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Exhibit 4-7
How many fewer persons work in the unskilled labor market at the minimum wage
(WM) than at the equilibrium wage (W1)?
a. (N2 - N1) persons
b. (N1 - N3) persons
c. (N2 - N3) persons
d. N3 persons
e. none of the above
If total production (TP) is greater than total expenditures (TE), it follows that
a. producers have produced more than individuals buy.
b. optimum inventory levels rise.
c. firms have underproduced.
d. actual inventory levels unexpectedly rise.
e. a and d
What does the term run on the bank mean?
a. People will rush in to deposit money in the bank.
b. People will rush to buy the bank's stock.
c. Depositers of the bank will rush in to close out their accounts at the bank.
d. Depositers of the bank will rush in to add money to the accounts they already have
with the bank.
e. none of the above
Former Fed Chairman Alan Greenspan has argued that low ___________ interest rates,
not ______________ interest rates, were the cause of the housing boom in the late
1990s and early 2000s.He also argued that the Fed has more control over
_______________ rates than over ____________ rates.
a. long-term; short-term
b. long-term; long-term
c. short-term; short-term
d. short-term; long-term
Resource X is necessary to the production of good Y. If the price of resource X falls,
a. the supply curve of Y shifts leftward.
b. the supply curve of Y shifts rightward.
c. the supply curve of Y is unaffected.
d. there is a movement down the supply curve of Y.
e. there is a movement up the supply curve of Y.
If the economy is currently in a recessionary gap,
a. all economists will agree that the economy can remove itself from the recessionary
gap without government intervention.
b. some economists will argue that the economy can remove itself from the recessionary
gap without government intervention.
c. no economist will state that the economy can remove itself from the recessionary gap
without government intervention.
d. all economists will agree that over time the recessionary gap will worsen.
A person who believes the economy is self-regulating also believes that
a. when there is a surplus in the labor market, the wage rate falls, and when there is a
shortage in the labor market, the wage rate rises.
b. it is better if the economy is in an inflationary gap than a recessionary gap.
c. prices are flexible but wages are not.
d. the economy is always in long-run equilibrium.
e. the real balance effect does not operate in a recessionary gap.
An increase in the supply of corn will lower the total revenue from corn if
a. the demand curve for corn is inelastic between the current and new price of corn.
b. the demand curve for corn is elastic between the current and new price of corn.
c. there are many substitutes for corn.
d. there are only a few substitutes for corn.
e. none of the above
International trade exists because countries
a. can make themselves better off through trade.
b. want to be neighborly with each other.
c. want to be political allies.
d. want to improve diplomatic relations with each other.
e. want to avoid war with each other.
When the Federal Reserve system was being created, some people thought that there
should be as few district banks as possible to enhance efficiency and for ease of
operation.
a. True
b. False
When borrowers are unable to make their monthly mortgage payments, the value of
mortgage-backed securities and collateralized debt obligations
a. falls, which pushes banks that own them closer to insolvency.
b. rises, which pushes banks that own them closer to insolvency.
c. falls; which pushes banks that own them towards greater solvency.
d. rises, which pushes banks that own them towards greater solvency.
Exhibit 34-6
The opportunity cost of 1 unit of cheese in terms of units of wine is __________ for
country B.
a. 1
b. 5
c. 10
d. 15
An advance in technology in the production of good X causes
a. a rightward shift in the supply curve for good X.
b. a leftward shift in the supply curve for good X.
c. the supply curve for good X to change from upward sloping to vertical.
d. the supply curve for good X to change from vertical to upward sloping.
With collateralized debt obligations (CDOs) buyers are purchasing _________ slices,
and buyers of mortgage-backed securities (MBSs) purchase ___________ slices.
a. unequal; equal
b. equal; equal
c. unequal; unequal
d. equal; unequal
In the Keynesian analysis of changes from one Real GDP level to another, which of the
following plays a critical role?
a. changes in prices
b. the relationship between optimum inventory levels and current inventory levels
c. the long-run aggregate supply (LRAS) curve
d. the relationship between total expenditures (TE) and the aggregate demand (AD)
curve
e. none of the above
In reading the stock market quotes in the newspaper, the column with the heading "P/E"
gives the
a. number of shares of the stock traded that day.
b. dividend per share divided by the closing price per share.
c. stock symbol for the company.
d. latest closing price per share divided by the latest available earnings per share.
Suppose that the Fed undertakes an open market purchase of $1 million worth of
securities from a bank.If the required reserve ratio is 9%, what is the resulting change in
checkable deposits (or the money supply), assuming that there are no cash leakages and
that banks hold zero excess reserves?
a. $11.11 million
b. $9 million
c. $1.09 million
d. $90 million
