The appreciation of the dollar will make U.S. goods ________ to foreigners and make
imports ________ for U.S. residents.
A) more expensive; more expensive
B) cheaper; cheaper
C) more expensive; cheaper
D) cheaper; more expensive
Which of the following individuals referred to the expectations of investors as “animal
spirits”?
A) Friedman
B) Lucas
C) Keynes
D) Greenspan
When determining monetary policies, central banks tend to take what kind of approach?
A) liberal economic policies
B) conservative economic policies
C) make fighting inflation the highest priority
D) focus only on preventing recessions
Economists define the unemployed as individuals who are
A) not currently working.
B) not currently working but are actively looking for work.
C) working but looking for a different job.
D) working less than their desired amount of time.
The market supply curve is:
A) negatively sloped.
B) upward sloping.
C) always vertical
D) always horizontal.
If Congress were required to consent to every deviation of the actual budget from the
initially approved budget, the federal budget would not work as an automatic economic
stabilizer due to:
A) the long inside lags.
B) the crowding out effect.
C) the long fiscal year.
D) the long outside lags.
The fraction of its deposits that banks keep in the form of reserves as required by law
is/are called:
A) required reserves.
B) owner’s equity.
C) excess reserves.
D) federal funds.
Autarky refers to
A) a situation in which nations trade goods and services.
B) the location on a consumption possibilities curve.
C) a situation in which there is no trade.
D) the equilibrium a nation reaches after trade begins.
When Bob receives a 5 percent nominal wage increase in a period where inflation is
also 5 percent, then we say that he experiences money illusion when:
A) he believes that his real wage increased.
B) when he believes that his real wage did not change.
C) he believes that his real wage decreased.
D) All of the above are correct.
Recall Application 2, “Two Approaches to Determining the Causes of Recessions,” to
answer the following questions:
According to the application, a recession caused by a decrease in aggregate demand
occurred in:
A) 1973.
B) 1979.
C) 1929.
D) All of the above were caused by a decrease in aggregate demand.
Deflation is a great economic problem because:
A) consumers can not afford to maintain their usual lifestyles.
B) firms have a difficult time selling their goods and services.
C) people have difficulty paying back their debts.
D) Social Security costs rise very fast.
Table 3.2
Consider two individuals, Rose and Sharon, who produce fish and coconuts. Rose and
Sharon’s hourly productivity are shown in Table 3.2. Which of the following is true?
A) Rose has a comparative advantage in producing coconuts but not fish.
B) Rose has a comparative advantage in producing fish but not coconuts.
C) Rose has a comparative advantage in producing both goods.
D) Rose does not have a comparative advantage in producing either good.
Recall Application 1, “Don’t Forget the Costs of Time and Invested Funds,” to
answer the following questions.
Using figures from the Application, the opportunity cost of running your business:
A) should only include the opportunity cost of the invested capital.
B) should include your invested capital.
C) should not include the invested capital.
D) should only include the opportunity cost of your time.
Assume that the required reserve ratio is 20%. If the Fed sells $10 million worth of
government bonds to the public, the maximum change in the money supply will be:
A) more than 10 million.
B) $2 million.
C) less than 10 million.
D) less than 2 million.
Figure 7.4
From Figure 7.4, crowding in is most pronounced between:
A) points A and B.
B) points B and C.
C) points C and D.
D) points D and E.
One reason the aggregate demand curve is downward sloping is because of the
A) interest rate effect.
B) welfare effect.
C) price effect.
D) tariff effect.
Table 5.3
Refer to Table 5.3. Suppose this economy produces only the two goods X and Y.
Nominal GDP in year 2 is:
A) $130.
B) $250.
C) $280.
D) $330.
A high rate of inflation in one country relative to another puts pressure on the exchange
rate between the two countries, and there is a general tendency for the:
A) currency of the low-inflation country to depreciate.
B) currency of the high-inflation country to appreciate.
C) currency of the high-inflation country to depreciate.
D) none of the above
Suppose that the U.S. has an open economy and is currently at full employment. When
the country ends its war in Afghanistan and cuts military spending, crowding in will
take the form of:
A) an increase in investment spending.
B) an increase in consumption spending.
C) an increase in net exports.
D) All of the above are correct.