Assuming the economy was in equilibrium, use the following information to determine
the total amount of funds demanded in the loanable funds market.
a. $0.3 trillion
b. $2.2 trillion
c. $2.5 trillion
d. $3.0 trillion
e. $5.2 trillion
What could be a reason for a falling inflation rate?
a. Consumer optimism
b. A negative spending shock
c. Unemployment is below the natural rate
d. An increase in oil prices
e. A sudden increase in investment spending
During the Great Depression the price level increased.
If there is an increased interest in U.S. goods by Indian consumers, which of the
following will happen in the market for Indian rupees?
a. A rightward shift of the supply curve, a depreciation of the rupee, and a larger
number of rupees traded
b. A rightward shift of the demand curve, a depreciation of the rupee, and a smaller
number of rupees traded
c. A rightward shift of the demand curve, an appreciation of the rupee, and a larger
number of rupees traded
d. A leftward shift of the demand curve, a depreciation of the rupee, and a smaller
number of rupees traded
e. A leftward shift of the supply curve, an appreciation of the rupee, and a smaller
number of rupees traded.
Which of the following is the most liquid form of asset?
a. Small time deposits
b. Large time deposits
c. Savings accounts
d. Money market mutual fund (MMMF) balances
e. Travelers’ checks
The Federal Open Market Committee (FOMC) controls the U.S. money supply by
buying and selling loans in the public loan market.
The least liquid of the following assets is
a. cash in the hands of the public
b. time deposits
c. savings accounts
d. travelers’ checks
e. demand deposits
If the U.S. inflation rate is 3 percent annually and the Swiss inflation rate is 5 percent
annually, by what percent would the dollar price of francs need to change according to
purchasing power parity?
a. Depreciate by 5 percent
b. Appreciate by 3 percent
c. Appreciate by 5 percent
d. Depreciate by 2 percent
e. Appreciate by 2 percent
A higher interest rate will lead a firm to purchase less capital because the higher interest
rate
Refer to Figure 15-3. Which of the following most likely caused the shifts from AE1to
AE2, and from AD1to AD2?
a. A decrease in the money supply
b. An increase in government purchases
c. An increase in investment spending
d. An increase in autonomous consumption
e. An increase in taxes
If Country A can produce a good at a lower opportunity cost than Country B can,
a. there are benefits from trade
b. Country A has an absolute advantage in producing the good
c. economic efficiency has been achieved
d. Country A does not have a comparative advantage in producing the good
e. Country A can sell the good for a higher price abroad
The amount of a good or service that buyers would be willing and able to purchase at a
specific price is known as
Which of the following is the formula for the government’s budget deficit?
a. S – G
b. G -T
c. C + I + G
d. S + I
e. I + G
The choice between hawk and dove positions depends on
a. the extent of cyclical unemployment at the time of the decision
b. relative importance of short-run and long-run monetary considerations
c. cooperation between Congress and the monetary authorities
d. the frequency of negative supply shocks
e. the Fed’s relative concern for price and employment stability
In the presence of a negative externality
If you observed the wage rate decreasing while employment increased, which of the
following would be a possible explanation?
a. A decrease in labor demand
b. A decrease in labor demand coupled with a decrease in labor supply
c. An increase in labor supply
d. A decrease in labor supply
e. It is not possible for the wage rate to decrease while employment is increasing
Economic efficiency
If countries have different resource endowments, trade is usually not possible.
Which of the following assumptions of the classical model is the best reason we cannot
use it to explain short-run economic fluctuations?
a. Markets never clear in the long run.
b. The labor market clears.
c. Prices remain constant and supply and demand adjust.
d. It does not show how an economy recovers from a recession.
e. Government intervention is essential to get markets to clear.