The required reserve ratio is the:
a. actual amount of reserves that banks must hold.
b. excess amount of reserves that a bank must hold.
c. minimum amount of reserves the Fed requires a bank to hold.
d. total amount of reserves that banks hold at all times.
e. maximum amount of reserves that banks can hold to remain liquid.
Assume Congress enacts a $10 billion increase in spending and a $10 billion tax
increase to finance the additional government spending. The result of this
balanced-budget approach is a:
a. $20 billion increase in aggregate demand.
b. $10 billion increase in aggregate demand.
c. $100 billion increase in aggregate demand.
d. $10 billion decrease in aggregate demand.
Suppose two variables are directly related. If one variable rises, then the other variable:
a. also rises.
b. falls.
c. remains unchanged.
d. reacts unpredictably.
Exhibit 18-5 International currency markets
Exhibit 18-5 displays
the international currency market for yen in terms of dollars and dollars in terms of yen.
The supply curve in graph 18-5(A) is determined by:
a. U.S. citizens attempting to purchase Japanese-made goods.
b. Japanese attempting to purchase U.S.-made goods.
c. U.S. businesses attempting to sell to the Japanese.
d. Japanese businesses attempting to sell to the U.S.
e. the U.S. government attempting to unload dollars to the international market.
Which one of the following best describes the external auditor’s report?
a. The external auditor’s report is an opinion.
b. The external auditor’s report is a statement of fact.
c. The external auditor’s report must comply with both FASB and IASB standards.
d. The firms that provide external audit reports are restricted to 20 partners, based on
authoritative standards issued by the PCAOB.
Consider the market for grapes. An increase in the wage paid to grape pickers will
cause the:
a. demand curve for grapes to shift to the right, resulting in a higher equilibrium price
for grapes and a reduction in the quantity consumed.
b. demand curve for grapes to shift to the left, resulting in a lower equilibrium price for
grapes and an increase in the quantity consumed.
c. supply curve for grapes to shift to the left, resulting in a lower equilibrium price for
grapes and a decrease in the quantity consumed.
d. supply curve for grapes to shift to the left, resulting in a higher equilibrium price for
grapes and a decrease in the quantity consumed.
If a bank that is subject to a 10 percent required reserve ratio has $20,000 in excess
reserves, it can make new loans of:
a. $2,000.
b. $18,000.
c. $20,000.
d. $200,000.
Exhibit 18-7 Foreign exchange market for U.S. dollars and British pounds
Exhibit 18-7 shows a situation in which:
a. both the dollar and the pound have depreciated.
b. both the dollar and the pound have appreciated.
c. the dollar has depreciated and the pound has appreciated.
d. the dollar has appreciated and the pound has depreciated.
If consumption spending is larger than disposable income,
a. saving is positive.
b. dissaving occurs.
c. saving is exactly zero.
d. a depression results.
e. this cannot occur.
Assuming peaches are a normal good and consumer incomes rise, producer surplus in
the peach market:
a. increases.
b. decreases.
c. remains unchanged.
d. equals the deadweight loss increase.
When interest rates rise, the quantity demanded of money held for the:
a. speculative motive rises.
b. precautionary motive rises.
c. transactions motive falls.
d. precautionary motive falls.
e. speculative motive falls.
The excess supply created when governments impose a price floor is:
a. shrinking as the floor rises.
b. the difference between the old quantity supplied and new quantity demanded.
c. the difference between the new quantity supplied and the old quantity demanded.
d. the difference between the new quantity supplied and the new quantity demanded.
e. actually efficient because prices are higher for suppliers.
Compared to ideal economic efficiency, when the production of a good generates
external costs, competitive markets will result in an output that is too:
a. large and a price that is too high.
b. large and a price that is too low.
c. small and a price that is too high.
d. small and a price that is too low.
Which of the following categories accounted for the lowest percent of the total federal
government expenditures in recent years?
a. Income security.
b. National defense. c. Education and health.
d. Interest on the national debt.
A surplus in a market exists when there is an excess quantity demanded.
Keynes argued that the economy naturally achieves full employment because supply
creates its own demand.
A decrease in the supply of money, other things being equal, will raise the equilibrium
interest rate.
Equilibrium in a market exists when there is neither a surplus nor a shortage of the item.
One of the problems with a growing national debt is the growing interest payments
which must be paid on that debt.
An increase in the supply of money, other things being equal, will raise the equilibrium
interest rate.
Nominal values are values measured in terms of the prices at which goods and services
are actually sold.
Contrast the Keynesian and Monetarist views on how a change in the money supply
impacts the economy.
The transmission mechanism is the effect of changes in monetary policy on the stock
market.