Suppose that the exchange rate between the U.S. dollar and the Mexican peso starts out
at $0.11 per peso.If the exchange rate then changes to $0.08 per peso, there will be a(n)
__________ in the quantity demanded of dollars by Mexicans, and therefore there will
be a(n) __________in the quantity supplied of pesos to the foreign exchange market.
a. decrease; decrease
b. decrease; increase
c. increase; decrease
d. increase; increase
The object of inflation targeting is for a country’s central bank to try to keep the
inflation rate near
a. the country’s historical average economic growth rate.
b. some predetermined level.
c. the country’s historical average inflation rate.
d. the country’s historical average unemployment rate.
Suppose you live in New York City and the government has imposed price ceilings on
apartment rental rates. You want to rent an apartment from Smith, who says that unless
you buy the furniture in the apartment for $4,000, he cannot rent the apartment to you.
The condition of buying the furniture could be considered
a. a price ceiling.
b. a price floor.
c. a tie-in sale.
d. to be something no renter would agree to.
e. c and d
According to the simple quantity theory of money in the AD-AS framework, when the
money supply decreases, the result is __________ in Real GDP and __________ in the
price level.
a. no change; no change
b. a rise; no change
c. no change; a rise
d. a rise; a fall
e. no change; a fall
The liquidity trap is the
a. vertical portion of the demand curve for money.
b. horizontal portion of the demand curve for money.
c. vertical portion of the supply curve of money.
d. horizontal portion of the supply curve of money.
e. vertical portion of the demand curve for investment.
Which of the following statements is false?
a. Private equity firms often need to borrow the money needed to buy a public
corporation.
b. Once a private equity firm owns a formerly publicly held corporation, they tend to
cut costs and enhance efficiency.
c. Critics of private equity firms say that companies that have too much cash and too
little debt become targets for private equity firms to buy.
d. A private equity firm is a group of investors that takes a privately held corporation
and uses an investment banker to turn it into a publicly held corporation.
Which of the following statements is false?
a. The exchange rate is the price of one (country’s) currency in terms of another
(country’s) currency.
b. A currency has appreciated in value if more of a foreign currency is needed to buy it.
c. A change in the money supply can change aggregate demand.
d. A change in business taxes can change investment, which can change aggregate
demand.
e. none of the above
If the current unemployment rate is less than the natural unemployment rate, then the
economy is
a. in long-run equilibrium.
b. in an inflationary gap.
c. in a recessionary gap.
d. producing at full employment.
e. b and d
Between 1890 and 1914, the gold stock of the world doubled, but world prices fell
during this time.
a. True
b. False
Exhibit 5-1
which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. At P =
$0, there is a ________ of freeway space at 8 a.m. and ________ at 11 p.m.
a. shortage; a surplus
b. surplus; a shortage
c. surplus; equilibrium
d. shortage; equilibrium
Supply-side economists believe reductions in tax rates can
a. shift the aggregate demand curve to the left.
b. shift the short run aggregate supply curve to the left.
c. increase output and lower prices.
d. decrease output and lower prices.
John Maynard Keynes was the son of
a. one of the first female students to attend Cambridge University.
b. Russian ballerina Lydia Lopokova.
c. the mayor of London.
d. an eminent economist.
e. a and d
Which of the following is a major import for the United States?
a. corn
b. soybeans
c. coal
d. fish
e. none of the above
Which of the following statements is true?
a. Oil is classified as part of the resource category land.
b. A person working for a company is classifiedas part of the resource category capital.
c. A machine in a factory is classified as part of the resource category land.
d. A person with the particular talent for organizing the resources of land, labor, and
capital to produce goods, seek new business opportunities, and develop new ways of
doing things is classified as part of the resource category labor.
e. a and d
Suppose the price level in Germany rises, ceteris paribus.This ________________
United States net exports, ultimately shifting the United States AD curve
____________________.
a. stimulates; rightward
b. stimulates; leftward
c. depresses; rightward
d. depresses; leftward.
A discount loan is a loan the Federal Reserve makes to a commercial bank.
a. True
b. False