Recall Application 4, “Coping with the Financial Chaos Caused by the Mortgage
Crisis,” to answer the following questions:
According to Application 4, which insurance company did the Fed take an 80 percent
stake in and made an $85 billion loan to?
A) AIG
B) Bank of America
C) Geico
D) Bear Stearns
Spending on programs that Congress authorizes ________ is known as discretionary
spending.
A) by prior law
B) on an annual basis
C) on an off-budget emergency basis
D) after approval from the Federal Reserve
As the marginal propensity to consume ________, the value of the multiplier increases.
A) is constant
B) decreases
C) increases
D) decreases slightly
The existence of deposit insurance can prevent a bank run because:
A) the depositors with accounts greater than $250,000 are guaranteed to get their
deposits in case the bank fails.
B) the depositors with accounts less than $250,000 are guaranteed to get their deposits
in case the bank fails.
C) the depositors with accounts greater than $1,000,000 are guaranteed to get their
deposits in case the bank fails.
D) the depositors with accounts less than $1,000,000 are guaranteed to get their
deposits in case the bank fails.
Suppose a bank has $200,000 in deposits, a reserve ratio of 10 percent, and reserves of
$45,000. This bank has excess reserves of
A) $155,000.
B) $25,000.
C) $10,000.
D) $5,000.
The U.S. balance of payments records all transactions involving:
A) the U.S. and the rest of the world.
B) the U.S. federal government and a state government.
C) the U.S. and a U.S. territory.
D) the U.S. and countries that also use the U.S. dollar as their currency.
________ occurs when a firm cuts prices below production costs in a deliberate attempt
to drive competitors out of business.
A) Voracious dumping
B) Ravaging dumping
C) Predatory dumping
D) Deliberate dumping
The central bank of the United States is known as the:
A) Federal Reserve System.
B) Federal Deposit Insurance Corporation.
C) Department of the Treasury.
D) Federal Savings and Loan Insurance Corporation.
From the application, the decline in the real wages of laborers in England from the time
after the plague until the 1800s implies that during this period:
A) there was a large decline in the population.
B) there was a significant increase in the population.
C) there was rapid technological progress.
D) there was a large increase in the capital stock.
Figure 2.2
Figure 2.2 presents a production possibilities curve for a country that can either produce
highways or provide people with medical care in a given year. The reason why the
production possibilities curve is shaped as it is (bowed outward) is because inputs for
healthcare and highways are:
A) used in precisely the same ratios.
B) substitutable, but not perfectly substitutable.
C) not substitutable at all.
D) perfectly substitutable.
Recall the Application about why the U.S. federal government took over the debt of the
state governments in the late 1700s to answer the following question(s).According to
this Application, the federal government’s assuming the debts of the state governments
that had been incurred during the Revolutionary War was seen as a way to
A) force states to be dependant on the federal government.
B) strengthen the federal government.
C) prevent rapid inflation.
D) balance the federal budget.
Recall the Application about the time involved in including cell phones in the
calculation of the CPI to answer the following question.
According to this Application, the bias in the CPI would be ________ if new goods are
________ incorporated in CPI calculations.
A) smaller; quickly
B) greater; immediately
C) smaller; slowly
D) negligible; slowly
Table 2.2
Krystal runs a nail salon and needs to decide how many hours to stay open. Table 2.2
illustrates her marginal costs of staying open for each additional hour. Suppose that
Krystal’s marginal benefit of staying open per hour is $18. If she is following the
marginal principle, how many hours should Krystal stay open?
A) 3 hours
B) 4 hours
C) 6 hours
D) 7 hours
Table 2.2 Julianne runs a business and needs to
decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying
open for each additional hour. Suppose that Julianne’s marginal benefit of staying open
per hour is $3. If she is following the marginal principle, how many hours should
Julianne stay open?
A) 1 hour
B) 3 hours
C) 6 hours
D) none of the above