Academia.edu no longer supports Internet Explorer.
To browse Academia.edu and the wider internet faster and more securely, please take a few seconds to upgrade your browser.
Finance
Vinh San NguyenRelated papers
ESTADÍSTICA II ESTADÍSTICA INFERENCIAL PARAMÉTRICA, NO PARAMÉTRICA Y MULTIVARIANTE
It is a material that will help to understand OPERATIONS RELATED inferential statistics parametric and nonparametric
Fe3O4.CeO2/SiO2 oxide nanocomposite as a Fenton-like catalyst for degradation of Congo red
Congo red (CR) was broken down by a heterogeneous Fenton oxidation process using a catalyst that concurrently contained cerium dioxide and ferromagnetic oxide on a silicon dioxide substrate (Fe3O4.CeO2/SiO2). CeO2 was prepared from Ce(NO3)3.6H2O with a carrier SiO2 generated from rice husks; Fe3O4 catalyst was prepared from FeCl3.6H2O and FeCl2.4H2O. X-ray diffraction (XRD), scanning electron microscopy (SEM-EDX), specific surface area (BET), and Fourier transform infrared (FTIR) spectroscopy were used to investigate the catalyst's characteristics. The oxidation of Congo red was used to measure the catalytic activity. Other factors examined included the amount of catalyst, the pH, the H2O2 ratio, and the decomposition duration.
Stone Beads in Oman during the 3rd to 2nd Millennia BCE. New Approaches to the Study of Trade and Technology
BEADS, 2018
This paper focuses primarily on ancient stone beads found in Oman at sites dating to the 3rd to 2nd millennium BCE, generally dated to the Umm an-Nar and Wadi Suq periods. Archaeological collections were documented to determine the range of variation in the finished objects and if there is evidence for local production of carnelian and other hard-stone beads. A comparative analysis with published materials from other regions was also undertaken to document the bead types in Oman that might have been obtained through trade networks that linked this region to Mesopotamia, Iran, the Indus Valley region, Afghanistan, Egypt, and Anatolia. The overall outcome of this study is a more comprehensive understanding of the types of interactions that were carried out between communities in Oman and adjacent regions during the prehistoric period.
Moura Coutinho de Lamego (séculos XV e XVI) . Osório Coutinho, Cardoso Coutinho, Vieira, Vieira de Moura, Cardoso e Monteiro Coutinho
Editora Caminhos Romanos (https://caminhosromanos.pt/livros/67-moura-coutinho-de-lamego.html), 2023
Semiologia de la Guerra Fria
La continuidad de la guerra. Exploraciones en las fronteras de los saberes, 2024
El capítulo se propone revisitar uno de los periodos más fructíferos en la cultura popular y masiva: la Guerra Fría, allí donde en entramado bipolar internacional libra la verdadera batalla de los sentidos. Tal coyuntura constataría el valor que un campo como la semiótica puede tener a la hora de pensar ese enclave histórico hartamente teorizado por los estudios internacionales, cuestión que el escrito se propone corroborar. En diálogo con la lectura de Eduardo Grüner, procura abordar las distintas “esteticidades” ha generado la Guerra Fría, aventurando que, en torno a ese conflicto puntual, gravita una inagotable constelación de sentidos que acaba constituyendo un acontecimiento histórico en todo un modelo explicativo. O mejor: en aquello que Fredric Jameson supo definir como una “estética geopolítica”, un concepto espinoso que el crítico diseña para pensar la producción del cine en el sistema mundial posmoderno. El concepto se ilustrará a través de un corrido de filmes clásicos y actuales, atravesando dos rasgos constitutivos de la Guerra Fría, al menos en los términos de un inconsciente geopolítico: la extrema polarización con su correlato, el telón de acero, y la carrera armamentista. La permanencia de estas formas pondría de manifiesto que, consecuencia de la Guerra Fría, el afecto imperante en nuestra cultura posmoderna es la paranoia, de modo tal que aquello irrepresentable que busca desesperadamente hacer síntoma es una lógica del complot, motivo por demás obsesivo en las producciones audiovisuales de la cultura de masas.
Penyitan dan pemeriksaan hukum acara perdata
Pemeriksaan dan Penyitaan Hukum Acara Perdata, 2024
The judicial system is one way to resolve conflicts between communities in various regions. If a person feels that his or her interests and rights are being violated, he or she may file a claim against the responsible parties before a competent court. The goal of justice seekers is to get the fairest justice possible in solving their problems. And also their rights and interests feel protected by law. However, many individuals or plaintiffs want the judicial process to be completed quickly. To do so, they must also comply with the rules of procedure for resolving disputes in court. However, reality often shows that the process of resolving civil cases can take a relatively long time. This is usually due to factors such as the parties involved in the dispute, witnesses or the effectiveness of the proceedings and the judge making the decision. This paper also aims to analyze some of the important stages of the case examination process as well as the seizure stage in the trial procedure law. Where the examination will review the mediation to the conclusion of the disputed case. Meanwhile, the confiscation section describes and analyzes the purpose of confiscation, the types of confiscation and also the execution of confiscation in civil procedure law.
QN=1
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The two major reasons for the tremendous growth in output in the U.S.
economy over the last 125 years are
population growth and increased productivity
low inflation and low trade deficits
population growth and low inflation
low unemployment and low inflation
a
1
1
Yes
QN=2
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The main reason that the United States has such a high standard of living is
low unemployment
high government budget deficits
low inflation
high average labor productivity
d
1
1
Yes
QN=3
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Average labor productivity is the
amount of machines per worker
amount of workers per machine
amount of output per worker
ratio of employed to unemployed workers
c
1
1
Yes
QN=4
In analyzing macroeconomic data during the past year, you have discovered
that average labor productivity fell, but total output increased. What was
most likely to have caused this?
The capital/output ratio probably rose
There is nothing unusual in this outcome because this is what normally
occurs.
There was an increase in labor input
Unemployment probably increased
c
1
1
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
1
QN=5
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The most direct effect of an increase in the growth rate of average labor
productivity would be an increase in
the inflation rate
the long-run economic growth rate
the unemployment rate
imported goods
b
1
1
Yes
QN=6
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Short-run contractions and expansions in economic activity are called
the business cycle
recessions
expansions
deficits
a
1
1
Yes
QN=7
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
When national output rises, the economy is said to be in
a deflation
an inflation
a recession
an expansion
d
1
1
Yes
QN=8
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Which of the following best describes a typical business cycle?
Economic expansions are followed by economic contractions.
Stagflation is followed by inflationary economic growth.
Inflation is followed by unemployment.
Inflation is followed by unemployment.
a
1
1
Yes
QN=9
During recessions, the unemployment rate ________ and output ________.
2
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
rises; falls
falls; rises
rises; rises
falls; falls
a
1
1
Yes
QN=10
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The number of unemployed divided by the labor force equals
the inflation rate.
the labor force participation rate.
the misery index.
the unemployment rate.
d
1
1
Yes
QN=11
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The unemployment rate is the
number of unemployed divided by the labor force.
labor force divided by the number of unemployed.
number of unemployed divided by the number of employed.
number of employed divided by the number of unemployed.
a
1
1
Yes
QN=12
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A country is said to be experiencing inflation when
prices of most goods and services are falling over time.
prices of most goods and services are rising over time.
total output is rising over time.
total output is falling over time.
b
1
1
Yes
QN=13
A country is said to be experiencing deflation when
3
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
prices of most goods and services are falling over time.
prices of most goods and services are rising over time.
total output is rising over time.
total output is falling over time.
b
1
1
Yes
QN=14
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The inflation rate is the
percent increase in the unemployment rate over a year.
percent increase in output over a year.
percent increase in the average level of prices over a year.
price level divided by the level of output.
c
1
1
Yes
QN=15
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
If the price level was 100 in 2009 and 102 in 2010, the inflation rate was
0.2%.
2%.
20%.
102%.
b
1
1
Yes
QN=16
a.
A closed economy is a national economy that
has extensive trading and financial relationships with other national
economies.
doesn't interact economically with the rest of the world.
has a stock market that is not open to traders from outside the country.
has not established diplomatic relations with other national economies.
b
1
1
Yes
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=17
An open economy is a national economy that
4
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=18
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
has extensive trading and financial relationships with other national
economies.
has established diplomatic relations with most other national economies.
doesn't interact economically with the rest of the world.
has a stock market that is open to traders from anywhere in the world.
a
1
1
Yes
An economy that doesn't interact economically with the rest of the world is
called ________ economy.
an authoritarian
an open
a surplus
a closed
d
1
1
Yes
QN=19
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
U.S. imports are goods and services
produced in the United States and sold to Americans.
produced abroad and sold to foreigners.
produced abroad and sold to Americans.
produced in the United States and sold to foreigners.
c
1
1
Yes
QN=20
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A country has a trade surplus when
exports exceed imports.
imports exceed exports.
imports equal zero.
imports equal exports.
a
1
1
Yes
QN=21
A country has a trade deficit when
5
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
imports equal exports.
exports are zero.
exports exceed imports.
imports exceed exports.
d
1
1
Yes
QN=22
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A central bank is an institution that
controls a nation's monetary policy.
runs a country's stock market.
pays for government expenditures.
determines a nation's fiscal policy.
a
1
1
Yes
QN=23
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
In the United States, monetary policy is determined by
the Treasury Department.
the Federal Reserve.
the president.
private citizens.
b
1
1
Yes
QN=24
a.
The difference between microeconomics and macroeconomics is that
microeconomics looks at individual consumers, macroeconomics looks at
national totals.
microeconomics looks at national issues, macroeconomics looks at global
issues.
microeconomics looks at prices, macroeconomics looks at inflation.
microeconomics looks at supply and demand for goods, macroeconomics
looks at supply and demand for services.
a
1
1
Yes
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=25
Aggregation is the process of
6
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
predicting when recessions will occur.
summing individual economic variables to obtain economy-wide totals.
forecasting the components of GDP.
calculating real GDP based on nominal GDP and the price index.
b
1
1
Yes
QN=26
A country that has many well-trained macroeconomic analysts will not
necessarily have more beneficial macroeconomic policies because
economists' understanding of the economy remains poor.
there are few ways in which economists' complex models can be applied to
the real world.
economic policy is usually made by politicians, not economists.
economists agree on so few government policies.
c
1
1
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=27
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A set of ideas about the economy that have been organized in a logical
framework is called
data development.
a methodology.
empirical analysis.
economic theory.
d
1
1
Yes
QN=28
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Assumptions for economic theories and models should be
maintained until overwhelming evidence to the contrary occurs.
rejected if they are not totally realistic.
simple and reasonable rather than complex.
logical rather than empirically testable.
c
1
1
Yes
QN=29
If the theory behind an economic model fits the data poorly, you would
probably want to
7
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=30
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=31
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=32
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=33
start from scratch with a new model.
use the theory to predict what would happen if the economic setting or
economic policies change.
enrich the model with additional assumptions.
restate the research question.
a
1
1
Yes
Positive analysis of economic policy
examines the economic consequences of policies but does not address the
question of whether those consequences are desirable.
generates less agreement among economists than normative analysis.
is rare in questions of economic policy.
examines the economic consequences of policies and addresses the question
of whether those consequences are desirable.
a
1
1
Yes
Equilibrium in the economy means
quantities demanded and supplied are equal in all markets.
prices are not changing over time.
tax revenues equal government spending, so the government has no budget
deficit.
unemployment is zero.
a
1
1
Yes
Adam Smith's idea of the "invisible hand" says that given a country's
resources and its initial distribution of wealth, the use of markets will
eliminate inequalities between the rich and the poor.
make people as economically well off as possible.
eliminate problems of hunger and dissatisfaction.
insulate a nation from the effects of political instability.
b
1
1
Yes
The two most comprehensive, widely accepted macroeconomic models are
8
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
the classical model and the supply-side model.
the Austrian model and the Keynesian model.
the supply-side model and the real business cycle model.
the classical model and the Keynesian model.
d
1
1
Yes
QN=34
a.
b.
c.
Classical economists argue that
government policies will be ineffective and counterproductive.
the government should have an active role in the economy.
wages and prices don't adjust quickly, so the economy is slow to return to
equilibrium.
the government should actively intervene in the economy to eliminate
business cycles.
a
1
1
Yes
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=35
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=36
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=37
Keynes assumed that wages and prices were slow to adjust in order to
explain
why inflation fell in recessions.
high inflation.
persistently high unemployment.
the high level of interest rates.
c
1
1
Yes
How did Keynes propose to solve the problem of high unemployment?
Put on wage and price controls, so wages won't rise and firms won't have to
lay people off to cut costs.
Allow wages to decline, so that firms will want to hire more workers.
Increase the growth rate of the money supply.
Have the government increase its demand for goods and services.
d
1
1
Yes
The primary factor that caused most economists to lose their faith in the
classical approach to macroeconomic policy was
9
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=38
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=1
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=2
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
the presence of both high unemployment and high inflation during the
1970s.
the evidence that classical ideas were useful during economic booms, but
not during economic recessions.
the theoretical proof that classical ideas were invalid.
the high levels of unemployment that occurred during the Great Depression.
d
1
1
Yes
The primary factor that caused some economists to lose their faith in the
Keynesian approach to macroeconomic policy was
38) ______
the high levels of unemployment that occurred during the Great Depression.
the presence of both high unemployment and high inflation during the
1970s.
evidence that Keynes's ideas were useful during economic recessions, but
not during economic booms.
theoretical proof that Keynes's ideas were invalid.
b
1
1
Yes
The accounting framework used in measuring current economic activity is
called
the national income accounts.
the U.S. expenditure accounts.
the flow of funds accounts.
the balance of payments accounts.
a
1
2
Yes
The three approaches to measuring economic activity are the
consumer, business, and government approaches.
product, income, and expenditure approaches.
cost, income, and expenditure approaches.
private, public, and international approaches.
b
1
2
Yes
10
QN=3
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=4
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=5
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=6
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
The value of a producer's output minus the value of the inputs it purchases
from other producers is called the producer's
value added.
profit.
surplus.
gross product.
a
1
2
Yes
The Bigdrill company drills for oil, which it sells for $200 million to the
Bigoil company to be made into gas. The Bigoil company's gas is sold for a
total of $600 million. What is the total contribution to the country's GDP
from companies Bigdrill and Bigoil?
$800 million
$600 million
$400 million
$200 million
b
1
2
Yes
Sam's Semiconductors produces computer chips, which it sells for $10
million to Carl's Computer Company (CCC). CCC's computers are sold for
a total of $16 million. What is the value added of CCC?
$16 million
$6 million
$10 million
$26 million
b
1
2
Yes
The Compagnie Naturelle sells mounted butterflies, using butterfly bait it
buys from another firm for $20,000. It pays its workers $35,000, pays
$2,000 in taxes, and has profits of $3,000. What is its value added?
$40,000
$59,000
$3000
$39,000
a
1
2
11
MIX
CHOICES:
Yes
QN=7
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The equation total production = total income = total expenditure is called
Say's Law.
the total identity.
the fundamental identity of national income accounting.
the goods-market equilibrium condition.
c
1
2
Yes
QN=8
To ensure that the fundamental identity of national income accounting
holds, changes in inventories are
treated as part of saving.
ignored.
treated as part of expenditure.
counted as consumption.
C
1
2
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=9
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=10
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
To what extent are homemaking and child-rearing accounted for in the
government's GDP accounts?
Only to the extent that taxes are paid on them
Not at all
All homemaking and child-rearing are accounted for
Only to the extent that they are provided for pay
D
1
2
Yes
The measurement of GDP includes
the benefits of clean air and water.
purchases and sales of goods produced in previous periods.
estimated values of activity in the underground economy.
nonmarket goods such as homemaking and child-rearing.
C
1
2
Yes
12
QN=11
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Which of the following is included in U.S. GDP?
The purchase of a watch from a Swiss company
The sale of a used car
The sale of a new car from a manufacturer's inventory
A newly constructed house
D
1
2
Yes
QN=12
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Government statisticians adjust GDP figures to include estimates of
the costs of pollution to society.
the value of homemaking (work done within the home).
the underground economy.
child-rearing services provided by stay-at-home parents.
C
1
2
Yes
QN=13
a.
b.
c.
Because government services are not sold in markets,
they are valued at their cost of production.
taxes are used to value their contribution.
the government tries to estimate their market value and uses this to measure
the government's contribution to GDP.
they are excluded from measurements of GDP.
A
1
2
Yes
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=14
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Intermediate goods are
either capital goods or inventories.
final goods that remain in inventories.
goods that are used up in the production of other goods in the same period
that they were produced.
capital goods, which are used up in the production of other goods but were
produced in earlier periods.
C
1
2
Yes
13
QN=15
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=16
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=17
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=18
a.
b.
c.
d.
ANS:
PTS:
Capital goods are
a type of intermediate good.
final goods, because they are not used up during a given year.
produced in one year, whereas final goods are produced over a period of
more than one year.
produced in the same year as the related final good, whereas intermediate
goods are produced in different years.
B
1
2
Yes
Marvin's Metal Company produces screws that it sells to Ford, which uses
the screws as a component of its cars. In the national income accounts, the
screws are classified as
intermediate goods.
final goods.
inventory.
capital goods.
A
1
2
Yes
Father and Son Limited produces lathes, which are purchased by furniture
manufacturers all over the world. The standard lathe depreciates over a
twenty-five year period. In the national income accounts, the lathes are
classified as
intermediate goods.
inventory.
capital goods.
raw materials.
C
1
2
Yes
Fred the farmer purchased five new tractors at $25,000 each. Fred sold his
old tractors to other farmers for $50,000. The net increase in GDP of these
transactions was
$100,000.
$50,000.
$125,000.
$150,000.
C
1
14
CHAPTER:
MIX
CHOICES:
2
Yes
QN=19
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Inventories include each of the following except
unsold finished goods.
raw materials held by firms.
office equipment.
goods in process.
C
1
2
Yes
QN=20
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
GDP differs from GNP because
GNP = GDP - net factor payments from abroad.
GDP = GNP - capital consumption allowances.
GNP = GDP - capital consumption allowances.
GDP = GNP - net factor payments from abroad.
D
1
2
Yes
QN=21
If an American construction company built a road in Kuwait, this activity
would be
included in U.S. GNP only for that portion that was attributable to
American capital and labor.
included in U.S. GDP but not in U.S. GNP.
fully included in U.S. GDP.
excluded from U.S. GNP.
A
1
2
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=22
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
If C = $500, I = $150, G = $100, NX = $40, and GNP = $800, how much is
NFP?
-$10
$10
-$5
$5
B
1
2
15
MIX
CHOICES:
Yes
QN=23
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The income-expenditure identity says that
Y = C + I + G.
Y = C + S + T.
Y = C + I + G + NX + CA.
Y = C + I + G + NX.
D
1
2
Yes
QN=24
Which of the following is not a category of consumption spending in the
national income accounts?
Housing purchases
Nondurable goods
Consumer durables
Services
A
1
2
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=25
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=26
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
Consumer spending is spending by ________ households on final goods
and services produced ________.
domestic and foreign; domestically and abroad
domestic; domestically
domestic; domestically and abroad
domestic and foreign; domestically
C
1
2
Yes
In the expenditure approach to GDP, which of the following would be
excluded from measurements of GDP?
Government payments for goods produced by firms owned by state or local
governments
All government payments are included in GDP
Government payments for welfare
Government payments for goods produced by foreign firms
C
1
2
16
MIX
CHOICES:
Yes
QN=27
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Net national product equals
gross national product minus statistical discrepancy.
gross national product minus depreciation.
national income plus depreciation.
national income minus taxes on production and imports.
B
1
2
Yes
QN=28
Monica grows coconuts and catches fish. Last year she harvested 1500
coconuts and 600 fish. She values one fish as having a worth of three
coconuts. She gave Rachel 300 coconuts and 100 fish for helping her to
harvest coconuts and catch fish, all of which were consumed by Rachel. In
terms of fish, Monica's income would equal
700 fish.
2700 fish.
900 fish.
1100 fish.
C
1
2
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=29
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=30
Monica grows coconuts and catches fish. Last year she harvested 1500
coconuts and 600 fish. She values one fish as having a worth of three
coconuts. She gave Rachel 300 coconuts and 100 fish for helping her to
harvest coconuts and catch fish, all of which were consumed by Rachel.
Monica consumed the remaining fish and coconuts. In terms of fish, total
consumption by both Monica and Rachel would equal
700 fish.
2700 fish.
900 fish.
1100 fish.
D
1
2
Yes
Private disposable income equals
17
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
GNP - taxes + transfers + interest.
national income - taxes - transfers + interest.
national income - taxes + transfers + interest.
NNP - taxes + transfers + interest.
A
1
2
Yes
QN=31
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The value of a household's assets minus the value of its liabilities is called
debt.
wealth.
income.
stock.
B
1
2
Yes
QN=32
In a given year, a country's GDP = $9842, net factor payments from abroad
= $890, taxes = $868, transfers received from the government = $296,
interest payments on the government's debt = $103, consumption = $8148,
and government purchases = $185. The country had private saving equal to
$2397.
$2115.
$2112.
$3850.
B
1
2
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=33
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
In a given year, a country's GDP = $9841, net factor payments from abroad
= $889, taxes = $870, transfers received from the government = $300,
interest payments on the government's debt = $104, consumption = $8148,
and government purchases = $185. The country had government saving
equal to
$470.
$366.
$281.
$685.
C
1
2
Yes
18
QN=34
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
If a local government collects taxes of $500,000, has $350,000 of
government consumption expenditures, makes transfer payments of
$100,000, and has no interest payments or investment, its budget would
show a deficit of $50,000.
be in balance with neither a surplus nor a deficit.
show a surplus of $150,000.
show a surplus of $50,000.
D
1
2
Yes
QN=35
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The government budget surplus equals
government purchases minus transfers.
government purchases minus net receipts.
government purchases plus transfers.
government receipts minus government outlays.
D
1
2
Yes
QN=36
National saving equals private saving plus government saving, which in turn
equals
GDP + C + G.
GDP + NFP.
C + S + T.
GDP + NFP - C - G.
D
1
2
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=37
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
The uses-of-saving identity says that an economy's private saving is used
for
investment, interest expenses, the government budget deficit, and the
current account.
investment, interest expenses, and the government budget deficit.
investment, interest expenses, the government budget deficit, transfer
payments, and the current account.
investment, the government budget deficit, and the current account.
D
1
2
Yes
19
CHOICES:
QN=38
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=39
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=40
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=41
The uses-of-saving identity shows that if the government budget deficit
rises, then one of the following must happen.
Private saving must rise, investment must fall, and/or the current account
must rise.
Private saving must rise, investment must rise, and/or the current account
must fall.
Private saving must rise, investment must fall, and/or the current account
must fall.
Private saving must fall, investment must rise, and/or the current account
must rise.
C
1
2
Yes
Suppose that private saving is $1591 billion, investment is $1945 billion,
and the current account balance is -$490 billion. From the uses-of-saving
identity, how much is government saving?
$134 billion
$136 billion
-$134 billion
-$136 billion
D
1
2
Yes
Suppose that national saving is $1460 billion, investment is $1945 billion,
and private saving is $1590 billion. How much is the current account
balance?
-$489 billion
-$485 billion
$485 billion
$489 billion
B
1
2
Yes
In the mid-to-late 1980s, the United States had "twin deficits" because both
________ and ________ were negative.
20
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
saving; investment
the current account; investment
government saving; the current account
government saving; private saving
C
1
2
Yes
QN=42
The country of Old Jersey produces milk and butter, and it has published the
following macroeconomic data, where quantities are in gallons and prices
are dollars per gallon.
[file: figure_02_x01.jpg]
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Between Year 1 and Year 2, nominal GDP grew by
60.0%.
190.0%.
83.3%.
65.5%.
B
1
2
Yes
QN=43
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The value of real GDP in the current year equals
the value of current-year output in prices of the current year.
the value of base-year output in prices of the base year.
the value of current-year output in prices of the base year.
the value of base-year output in prices of the current year.
C
1
2
Yes
QN=44
The country of Old Jersey produces milk and butter, and it has published the
following macroeconomic data, where quantities are in gallons and prices
are dollars per gallon.
[file: figure_02_x01.jpg]
Between Year 1 and Year 2, the percent change in real GDP (based on Year
1 as a base year) was
21
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
130%.
190%.
60%.
58%.
C
1
2
Yes
QN=45
The country of Old Jersey produces milk and butter, and it has published the
following macroeconomic data, where quantities are in gallons and prices
are dollars per gallon.
[file: figure_02_x01.jpg]
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=46
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=47
a.
b.
c.
d.
ANS:
PTS:
Between Year 1 and Year 2, the GDP deflator (based on Year 1 as a base
year) rose
81.25%.
83.33%.
123.00%.
60.00%.
A
1
2
Yes
If real GDP for 2009 is $6400 billion and real GDP for 2010 is $6720
billion (in 2005 dollars), then the growth rate of real GDP in 2010 is
0%.
50%.
5%.
0.5%.
C
1
2
Yes
If the price index was 100 in 2000 and 120 in 2010, and nominal GDP was
$360 billion in 2000 and $480 billion in 2010, then the value of 2010 GDP
in terms of 2000 dollars would be
$300 billion.
$384 billion.
$424 billion.
$400 billion.
D
1
22
CHAPTER:
MIX
CHOICES:
2
Yes
QN=48
Nominal GDP in 1970 was $1,035.6 billion, and in 1980 it was $2,784.2
billion. The GDP price index was 30.6 for 1970 and 60.4 for 1980, where
1992 was the base year. Calculate the percent change in real GDP in the
decade from 1970 to 1980. Round off to the nearest percentage point.
169%
97%
136%
36%
D
1
2
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=49
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=50
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=51
Nominal personal consumption expenditures in the United States were
$1760.4 billion in 1980 and rose to $3839.3 billion in 1990. The price index
for personal consumption expenditures was 58.5 for 1980 and 92.9 for
1990, where 1992 was the base year. Calculate the percent change in real
personal consumption expenditures (rounded to the nearest percentage
point) in the decade.
118%
59%
37%
137%
C
1
2
Yes
Two years ago, the GDP deflator for Old York was 300, and today it is
330.75. Based on this information the annual average inflation rate for the
two years was
10.25%.
10%.
5%.
5.125%.
C
1
2
Yes
If the price index last year was 1.0 and today it is 1.4, what is the inflation
rate over this period?
23
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
4%
-4%
40%
1.4%
C
1
2
Yes
QN=52
You are given information on the consumer price index (CPI), where the
values given are those for December 31 of each year.
[file: figure_02_x02.jpg]
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=53
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=54
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
In which year was the inflation rate the highest?
2007
2008
2006
2009
C
1
2
Yes
The consumer price index (CPI) was 180 for 2009 when using 1995 as the
base year (1995 = 100). Now suppose we switch and use 2009 as the base
year (2009 = 100). What is the CPI for 1995 with the new base year?
18.0
111.2
80.0
55.6
D
1
2
Yes
The CPI may overstate inflation for all the following reasons except
problems measuring changes in the quality of goods.
changes in Social Security benefits.
problems measuring the quality of services.
substitution by consumers towards cheaper goods.
B
1
2
Yes
24
QN=55
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The nominal interest rate minus the inflation rate is the
real interest rate.
forward rate.
depreciation rate.
discount rate.
A
1
2
Yes
QN=56
By Marks buys a one-year German government bond (called a bund) for
$400. He receives principal and interest totaling $436 one year later. During
the year the CPI rose from 150 to 162. The nominal interest rate on the bond
was ________, and the real interest rate was ________.
36%; 24%
9%; -1%
36%; 12%
9%; 1%
D
1
2
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=57
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The expected real interest rate (r) is equal to
expected nominal interest rate minus inflation rate.
nominal interest rate minus expected inflation rate.
nominal interest rate minus inflation rate.
nominal interest rate plus expected inflation rate.
B
1
2
Yes
QN=58
In 2008, inflation exceeded expected inflation. In 2009, expected inflation
exceeded inflation. Therefore the real interest rate was ________ than the
expected real interest rate in 2008 and the real interest rate was ________
than the expected real interest rate in 2009.
greater; greater
less; less
greater; less
less; greater
D
1
2
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
25
CHOICES:
QN=59
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=60
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=61
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=1
a.
b.
c.
d.
ANS:
In 2008, expected inflation exceeded inflation. In 2009, inflation exceeded
expected inflation. Therefore the real interest rate was ________ than the
expected real interest rate in 2008 and the real interest rate was ________
than the expected real interest rate in 2009.
less; less
less; greater
greater; greater
greater; less
D
1
2
Yes
If the expected inflation rate was 2.5%, the expected real interest rate was
4.0%, and the actual inflation rate turned out to be 3.2%, then the real
interest rate equals
3.3%.
3.2%
4.7%
1.7%
A
1
2
Yes
By Marks buys a one-year German government bond (called a bund) for
$400. He receives principal and interest totaling $436 one year later. During
the year the CPI rose from 150 to 162, but he had thought the CPI would be
at 159 by the end of the year. By Marks had expected the real interest rate to
be ________, but it actually turned out to be ________.
6%; 3%
8%; 1%
3%; 1%
1%; 3%
C
1
2
Yes
Desired national saving equals
I(d) + G.
C(d) + I(d) + G.
Y - C(d) - G.
Y - I(d) - G.
C
26
PTS:
CHAPTER:
MIX
CHOICES:
1
04
Yes
QN=2
With no inflation and a nominal interest rate (i) of .03, a person can trade
off one unit of current consumption for ________ units of future
consumption.
-.03
0.97
.03
1.03
D
1
04
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=3
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=4
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=5
a.
b.
c.
The desire to have a relatively even pattern of consumption over time is
known as
excess sensitivity.
the substitution effect.
forced saving.
the consumption-smoothing motive.
D
1
04
Yes
When a person gets an increase in current income, what is likely to happen
to consumption and saving?
Consumption decreases and saving increases.
Consumption increases and saving decreases.
Consumption decreases and saving decreases.
Consumption increases and saving increases.
D
1
04
Yes
Last year, Linus earned a salary of $25,000 and he spent $24,000, thus
saving $1,000. At the end of the year, he received a bonus of $1,000 and he
spent $500 of it, saving the other $500. What was his marginal propensity to
consume?
.50
.96
.04
27
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
.02
A
1
04
Yes
QN=6
The fraction of additional current income that a person consumes in the
current period is known as the
consumption deficit.
consumption-smoothing motive.
marginal propensity to consume.
saving rate.
C
1
04
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=7
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=8
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=9
a.
b.
c.
An increase in expected future output while holding today's output constant
would
decrease today's desired consumption and decrease desired national saving.
decrease today's desired consumption and increase desired national saving.
increase today's desired consumption and increase desired national saving.
increase today's desired consumption and decrease desired national saving.
D
1
04
Yes
When a person receives an increase in wealth, what is likely to happen to
consumption and saving?
Consumption increases and saving decreases.
Consumption decreases and saving decreases.
Consumption increases and saving increases.
Consumption decreases and saving increases.
A
1
04
Yes
Aunt Agatha has just left her nephew $5000. The most likely response is for
her nephew to
increase current consumption, but not future consumption.
increase future consumption, but not current consumption.
decrease current consumption, but increase future consumption.
28
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
increase both current consumption and future consumption.
D
1
04
Yes
QN=10
The stock market just crashed; the Dow Jones Industrial Average fell by
750 points. You would effect on aggregate consumption to be the largest if
which of the following facts was true?
Many individuals had invested in the stock market immediately prior to the
crash.
Most stocks were owned by insurance companies.
The crash had been preceded by a large run-up in the price of stocks.
Most stocks were owned by pension funds that invested in the market.
A
1
04
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=11
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=12
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
If the substitution effect of the real interest rate on saving is larger than the
income effect of the real interest rate on saving, then a rise in the real
interest rate leads to a ________ in consumption and a ________ in saving,
for someone who's a lender.
fall; rise
rise; fall
rise; rise
fall; fall
A
1
04
Yes
If the substitution effect of the real interest rate on saving is smaller than the
income effect of the real interest rate on saving, then a rise in the real
interest rate leads to a ________ in consumption and a ________ in saving,
for someone who's a lender.
fall; fall
rise; fall
rise; rise
fall; rise
B
1
04
Yes
29
QN=13
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=14
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=15
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=16
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
With a nominal interest rate of 4%, an expected inflation rate of 1%, and
interest income taxed at a rate of 25%, what is the expected after-tax real
interest rate?
0%
3%
2%
1%
C
1
04
Yes
The nominal interest rate is 10%, the expected inflation rate is 5%, and the
combined state-federal tax rate is 35%. The expected after-tax real interest
rate is
1.50%
6.50%
3.25%
5.00%
A
1
04
Yes
Three factors that cause interest rates among different financial instruments
to vary are
default risk, maturity, and taxability.
default risk, expected inflation, and maturity.
default risk, current inflation, and taxability.
default risk, expected inflation, and taxability.
A
1
04
Yes
The yield curve generally slopes upward because
longer maturity bonds are not taxable.
longer maturity bonds typically pay higher interest rates than shorter
maturity bonds.
shorter maturity bonds have more default risk.
longer maturity bonds typically pay lower interest rates than shorter
maturity bonds.
B
1
04
Yes
30
CHOICES:
QN=17
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The yield curve shows
the yields on stocks of different maturities.
the yields on stocks with differing default risk.
the interest rates on bonds of different maturities.
the yields on bonds with differing default risk.
C
1
04
Yes
QN=18
a.
b.
c.
Desired national saving would increase unambiguously if there were
an increase in both expected future output and government purchases.
a fall in both government purchases and expected future output.
an increase in both expected future output and the expected real interest
rate.
an increase in both current output and expected future output.
B
1
04
Yes
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=19
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=20
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
Desired national saving would decrease unambiguously if there were
an increase in both expected future output and the expected real interest
rate.
a fall in both government purchases and expected future output.
a decrease in current output and a decrease in taxes.
an increase in expected future output and a decrease in government
purchases.
C
1
04
Yes
The Ricardian equivalence proposition suggests that a government deficit
caused by a tax cut
causes a current account deficit.
causes inflation.
doesn't affect consumption.
raises interest rates.
C
1
04
Yes
31
CHOICES:
QN=21
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=22
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=23
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=24
a.
b.
c.
If the government cuts taxes today, issuing debt today and repaying the debt
plus interest next year, a rational taxpayer will
increase consumption today, before taxes go up next year.
spend the full amount of the tax cut today and reduce consumption next
year.
increase saving today, leaving consumption unchanged.
leave a smaller gross bequest to her or his heirs.
C
1
04
Yes
Which of the factors listed below might cause the Ricardian equivalence
proposition to be violated?
There may be constraints on the level of government taxation.
There may be international capital inflows and outflows.
There may be constraints on the level of government spending.
Consumers may not understand that an increase in government borrowing
today is likely to lead to higher future taxes.
D
1
04
Yes
The user cost of capital is given by the following formula, where PK is the
real price of capital goods, d is the depreciation rate, and r is the expected
real interest rate.
uc = d PK/r
uc = PK /(r + d)
uc = (r + d) PK
uc = (r + d)/ PK
C
1
04
Yes
Which of the following machines has the lowest user cost? Machine A costs
$15,000 and depreciates at a 25% rate, machine B costs $10,000 and
depreciates at a rate of 20%, machine C costs $20,000 and depreciates at a
rate of 10%, and machine D costs $17,000 and depreciates at a rate of 11%.
The expected real interest rate is 5%.
Machine C
Machine D
Machine B
32
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Machine A
C
1
04
Yes
QN=25
Which of the following machines has the lowest user cost? Machine A costs
$15,000 and depreciates at a rate of 25%, machine B costs $10,000 and
depreciates at a rate of 20%, machine C costs $20,000 and depreciates at a
rate of 10%, and machine D costs $17,000 and depreciates at a rate of 11%.
The expected real interest rate is 0%.
Machine C
Machine D
Machine A
Machine B
B
1
04
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=26
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=27
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=28
Calculate the user cost of capital of a machine that costs $5,000 and
depreciates at a rate of 25%, when the expected real interest rate is 5%.
$5000
$1500
$150
$500
B
1
04
Yes
Calculate the user cost of capital of a machine that costs $5,000 and
depreciates at a rate of 25%, when the nominal interest rate is 10% and the
expected inflation rate is 5%.
$150
$1500
$500
$5000
B
1
04
Yes
Calculate the user cost of capital of a machine that costs $100,000 and
depreciates at a rate of 25%, when the nominal interest rate is 4% and the
33
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=29
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=30
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=31
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
expected inflation rate is 1%.
$29,000
$3,000
$28,000
$25,000
C
1
04
Yes
You are trying to figure out how much capacity to add to your factory. You
will increase capacity as long as
the expected marginal product of capital is greater than or equal to the
expected marginal product of labor.
the expected marginal product of capital is positive.
the expected marginal product of capital is greater than or equal to the user
cost of capital.
the expected marginal product of capital is greater than or equal to the
marginal product of capital.
C
1
04
Yes
When a company must consider taxes in determining investment, its desired
capital stock is chosen such that
MPK(f) = uc/(1-t)
t × MPK(f) = uc
MPK(f) = t × uc
MPK(f) = uc(1-t)
A
1
04
Yes
If the rate of depreciation increases, then user cost ________ and the desired
capital stock ________.
falls; falls
falls; rises
rises; falls
rises; rises
C
1
04
Yes
34
QN=32
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The relationship between stock prices and firms' investments in physical
capital is captured by what theory?
q theory
Keynesian theory
User-cost-of-capital theory
Yield-curve theory
A
1
04
Yes
QN=33
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Tobin's q is equal to
the ratio of capital's market value to its replacement cost.
the stock market value of a firm
the expected after-tax real interest rate.
the ratio of capital's replacement cost to its market value.
A
1
04
Yes
QN=34
If the stock market value of a firm is $10 million and the firm owns $15
million of capital, then Tobin's q equals
2/3
4
3/2
1
A
1
04
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=35
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A firm should invest more if Tobin's q
equals one.
equals zero.
is less than one.
is more than one.
D
1
04
Yes
QN=36
A technological improvement will
35
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=37
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=38
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=39
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
decrease the desired capital stock.
increase the desired capital stock.
have no effect on the desired capital stock.
have the same effect on the desired capital stock as an increase in corporate
taxes.
B
1
04
Yes
Suppose your company is in equilibrium, with its capital stock at its desired
level. A permanent decline in the expected real interest rate now has what
effect on your desired capital stock?
Raises it, because the user cost of capital is now lower
Lowers it, because the future marginal productivity of capital is lower
Lowers it, because the user cost of capital is now higher
Raises it, because the future marginal productivity of capital is higher
A
1
04
Yes
Suppose your company is in equilibrium, with its capital stock at its desired
level. A permanent increase in the depreciation rate now has what effect on
your desired capital stock?
Raises it, because the user cost of capital is now lower
Lowers it, because the future marginal productivity of capital is lower
Raises it, because the future marginal productivity of capital is higher
Lowers it, because the user cost of capital is now higher
D
1
04
Yes
Calculate the tax-adjusted user cost of capital of a machine that costs
$10,000 and depreciates at a rate of 10%, when the real interest rate is 3%
and the tax rate on revenue is 5%.
$1368
$1300
$1800
$1238
A
1
04
Yes
36
QN=40
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
What is the difference between gross investment and net investment?
Net investment = gross investment minus inventory accumulation
Net investment = gross investment minus taxes
Net investment = gross investment minus net factor payments
Net investment = gross investment minus depreciation
D
1
04
Yes
QN=41
At the start of the year, your firm's capital stock equaled $100 million, and
at the end of the year it equaled $105 million. The average depreciation rate
on your capital stock is 20%. Gross investment during the year equaled
$25 million.
$5 million.
$7 million.
$1 million.
A
1
04
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=42
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=43
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
At the start of the year, your firm's capital stock equaled $10 million, and at
the end of the year it equaled $15 million. The average depreciation rate on
your capital stock is 20%. Net investment during the year equaled
$3 million.
$7 million.
$5 million.
$4 million.
C
1
04
Yes
Your firm has capital stock of $10 million and a depreciation rate of 15%.
Gross investment is $3 million. How much is net investment?
$3.5 million
$2.5 million
$2.0 million
$1.5 million
D
1
04
Yes
37
QN=44
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=45
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=46
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=47
You have just purchased a home that cost $250,000. The nominal mortgage
interest rate is 8% per annum, mortgage interest payments are tax
deductible, and you are in a 30% tax bracket. The expected inflation rate is
4%. Maintenance and other expenses are 8% of the initial value of the
house. What is the real user cost of your house?
$30,000
$20,000
$27,000
$24,000
D
1
04
Yes
When desired national saving equals desired national investment (in a
closed economy), what market is in equilibrium?
The foreign exchange market
The goods market
The money market
The stock market
B
1
04
Yes
An economy has full-employment output of 5000. Government purchases
are 1000. Desired consumption and desired investment are given by
C(d) = 3000 - 2000r + 0.10Y
I(d) = 1000 - 4000r
where Y is output and r is the real interest rate. The real interest rate that
clears the goods market is equal to
8.33%.
25.00%.
1.25%.
2.50%.
A
1
04
Yes
An economy has government purchases of 1000. Desired national saving
and desired investment are given by
S(d) = 200 + 5000r + 0.10Y - 0.20G
I(d) = 1000 - 4000r
When the full-employment level of output equals 5000, then the real interest
38
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=48
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
rate that clears the goods market will be
1.11%.
16.67%.
21.11%.
5.56%.
D
1
04
Yes
Any change in the economy that raises desired national saving for a given
value of the real interest rate will shift the desired national saving curve to
the left and decrease the real interest rate.
the left and increase the real interest rate.
the right and decrease the real interest rate.
the right and increase the real interest rate.
C
1
04
Yes
QN=49
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
An increase in the expected real interest rate tends to
raise desired investment only.
raise both desired saving and desired investment.
raise desired saving only.
raise desired saving, but lower desired investment.
D
1
04
Yes
QN=50
The saving-investment diagram shows that a higher real interest rate due to
a leftward shift of the saving curve
causes the amount of firms' investment to increase.
causes the total amounts of saving and investment to fall.
increases the total amount of saving because of the increase in the real
interest rate.
raises the profitability of investment for firms.
B
1
04
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=51
A temporary decrease in government purchases would cause
39
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=52
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=53
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=54
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
a rightward shift in the saving curve, but no shift in the investment curve.
a rightward shift in the saving curve and a leftward shift in the investment
curve.
no shift in the saving curve, but a leftward shift in the investment curve.
a rightward shift in the saving curve and a rightward shift in the investment
curve.
A
1
04
Yes
If consumers foresee future taxes completely, a reduction in taxes this year
that is accompanied by an offsetting increase in future taxes would cause
a rightward shift in the saving curve and a rightward shift in the investment
curve.
no shift in the saving curve, but a rightward shift in the investment curve.
a leftward shift in the saving curve, but no shift in the investment curve.
a shift in neither the saving nor the investment curve.
D
1
04
Yes
An invention that raises the future marginal product of capital (in a closed
economy) would cause an increase in desired investment, which would
cause the investment curve to shift to the ________ and would cause the
real interest rate to ________.
left; increase
right; decrease
left; decrease
right; increase
D
1
04
Yes
If the government reduces the effective tax rate on capital (in a closed
economy), then the real interest rate ________ and saving ________.
rises; declines
falls; increases
falls; declines
rises; increases
D
1
04
Yes
40
CHOICES:
QN=55
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=56
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=57
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=1
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
If the stock market booms and people feel wealthier (in a closed economy),
then the real interest rate ________ and investment ________.
rises; increases
falls; increases
falls; declines
rises; declines
D
1
04
Yes
Onerous regulations on businesses that take effect next year (in a closed
economy) reduce businesses' expected future marginal product of capital.
As a result, the real interest rate ________ and saving ________.
falls; declines
falls; increases
rises; declines
rises; increases
A
1
04
Yes
If consumers believe that next year a recession will occur (in a closed
economy), then the real interest rate ________ and investment ________.
rises; increases
falls; increases
falls; declines
rises; declines
B
1
04
Yes
Net exports of goods are known as
the current account.
the merchandise trade balance
the balance of payments
the capital and financial account
B
1
5
Yes
41
CHOICES:
QN=2
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
If a country's merchandise exports exceed its merchandise imports it has a
trade deficit.
current account surplus.
trade surplus.
current account deficit.
C
1
5
Yes
QN=3
a.
b.
If France has a trade deficit, then
imports into France exceed exports from France.
imports into France from the United States exceed exports from France into
the United States.
imports into the United States from France exceed exports from the United
States into France.
exports from France exceed imports into France.
A
1
5
Yes
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=4
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=5
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
If all international factor payment flows are investment income, then net
investment income from abroad equals
net exports.
net factor payments from abroad.
the trade balance.
the current account balance.
B
1
5
Yes
If the United States donates footballs to Japan, how is the transaction
recorded on the U.S. balance of payments accounts?
debit: capital and financial account; credit: merchandise trade
debit: merchandise trade; credit: net unilateral transfers
debit: merchandise trade; credit:capital and financial account
debit: net unilateral transfers; credit: merchandise trade
D
1
5
Yes
42
CHOICES:
QN=6
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=7
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=8
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=9
a.
b.
c.
d.
ANS:
If the United States sells computers to Russia, and uses the proceeds to buy
shares of stock in Russian companies, the U.S. trade balance ________ and
the U.S. capital and financial account balance ________.
falls; falls
rises; falls
falls; rises
rises; rises
B
1
5
Yes
The current account balance consists of
net exports of goods and services, plus investment income from abroad, plus
net unilateral transfers.
net exports of goods and services, minus net unilateral transfers.
the trade balance plus the services balance.
net exports of goods and services, plus investment income from abroad, plus
net unilateral transfers, minus the capital and financial account balance.
A
1
5
Yes
If a U.S. firm buys tulips from a Dutch firm and the Dutch firm uses the
dollars it gets to buy U.S. stocks, the U.S. trade balance ________ and the
U.S. capital and financial account ________.
falls; rises
rises; rises
falls; falls
rises; falls
A
1
5
Yes
If a U.S. company imports 10 Toyotas from Japan at $15,000 each, and the
Japanese company buys airline tickets on a U.S. airline with the money,
how does this affect the U.S. balance of payments accounts?
debit: merchandise trade; credit:capital and financial account
debit: capital and financial account; credit: merchandise trade
debit: services; credit: merchandise trade
debit: merchandise trade; credit: services
D
43
PTS:
CHAPTER:
MIX
CHOICES:
1
5
Yes
QN=10
Suppose a wealthy Canadian donates $10 million to charities in Mexico.
Mexican net exports ________ and the current account balance ________.
are unchanged; is unchanged
rise; rises
fall; is unchanged
fall; rises
C
1
5
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=11
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=12
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=13
If a French company exports $2 million of machinery to Italy and French
tourists spend $2 million at Italian beaches, the French merchandise trade
balance ________ , and the French capital and financial account balance
________.
rises; is unchanged
rises; rises
is unchanged; is unchanged
is unchanged; rises
A
1
5
Yes
If a Japanese company sells 200 VCRs to a French company and uses the
money to buy U.S. government bonds, the Japanese merchandise trade
balance ________, and the Japanese capital and financial account balance
________.
rises; falls
rises; rises
falls; rises
falls; falls
A
1
5
Yes
Which of the following would be part of the nation's current account?
44
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
a factory built by the Japanese in the United States
the interest an American earns on a British bond
an old house purchased by an American in Italy
the purchase of a U.S. Treasury bond by a foreigner
B
1
5
Yes
QN=14
a.
A country has a current account surplus if
the value of its net exports of services exceeds the value of its net exports of
goods.
its capital inflows exceed its capital outflows.
the value of its exports exceeds the value of its imports, assuming net
income from foreign assets and net unilateral transfers have a value of zero.
it receives more income from foreign assets than it pays to foreigners for
foreign-owned domestic assets.
C
1
5
Yes
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=15
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=16
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
Which of the following would be part of the nation's capital and financial
account?
A night club show seen by an American in Mexico City
A payment to the Philippine government for the use of military bases in
their country
A dividend from a British equity owned by an American
One hundred shares of British Petroleum stock purchased by an American
D
1
5
Yes
If a French company exports $2 million of machinery to Italy and French
tourists spend $2 million at Italian beaches, the Italian current account
balance ________, and the Italian capital and financial account balance
________.
is unchanged; rises
rises; is unchanged
rises; rises
is unchanged; is unchanged
D
1
5
Yes
45
CHOICES:
QN=17
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The official settlements balance equals
the current account minus net unilateral transfers.
the net increase in a country's official reserve assets.
net investment income from abroad.
the sum of the current account and the capital and financial account.
B
1
5
Yes
QN=18
A negative value for the U.S. official reserve assets line in the balance of
payments accounts means that
U.S. residents have sold more gold to foreigners than they bought.
the U.S. central bank has decreased its holdings of foreign reserve assets.
the U.S. central bank has increased its holdings of foreign reserve assets.
U.S. residents bought more gold from foreigners than they sold.
C
1
5
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=19
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=20
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
If the Federal Reserve buys $3 billion worth of Japanese yen and sells $5
billion of euros, how does this affect the official settlements balance?
Falls by $5 billion
Falls by $2 billion
Rises by $2 billion
Rises by $3 billion
B
1
5
Yes
Suppose the current account shows debits of $5.3 billion and credits of $4.7
billion. The current account balance is ________, and the capital and
financial account balance is ________.
+$0.6 billion; -$0.6 billion
-$0.6 billion; +$0.6 billion
+$0.6 billion; +$0.6 billion
-$0.6 billion; -$0.6 billion
B
1
5
Yes
46
CHOICES:
QN=21
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A capital and financial account surplus necessarily implies
a current account deficit.
an increase in the nation's official reserve assets.
a current account surplus.
a balance of payments surplus.
A
1
5
Yes
QN=22
If the United States had a capital and financial account deficit of $50 billion,
we could say the United States had
a current account deficit of $50 billion.
net imports of $50 billion.
acquired net foreign assets of $50 billion.
net foreign borrowing of $50 billion.
C
1
5
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=23
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=24
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A country's capital and financial account balance decreases if
its current account balance increases.
its domestic residents working abroad reduce the income they send home to
their families.
its income payment inflows on foreign assets decrease.
foreigners increase their purchases of its existing assets.
A
1
5
Yes
If a country has a current account surplus, it also has
an increase in its official reserve assets.
an increase in its holding of net foreign assets.
a balance of payments deficit.
a capital and financial account surplus.
B
1
5
Yes
47
QN=25
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=26
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=27
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=28
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
If there are no net factor payments from abroad and no unilateral transfers,
net exports of $10 billion is the same as
net acquisition of foreign assets of $10 billion.
net foreign borrowing of $10 billion.
a current account deficit of $10 billion.
a capital and financial account surplus of $10 billion.
A
1
5
Yes
Assuming no change in the effective tax rate on capital, a decrease in the
government budget deficit will reduce the current account deficit if and only
if the decrease in the budget deficit
increases desired national saving.
reduces desired national saving.
increases desired national investment.
reduces desired national investment.
A
1
5
Yes
Assume that an increase in Costa Rica's government budget deficit reduced
desired national saving by 10 million colon. Assuming Costa Rica is a small
open economy, you would expect the government's action to
increase the current account balance by less than 10 million colon.
increase the current account balance by exactly 10 million colon.
reduce the current account balance by exactly 10 million colon.
reduce the current account balance by more than 10 million colon.
C
1
5
Yes
An increase in a small open economy's government budget deficit that
reduces national saving and the current account balance causes an
increase in absorption.
increase in desired saving.
increase in exports.
increase in the world real interest rate.
A
1
5
Yes
48
QN=29
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=30
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=31
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=32
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
In a large open economy like the United States, an increased government
budget deficit which reduces national saving
has no effect on investment, but reduces the current account balance.
reduces investment and reduces the current account balance.
has no effect on either investment or the current account balance.
reduces investment and improves the current account balance.
B
1
5
Yes
In goods market equilibrium in an open economy,
the desired amount of national saving must equal the desired amount of
domestic investment.
the desired amount of national saving must equal the desired amount of
domestic investment plus the amount lent abroad.
the desired amount of exports must equal the desired amount of imports less
the amount lent abroad.
the desired amount of exports must equal the desired amount of imports.
B
1
5
Yes
In goods market equilibrium in an open economy,
the desired amount of national saving must equal the desired amount of
domestic investment.
the desired amount of national saving must equal the desired amount of
domestic investment plus the current account balance.
the desired amount of exports must equal the desired amount of imports.
the desired amount of exports must equal the desired amount of imports less
the amount lent abroad.
B
1
5
Yes
Total spending by domestic residents, businesses, and governments is called
GDP
absorption.
investment.
net domestic purchases.
B
1
5
49
MIX
CHOICES:
Yes
QN=33
Suppose output is $1000 billion, government purchases are $200 billion,
desired consumption is $700 billion, and desired investment is $150 billion.
Net foreign lending would be equal to
-$150 billion.
$50 billion.
-$50 billion.
$150 billion.
C
1
5
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=34
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=35
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=36
Suppose output is $35 billion, government purchases are $10 billion,
desired consumption is $15 billion, and net exports are $4 billion. Then
desired investment equals
$8 billion.
$2 billion.
$6 billion.
$4 billion.
C
1
5
Yes
Suppose output is $35 billion, government purchases are $10 billion,
desired consumption is $15 billion, and desired investment is $6 billion.
Absorption is equal to
$35 billion.
$25 billion.
$39 billion.
$31 billion.
D
1
5
Yes
Suppose output is $440 billion, government purchases are $40 billion,
desired consumption is $320 billion, and net exports are $35 billion. Then
desired investment equals
50
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
$30 billion.
$45 billion.
$35 billion.
$20 billion.
B
1
5
Yes
QN=37
Suppose output is $440 billion, government purchases are $40 billion,
desired consumption is $320 billion, and net exports are $35 billion.
Absorption is equal to
$405 billion.
$420 billion.
$440 billion.
$435 billion.
A
1
5
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=38
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
An economy is considered a small open economy if it
has GDP less than 1% of world GDP.
has a zero trade balance.
is too small to affect the world real interest rate.
doesn't trade internationally.
C
1
5
Yes
QN=39
A small open economy has a current account balance of zero. A rise in the
world real interest rate causes
a current account surplus.
absorption to exceed income.
net borrowing from abroad.
a capital and financial account surplus.
A
1
5
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=40
A small open economy has a current account balance of zero. A rise in its
investment demand causes
51
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
a current account surplus.
net borrowing from abroad.
income to exceed absorption.
a capital and financial account deficit.
B
1
5
Yes
QN=41
A small open economy increases its investment demand. This causes the
world real interest rate to ________ and the country's current account
balance to ________.
rise; rise
rise; fall
remain unchanged; rise
remain unchanged; fall
D
1
5
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=42
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=43
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=44
A small open economy reduces its desired saving. This causes the world
real interest rate to ________ and the country's current account balance to
________
remain unchanged; rise
fall; fall
fall; rise
remain unchanged; fall
D
1
5
Yes
When a temporary beneficial supply shock hits a small open economy, it
causes the current account to ________ and investment to ________.
fall; remain unchanged
rise; remain unchanged
rise; fall
fall; fall
D
1
5
Yes
When future labor income falls in a small open economy, it causes the
52
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=45
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=46
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=47
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
current account to ________ and investment to ________.
fall; remain unchanged
rise; remain unchanged
fall; rise
rise; rise
B
1
5
Yes
If there is an increase in the future marginal product of capital in a small
open economy, it causes the current account to ________ and saving to
________.
fall; remain unchanged
rise; remain unchanged
rise; rise
fall; rise
A
1
5
Yes
If there is a decrease in taxes on business firms in a small open economy, it
causes the current account to ________ and saving to ________.
fall; remain unchanged
fall; fall
rise; remain unchanged
rise; fall
A
1
5
Yes
If a freeze destroys much of the crop of an agricultural nation, then
net foreign lending would decrease.
the desired investment curve would shift to the right.
net foreign lending would increase.
the desired investment curve would shift to the left.
D
1
5
Yes
53
QN=48
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=49
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=50
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=51
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
The best weather in a decade has given Australia a bumper wheat crop.
Australia is a small open economy. Based on this information alone, you
would expect that
desired investment would decrease.
the current account would decrease.
the current account would increase.
desired investment would increase.
C
1
5
Yes
Consider a small open economy with desired national saving of S(d)= 200 +
10,000r and desired investment of I(d) = 1,000 - 5,000r. If r = 0.05, then net
exports equal
-100.
-50.
50.
100.
B
1
5
Yes
Consider a small open economy with desired national saving of S(d) = 200
+ 10,000r and desired investment of I(d) = 1,000 - 5,000r. If r= 0.05, and
output = 5,000, then absorption equals
4,900.
5,100.
4,950.
5,050.
D
1
5
Yes
When there are two large open economies, the world real interest rate will
be such that
desired international borrowing will be the same in both countries.
desired international lending by one country equals desired international
borrowing by the other country.
desired international lending will be the same in both countries.
desired international lending and borrowing will be zero in both countries.
B
1
5
54
MIX
CHOICES:
Yes
QN=52
When there are two large open economies, if desired international lending
by the domestic country exceeds desired international borrowing by the
foreign country, then
the world real interest rate must fall.
the world real interest rate must rise.
domestic saving must rise.
domestic saving must fall.
A
1
5
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=53
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=54
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=55
When there are two large open economies, if desired international
borrowing by the domestic country exceeds desired international lending by
the foreign country, then
domestic investment must fall.
the world real interest rate must fall.
the world real interest rate must rise.
domestic investment must rise.
D
1
5
Yes
A large open economy reduces its investment demand. This causes the
world real interest rate to ________ and the country's current account
balance to ________.
fall; fall
fall; rise
rise; rise
rise; fall
B
1
5
Yes
A large open economy increases its desired saving. This causes the world
real interest rate to ________ and the country's current account balance to
________.
55
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
remain unchanged; rise
fall; rise
fall; fall
remain unchanged; fal
B
1
5
Yes
QN=56
When a temporary adverse supply shock hits a large open economy, it
causes the current account to ________ and investment to ________.
rise; remain unchanged
rise; fall
fall; remain unchanged
fall; fall
D
1
5
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=57
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=58
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=59
When future labor income falls in a large open economy, it causes the
current account to ________ and investment to ________.
fall; fall
fall; rise
rise; rise
rise; remain unchanged
C
1
5
Yes
If there's an increase in the future marginal product of capital in a large open
economy, it causes the current account to ________ and saving to
________.
fall; rise
rise; rise
fall; remain unchanged
rise; remain unchanged
A
1
5
Yes
If business taxes rise in a large open economy, it causes the current account
to ________ and saving to ________.
56
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
fall; remain unchanged
rise; remain unchanged
rise; fall
fall; fall
C
1
5
Yes
QN=60
A large country imposes capital controls that prohibit foreign borrowing and
lending by domestic residents. The country is currently running a capital
and financial account surplus. The imposition of the capital controls will
cause
desired national saving to fall.
real domestic interest rates to rise.
net exports to decrease.
real world interest rates to rise.
B
1
5
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=61
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=62
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
A large country imposes capital controls that prohibit foreign borrowing and
lending by domestic residents. The country is currently running a capital
and financial account deficit. The imposition of the capital controls will
cause
real world interest rates to fall.
real domestic interest rates to rise.
net exports to increase.
desired national saving to fall.
D
1
5
Yes
Real domestic interest rates would increase in a large open economy if
there were a temporary negative domestic supply shock.
the government imposed capital controls and the capital and financial
account had been in deficit.
there were a temporary negative supply shock abroad in a small open
economy.
foreigners were more willing to save.
A
1
5
Yes
57
CHOICES:
QN=63
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A large open economy's real interest rate will decrease if
there is a temporary positive domestic supply shock.
the expected future marginal product of foreign capital rises.
the expected future marginal product of domestic capital rises.
there is a temporary negative domestic supply shock.
A
1
5
Yes
QN=64
Suppose the development of the European Union leads to greater
investment in Europe. You'd expect
an increase in the world real interest rate.
a rise in the current account in Europe.
a recession in Europe.
a decline in the world real interest rate.
A
1
5
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=65
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=66
A large open economy has desired national saving of S= 1200 + 1000r, and
desired national investment of I= 1000 – 500r. The foreign economy has
desired national saving of S(for)= 1300 + 1000r, and desired national
investment of I(for = 1800 – 500r. The equilibrium world real interest rate
equals
0.15
0.20
0.10
0.05
C
1
5
Yes
A large open economy has desired national saving of S = 1200 + 1000r, and
desired national investment of I = 1000 – 500r. The foreign economy has
desired national saving of S(for) = 1300 + 1000r, and desired national
investment of I(for) = 1800 – 500r. In equilibrium, the foreign country has
net exports equal to
58
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
500.
-500.
-350.
350.
C
1
5
Yes
QN=67
Assuming no change in the effective tax rate on capital, a decrease in the
government budget deficit will reduce the current account deficit if and only
if the decrease in the budget deficit
increases desired national saving.
reduces desired national saving.
reduces desired national investment.
increases desired national investment.
A
1
5
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=68
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=69
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=70
Assume that an increase in Costa Rica's government budget deficit reduced
desired national saving by 10 million colon. Assuming Costa Rica is a small
open economy, you would expect the government's action to
reduce the current account balance by exactly 10 million colon.
reduce the current account balance by more than 10 million colon.
increase the current account balance by less than 10 million colon.
increase the current account balance by exactly 10 million colon.
A
1
5
Yes
An increase in a small open economy's government budget deficit that
reduces national saving and the current account balance causes an
increase in the world real interest rate.
increase in desired saving.
increase in absorption.
increase in exports.
C
1
5
Yes
Consider a small open economy with desired national saving of S(d) = 200
59
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=71
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=72
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=1
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
+ 10,000r and desired investment of I(d) = 1,000 - 5,000 r. If r = 0.05, then
a rise in government spending of 50 with no change in private saving causes
net exports to become
-100
50
100
-50
A
1
5
Yes
In a large open economy like the United States, an increased government
budget deficit which reduces national saving
has no effect on investment, but reduces the current account balance.
reduces investment and reduces the current account balance.
has no effect on either investment or the current account balance.
reduces investment and improves the current account balance.
B
1
5
Yes
A large open economy has desired national saving of S= 1200 + 1000r, and
desired national investment of I= 1000 – 500r. The foreign economy has
desired national saving of S(for) = 1300 + 1000r, and desired national
investment of I(for) = 1800 – 500r. Suppose the foreign country's
government increases its spending by 300 and private saving does not
change. Then in equilibrium, the foreign country has net exports equal to
500
-500
-350
350
B
1
5
Yes
The elasticity of output with respect to capital
is the increase in output resulting from an increase in the capital stock.
is the inverse of the elasticity of output with respect to labor.
is always greater than one.
is the percentage increase in output resulting from a 1% increase in the
capital stock.
D
1
6
60
MIX
CHOICES:
Yes
QN=2
Suppose the current level of output is 5000 and the elasticity of output with
respect to capital is 0.4. A 10% increase in capital would increase the
current level of output to
5050.
5500.
5200.
5020.
C
1
6
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=3
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=4
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=5
Suppose the current level of output is 5000 and the elasticity of output with
respect to labor is 0.7. A 10% increase in labor would increase the current
level of output to
5070.
5350.
5035.
5700.
B
1
6
Yes
Suppose the current level of output is 5000. If the elasticities of output with
respect to capital and labor are 0.3 and 0.7, respectively, a 10% increase in
capital combined with a 5% increase in labor and a 5% increase in
productivity would increase the current level of output to
6000.
5015.
5325.
5575.
D
1
6
Yes
Over the past year, productivity grew 2%, capital grew 1%, and labor grew
1%. If the elasticities of output with respect to capital and labor are 0.2 and
0.8, respectively, how much did output grow?
61
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
3%
4%
2%
1%
A
1
6
Yes
QN=6
Over the past year, productivity grew 1%, capital grew 2%, and labor grew
2%. If the elasticities of output with respect to capital and labor are 0.3 and
0.7, respectively, how much did output grow?
4%
2%
3%
1%
C
1
6
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=7
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Over the past year, productivity grew 1%, capital grew 0%, and labor grew
5%. If the elasticities of output with respect to capital and labor are 0.4 and
0.6, respectively, how much did output grow?
1%
2%
4%
3%
C
1
6
Yes
QN=8
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The growth accounting equation is
ΔY/Y = ΔA/A – a(K)ΔK/K – a(N)ΔN/N
Y = AF(K, N)
Y = A^ a(K)K^ a(N)N
ΔY/Y = ΔA/A + a(K)ΔK/K + a(N)ΔN/N
D
1
6
Yes
QN=9
If capital and labor each grow 5% in a year, the elasticities of output with
respect to capital and labor sum to one, and productivity grows 2% in the
62
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
year, by how much does output grow during the year?
7%
2%
5%
3%
A
1
6
Yes
QN=10
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Total factor productivity growth is that part of economic growth due to
capital growth less labor growth.
capital growth plus labor growth.
capital growth times labor growth.
neither capital growth nor labor growth.
D
1
6
Yes
QN=11
Over the past year, output grew 4%, capital grew 2%, and labor grew 1%. If
the elasticities of output with respect to capital and labor are 0.3 and 0.7,
respectively, how much did productivity grow?
2.0%
3.0%
3.3%
2.7%
D
1
6
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=12
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Over the past year, output grew 5%, capital grew 5%, and labor grew 1%. If
the elasticities of output with respect to capital and labor are 0.3 and 0.7,
respectively, how much did productivity grow?
1.0%
2.2%
2.8%
0.5%
C
1
6
Yes
63
QN=13
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=14
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Over the past year, output grew 6%, capital grew 2%, and labor grew 4%. If
the elasticities of output with respect to capital and labor are 0.3 and 0.7,
respectively, how much did productivity grow?
3.0%
3.3%
2.6%
2.0%
C
1
6
Yes
Over the past year, output grew 5%, capital grew 5%, and labor grew 1%. If
the elasticities of output with respect to capital and labor are 0.5 and 0.5,
respectively, how much did productivity grow?
0.5%
2.0%
1.0%
1.5%
B
1
6
Yes
QN=15
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The per-worker production function in the Solow model assumes
constant returns to scale and diminishing marginal productivity of capital.
constant returns to scale and increasing marginal productivity of capital.
decreasing returns to scale and diminishing marginal productivity of capital.
increasing returns to scale and diminishing marginal productivity of capital.
A
1
6
Yes
QN=16
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The bowed shape of the per-worker production function is caused by
increasing marginal productivity of capital.
diminishing marginal productivity of capital.
wealth effects that reduce labor supply.
increasing marginal productivity of labor.
B
1
6
Yes
64
QN=17
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
In the Solow model, if productivity doesn't change,
the capital-labor ratio must rise.
the capital-labor ratio must decline.
the economy must eventually reach a steady state.
there can be no saving.
C
1
6
Yes
QN=18
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
In a steady state
consumption per worker is constant, but the capital-labor ratio can change.
consumption per worker can change, but the capital-labor ratio is constant.
capital and labor, by definition, are inversely related to one another.
both consumption per worker and the capital-labor ratio are constant.
D
1
6
Yes
QN=19
Steady-state investment per worker is positively related to the capital-labor
ratio because the higher the capital-labor ratio
the lower the capital depreciation rate
the greater the amount of resources available for capital investment.
the less the economy needs to equip new workers with the same high level
of capital.
the more investment per worker is required to replace depreciating capital.
D
1
6
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=20
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
In the absence of productivity growth, in a steady-state economy
output per worker and consumption per worker remain constant over time.
output per worker and consumption per worker both grow over time.
output per worker remains constant over time, but consumption per worker
grows over time.
output per worker grows over time, but consumption per worker remains
constant over time.
A
1
6
Yes
65
QN=21
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=22
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=23
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=24
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
According to the Solow model, an increase in the capital-labor ratio will
always reduce steady state consumption per worker.
increase steady state consumption per worker if the capital-labor ratio is
below the Golden rule capital stock.
always increase steady state consumption per worker.
reduce steady state consumption per worker if the capital-labor ratio is
below the Golden rule capital stock.
B
1
6
Yes
The level of the capital-labor ratio that maximizes consumption per worker
in the steady state is known as the
Solow residual capital-labor ratio.
dynamically efficient capital-labor ratio.
q theory capital-labor ratio.
Golden Rule capital-labor ratio.
D
1
6
Yes
The Golden Rule capital-labor ratio is the level of the capital-labor ratio
that, in the steady state,
maximizes consumption per worker.
maximizes output per worker.
maximizes investment per worker.
maximizes capital per worker.
A
1
6
Yes
If the capital-labor ratio is above the Golden Rule capital-labor ratio, then in
the steady state,
investment per worker exceeds output per worker.
consumption per worker is not at its maximum.
capital per worker is above its maximum.
output per worker is less than it would be at the Golden Rule capital-labor
ratio.
B
1
6
Yes
66
QN=25
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=26
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=27
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=28
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The idea that saving equals investment in the Solow model means that a
steady state can be reached only when
s = n + d.
sf(k) = (s + d)k.
s = k.
sf(k) = (n + d)k.
D
1
6
Yes
In the Solow model, if f(k) = 2k^0.5, s = 0.3, n = 0.05, and d = 0.15, what is
the value of k at equilibrium?
9
6
1
3
A
1
6
Yes
In the Solow model, if f(k) = 2k^0.5, s = 0.25, n = 0.05, and d = 0.2, what is
the value of k at equilibrium?
0.25
2.25
6.25
4.00
D
1
6
Yes
In the Solow model, if f(k) = 2k^0.5, s = 0.1, n = 0.1, and d = 0.05, what is
the value of f(k) at equilibrium?
8/3
2
2/3
4/3
A
1
6
Yes
67
QN=29
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=30
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
In the Solow model, if f(k) = 8k^0.5, s = 0.2, n = 0.3, and d = 0.1, what is
the value of k at equilibrium?
4
9
1
16
D
1
6
Yes
In the Solow model, if f(k) = 6k^0.5, s = 0.1, n = 0.1, and d = 0.2, what is
the value of c at equilibrium?
10.8
10
11.2
10.4
A
1
6
Yes
QN=31
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
In the Solow model, if k = 8, y = 20, and s = 0.2, what is c?
20
16
24
12
B
1
6
Yes
QN=32
a.
b.
c.
d.
In the Solow model, if k = 8, y = 24, and s = 0.25, what is c?
18
12
20
24
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A
1
6
Yes
QN=33
The Solow model demonstrates that
68
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=34
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=35
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=36
productivity growth must exceed the rate of growth in the population to
avoid a steady state in the long run.
productivity growth will inevitably decline due to diminishing marginal
productivity.
in the absence of productivity growth, economic growth will turn negative
in the long run.
in the absence of productivity growth, economic growth will reach a steady
state of zero per-capita growth in the long run.
D
1
6
Yes
An earthquake destroys a good portion of the capital stock. How would you
expect this to affect the capital-labor ratio in the long run? There would be
no change in the long-run capital-labor ratio.
a downward shift in the saving-per-worker curve and a decrease in the
capital-labor ratio.
a leftward movement along the saving-per-worker curve and a decrease in
the capital-labor ratio.
a rightward movement along the saving-per-worker curve and an increase in
the capital-labor ratio.
A
1
6
Yes
Which of the following changes would lead, according to the Solow model,
to a higher level of long-run output per worker?
A lower level of capital per worker.
A decrease in productivity.
A rise in the rate of population growth.
An increase in the saving rate.
D
1
6
Yes
An increase in the saving rate in a steady-state economy would cause
69
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=37
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=38
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=39
an upward shift in the saving-per-worker curve and an increase in the
capital-labor ratio.
a downward shift in the saving-per-worker curve and a decrease in the
capital-labor ratio.
a rightward movement along the saving-per-worker curve and an increase in
the capital-labor ratio.
a leftward movement along the saving-per-worker curve and a decrease in
the capital-labor ratio.
A
1
6
Yes
In the long run, an increase in the saving rate in a steady-state economy will
cause
a decrease in the capital-labor ratio and a decrease in consumption per
worker.
a decrease in the capital-labor ratio and an increase in consumption per
worker.
an increase in the capital-labor ratio and a decrease in consumption per
worker.
an increase in the capital-labor ratio and an increase in consumption per
worker.
D
1
6
Yes
All else being equal, a permanent decrease in the saving rate in a steadystate economy would cause
an increase in the capital-labor ratio and a decrease in consumption per
worker.
a decrease in the capital-labor ratio and a decrease in consumption per
worker.
a decrease in the capital-labor ratio and an increase in consumption per
worker.
an increase in the capital-labor ratio and an increase in consumption per
worker.
B
1
6
Yes
An increase in the growth rate of population in a steady-state economy
would cause
70
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
a parallel shift upward in the investment line.
a parallel shift downward in the investment line.
a pivot down and to the right in the investment line.
a pivot up and to the left in the investment line.
D
1
6
Yes
QN=40
An increase in population growth will lead to a ________ in the steady-state
capital-labor ratio and a ________ in output per worker.
fall; fall
fall; rise
rise; fall
rise; rise
A
1
6
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=41
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=42
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A productivity improvement will cause
a leftward movement along the saving-per-worker curve and a decrease in
the capital-labor ratio.
an upward shift in the saving-per-worker curve and an increase in the
capital-labor ratio.
a downward shift in the saving-per-worker curve and a decrease in the
capital-labor ratio.
a rightward movement along the saving-per-worker curve and an increase in
the capital-labor ratio.
B
1
6
Yes
An increase in pollution has caused a permanent increase in the rate of
capital depreciation. This would cause
a decline in consumption per worker.
output per worker to fall.
an increase in the capital-labor ratio.
the capital-labor ratio to be unaffected.
B
1
6
Yes
71
QN=43
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=44
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=45
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=46
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
In the long run, a reduction in productivity will cause
a decrease in the capital-labor ratio and an increase in consumption per
worker.
a decrease in the capital-labor ratio and a decrease in consumption per
worker.
an increase in the capital-labor ratio and an increase in consumption per
worker.
an increase in the capital-labor ratio and a decrease in consumption per
worker.
B
1
6
Yes
In the very long run, the level of consumption per worker can grow
continually if
productivity continually improves.
the saving rate continually falls.
the depreciation rate continually rises.
the population growth rate continually rises.
A
1
6
Yes
Endogenous growth theory attempts to
explain how societies can more easily reach the "Golden Rule."
show how population growth reduces capital and output.
replace the Solow model with a model in which money growth plays a key
role.
explain why productivity changes.
D
1
6
Yes
In the textbook model of endogenous growth, in equilibrium, output grows
at the rate of
sA - d.
A.
K.
n + d.
A
1
6
Yes
72
CHOICES:
QN=47
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=48
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
In the textbook model of endogenous growth, long-run output growth would
decline if there were either a ________ in the saving rate or a ________ in
the depreciation rate.
rise; rise
fall; fall
fall; rise
rise; fall
C
1
6
Yes
Government policies to raise the rate of productivity growth include all of
the following EXCEPT
reducing the government budget surplus
encouraging research and development.
improving human capital development.
improving infrastructure.
A
1
6
Yes
QN=49
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A government policy that would raise the rate of productivity growth is
reducing the government budget surplus.
taxing expenditures on research and development.
shifting infrastructure expenditures to the private sector.
improving human capital development.
D
1
6
Yes
QN=1
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
A disadvantage of the barter system is that
no trade occurs
the opportunity to specialize is greatly reduced
people must produce all their own food, clothing, and shelter
gold is the only unit of account
B
1
7
73
MIX
CHOICES:
Yes
QN=2
The use of money is more efficient than barter because the introduction of
money
reduces the need to exchange goods.
reduces the need for economic specialization.
reduces transaction costs.
reduces the need for other stores of value.
C
1
7
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=3
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
In economics, money refers to
income.
currency.
assets used and accepted as payment.
wealth.
C
1
7
Yes
QN=4
Money's primary role in the economy comes from the benefits of lowering
transactions costs and allowing specialization. This function of money is
called
store of value
unit of account.
standard of deferred payment.
medium of exchange.
D
1
7
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=5
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
For something to satisfy the medium-of-exchange function of money, it
must be
issued by a central bank.
backed by gold.
readily exchangeable for other goods.
an inherently valuable commodity.
C
1
7
74
MIX
CHOICES:
Yes
QN=6
In some countries, prices in stores are listed in terms of U.S. dollars, rather
than in units of the local currency. That's most likely because
interest rates are higher using U.S. dollars than using the local currency.
the country's political system is unstable.
there is no other store of value.
the country has experienced high rates of inflation.
D
1
7
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=7
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=8
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=9
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
The number of units of one good that trade for one unit of alternative goods
can be determined most easily when
the goods are all new.
the goods all weigh about the same.
the goods are actively traded through barter.
there is one unit of account.
D
1
7
Yes
A good that is used as a medium of exchange as well as being a
consumption good is called
a legal tender.
a commodity money.
a barter money.
a debased money.
B
1
7
Yes
Why do people keep currency in their pockets when bank deposits pay
interest?
Because bank deposits lose value due to inflation.
Because currency is more liquid.
Because bank deposits lose value due to changes in interest rates.
Because banks might steal your money.
B
1
7
75
MIX
CHOICES:
Yes
QN=10
One of money's primary roles in the economy comes from the use of money
to transfer purchasing power to the future. This role of money is called
medium of exchange.
store of value.
unit of account.
standard of deferred payment.
B
1
7
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=11
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=12
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=13
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
Which of the following measures is the best measure of money as a medium
of exchange?
M1
M2
M3
None of the above
A
1
7
No
Suppose your bank raises its minimum-balance requirement for free
checking on checking accounts by $500. You take $500 out of your
passbook savings account and put it in your checking account. What is the
overall effect on M1 and M2?
M1 is unchanged, M2 falls by $500.
M1 is unchanged, M2 is unchanged.
M1 rises by $500, M2 is unchanged.
M1 rises by $500, M2 falls by $500.
C
1
7
Yes
Which of the following is not part of M1?
Demand deposits
Traveler's checks
Time deposits
Checking accounts
C
1
7
76
MIX
CHOICES:
Yes
QN=14
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Which of the following statements about M1 and M2 is true?
Savings deposits are part of M2.
M1 is larger than M2.
M2 is more liquid than M1.
Demand deposits are not part of M1.
A
1
7
Yes
QN=15
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
M2 does not include
M1.
Treasury bonds.
small-denomination time deposits.
passbook savings accounts.
B
1
7
Yes
QN=16
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Over half of U.S. currency is
held by banks as reserves.
held abroad.
used in the underground economy.
held by businesses, especially retailers, for making transactions.
B
1
7
Yes
QN=17
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Americans shouldn't be concerned about U.S. currency held abroad because
it represents an interest-free loan to the United States.
foreigners can't spend it in their own countries.
the currency will never return to the United States.
foreigners use it to buy U.S. bonds.
A
1
7
Yes
QN=18
What's the most common way for a central bank to reduce the money
77
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
supply?
Collect higher taxes
Buy bonds from the government
Buy bonds from the public
Sell bonds to the public
D
1
7
Yes
QN=19
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
People's best guesses about returns on assets are called
the term structure of returns.
risk.
liquidity.
expected returns.
D
1
7
Yes
QN=20
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The set of assets that a holder of wealth chooses to own is called
a wealth strategy.
a portfolio.
an asset assortment.
an investment envelope.
B
1
7
Yes
QN=21
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The uncertainty about the return an asset will earn is
risk.
stochastic dominance.
time to maturity.
liquidity.
A
1
7
Yes
QN=22
The ease and quickness with which an asset can be exchanged for goods,
services, or other assets is its
78
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
velocity.
risk.
liquidity.
time to maturity.
C
1
7
Yes
QN=23
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Time to maturity refers to the amount of time until
an asset repays the principal to an investor.
the yield curve shows an upward slope.
a bond can be sold on the secondary market.
an asset pays interest for the first time.
A
1
7
Yes
QN=24
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Compared with money, bonds have
more risk and less liquidity.
less risk and more liquidity.
more risk and more liquidity.
less risk and less liquidity.
A
1
7
Yes
QN=25
AAA Company stock has a higher expected rate of return than ZZZ
Company stock. All else being equal, you would expect that relative to
ZZZ, AAA company stock provides
more risk and more liquidity.
less risk and more liquidity.
less risk and less liquidity.
more risk and less liquidity.
D
1
7
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=26
The least liquid asset on this list is
79
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
houses.
bonds.
money.
stocks.
A
1
7
Yes
QN=27
In the early 2000s, lenders began issuing mortgage loans to people who
would normally not be qualified to take out loans because they did not meet
lending standards. Those borrowers are known as
alternative borrowers.
weak borrowers.
credit risks.
subprime borrowers.
D
1
7
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=28
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=29
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The financial crisis occurred in 2008 in large part because of losses on
securities consisting of bundles of mortgage loans known as
mortgage-backed securities.
credit default swaps.
home loan loss reserves.
naked put options.
A
1
7
Yes
A one-year bond has an interest rate of 5% today. Investors expect that in
one year, a one year bond will have an interest rate equal to 7%. According
to the expectations theory of the term structure of interest rates, in
equilibrium, a two-year bond today will have an interest rate equal to
6.0%.
5.5%.
3.0%.
5.0%.
A
1
7
Yes
80
QN=30
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=31
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=32
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=33
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The idea that investors today compare the returns on bonds with differing
times to maturity to see which is expected to give them the highest return is
the underlying principle behind the ________ of the term structure of
interest rates.
segmented-markets theory
yield comparison theory
investors' viewpoint analysis
expectations theory
D
1
7
Yes
The interest rate on long-term bonds is somewhat higher than suggested by
the expectations theory because
the expectations theory doesn't account for taxes.
the Fed can only control short-term interest rates.
an inflation premium must be added to long-term bonds.
a risk premium exists.
D
1
7
Yes
By spreading her investments out over many different assets, an investor
achieves
increased risk.
a higher expected return.
diversification.
greater liquidity.
C
1
7
Yes
A 10% decrease in real income usually leads to ________ in money
demand.
a decrease of less than 10%
a decrease of 10%
no change
an increase
A
1
7
Yes
81
QN=34
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=35
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Which of the following is most likely to lead to a decrease of 10% in the
nominal demand for money?
A decrease in real income of 5%
An increase in real income of 5%
An increase of 10% in the price level
A decline of 10% in the price level
D
1
7
Yes
Which of the following is most likely to lead to an increase of 1% in the
nominal demand for money?
An increase of 1% in the price level
A decrease in real income of 0.5%
An increase in real income of 0.5%
A decline of 1% in the price level
A
1
7
Yes
QN=36
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The opportunity cost of holding currency decreases when
the interest rate on money decreases.
the interest rate on bonds decreases.
wealth decreases.
income decreases.
B
1
7
Yes
QN=37
An increase in the real interest rate would cause an increase in the real
demand for money
no matter what the change in expected inflation.
if expected inflation fell by more than the rise in the real interest rate.
if expected inflation fell by the same amount as the rise in the real interest
rate.
if expected inflation fell by less than the rise in the real interest rate.
B
1
7
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
82
QN=38
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=39
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=40
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=41
An increase in expected inflation is likely to cause
a decline in the demand for real balances.
an increase in the demand for real balances.
no change in the demand for real balances only if the income elasticity of
real money demand is zero.
no change in the demand for real balances.
A
1
7
Yes
Mr. Pierpont has wealth of $200,000. He wants to keep at least $80,000 in
bonds at all times, and will shift $10,000 into bonds from his checking
account for each percentage point that the interest rate on bonds exceeds the
interest rate on his checking account. If the interest rate on checking
accounts is 4% and the interest rate on bonds is 9%, how much does Mr.
Pierpont keep in his checking account?
$150,000
$50,000
$130,000
$70,000
D
1
7
Yes
Mr. Pierpont has wealth of $200,000. He wants to keep at least $80,000 in
bonds at all times, and will shift $10,000 into bonds from his checking
account for each percentage point that the interest rate on bonds exceeds the
interest rate on his checking account. Currently, he keeps $100,000 in
bonds, which pay him 7%. What is the current interest rate on checking
accounts?
5%
7%
10%
9%
A
1
7
Yes
Money demand is given by
M(d) /P = 1000 + .2Y - 1000i.
Given that P = 200, Y = 2000, and i = .10, real money demand is equal to
83
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
260,000.
1,300.
1,500.
300,000.
B
1
7
Yes
QN=42
Over time, the wealth of society increases and payments technologies get
more efficient. What is the effect on money demand of these two changes?
Money demand rises proportionately to the rise in wealth.
The overall effect is ambiguous.
Money demand rises, but less than proportionately to the rise in wealth.
Money demand declines.
B
1
7
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=43
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=44
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=45
If there is a financial panic and increased uncertainty about the returns in the
stock market and bond market, what is the likely effect on money demand?
The overall effect is ambiguous.
Money demand declines first, then rises when inflation increases.
Money demand declines.
Money demand rises.
D
1
7
Yes
Suppose a new law imposes a tax on all trades of bonds and stock. What is
the likely effect on money demand?
Money demand declines.
The overall effect is ambiguous.
Money demand declines first, then rises when inflation increases.
Money demand rises.
D
1
7
Yes
If real income rises 4%, prices rise 1%, and nominal money demand rises
4%, what is the income elasticity of real money demand?
84
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
4/5
1
5/6
3/4
D
1
7
Yes
QN=46
If the interest elasticity of money demand is -0.1, by what percent does
money demand change if the nominal interest rate rises from 2% to 3%?
-5%
5%
0%
-0.1%
A
1
7
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=47
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
If the income elasticity of money demand is 3/4 and the interest elasticity of
money demand is -1/4, by what percent does money demand rise if income
rises 10% and the nominal interest rate rises from 4% to 5%?
1.25%
7.50%
5.00%
6.25%
A
1
7
Yes
QN=48
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Velocity is defined as
nominal money stock/nominal GDP.
nominal GDP/nominal money stock.
mc^2
real money stock/real GDP.
B
1
7
Yes
QN=49
If real GDP is $4 billion, the price level is 1.25, and the nominal money
stock is $500 million, then velocity is
85
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
0.1.
100.
1.
10.
D
1
7
Yes
QN=50
Money demand is given by
M(d) /P = 1000 + .2Y - 1000i.
Given that P = 200, Y = 2000, and i = .10, velocity is equal to
1.54.
0.75.
1.33.
0.65.
A
1
7
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=51
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=52
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Suppose velocity is 3, real output is 9000, and the price level is 1.5. What is
the level of real money demand in this economy?
6000
30,000
2000
3000
D
1
7
Yes
Suppose velocity is constant at 4, real output is 10, and the price level is 2.
From this initial situation, the government increases the nominal money
supply to 6. If velocity and output remain unchanged, by how much will the
price level increase?
50%
24%
20%
2.4%
C
1
7
Yes
86
QN=53
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=54
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=55
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=56
a.
b.
c.
d.
ANS:
Under a situation of asset market equilibrium,
the quantity of money supplied equals the quantity of nonmonetary assets
supplied.
the quantity of money supplied equals the quantity of nonmonetary assets
demanded.
the quantity of nonmonetary assets supplied equals the quantity of monetary
assets demanded.
the quantity of money supplied equals the quantity of money demanded.
D
1
7
Yes
When the real quantity of money supplied equals the real quantity of money
demanded, there is said to be
goods market equilibrium.
money illusion.
asset market equilibrium.
monetary neutrality.
C
1
7
Yes
If the quantity of money demanded exceeds the quantity of money supplied,
then
the quantity of nonmonetary assets demanded will still equal the quantity
supplied, all else being equal.
you can make no conclusions about the relative supply and demand of
nonmonetary assets.
the quantity of nonmonetary assets demanded exceeds the quantity supplied.
the quantity of nonmonetary assets supplied exceeds the quantity demanded.
D
1
7
Yes
Suppose the real money demand function is
M(d) /P = 2400 + 0.2 Y - 10,000 (r + pi(e)).
Assume M = 4000, P = 2.0, pi(e) = .03, and Y = 5000. The real interest rate
that clears the asset market is
6%.
3%.
14%.
11%.
D
87
PTS:
CHAPTER:
MIX
CHOICES:
1
7
Yes
QN=57
Suppose the real money demand function is
M(d) /P = 2400 + 0.2 Y - 10,000 (r + pi(e)).
Assume M = 5000, pi(e) = .03, and Y = 5000. If the price level were to
decrease from 2.5 to 2.0, then the real interest rate would decrease by how
many percentage points (assuming M(d), pi(e), and Y are unchanged)?
5
4
14
9
A
1
7
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=58
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=59
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Suppose the real money demand function is
M(d) /P = 2400 + 0.2 Y - 10,000 (r + pi(e)).
Assume M = 5000, P = 2.0, and pi(e) = .03. If Y were to increase from 4000
to 5000, then the real interest rate would increase by how many percentage
points?
7
2
5
5
B
1
7
Yes
Suppose real money demand is
L = 0.8 Y - 100,000 (r + pi(e)).
If the nominal money supply is 12,000, real output is 15,000, the real
interest rate is .02, and the expected inflation rate is .01, then the price level
is
3
1
4/3
3/4
C
1
7
Yes
88
QN=60
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=61
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=62
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=63
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Suppose the real interest rate is 4% and the expected inflation rate is 3%. If
the money supply increases by 10% and output, the real interest rate, and
the expected inflation rate are unchanged, then the price level increases by
7%.
3%.
4%.
10%.
D
1
7
Yes
If the nominal money supply doubles while real money demand is
unchanged, what happens to the price level?
The price level increases by a factor of four.
The price level falls by one-half.
The price level doubles.
The price level is unchanged.
C
1
7
Yes
If real money demand doubles while the nominal money supply is
unchanged, what happens to the price level?
The price level doubles.
The price level is unchanged.
The price level increases by a factor of four.
The price level falls by one-half.
D
1
7
Yes
If nominal money supply grows 3% and real money demand grows 8%, the
inflation rate is
-5%.
11%.
5%.
8/3%.
A
1
7
Yes
89
QN=64
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=65
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=66
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=67
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
If the income elasticity of money demand is 3/4 and income increases 8%,
by about how much does the price level change, where nominal money
supply remains the same?
Rises by 6%.
Unchanged.
Rises by 8%.
Falls by 6%.
D
1
7
Yes
If the nominal money supply grows 5%, real income falls 2%, and the
income elasticity of money demand is 0.8, then the inflation rate is
3.4%.
3.0%.
7.0%.
6.6%.
D
1
7
Yes
If the nominal money supply grows 6%, real income rises 2%, and the
inflation rate is 5%, then the income elasticity of money demand is
1.0.
1.5.
0.5.
0.75.
C
1
7
Yes
If the nominal money supply grows 10%, the inflation rate is 6%, and the
income elasticity of money demand is 1.0, then real income growth equals
3%.
4%.
1%.
2%.
B
1
7
Yes
90
QN=68
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=69
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Large differences in inflation rates among countries are almost always the
result of large differences in
productivity.
the growth rates of real money demand.
real income growth.
the growth rates of nominal money supplies.
D
1
7
Yes
When a government prints money to finance its expenditures, it is likely to
cause
unemployment.
reductions in the use of barter.
inflation.
deflation.
C
1
7
Yes
QN=1
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The trough of a business cycle occurs when ________ hits its lowest point.
aggregate economic activity.
the money supply.
inflation.
the unemployment rate.
A
1
8
Yes
QN=2
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The low point in the business cycle is referred to as the
boom.
peak.
trough.
expansion.
C
1
8
Yes
QN=3
When aggregate economic activity is increasing, the economy is said to be
91
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
in
a peak.
a turning point.
an expansion.
a contraction.
C
1
8
Yes
QN=4
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
When aggregate economic activity is declining, the economy is said to be in
an expansion.
a contraction.
a turning point.
a trough.
B
1
8
Yes
QN=5
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Peaks and troughs of the business cycle are known collectively as
turning points.
volatility.
equilibrium points.
real business cycle events.
A
1
8
Yes
QN=6
The tendency of many different economic variables to have regular and
predictable patterns over the business cycle is called
recurrence.
persistence.
periodicity.
comovement.
D
1
8
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=7
Comovement is
92
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=8
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=9
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=10
the tendency of many economic variables to move together in a predictable
way over the business cycle.
the idea that the standard pattern of contraction-trough-expansion-peak
occurs again and again in industrial economies.
the idea that peaks and troughs of the business cycle occur at regular
intervals.
the tendency for declines in economic activity to be followed by further
declines, and for growth in economic activity to be followed by more
growth.
A
1
8
Yes
The tendency for declines in economic activity to be followed by further
declines, and for growth in economic activity to be followed by more
growth is called
periodicity.
recurrence.
comovement.
persistence.
D
1
8
Yes
Persistence is
the tendency of many economic variables to move together in a predictable
way over the business cycle.
the idea that peaks and troughs of the business cycle occur at regular
intervals.
the tendency for declines in economic activity to be followed by further
declines, and for growth in economic activity to be followed by more
growth.
the idea that the standard pattern of contraction-trough-expansion-peak
occurs again and again in industrial economies.
C
1
8
Yes
The idea that the business cycle is recurrent means that
93
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
peaks and troughs of the business cycle occur at regular intervals.
many economic variables to move together in a predictable way over the
business cycle.
declines in economic activity tend to be followed by further declines, and
growth in economic activity tends to be followed by more growth.
the standard pattern of contraction-trough-expansion-peak occurs again and
again in industrial economies.
D
1
8
Yes
QN=11
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The Great Depression consisted of how many business cycles?
1
2
3
4
B
1
8
Yes
QN=12
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The 1973-1975 recession was caused by
the Fed's easy monetary policy.
business pessimism about investment caused by high tax rates on capital.
the Fed's tight monetary policy.
the quadrupling of oil prices by OPEC.
D
1
8
Yes
QN=13
The NBER's Business Cycle Dating Committee picks recession dates by
looking at many variables, the four most important of which are industrial
production, manufacturing and trade sales, nonfarm employment, and real
personal income. These variables are known as
recession indicators.
leading indicators.
lagging indicators.
coincident indicators.
D
1
8
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
94
QN=14
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=15
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=16
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=17
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
An economic variable that moves in the same direction as aggregate
economic activity (up in expansions, down in contractions) is called
acyclical.
procyclical.
a leading variable.
countercyclical
B
1
8
Yes
An economic variable that moves in the opposite direction as aggregate
economic activity (down in expansions, up in contractions) is called
countercyclical.
a leading variable.
acyclical
procyclical.
A
1
8
Yes
An economic variable that doesn't move in a consistent pattern with
aggregate economic activity is called
procyclical.
countercyclical.
a leading variable.
acyclical.
D
1
8
Yes
A variable that tends to move in advance of aggregate economic activity is
called
a coincident variable.
an acyclical variable.
a leading variable.
a lagging variable.
C
1
8
Yes
95
QN=18
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=19
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=20
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=21
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A variable that tends to move at the same time as aggregate economic
activity is called
a leading variable.
an acyclical variable.
a lagging variable.
a coincident variable.
D
1
8
Yes
A variable that tends to move later than aggregate economic activity is
called
a leading variable.
an acyclical variable.
a lagging variable.
a coincident variable.
C
1
8
Yes
Which of the following macroeconomic variables is procyclical and
coincident with the business cycle?
Industrial production
Residential investment
Nominal interest rates
Unemployment
A
1
8
Yes
Which of the following macroeconomic variables is procyclical and leads
the business cycle?
Residential investment
Business fixed investment
Nominal interest rates
Unemployment
A
1
8
Yes
96
QN=22
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Which of the following macroeconomic variables is acyclical?
Money supply
Unemployment
Consumption
Real interest rates
D
1
8
Yes
QN=23
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Real interest rates are
acyclical, just like nominal interest rates.
acyclical, while nominal interest rates are procyclical.
procyclical, just like nominal interest rates.
countercyclical, while nominal interest rates are procyclical.
B
1
8
Yes
QN=24
Which of the following macroeconomic variables is procyclical and lags the
business cycle?
Stock prices
Employment
Nominal interest rates
Business fixed investment
C
1
8
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=25
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=26
Which of the following macroeconomic variables would you include in an
index of leading economic indicators?
Real interest rates
Employment
Inflation
Residential investment
D
1
8
Yes
Which of the following is not a leading variable?
97
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Residential investment
Stock prices
Average labor productivity
Inflation
D
1
8
Yes
QN=27
Which of the following macroeconomic variables would you exclude from
an index of leading economic indicators?
Money supply
Residential investment
Inventory investment
Industrial production
D
1
8
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=28
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Industries that are extremely sensitive to the business cycle are the
capital goods and durable goods sectors.
capital goods and nondurable goods sectors.
nondurable goods and service sectors.
durable goods and service sectors.
A
1
8
Yes
QN=29
You want to invest in a firm whose profits show large fluctuations
throughout the business cycle. Which of the following would you invest in?
A corporation that depends heavily on government purchases
A corporation that depends heavily on business fixed investment
A corporation that depends heavily on consumer nondurables
A corporation that depends heavily on consumer services
B
1
8
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=30
Which of the following is true?
98
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=31
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Employment is procyclical and unemployment is coincident with the
business cycle.
Employment and unemployment are both coincident with the business
cycle.
Employment and unemployment are both procyclical.
Employment is procyclical and unemployment is countercyclical.
D
1
8
Yes
The job finding rate is defined as
the probability that someone who is employed will change jobs in the next
month.
the probability that someone who is unemployed will find a job in the next
month
the probability that someone who has been unemployed for over a year will
find a job in the next month.
the probability that someone who is not in the labor force will enter the
labor force in the next month.
B
1
8
Yes
QN=32
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The job finding rate
equals 1 minus the job loss rate.
rises in recessions.
rises in expansions.
remains constant over the business cycle.
C
1
8
Yes
QN=33
The probability that an employed worker will lose his or her job in the next
month is known as
the job loss rate.
the underemployment rate.
the job finding rate.
the unemployment rate.
A
1
8
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
99
QN=34
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The job loss rate
remains constant over the business cycle.
rises in recessions.
equals 1 minus the job finding rate.
rises in expansions.
B
1
8
Yes
QN=35
a.
b.
c.
Which of the following statements is true?
Both nominal and real interest rates are procyclical and lagging.
Nominal interest rates are procyclical and real interest rates are acyclical.
Nominal interest rates are procyclical and real interest rates are
countercyclical.
Both nominal and real interest rates are procyclical and leading.
B
1
8
Yes
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=36
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=37
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Using the seasonal business cycle as your guide, during which quarter
would you be most likely to expect an increase in your corporation's sales?
The third quarter of the year (July-September)
The first quarter of the year (January-March)
The fourth quarter of the year (October-December)
The second quarter of the year (April-June)
C
1
8
Yes
Which of the following macroeconomic variables is the most seasonally
procyclical?
Expenditure on services
The real wage
Expenditure on durable goods
The unemployment rate
C
1
8
Yes
100
QN=38
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
What are the two main components of business cycle theories?
A model of how equilibrium is reached and a description of the
government's role in the economy
A model of how people decide to spend and a description of the
government's role in the economy
A description of shocks and a description of the government's role in the
economy
A description of shocks and a model of how the economy responds to them
D
1
8
Yes
QN=39
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Economists use the term shocks to mean
the business cycle.
typically unpredictable forces that have major impacts on the economy.
unexpected government actions that affect the economy.
sudden rises in oil prices.
B
1
8
Yes
QN=40
Wars, new inventions, harvest failures, and changes in government policy
are examples of
shocks.
economic models.
the business cycle.
opportunity costs.
A
1
8
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=41
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The three main components of the aggregate demand-aggregate supply
model include
AD, SRAS, LM
SRAS, LRAS, IS
AD, SRAS, LRAS
AD, IS, LM
C
1
8
Yes
101
QN=42
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=43
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=44
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=45
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The AD, SRAS, and LRAS curves each show a relationship between which
two economic variables?
Output and unemployment
The aggregate price level and the interest rate
The aggregate price level and output
Output and the interest rate
C
1
8
Yes
When plotted with the aggregate price level on the vertical axis and output
on the horizontal axis, which of the following curves slopes downward?
SRAS
AD
LRAS
None of the above
B
1
8
No
When plotted with the aggregate price level on the vertical axis and output
on the horizontal axis, which of the following curves is vertical?
SRAS
AD
LRAS
None of the above
C
1
8
No
When plotted with the aggregate price level on the vertical axis and output
on the horizontal axis, the long-run aggregate supply curve
is horizontal.
is vertical.
slopes upward.
slopes downward.
B
1
8
Yes
102
QN=46
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A decrease in government spending on the park system would cause
a movement down and to the right along the aggregate demand curve.
a movement up and to the left along the aggregate demand curve.
the aggregate demand curve to shift to the left.
the aggregate demand curve to shift to the right.
C
1
8
Yes
QN=47
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A decline in the stock market, which makes consumers poorer, would cause
the aggregate demand curve to shift to the right.
a movement up and to the left along the aggregate demand curve.
a movement down and to the right along the aggregate demand curve.
the aggregate demand curve to shift to the left.
D
1
8
Yes
QN=48
In the short run, an increase in export sales would cause output to ________
and the price level to ________.
rise; stay constant
rise; rise
fall; stay constant
fall; rise
A
1
8
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=49
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=50
In the long run, an increase in consumer spending would cause output to
________ and the price level to ________.
stay constant; stay constant
stay constant; rise
rise; stay constant
rise; rise
B
1
8
Yes
In the long run, an increase in government purchases of military equipment
would cause output to ________ and the aggregate price level to ________.
103
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
fall; fall
stay constant; fall
stay constant; rise
fall; stay constant
C
1
8
Yes
QN=51
According to classical macroeconomists, prices adjust ________ to shocks,
so the government should ________.
slowly; fight recessions
rapidly; do little
slowly; do little
rapidly; fight recessions
B
1
8
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=52
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=53
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=54
According to Keynesian macroeconomists, prices adjust ________ to
shocks, so the government should ________.
rapidly; fight recessions
rapidly; do little
slowly; fight recessions
slowly; do little
C
1
8
Yes
In the long run, an increase in productivity would cause output to ________
and the aggregate price level to ________.
fall; rise
rise; rise
rise; fall
fall; fall
C
1
8
Yes
In the long run, a reduction in labor supply would cause output to ________
and the aggregate price level to ________.
104
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
fall; rise
fall; fall
rise; rise
rise; fall
A
1
8
Yes
QN=55
The key difference between classical and Keynesian macroeconomists is
their differing beliefs about
the full-employment level of output.
the slope of the aggregate demand curve.
the natural rate of unemployment.
the speed at which prices adjust.
D
1
8
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=1
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The FE line shows the level of output at which the ________ market is in
equilibrium.
Money
Goods
Asset
Labor
D
1
09
yes
QN=2
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The FE line
is vertical.
slopes downward.
slopes upward.
is horizontal.
A
1
09
yes
QN=3
The FE line is vertical because the level of output at full employment
doesn't depend on the
level of employment.
a.
105
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
real interest rate.
marginal product of labor.
real wage rate.
B
1
09
yes
QN=4
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Which of the following would shift the FE line to the right?
A decrease in the capital stock
An increase in labor supply
An adverse supply shock
An increase in the future marginal productivity of capital
B
1
09
yes
QN=5
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Which of the following would shift the FE line to the left?
A decrease in the future marginal productivity of capital
A decrease in the capital stock
An increase in labor supply
A beneficial supply shock
B
1
09
yes
QN=6
a.
b.
c.
d.
An increase in the money supply would cause the FE line to
remain unchanged.
shift to the right.
shift to the left.
remain unchanged if Ricardian equivalence holds; otherwise, shift to the
right.
A
1
09
yes
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=7
a.
b.
c.
An increase in investment spending would cause the FE line to
remain unchanged.
remain unchanged if Ricardian equivalence holds; otherwise, shift to the
right.
shift to the right.
106
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
shift to the left.
A
1
09
yes
QN=8
a.
An adverse supply shock would cause the FE line to
remain unchanged if the shock is temporary; shift to the right if the shock is
permanent.
shift to the left.
remain unchanged.
shift to the right.
B
1
09
yes
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=9
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The IS curve shows the combinations of output and the real interest rate for
which
the labor market is in equilibrium.
the financial asset market is in equilibrium.
the goods market is in equilibrium.
an increase in output will cause the market-clearing interest rate to be bid
up.
C
1
09
yes
QN=10
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The IS curve
slopes downward.
is horizontal.
slopes upward.
is vertical.
A
1
09
yes
QN=11
Any change that reduces desired saving relative to desired investment (for a
given level of output) causes the real interest rate to ________ and shifts the
IS curve ________.
increase; up and to the right
decrease; up and to the right
decrease; down and to the left
a.
b.
c.
107
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
increase; down and to the left
A
1
09
yes
QN=12
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A decline in expected future output would cause the IS curve to
shift down and to the left.
remain unchanged.
shift up and to the right.
shift up and to the right only if people face borrowing constraints.
A
1
09
yes
QN=13
a.
A decrease in the effective tax rate on capital would cause the IS curve to
remain unchanged if taxes are fully deductible from income; otherwise, shift
up and to the right.
shift up and to the right.
shift down and to the left.
remain unchanged.
B
1
09
yes
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=14
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
An increase in labor supply would cause the IS curve to
remain unchanged.
shift up and to the right only if people face borrowing constraints.
shift down and to the left.
shift up and to the right.
A
1
09
yes
QN=15
a.
b.
c.
d.
ANS:
PTS:
An increase in the money supply would cause the IS curve to
shift up and to the right only if people face borrowing constraints.
shift down and to the left.
remain unchanged.
shift up and to the right.
C
1
108
CHAPTER:
MIX
CHOICES:
09
yes
QN=16
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A temporary decline in productivity would cause the IS curve to
shift up and to the right.
QN=17
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A decrease in wealth would cause the IS curve to
shift up and to the right only if people face borrowing constraints.
shift down and to the left.
shift up and to the right.
remain unchanged.
B
1
09
yes
QN=18
An increase in the expected future marginal product of capital would cause
the IS curve to
remain unchanged if firms face borrowing constraints; otherwise, shift
down and to the left.
shift up and to the right.
remain unchanged.
shift down and to the left.
B
1
09
yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=19
a.
b.
c.
d.
ANS:
PTS:
shift down and to the left.
shift up and to the right only if people face borrowing constraints.
remain unchanged.
D
1
09
yes
The IS curve would unambiguously shift up and to the right if there were
an increase in both government purchases and the expected future marginal
product of capital.
an increase in both government purchases and corporate taxes.
an increase in the expected future marginal product of capital and a decrease
in expected future output.
a decrease in both corporate taxes and the expected future marginal product
of capital.
A
1
109
CHAPTER:
MIX
CHOICES:
09
yes
QN=20
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A rise in the price of a bond causes the yield of the bond to
rise.
remain unchanged.
rise if it's a short-term bond, fall if it's a long-term bond.
fall.
D
1
09
yes
QN=21
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A decline in the price of a bond causes the yield of the bond to
fall.
remain unchanged.
rise if it's a short-term bond, fall if it's a long-term bond.
rise.
D
1
09
yes
QN=22
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The LM curve
slopes downward.
slopes upward.
is vertical.
is horizontal.
B
1
09
yes
QN=23
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Looking only at the asset market, an increase in output would cause
the LM curve to shift down and to the right.
a decrease in the real interest rate along the LM curve.
the LM curve to shift up and to the left.
an increase in the real interest rate along the LM curve.
D
1
09
yes
110
QN=24
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=25
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=26
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=27
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A change that increases the real money supply relative to real money
demand causes
the LM curve to shift up and to the left.
the LM curve to shift down and to the right.
the IS curve to shift up and to the right.
the IS curve to shift down and to the left.
B
1
09
yes
A change that increases real money demand relative to the real money
supply causes
the IS curve to shift up and to the right.
the LM curve to shift up and to the left.
the LM curve to shift down and to the right.
the IS curve to shift down and to the left.
B
1
09
yes
Banks decide to raise the interest rate they pay on checking accounts from
1% to 2%. This action would
decrease money demand, shifting the LM curve up and to the left.
increase money demand, shifting the LM curve down and to the right.
increase money demand, shifting the LM curve up and to the left.
decrease money demand, shifting the LM curve down and to the right.
C
1
09
yes
You have just read that the Federal Reserve has increased the money supply
to avoid a recession. For a given price level, you would expect the LM curve
to
shift up and to the left as the real money supply rises.
shift down and to the right as the real money supply rises.
shift down and to the right as the real money supply falls.
shift up and to the left as the real money supply falls.
B
1
09
yes
111
QN=28
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=29
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=30
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=31
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The Fed has announced that it plans to lower the rate of monetary growth
from 10% per year to 2% per year. You would expect this announcement to
directly
increase money demand, shifting the LM curve up and to the left.
increase money demand, shifting the LM curve down and to the right.
decrease money demand, shifting the LM curve down and to the right.
decrease money demand, shifting the LM curve up and to the left.
A
1
09
yes
The probable effect of introducing an increased number of automatic teller
machines is to
increase money demand, shifting the LM curve up and to the left.
decrease money demand, shifting the LM curve down and to the right.
increase money demand, shifting the LM curve down and to the right.
decrease money demand, shifting the LM curve up and to the left.
B
1
09
yes
An increase in wealth that doesn't affect labor supply would cause the IS
curve to ________ and the FE line to ________.
shift down and to the left; be unchanged
shift up and to the right; shift left
shift down and to the left; shift left
shift up and to the right; be unchanged
D
1
09
yes
An increase in the effective tax rate on capital would cause the IS curve to
________ and the LM curve to ________.
shift down and to the left; be unchanged
shift up and to the right; shift up and to the left
shift up and to the right; be unchanged
shift down and to the left; shift up and to the left
A
1
09
yes
112
QN=32
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
When all markets in the economy are simultaneously in equilibrium, we say
there is disequilibrium.
markets are complete.
markets are perfect.
there is general equilibrium.
D
1
09
yes
QN=33
To reach general equilibrium, the price level adjusts to shift the ________
until it intersects with the ________.
LM curve; FE line and IS curve
ND curve; FE line and NS curve
IS curve; FE line and LM curve
FE line; LM and IS curves
A
1
09
yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=34
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
What adjusts to restore general equilibrium after a shock to the economy?
The IS curve
The FE line
The LM curve
The labor supply curve
C
1
09
yes
QN=35
a.
b.
The IS-LM model predicts that a temporary beneficial supply shock
increases output, national saving, investment, and the real interest rate.
increases the real interest rate, investment, and output, but not national
saving.
increases output, national saving, and investment, but not the real interest
rate.
increases output, national saving, and the real interest rate, but not
investment.
C
1
09
yes
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
113
QN=36
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A temporary supply shock, such as a bumper crop, would
have no effect on the FE line.
shift the FE line to the left and leave the IS curve unchanged.
shift the FE line to the right and leave the IS curve unchanged.
shift the FE line to the left and shift the IS curve up and to the right.
C
1
09
yes
QN=37
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A temporary supply shock, such as an increase in oil prices, would
shift the IS curve down and to the left and shift the FE line to the left.
shift the IS curve up and to the right, but leave the FE line unchanged.
shift the IS curve down and to the left and leave the FE line unchanged.
have no effect on the IS curve.
D
1
09
yes
QN=38
You have just read that Australia has suffered a drought, destroying its
wheat crop for this year. The effect of this adverse supply shock on
Australia would probably be
a decrease in prices and a decrease in real interest rates.
an increase in prices and an increase in real interest rates.
a decrease in prices, a decrease in nominal interest rates, but an increase in
real interest rates.
an increase in prices, an increase in nominal interest rates, but a decrease in
real interest rates.
B
1
09
yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=39
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A temporary adverse supply shock directly causes
a shift to the left of the FE line.
a shift down and to the right of the LM curve.
a shift down and to the left of the IS curve.
a shift up and to the right of the IS curve.
A
1
09
yes
114
QN=40
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=41
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=42
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=43
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
After a temporary beneficial supply shock hits the economy, general
equilibrium is restored by
a shift up and to the left of the LM curve.
a shift down and to the right of the LM curve.
a shift to the left of the FE line.
a shift down and to the left of the IS curve.
B
1
09
yes
An adverse supply shock that is permanent shifts which curve in addition to
the curves shifted by one that is temporary?
The FE line
The labor demand curve
The LM curve
The IS curve
D
1
09
yes
Which market adjusts the quickest in response to shocks to the economy?
The labor market
The goods market
The asset, labor, and goods markets adjust at about the same speed to
eliminate a disequilibrium in the macroeconomy.
The asset market
D
1
09
yes
A temporary decrease in government purchases causes the real interest rate
to ________ and output to ________ in the short run, before prices adjust to
restore equilibrium.
rise; rise
fall; fall
fall; rise
rise; fall
B
1
09
yes
115
QN=44
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=45
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=46
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=47
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
An increase in expected inflation causes the real interest rate to ________
and output to ________ in the short run, before prices adjust to restore
equilibrium.
rise; fall
fall; rise
rise; rise
fall; fall
B
1
09
yes
Suppose the intersection of the IS and LM curves is to the left of the FE line.
A decrease in the price level would most likely eliminate a disequilibrium
among the asset, labor, and goods markets by
shifting the IS curve down and to the left.
shifting the FE curve to the left.
shifting the IS curve up and to the right.
shifting the LM curve down and to the right.
D
1
09
yes
Suppose the intersection of the IS and LM curves is to the left of the FE line.
What would most likely eliminate a disequilibrium among the asset, labor,
and goods markets?
A fall in the price level, shifting the LM curve down and to the right
A rise in the price level, shifting the IS curve up and to the right
A fall in the price level, shifting the IS curve down and to the left
A rise in the price level, shifting the LM curve up and to the left
A
1
09
yes
Suppose the intersection of the IS and LM curves is to the right of the FE
line. What would most likely eliminate a disequilibrium among the asset,
labor, and goods markets?
A rise in the price level, shifting the LM curve up and to the left.
A fall in the price level, shifting the IS curve down and to the left.
A rise in the price level, shifting the IS curve up and to the right.
A fall in the price level, shifting the LM curve down and to the right.
A
1
09
116
MIX
CHOICES:
yes
QN=48
A temporary decrease in government purchases causes the real interest rate
to ________ and the price level to ________ in general equilibrium.
rise; rise
rise; fall
fall; fall
fall; rise
C
1
09
yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=49
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=50
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=51
a.
b.
c.
d.
ANS:
PTS:
An increase in taxes (when Ricardian equivalence doesn't hold) causes the
real interest rate to ________ and the price level to ________ in general
equilibrium.
fall; fall
rise; fall
fall; rise
rise; rise
A
1
09
yes
A decrease in money supply causes the real interest rate to ________ and
output to ________ in the short run, before prices adjust to restore
equilibrium.
fall; rise
rise; fall
rise; rise
fall; fall
B
1
09
yes
An increase in money supply causes the real interest rate to ________ and
the price level to ________ in general equilibrium.
fall; fall
remain unchanged; rise
rise; rise
remain unchanged; fall
B
1
117
CHAPTER:
MIX
CHOICES:
09
yes
QN=52
A decrease in money supply causes the real interest rate to ________ and
the price level to ________ in general equilibrium.
remain unchanged; rise
rise; rise
fall; fall
remain unchanged; fall
D
1
09
yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=53
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=54
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=55
a.
b.
c.
d.
ANS:
PTS:
Classical economists think general equilibrium is attained relatively quickly
because
the level of output adjusts quickly.
the real wage rate adjusts quickly.
the real interest rate adjusts quickly.
the price level adjusts quickly.
D
1
09
yes
Keynesian economists think general equilibrium is not attained quickly
because
the real interest rate adjusts slowly.
the price level adjusts slowly.
the real wage rate adjusts slowly.
the level of output adjusts slowly.
B
1
09
yes
Keynesian economists believe that in the short run, money neutrality exists
and prices adjust rapidly.
money neutrality exists and prices adjust rapidly.
money neutrality does not exist and prices do not adjust rapidly.
money neutrality exists and prices do not adjust rapidly.
money neutrality does not exist and prices adjust rapidly.
B
1
118
CHAPTER:
MIX
CHOICES:
09
yes
QN=56
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Classical economists believe that in the short run,
money neutrality does not exist and prices adjust rapidly.
money neutrality does not exist and prices do not adjust rapidly.
money neutrality exists and prices adjust rapidly.
money neutrality exists and prices do not adjust rapidly.
C
1
09
yes
QN=57
Under monetary neutrality, an increase in the money supply causes output
to ________ and the price level to ________.
not change; not change
rise; not change
not change; rise
rise; rise
C
1
09
yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=58
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=59
a.
b.
c.
d.
ANS:
Under an assumption of monetary neutrality, a change in the nominal
money supply has
a proportionate effect on the price level.
a less than proportionate effect on the price level.
no effect on the price level.
a more than proportionate effect on the price level.
A
1
09
yes
The aggregate demand curve shows
the relation between the real interest rate and output when the goods market
clears.
the demand for goods depending on the relative price of goods compared to
financial assets.
the relation between the aggregate quantity of goods demanded and the
price level.
the amount of output that can be obtained given the current production
function in the economy.
C
119
PTS:
CHAPTER:
MIX
CHOICES:
1
09
yes
QN=60
The aggregate demand curve shows the combinations of output and the
price level that put the economy on
the FE line and the IS curve.
the FE line, the IS curve, and the LM curve.
the IS curve and the LM curve.
the IS curve.
C
1
09
yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=61
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The aggregate demand curve
is horizontal.
slopes upward.
slopes downward.
is vertical.
C
1
09
yes
QN=62
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Which of the following changes shifts the AD curve down and to the left?
A rise in the nominal money supply
A temporary increase in government purchases
A decrease in corporate taxes
A decrease in consumer confidence
D
1
09
yes
QN=63
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
Which of the following changes shifts the AD curve up and to the right?
An increase in income taxes
A rise in the nominal money supply
A decrease in the future marginal productivity of capital
An increase in the risk on nonmonetary assets
B
1
09
yes
120
CHOICES:
QN=64
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The aggregate supply curve shows the relation between
the inflation rate and the unemployment rate.
the supply of goods by firms and the price of goods relative to the price of
nonmonetary assets.
the real interest rate and the aggregate amount of output that firms supply.
the price level and the aggregate amount of output that firms supply.
D
1
09
yes
QN=65
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The short-run aggregate supply curve (in the absence of misperceptions)
slopes upward.
slopes downward.
is vertical.
is horizontal.
D
1
09
yes
QN=66
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The long-run aggregate supply curve
is vertical.
is horizontal.
slopes upward.
slopes downward.
A
1
09
yes
QN=67
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Which of the following changes shifts the SRAS curve up?
An increase in the money supply
An increase in firms' costs
An increase in the labor force
A decrease in government purchases
B
1
09
yes
QN=68
Which of the following changes shifts the long-run aggregate supply curve
121
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
to the right?
A decrease in the demand for labor
A decrease in taxes (assuming Ricardian equivalence doesn't hold)
An increase in consumer confidence
A demographic change that increases the labor supply
D
1
09
yes
QN=69
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Which of the following changes shifts the SRAS curve down?
An increase in the labor force
A decrease in firms' costs
A decrease in government purchases
An increase in the money supply
B
1
09
yes
QN=70
When the money supply rises by 10%, in the short run, output ________
and the price level ________.
declines; is unchanged
rises; is unchanged
declines; falls
is unchanged; falls
B
1
09
yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=71
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=1
When the money supply declines by 10%, in the long run, output ________
and the price level ________.
is unchanged; is unchanged
declines; is unchanged
declines; falls
is unchanged; falls
D
1
09
yes
The origin of the idea of a trade-off between inflation and unemployment
was a 1958 article by
122
a.
b.
c.
d.
dman.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Robert Gordon.
Edmund
A.W. Phillips.
QN=2
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Phillips's research looked at British data on
unemployment and inflation.
unemployment and output.
inflation and nominal wage growth.
unemployment and nominal wage growth.
D
1
12
Yes
QN=3
The negative relationship between unemployment and inflation is known as
the
Phillips curve.
aggregate supply curve.
aggregate demand curve.
efficiency wage line.
A
1
12
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
C
1
12
Yes
QN=4
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The Phillips curve appeared to fit the data well for the United States in the
1980s.
1990s.
1960s.
1970s.
C
1
12
Yes
QN=5
Friedman and Phelps suggested that there should not be a stable relationship
between inflation and unemployment, but there should be a stable
relationship between
123
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
anticipated inflation and cyclical unemployment.
unanticipated inflation and frictional unemployment.
anticipated inflation and frictional unemployment.
unanticipated inflation and cyclical unemployment.
D
1
12
Yes
QN=6
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Milton Friedman and Edmund Phelps questioned
the existence of a full-employment level of output.
the existence of a natural rate of unemployment.
the use of expectations in the Phillips curve.
the stability of the relationship between inflation and unemployment.
D
1
12
Yes
QN=7
In the extended classical model, an anticipated decrease in the money
supply would cause output to ________ and the price level to ________ in
the short run.
remain unchanged; decrease
remain unchanged; increase
increase; decrease
increase; remain unchanged
A
1
12
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=8
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=9
In the extended classical model, an unanticipated increase in the money
supply would cause output to ________ and the price level to ________ in
the short run.
decrease; remain unchanged
remain unchanged; increase
increase; increase
decrease; decrease
C
1
12
Yes
In the extended classical model, an unexpected decrease in aggregate
demand would cause unanticipated inflation to be ________ and cyclical
124
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=10
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=11
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=12
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=13
unemployment to be ________.
negative; negative
positive; negative
negative; positive
positive; positive
C
1
12
Yes
In the expectations-augmented Phillips curve, pi = pi(e) – 3(u –u(bar)). If pi
= 0.03 when pi(e) = 0.06 and u = 0.06, then u(bar) =
0.03.
0.04.
0.02.
0.05.
D
1
12
Yes
In the expectations-augmented Phillips curve, pi = pi(e) – 3(u –u(bar)). If pi
= 0.06 when pi(e) = 0.06 and u = 0.04, then u(bar) =
0.04.
0.05.
0.03.
0.02.
A
1
12
Yes
In the expectations-augmented Phillips curve, pi = pi(e) – 3(u – u(bar)). If pi
= 0.09 when pi(e) = 0.06 and u = 0.06, then u(bar) =
0.07.
0.08.
0.05.
0.06.
A
1
12
Yes
In the expectations-augmented Phillips curve, pi = pi(e) - 3(u – 0.06). When
125
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=14
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=15
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=16
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=17
pi = 0.06 and pi(e) = 0.03, the unemployment rate is
0.05.
0.06.
0.07.
0.04.
A
1
12
Yes
In the expectations-augmented Phillips curve, pi = pi(e) -3(u – 0.05). When
pi = 0.06 and pi(e) = 0.03, the unemployment rate is
0.04.
0.07.
0.06.
0.05.
A
1
12
Yes
In the expectations-augmented Phillips curve, pi = pi(e) – 3(u – 0.05). When
pi = 0.03 and pi(e) = 0.06, the unemployment rate is
0.05.
0.06.
0.04.
0.07.
B
1
12
Yes
The Phillips curve is the relation between inflation and unemployment that
holds for a given natural rate of unemployment and a
given level of unemployment.
given expected level of unemployment.
given expected rate of inflation.
given rate of inflation.
C
1
12
Yes
Suppose most people had anticipated that inflation would be 3% in the
126
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
coming year because the Fed would increase the money supply by 3%.
Instead, the Fed increases the money supply by 5%. In the short run, this
would cause actual output to be ________ full-employment output and
prices to increase by ________ 3%.
above; less than
below; more than
below; less than
above; more than
D
1
12
Yes
QN=18
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
An increase in the expected rate of inflation would
shift the Phillips curve upward.
shift the long-run Phillips curve to the left.
shift the long-run Phillips curve to the right.
shift the Phillips curve downward.
A
1
12
Yes
QN=19
If the expected inflation rate is unchanged, a fall in the natural rate of
unemployment would
shift the Phillips curve to the right.
not shift the Phillips curve.
shift the Phillips curve to the left and shift the long-run Phillips curve to the
right.
shift the Phillips curve to the left.
D
1
12
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=20
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
If the expected rate of inflation rose at the same time the natural rate of
unemployment rose, the Phillips curve
might shift up or down or not move, depending on which effect was larger.
would shift up.
would not move.
would shift down.
B
1
12
Yes
127
QN=21
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A beneficial supply shock would cause
the short-run Phillips curve to shift upward and to the right.
a movement down the short-run Phillips curve.
a movement up the short-run Phillips curve.
the short-run Phillips curve to shift downward and to the left.
D
1
12
Yes
QN=22
a.
Classicals argue that an adverse supply shock would
raise both the natural rate of unemployment and the actual rate of
unemployment.
raise the natural rate of unemployment, but not the actual rate of
unemployment.
raise neither the natural rate of unemployment nor the actual rate of
unemployment.
raise the actual rate of unemployment, but not the natural rate of
unemployment.
A
1
12
Yes
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=23
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=24
Historically, Brazil has suffered higher and more variable rates of inflation
than Venezuela. You would expect the short-run aggregate supply curve of
Brazil to be ________ than that of Venezuela, and the Phillips curve of
Brazil to be ________ than that of Venezuela.
steeper; flatter
flatter; flatter
steeper; steeper
flatter; steeper
C
1
12
Yes
The Friedman-Phelps analysis shows that a negative relationship between
inflation and unemployment holds
128
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=25
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=26
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=27
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
even when the natural rate of unemployment changes.
even if both the expected inflation rate and the natural rate of
unemployment change.
even when expected inflation changes.
as long as the expected inflation rate and the natural rate of unemployment
are approximately constant.
D
1
12
Yes
Examining data on cyclical unemployment plotted against unanticipated
inflation shows
a positive relationship.
a relationship only during the 1960s.
no significant relationship.
a negative relationship.
D
1
12
Yes
The Friedman-Phelps analysis suggests that there is a long-term relationship
between
inflation and unemployment.
anticipated inflation and structural unemployment.
unanticipated inflation and cyclical unemployment.
cyclical inflation and structural unemployment.
C
1
12
Yes
Both classicals and Keynesians agree that policymakers
cannot exploit the Phillips curve in the short run.
cannot keep the unemployment rate permanently below the natural rate by
permanently running a high rate of inflation.
can exploit the Phillips curve in the short run.
can keep the unemployment rate permanently below the natural rate by
permanently running a high rate of inflation.
B
1
12
Yes
129
QN=28
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=29
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The Lucas critique is an objection to the assumption that
historical relationships between macroeconomic variables will continue to
hold after new policies are in place.
there is a negative relationship between inflation and unemployment.
people form expectations rationally.
inflation is always and everywhere a monetary phenomenon.
A
1
12
Yes
The argument that when policy changes, people's behavior changes so that
historical relationships between macroeconomic variables will no longer
hold is known as
hysteresis.
the policy irrelevance hypothesis.
the Phillips curve.
the Lucas critique.
D
1
12
Yes
QN=30
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The long-run Phillips curve is
downward sloping.
vertical.
upward sloping.
horizontal.
B
1
12
Yes
QN=31
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The fact that the long-run Phillips curve is vertical implies that
monetary policy can't affect unemployment.
money is neutral in the long run.
money can't affect inflation in the long run.
there is a natural rate of inflation.
B
1
12
Yes
QN=32
When the economy goes into a recession, there's an increase in
130
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
cyclical unemployment.
structural unemployment.
voluntary unemployment.
frictional unemployment.
A
1
12
Yes
QN=33
According to Okun's law, if full-employment output is $5,000 billion, then
each percentage point of unemployment sustained for one year reduces
output by
$100 billion
$50 billion
$150 billion
$200 billion
A
1
12
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=34
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=35
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
Some economists argue that Okun's Law overstates the cost of cyclical
unemployment because
if efficiency wages prevail, and workers are paid their real wage, already
employed workers will reduce their effort, reducing output.
the cost of retraining workers must be offset against the loss in output that
occurs when workers are unemployed.
it ignores the loss of government revenue and additional government
expenditures that occur when unemployment rises.
it ignores the fact that leisure increases during a recession.
D
1
12
Yes
A difficulty faced by policymakers who wish to use the unemployment rate
as a guide to whether the economy is weak or strong is that
the impact of policy on the economy is subject to long and variable lags.
policymakers must use data on output to tell whether the unemployment rate
is too high or too low.
the natural rate of unemployment is hard to measure.
the natural rate of unemployment almost never changes.
C
1
12
Yes
131
CHOICES:
QN=36
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Because the natural rate of unemployment is not known precisely,
policymakers who use it as a guide for policy must be
more aggressive with policy changes than they would be if they knew the
value of the natural rate.
aware of other data.
less aggressive with policy changes than they would be if they knew the
value of the natural rate.
ready to change policy more quickly.
C
1
12
Yes
QN=37
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
One cost of a perfectly anticipated inflation is that it
transfers wealth from lenders to borrowers.
increases menu costs.
transfers wealth from borrowers to lenders.
damages the role of prices as signals in the economy.
B
1
12
Yes
QN=38
The costs in time and effort incurred by people and firms who are trying to
minimize their holdings of cash because of inflation are called
imperfect competition costs.
shoe leather costs.
menu costs.
transactions costs.
B
1
12
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=39
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
Shoe leather costs are
the costs of changing prices, such as printing and mailing catalogues.
the costs associated with the confusion of prices as signals.
the costs of the redistribution of wealth between lenders and borrowers.
the costs in time and effort incurred by people and firms who are trying to
minimize their holdings of cash because of inflation.
D
1
12
132
MIX
CHOICES:
Yes
QN=40
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
When actual inflation is greater than expected inflation
unemployment falls, according to Phillips-curve analysis.
there are transfers from lenders to borrowers.
there are transfers from borrowers to lenders.
cyclical unemployment falls, according to Phillips-curve analysis.
B
1
12
Yes
QN=41
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
One cost of an unanticipated inflation is that it
increases the purchasing power of money.
transfers wealth from lenders to borrowers.
transfers wealth from borrowers to lenders.
decreases menu costs.
B
1
12
Yes
QN=42
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A COLA is
a center of labor activity.
a crisis of labor analysis.
a cost of living adjustment.
a contract on long-term assets.
C
1
12
Yes
QN=43
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Hyperinflation occurs when
the inflation rate is extremely high.
the inflation rate is extremely low.
the inflation rate declines.
the inflation rate rises.
A
1
12
Yes
QN=44
The reduction of the inflation rate is called
133
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
reflation.
deflation.
unflation.
disinflation.
D
1
12
Yes
QN=45
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The costs of disinflation would be low if
expected inflation falls as inflation falls.
the Phillips curve were nearly horizontal.
wage and price controls were used.
the Phillips curve adjusted slowly to changes in inflation.
A
1
12
Yes
QN=46
A rapid and decisive reduction in the rate of growth of the money supply for
the purpose of disinflation is called
a cold shower policy.
a cold turkey policy.
gradualism.
a salt water policy.
B
1
12
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=47
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Keynesians prefer a disinflation policy of
gradualism.
aggregate demand management.
cold turkey.
stabilization.
A
1
12
Yes
QN=48
The sacrifice ratio is
134
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=49
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=50
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=51
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
the percentage reduction in inflation when output falls one percentage point
below potential.
the amount of output lost when the inflation rate is reduced by one
percentage point.
the number of percentage points that the unemployment rate rises when
output declines by one percentage point.
the percentage change in employment when output declines by one
percentage point.
B
1
12
Yes
The amount of output lost when the inflation rate is reduced by one
percentage point is called
the sacrifice ratio.
Okun's law.
the Solow residual.
Planck's constant.
A
1
12
Yes
Ball's research showed that the sacrifice ratio
varied considerably across countries.
was the same for all countries.
was about 10 for all countries except the United States, where it was about
2.
was nearly zero for most countries.
A
1
12
Yes
Ball found that an important factor affecting the sacrifice ratio is
the real interest rate.
the shape of the yield curve.
the tightness of fiscal policy.
the flexibility of the labor market.
D
1
12
Yes
135
QN=52
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=53
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=54
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=55
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
Countries in which wages adjust slowly to changes in the supply of and
demand for labor are likely to have ________ sacrifice ratio.
a low
a zero
a high
an infinite
C
1
12
Yes
Countries in which wages adjust rapidly to changes in the supply and
demand for labor are likely to have ________ sacrifice ratio.
a low
a negative
an infinite
a high
A
1
12
Yes
Countries in which the government does not regulate the labor market are
likely to have ________ sacrifice ratio.
a negative
a low
an infinite
a high
B
1
12
Yes
Ball's research on disinflation across different countries found that
costs of disinflation were smaller for rapid disinflation than for gradual
disinflation.
costs of disinflation were about the same for both rapid and gradual
disinflation.
costs of disinflation were larger for rapid disinflation than for gradual
disinflation.
costs of disinflation were smaller when the central bank had a strong
inflation-fighting reputation.
A
1
12
Yes
136
CHOICES:
QN=56
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=57
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
If a rapid disinflation has a lower sacrifice ratio than a slow disinflation,
then reducing inflation is best accomplished by
a cold-turkey approach.
gradualism.
reducing interest rates.
increasing money growth.
A
1
12
Yes
The main determinant of how quickly expected inflation adjusts to changes
in monetary policy is
the credibility of the central bank.
the slope of the Phillips curve.
the degree of indexation in the economy.
the slope of the short-run aggregate supply curve.
A
1
12
Yes
QN=1
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The price of one currency in terms of another is called
purchasing power parity.
the exchange rate.
a currency band.
the terms of trade.
B
1
13
Yes
QN=2
An exchange-rate system in which the nominal exchange rate is set by the
government is known as
a floating-exchange-rate system.
an exchange-rate union.
a fixed-exchange-rate system.
a flexible-exchange-rate system.
C
1
13
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
137
QN=3
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The Bretton Woods system relied on
a fixed-exchange-rate system.
a floating-exchange-rate system.
a flexible-exchange-rate system.
an exchange-rate union.
A
1
13
Yes
QN=4
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The real exchange rate is
the quantity of gold that can be purchased by one unit of currency.
the price of domestic goods relative to foreign goods.
the difference in interest rates between two countries.
the price of one currency in terms of another.
B
1
13
Yes
QN=5
When the domestic currency strengthens under a fixed-exchange-rate
system, this is called
a devaluation.
a depreciation.
an appreciation.
a revaluation.
D
1
13
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=6
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Three-wheel cars made in North Edsel are sold for 5000 pounds. Fourwheel cars made in South Edsel are sold for 10,000 marks. The real
exchange rate between North and South Edsel is four three-wheel cars for
three four-wheel cars. The nominal exchange rate between the two countries
is
2.00 marks/pound.
0.66 marks/pound.
1.50 marks/pound.
0.50 marks/pound.
C
1
13
Yes
138
QN=7
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Three-wheel cars made in North Edsel are sold for 5000 pounds. Fourwheel cars made in South Edsel are sold for 10,000 marks. The nominal
exchange rate between the two countries is three marks per pound. The real
exchange rate between the two countries is
0.50 three-wheel cars per four-wheel car.
2.00 three-wheel cars per four-wheel car.
1.50 three-wheel cars per four-wheel car.
0.66 three-wheel cars per four-wheel car.
D
1
13
Yes
QN=8
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
When the domestic currency buys fewer units of foreign currency, the
real exchange rate falls.
real exchange rate rises.
nominal exchange rate falls.
nominal exchange rate rises.
C
1
13
Yes
QN=9
a.
When the nominal exchange rate falls,
the domestic currency buys fewer units of foreign currency and the
domestic currency has appreciated.
the domestic currency buys more units of foreign currency and the domestic
currency has depreciated.
the domestic currency buys more units of foreign currency and the domestic
currency has appreciated.
the domestic currency buys fewer units of foreign currency and the
domestic currency has depreciated.
D
1
13
Yes
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=10
From 1980 to 2000, the yen/dollar exchange rate fell from 240 yen/dollar to
102 yen/dollar, while the dollar/pound exchange rate fell from 2.22
dollars/pound to 1.62 dollars/pound. As a result,
139
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
the dollar appreciated relative to both the yen and the pound.
the dollar appreciated relative to the yen, but depreciated relative to the
pound.
the dollar depreciated relative to the yen, but appreciated relative to the
pound.
the dollar depreciated relative to both the yen and the pound.
C
1
13
Yes
QN=11
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
When the nominal exchange rate in terms of dollars per yen rises,
the dollar buys more yen and the dollar has appreciated.
the dollar buys fewer yen and the dollar has appreciated.
the dollar buys more yen and the dollar has depreciated.
the dollar buys fewer yen and the dollar has depreciated.
D
1
13
Yes
QN=12
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A rise in the real exchange rate is called
a real depreciation.
a real bargain.
a real devaluation.
a real appreciation.
D
1
13
Yes
QN=13
For a given real exchange rate, a nominal appreciation of the domestic
currency will result from
an increase in the domestic rate of inflation.
an increase in the price of the domestic good.
an increase in the price of the foreign good.
a decline in the terms of trade.
C
1
13
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=14
If the real exchange rate rises 2%, domestic inflation is 3%, and foreign
inflation is 1%, what is the approximate percent change in the nominal
exchange rate?
140
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
4%
2%
6%
0%
D
1
13
Yes
QN=15
If the real exchange rate rises 4%, domestic inflation is 2%, and foreign
inflation is 0%, what is the approximate percent change in the nominal
exchange rate?
4%
0%
2%
6%
C
1
13
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=16
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=17
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
If the nominal exchange rate rises 5%, domestic inflation is 2%, and foreign
inflation is 3%, what is the approximate percent change in the real exchange
rate?
4%
8%
2%
6%
A
1
13
Yes
If all countries produce the same good (or the same set of goods) and goods
are freely traded among countries, so that the real exchange rate equals one,
then the relationship between domestic and foreign prices and the nominal
exchange rate is
P = P(For)/e(nom).
P = P(For).
e(nom) = P*P(For).
P = e(nom)/P(For).
A
1
13
Yes
141
QN=18
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The idea that similar foreign and domestic goods, or baskets of goods,
should have the same price when priced in terms of the same currency is
called
efficiency.
purchasing power parity.
the tragedy of the commons.
equity.
B
1
13
Yes
QN=19
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Purchasing power parity means that
e(nom) =mc^2.
P = P(For).
e(nom) = P(For)/P.
P = e(nom)/P(For).
C
1
13
Yes
QN=20
Empirical evidence shows that in the short run, purchasing power parity
________, and in the long run, purchasing power parity ________.
does not hold; holds
holds; holds
holds; does not hold
does not hold; does not hold
A
1
13
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=21
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Purchasing power parity does not hold in the short to medium run because
exports don't equal imports.
exchange rates fluctuate too much.
countries produce different goods.
most business cycles are caused by shocks to aggregate demand.
C
1
13
Yes
142
QN=22
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Purchasing power parity does not hold in the short to medium run because
some goods aren't internationally traded.
exchange rates fluctuate too much.
exports don't equal imports.
most business cycles are caused by shocks to aggregate demand.
A
1
13
Yes
QN=23
Suppose purchasing power parity holds. If the price level in the United
States is 100 dollars per good and the price level in Japan is 250 yen per
good, then the nominal exchange rate is ________ yen per dollar.
4.0
2.5
0.25
0.4
B
1
13
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=24
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=25
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Suppose purchasing power parity holds. If in 1997 the price level in the
United States is 100, the price level in Japan is 10,000, and the nominal
exchange rate is 100 yen per dollar, while in 1998 the price level in Japan
rises to 10,500 and the nominal exchange rate rises to 105, then the price
level in the United States in 1998 must be
105.
110.25.
100.
95.
C
1
13
Yes
Relative purchasing power parity occurs when
purchasing power parity holds between every two countries.
the real exchange rate is constant.
the nominal exchange rate is constant.
purchasing power parity only holds in recessions.
B
1
13
Yes
143
QN=26
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=27
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
When the rate of appreciation of the nominal exchange rate equals the
foreign inflation rate minus the domestic inflation rate, we say there is
purchasing power parity.
relative purchasing power parity.
a Phillips curve.
an aggregate supply shock.
B
1
13
Yes
When the dollar rises relative to other currencies,
U.S. goods become more expensive to foreigners.
foreign currency is more expensive in the United States, but foreign goods
are cheaper.
foreign currency is more expensive in terms of dollars.
foreign goods are more expensive in terms of dollars.
A
1
13
Yes
QN=28
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
When the British pound rises in value relative to other currencies, then
British exports rise in price.
goods imported into Britain rise in price.
both British exports and imports rise in price.
neither British exports nor imports rise in price.
A
1
13
Yes
QN=29
Suppose the euro/yen exchange rate falls while the dollar/yen exchange rate
rises. What happens to the price of goods imported into Japan?
Both European and U.S. goods become cheaper.
European goods become cheaper while U.S. goods become more expensive.
European goods become more expensive while U.S. goods become cheaper.
Both European and U.S. goods become more expensive.
B
1
13
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
144
QN=30
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Suppose the Swiss franc rises against the British pound but falls against the
Japanese yen. What happens to the prices of goods imported into
Switzerland?
British goods rise in price while Japanese goods fall in price.
Both British and Japanese goods rise in price.
British goods fall in price while Japanese goods rise in price.
Both British and Japanese goods fall in price .
C
1
13
Yes
QN=31
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A depreciation of the dollar causes
a decrease in U.S. exports.
an increase in the prices of U.S. exports.
an increase in the prices of U.S. imports.
an increase in U.S. imports.
C
1
13
Yes
QN=32
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
When the euro falls in value relative to other currencies, then
goods imported into Europe rise in price.
European exports rise in price.
both European exports and imports rise in price.
neither European exports nor imports rise in price.
A
1
13
Yes
QN=33
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Suppose the dollar/euro exchange rate falls. Then
the euro is more valuable relative to the dollar.
French firms will import more from the United States into France.
the dollar is less valuable relative to the euro.
U.S. firms will export less to France.
D
1
13
Yes
QN=34
There's been a real depreciation of the dollar over the past month. In the
long run, you would expect the quantity of
145
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
American imports to fall and the quantity of American exports to fall.
American imports to rise and the quantity of American exports to rise.
American imports to rise and the quantity of American exports to fall.
American imports to fall and the quantity of American exports to rise.
D
1
13
Yes
QN=35
a.
b.
The J curve implies that a real depreciation will cause
net exports to fall in the short run and rise in the long run.
the nominal exchange rate to appreciate in the short run and depreciate in
the long run.
the nominal exchange rate to depreciate in the short run and appreciate in
the long run.
net exports to rise in the short run and fall in the long run.
A
1
13
Yes
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=36
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=37
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
According to the "beachhead effect," in order to undo the effects of a
strong-dollar period, the real value of the dollar
must fall to at least half of its value before appreciation of the dollar began.
must fall to a much lower level than it had before appreciation of the dollar
began.
must fall to the value it had before appreciation of the dollar began.
must actually appreciate before it depreciates to undo the effects of a strongdollar period.
B
1
13
Yes
Under a flexible-exchange-rate system, an increase in the demand for
Japanese yen would cause the U.S. dollar/Japanese yen exchange rate to
remain unchanged, because supply also increases.
fall.
remain unchanged, because the exchange rate is set by the central bank.
rise.
D
1
13
Yes
146
QN=38
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
In a flexible-exchange-rate system, the value of a currency is determined by
Swiss gnomes.
the demand and supply for the currency in the foreign exchange market.
the government.
the intersection of the IS and LM curves.
B
1
13
Yes
QN=39
An increase in domestic output would cause a ________ in net exports and
a ________ in the exchange rate.
rise; fall
fall; fall
fall; rise
rise; rise
B
1
13
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=40
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=41
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A rise in the domestic real interest rate would cause a ________ in net
exports and a ________ in the exchange rate.
fall; fall
rise; fall
fall; rise
rise; rise
C
1
13
Yes
Which of the following changes would cause American net exports to
increase?
A shift in demand by American consumers away from domestically
produced goods
An increase in the real value of the dollar
An increase in foreign income
An increase in American income
C
1
13
Yes
147
QN=42
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=43
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=44
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=45
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Which of the following changes would cause American net exports to
decrease?
A decrease in the real value of the dollar
A decrease in American income
A shift in demand by American consumers away from domestically
produced goods
An increase in foreign income
C
1
13
Yes
The U.S. real interest rate rises relative to the British real interest rate.
British net exports ________ and the British exchange rate ________.
increase; rises
decrease; falls
increase; falls
decrease; rises
C
1
13
Yes
The Japanese real interest rate declines relative to the German real interest
rate. German net exports ________ and the German exchange rate
________.
decrease; falls
increase; falls
decrease; rises
increase; rises
C
1
13
Yes
Goods market equilibrium in the open economy occurs when
desired consumption equals desired investment.
desired saving minus desired investment equals net exports.
desired saving equals desired investment.
output equals desired consumption plus desired investment plus government
spending.
B
1
13
Yes
148
QN=46
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=47
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=48
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=49
a.
b.
c.
d.
ANS:
PTS:
In an open economy, a decrease in net exports because of reduced demand
for domestic products by foreigners should cause the domestic real interest
rate to ________ and should cause desired saving minus desired investment
to ________.
fall; fall
fall; rise
rise; fall
rise; rise
A
1
13
Yes
A decrease in foreign output would cause the domestic country's net exports
to ________ and cause the domestic country's IS curve to ________.
fall; shift down
rise; shift down
fall; shift up
rise; shift up
A
1
13
Yes
An increase in foreign output would cause the domestic country's net
exports to ________ and cause the domestic country's IS curve to
________.
rise; shift up
fall; shift down
rise; shift down
fall; shift up
A
1
13
Yes
A decrease in the foreign real interest rate would cause the domestic
country's net exports to ________ and cause the domestic country's IS curve
to ________.
fall; shift up
fall; shift down
rise; shift up
rise; shift down
B
1
149
CHAPTER:
MIX
CHOICES:
13
Yes
QN=50
A shift in demand toward the home country's goods would ________ the
domestic real interest rate and ________ net desired saving (desired saving
less desired investment) in the economy.
lower; decrease
lower; increase
raise; decrease
raise; increase
D
1
13
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=51
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=52
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=53
In the Keynesian model of an open economy, a temporary decrease in
government purchases would ________ the domestic real interest rate and
________ net desired saving (desired saving less desired investment) in the
economy.
lower; decrease
lower; increase
raise; decrease
raise; increase
B
1
13
Yes
A temporary increase in government purchases would ________ the
domestic real interest rate and ________ net desired saving (desired saving
less desired investment) in the economy.
raise; decrease
lower; increase
raise; increase
lower; decrease
A
1
13
Yes
A temporary decrease in government purchases would ________ the
domestic real interest rate and ________ net desired saving (desired saving
less desired investment) in the economy.
150
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
raise; decrease
lower; decrease
raise; increase
lower; increase
D
1
13
Yes
QN=54
In a Keynesian model, a temporary increase in government purchases would
cause output to ________ and the domestic real interest rate to ________, in
the short run.
increase; increase
remain unchanged; increase
remain unchanged; decrease
increase; decrease
A
1
13
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=55
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=56
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
In the short run in the Keynesian model, an increase in the domestic money
supply would cause domestic output to ________ and the domestic real
interest rate to ________.
rise; rise
fall; fall
fall; rise
rise; fall
D
1
13
Yes
An increase in the U.S. money supply would cause the value of the dollar to
________ and U.S. net exports to ________ in the short run using a
Keynesian model.
fall; rise
rise; rise
fall; fall
rise; fall
C
1
13
Yes
151
QN=57
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=58
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=59
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=60
a.
b.
c.
d.
ANS:
The Federal Reserve has just purchased bonds in the market, carrying out
open market operations. In the short run in the Keynesian model, this would
cause the foreign real interest rate to ________ and foreign output to
________.
increase; increase
decrease; decrease
decrease; increase
increase; decrease
A
1
13
Yes
According to the classical model, an increase in the American nominal
money supply would cause the nominal exchange rate to ________ and the
real exchange rate to ________.
depreciate; remain unchanged.
appreciate; depreciate
appreciate; remain unchanged
depreciate; appreciate
A
1
13
Yes
Suppose Japan is currently running a current account surplus. The most
effective way of eliminating this current account surplus would be to
temporarily ________ government purchases and ________ the domestic
money supply, where the exchange rate effect plays a little role.
increase; decrease
increase; increase
decrease; decrease
decrease; increase
B
1
13
Yes
You have just noticed that the dollar appreciated and you suspect that the
American government was behind this change. Which would you choose as
the most likely cause of this appreciation in the real exchange rate?
A temporary increase in government purchases
A temporary decrease in taxes
An increase in the money supply
A decrease in the money supply
D
152
PTS:
CHAPTER:
MIX
CHOICES:
1
13
Yes
QN=61
To encourage more investment, Mexico has lowered its tax rates to reduce
the user cost of capital. Argentina is unable to pay back its foreign debts,
causing its expected future marginal product of capital to fall. Mexico's real
exchange rate will ________ and its net exports will ________.
depreciate; rise
appreciate; fall
depreciate; fall
appreciate; rise
B
1
13
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=62
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=63
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=64
a.
b.
c.
d.
ANS:
Under a system of fixed exchange rates, what happens if a country's
currency is overvalued?
The central bank loses official reserve assets.
The currency appreciates.
The central bank gains official reserve assets.
The exchange rate rises.
A
1
13
Yes
Under a system of fixed exchange rates, what happens if a country's
currency is undervalued?
The central bank loses official reserve assets.
The exchange rate falls.
The central bank gains official reserve assets.
The currency depreciates.
C
1
13
Yes
If a country has an overvaluation problem, the best solution is to
increase the official rate.
sell more of its currency in the foreign exchange market.
decrease the money supply.
buy less of its currency in the foreign exchange market.
C
153
PTS:
CHAPTER:
MIX
CHOICES:
1
13
Yes
QN=65
a.
b.
c.
International businesses like a fixed-exchange-rate system because
fixed exchange rates are economically efficient.
they can plan better if they know what the exchange rate will be.
they like large swings in currency values when devaluation or revaluation
occur.
they profit by speculating on devaluation or revaluation.
B
1
13
Yes
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=66
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=67
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=68
a.
b.
c.
d.
ANS:
PTS:
When a group of countries agree to share a common currency, they are said
to have formed a
welfare state.
currency union.
monetary cartel.
monetary alliance.
B
1
13
Yes
The currency created by the European Monetary Union, for which notes and
coins became available in 2002, is the
pound.
ECU.
EMU.
euro.
D
1
13
Yes
Currency unions are rare because
they're to no one's advantage.
having flexible exchange rates has the same benefits and none of the costs.
speculative attacks are likely to occur.
countries are reluctant to give up having their own currencies.
D
1
154
CHAPTER:
MIX
CHOICES:
13
Yes
QN=69
Compared to a system of fixed exchange rates, currency unions are
beneficial because they
allow exchange rates to float.
allow every country to have an independent monetary policy.
restrict what countries can do with fiscal policy.
reduce the costs of trading goods and assets.
D
1
13
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=70
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Compared with a system of fixed exchange rates, currency unions are
beneficial because they
eliminate the possibility of speculative attacks.
allow every country to have an independent monetary policy.
restrict what countries can do with fiscal policy.
allow exchange rates to float.
A
1
13
Yes
QN=71
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Monetary policy in the European Monetary Union is determined by
the Bundesbank.
the European Union Senate.
the European Central Bank.
None of the above.
C
1
13
No
QN=72
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
The Maastricht treaty was the first step toward
European monetary union.
having free trade between Russia and China.
gaining credibility for monetary policy.
reducing the costs of disinflation.
A
1
13
Yes
155
CHOICES:
QN=1
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Which of the following are depository institutions?
The U.S. Treasury and the IRS
The Federal Reserve Banks of New York and Chicago
Investment banks and finance companies
Banks and thrifts
D
1
14
Yes
QN=2
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The monetary base is defined as
bank reserves minus vault cash.
bank reserves plus currency held by the nonbank public.
all deposits at the Fed.
deposits at the Fed plus vault cash.
B
1
14
Yes
QN=3
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
High-powered money consists of
deposits at the Fed plus vault cash.
bank reserves plus currency held by the nonbank public.
all deposits at the Fed.
bank reserves minus vault cash.
B
1
14
Yes
QN=4
Vault cash is equal to $2 million, deposits by depository institutions at the
central bank are $1 million, the monetary base is $15 million, and bank
deposits are $35 million. Currency held by the nonbank public is
$15 million.
$12 million.
$20 million.
$3 million.
B
1
14
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
156
QN=5
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Vault cash is equal to $2 million, deposits by depository institutions at the
central bank are $1 million, the monetary base is $15 million, and bank
deposits are $30 million. Bank reserves are equal to
$5 million.
$10 million.
$3 million.
$2 million.
C
1
14
Yes
QN=6
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Fractional reserve banking is the system that
limits banks' activities from crossing state lines.
allows banks to keep smaller reserves than their deposits.
allows banks not to insure their deposits.
allows banks not to join the Federal Reserve System.
B
1
14
Yes
QN=7
a.
b.
c.
Banks hold some deposits on reserve at the Fed because
these deposits meet the reserve requirements of the Fed.
these are membership dues for being a member bank.
the Fed requires every bank to hold at least $100 million on deposit at all
times.
the Fed will insure those deposits, but will not insure regular bank deposits.
A
1
14
Yes
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=8
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The currency-deposit ratio is determined by
banks.
the Federal Reserve.
the public.
Congress.
C
1
14
Yes
157
QN=9
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=10
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=11
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=12
a.
b.
c.
d.
ANS:
In a fractional reserve banking system with no currency where res is the
ratio of reserves to deposits, the money multiplier is
res^2
1 - res.
1/res.
1 + res.
C
1
14
Yes
Assume that the currency-deposit ratio is 0.2 and the reserve-deposit ratio is
0.1. The Federal Reserve carries out open-market operations, purchasing $1
million worth of bonds from banks. This action will increase the money
supply by
$3 million.
$1 million.
$4 million.
$2 million.
C
1
14
Yes
Assume that the reserve-deposit ratio is 0.2. The Federal Reserve carries out
open-market operations, purchasing $1,000,000 worth of bonds from banks.
This action increased the money supply by $2,600,000. What is the
currency-deposit ratio?
0.3
0.5
0.4
0.2
A
1
14
Yes
Assume that the reserve-deposit ratio is 0.4. The Federal Reserve carries out
open-market operations, purchasing $1,000,000 worth of bonds from banks.
This action increased the money supply by $1,750,000. What is the
currency-deposit ratio?
0.2
0.3
0.5
0.4
D
158
PTS:
CHAPTER:
MIX
CHOICES:
1
14
Yes
QN=13
Assume that the currency-deposit ratio is 0.5. The Federal Reserve carries
out open-market operations, purchasing $1 million worth of bonds from
banks. This action increased the money supply by $2 million. What is the
reserve-deposit ratio?
0.35
0.50
0.25
0.40
C
1
14
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=14
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=15
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=16
Assume that the currency-deposit ratio is 0.3 and the reserve-deposit ratio is
0.2. What is the money multiplier?
1.5
5.0
2.6
2.0
C
1
14
Yes
Suppose there was a banking crisis. The money supply would shrink by the
greatest amount if the public ________ their currency-deposit ratio and the
banks ________ their reserve-deposit ratio.
decreased; decreased
increased; increased
increased; decreased
decreased; increased
B
1
14
Yes
Suppose the Federal Reserve wanted to reduce the money supply without
using open-market operations. It could try to get the public to ________
their currency-deposit ratio and ________ banks' reserve requirements,
which would in turn change the banks' reserve-deposit ratio.
159
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
increase; lower
decrease; lower
decrease; raise
increase; raise
D
1
14
Yes
QN=17
The money supply is $10 million, currency held by the nonbank public is $2
million, and the reserve-deposit ratio is 0.2. Bank reserves are equal to
$2 million.
$1.6 million.
$4 million.
$8 million.
B
1
14
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=18
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=19
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=20
The money supply is $10 million, currency held by the nonbank public is $2
million, and the reserve-deposit ratio is 0.2. Bank deposits are equal to
$4 million.
$2 million.
$8 million.
$1.6 million.
C
1
14
Yes
The money supply is $6 million, currency held by the nonbank public is $2
million, and the reserve-deposit ratio is 0.1. The monetary base is equal to
$2.6 million.
$2.4 million.
$2.0 million.
$4.0 million.
B
1
14
Yes
Vault cash is equal to $8 million, deposits by depository institutions at the
central bank are $2 million, the monetary base is $40 million, and bank
deposits are $90 million. The money multiplier is equal to
160
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
4.0.
3.0.
5.0.
2.5.
B
1
14
Yes
QN=21
Vault cash is equal to $8 million, deposits by depository institutions at the
central bank are $2 million, the monetary base is $30 million, and bank
deposits are $100 million. The money multiplier is equal to
4.0.
2.5.
3.0.
5.0.
A
1
14
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=22
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=23
Suppose that in Mysore, the reserve-deposit ratio is
res = 0.5 - 2 i,
where i is the nominal interest rate. The currency-deposit ratio is 0.2 and the
monetary base equals 100. The real quantity of money demanded is given
by the money demand function
L(Y, i) = 0.5Y - 10i,
where Y is real output. Currently, the real interest rate is 5% and the
economy expects an inflation rate of 5%. The money multiplier equals
4.00.
2.40.
3.00.
2.00.
B
1
14
Yes
Suppose that in Mysore, the reserve-deposit ratio is
res = 0.5 - 2i,
where i is the nominal interest rate. The currency-deposit ratio is 0.2 and the
monetary base equals 100. The real quantity of money demanded is given
by the money demand function
L(Y, i) = 0.5Y - 10i,
where Y is real output. Currently, the real interest rate is 5% and the
economy expects an inflation rate of 5%. The money supply equals
161
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
200.
400.
300.
240.
D
1
14
Yes
QN=24
If the Fed decreases the monetary base by $100 million and the money
multiplier is 4, M1 will
fall by $25 million.
rise by $25 million.
fall by $400 million.
rise by $400 million.
D
1
14
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=25
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=26
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=27
If the money multiplier is 10, the purchase of $1 billion of securities by the
Fed on the open market causes a
$10 billion increase in the money supply.
$10 billion decrease in the money supply.
$1 billion increase in the money supply.
$1 billion decrease in the money supply.
A
1
14
Yes
If the money multiplier is 10, the sale of $1 billion of securities by the Fed
on the open market causes a
$1 billion increase in the money supply.
$10 billion decrease in the money supply.
$1 billion decrease in the money supply.
$10 billion increase in the money supply.
B
1
14
Yes
A bank run is
162
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
a situation when a bank borrows from the Fed's discount window.
a situation in which a bank borrows at the Federal funds rate.
a large-scale, panicky withdrawal of deposits from a bank.
the transfer of funds from one bank to another.
C
1
14
Yes
QN=28
Which of the following is the Federal Reserve most likely to use to change
the nation's money supply?
Open-market operations
Discount lending
Credit controls
Reserve requirements
A
1
14
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=29
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The Fed can reduce the money supply by reducing
the discount rate.
reserve requirements.
the monetary base.
the currency-deposit ratio.
C
1
14
Yes
QN=30
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The Federal Reserve is
a wild game preserve.
an express mail service.
a Kentucky bourbon.
the central bank of the United States.
D
1
14
Yes
QN=31
The leadership of the Federal Reserve System is provided by
163
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
the Federal Advisory Committee.
the directors of the twelve Federal Reserve banks.
the Federal Open Market Committee.
the Board of Governors.
D
1
14
Yes
QN=32
The current chairman of the Board of Governors of the Federal Reserve
System is
Ben Bernanke.
Milton Friedman.
Paul Volcker.
Alan Greenspan.
A
1
14
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=33
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Who determines the open-market operations of the Federal Reserve
System?
Board of Governors
FOMC
FHLBB
FDIC
B
1
14
Yes
QN=34
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The Federal Reserve System's largest asset among the assets listed below is
deposits of depository institutions.
loans to depository institutions.
U.S. Treasury securities.
gold.
C
1
14
Yes
QN=35
Which of the Fed's instruments is most frequently used?
164
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Changing margin requirements for the stock market
Open-market operations
Changing reserve requirements
Changing the discount rate
B
1
14
Yes
QN=36
Since the 1930s, the Fed's most important tool for controlling the money
supply has been
moral suasion.
setting reserve requirements.
setting the discount rate.
open-market operations.
D
1
14
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=37
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Changes in reserve requirements directly and immediately affect
the monetary base.
banks' holdings of securities.
the money multiplier.
the Fed's holdings of foreign exchange.
C
1
14
Yes
QN=38
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The primary purpose of the discount window is to
control banks' excess reserves.
fulfill the bank's lender of last resort role.
influence the nation's money supply.
influence the amount of loans that banks provide to the public.
B
1
14
Yes
QN=39
When U.S. banks borrow from one another, they must pay the
165
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Interbank Offer Rate.
Fed funds rate.
discount rate.
prime rate.
B
1
14
Yes
QN=40
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The Federal funds market is a market for trading funds between
a bank and another bank.
a bank and the Federal Reserve Bank.
a bank and the government.
a bank and a multinational corporation.
A
1
14
Yes
QN=41
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
If a bank borrows from a Federal Reserve Bank, the interest rate is called
the prime rate.
the reserve availability rate.
the Fed funds rate.
the discount rate.
D
1
14
Yes
QN=42
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Which of the following might the Fed rely on as an intermediate target?
The discount rate
The monetary base
M2
The exchange rate of the dollar
C
1
14
Yes
QN=43
Which of the following variables is likely to serve as an intermediate target
for monetary policy?
166
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Open-market operations
Unemployment rate
Inflation rate
Money supply
D
1
14
Yes
QN=44
In the Keynesian model, suppose the Fed sets a target for the money supply.
If the IS curve shifts to the left, and the Fed wants to keep output
unchanged, what should the Fed do?
reduce the money supply.
reduce taxes.
increase the money supply.
increase taxes.
C
1
14
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=45
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=46
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
In the Keynesian model, suppose the Fed sets a target for the real interest
rate. If the IS curve shifts to the left, and the Fed wants to keep output
unchanged,
taxes will decrease.
the money supply will decline.
taxes will increase.
the real interest rate will decrease.
D
1
14
Yes
In the Keynesian model, suppose the Fed wants to keep output unchanged.
If the IS curve shifts to the left, and the Fed acts to keep output unchanged,
then
the real interest rate will decrease.
the money supply will decline.
taxes will decrease.
taxes will increase.
A
1
14
Yes
167
QN=47
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=48
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=49
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=50
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
In the Keynesian model, suppose the Fed sets a target for the real interest
rate. If the IS curve shifts down and to the left, and the Fed wants to keep
output unchanged in the short run and the price level unchanged in the long
run, it will
shift the LR curve up.
shift the IS curve up and to the right.
shift the LR curve down.
not shift the LR curve.
C
1
14
Yes
In the Keynesian model, suppose the Fed sets a target for the real interest
rate. If the IS curve shifts up and to the right, and the Fed wants to keep
output unchanged in the short run and the price level unchanged in the long
run, it will
shift the LR curve up.
not shift the LR curve.
shift the IS curve up and to the right.
shift the LR curve down.
A
1
14
Yes
Which of the following is not a major channel of monetary policy
transmission?
Credit channel
Interest rate channel
Fiscal channel
Exchange rate channel
C
1
14
Yes
When the effects of monetary policy on the economy work through changes
in real interest rates, the effect is called
disintermediation.
the interest rate channel.
the fiscal channel.
the credit channel.
B
1
14
168
MIX
CHOICES:
Yes
QN=51
When monetary policy works through changes in the real exchange rate, the
effect is called
the credit channel.
disintermediation.
the interest rate channel.
the exchange rate channel.
D
1
14
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=52
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=53
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=54
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
When monetary policy works by affecting the supply and demand for credit,
the mechanism is referred to as
the exchange rate channel.
the credit channel.
the interest rate channel.
the fiscal channel.
B
1
14
Yes
The credit channel of monetary policy transmission works in two ways. On
the supply side of the credit market, tight monetary policy leads to
________ lending by banks; on the demand side of the credit market, tight
monetary policy leads to ________ in the credit-worthiness of borrowers.
reduced; a decrease
increased; an increase
reduced; an increase
increased; a decrease
A
1
14
Yes
Worries about the zero bound from 2002 to 2005 led the Fed to
keep the Federal funds rate below the inflation rate.
tighten monetary policy.
increase reserve requirements on banks.
make more discount loans than usual.
A
1
14
169
MIX
CHOICES:
Yes
QN=55
a.
Which of the following statements would Milton Friedman disagree with?
In the long run, changes in the money supply primarily affect the price
level.
The Federal Reserve cannot be relied on to effectively smooth out business
cycles.
In practice, there is little scope for using monetary policy actively to smooth
out business cycles.
Monetary policy has few short-run effects on the real economy.
D
1
14
Yes
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=56
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=57
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=58
Which of the following statements would Milton Friedman agree with
concerning the conduct of monetary policy?
Wage and price adjustments are relatively slow, so changing the money
supply will have a minimal impact on the real economy.
There is little uncertainty over the effect of a change in the money supply on
the economy.
There are long and variable lags between monetary policy actions and their
economic results.
Information lags are short, enabling the central bank to respond quickly to
changes in the economy.
C
1
14
Yes
Milton Friedman would eliminate the destabilizing effect of the Federal
Reserve's monetary policy by
eliminating the Federal Reserve's right to carry out open-market operations.
eliminating the Federal Reserve.
requiring that the Federal Reserve choose a monetary aggregate and
increase it at a fixed percentage rate each year.
removing the Federal Reserve's political independence.
C
1
14
Yes
Monetarists suggest doing which of the following?
170
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Maintain a steady growth rate of the money supply.
Use fiscal policy to combat unemployment in the short run.
Use fiscal policy to combat inflation in the long run.
Use monetary policy to combat unemployment in the long run.
A
1
14
Yes
QN=59
a.
b.
c.
d.
Most Keynesians suggest that the Fed
use discretion in setting monetary policy.
use fiscal policy to combat inflation in the long run.
use fiscal policy to combat unemployment in the short run.
follow a rule, such as keeping the money growth rate at 3%, regardless of
the state of the economy.
A
1
14
Yes
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=60
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=61
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The Taylor rule relates
the growth rate of the monetary base to inflation over the past year and the
deviation of output from full-employment output.
the growth rate of the monetary base to the growth rate of nominal GDP and
the change in velocity over the past year.
the nominal Fed funds rate to the growth rate of nominal GDP and the
change in velocity over the past year.
the nominal Fed funds rate to inflation over the past year and the deviation
of output from full-employment output.
D
1
14
Yes
According to the Taylor rule, if inflation in the last year was 6% and output
was 2% below its full-employment level, the nominal Fed funds rate should
be
7%.
9%.
3%.
5%.
B
1
14
Yes
171
QN=62
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=63
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=64
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=65
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
According to the Taylor rule, if the inflation rate in the last year was 2% and
output was equal to its full-employment level, the nominal Fed funds rate
should be
6%.
5%.
4%.
3%.
C
1
14
Yes
According to the Taylor rule, if output is above its full-employment level
and inflation is less than 2%,
what the Fed should do is ambiguous.
the Fed should reduce the Fed funds rate below 4%.
the Fed should make the Fed funds rate exactly 4%.
the Fed should raise the Fed funds rate above 4%.
A
1
14
Yes
The degree to which the public believes the central bank's announcements
about future policy is its
reputation.
credibility.
transparency.
openness.
B
1
14
Yes
The problem with the strategy of achieving credibility through reputation is
that
serious costs may be incurred during the period in which reputation is
established.
rules always have a lower cost than reputations in maintaining credibility.
reputations are rarely credible.
reputations lack any commitment.
A
1
14
Yes
172
CHOICES:
QN=66
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=67
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=68
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=1
a.
b.
c.
d.
ANS:
PTS:
The primary criticism by Keynesians of the credibility argument for rules is
that
reputations are a less costly method of maintaining credibility.
reputations are a less costly method of gaining credibility.
rules that reduce presidential and congressional influence over monetary
policy could ultimately be harmful to the economy.
the cost of losing flexibility over policy choices may exceed the cost of
gaining credibility.
D
1
14
Yes
When the central bank announces the inflation rate that it will achieve over
the next one to four years, it is following a strategy known as
inflation targeting.
money targeting.
real business cycle targeting.
a currency board.
A
1
14
Yes
There is ________ relationship between inflation and central bank
independence and ________ relationship between long-run rates of
unemployment and central bank independence.
a positive; a negative
a negative; no
a positive; no
a negative; a negative
B
1
14
Yes
Subtracting government investment from government purchases gives us
the amount of government
consumption expenditures.
primary expenditures.
secondary spending.
outlays.
A
1
173
CHAPTER:
MIX
CHOICES:
15
Yes
QN=2
a.
b.
The three main categories of government outlays are
government purchases, transfer payments, and net interest payments.
net interest payments, government investment, and government
consumption expenditures.
net government subsidies, the government deficit, and government
purchases.
government consumption expenditures, government investment, and
transfer payments.
A
1
15
Yes
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=3
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The largest source of tax receipts for the government in the U.S. is
personal taxes.
corporate taxes.
contributions for social insurance.
taxes on production and imports.
A
1
15
Yes
QN=4
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The primary deficit is equal to
government purchases + transfers + net interest - tax revenues.
outlays + net interest - tax revenues.
outlays - tax revenues.
government purchases + transfers - tax revenues.
D
1
15
Yes
QN=5
a.
The deficit is
the amount by which government purchases, transfers, and net interest
exceed tax revenues.
total tax revenues minus net interest minus government expenditures.
the primary deficit minus net interest payments.
the amount by which government purchases and transfers exceed tax
revenues.
A
1
b.
c.
d.
ANS:
PTS:
174
CHAPTER:
MIX
CHOICES:
15
Yes
QN=6
The amount by which government purchases and transfers exceed tax
revenues is known as the
primary current deficit.
primary deficit.
government debt.
primary surplus.
B
1
15
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=7
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The current deficit is
the deficit plus net interest payments.
the deficit minus government investment.
the deficit minus depreciation.
the deficit minus current expenditures.
B
1
15
Yes
QN=8
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The current deficit is
outlays minus tax revenues.
the deficit minus depreciation.
the deficit plus net interest payments.
current expenditures minus tax revenues.
D
1
15
Yes
QN=9
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The primary current deficit is
current expenditures - net interest - tax revenues.
current expenditures + transfers - tax revenues.
current expenditures - tax revenues.
current expenditures + transfers + net interest - tax revenues.
A
1
15
Yes
175
QN=10
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The current deficit minus net interest is called the
primary deficit.
current surplus.
net current deficit.
primary current deficit.
D
1
15
Yes
QN=11
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Classical economists think that lump-sum tax changes
should be used to smooth business cycles.
have no effect because of Ricardian equivalence.
have a powerful effect on the economy.
affect aggregate demand after a lag.
B
1
15
Yes
QN=12
a.
b.
c.
d.
The political process by which fiscal policy is made
is relatively rapid, contributing to the effectiveness of fiscal policy.
is efficient in reaching a decision within a year.
is slow and results in a long time lag for fiscal policy.
requires only that the president approve changes to the budget, a decision
that takes several months.
C
1
15
Yes
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=13
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=14
Provisions in the budget that cause government spending to rise or taxes to
fall without legislation when GDP falls are known as
automatic stabilizers.
non-political fiscal policy.
primary deficit enhancers.
expansionary fiscal stimulus.
A
1
15
Yes
Which of the following would not act as an automatic stabilizer?
176
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Government purchases
Unemployment insurance
Corporate income taxes
Personal income taxes
A
1
15
Yes
QN=15
Because of automatic stabilizers, in recessions the government budget
deficit ________, while in expansions the deficit ________.
rises; rises
falls; rises
rises; falls
falls; falls
C
1
15
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=16
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The amount the government budget deficit would be if the economy were at
full employment is known as the
primary deficit.
natural deficit.
current deficit.
full-employment deficit.
D
1
15
Yes
QN=17
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Government capital consists of
money owned by the government.
securities owned by the government.
long-lived physical assets owned by the government.
the buildings owned by the government in Washington, D.C.
C
1
15
Yes
QN=18
All of the following can be government capital EXCEPT
177
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
mass-transit systems.
Treasury securities.
roads.
schools.
B
1
15
Yes
QN=19
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The total amount of taxes paid divided by before-tax income is the
rate of hysteresis.
median taxpayer rate.
average tax rate.
marginal tax rate.
C
1
15
Yes
QN=20
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The marginal tax rate is
the total amount of taxes paid divided by after-tax income.
the fraction of an additional dollar of income that must be paid in taxes.
the average amount of government spending that is financed by taxes.
the total amount of taxes paid divided by before-tax income.
B
1
15
Yes
QN=21
An increase in the marginal tax rate, with the average tax rate held constant,
will
a.
b.
increase the amount of labor supplied at any real wage.
increase the amount of labor supplied at any real wage if the average tax
rate is above the marginal tax rate, but decrease the amount of labor
supplied at any real wage if the average tax rate is below the marginal tax
rate.
not affect the amount of labor supplied at any real wage.
decrease the amount of labor supplied at any real wage.
D
1
15
Yes
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=22
A decrease in the average tax rate, with the marginal tax rate held constant,
178
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=23
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=24
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
will
not affect the amount of labor supplied at any real wage.
increase the amount of labor supplied at any real wage.
decrease the amount of labor supplied at any real wage.
increase the amount of labor supplied at any real wage if the average tax
rate is above the marginal tax rate, but decrease the amount of labor
supplied at any real wage if the average tax rate is below the marginal tax
rate.
C
1
15
Yes
Suppose that all workers place a value on their leisure of 40 goods per day.
The production function relating output per day Y to the number of people
working per day N is
Y = 200N – N^2
and the marginal product of labor is
MPN = 200 - 2N.
A 20% tax is levied on wages. Output per day would be
9,375.
11,250.
7,250.
5,625.
A
1
15
Yes
Suppose that all workers place a value on their leisure of 40 goods per day.
The production function relating output per day Y to the number of people
working per day N is
Y = 200N – N^2
and the marginal product of labor is
MPN = 200 - 2N.
A 20% tax is levied on wages. In terms of lost output, what is the cost of the
distortion introduced by this tax?
75
150
225
25
C
1
15
Yes
179
QN=25
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=26
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Taxes distort economic behavior because they
change the composition of income and spending.
change the composition of consumption, investment, government spending,
and net exports.
change the balance between private and public expenditures.
cause deviations in economic behavior from the efficient, free-market
outcome.
D
1
15
Yes
Assume that the lost output due to tax distortions is proportional to the
square of the tax rate. If the average cost of the distortion created by taxes is
currently $1000, and the tax rate is increased from 40% to 50%, the average
cost of the distortion created by taxes will increase to
$640.
$383.33.
$450.00.
$1562.50.
D
1
15
Yes
QN=27
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The average cost of the distortion created by taxes
increases proportionately with the tax rate.
is higher when the tax rate is constant than when it fluctuates.
is lower when the tax rate is constant than when it fluctuates.
equals the square root of the tax rate.
C
1
15
Yes
QN=28
The total value of government bonds outstanding at any particular time is
called the
government debt.
seignorage revenue.
yield curve.
government deficit.
A
1
15
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
180
QN=29
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Increases in the debt-GDP ratio are primarily caused by
a high government deficit relative to GDP.
a high growth rate of GDP.
increases in interest rates.
increases in government borrowing through bonds.
A
1
15
Yes
QN=30
If the deficit is 0.02 times GDP, the existing debt/GDP ratio is 0.5, and the
growth rate of nominal GDP is 0.03, then the change in the debt-GDP ratio
is
+0.05
-0.025.
0.0
+0.025.
A
1
15
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=31
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=32
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
A decreased government deficit created by a lump-sum tax increase will
increase national saving if
the real interest rate is less than the growth rate of real GNP.
it causes consumption to fall.
the government runs a primary surplus as a result.
the value of government bonds outstanding grows slower than the public's
wealth.
B
1
15
Yes
According to the Ricardian equivalence proposition, current deficits
will affect both consumption and national saving.
will not affect consumption or national saving.
will affect national saving but not consumption.
will affect consumption but not national saving.
B
1
15
Yes
181
QN=33
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Deficits are a burden on future generations if they
are always a primary government deficit.
are not used for government capital formation.
cause national saving to fall.
cause higher rates of inflation to occur.
C
1
15
Yes
QN=34
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
Seignorage is the revenue a government raises by
borrowing money.
charging fees for services.
taxation.
printing money.
D
1
15
Yes
QN=35
State governments in the United States can raise revenue by all the
following means except
increasing the money supply.
increasing sales taxes.
increasing income taxes.
increasing taxes on corporate profits.
A
1
15
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=36
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The relationship between the government deficit and the change in the
monetary base is
deficit equals change in government debt held by the public plus change in
monetary base.
deficit equals change in government debt outstanding plus change in
monetary base.
deficit equals change in government debt held by the public minus change
in monetary base.
deficit equals change in government debt outstanding minus change in
monetary base.
A
1
15
Yes
182
QN=37
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=38
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=39
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=40
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
In which case would you be most likely to expect inflation to occur?
The government runs a sustained government deficit by increasing
purchases.
The government runs a sustained government deficit by lowering taxes.
The government funds its sustained deficit by increasing the money supply.
The government runs a sustained primary deficit by increasing purchases.
C
1
15
Yes
In an all-currency economy in which real output and the real interest rate are
fixed and the rates of money growth and inflation are constant, the inflation
rate equals
the nominal interest rate.
the level of real seignorage revenue.
the real interest rate.
the growth rate of the nominal money supply.
D
1
15
Yes
The real seignorage collected by the government in an all-currency
economy is the product of
the debt/GDP ratio and the rate of inflation.
the rate of inflation and the real money supply.
the rate of inflation and the real supply of government bonds.
the debt/GDP ratio and the real money supply.
B
1
15
Yes
Assume that in an all-currency economy the real interest rate is 4%, the
expected rate of inflation is 8%, and the nominal interest rate is 12%. The
real monetary base equals $50 billion. The real seignorage revenue collected
by the government would equal
$4 billion.
$12 billion.
$8 billion.
$6 billion.
A
1
15
183
MIX
CHOICES:
Yes
QN=41
Real money demand in the economy is given by
L = 0.5Y - 2500i,
where Y is real income and i is the nominal interest rate. In equilibrium, real
money demand L equals real money supply M/P. Suppose that Y equals
1000 and the real interest rate is 0.02. At what rate of inflation is seignorage
maximized?
0.10
0.075
0.05
0.09
D
1
15
Yes
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=42
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=43
Real money demand in the economy is given by
L = 0.5Y - 2500i,
where Y is real income and i is the nominal interest rate. In equilibrium, real
money demand L equals real money supply M/P. Suppose that Y equals
1000 and the real interest rate is 0.02. What is the maximum amount of
seignorage revenue?
22.25
20.25
24.75
11.11
B
1
15
Yes
Consider an economy that has the following monetary data.
Currency held by the nonbank public = $300
Bank reserves = $50
Monetary base = $350
Deposits = $700
Money supply = $1000
The monetary base and the money supply are expected to grow at a constant
rate of 20% per year. Inflation and expected inflation are 20% per year.
Suppose that bank reserves and currency pay no interest, all currency is held
by the public, and bank deposits pay no interest. What is the cost to the
public of the inflation tax?
184
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
$140
$60
$200
$190
C
1
15
Yes
QN=44
Consider an economy that has the following monetary data.
Currency held by the nonbank public = $300
Bank reserves = $50
Monetary base = $350
Deposits = $700
Money supply = $1000
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
QN=45
a.
b.
c.
d.
ANS:
PTS:
CHAPTER:
MIX
CHOICES:
The monetary base and the money supply are expected to grow at a constant
rate of 20% per year. Inflation and expected inflation are 20% per year.
Suppose that bank reserves and currency pay no interest, all currency is held
by the public, and bank deposits pay no interest. What is the nominal value
of seignorage over the year?
$70
$10
$60
$200
A
1
15
Yes
Whether real seignorage revenue increases when the rate of money growth
increases depends on whether
the rise in the real supply of currency outweighs the decline in inflation.
the rise in inflation ratio outweighs the decline in the real supply of
currency.
the rise in inflation outweighs the decline in real money holdings.
the rise in real money holdings outweighs the decline in inflation.
C
1
15
Yes
185
186
Related papers
Innsbruck: Zeughausareal und Sillkanal
Fundberichte aus Österreich 60/2021, 2024
El populismo como clave interpretativa para la política contemporánea colombiana
Análisis Político, 2023
Will the Media Proclamation set the press free? Enforcing the right to freedom of expression in Ethiopia
Ethiopian Human Rights Law Series , 2022
Interdisciplinaridade, Direito e Estado: memórias da Faculdade de Direito da UFMG
Revista Brasileira de Estudos Políticos, 2012
Na margini povijesti
Na margini povijesti: zbornik radova, 2018
CEZA MUHAKEMESİNDE UZLAŞTIRMA KİTABI
Ceza Muhakemesinde Uzlaştırma, 2021
School Choice, Equity and Social Justice: The Case for More Control
Http Dx Doi Org 10 1111 J 1467 8527 2006 00334 X, 2010
Bone Scintigraphy for Guidance of Targeted Treatment of Vertebral Compression Fractures
Journal of clinical medicine, 2024
Esophageal Temperature Management in Patients Suffering from Traumatic Brain Injury
Therapeutic Hypothermia and Temperature Management
Molecular characterization of imidazolinone-resistant Brassica rapa × B. napus hybrids
Environmental Monitoring and Assessment, 2020
Generalized Review on EVD and Constraints Simplex Method of Materials Properties Optimization for Civil Engineering
Civil Engineering Journal, 2019
A previsibilidade do dano segundo a Convenção de Viena (e não somente
Journal of Contemporary Private Law, 2016
Spatial Modelling of Urban Growth and Urban Influence
Environment and Urbanization ASIA, 2012
- Find new research papers in:
- Physics
- Chemistry
- Biology
- Health Sciences
- Ecology
- Earth Sciences
- Cognitive Science
- Mathematics
- Computer Science