What is the motivation for individuals to hold money?
A) to reduce risk
B) to have liquidity
C) to facilitate transactions
D) all of the above
Table 2.5
Comparing the minimum wages between 1974 and 2011 addresses the economic
concept of
A) the marginal principle.
B) the principle of voluntary exchange.
C) the principle of diminishing returns.
D) the real-nominal principle.
Refer to Figure 4.1, which shows Molly’s and Ryan’s individual demand curves for
compact discs per month. Assuming Molly and Ryan are the only consumers in the
market, if the market quantity demanded is 15, the price must be
A) $0.
B) $6.
C) $9.
D) $15.
Targeting a range of inflation rates, instead of a single inflation level, would:
A) prevent the central bank from meeting employment targets.
B) give the central bank some “wiggle room” to meet employment targets.
C) give Congress some “wiggle room” to meet employment targets.
D) prevent Congress from meeting employment targets.
Members of the Federal Reserve Board of Governors
A) are appointed to 4 year terms.
B) are confirmed by the House of Representatives.
C) frequently need to deal with political pressures.
D) are members of the Federal Open Market Committee.
Recall the Application about the link between happiness and GDP to answer the
following question(s). Comparing changes in happiness to changes in per capita
income over the last 30 years, economists at Dartmouth College and Warwick
University have measured levels of happiness in the United States and United
Kingdom based on income levels, ethnicity, age, and gender. According to the
Application, large increases in per capita income in the United States over the past 30
years have
A) had the greatest impact on retired people.
B) not increased happiness levels.
C) led to a higher divorce rate.
D) lowered stress levels.
Decreased investment spending in the economy would be a possible result of
A) a decrease in interest rates.
B) an open market purchase of bonds by the Fed.
C) an open market sale of bonds by the Fed.
D) an increase in the money supply.
Figure 16.1 Refer to Figure 16.1 to answer this question. Suppose the economy is
initially at Point A. If labor leaders successfully negotiate a wage increase and the Fed
does nothing, then the economy will experience a/n:
A) inflation and an expansion.
B) inflation and a recession.
C) deflation and an expansion.
D) deflation and a recession.
Resources are all of the following EXCEPT
A) unlimited and in abundance.
B) the things we use to produce goods and services.
C) limited in quantity and can be used in different ways.
D) scarce and therefore require choices to be made.
Recall the Application about how the Fed kept the U.S. financial system in operation
following the attacks of September 11, 2001, to answer the following question(s). To
help prevent financial firms from defaulting on their debts, the Fed took several steps to
provide additional funds to the financial system, including allowing banks to borrow
more, increasing the difference between the credits and debits it extended while serving
as a clearinghouse for checks, purchasing government securities, and providing dollars
to foreign central banks. Together, these actions increased the credit extended by the
Fed by over $90 billion.
According to this Application, immediately following the attacks of September 11,
2001, the Fed provided additional funds to the financial system. On September 12,
banks borrowed $45.5 billion dollars, up from $99 million the previous week. This was
an example of the Fed acting as a
A) medium of exchange.
B) unit of account.
C) store of value.
D) lender of last resort.
From World War II until 2011, the U.S. has experienced:
A) ten recessions.
B) eleven recessions.
C) nine recessions and one depression.
D) a continuous period of economic growth.
Monetary policymakers tend to be conservative because
A) they are old and boring.
B) their actions influence the public’s expectations.
C) their actions have no effect on the public’s expectations.
D) they do not want to increase the federal budget deficit.
Suppose investment increases by $200 and that the equilibrium level of output rises by
$400. Given this information, we know that:
A) the marginal propensity to save = 0.25.
B) the marginal propensity to save = 0.4.
C) the marginal propensity to save = 0.1.
D) the marginal propensity to save = 0.5.
The agreements that were reached at the Bretton Woods conference in 1944 established
a system:
A) in which the values of currencies were fixed in terms of a specific number of ounces
of gold, which in turn determined their values in international trading.
B) of floating exchange rates determined by the supply and demand of one nation’s
currency relative to the currency of other nations.
C) of essentially fixed exchange rates under which each country agreed to intervene in
the foreign exchange market when necessary to maintain the agreed-upon value of its
currency.
D) that prohibited governments from intervening in the foreign exchange market.
A reduction in government expenditure or an increase in taxes is defined as:
A) expansionary monetary policy.
B) contractionary fiscal policy.
C) expansionary fiscal policy.
D) contractionary monetary policy.
Figure 9.1 shows three aggregate demand curves. A movement from curve AD1 to curve
AD2 could be caused by a(n)
A) decrease in the money supply.
B) increase in taxes.
C) decrease in the price level.
D) increase in government spending.