Table 2.1 A group of people has formed a house cleaning and yard
maintenance business. The number of houses or yards that they can clean or maintain in
any given day is depicted in Table 2.1. The opportunity cost of cleaning the second
house in a day is:
A) 1 yard maintained.
B) 2 yards maintained.
C) 3 yards maintained.
D) 18 yards maintained.
A large reduction in oil prices will cause:
A) a rightward shift in the aggregate demand curve.
B) a leftward shift in the aggregate demand curve.
C) a rightward shift in the aggregate supply curve.
D) a leftward shift in the aggregate supply curve.
How can the Federal Reserve actually increase the money supply?
A) by delaying transfer of money among banks
B) by raising the discount rate
C) by doubling the reserve requirement
D) by purchasing more government bonds in the open market
Table 13.4 Refer to Table 13.4. If First Charter Bank earns a loss of $100,000, then:
A) owner’s equity will decrease by $100,000.
B) deposits will decrease by $100,000.
C) owner’s Equity will increase by $100,000.
D) deposits will increase by $100,000.
If the Fed wishes to decrease long-term investment spending, it must:
A) cut the current short-term interest rate.
B) convince the public that the expected future short-term rates would be low.
C) raise the short-term interest rates and the expected short-term future rates.
D) A and B are correct.
Recall Application 4, “Coping with the Financial Chaos Caused by the Mortgage
Crisis,” to answer the following questions:
According to Application 4, by buying commercial paper or extending short term loans
to corporations, the Fed is applying which of its primary functions to private
corporations?
A) lender of last resort
B) provide a system of check collection and clearing
C) supply currency to the economy
D) conduct monetary policy
When you pay $12 for the pizza that you ordered for dinner, you are using money as a
(an):
A) store of value.
B) investment good.
C) medium of exchange.
D) unit of account.
Assume that C = 150 + 0.9Y and I = 50. The balanced budget multiplier is:
A) -9.
B) 1.
C) -10.
D) 10.
A possible reason a nation might impose a protectionist policy such as a tariff is to
A) help domestic firms establish a world monopoly in a particular market.
B) increase the level of imports.
C) encourage specialization in the good in which the nation has a comparative
advantage.
D) increase the welfare of domestic consumers.
Figure 18.4
For the good in Figure 18.5, with the tariff, the people in the country will buy:
A) Q2.
B) Q1.
C) Q4.
D) Q5.
Under the Bretton Woods exchange rate system, each country’s exchange rate was
pegged to:
A) the U.S. dollar.
B) the Japanese Yen.
C) the British pound.
D) gold.
The costs of inflation that arise from trying to reduce cash holdings are known as
A) shoe leather costs.
B) menu costs.
C) chain-index costs.
D) diminishing costs.
In the 1980s and most of the 1990s, the federal government
A) was balanced.
B) ran small deficits.
C) ran large deficits.
D) ran small surpluses.
By 1995 in Japan, ________ largest mortgage lenders had gone bankrupt due to a real
estate crash.
A) seven of the eight
B) seven of the nine
C) three of the four
D) five of the six
Recall Application 3, “The Effectiveness of Committees,” to answer the following
questions:
According to the application, experiments show that decisions made by committees:
A) are more accurate and just as quick as decisions made by individuals.
B) are less accurate but just as quick as decisions made by individuals.
C) are more accurate but slower than decisions made by individuals.
D) are less accurate and slower than decisions made by individuals.