Q1. The
effect of contractionary monetary policy is to
a. decrease real output and increase the
price level.
b. increase real output and decrease the
price level.
c. increase real output and increase the
price level.
d. decrease real output and decrease the
price level.
Q2. A
contractionary monetary policy
a. will lead to an increase in aggregate
demand.
b. will lead to a decrease in aggregate
demand.
c. is brought about by a lowering of the
required reserve ratio.
d.
is brought about by lower interest rates.
Q3. The price
of bonds and the interest rate are
a. unrelated.
b. inversely related.
c. related, but we are not sure how.
d. positively related.
Q4. If the
Fed increases the reserve requirement,
a. banks will issue more loans.
b. consumers will save more.
c. banks will issue fewer loans.
d. consumers will save less.
Q5. The
Federal Reserve increased the money supply significantly during the Great
Depression, but prices continued to fall anyway.
a. true
b. false
Q6. A sale of
bonds by the Fed generates
a. a decrease in the demand for money
balances.
b. an increase in the demand for money
balances.
c. an increase in the demand for bonds and
a rise in bond prices.
d. an increase in the supply of bonds and
a fall in bond prices.
Q7. Both
Keynesians and monetarists agree that monetary policy works by shifting
aggregate supply.
a. true
b. false
Q8.
Contractionary monetary policy is used to combat recessions.
a. true
b. false
Q9. The
direct effect of an increase in the money supply is that
a. people will spend the extra money,
causing the aggregate demand curve to shift to the right and resulting in a
boost to economic activity.
b. people will spend the extra money,
causing the aggregate demand curve to shift to the left and resulting in a
recession.
c. people will save the money, causing an
increase in bank deposits with the result that interest rates will increase.
d. people will save more money, causing a
decrease in economic activity and a fall in prices.
Q10. If the
Fed contracts the money supply,
a. the price level will rise.
b. interest rates will rise.
c. firms will increase their levels of
investment.
d. aggregate demand will increase.
Q11. When the
Fed buys government securities on the open market,
a. it is engaging in expansionary monetary
policy.
b. interest rates will increase.
c. the money supply will contract.
d. bond prices will fall.
Q12.
Keynesian economists believe that monetary policy works through its effect on
a. long-run aggregate supply.
b. the interest rate.
c. consumer confidence.
d. the federal budget deficit.
Q13. Economic
growth is reflected in
a.
growth in
total output.
b. an increase in tax revenue.
c. increases in the level of employment.
d. increase in per capita real GDP.
Q14. Which
one of the following is TRUE?
a. Small changes in the annual growth rate
amount to a measurable difference in the long-term growth trend of a country.
b. For every country that experiences an
increase in its growth rate, there must be another experiencing a decline.
c. A well-defined system of property
rights benefits only the wealthy, and consequently it produces income
inequality that will stifle economic growth.
d. Restricting imports will enhance a
country’s economic growth.
Q15. Economic
growth is reflected in the production possibilities curve becoming flatter.
a. true
b. false
Q16. Which
one of the following is FALSE?
a. Increases in the capital stock can
improve the productivity of labor.
b. Increases in the size of the labor
force improve labor productivity.
c. Increases in labor productivity can
enhance economic growth.
d. Labor productivity contributes to
economic growth.
Q17. Research
has shown that the growth of developing countries is most strongly enhanced by
a. providing a good secondary education.
b. increasing the money supply.
c. providing incentives to have large
families.
d. providing colleges and universities.
Q18. Small
differences in the annual growth rate of a country add up to large differences
over time because of compounding.
a. true
b. false
Q19. Studies
indicate that
a. there is no relationship between
economic growth and saving.
b. there is a negative relationship
between economic growth and saving.
c. there is a positive relationship
between economic growth and saving.
d. saving does not contribute to capital
formation.
Q20.
Secondary schooling makes measurable contributions to economic growth in
developing countries.
a. true
b. false
Q21. The more
certain property rights are, the more capital accumulation there will be, and
therefore the greater economic growth.
a. true
b. false
Q22. Which of
the following is the most important factor affecting economic growth?
a. the rate of interest
b. the exchange rate
c. the price level
d. the rate of saving
Q23. Economic
growth occurs when
a. there is an increase in the inflation
rate.
b. there is an increase in the amount of
capital.
c. there is an increase in the
unemployment rate.
d. the production possibilities curve
becomes flatter.
Q24. Which
one of the following helps preserve incentives to develop new technologies?
a. tariffs
b. income taxes
c. patents
d. quantity restrictions on imports
Q25. The
European Union is an example of a common market.
a. true
b. false
Q26. Which of
the following is a true statement?
a. Exporters benefit from trade and
importers do not.
b. Free trade harms domestic producers of
goods that face import competition.
c. Consumers benefit from trade and
producers do not.
d. Everyone benefits from free trade in
the short run.
Q27. Table
16.1
Alpha’s
Production Possibilities
A B C D E
Cookies 4 3 2 1 0
Coffee 0 5 10 15 20
Beta’s
Production Possibilities
A B C D E
Cookies 8 6 4 2 0
Coffee 0 6 12 18 24
Table 16.1
shows the quantities of cookies and coffee that can be produced with the full
amount of resources available in each of two countries, Alpha and Beta.
Refer to
Table 16.1. The table shows the production possibilities of cookies and coffee
in Alpha and Beta measured in tons. In Alpha the domestic cost of 1 ton of
cookies
a. is 5 tons of coffee.
b. changes with the level of coffee
production.
c. changes with the level of cookie
production.
d. averages 4 tons of coffee.
Q28. An
infant industry is one in which
a. the firms are too new and too small to
compete internationally.
b. no country has a comparative advantage.
c. no country has an absolute advantage.
d. the products are only consumed
domestically.
Q29.
Comparative advantage is related to the concept of opportunity cost.
a. true
b. false
Q30. The
effect of a tariff is to
a. shift the supply curve of the imported
good to the left.
b. shift the demand curve for the imported
good to the left.
c. shift the demand curve for the imported
good to the right.
d. shift the supply curve of the imported
good to the right.
Q31. The
effect of a quota is to
a. increase quantity supplied and lower
price.
b. reduce quantity supplied and raise
price.
c. increase quantity supplied and increase
price.
d. increase demand for the good and
increase price.
Q32. The law
that created the high level of tariffs in United States in the 1930s is
a. the World Trade Act.
b. the North American Free Trade
Agreement.
c. the Smoot-Hawley Act.
d. the Compromise Tariff.
Q33. Table
16.1
Alpha’s
Production Possibilities
A B C D E
Cookies 4 3 2 1 0
Coffee 0 5 10 15 20
Beta’s
Production Possibilities
A B C D E
Cookies 8 6 4 2 0
Coffee 0 6 12 18 24
Table 16.1
shows the quantities of cookies and coffee that can be produced with the full
amount of resources available in each of two countries, Alpha and Beta.
Refer to
Table 16.1. If these two countries, Alpha and Beta, specialize based on
comparative advantage
a. Beta will specialize in producing both
items.
b. Alpha will specialize in cookies, and
Beta will specialize in coffee production.
c. Alpha will specialize in coffee, and
Beta will specialize in cookies.
d. Alpha will specialize in producing both
items.
Q34. Which
one of the following is FALSE?
a. Trade of goods facilitates the exchange
of intellectual property as well.
b. The end result of trade is that richer
countries take advantage of poorer ones.
c. A country enjoys an absolute advantage
if it can produce a good with fewer resources than any other country can.
d. Countries that engage in trade will end
up specializing according to their own comparative advantage.
Q35. A
country is made richer by its exports and poorer by its imports.
a. true
b. false
Q36.
Countries engaged in international trade specialize in production based on
a. the differences in transportation
costs.
b. comparative advantage.
c. relative price levels.
d. relative foreign exchange rates.
Q37. The
foreign sector of our economy has been steadily declining in size for the past
50 years.
a. true
b. false
Q38. Trade
restrictions tend to make domestic products
a. cheaper because they do have to compete
with foreign goods.
b. cheaper because they do not have to
compete with foreign goods.
c. more expensive because they do not have
to compete with foreign goods.
d. more expensive because they have to
compete with foreign goods.
Q39. Every
transaction concerning the exportation of American goods constitutes a
a. demand for foreign currency and a
supply of dollars.
b. demand for dollars, with no effect on
markets for foreign currencies.
c. supply of foreign currency, with no
effect on the market for dollars.
d. supply of foreign currency and demand
for dollars.
Q40.
Figure
17.1-Foreign Exchange Market for Yen
Refer to
Figure 17.1. Suppose E is the original equilibrium. An increase in the
inflation rate in Japan relative to the rate in the United States generates
a. an increase in the price of yen and an
increase in the quantity of yen sold per week.
b. a decrease in the price of yen and a
decrease in the quantity of yen sold per week.
c. a decrease in the price of yen and an
increase in the quantity of yen sold per week.
d. an increase in the price of yen and a
decrease in the quantity of yen sold per week.
Q41. If a
country is experiencing a trade surplus, then all of its trading partners will
be experiencing one also.
a. true
b. false
Q42. Floating
exchange rates are determined by
a. the predictions of currency
speculators.
b. the government of the importing
country.
c. the forces of supply and demand.
d. the government of the exporting
country.
Q43. Under
floating exchange rates, the exchange rate is set by
a. negotiations among central banks of G-7
nations.
b. the U.S. Federal Reserve Board.
c. the International Monetary Fund.
d. the intersection of demand and supply
curves in the currency markets.
Q44. The
balance of payments is equivalent to the balance of trade.
a. true
b. false
Q45. The
demand for Japanese yen will increase when
a. Japan becomes more productive relative
to the United States.
b. Americans change preferences in favor
of domestically produced goods.
c. America is perceived as more stable
politically and economically than Japan.
d. real interest rates in Japan fall.
Q46. When a
country attempting to maintain a fixed exchange rate runs out of foreign
currency reserves, it is known as a
a. currency depreciation.
b. currency crisis.
c.
currency appreciation.
d. hedge.
Q47. The
balance of payments consists of the
a. capital account, official reserve
transactions account, and recent account.
b. current account, official reserve
transactions account, and monetary account.
c. current account, capital account, and
official reserve transactions account.
d. current account, capital account, and
gold flows.
Q48. An
example of a unilateral transfer is
a. a gift to your university in the United
States.
b. gold payments to foreign companies.
c. a gift to a relative who lives abroad.
d. receipts from the export of financial
services.
Q49.
Figure
17.1-Foreign Exchange Market for Yen
Refer to
Figure 17.1. Suppose E is the original equilibrium. The Japanese have increased
their demand for U.S. goods. This will lead to
a. a decrease in the price of yen and a
decrease in the quantity of yen sold per week.
b. an increase in the price of yen and a
decrease in the quantity of yen sold per week.
c. an increase in the price of yen and an
increase in the quantity of yen sold per week.
d. a decrease in the price of yen and an
increase in the quantity of yen sold per week.
Q50. Which of
the following statements is true about the role of gifts given to U.S. citizens
from foreigners?
a. Gifts are only included in the balance
of payments if the gift is over $1,000,000.
b. Gifts given to U.S. citizens are not
included in the balance of payments, but gifts given to foreigners are included
as deficit items.
c. Gifts are included in the balance of
payments.
d. Gifts are not included in the balance
of payments.
