In a fixed exchange rate system, speculation regarding an expected revaluation or
devaluation of a currency makes it more difficult to maintain the existing exchange rate.
If the Fed wishes to decrease the supply of money and credit, it may sell government
securities, raise the discount rate, or lower required reserve ratios.
A cash withdrawal reduces deposits, reserves and excess reserves in the banking
system.
During the 1960s, in face of moderate and stable inflation, people tended to form
adaptive expectations of future inflation rates.
If a tax is imposed on a product, the buyer will always bear the entire burden of the tax.
The quantity equation becomes the basis for a theory when we assume that velocity of
money is constant.
If consumption is defined as C = 2,400 + 0.9Y, then the marginal propensity to consume
is 0.9.
Soldiers in a World War II prisoner-of-war camp
A) used gold as a fiat money.
B) used cowrie shells as money.
C) used cigarettes as money.
D) used U.S. dollars as a commodity money.
The Federal Reserve’s two main ________ are the money supply and the interest rate.
A) monetary policy targets
B) policy tools
C) fiscal policy targets
D) fiscal tools
The per-worker production function has a ________ slope, indicating that increases in
capital per hour worked ________ real GDP.
A) negative; increase
B) positive; increase
C) negative; decrease
D) positive; decrease
Companies in the sharing economy, such as Airbnb and Uber, have the potential to
increase consumer surplus and decrease deadweight loss. This would occur by
________ the equilibrium price in their market, and by doing so ________ efficiency.
A) lowering; decreasing
B) lowering; increasing
C) raising; decreasing
D) raising; increasing
The unemployment rate is an important economic statistic that can tell us about the
health of the economy. If the unemployment rate turns out to be high or higher than
anticipated, we would expect
A) it is more likely that an incumbent president will be re-elected.
B) that stock prices are more likely to fall.
C) that jobs are less difficult to find.
D) that investors will be more optimistic about the economy.
Table 2-9
Table 2-9 shows the number of labor hours required to produce a wristwatch and a
pound of rice in Japan and Thailand.
Refer to Table 2-9. What is Thailand’s opportunity cost of producing one wristwatch?
A) 0.05 pounds of rice
B) 20 pounds of rice
C) 25 pounds of rice
D) 60 pounds of rice
Since 1900, real GDP in the United States has grown
A) more rapidly than the population.
B) more slowly than the population.
C) as rapidly as the population.
D) in a random unpredictable manner relative to the population.
________ occurs when actions taken by one party to a transaction are different from
what the other party expected at the time of the transaction.
A) Adverse selection
B) Risk aversion
C) Fraud
D) Moral hazard
Table 4-4
Table 4-4 shows the demand and supply schedules for the low-skilled labor market in
the city of Westover.
Refer to Table 4-4. If a minimum wage of $9.50 an hour is mandated, what is the
quantity of labor supplied?
A) 390,000
B) 380,000
C) 370,000
D) 340,000
Table 2-4
Table 2-4 shows the output per day of two gardeners, George and Jack. They can either
devote their time to mowing lawns or cultivating gardens.
Refer to Table 2-4. Which of the following statements istrue?
A) Jack has an absolute advantage in both tasks.
B) George has an absolute advantage in both tasks.
C) Jack has an absolute advantage in lawn mowing and George in garden cultivating.
D) Jack has an absolute advantage in garden cultivating and George in lawn mowing.
If workers and firms know that the Federal Reserve is following an expansionary
monetary policy, workers and firms will expect inflation to ________ and will adjust
wages so that the real wage ________.
A) increase; increases
B) increase; remains unchanged
C) decrease; decreases
D) increase; decreases
Suppose that last year the unemployment rate was 5 percent and the inflation rate was
2.5 percent. If the natural rate of unemployment is 5 percent, how do you expect
inflation to change?
What effect does the payment of government unemployment insurance have on the
unemployment rate?
What factors increase potential GDP? Include a definition of potential GDP in your
answer.
In a simple circular flow diagram, who supplies factors of production in markets and
who buys these factors of production? Who supplies goods and services in markets and
who buys these goods and services?
List the five categories of federal government expenditures.
In most countries in South America, the legal driving age is 18. If the legal driving age
in the United States was raised from 16 to 18, how would this affect the market for new
and used automobiles? What would happen to the equilibrium price and quantity of new
and used automobiles?
Explain the three reasons the aggregate demand curve slopes downward.
Table 12-10
Refer to Table 12-10. Using the table above, calculate the unplanned change in
inventories for each level of GDP, and explain what will happen to GDP?
Explain the difference between Gross Domestic Product and Gross National Product.
Give an example of each.