The existence of the principal-agent problem
A) increases the risk of buying stock in a corporation.
B) increases the risk of becoming the sole proprietor of a business.
C) implies that managers that have the same incentives as the board of directors.
D) does all of the above.
Figure 3-1
Refer to Figure 3-1. If the product represented is an inferior good, a decrease in income
would be represented by a movement from
A) A to B.
B) B to A.
C) D1 to D2.
D) D2 to D1.
Figure 16-11
Refer to Figure 16-11. If government purchases increase by $100 billion and lead to an
ultimate increase in aggregate demand as shown in the graph below, the difference in
real GDP between point A and point B will be
A) $100 billion.
B) less than $100 billion.
C) more than $100 billion.
D) There is insufficient information given here to draw a conclusion.
Which policy tool allows the Federal Reserve the greatest control over monetary
policy?
A) the discount rate
B) open market operations
C) the reserve requirement
D) lender of last resort
If the Federal Reserve raises or lowers interest rates too late, it could result in a
________ policy that destabilizes the economy.
A) fiscal
B) budgetary
C) procyclical
D) countercyclical
The current account does not include which of the following?
A) net exports
B) net investment income
C) net transfers
D) U.S. holdings of foreign assets
Some economists and lawmakers believe the Fed lost some of its independence when it
A) began printing money at the directive of the White House prior to the 2008
presidential election.
B) began working closely with the Treasury Department while dealing with the
financial crisis of 2008.
C) embarked on an expansionary monetary policy during the recession of 2007-2009.
D) began using the federal funds rate instead of M1 and M2 as a monetary policy target.
In recent years the cost of producing wines in the U.S. has increased largely due to
rising rents for vineyards. At the same time, more and more Americans prefer wine over
beer. Which of the following best explains the effect of these events in the wine market?
A) The supply curve has shifted to the left and the demand curve has shifted to the
right. As a result there has been an increase in the equilibrium quantity and an uncertain
effect on the equilibrium price.
B) Both the supply and demand curves have shifted to the right. As a result, there has
been an increase in the equilibrium price and an uncertain effect on the equilibrium
quantity.
C) Both the supply and demand curves have shifted to the right. As a result, there has
been an increase in both the equilibrium price and the equilibrium quantity.
D) The supply curve has shifted to the left and the demand curve has shifted to the
right. As a result, there has been an increase in the equilibrium price and an uncertain
effect on the equilibrium quantity.
Table 2-6
Table 2-6 shows the output per week of two people, James and Lucy. They can either
devote their time to making bracelets or making necklaces.
Refer to Table 2-6. Which of the following statements istrue?
A) Lucy has a comparative advantage in making both products.
B) James has a comparative advantage in making both products.
C) Lucy has a comparative advantage in making wagons and James in making tricycles.
D) Lucy has a comparative advantage in making tricycles and James in making wagons.
If the exchange rate between the U.S. dollar and the Mexican peso (pesos per dollar) is
less than the relative purchasing power between the two countries, which of the
following would be true?
A) There are opportunities for profit by purchasing goods in the United States and then
selling them in Mexico.
B) Purchasing power parity predicts that the value of the dollar will fall as traders take
advantage of arbitrage opportunities.
C) Purchasing power parity predicts that the dollar is overvalued as traders take
advantage of arbitrage opportunities.
D) There are no arbitrage opportunities for which traders can take advantage.
Poorly timed discretionary policy can do more harm than good. Getting the timing right
with fiscal policy is generally
A) less difficult than with monetary policy.
B) far less difficult than with monetary policy.
C) more difficult than with monetary policy.
D) about the same difficulty as with monetary policy.
Since 1950, recessions in the United States
A) have not occurred.
B) have become more severe than before 1950.
C) have become less severe than before 1950.
D) are about as severe as they were before 1950.
If firms find that consumers are purchasing less than expected, which of the following
would you expect?
A) Aggregate expenditure will likely be greater than GDP.
B) Aggregate expenditure will likely be less than GDP.
C) The economy will adjust to macroeconomic equilibrium as inventories rise, and
production and employment rise.
D) The economy will adjust to macroeconomic equilibrium as inventories fall, and
production and employment rise.
The ________ curve is vertical.
A) short-run aggregate supply
B) short-run aggregate demand
C) long-run aggregate supply
D) long-run aggregate demand