An increase in Swiss prices will cause
A) an increase in the demand for U.S. dollars and an increase in the exchange rate of
Swiss francs per dollar.
B) a decrease in the demand for U.S. dollars and a decrease in the exchange rate of
Swiss francs per dollar.
C) an increase in the supply of U.S. dollars and a decrease in the exchange rate of Swiss
francs per dollar.
D) a decrease in the supply of U.S. dollars and an increase in the exchange rate of Swiss
francs per dollar.
The economy attains full employment when the unemployment rate:
A) equals the natural rate of unemployment.
B) equals the structural rate of unemployment.
C) is equal to zero.
D) equals to seven percent or higher.
Recall Application 1, “The Chinese Yuan and Big Macs,” to answer the following
questions:
According to the Application, the dollar price of a Big Mac in the US is lower than the
dollar price of the Big Mac in:
A) Switzerland.
B) China.
C) Mexico.
D) the United Kingdom.
When economists assume that people are rational and respond to incentives, they mean
A) people act with kindness.
B) people are altruistic.
C) people act in their own self-interest.
D) people are selfish.
If the consumption function is C = 80 + 0.6Y, then the autonomous consumption
equals:
A) 80.
B) 0.4.
C) 0.6.
D) -0.4.
Recall Application 6, “Why Lower Drug Prices?” to answer the following questions:
In the Application, what did the Justice Department identify as the explanation for why
(illegal) drug prices have been dropping?
A) an increase in the supply
B) an increase in demand
C) a decrease in supply
D) a decrease in demand
Table 3.2
Consider two individuals, Jesse and April, who hand paint kites and snowboards. Table
3.2 shows how much of each good Jesse and April can paint in one hour. Which of the
following is true?
A) April has both an absolute and comparative advantage in painting kites.
B) April has both an absolute and comparative advantage in painting snowboards.
C) April has neither an absolute nor comparative advantage in painting kites.
D) April has neither an absolute nor a comparative advantage in painting snowboards.
If the price level increases from 120 to 320 in one month, the inflation rate for that
month equals:
A) 167 percent.
B) 267 percent.
C) 67 percent.
D) 2.67 percent.
A currency system in which exchange rates are determined in free markets is called a
A) fixed exchange rate system.
B) gold standard.
C) flexible exchange rate system.
D) all of the above
Figure 11.1
Refer to Figure 11.1. If the expenditures in the economy correspond to C + I, what
should businesses do to get back to equilibrium if the economy is at point c?
A) increase production, because expenditures exceed production
B) decrease production, because expenditures exceed production
C) increase production, because expenditures are less than production
D) decrease production, because expenditures are less than production
According to Keynes, which of the following determines the level of employment in the
economy?
A) stock prices
B) aggregate demand
C) prices
D) wages