If a government wants to increase the value of its currency in foreign exchange markets,
it can:
A) use contractionary monetary policy.
B) use expansionary monetary policy.
C) decrease interest rates.
D) sell its currency.
Economists argue that money is neutral:
A) in both the short and the long run.
B) in the short run only.
C) in the long run, but money does affect the price level.
D) in the long run, but money does not affect the price level.
During inflation the _____ price level _____.
A) average; falls
B) average; increases
C) average; remains constant
D) real; falls
Facebook’s primary type of investment spending is the purchase of server farms, or
arrays of linked computers that track and process social media information.
A) True
B) False
The _____ hypothesis is that macroeconomic policy should be used to stabilize the
economy rather than to permanently decrease the unemployment rate.
A) natural rate
B) political business cycle
C) rational expectations
D) real business cycle
The U.S. Federal Reserve, the Bank of England, the Bank of Japan, and the ECB are
all:
A) central banks.
B) large commercial banks.
C) investment banks.
D) a combination of savings and loans and credit unions.
Absolute advantage is the basis for gains from trade.
A) True
B) False
To make it easier for S&Ls to compete with banks in the late 1970s, Congress allowed
the thrifts to undertake riskier investments in addition to home mortgages.
A) True
B) False
Figure: Technological Progress and Productivity Growth
Look at the figure
Technological Progress and Productivity Growth. Which of the following changes in
real GDP is most likely to have resulted from an increase in the quality (as well as
quantity) of government spending on education?
A) A to B
B) B to A
C) B to C
D) C to B
Your health club is offering a free one-year membership for the person who attends the
most yoga classes in March. This results in more people attending yoga. This statement
best represents this economic concept:
A) The real cost of something is what you must give up to get it.
B) People usually exploit opportunities to make themselves better off.
C) There are gains from trade.
D) Markets move toward equilibrium.
Which of the following is intended to prevent bank runs?
A) the Sherman Anti-Trust Act
B) regulation Q, which prohibits banks from paying interest on demand deposits
C) deposit insurance
D) maturity transformation
Figure: Actual and Natural Rates of Unemployment
Look at the figure Actual and Natural Rates of Unemployment. In 2014, the amount of
cyclical unemployment was approximately:
A) 2%.
B) 0.5%
C) 9%.
D) 14%.
Suppose only two countries existed. Country A imported $200 million worth of goods
and services from country B. Country B imported $100 million worth of goods and
services from country A. Net exports for country _____ equal _____.
A) A; $200 million
B) B; $200 million
C) A; “$100 million
D) B; “$100 million
According to the principle of purchasing power parity, the 2001 devaluation of the
Argentine peso:
A) increased the inflation rate in Argentina relative to the inflation rate in the United
States.
B) made Argentine imports from the United States cheaper.
C) decreased the inflation rate in Argentina relative to the inflation rate in the United
States.
D) had no impact on the Argentine inflation rate.
The debt is monetized when:
A) the budget is approved by Congress.
B) the Fed buys back debt via open-market purchases.
C) the government raises taxes.
D) transfer payments are decreased.
The political business cycle is MOST often found when:
A) monetary policy is used.
B) monetary rule is implemented.
C) activist macroeconomic policy is followed.
D) macroeconomic policies are based on technical findings such as those reported by
Friedman and Schwartz.
Between 1980 and 1994, growth rates of real GDP per capita in sub-Saharan Africa
ranged from 20% to 30%.
A) True
B) False
Consider an economy that produces only DVDs and DVD players. If 10 DVDs are sold
at $20 each and 5 DVD players are sold at $100 each, then nominal GDP is:
A) $100.
B) $700.
C) $1,100.
D) $900.
In autarky, the amount of a country’s production and consumption of a good must be
identical.
A) True
B) False
If the exchange rate for the U.S. dollar changes from $1.25 per euro to $1.50 per euro,
then the dollar depreciates.
A) True
B) False
If you expect to get a substantial raise six months from now and if you are like most
people, it will not affect your current consumption because you haven’t received the
money yet.
A) True
B) False
Economists include the prices of only the most important consumer goods, such as food
and energy, in the aggregate price level.
A) True
B) False
If the United States exports $100 billion of goods and services and imports $150 billion
of goods and services and there is no other factor income or transfers, the balance on
the financial account is:
A) $250 billion.
B) “$250 billion.
C) $50 billion.
D) “$50 billion.
The economist whose writings in the 1930s argued that the cause of an economic
depression is inadequate spending was:
A) Herbert Hoover.
B) John Maynard Keynes.
C) Andrew Mellon.
D) Joseph Schumpeter.
The demand for money in Japan is much lower than the demand for money in the
United States.
A) True
B) False
In the past 30 years, both China and India have had substantial economic growth:
A) and as a result, they are almost as rich as the United States today.
B) but India is still poorer than the United States was in 1900, and China only now
matches the level of income in the U.S. in 1900.
C) which was fueled by both countries’ increases in consumption.
D) which came about because of their relatively low levels of saving.
Scenario: Consumption Spending
Suppose that the consumption function is C= $500 + 0.8 YD,where YD is disposable
income.
Look at the scenario Consumption Spending. If income increases by $2,000,
consumption will increase by:
A) $500.
B) $2,000.
C) $1,600.
D) $400.
A supply shock:
A) moves our economy along the short-run aggregate supply curve.
B) moves us along the short-run Phillips curve.
C) shifts the short-run Phillips curve.
D) shifts the short-run aggregate supply curve but not the short-run Phillips curve.
Suppose that the Federal Reserve sells $500 in U.S. Treasury bills, and as a result the
money supply falls by $5,000. The reserve ratio can be as low as:
A) 100.
B) 10.
C) 0.1.
D) 0.5.
Investment spending in a closed economy must equal GDP minus consumption minus
government spending.
A) True
B) False
The aggregate demand curve is negatively sloped in part because of the impact of:
A) the wealth effect on consumption.
B) a changing exchange rate on potential output.
C) the stickiness of nominal wages and salaries.
D) the flexibility of nominal wages and salaries.
Monetary policy affects both the aggregate price level and output in the long run.
A) True
B) False
If the money held by the public is $3 billion and inflation is 6%, the inflation tax is:
A) $3.18 billion.
B) $50 billion.
C) $180 million.
D) $1.8 billion.