What impact might a decrease in the U.S. federal budget deficit have on interest rates
and exchange rates in the market for the U.S. dollar? (Assume the exchange rate is
stated in terms of foreign currency per U.S. dollar.)
A) Interest rates and exchange rates increase.
B) Interest rates increase and exchange rates decrease.
C) Interest rates decrease and exchange rates increase.
D) Interest rates and exchange rates decrease.
Using the Taylor rule, if the current inflation rate equals the target inflation rate and real
GDP equals potential GDP, then the federal funds target rate equals the
A) current discount rate.
B) current inflation rate.
C) real equilibrium federal funds rate.
D) current inflation rate plus the real equilibrium federal funds rate.
Figure 3-4
Refer to Figure 3-4. At a price of $25, how many units will be sold?
A) 400
B) 500
C) 600
D) 800
If the dollar appreciates, how will aggregate demand in the United States be affected?
A) Aggregate demand will increase as exports increase and imports decrease.
B) Aggregate demand will increase as imports increase and exports decrease.
C) Aggregate demand will decrease as imports increase and exports decrease.
D) Aggregate demand will decrease as exports increase and imports decrease.
An advantage of the personal consumption expenditures price index (PCE) over the
Consumer Price Index (CPI) as a measure of inflation is that the PCE
A) includes the prices of more consumer goods and services.
B) includes the prices of consumer goods, but not consumer services.
C) includes the prices of consumer services, but not consumer goods.
D) is a fixed market-basket price index that does not allow the mix of products to
change each year.
Which of the following would increase gross private domestic investment in an
economy?
A) an increase in the shares of Apple stock households own
B) an increase in the number of workers Apple hires
C) an increase in the level of Apple’s inventory
D) an increase in the number of highway construction projects the government is
funding
From an initial long-run equilibrium, if aggregate demand grows faster than long-run
and short-run aggregate supply, then Congress and the president would most likely
A) decrease the required reserve ratio.
B) decrease government spending.
C) decrease oil prices.
D) decrease tax rates.
A change in consumption spending caused by income changes is ________ change in
spending, and a change in government spending that occurs to improve roads and
bridges is ________ change in spending.
A) an induced; an autonomous
B) an expansionary; a contractionary
C) an autonomous; an induced
D) a contractionary; an expansionary
Figure 17-1
Refer to Figure 17-1. Suppose that the economy is currently at point A, and the
unemployment rate at A is the natural rate. What policy would the Federal Reserve
pursue if it wanted the economy to move to point C in the long run?
A) Buy treasury bills.
B) Sell treasury bills.
C) Lower the discount rate.
D) Increase the money supply.
E) No policy will move the economy to point C in the long run.
Minimum wage laws cause unemployment because the legal minimum wage is set
A) below the market wage, causing labor demand to be greater than labor supply.
B) below the market wage, causing labor demand to be less than labor supply.
C) above the market wage, causing labor demand to be greater than labor supply.
D) above the market wage, causing labor demand to be less than labor supply.
E) too low.