The proponents of ________ and ________ think that the Federal Reserve should adopt
a constant monetary growth rule.
A) new Keynesianism; the new classical model
B) the real business cycle model; Marxism
C) rational expectations; monetarism
D) the monetarist model; the Keynesian model
All of the following have enhanced the Fed’s credibility in conducting monetary policy
except
A) following through with changes it has announced.
B) revealing the Fed’s target for the federal funds rate.
C) making the minutes of the open market committee meetings public.
D) discontinuing the policy of announcing whether it considered the economy to be at
greater risk of inflation or recession following each FOMC meeting.
Consider the following characteristics:
a. a market structure with barriers to entry
b. demand curves that are easily identified
c. firm cannot make zero profits in the long run
d. firm can reap long run profits. Which of the characteristics in the list above is shared
by an oligopolist and a monopolist?
A) a, b, c, and d
B) a, b, and d
C) a, c, and d
D) a and d
Using the Taylor rule, if the current inflation rate exceeds the target inflation rate and
real GDP exceeds potential GDP, then the federal funds target rate ________ the sum of
the current inflation rate plus the real equilibrium federal funds rate.
A) will be greater than
B) will be less than
C) will be the same as
D) may be greater than or less than
Figure 5-4
Suppose there are several paper mills producing paper for a market. These mills,
located upstream from a fishing village, discharge a large amount of wastewater into the
river. The waste material affects the number of fish in the river, and the use of the river
for recreation and as a public water supply source. Figure 5-4 shows the paper market.
Use this Figure to answer the following question(s).
What is the economically efficient output level?
A) Q1
B) Q2 minus Q1
C) Q2
D) Q1 plus Q2
If the current account is in deficit and the capital account is zero, then
A) the financial account must be in surplus.
B) the balance of trade must be in surplus.
C) the balance of payments must be in surplus.
D) there is a capital outflow.
E) the balance of services must be in surplus.
Scenario 1-1 Suppose a cigar manufacturer currently sells 1,500 cigars per week and
makes a profit of $3,000 per week. The plant foreman observes, “Although the last 500
cell cigars we produced and sold increased our revenue by $7,500 and our costs by
$7,000, we are only making an overall profit of $3,000 per week so I think we need to
cut back on production. Had the firm not produced and sold the last 500 cigars, would
its profit be higher or lower, and if so by how much?
A) Its profit will be $500 higher.
B) Its profit will be $1,000 higher.
C) Its profit will be $500 lower.
D) Its profit will be $1,500 lower.
Which of the following would most likely induce the Federal Reserve to conduct
expansionary monetary policy? A significant decrease in
A) oil prices.
B) business taxes.
C) income tax rates.
D) investment spending.
Figure 4-4
The figure above represents the market for pecans. Assume that this is a competitive
market. If the price of pecans is $3
A) economic surplus is maximized.
B) not enough consumers want to buy pecans.
C) the quantity supplied is less than the economically efficient quantity.
D) the quantity supplied is economically efficient but the quantity demanded is
economically inefficient.
Assume the United States is the “domestic” country and China is the “foreign” country.
Which of the following might increase the real exchange rate between the United States
and China?
A) an appreciation of the yuan
B) a depreciation of the dollar
C) an increase in the price level in the United States.
D) an increase in the price level of China
A market demand curve reflects the
A) private benefits of consuming a product.
B) external benefits of consuming a product.
C) social benefits of consuming a product.
D) the sum of private and social benefits of consuming a product.
Table 2-19
Table 2-19 shows the output per month of two people, Wilma and Betty. They can either
devote their time to making marble statues or making marble benches.
What is Betty’s opportunity cost of making a statue?
A) 1/2 bench
B) 2 benches
C) 1/3 bench
D) 1.4 statues
Ranchers can raise either cattle or sheep on their land. Which of the following would
cause the supply of sheep to increase?
A) an increase in the price of sheep
B) a decrease in the price of cattle
C) an increase in the demand for cattle
D) an increase in the price of sheep feed
The demand for soft drinks in the United States has been ________ while the global
demand has been ________.
A) increasing; increasing
B) increasing; decreasing
C) decreasing; increasing
D) decreasing; decreasing
Rising prices erode the value of money as a ________ and as a ________.
A) unit of barter; unit of account
B) store of value; unit of liquidity
C) medium of exchange; store of value
D) store of value; unit of barter
Article Summary. For only the second time in the previous 10 quarters, China’s
GDP grew at a faster rate than from the same period a year earlier. From July
through September 2013, China’s GDP increased 7.8 percent, but a decline in
exports, growing inflation, and slowing growth in factory production all suggest
that growth will be slowing down. China has recently been attempting to
restructure its economy by moving toward increasing consumption and relying
less on exports and investments as a means to achieving more sustainable
economic growth. In the first nine months of 2013, 46 percent of growth was due to
consumption, 56 percent was due to investment, and exports accounted for
negative 1.7 percent.
Source: Aileen Wang and Kevin Yao, “China’s third-quarter GDP growth fastest
this year, but outlook dim,” Reuters, October 18, 2013.
In China, ________ is (are) the main driver of economic growth, while in the United
States, ________ is the main driver of economic growth.
A) consumption; investment
B) net exports; government purchases
C) investment; consumption
D) consumption; net exports
Which of the following would cause the equilibrium price of ketchup to increase and
the equilibrium quantity of ketchup to decrease?
A) a decrease in the price of tomatoes
B) an increase in the price of tomatoes
C) an increase in the price of mustard, a substitute for ketchup
D) an increase in the price of french fries, a complement for ketchup