Article Summary. In a September 2013 speech to the Independent Bankers
Association of Texas, Federal Reserve Bank of Dallas president Richard Fisher
stated that the Fed’s credibility was harmed when it announced the previous week
that it would continue its large bond purchasing program. In June, Fed Chairman
Ben Bernanke had stated that that the program could begin to be cut back later in
the year, and several other Fed officials expressed being open to the announced
timing of this policy. Bernanke’s change in his announced timeline of the Fed’s
intentions regarding the bond purchasing program brought criticism that the Fed
had misled investors. In his speech, Fisher stated “I disagreed with the decision of
the committee and argued against it. Doing nothing at this meeting would increase
uncertainty about the future conduct of policy and call the credibility of our
communications into question. I believe that is exactly what has occurred, though I
take no pleasure in saying so.” Fisher has been a long-time opponent of the Fed’s
bond purchasing program, claiming it is ineffective and may well lead to future
inflation, and had been calling for the Fed to begin phasing out this program in
September. Source: “Fisher: Standing pat on policy hurt Fed’s credibility,”
Reuters, September 23, 2013.
If the Federal Reserve’s announcements about upcoming monetary policy decisions are
not seen as credible, as Richard Fisher alludes to regarding the announcements about
the bond purchasing program, which of the following would you expect to see?
A) Inflation expectations will accurately reflect actual inflation.
B) Expansionary monetary policy will result in lower rates of inflation.
C) Firms and workers will be unable to accurately forecast changes in the rate of
inflation.
D) The Federal Reserve will have more control over the inflation rate.
Which of the following statements is true?
A) An inverse relationship has a positive slope value.
B) A direct relationship has a negative slope value.
C) A curved line has slope values that change at every point.
D) A straight line has a slope of one.
FedEx plays such a large role in moving packages around the country that there is
usually a close relationship between fluctuations in FedEx’s business and fluctuations in
GDP. Some economists refer to this relationship as the
A) shipping cycle.
B) FedEx indicator.
C) overnight delivery index.
D) package prognostication process.
In a small Asian country, it is estimated that a $10,000 increase in capital per hour
worked will increase real GDP per hour worked by $600. Based on this information,
what is the slope of the per-worker production function in this range?
A) 0.06
B) 6.6
C) 66.6
D) 666
Which of the following is the best example of a tariff?
A) a subsidy from the U.S. government to domestic manufacturers of residential air
conditioners to enable them to compete more effectively with foreign producers
B) a limit on the quantity of residential air conditioners that can be imported from a
foreign country
C) a $150 fee imposed on all imported residential air conditioners
D) a tax placed on all residential air conditioners sold in the domestic market to help
offset the impact of emissions on the environment
Table 4-6
The table above lists the marginal cost of polo shirts by Marko’s, a firm that specializes
in producing men’s clothing. If the market price of Marko’s polo shirts is $30, Marko’s
will produce
A) 0 shirts.
B) 1 shirt.
C) 3 shirts.
D) 4 shirts.
Fluctuating exchange rates can alter a multinational firm’s profits and losses. German
auto maker Volkswagen produces automobiles in Germany and sells them in the United
States. If the dollar depreciates against the euro, then Volkswagen’s revenues from these
operations should ________ because it will take ________ U.S. dollars to purchase the
German-made Volkswagens.
A) rise; more
B) rise; fewer
C) fall; more
D) fall; fewer
Figure 4-5 Figure 4-5 shows the
market for apartments in Bay City. Recently, the government imposed a rent ceiling at
R0. Suppose that instead of a price ceiling, the government imposed a price floor of R1.
What is the area representing producer surplus after the imposition of the price floor?
A) A
B) B + D + F
C) C + E
D) B + C + D + E + F
Figure 12-1
If the firm is charging a price of $12 per unit,
A) it breaks even.
B) it is making a profit.
C) it is selling 700 units.
D) it is not selling any output.
Table 15-2
Typically, the higher the level of income per person in a country, the higher the level of
spending per person on health care. This relationship between income and spending
indicates that health care is a
A) normal good.
B) inferior good.
C) luxury.
D) necessity.
Figure 2-2
Figure 2-2 above
shows the production possibilities frontier for Mendonca, an agrarian nation that
produces two goods, meat and vegetables. The linear production possibilities frontier in
the figure indicates that
A) Mendonca has a comparative advantage in the production of vegetables.
B) Mendonca has a comparative disadvantage in the production of meat.
C) the tradeoff between meat and vegetables is constant.
D) it is progressively more expensive to produce meat.
From 1991 until 2001, the United States was in a period of
A) expansion.
B) recession.
C) business cycle troughs.
D) business cycle peaks.
Figure 2-6
If the economy is currently producing at point D, what is the opportunity cost of
moving to point B?
A) 16 thousand spoons
B) 46 thousand forks
C) 60 thousand spoons
D) 0 forks
Identify the type of merger in each of the following situations and indicate how the
post-merger concentration ratio for the industry is affected.
a. A steel company merges with a coal and iron ore mining company.b. Staples, a
retailer of office supplies, acquires Office Depot, another retailer of office supplies.c.
An oil company merges with pipeline, shipping, and railroad companies as well as
refineries and gas stations.
When the price of gasoline rises, some consumers begin riding their bikes more
frequently or riding the bus instead of driving their cars. The fact that the CPI does not
fully account for such changes in consumer behavior is called
A) outlet bias.
B) increase in quality bias.
C) substitution bias.
D) discrimination bias.
Table 4-6
The table above lists the marginal cost of polo shirts by Marko’s, a firm that specializes
in producing men’s clothing. If the market price of Marko’s polo shirts is $13, Marko’s
will produce
A) 1 shirt.
B) 2 shirts.
C) 3 shirts.
D) 4 shirts.
In order to change inflationary expectations in 1979, the Fed’s monetary policy under
Paul Volcker’s leadership resulted in ________ and ________.
A) disinflation; high unemployment
B) steep inflation; low unemployment
C) disinflation; low unemployment
D) steep inflation; high unemployment
E) deflation; high unemployment
A change in the slope of an isocost line is due to a change in
A) the output price.
B) the price of one or both inputs.
C) total cost.
D) quantity of output.
The owners of a ________ have a separate legal distinction from the business.
A) corporation
B) partnership
C) sole proprietorship
D) All of the above are correct.