Figure 10-1 shows the demand schedule facing the only gas station in a small
Midwestern town. The station does not price discriminate. Which of the following
statements is correct?
If Cathy has a bond that will pay $1,000 one year from now and its current price is
$800, what is the current interest rate?
a. 10 percent
b. 25 percent
c. 20 percent
d. 200 percent
e. 2 percent
Over the past twenty years the Fed’s policy experience
a. has been good and improving
b. is an indicator that economic policy is confused
c. shows a focus on full employment
d. reveals a lack of concern about unemployment
e. has been generally poor and deteriorating
Which of the following is not an example of a Pareto improvement?
Assume that an industry requires a very specialized technology that involves high
start-up costs for new firms no matter what level of output they produce. In the long
run, at low levels of output, these firms will tend to exhibit
Marginal revenue, average revenue, and price are all equal for a monopolist.
The concept of elasticity is used to
If labor supply increases, the wage rate increases.
Which of the following explains why long-run average total cost at first decreases as
output increases?
Revisions in the interest rate target
a. occur on a daily basis
b. have widespread impacts on the financial markets
c. require Congressional approval
d. are based solely on data gathered in previous quarters
e. are a no-lose opportunity for the Fed
After the Fed sells a government bond, which of the following is the impetus for the
money supply process that follows?
a. Banks now have excess reserves.
b. Banks now have deficient reserves.
c. Banks must print money to purchase the bonds.
d. Banks now have to hold more required reserves.
e. Banks now must be regulated closely.
Refer to Figure 14-3. What are the equilibrium interest rate and quantity of money?
a. 10 percent and $500 billion
b. 8 percent and $500 billion
c. 6 percent and $500 billion
d. 8 percent and $750 billion
e. 6 percent and $750 billion
Which of the following is a stock variable?
a. The interest rate
b. Real GDP
c. Investment in physical capital
d. Physical capital
e. Investment in human capital
If there is a leftward shift of the money demand curve, which of the following should
the Fed do if it wants to keep the price level stable?
a. Lower its interest rate target
b. Sell bonds in the open market
c. Wait, since the price level does not usually change when the money demand curve
shifts
d. Raise its interest rate target
e. Buy bonds in the open market
Classical economists believed that production could be stuck below its full employment
level for a long period of time.
Which of the following would increase the amount of an inferior good that buyers
would like to purchase?
Macroeconomists are able to study the entire economy by
a. ignoring much of the data available in order to reduce the number of markets that
need to be studied
b. studying only a few markets at a time
c. simply adding up all the prices and quantities in individual markets
d. aggregation which reduces the number of markets that need to be studied
e. dividing total output by the number of markets