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Mexico pegged its exchange rate to the U.S. dollar in the 1980s
A) to discourage foreign investment.
B) in an attempt to abandon the peso and switch to U.S. dollars as currency.
C) to signal investors that Mexico was serious about controlling inflation.
D) to maintain a similar unemployment rate to the United States
The purchasing power of money increases as the
A) demand increases.
B) unemployment decreases.
C) price level falls.
D) production increases.
Refer to Figure 4.1, which shows Molly's and Ryan's individual demand curves for
compact discs per month. Assuming Molly and Ryan are the only consumers in the
market, what is the market quantity demanded at a price of $9?
A) 2
B) 4
C) 6
D) 10
The GDP for the nation of Economia is currently above potential output. If the
adjustment to the long-run equilibrium occurs slowly, the government of Economia is
most likely to pursue a policy of
A) increasing government spending to decrease aggregate demand.
B) decreasing the money supply to decrease aggregate demand.
C) taking no action and allowing the economy to adjust naturally.
D) decreasing government spending to increase aggregate demand.
Refer to Figure 15.2. An increase in wages is represented by a movement from point
________ to point ________.
A) c; d
B) c;
C) a;
D) e; a
If $10,000 of new reserves are deposited in the banking system, what is the maximum
amount of money that can be generated by the banking system if the reserve ratio is:
(a) 100%
(b) 50%
(c) 25%
(d) 20%
(e) 10%
Spending money on a new car instead of a used car when you are on a fixed budget is
an example of
A) the incursion of an opportunity cost.
B) isolating variables.
C) a bad thing to do because you run out of money.
D) living on the edge.
The WTO and GATT promote trade by:
A) reducing tariffs.
B) directing trade.
C) setting the prices of goods sold internationally.
D) all of the above.
The United States had serious difficulties fighting inflation in
A) the 1970s.
B) the 1980s.
C) both the 1970s and the 1980s.
D) every decade since World War II.
Recall the Application about the effect of global warming on economic growth to
answer the following question(s).
According to this Application, a study of municipalities in Latin and South America
found that a one degree Celsius rise in temperature was associated with
A) no measurable change in per capita income.
B) a small decline in real income and a small increase in per capita real income.
C) a slight increase in municipal per capita income.
D) a decline in municipal per capita income.
When Bob, a recent college grad, took an internship at an accounting firm, he is
accumulating which factor of production?
A) physical capital
B) human capital
C) entrepreneurship
D) natural resources
Recall the Application about Fed Chairman Ben Bernanke's views on how to fight a
liquidity trap to answer the following question(s).
Recall the Application. After becoming Fed Chairman, Ben Bernanke ________ a
policy of purchasing long-term government bonds and ________ a policy of creating
expectations of inflation in an effort to fight a liquidity trap.
A) still supported; still supported
B) still supported; no longer supported
C) no longer supported; still supported
D) no longer supported; no longer supported
A necessary condition for the classical model to work is that
A) wages and prices are fully flexible.
B) prices, but not wages, are fully flexible.
C) wages and prices are not fully flexible.
D) wages, but not prices, are fully flexible.
Recall the Application about growth in China and India to answer the following
question(s). From 1978 to 2004, China grew at a rate of 9.3 percent per year and
India grew at a rate of 5.4 percent per year.
According to this Application, based on the analysis of the sources of growth in China
and India, and assuming that nothing changes, it can be concluded that
A) India's long-term growth prospects are not as strong those for China.
B) the growth rate in China should significantly slow down in the near future, but the
growth rate in India will continue to rapidly increase in the near and distant future.
C) there is convergence between the nations in Asia.
D) China's reliance on technology for economic growth makes it less likely to keep
pace with the growth rate in India.
Which of the following situations will arise in the domestic market following the
imposition of a tariff?
A) imports decrease, domestic production increases, prices increase
B) imports increase, domestic production increases, prices increase
C) imports increase, domestic production decreases, prices decrease
D) imports decrease, domestic production increases, prices decrease
Recall Application 1, "The Chinese Yuan and Big Macs," to answer the following
questions:
According to the Application, the predicted purchasing power exchange rate in China is
3.49 yuan. This implies that:
A) if the exchange rate is 3.49 yuan for one US dollar, then the Big Mac in both
countries would cost the same.
B) the cost of a Big Mac in China is 3.49 yuan.
C) the US dollar should be worth 3.49 yuan more than the current exchange rate.
D) the US dollar should be worth 3.49 yuan less than the current exchange rate.
