120.6.
D) 133.3.
The Federal Reserve was created in
A) 1893.
B) 1913.
C) 1921.
D) 1933.
If a country’s currency appreciates, the country will experience a ________ in exports
and a ________ in imports.
A) rise; rise
B) fall; fall
C) rise; fall
D) fall; rise
Nobel laureate Franco Modigliani found that increases in wealth cause:
A) increases in autonomous consumption.
B) decreases in autonomous consumption.
C) increases in the marginal propensity to consume.
D) decreases in the marginal propensity to consume.
Table 2.4
Refer to Table 2.4. Increasing the tanks of fertilizer from 3 to 4 will increase the
truckloads of potatoes by
A) 152
B) 35
C) 17
D) 11
Under a flexible exchange rate system, the exchange rate between two currencies is
determined by:
A) the governments of both countries.
B) the International Monetary Fund.
C) the demand and supply of both countries’ currencies.
D) the Bretton Woods agreement.
Net interest spending consists of:
A) interest payments on government debt held by the public.
B) interest payments on foreign debt held by the government.
C) interest payments on commercial debt held by the government.
D) all of the above
What causes investments to increase when the production in the economy is below full
employment?
A) When the economy is below full employment, the price level drops, resulting in a
decrease in the demand for money and a decrease in interest rates.
B) When the economy is below full employment, the price level drops, resulting in an
increase in the demand for money and an increase in interest rates.
C) When the economy is below full employment, the price level drops, resulting in a
decrease in the demand for money and an increase in interest rates.
D) When the economy is below full employment, the price level rises, resulting in an
increase in the demand for money and a decrease in interest rates.
Recall Application 1, “The Impact of Tariffs on the Poor,” to answer the following
questions:
After reading the application, we can conclude that U.S. tariffs hurt poor consumer’s the
disproportionately because:
A) U.S. tariffs fall heaviest on labor intensive goods.
B) U.S. tariffs fall heaviest on the lowest price goods in a category.
C) U.S. tariffs are on goods like apparel items that poor consumers spend a larger
fraction of income on.
D) all of the above
In 1971, most countries, including the United States:
A) returned to the gold standard.
B) adopted a new system of fixed exchange rates.
C) adopted a single, internationally accepted currency whose use is limited to
international transactions.
D) gave up trying to fix exchange rates formally and began allowing them to be
determined essentially by supply and demand.
When the expected rate of inflation is added to the real interest rate, the result is called
the
A) preferred rate.
B) nominal interest rate.
C) adjustment rate.
D) differential rate.