The Federal Reserve banks make loans to member banks at a special interest rate called
the discount rate.
When opportunity costs rise as more of a good is consumed, the production possibilities
frontier will be concave (bowed out) with respect to the origin.
The federal funds rate is closely tied to many interest rates on many types of loans.
Which one is the exception?
a. Auto loan rates
b. Adjustable rate mortgages
c. Adjustable rate home equity loans
d. 30-year Treasury bonds
e. Business loans
In the classical model with an open economy, an increase in government purchases can
affect a country’s exchange rate, causing its imports and exports to change.
Which of the following is included in GDP?
a. The imputed rental value of a family-owned home
b. The sale prices of all previously built homes
c. Social security payments to retirees
d. The salary of a U.S. scientist working in a foreign country
e. Purchases of stocks and bonds
A banking panic occurs when
a. many banks fail simultaneously
b. banks do not earn enough profit
c. a bank exhausts all of its vault cash
d. individuals cannot withdraw money from a bank
e. bank officials fear they have made too many bad loans
Opportunity costs arise because of resource scarcity.
Molly needs 30 minutes to wash the car and 45 minutes to mow the lawn. Renee needs
1 hour to wash the car and 2 hours to mow the lawn. Which of the following statements
is correct?
a. Molly has an absolute advantage in washing the car; Renee has an absolute advantage
in mowing the lawn.
b. Molly has an absolute advantage in mowing the lawn; Renee has an absolute
advantage in washing the car.
c. Molly has an absolute advantage in both tasks.
d. Renee has an absolute advantage in both tasks.
e. Neither woman has an absolute advantage in washing the car.
An increase in government purchases will increase GDP by an amount equal to the
change in government purchases times the expenditure multiplier.
Defining a market involves deciding how to view
a. equilibrium supply and demand
b. normative economic analysis
c. the thing being traded, the decision makers, and the trading environment
d. suppliers, demanders, shortages, and surpluses
e. excess demand and excess supply
Refer to Figure 5-1 above. If the economy moves from point A to B on the graph, it is
going through a(n)
a. peak
b. trough
c. expansion
d. boom
e. recession
Which of the following is a flow variable?
a. the number of cars registered in the U.S.
b. the number of unemployed workers this week
c. your total net worth yesterday
d. the government debt this year
e. a salary of $4,000 per month
Unsold goods are part of the nation’s capital stock.
Refer to Figure 9-9. The production possibilities frontier tells us that there is a trade-off
between investment in capital and
a. investment in human capital
b. research and development expenditures
c. leisure time available to workers
d. higher living standards in the future
e. living standards in the present
Which of the following would happen as the wage rate gradually adjusts following a
shock?
a. Nothing will change
b. A shift of the production possibilities frontier
c. A shift in the short-run aggregate supply curve
d. A shift in the aggregate demand curve
e. A shift in the long-run aggregate supply curve.
An increase in the stock of human capital would
a. shift the production function upward, lowering productivity and raising living
standards
b. shift the production function upward, raising productivity and living standards
c. cause the economy to move along a fixed production function, increasing both
productivity and living standards
d. cause the economy to move along a fixed production function, reducing both
productivity and living standards
e. shift the production function downward, reducing both productivity and living
standards
Which of the following statements is correct?
a. The demand curve typically slopes upward; the supply curve typically slopes
downward.
b. The demand curve typically slopes downward; the supply curve typically slopes
upward.
c. Both the demand and supply curves typically slope downward.
d. Both the demand and supply curve typically slope upward.
e. The demand curve is typically vertical; the supply curve is typically horizontal.
The United States will always have unemployment.
The main function of the Federal Open Market Committee is
a. to control the printing of currency.
b. to determine the path of tax rates.
c. to use open market operations to control the nation’s money supply.
d. to create and issue bonds on behalf of the Treasury.
e. to oversee economic activity in the various Federal Reserve districts.