The exchange rate is the:
a. value of money.
b. quantity of dollars, yen, etc. that are traded.
c. amount of a foreign currency that is brought back to the United States by tourists.
d. number of units of your currency that it takes to buy one unit of a foreign currency.
e. number of units of a foreign currency that can be bought with one unit of your own
currency.
An economic theory claims that a rise in gasoline prices will cause gasoline purchases
to fall, Ceteris paribus. The phrase “Ceteris paribus” means that:
a. other relevant factors like consumer incomes must be held constant.
b. the gasoline prices must first be adjusted for inflation.
c. the theory is widely accepted but cannot be accurately tested.
d. consumers’ need for gasoline remains the same regardless of the price.
In a graphic relationship, shifts in a curve are caused by a change in:
a. the slope of the curve.
b. a factor not measured on the axes of the graph.
c. one of the factors measured on either axes of the graph.
d. any factor, whether measured on the axes of the graph of not.
When the inflation rate rises, the purchasing power of nominal income:
a. remains unchanged.
b. decreases.
c. increases.
d. changes by the inflation rate minus one.
According to the crowding-out view, budget deficits will:
a. reduce interest rates.
b. increase interest rates and retard private investment.
c. reduce the investments of foreigners in the United States.
d. increase the capital stock available to future generations.
Fiscal policy is concerned with:
a. encouraging businesses to invest.
b. regulation of net exports.
c. changes in government spending and/or tax revenues.
d. expanding and contracting the money supply.
Someone notices that sunspot activity is high just prior to recessions and concludes that
sunspots cause recessions. This person has:
a. confused association and causation.
b. misunderstood the Ceteris paribus assumption.
c. used normative economics to answer a positive question.
d. built an untestable model.
A tariff is:
a. a duty that a company must pay its own government on exports.
b. the price charged by one country to buyers of a good in another country.
c. a price reduction designed to encourage international trade.
d. a tax on an import.
Exhibit 18-3 Potatoes and wheat output (tons per day) Country PotatoesWheat
United States 4 2
Ireland 3 1 In Exhibit 18-3, the United States has an absolute advantage in producing:
a. potatoes.
b. wheat.
c. both.
d. neither.
An improvement in a firm’s technology that improves productivity results in a(n):
a. leftward shift of the supply curve.
b. upward movement along the supply curve.
c. willingness to supply a larger quantity than before at any given price.
d. downward movement along the supply curve.
Policies to create jobs in the nation are the concern of:
a. macroeconomics.
b. microeconomics.
c. both microeconomics and macroeconomics.
d. neither microeconomics nor macroeconomics.
If the marginal propensity to consume (MPC) is 0.75, the value of the spending
multiplier is:
a. 0.
b. 1.
c. 4.
d. 5.
A movement along a demand curve is called a change in:
a. income.
b. quantity demanded.
c. demand.
d. tastes.
e. population.
When the Fed raises the required reserve ratio, then the:
a. ability of banks to make loans is restricted.
b. ability of banks to make loans is enhanced.
c. ability of banks to make loans is unaffected.
d. interest rate that banks pay to the Fed to borrow money is increased.
e. interest rate that banks pay to other banks to borrow money is increased.