In an effort to improve the central bank’s credibility in fighting inflation, the central
bank in New Zealand:
A) has been operating under a law that specifies that its only goal is to maintain stable
prices.
B) has been running advertisements on the television pledging their credibility.
C) no longer issues currency and uses the Australian dollar to conduct open market
operations.
D) has been releasing incorrect information about the true inflation that the economy
has been experiencing.
If aggregate demand increases and expectations regarding inflation remain constant:
A) the economy moves left along the short-run Phillips curve.
B) the short-run Phillips curve shifts to the right.
C) the short-run Phillips curve shifts to the left.
D) the long-run Phillips curve shifts to the right.
Recall Application 1, “Creating the U.S. Federal Fiscal System Through Debt Policy,”
to answer the following questions:
According to the Application, what was the reason why the states, after the new
Constitution was enacted in 1789, gave up their rights to raise revenues by taxing
imported goods?
A) The federal government assumed their debts.
B) The federal government shared the revenue with them.
C) The federal government forced them to do so.
D) The federal government gave the states guns and ammunition in return.
Recall Application 1, “Beyond Purchasing Treasury Securities,” to answer the following
questions:
According to the application, how did the Fed conduct monetary policy prior to 2008?
A) The Fed only held U.S. Treasury securities as its assets.
B) The Fed never intervened in a specific credit or security market.
C) The Fed’s asset holdings were less than $1 trillion.
D) All of the above are correct.
Recall the Application about the number of homeowners in the year 2012 who owed
more on their homes than their homes were worth to answer the following question(s).
To assist homeowners who are behind on their payments and may eventually lose their
homes to foreclosure, many in Congress have advocated for reduction on the amount of
money they actually owe€or principal reduction. The hope is that with a reduction in
the amount they owed they would start making timely payments on their mortgages and
avoid a messy default.According to this Application, for approximately 12 million
homeowners in 2012, the amount owed on mortgages was higher than the actual value
of the homes. Homeowners who find themselves in this situation are said to be
A) ‘subprime borrowers.”
B) ‘shadow mortgage holders.”
C) “underwater.”
D) “financially grounded.”
________ is commonly defined as a severe recession.
A) A depression
B) A trough
C) An expansion
D) A peak
The federal government runs a budget surplus because:
A) it buys back fewer bonds than it issues.
B) it spends less than what it receives in tax revenues.
C) it spends more than what it receives in tax revenues.
D) the economy is in a recession.
If the inflation rate unexpectedly increases, it is likely that workers will not fully
anticipate some of this sudden increase. This will tend to cause nominal wages to
________ and the belief that real wages have ________.
A) increase; increased
B) increase; decreased
C) decrease; increased
D) decrease; decreased
When there is a change in the quantity demanded it means that
A) the hours the customer can buy products each day have increased.
B) the number of products in inventory have increased.
C) the quantity a consumer is willing to buy changes when the price changes.
D) the selling price of the products has not changed.
An increase in the employment tax should have a relatively small effect on output if the
labor supply curve
A) is relatively steep.
B) is relatively flat.
C) is perfectly horizontal.
D) has a positive slope.
When the Fed randomly increases the money supply at a lower rate than what is
expected by the public:
A) interest rates go up.
B) the public will immediately lower their inflation expectations.
C) investment goes down.
D) the demand for money will accelerate.
The first major international trade agreement following World War II was the North
American Free Trade Agreement (NAFTA).
Which of the following did not contribute to higher inflation in the late 1970s?
A) expansionary monetary policies used to lower the unemployment rates below the
natural rate
B) expansionary fiscal policies used to lower the unemployment rates below the natural
rate
C) an oil shock in 1979
D) Paul Volcker becoming the Fed Chairman
If the money supply is currently $100 million and the government prints another $300
million to finance the budget deficit, then we should expect:
A) a 300 percent inflation rate.
B) a 200 percent inflation rate.
C) a 3 percent inflation rate.
D) a 200 million percent inflation rate.
Figure 4.6
Figure 4.6 illustrates a set of supply and demand curves for a product. If the good were
inferior and the consumer’s income decreases, then this can be illustrated as moving
from point:
A) A to B.
B) C to B.
C) E to B.
D) B to A.
Figure 19.1 vRefer to Figure 19.1. The yen is currently at Point A. A depreciation of the
yen causes a movement to Point ________.
A) B
B) D
C) E
D) C
A depreciation is
A) a decrease in the value of currency.
B) a decrease in the trade deficit.
C) an increase in the trade surplus.
D) an increase in the value of currency.
Figure 8.3
Refer to Figure 8.3. Moving from point A to point B requires:
A) a higher level of capital.
B) a higher population growth.
C) a higher depreciation rate.
D) a higher consumption rate.
Which of the following is a question answered with normative economic reasoning?
A) If the college offers free textbooks for students, will more students read their
textbooks?
B) If the college provided less financial aid for out-of-state students, would more
in-state students benefit?
C) If the college increased its enrollment requirements, would class size decline?
D) Should the college increase tuition to fund its athletic programs?
Recall the Application about the difficulty in estimating the size of multipliers and the
historical record of the size of multipliers to answer the following
question(s).According to this Application, economists Robert Barro and Charles
Redlick found multipliers for defense spending were typically
A) negative.
B) less than 1.
C) between 3 and 5.
D) greater than 5.