Table 3-2
Refer to Table 3-2. The table above shows the demand schedules for cashews of two
individuals (Jordy and Amy) and the rest of the market. If the price of cashews rises
from $4 to $6, the market quantity demanded would
A) decrease by 33 lbs.
B) increase by 39 lbs.
C) increase by 33 lbs.
D) decrease by 39 lbs.
In the United States today, how much gold will the Federal Reserve give you in
exchange for $1?
A) none
B) $1 worth of gold (based on the market price of an ounce of gold at the time you
redeem the gold)
C) 1 ounce of gold
D) 1/35th of an ounce of gold
Suppose the U.S. dollar is backed by one-sixth of an ounce of gold and the British
pound is backed by one-third of an ounce of gold. The exchange rate between the U.S.
dollar and the British pound equals ________ per pound.
A) $0.50
B) $1.00
C) $1.50
D) $2.00
If an economy is growing at a rate of 2.5% per year, how long will it take the economy
to double in size?
A) 60 years
B) 43 years
C) 36 years
D) 28 years
Which of the following is not included in the balance of the financial account of the
United States?
A) a purchase of Toyota stock by Ford
B) a purchase of GE stock by a firm in China
C) a purchase of U.S. car manufacturing plant by Toyota
D) a purchase of a German brewery by the U.S. company, Budweiser
E) a purchase of German financial services by Chase Manhattan bank
Consider the collectors’ market for first editions of two popular children’s books, Harry
Potter and the Order of the Phoenix by J. K. Rowling and Ruby in the Smoke by Philip
Pullman. Sales of the Harry Potter novel are much greater than sales of Ruby in the
Smoke yet the price of the Harry Potter novel is much lower than the price of Pullman’s
novel.
a. On one large diagram, draw a demand and supply graph for first editions of Harry
Potter and the Order of the Phoenix and another demand and supply graph for first
editions of Ruby in the Smoke.
b. Show how it is possible for the price of the Harry Potter novel to be much lower than
the price of Pullman’s novel, even though the demand for the Harry Potter novel is
much greater than the demand for Ruby in the Smoke.
c. Provide a written explanation to accompany your graphical illustration.
When the Fed increases the money supply,
A) the interest rate rises and this stimulates consumption spending.
B) people spend less because they have more money.
C) the interest rate falls and this stimulates investment spending.
D) the interest rate rises and this stimulates investment spending.
The largest liability on the balance sheet of most banks is its
A) loans.
B) holdings of securities.
C) deposits with the Federal Reserve.
D) checking account and savings account deposits of its customers.
E) vault cash.
When the value of a currency is determined mostly by demand and supply, but with
occasional government intervention, the exchange rate system is defined as
A) fixed.
B) floating.
C) managed float.
D) Bretton Woods.
To reassure investors who were unwilling to buy mortgages in the secondary market,
the U.S. Congress used two government sponsored enterprises, Fannie Mae and Freddie
Mac, to stand between investors and banks that grant mortgages. Fannie Mae and
Freddie Mac
A) sell mortgages to investors and use the funds to purchase bonds from banks.
B) sell bonds to investors and use the funds to purchase mortgages from banks.
C) sell bonds to banks and use the funds to purchase mortgages from investors.
D) sell mortgages to banks and use the funds to purchase bonds from investors.
Which of the following would reduce the labor force participation rate, all else equal?
A) an increase in the number of people in the labor force
B) an increase in the unemployment rate
C) a decrease in the unemployment rate
D) an increase in the working-age population
Scenario 14-2
Imagine that Kristy deposits $10,000 of currency into her checking account deposit at
Bank A and that the required reserve ratio is 20%.
Refer to Scenario 14-2. As a result of Kristy’s deposit, Bank A can make a maximum
loan of
A) $2,000.
B) $8,000.
C) $10,000.
D) $50,000.
Figure 2-2
Figure 2-2 above shows the production possibilities frontier for Vidalia, a nation that
produces two goods, roses and orchids.
Refer to Figure 2-2. What is the opportunity cost of one dozen roses?
A) 0.4 dozen orchids
B) 2.5 dozen orchids
C) 7.25 dozen orchids
D) 16 dozen orchids
Figure 13-4
Refer to Figure 13-4. In the figure above, LRAS1 and SRAS1 denote LRAS and SRAS in
year 1, while LRAS2 and SRAS2 denote LRAS and SRAS in year 2. Given the economy is
at point A in year 1, what is the growth rate in potential GDP in year 2?
A) 8%
B) 9.1%
C) 10%
D) 12%
Dividends are
A) financial securities which represent ownership in a corporation.
B) the yearly payments associated with bonds.
C) the interest rate paid on shares of stock.
D) payments by a corporation to its shareholders.