If, under a fixed exchange rate system, the dollar price of a Mexican peso is above its
equilibrium level, then the
a. dollar is overvalued.
b. peso is overvalued.
c. dollar has appreciated.
d. peso has depreciated.
Which of the following will not increase the money supply in the United States?
a. lowering the required reserve ratio
b. Fed purchases of government securities on the open market
c. lowering the discount rate relative to the federal funds rate
d. Fed sales of government securities on the open market
e. none of the above
The PPF between goods X and Y will be a downward-sloping
a. straight line if increasing opportunity costs exist.
b. straight line if decreasing opportunity costs exist.
c. curve that is bowed inward if increasing opportunity costs exist.
d. straight line if constant opportunity costs exist.
A low price-earnings ratio usually indicates that people believe that this corporation
will have lower than average growth in earnings.
a. True
b. False
Several years ago, a bookstore chain extended its closing time from 9 p.m. to 10 p.m.
Now it is considering a further extension to 11 p.m. In making this marginal decision,
the results of having gone from 9 p.m. to 10 p.m. are
a. no longer relevant to the current decision.
b. relevant if the marginal costs and benefits were unequal.
c. relevant since they are part of the calculation of total costs and benefits.
d. relevant if the marginal costs and benefits were equal.
When the MPC = 0.9, the multiplier is
a. 0.20.
b. 1.25.
c. 2.50.
d. 5.00.
e. 10.00.
Exhibit 3-3
Good Y
A movement from point V to point W could nothave been the result of
a. a increase in the price of good Y.
b. an increase in good Y buyers€ income (assuming that good Y is an inferior good).
c. an increase in the price of a complement to good Y.
d. a decrease in the number of buyers of good Y.
e. a decrease in good Y buyers€ income (assuming that good Y is a normal good).
As the dollar appreciates, the dollar price of imported goods ___________ ultimately
shifting the United States AD curve to the _______________.
a. rises; right
b. rises; left
c. falls; right
d. falls; left
At a price for which the quantity supplied exceeds the quantity demanded, a
__________ is experienced, which pushes the price __________ toward its equilibrium
value.
a. surplus; downward
b. surplus; upward
c. shortage; downward
d. shortage; upward
Country 1 produces two goods, A and B. Country 2 produces the same two goods.
Currently, country 1 produces 100A and 200B and country 2 produces 300A and 700B.
Which of the following statements is true?
a. If country 1 is on its production possibilities frontier, then country 2 must be on its
PPF, too.
b. The PPF for country 1 is necessarily closer to the origin (or further to the left) than
the PPF for country 2.
c. If country 1 is productive inefficient, then so is country 2.
d. Country 2 is operating on its PPF, but country 1 is clearly not operating on its PPF.
e. none of the above
Company Z is a U.S. company that has just entered the market for a given good and is
the first in this country to produce that good. The good is already being produced in
many foreign countries is exported to the United States. If company Z wants to restrict
this foreign competition, it will most likely use which of the following arguments?
a. anti-dumping
b. national-defense
c. job-creation
d. infant-industry
e. low-foreign-wages
The cyclical unemployment rate can never be negative.
a. True
b. False
Assume that because of a long policy lag, the Fed starts implementing expansionary
monetary policy too late, i.e., at a time when the economy is already healing itself. As a
result, the economy will probably move from an initial
a. recessionary gap to an even deeper recessionary gap.
b. recessionary gap to an inflationary gap.
c. inflationary gap to the natural level of Real GDP.
d. inflationary gap to a recessionary gap.
As incorrectly low inflation expectations catch up with the higher actual inflation rate,
the SRAS curve shifts __________ and the short-run Phillips curve shifts __________.
a. leftward; downward
b. rightward; upward
c. leftward; upward
d. rightward; downward
Bank A has checkable deposits of $10 million and total reserves of $1 million. The
required reserve ratio is 9 percent. The bank has excess reserves of
a. $910,000.
b. $91,000.
c. $100,000.
d. $10,000.
e. There is not enough information provided to answer this question.