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When using the formula PV = K/(1+i)t to calculate the present value of a future
payment, a higher t implies:
A) a lower present value.
B) a higher future value.
C) a higher present value.
D) a lower future value.
Figure 4.4
Figure 4.4 illustrates the demand for guitars. A decrease in the demand for guitars is
represented by the movement from:
A) point B to point C.
B) point B to point A.
C) D1 to D0.
D) D1 to D2.
To stop hyperinflations, a nation must
A) increase the budget deficit.
B) decrease taxes.
C) increase spending.
D) eliminate the budget deficit.
An example of a market failure due to a firm not fully bearing the costs of its
production decision is:
A) a levee.
B) pollution.
C) profit.
D) imperfect information.
Suppose bad weather in Florida unexpectedly results in a much smaller citrus crop than
had been projected. This would cause the ________ labor to pick citrus fruit in Florida
to ________.
A) demand for; increase
B) demand for; decrease
C) supply of; increase
D) supply of; decrease
If the marginal propensity to consume is 0.55, the tax multiplier is:
A) -2.22.
B) -1.22.
C) -2.33.
D) -3.33.
If the Fed follows a policy of targeting the inflation rate:
A) its credibility will be enhanced.
B) the natural rate of unemployment will rise.
C) it will likely face more political pressures.
D) the financial market will be more confused.
Figure 4.3
Figure 4.3 illustrates the supply and demand for blue jeans. If the actual price of blue
jeans is $30, we would expect that:
A) demand will decrease until quantity demanded equals quantity supplied.
B) supply will increase until quantity demanded equals quantity supplied.
C) price will increase until quantity demanded equals quantity supplied.
D) there will be no change since the market is in equilibrium.
When a U.S. company shifts some of its production to Mexico, it is engaging in
A) outsourcing.
B) insourcing.
C) self-sufficiency.
D) involuntary exchange.
Which of the following is a question answered with positive economic analysis?
A) Should the college reduce tuition for out-of-state residents?
B) Should the college charge higher tuition for part-time students?
C) If the college increased its eligibility requirements for enrollment, will class sizes
decline?
D) Should the college eliminate its athletic program to cut its costs?
Third National Bank has $750 million in deposits. The required reserve ratio is 15%.
Third National Bank must keep ________ in reserves.
A) $150.5 million
B) $60.5 million
C) $112.5 million
D) $160.5 million
Expected real interest rates are the
A) interest rates quoted in the market minus the expected inflation rate.
B) interest rates quoted in the market plus the expected inflation rate.
C) expectations of future interest rates.
D) interest rates quoted in the market.
