When a waiter deposits his cash tips in his savings account:
A) M2 increases.
B) M1 decreases.
C) M2 decreases.
D) M3 increases.
A floating exchange rate:
A) retains the ability of monetary policy to help stabilize the economy.
B) reduces the ability of monetary policy to stabilize the economy.
C) reduces the uncertainty faced by business firms.
D) makes foreign goods easier to price.
If the economy booms and peoples’ incomes rise, then the demand curve for a normal
good like new houses will _____ and the equilibrium quantity of new houses produced
will _____.
A) shift to the right; increase
B) not shift; not change
C) not shift; increase
D) shift to the left; decrease
Taken collectively, people in nations that engage in international trade are not likely to:
A) consume more than they were able to consume in the absence of trade.
B) raise their standards of living.
C) gain from lower opportunity costs of production.
D) be made worse off.
The changes in the economy of Ft. Myers between 2003 and 2010 illustrate that the
multiplier has positive effects but not negative effects.
A) True
B) False
“In 2008, air travel decreased substantially despite significant reductions in ticket
prices.” If this information is correct, it indicates that the law of demand did not apply
to air travel in 2008.
A) True
B) False
The main cause of the recession that ended in late 2001 was a decrease in consumer
savings.
A) True
B) False
A fixed exchange rate:
I. leaves monetary policy available for domestic stabilization.
II. reduces the uncertainty of international trade.
A) I only
B) II only
C) I and II
D) neither I nor II
Figure: Comparative Advantage
Eastland and Westland produce only two goods, boxes of peaches and boxes of oranges,
and this figure shows each nation’s production possibility frontier for the two goods.
Look at the figure Comparative Advantage. The opportunity cost of producing 1 box of
peaches for Westland is _____ box(es) of oranges.
A) 1
B) 0.25
C) 4
D) 10
Figure: Fiscal Policy and the End of the Great Depression
Look at the figure Fiscal Policy and the End of the Great Depression. The period from
1936 to 1938 would seem to indicate that in the short run a decrease in government
deficit spending can _____ the unemployment rate.
A) reduce
B) increase
C) not affect
D) eliminate
In the long run, a change in monetary policy will affect only the aggregate price level.
A) True
B) False
Figure: Aggregate Expenditures Curve II
Look at the table Aggregate Expenditures Curve II. The slope of the aggregate
expenditures curve is:
A) 0.25.
B) 0.5.
C) 0.6.
D) 45 degrees.
Because Keynes’s theory recognized the problem of interest rates being at the zero
bound (the liquidity trap), it:
A) perceived the economy as being mostly self-adjusting.
B) favored the use of monetary policy over fiscal policy.
C) considered technological progress the answer to any economic slump.
D) favored the use of fiscal policy over monetary policy.
Look at the table Wages and Hours Worked. Graphing the relation with wages on the
vertical axis and hours worked on the horizontal axis, the slope between point A and
point B is:
A) 2.5.
B) 5.
C) 2.
D) 2/5.
If the economy is at potential output and the Fed decreases the money supply, in the
long run real GDP will likely decrease.
A) True
B) False
A recession leads to all of the following EXCEPT:
A) higher unemployment.
B) reduced output.
C) reduced income and living standards.
D) higher employment.
The point at which a recession ends and the expansion begins is called the:
A) trough.
B) downturn.
C) peak.
D) lag.
Which of the following is a component of BOTH the monetary base and the money
supply?
A) bank reserves at the Fed
B) currency in bank vaults
C) demand deposits
D) currency in circulation
Nancy believes that the best way to grow the economy is through tax cuts to increase
the incentive to work and invest. Though these tax cuts might initially increase the
budget deficit, Nancy is convinced that the economic growth that results will actually
increase government tax revenue. Nancy is best described as a:
A) monetarist.
B) classical economist.
C) new Keynesian.
D) supply-sider.
Other things equal, the _____ the loan period, the _____ the present value.
A) shorter; lower
B) longer; higher
C) longer; lower
D) shorter; more variable
For the past several months, per capita output has increased at a slower and slower rate.
Over the same period, the unemployment rate has been falling, but it appears to have
leveled off and may soon rise. Where in the business cycle is the economy?
A) peak
B) recession
C) trough
D) expansion
Equity is the same as efficiency.
A) True
B) False
Currencies can be exchanged for each other in the _____ market.
A) loanable funds
B) foreign exchange
C) resource
D) goods and services
The central bank of the United States is called the:
A) Congressional Budget Office.
B) Internal Revenue Service.
C) Federal Reserve System.
D) Federal Deposit Insurance Corporation.
Banks create money when they:
A) make loans.
B) take deposits.
C) hold excess reserves.
D) pay withdrawals to depositors.
An announcement that smoking will harm your ability to think clearly will most likely
result in:
A) an increase in the quantity of cigarettes demanded.
B) a decrease in the demand for cigarettes.
C) no change in smoking habits.
D) an increase in the price of cigarettes.
If the economy is at potential output and the Fed decreases the money supply, in the
short run the price level will likely decrease.
A) True
B) False
A relatively low saving rate affects productivity growth by:
A) causing a shortage of funds for investment in physical capital.
B) decreasing consumption spending and increasing investment in human capital.
C) reducing the tax base and preventing the government from providing public goods.
D) stimulating imports and increasing the trade deficit.
Productivity is equal to:
A) real GDP divided by the number of workers.
B) real GDP divided by the population.
C) the number of workers per machine.
D) the total output produced.
The automatic stabilizer in government tax revenue that occurs when GDP rises _____
the multiplier.
A) has no effect on
B) increases
C) decreases
D) may either increase or decrease
Which of the following influences does NOT shift the supply curve?
A) people deciding that they want to buy more of the product
B) a decrease in the price firms expect to receive in the future
C) a rise in the wages paid to workers
D) the development of a new production technology
If the Fed sells $250 million of Treasury bills to commercial banks, the banks pay with
their reserves.
A) True
B) False