China has intervened in the foreign exchange market to maintain the value of its
currency vis–vis other countries.
a. True
b. False
An American good with a price tag of $89 costs 809 pesos. The exchange rate must be
approximately
a. $11.00 = 1 peso
b. $0.11 = 1 peso
c. $0.89 = 1 peso
d. $0.09 = 1 peso
e. none of the above
The classical economists felt that saving would be equal to investment because
a. wages are flexible.
b. prices of domestic goods are flexible.
c. interest rates are flexible.
d. prices of imports are flexible.
Consumers’ surplus is the difference between the price
a. sellers receive for a good and the maximum price they would have paid for the good.
b. sellers receive for a good and the minimum price for which they could have sold the
good.
c. buyers pay for a good and the maximum price they would have paid for the good.
d. buyers pay for a good and the minimum price for which they would have sold the
good.
Which of the following statements is true?
a. Base year prices are necessarily higher than current year prices.
b. The CPI in the base year is always 100.
c. If the CPI is 112 in year 1 and 123 in year 2, prices have risen by approximately 9.8
percent between the two years.
d. b and c
e. a, b, and c
Suppose that the current federal funds rate is below the federal funds target rate.In order
to raise the federal funds rate the Fed will ________________ securities on the open
market which will ________________ the supply of reserves in the market for reserves,
pushing the rate closer to the target rate.
a. sell; increase
b. purchase; increase
c. purchase; decrease
d. sell; decrease
A bank has $7 million in checkable deposits and $1.2 million in total reserves. If the
required reserve ratio is 10 percent, then the bank has
a. required reserves of $700,000.
b. excess reserves of $500,000.
c. excess reserves of $1,080,000.
d. required reserves of $120,000.
e. a and b
The labor force participation rate (LFPR) equals the number of
a. employed persons divided by the number of unemployed persons.
b. unemployed persons divided by the civilian noninstitutional population.
c. employed persons divided by the civilian labor force.
d. employed persons divided by the civilian noninstitutional population.
e. none of the above
Oil producers expect that oil prices next year will be higher than oil prices this year. As
a result, oil producers are most likely to
a. place more oil on the market this year, thus shifting the present supply curve of oil
rightward.
b. hold some oil off the market this year, thus shifting the present supply curve of oil
leftward.
c. place more oil on the market this year, thus increasing the quantity supplied of oil at
lower but not higher prices.
d. hold some oil off the market this year, thus decreasing the quantity supplied of oil at
lower but not higher prices.
Here is how an open market purchase works: The Fed __________ government
securities to (from) a commercial bank, which raises the bank’s deposits at the
__________ and increases the bank’s __________.
a. sells; Fed; reserves
b. buys; Fed; reserves
c. buys; Treasury; discount loans
d. sells; Treasury; required reserve ratio
e. buys; Fed; liabilities
In the early 2000s, the Fed’s ____________ interest rate policy had several
effects.Among these effects were a _______________ in mortgage interest rates and
a(n) ____________ in the size of loans taken out by mortgage borrowers.
a. high; decline; decrease
b. low; decline; increase
c. low; rise; increase
d. high; rise; increase
Every time you make a __________, you incur a(n) __________.
a. decision; efficient effect
b. choice; opportunity cost
c. competitive move; price
d. decision; mistake
e. none of the above
According to the Keynesian transmission mechanism, if the Fed conducts an open
market sale of government securities, it may cause which of the following in the
investment goods market?
a. a rightward shift in the investment demand curve
b. a leftward shift in the investment demand curve
c. a movement down and along a given investment demand curve
d. a movement up and along a given investment demand curve
The Taylor rule is an example of a rule-based monetary policy system.
a. True
b. False
We start with a 3 percent real interest rate in the United States and in Japan. Next, the
real interest rate in Japan falls to 2 percent, and the U.S. real interest remains constant.
As a result,
a. the yen will depreciate and the dollar will appreciate.
b. both the yen and the dollar will depreciate.
c. the yen will appreciate and the dollar will depreciate.
d. both the yen and the dollar will appreciate.
The terms scarcity and shortage are synonyms.
a. True
b. False
Bank capital equals assets minus liabilities.
a. True
b. False