Exhibit 3-4
At a price of $2 _______________ units will be exchanged.
a. 5
b. 10
c. 15
d. 20
A simultaneous rightward shift in SRAS and leftward shift in AD may come from the
dollar _______________ in the aftermath of a ____________________ in United
States real interest rates.
a. depreciating; rise
b. depreciating; fall
c. appreciating; rise
d. appreciating; fall
When the Fed increases the required reserve ratio, a bank’s
a. required reserves are unaffected.
b. required reserves are increased.
c. required reserves are decreased.
d. excess reserves are decreased.
e. b and d
Consumers receive more consumers’ surplus when __________.
a. tariffs exist.
b. tariffs and quotas do not exist.
c. quotas exist.
d. a and c
Exhibit 3-5
In the market shown, if equilibrium was originally at point W and is now at point X, the
new equilibrium price is __________ it was originally and the new equilibrium quantity
is ____________ it was originally.
a. greater than; greater than
b. less than; greater than
c. greater than; less than
d. less than; less than
An open market sale by the Fed will
a. increase bank reserves.
b. increase currency held by the public or vault cash.
c. increase the money supply.
d. reduce the money supply.
Which of the following is counted in GDP?
a. the trading of 100 shares of Microsoft stock
b. the services of a real estate broker
c. government transfer payments
d. the sale of a used car
e. none of the above
Suppose that a bank has $500 million in asset X, $400 million in asset Y, and $200
million in asset Z.Each asset has a different risk weight.The risk weight for asset X is
40%, the risk weight for asset Y is 70%, and asset Z has zero risk.The amount of
risk-weighted assets for this bank is ____________ million.Assuming that the bank has
to hold capital equal to 8% of its risk-weighted assets, the bank must hold
_____________ million in capital.
a. $480; $38.4
b. $1,100; $88
c. $1,100; $880
d. $340; $27.2
A bond is
a. a claim on the assets of the corporation that gives the purchaser an ownership right in
the corporation.
b. the share of profits distributed to bondholders.
c. a promise to pay for the use of someone else’s money.
d. a promise of ownership of the government.
e. c and d
Which of the following statements is true?
a. Government cannot remove individuals from a prisoner’s dilemma setting and make
them better off.
b. As long as government charges each individual a tax that is more than the gain
received by being removed from a prisoner’s dilemma setting, then government makes
that individual better off.
c. Government can remove individuals from a prisoner’s dilemma setting by changing
the payoff matrix.
d. a and c
e. all of the above
Disposable income is
a. equal to GDP minus the capital consumption allowance.
b. that portion of personal income that can be used for consumption and saving.
c. the sum of all payments to suppliers of the factors of production.
d. equal to national income.
e. another term for personal income.
Which of the following statements is true?
a. A savings deposit is not counted in the most basic, or narrow, definition of the money
supply.
b. M1 is sometimes referred to as transactions money.
c. Money reduces the transaction costs of making exchanges.
d. b and c
e. a, b, and c
Which of the following is the correct equation for computing personal income?
a. Personal income = National income + undistributed profits – social insurance taxes –
corporate profits taxes + transfer payments.
b. Personal income = National income – undistributed profits – social insurance taxes +
corporate profits taxes + transfer payments
c. Personal income = National income – taxes
d. Personal income = National income – undistributed corporate profits – social
insurance taxes – corporate profits taxes + transfer payments
e. none of the above
An increase in the money supply that leads to an increase in expected inflation, which
in turn leads to an increase in the interest rate, is best described as the
a. liquidity effect.
b. income effect.
c. expectations effect.
d. adaptive expectations theory.
In the simple Keynesian model, an increase in aggregate demand leads to an increase in
a. Real GDP and the price level at all levels of Real GDP.
b. the price level and no change in Real GDP for levels of Real GDP below Natural
Real GDP.
c. the price level and a decrease in Real GDP at all levels of GDP.
d. Real GDP and no change in the price level for levels of Real GDP below Natural
Real GDP.
A tariff raises the price of the product on which the tariff has been placed, decreases
consumers’ surplus, increases producers’ surplus, and generates tariff revenue for the
government.
a. True
b. False
Situation 37-2
Dan and Ann live in the same community and both can participate in two activities,
producing and stealing. Ann spends 8 hours of each day producing and 1 hour of each
day stealing.It is probably the case for her that
a. at some point the MB/MC ratio for producing fell below the MB/MC ratio for
stealing.
b. her MB/MC ratio for producing was always greater than her MB/MC ratio for
stealing.
c. her MB/MC ratio for producing never changed, no matter how much or how little she
produced.
d. her MB/MC ratio for stealing never changed, no matter how much or how little she
stole.
e. There is not enough information to answer the question.
When a good is nonexcludable, then individuals
a. will purchase the good for more than what it cost to produce the good.
b. can obtain the benefits of the good without paying for it.
c. have an incentive to become free riders.
d. will purchase more than the optimum amount.
e. b and c
Productive inefficiency implies that
a. it is possible to obtain gains in one area without losses in another.
b. it is impossible to obtain gains in one area without losses in another.
c. there are too many resources.
d. there are too few resources.
e. none of the above