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Recall Application 2, "World Savings and the U.S. Current Account Deficits," to answer
the following questions:
Since reaching a high in July 2008, the price of oil has been fluctuating at lower prices
worldwide. Based on the argument provided in the Application, how will this drop in
the price of oil affect the amount of international investment made by Russia?
A) It will probably decrease.
B) It will probably increase.
C) It will probably stay the same.
D) It will experience unpredictable increases and decreases.
Quantity demanded is defined as the:
A) quantity of a product that consumers are willing and able to buy at a given price.
B) quantity of a product that sellers are willing and able to buy at a given level of
income.
C) quantity of a product that consumers and producers are willing and able to buy,
given their level of preference.
D) quantity of a product that consumers are willing and able to sell at a given price.
Suppose a bank has $1 million in deposits, a reserve ratio of 25 percent, and reserves of
$250,000. This bank has excess reserves of
A) $250,000.
B) $125,000.
C) $62,500.
D) $0.
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 we observe Joe staying open 6 hours per day. If he is following the
marginal principle, what must his marginal cost be?
A) $16
B) $24
C) $32
D) $48
Some economists object to having the Fed concentrate solely on price stability because
it would
A) free the Fed from political pressure.
B) lessen its credibility.
C) make stabilizing the economy more difficult.
D) privatize the Federal Reserve.
Financial intermediaries reduce risk by
A) limiting the diversity of their investment portfolios.
B) gaining expertise in evaluating and monitoring investments.
C) investing in a large number of projects with independent returns.
D) investing in a small number of projects with independent returns.
A commercial bank lists:
A) loans as liabilities.
B) deposits as liabilities.
C) required reserves as liabilities.
D) excess reserves as liabilities.
Figure 9.2
Refer to Figure 9.2. A movement from point to point c could be caused by a
simultaneous ________ and ________.
A) increase in the money supply; increase in the price of oil
B) decrease in taxes; decrease in the price of oil
C) increase in taxes; decrease in government spending
D) increase in the price of oil; massive crop failure
As a whole, nations are better off after trade and specialization because
A) nations can consume along their consumption possibilities curve, which is outside of
their production possibilities curve.
B) nations can consume along their consumption possibilities curve, which is inside of
their production possibilities curve.
C) nations can consume along their production possibilities curve, which is outside of
their consumption possibilities curve.
D) nations experience an inward shift of their production possibilities curve.
If the consumption function is C = 80 + 0.6Y, then the proportion of each additional
dollar that is saved is:
A) 0.6
B) 0.4
C) 1/0.6 = 1.5
D) -0.4
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, prices for nondurable goods have ________ prices for
services.
A) risen less than
B) risen more than
C) risen at the same rate as
D) fallen more than
