Foundations of Economics Midterm Exam
Course Introduction
Foundations of Economics provides a comprehensive introduction to the fundamental principles governing microeconomics and macroeconomics. This course explores core concepts such as demand and supply, market equilibrium, consumer behavior, production, market structures, and the role of governments in economic systems. Students will also examine broader economic indicators, fiscal and monetary policy, and the impact of globalization. Through real-world examples and practical analysis, the course equips students with the analytical tools necessary to understand and critically evaluate economic issues in contemporary society.
Recommended Textbook
Economics 5th Edition by R. Glenn Hubbard
Available Study Resources on Quizplus
30 Chapters
9264 Verified Questions
9264 Flashcards
Source URL: https://quizplus.com/study-set/3652
Page 2
Chapter 1: Economics: Foundations and Models
Available Study Resources on Quizplus for this Chatper
444 Verified Questions
444 Flashcards
Source URL: https://quizplus.com/quiz/72679
Sample Questions
Q1) Scarcity is a problem that will eventually disappear as technology advances.
A)True
B)False
Answer: False
Q2) Refer to Table 1-4. What is Eva's marginal cost if she decides to stay open for two hours instead of one hour?
A) $12
B) $24
C) $36
D) $71
Answer: A
Q3) The processes used to produce goods and services describes
A) innovation.
B) entrepreneurship.
C) technology.
D) capital.
Answer: C
Q4) What is an economic variable?
Answer: An economic variable is something measurable that can have different values, such as the wages of software programmers.
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Trade-Offs, Comparative Advantage, and the Market System
Available Study Resources on Quizplus for this Chatper
498 Verified Questions
498 Flashcards
Source URL: https://quizplus.com/quiz/72668
Sample Questions
Q1) Published in 1776, ________ was written by Adam Smith.
A) The General Theory of Employment, Interest, and Money
B) The Communist Manifesto
C) The Declaration of Economics
D) An Inquiry into the Nature and Causes of the Wealth of Nations
Answer: D
Q2) The ________ demonstrates the roles played by households and firms in the market system.
A) production possibilities frontier
B) circular flow model
C) theory of comparative advantage
D) business cycle
Answer: B
Q3) Refer to Figure 2-10. If the economy is currently producing at point E, what is the opportunity cost of moving to point D?
A) 26 thousand forks
B) 20 thousand forks
C) 16 thousand spoons
D) 0 spoons
Answer: C
Page 4
To view all questions and flashcards with answers, click on the resource link above.
Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
Available Study Resources on Quizplus for this Chatper
475 Verified Questions
475 Flashcards
Source URL: https://quizplus.com/quiz/72657
Sample Questions
Q1) What is the difference between a market equilibrium and a competitive market equilibrium?
Answer: A market equilibrium is a situation in which quantity demanded equals quantity supplied. A competitive market equilibrium is a market equilibrium with many buyers and sellers.
Q2) Refer to Figure 3-2. An increase in price of inputs would be represented by a movement from
A) A to B.
B) B to A.
C) S1 to S2.
D) S2 to S1.
Answer: D
Q3) The law of demand implies, holding everything else constant, that as the price of yogurt
A) increases, the demand for yogurt will increase.
B) increases, the quantity of yogurt demanded will decrease.
C) decreases, the quantity of yogurt demanded will decrease.
D) decreases, the demand for yogurt will increase.
Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Economic Efficiency, Government Price Setting, and Taxes
Available Study Resources on Quizplus for this Chatper
419 Verified Questions
419 Flashcards
Source URL: https://quizplus.com/quiz/72655
Sample Questions
Q1) Refer to Figure 4-10. Suppose that instead of a price ceiling, the government imposed a price floor of R1. What is the area representing producer surplus after the imposition of the price floor?
A) A
B) B + D + F
C) C + E
D) B + C + D + E + F
Q2) There is a shortage of every good that is scarce.
A)True
B)False
Q3) Each point on a ________ curve shows the willingness of consumers to purchase a product at different prices.
A) demand
B) supply
C) production possibilities
D) marginal cost
Q4) The incidence of a tax depends on whether the government collects the tax from buyers or sellers.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Externalities, Environmental Policy, and Public Goods
Available Study Resources on Quizplus for this Chatper
266 Verified Questions
266 Flashcards
Source URL: https://quizplus.com/quiz/72654
Sample Questions
Q1) An important difference between the demand for a private good and the demand for a public good is that
A) individuals reveal their preferences for a public good but they do not have to reveal their preferences a private good.
B) the resources used to provide public goods are common resources or government owned; the resources used to produce private goods are all privately owned.
C) individuals reveal their preferences for a private good but they do not have to reveal their preferences for a public good.
D) the demand for a private good produces consumption externalities; the demand for a public good produces production externalities.
Q2) A free market fails when
A) there is government intervention.
B) there is an external effect in either production, consumption, or both.
C) firms that produce goods which create positive externalities go bankrupt.
D) firms that produce goods which create negative externalities earn high profits.
Q3) How does a positive externality in consumption reduce economic efficiency?
Q4) Should the level of pollution be reduced to zero and if not, then to what level?
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Elasticity: the Responsiveness of Demand and Supply
Available Study Resources on Quizplus for this Chatper
295 Verified Questions
295 Flashcards
Source URL: https://quizplus.com/quiz/72653
Sample Questions
Q1) Refer to Figure 6-10. A unit-elastic supply curve is shown in A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.
Q2) If the slope of a demand curve is equal to -0.1 then A) demand is inelastic.
B) we don't know whether the demand is elastic or inelastic.
C) the demand is elastic at low prices and inelastic at high prices.
D) as price increases by 10 percent, quantity demanded decreases by 1 percent.
Q3) If the cross-price elasticity of demand between beer and wine is 0.31, then beer and wine are
A) complements.
B) price inelastic goods.
C) substitutes.
D) necessities.
Q4) The demand for gasoline is perfectly inelastic because most people need gasoline to drive their cars.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: The Economics of Health Care
Available Study Resources on Quizplus for this Chatper
334 Verified Questions
334 Flashcards
Source URL: https://quizplus.com/quiz/72652
Sample Questions
Q1) College education tends to result in a negative externality because the recipient does not receive the full benefit of the education.
A)True
B)False
Q2) Consider a used car market in which half the cars are good and half are bad (lemons). A rational buyer in this market should
A) offer to pay a price equal to the most she would pay for a good car.
B) offer to pay a price equal to the most she would pay for a lemon.
C) offer to pay a price somewhere between the price she would pay for a good car and the price she would pay for a lemon.
D) save up and buy a new car.
Q3) If a hospital knows that an insurance company will pay for most of a patient's bill, the hospital has more of an incentive to require additional medical procedures and tests, even if the patient may not require them. This is an example of A) moral hazard.
B) the principle-agent problem.
C) asymmetric information.
D) adverse selection.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Firms, the Stock Market, and Corporate Governance
Available Study Resources on Quizplus for this Chatper
278 Verified Questions
278 Flashcards
Source URL: https://quizplus.com/quiz/72651
Sample Questions
Q1) Corporate managers and shareholders always have the same goals.
A)True
B)False
Q2) If a corporate bond with a face value of $2,000 pays yearly coupon payments of $50, what is the coupon rate?
A) 2.5%
B) 4%
C) 25%
D) 40%
Q3) A financial security that represents a promise to repay a fixed amount of funds is a
A) share of stock.
B) coupon.
C) dividend.
D) bond.
Q4) Who controls a partnership?
A) stockholders
B) bondholders
C) the owners
D) all of these
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Comparative Advantage and the Gains From International Trade
Available Study Resources on Quizplus for this Chatper
379 Verified Questions
379 Flashcards
Source URL: https://quizplus.com/quiz/72650
Sample Questions
Q1) Refer to Figure 9-6. Suppose the U.S. government imposes a $0.25 per pound tariff on rice imports. Figure 9-6 shows the demand and supply curves for rice and the impact of this tariff. Use the figure to answer questions a-i.
a. Following the imposition of the tariff, what is the price that domestic consumers must now pay and what is the quantity purchased?
b. Calculate the value of consumer surplus with the tariff in place.
c. What is the quantity supplied by domestic rice growers with the tariff in place?
d. Calculate the value of producer surplus received by U.S. rice growers with the tariff in place.
e. What is the quantity of rice imported with the tariff in place?
f. What is the amount of tariff revenue collected by the government?
g. The tariff has reduced consumer surplus. Calculate the loss in consumer surplus due to the tariff.
h. What portion of the consumer surplus loss is redistributed to domestic producers? To the government?
i. Calculate the deadweight loss due to the tariff.
Q2) What are terms of trade?
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: Consumer Choice and Behavioral Economics
Available Study Resources on Quizplus for this Chatper
302 Verified Questions
302 Flashcards
Source URL: https://quizplus.com/quiz/72678
Sample Questions
Q1) Refer to Table 10-6. What is Jay's optimal consumption bundle?
A) 1 burger and 2 Pepsis
B) 2 burgers and 3 Pepsis
C) 3 burgers and 1 Pepsi
D) 3 burgers and 2 Pepsis
Q2) Which of the following is explained by the law of diminishing marginal utility?
A) The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her third bottle of Coca-Cola.
B) The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her third pretzel.
C) The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her friend Margie's third pretzel.
D) The total utility of one bottle of Coca-Cola is greater than the total utility of two bottles of Coca-Cola.
Q3) Why do many film processing companies have a policy of printing every picture on a roll of film or a memory card, even if the picture is very fuzzy and customers are allowed to ask for refunds on any pictures they do not like?
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 11: Technology, Production, and Costs
Available Study Resources on Quizplus for this Chatper
330 Verified Questions
330 Flashcards
Source URL: https://quizplus.com/quiz/72677
Sample Questions
Q1) State the law of diminishing marginal returns.
Q2) The rules of accounting generally require that ________ costs be used for purposes of keeping a company's financial records and for paying taxes. These costs are sometimes called ________ costs.
A) economic; legal
B) real; explicit
C) total; economic
D) explicit; accounting
Q3) Refer to Figure 11-13. The lines shown in the diagram are isocost lines. A movement from CE to BD occurs when
A) the price of capital increases while the price of labor remains unchanged.
B) the price of labor decreases while the price of capital remains unchanged.
C) the price of capital increases while the price of labor decreases.
D) the price of capital decreases while the price of labor increases.
Q4) What is the difference between between total costs, variable costs, and fixed costs?
Q5) In the long run, all of a firm's inputs are variable.
A)True
B)False
Q6) Describe the difference between technology and positive technological change.
Page 13
To view all questions and flashcards with answers, click on the resource link above.
Chapter 12: Firms in Perfectly Competitive Markets
Available Study Resources on Quizplus for this Chatper
298 Verified Questions
298 Flashcards
Source URL: https://quizplus.com/quiz/72676
Sample Questions
Q1) The price a perfectly competitive firm receives for its output
A) is determined by the interaction of the firm and all of the consumers who buy from the firm.
B) is determined by the interaction of all sellers and all buyers in the firm's market.
C) will not change in response to changes in market demand and supply because the firm is a price taker.
D) will be lowered by the firm in order to sell more output.
Q2) If a firm's fixed cost exceeds its total revenue, the firm should stop production by shutting down temporarily.
A)True
B)False
Q3) Being a price-taker, a perfectly competitive firm cannot receive a producer surplus in the short run.
A)True
B)False
Q4) Under what conditions should a competitive firm shut down in the short run?
Q5) What is meant by the term "long-run competitive equilibrium"?
To view all questions and flashcards with answers, click on the resource link above.
14
Chapter 13: Monopolistic Competition: the Competitive
Model in a More Realistic Setting
Available Study Resources on Quizplus for this Chatper
276 Verified Questions
276 Flashcards
Source URL: https://quizplus.com/quiz/72675
Sample Questions
Q1) Refer to Figure 13-15 to answer the following questions.
a. What is the profit-maximizing output level?
b. What is the profit-maximizing price?
c. What is the average total cost at the profit-maximizing output level?
d. What area represents the firm's profit?
e. At which output level are economies of scale exhausted?
f. Does this graph most likely represent the long run or the short run? Why?
Q2) Nike has used Michael Jordan to create the impression that Air Jordan basketball shoes are superior to any other basketball shoes. Nike is attempting to
A) differentiate Air Jordan basketball shoes from other types of basketball shoes.
B) lower the marginal cost of producing Air Jordan basketball shoes.
C) increase its profit by raising the price of Air Jordan basketball shoes.
D) convince consumers that Air Jordan basketball shoes are no different from other basketball shoes favored by celebrities.
Q3) There are many cattle ranchers in the world, and there are also many McDonald's restaurants in the world. Why, then, does a McDonald's restaurant face a downward-sloping demand curve while a cattle rancher faces a horizontal demand curve?
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Oligopoly: Firms in Less Competitive Markets
Available Study Resources on Quizplus for this Chatper
262 Verified Questions
262 Flashcards
Source URL: https://quizplus.com/quiz/72674
Sample Questions
Q1) According to Porter's Five Competitive Forces Model, similar products produced by different firms within the industry affects a firm's ability to raise prices far more than substitutable products produced outside the industry.
A)True
B)False
Q2) A four-firm concentration ratio measures
A) the fraction of an industry's sales accounted for by the four largest firms.
B) the production of any four firms in an industry.
C) how the four largest firms became so concentrated.
D) the fraction of employment of the four largest firms in an industry.
Q3) Refer to Table 14-8. If Brawny Juice selects a high price, what is Power Fuel's best strategy and what will Power Fuel earn as a result of this strategy?
A) Power Fuel will select a low price and earn $8 million.
B) Power Fuel will select a low price and earn $16 million.
C) Power Fuel will select a high price and earn $12 million.
D) Power Fuel will select a high price and earn $16 million.
Q4) Why do economists refer to the pricing strategies of oligopoly firms as a prisoner's dilemma game?
Q5) What is the difference between explicit collusion and implicit collusion?
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Monopoly and Antitrust Policy
Available Study Resources on Quizplus for this Chatper
271 Verified Questions
271 Flashcards
Source URL: https://quizplus.com/quiz/72673
Sample Questions
Q1) Natural monopolies in the United States are generally regulated by A) the Federal Trade Commission.
B) the Department of Justice.
C) local or state regulatory commissions.
D) the Department of Commerce.
Q2) Refer to Figure 15-15. The firm would maximize profit by producing
A) Q1 units.
B) Q2 units.
C) Q3 units.
D) Q4 units.
Q3) Refer to the Article Summary. The standards used by the Department of Justice and the FTC to evaluate a potential merger such as the one between American Airlines and US Airways are based on market concentration as determined by the
A) Herfindahl-Hirschman Index.
B) Clayton Antitrust Act.
C) Anti-Collusion Task Force.
D) Robinson-Patman Act.
Q4) Unlike a perfect competitor, a monopolist faces the market demand curve.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Pricing Strategy
Available Study Resources on Quizplus for this Chatper
263 Verified Questions
263 Flashcards
Source URL: https://quizplus.com/quiz/72672
Sample Questions
Q1) In an optimal two-part tariff pricing schedule, consumer surplus is zero.
A)True
B)False
Q2) Perfect price discrimination will lead a firm to produce up to the point where price equals marginal cost, the efficient level of output.
A)True
B)False
Q3) When colleges use yield management techniques, they increase financial aid offers to students likely to be more price sensitive and they reduce financial aid offers to students likely to be less price sensitive.
A)True
B)False
Q4) One method of setting price using the cost-plus method is to add
A) a given percentage of marginal cost to marginal cost of production.
B) a given percentage of fixed cost to total fixed cost.
C) a given percentage of average total cost to average total cost.
D) a given percentage of average variable cost to average total cost.
Q5) What is yield management? How is yield management being used in the airline industry?
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: The Markets for Labor and Other Factors of Production
Available Study Resources on Quizplus for this Chatper
286 Verified Questions
286 Flashcards
Source URL: https://quizplus.com/quiz/72671
Sample Questions
Q1) Economic rent is defined as
A) what you pay to rent your apartment or house.
B) the revenue received by a factor of production with an upward sloping supply curve.
C) the price of a factor of production that is fixed in supply.
D) the surplus received by employing a factor of production in its highest valued use.
Q2) Which of the following would cause an increase in the equilibrium wage?
A) The supply of labor increases more than the demand for labor.
B) The supply of jobs increases more than the demand for jobs.
C) The demand for labor increases faster than the supply of labor.
D) The supply of labor increases and the demand for labor decreases.
Q3) If it is difficult for a firm to attribute the output it produces to a particular worker, then
A) its employees are likely to form a union.
B) a commission system of compensation will be preferable to a salary system.
C) a salary compensation system will be preferable to a commission system.
D) a piece-rate system of compensation will be preferable to a salary system.
Q4) What is the signaling hypothesis of education?
Q5) What is a monopsony?
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Public Choice, Taxes, and the Distribution of Income
Available Study Resources on Quizplus for this Chatper
258 Verified Questions
258 Flashcards
Source URL: https://quizplus.com/quiz/72670
Sample Questions
Q1) A common belief among political analysts is that someone running for his or her party's nomination for president of the United States must choose a different strategy once the nomination is secured. To be nominated, the candidate must appeal to voters from one party-Democrat or Republican-but in a general election a party's nominee must appeal to voters from both parties as well as independent voters. Which of the following offers the best explanation for this change in strategy?
A) the Arrow impossibility theorem
B) the voting paradox
C) the median voter theorem
D) rent seeking
Q2) In reference to the federal income tax system, a tax bracket is
A) the estimated amount of federal income tax firms withhold from their employees' paychecks.
B) the formula the federal government uses to determine the dollar amount of the personal exemption and the amounts taxpayers are allowed for deductions from their incomes.
C) used to determine the average tax rate.
D) the income range within which a tax rate applies.
Q3) Explain the effect of price elasticities of supply and demand on tax incidence.
Page 20
To view all questions and flashcards with answers, click on the resource link above.
Chapter 19: GDP: Measuring Total Production and Income
Available Study Resources on Quizplus for this Chatper
266 Verified Questions
266 Flashcards
Source URL: https://quizplus.com/quiz/72669
Sample Questions
Q1) Gross domestic product understates the total production of final goods and services because of the omission of
A) the underground economy.
B) intermediate goods.
C) inflation.
D) exports.
Q2) If the GDP deflator is equal to 100, then for that year nominal GDP is equal to real GDP.
A)True
B)False
Q3) Which of the following accurately describes an effect of hurricane Katrina on GDP?
A) GDP would decrease reflecting the costs of cleanup.
B) GDP would increase reflecting the costs of cleanup.
C) GDP would increase reflecting the decrease in production that occurred during the storm and the productive capacity lost in the storm.
D) GDP would increase well-being.
Q4) What is the underground economy and how could it hurt an economy? How does it hurt developing economies?
To view all questions and flashcards with answers, click on the resource link above.
21
Chapter 20: Unemployment and Inflation
Available Study Resources on Quizplus for this Chatper
292 Verified Questions
292 Flashcards
Source URL: https://quizplus.com/quiz/72667
Sample Questions
Q1) Eliminating frictional unemployment would be good for the economy.
A)True
B)False
Q2) Unemployment caused by a business cycle recession is called cyclical unemployment.
A)True
B)False
Q3) Most economists believe that the biases in the consumer price index cause the CPI to overstate the true inflation rate by about
A) one-half to one percentage point.
B) one to two percentage points.
C) one quarter percentage point.
D) one and one-half percentage points.
Q4) To reduce the bias in the consumer price index, the Bureau of Labor Statistics
A) updates the market basket every two years, rather than every 10 years.
B) updates the market basket every 10 years, rather than every two years.
C) incorporates substitutions by consumers when prices of specific products rise rapidly.
D) incorporates substitutions by consumers when prices of specific products fall rapidly.
To view all questions and flashcards with answers, click on the resource link above.
22
Chapter 21: Economic Growth, the Financial System, and Business Cycles
Available Study Resources on Quizplus for this Chatper
257 Verified Questions
257 Flashcards
Source URL: https://quizplus.com/quiz/72666
Sample Questions
Q1) Increases in real GDP since 1900 can actually underestimate growth in the standard of living for Americans since 1900 because
A) the level of pollution in 1900 was much higher than it is today.
B) the crime rate was higher in 1900 than it is today.
C) goods and services are more expensive today as compared to 1900.
D) the quality of health care that exists today was not available in 1900.
Q2) For the recessions in the United States since the 1950s,
A) cyclical unemployment has been non-existent.
B) unemployment rises on average by about 1.2 percentage points 12 months after a recession begins.
C) unemployment falls on average by 2 percentage points 12 months after a recession begins.
D) unemployment rises on average about 5 percentage points 12 months after a recession begins.
Q3) In the United States, the average length of expansions from 1950 to 2009 was more than twice as long than they were from 1900 to 1950.
A)True
B)False
Q4) Give three reasons why the U.S. economy is more stable since 1950.
Page 23
To view all questions and flashcards with answers, click on the resource link above.
Chapter 22: Long-Run Economic Growth: Sources and Policies
Available Study Resources on Quizplus for this Chatper
268 Verified Questions
268 Flashcards
Source URL: https://quizplus.com/quiz/72665
Sample Questions
Q1) Which of the following policies would not help promote economic growth?
A) a law requiring that the funds in an individual retirement account be taxed
B) a law restricting elected officials from accepting expensive gifts and trips from private individuals
C) a law that funds prenatal care for all expectant mothers
D) a law that subsidizes research in nanotechnology
Q2) For how long does a patent give a firm the exclusive legal right to a product?
A) 10 years
B) 17 years
C) 20 years
D) 50 years
Q3) The purchase by an individual or firm of stock or bonds issued in another country is called
A) foreign exchange arbitrage.
B) foreign direct investment.
C) foreign portfolio investment.
D) global stock exchange.
Q4) How do economic growth rates affect a nation's standard of living?
To view all questions and flashcards with answers, click on the resource link above. Page 24
Q5) Suggest two policies the government could pursue to help increase the accumulation of knowledge.
Chapter 23: Aggregate Expenditure and Output in the Short Run
Available Study Resources on Quizplus for this Chatper
306 Verified Questions
306 Flashcards
Source URL: https://quizplus.com/quiz/72664
Sample Questions
Q1) Which of the following will cause a direct increase in consumption spending?
A) an increase in planned investment
B) an increase in government spending
C) an increase in disposable income
D) a decrease in net export spending
Q2) ________ is defined as national income + transfers - taxes.
A) Gross private domestic investment
B) GDP
C) Personal income
D) Disposable income
Q3) For all points below the 45-degree line, planned aggregate expenditure will be less than GDP.
A)True
B)False
Q4) Which of the following is a true statement about the multiplier?
A) The multiplier rises as the MPC rises.
B) The smaller the MPC, the larger the multiplier.
C) The multiplier is a value between zero and one.
D) The multiplier effect does not occur when autonomous expenditure decreases.
Q5) Given Table 23-6 below, fill in the values for saving. Assume taxes = $800.
To view all questions and flashcards with answers, click on the resource link above. Page 25
Chapter 24: Aggregate Demand and Aggregate Supply Analysis
Available Study Resources on Quizplus for this Chatper
284 Verified Questions
284 Flashcards
Source URL: https://quizplus.com/quiz/72663
Sample Questions
Q1) President Bush lowered income taxes for individuals in 2001. Explain how lower income taxes affect the aggregate demand curve.
Q2) Explain why the long-run aggregate supply curve is vertical.
Q3) Interest rates in the economy have risen. How will this affect aggregate demand and equilibrium in the short run?
A) Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall.
B) Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of GDP will fall.
C) Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise.
D) Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of GDP will rise.
Q4) An increase in aggregate demand results in a(n) ________ in the ________.
A) recession; long run
B) expansion; long run
C) expansion; short run
D) recession; short run
Page 26
To view all questions and flashcards with answers, click on the resource link above.
Chapter 25: Money, Banks, and the Federal Reserve System
Available Study Resources on Quizplus for this Chatper
280 Verified Questions
280 Flashcards
Source URL: https://quizplus.com/quiz/72662
Sample Questions
Q1) If people speculate that a run on one bank will cause a run on all banks in the financial system, and this speculation proves accurate, then the financial system would experience what is known as a
A) commodity crisis.
B) securitization meltdown.
C) bank panic.
D) institutional death spiral.
Q2) What is the principle monetary policy tool used by the Fed. Why?
Q3) A bank is legally required to hold a fraction of its ________ as ________.
A) deposits; required reserves
B) deposits; excess reserves
C) loans; excess reserves
D) loans; required reserves
Q4) The primary tool the Federal Reserve uses to increase the money supply is
A) printing more money.
B) lowering the required reserve ratio.
C) buying Treasury securities.
D) lowering the discount rate.
Q5) What are the implications of the quantity theory of money for monetary policy and price stability?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 26: Monetary Policy
Available Study Resources on Quizplus for this Chatper
277 Verified Questions
277 Flashcards
Source URL: https://quizplus.com/quiz/72661
Sample Questions
Q1) When calculating GDP, the Bureau of Economic Analysis releases its "advanced estimate" of a quarter's GDP approximately
A) three months before the quarter has ended.
B) one month after the quarter has ended.
C) three months after the quarter has ended.
D) one year after the quarter has ended.
Q2) In response to already low interest rates doing little to stimulate the economy, the Fed announced a new program in September 2011 under which it would purchase long-term Treasury securities while selling an equal amount of shorter-term Treasury securities. This policy was known as
A) inflation targeting.
B) Operation Twist.
C) securities-bubble deflating.
D) quantitative easing.
Q3) The federal funds rate is
A) the interest rate the Fed charges commercial banks.
B) the interest rate a bank charges its best customers.
C) the interest rate banks charge each other for overnight loans.
D) the interest rate on a Treasury Bill.
To view all questions and flashcards with answers, click on the resource link above.
Page 28
Chapter 27: Fiscal Policy
Available Study Resources on Quizplus for this Chatper
303 Verified Questions
303 Flashcards
Source URL: https://quizplus.com/quiz/72660
Sample Questions
Q1) In preparing their estimates of the stimulus package's effect on GDP, Obama administration economists estimated a government purchases multiplier of 1.57. This indicates that a ________ increase in government purchases would increase equilibrium real GDP by $157 billion
A) $1 billion.
B) $10 billion.
C) $100 billion.
D) $157 billion.
Q2) The federal budget was in deficit from 1931 to 1939, except in the year 1937. Given this fact, how do you explain E. Cary Brown's statement, "Fiscal policy, then, seems to have been an unsuccessful recovery device in the 'thirties-not because it did not work, but because it was not tried."
Q3) Which of the following is the largest category of federal government expenditures?
A) defense spending
B) transfer payments
C) interest on the debt
D) grants to state and local governments
Q4) What is the difference between federal purchases and federal expenditures?
To view all questions and flashcards with answers, click on the resource link above.
Page 29
Chapter 28: Inflation, Unemployment, and Federal Reserve Policy
Available Study Resources on Quizplus for this Chatper
257 Verified Questions
257 Flashcards
Source URL: https://quizplus.com/quiz/72659
Sample Questions
Q1) Growth in aggregate demand will
A) cause deflation.
B) increase unemployment.
C) move the economy to a higher point on the short-run Phillips curve.
D) cause the short-run Phillips curve to shift to the left.
Q2) Workers at a local construction company are paid $32.50 per hour, and they have incorporated a 4 percent annual raise in their contracts to account for expected inflation. Explain how unexpected inflation of 2 percent will affect the real wages earned by these workers and the unemployment rate of these workers.
Q3) According to the "rational expectations" school of thought in macroeconomics, the short-run Phillips curve is ________ in face of unanticipated changes in monetary policy.
A) negatively sloped
B) positively sloped
C) vertical
D) horizontal
Q4) When will a decrease in aggregate demand not result in a lower inflation rate in the short run?
Q5) What does it mean to say that workers and firms have rational expectations?
To view all questions and flashcards with answers, click on the resource link above. Page 30
Chapter 29: Macroeconomics in an Open Economy
Available Study Resources on Quizplus for this Chatper
278 Verified Questions
278 Flashcards
Source URL: https://quizplus.com/quiz/72658
Sample Questions
Q1) Net foreign investment minus net foreign portfolio investment is equal to A) capital outflows.
B) net foreign financial investment.
C) the balance of trade.
D) net foreign direct investment.
Q2) If foreign holdings of U.S. dollars decrease, holding all else constant,
A) the balance on the U.S. financial account will decrease.
B) the balance on the U.S. current account will decrease.
C) the balance on the U.S. capital account will decrease.
D) the U.S. balance of trade will decrease.
Q3) The current account does not include which of the following?
A) net exports
B) net investment income
C) net transfers
D) U.S. holdings of foreign assets
Q4) How does contractionary monetary policy affect net exports in the short run?
A) Contractionary monetary policy increases exports and reduces imports.
B) Contractionary monetary policy reduces exports and increases imports.
C) Contractionary monetary policy increases exports and increases imports.
D) Contractionary monetary policy reduces exports and reduces imports.
Page 31
To view all questions and flashcards with answers, click on the resource link above.
Chapter 30: The International Financial System
Available Study Resources on Quizplus for this Chatper
262 Verified Questions
262 Flashcards
Source URL: https://quizplus.com/quiz/72656
Sample Questions
Q1) Which of the following did not help Thailand maintain its peg against the dollar in the 1990s?
A) borrowing dollars from the International Monetary Fund in exchange for baht
B) buying baht on the foreign exchange market to support higher demand for the baht
C) increasing domestic interest rates to attract more foreign investors
D) foreigners selling off new investments in Thailand
Q2) A persistent shortage or surplus of a currency under the Bretton Woods system was evidence of
A) failure to support the existing fixed exchange rate by central banks.
B) fundamental disequilibrium in the country's exchange rate.
C) speculation against the currency by speculators in world exchange markets.
D) all of the above
Q3) The gold in Fort Knox backs all U.S. currency.
A)True
B)False
Q4) What do reports that the dollar is "undervalued" mean? How will foreign exchange markets respond to this information? Support your answer graphically.
Q5) Why might a country raise interest rates in the face of an exchange rate crisis?
To view all questions and flashcards with answers, click on the resource link above. Page 32