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If the Federal Reserve purchases newly issued government debt
A) the effect is the same as borrowing from the public.
B) existing money is destroyed.
C) new money is created.
D) the money supply decreases.
Which one of the following statements is true?
A) Demand deposits are assets of a bank.
B) A bank's assets plus its liabilities equals must equal zero.
C) A bank's reserves can only be kept as cash in its vault.
D) Assets generate income for a bank.
Which of the following is an item in the U.S. current account?
A) net investment income
B) the change in foreign private assets held in the United States
C) the change in private U.S. assets held abroad
D) the change in foreign government assets held in the United States
Which of the following exacerbated the problems caused by the trade deficit in Mexico
prior to 1994?
A) The Mexican government did not undertake steps to slow down the growth rate of
prices in Mexico.
B) The government and firms began to borrow in U.S. dollars instead of Mexican
pesos.
C) Political turmoil forced foreign investors to pull out their investments in the country.
D) All of the above are correct.
From the perspective of a commercial bank, are the following assets or liabilities?
(a) deposits
(b) loans
(c) reserves
If the price of papayas is 12 baht in Thailand and the exchange rate is 30 baht per dollar,
then what is the dollar price of papayas?
A) $0.40
B) $2.50
C) $2.90
D) $26.00
The four components of the aggregate demand curve are:
A) consumption, investment, government purchases and net exports.
B) land, labor, capital, and technology.
C) consumption, inventories, government purchases and net exports.
D) consumption, inventories, government spending and exports.
When investors reduce their investment spending, it is a sign that they are ________
about the economy.
A) optimistic
B) pessimistic
C) ill-advised
D) taking risks
Daily Output of Russia and Panama
Table 18.1
Refer to Table 18.1. After trade begins, ________ will specialize in the production of
hats and ________ will specialize in the production of gloves.
A) Russia; Panama
B) Panama; Russia
C) Panama; Panama
D) Russia; Russia
When a country experiences a balance of payments surplus in a fixed exchange rate
system, it usually ________ the currency to reduce exports.
A) allows the devaluation of
B) tries to hold constant the value of
C) allows the revaluation of
D) abandons
Which of the following increases the slope of the consumption function?
A) an increase in the marginal propensity to consume
B) a decrease in the value of consumer durables
C) an increase in consumer confidence
D) an increase in consumer wealth
Assuming all excess reserves are loaned out, currency holdings by the public are zero,
and a reserve ratio of 2 percent, an initial deposit of $500 will lead to a total increase in
deposits of
A) $250.
B) $5,000.
C) $25,000.
D) $50,000.
Nations that borrow from abroad to support current consumption
A) will always be better off in the future.
B) will always sacrifice future consumption.
C) may sacrifice future consumption.
D) will always sacrifice current consumption.
Which of the following is included in M2 but not included in M1?
A) demand deposits
B) currency held outside banks
C) savings accounts
D) other checkable deposits
Suppose there are only 2 nations, Atlantis and Pacifica, and only two goods, surfboards
and kayaks. If Atlantis produces only surfboards, it can make 50 per day. If Atlantis
produces only kayaks, it can make 75 per day. If Pacifica produces only surfboards, it
can make 75 per day. If Pacifica produces only kayaks, it can make 75 per day. After
trade begins, ________ will specialize in the production of surfboards and ________
will specialize in the production of kayaks.
A) Atlantis; Atlantis
B) Pacifica; Pacifica
C) Atlantis; Pacifica
D) Pacifica; Atlantis
Daily Output of Scotland and Poland
Table 18.1 Refer to Table 18.1. The opportunity cost of
a bagpipe in Poland is:
A) 2 accordions.
B) 1/2 accordion.
C) 6 accordions.
D) 1/3 accordion.
At full employment there is no
A) structural unemployment.
B) cyclical unemployment.
C) frictional unemployment.
D) all of the above
