Microeconomics Exam Preparation Guide
Course Introduction
Microeconomics is the branch of economics that focuses on the behavior and decision-making processes of individual consumers, firms, and markets. This course explores fundamental concepts such as supply and demand, elasticity, consumer choice, production costs, market structures, and the functioning of perfect competition, monopoly, and other market types. Students will analyze how prices are determined, how resources are allocated, and the impact of government interventions on market outcomes. Through theoretical and practical examples, the course equips learners with the analytical tools needed to understand real-world economic issues at the micro-level.
Recommended Textbook
Economics Principles and Applications 6th Edition by Robert E. Hall
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35 Chapters
4566 Verified Questions
4566 Flashcards
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Chapter 1: What Is Economics
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178 Verified Questions
178 Flashcards
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Sample Questions
Q1) After graduating from high school,Steve had the following three choices for his immediate future,listed in order of preference: (1)attend our campus, (2)work in a printed circuit board factory,or (3)attend a rival college.His opportunity cost of going to college here includes which of the following?
A) The cost of books and supplies at the rival college
B) The income he could have earned at the printed circuit board factory plus the direct cost of attending college here (tuition,textbooks,etc. )
C) The benefits he could have received from going to the rival college
D) Only the tuition and fees paid for taking classes here
E) Cannot be determined from the information given
Answer: B
Q2) Due to resource scarcity,
A) some economic activities have an opportunity cost
B) all economic activities have an opportunity cost
C) no economic activities have an opportunity cost
D) economic activities have opportunity costs equal to their market prices
E) economic activities have opportunity costs generally lower than their market prices
Answer: B
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Page 3
Chapter 2: Scarcity,choice,and Economic Systems
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146 Verified Questions
146 Flashcards
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Sample Questions
Q1) Figure 2-5 shows five different points along the production possibilities frontier for a country that produces rockets and cruise ships.If the country is currently operating at point C and decided to move to point B,
A) the opportunity cost would be four rockets
B) it could not do so,given the current state of technology and quantity of resources
C) the country would have to forego producing six cruise ships
D) the opportunity cost would be four cruise ships
E) the opportunity cost would be six rockets
Answer: D
Q2) Under market capitalism,resources are allocated by
A) command and owned privately
B) the market and owned privately
C) command and owned by the state
D) the market and owned by the state
E) tradition and owned by all
Answer: B
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4
Chapter 2: Scarcity, choice, and Economic Systems: Part A
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184 Verified Questions
184 Flashcards
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Sample Questions
Q1) Which of the following items is most likely to be an inferior good?
A) bus tickets
B) airline tickets
C) housing
D) stereo equipment
E) home computers
Answer: A
Q2) Consider the market represented by Figure 3-9.If the price of the good is currently $50.00,the price will
A) fall,causing the quantity demanded to fall
B) fall,causing the quantity supplied to fall
C) rise,causing the demand curve to shift to the right
D) rise,causing the supply curve to shift to the left
E) fall,causing the supply curve to shift to the right
Answer: B
Q3) Supply curves usually slope upward because producers face increasing opportunity costs when increasing output.
A)True
B)False
Answer: True
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Chapter 4: Working With Supply and Demand
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58 Flashcards
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Sample Questions
Q1) Price floors and price ceilings
A) lead to the same prices and quantities that would be found in a competitive market
B) lead to technical efficiency
C) cause the demand curve to shift to the left
D) usually result from government intervention
E) cause the supply curve to shift to the right
Q2) Nancy buys a $150,000 home using $30,000 of her own money and gets a mortgage for the remaining $120,000.If the price of the house increases 5%,what will Nancy's capital gain be?
A) $30,000
B) $31,500
C) $35,000
D) $37,500
E) $45,550
Q3) Within the context of the housing market,what does MBS stand for?
A) Multi-Banking System
B) Mortgage Backed Security
C) Mortgage Bubble System
D) Mixed Bracket Securities
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Page 6
Chapter 5: Elasticity
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) Which of the following goods is likely to have the most price inelastic demand?
A) margarine
B) Tide detergent
C) cigarettes
D) Coca-Cola
E) ground beef
Q2) In Figure 5-5,the slope of the demand curve
A) has a constant value of -2
B) is higher between points T and U than between points V and W
C) is lower between points T and U than between points V and W
D) matches the value of the price elasticity of demand at each point
E) is lower than the value of the price elasticity of demand at every point
Q3) The sign of the cross-price elasticity tells us whether two commodities are complements or substitutes,but the size of this elasticity measure tells us
A) how the supply side of the market reacts to changes in demand
B) whether the government should regulate the two markets
C) which technology producers use
D) how closely the two goods are related
E) whether or not excess profits can be made in either market
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Page 7
Chapter 6: Consumer Choice
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143 Flashcards
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Sample Questions
Q1) If income decreases,there will be a parallel inward shift of the budget line.
A)True
B)False
Q2) Behavioral economics
A) is a subfield of psychology that has partially replaced traditional economic analysis
B) is a subfield of economics that explains how people behavior
C) is a subfield of economics that incorporates insights from psychology and sociology
D) provides support for the traditional economic theory of rational utility maximization
E) predicts that demand curves slope upward
Q3) Procrastination,addiction,and honesty
A) may be explained by preferences that are not transitive B) violate the economist's assumption that "more is better"
C) help to explain why the substitution effect is more powerful than the income effect D) are often inconsistent with narrowly defined rationality E) are inferior economic "goods".
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8
Chapter 7: Production and Cost
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127 Verified Questions
127 Flashcards
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Sample Questions
Q1) If a firm increases its output level in the short run,then
A) variable cost rises but fixed cost remains unchanged
B) both variable cost and fixed cost rise
C) variable cost rises,but fixed cost fall
D) both variable cost and fixed cost fall
E) variable cost remains unchanged,but fixed cost rises
Q2) A firm's cost of variable inputs per unit of output is known as
A) average total cost
B) average fixed cost
C) marginal cost
D) total variable cost
E) average variable cost
Q3) Total fixed costs decrease as output expands.
A)True
B)False
Q4) The law of diminishing marginal returns says that as more of a variable input is combined with a fixed input,total output will increase;however,the increases in the firm's output will become ever smaller.
A)True
B)False
Page 9
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Chapter 8: How Firms Make Decisions: Profit Maximization
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118 Flashcards
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Sample Questions
Q1) If a firm's short-run total cost curve lies above its total revenue curve at all output levels,the goal of the firm should be to
A) minimize total cost
B) maximize total revenue
C) minimize its loss
D) minimize marginal cost
E) maximize marginal revenue
Q2) Figure 8-11 indicates the prices at which Lorine's Hair Salon is able to sell various quantities of manicures.If the marginal cost of a manicure is constant at $12.50,then the hair salon's profit on manicures is maximized at
A) 2 manicures per day
B) 3 manicures per day
C) 4 manicures per day
D) 5 manicures per day
E) 6 manicures per day
Q3) A firm may find it optimal to stay in business in the short run even if total revenue does not cover total cost.
A)True
B)False
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Chapter 9: Perfect Competition
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248 Verified Questions
248 Flashcards
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Sample Questions
Q1) Barriers to entry into a market could include all of the following,except one.Which is the exception?
A) government restrictions
B) brand loyalty
C) large marginal costs
D) licensing fees
E) large fixed costs
Q2) Which of the following is not a characteristic of perfect competition?
A) Many small buyers.
B) Different firms sell products with different features.
C) Ease of entry into and exit from the market.
D) Many small sellers.
Q3) Under perfect competition,a rightward shift of the market supply curve could be caused by
A) decrease in consumer demand
B) technological advance
C) high rate of inflation
D) high interest rate
E) increase in consumers' income for a normal good
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Page 11
Chapter 9: Perfect Competition: Part A
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5 Verified Questions
5 Flashcards
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Sample Questions
Q1) One of the defining characteristics of a perfectly competitive market is
A) both buyers and sellers are well informed about the market
B) a small number of buyers
C) high barriers to entry
D) a small number of buyers but a large number of sellers
E) buyers are better informed about the market than sellers
Q2) Diminishing marginal returns are the reason why some industries have positively-sloped long-run average cost curves.
A)True
B)False
Q3) In a perfectly competitive market,a technological advance allows all firms to earn higher economic profits in the long run.
A)True
B)False
Q4) In perfect competition,technological advances will allow economic profits for A) all firms.
B) only the firm developing the new technology.
C) early adopters.
D) none of the firms,as the advance will be immediately adopted by all of them.
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Chapter 10: Monopoly
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210 Verified Questions
210 Flashcards
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Sample Questions
Q1) Which of the following limits the price a monopolist charges?
A) patents
B) copyrights
C) competition from other firms
D) market demand
E) market supply
Q2) A market which only allows only one firm to operate at lowest average cost is called a(n)
A) natural monopoly.
B) scale industry.
C) increasing returns industry.
D) large scale industry.
Q3) When a non-discriminating monopolist is maximizing profit,its marginal revenue
A) must be positive
B) must be negative
C) must equal zero
D) may be either positive or negative
E) must be upward sloping
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Chapter 11: Monopolistic Competition and Oligopoly
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192 Flashcards
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Sample Questions
Q1) U.S.antitrust enforcement policies have focused on
A) breaking up any firm with more than a 10 percent market share
B) forcing firms to produce output at the point where P = MC
C) preventing price-fixing arrangements
D) preventing "golden parachutes"
E) enforcing market codes of ethics
Q2) Which of the following has contributed to decreased concentration in U.S.industry since the 1970s?
A) rising interest rates and disinflation
B) segmentation and economies of scale
C) devaluation and economies of scale
D) technological change and market globalization
E) marginal cost pricing and product differentiation
Q3) If consumers are loyal to the products of an existing firm,this loyalty may
A) reduce the incentives for the firm to invest
B) result in more responsive management and better quality products
C) reduce the demand for imported goods
D) serve as a barrier to new entry into the market
E) force the firm to produce at higher costs
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Page 14
Chapter 12: Labor Markets
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95 Verified Questions
95 Flashcards
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Sample Questions
Q1) Figure 12-5 shows the number of baseballs a manufacturer can produce per day with different quantities of labor.Each baseball sells for $5 in a competitive market.The total revenue per day for the firm if it employs five workers is
A) $500
B) $300
C) $2,200
D) $5,000
E) $2,500
Q2) Figure 12-9 shows the number of baseballs a manufacturer can produce per day with different quantities of labor.Each baseball sells for $5.If the wage rate is $380 per day,the firm
A) should hire two workers
B) should hire five workers
C) cannot justify hiring any workers
D) should hire four workers
E) should hire three workers
Q3) A change in the wage rate causes a firm's labor demand curve to shift.
A)True
B)False
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Page 15
Chapter 12: labor Markets: Part A
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) Everything else being equal,a job in which workers face a relatively small chance of being laid off would generally have
A) a lower wage rate
B) a higher wage rate
C) more fringe benefits
D) higher skill requirements
E) no expected wage differentials in equilibrium
Q2) Wage differentials are due exclusively to differences in market structure.
A)True
B)False
Q3) Jobs that require more costly training generally have
A) higher wages
B) lower employment levels
C) less human capital required
D) higher personal risk levels
E) lower wages
Q4) Advocates of comparable worth favor eliminating all differences in wage rates among employees of the same firm.
A)True
B)False
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Chapter 13: Capital and Financial Markets
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) A newly issued bond with a face value of $12,000 and no coupon payments is priced at $9,000.The bond will mature in one year.What is the yield on this bond?
A) 33.3 percent
B) 25 percent
C) $3,000
D) $1,909.09
E) It depends on the interest rate
Q2) What would you pay for a newly issued 10-year bond with face value of $10,000 and no coupon payments? Assume the interest rate is 5 percent (0.05)per year.
A) $0
B) $6,139.13
C) $10,000
D) $95,632.41
E) $100,000.00
Q3) The supply curve for a particular bond is vertical.
A)True
B)False
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Chapter 14: Economic Efficiency and the Competitive Ideal
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80 Verified Questions
80 Flashcards
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Sample Questions
Q1) If the supply curve is perfectly inelastic and an excise tax is imposed
A) all of the tax is paid by buyers
B) all of the tax is paid by sellers
C) the market price will rise by the amount of the tax
D) the market price will fall by the amount of the tax
E) the tax is divided equally between buyers and sellers
Q2) If a perfectly competitive market is in equilibrium and market demand decreases,which of the following would happen?
A) both producer and consumer surplus would increase
B) both producer and consumer surplus would decrease
C) producer surplus would decrease and consumer surplus would increase
D) producer surplus would increase and consumer surplus would decrease
E) producer and consumer surplus would remain unchanged
Q3) Instead of throwing away a worn-out pair of jeans,a cowboy trades them in for $12.The jeans are resold for $45 to someone who likes to project a rugged image.These transactions are Pareto improvements.
A)True
B)False
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Chapter 15: Governments Role in Economic Efficiency
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115 Verified Questions
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Sample Questions
Q1) When breaking up a natural monopoly is not advisable
A) it should be left alone
B) government regulation should be used to set marginal revenue equal to marginal cost
C) government regulation should be used to set price equal to marginal revenue
D) government regulation should be used to set marginal cost equal to long-run average total cost.
E) public ownership and operation may improve efficiency
Q2) A market failure in the form of an externality arises when
A) production costs are included in the price of a good
B) not all costs and benefits are included in the price of a good
C) the benefits of consuming a good exceed the costs
D) a market fails to achieve equilibrium
E) equilibrium price is unstable
Q3) Which of the following is a pure public good?
A) cable TV service
B) fire protection
C) a fireworks display
D) corn flakes
E) higher education
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Chapter 16: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) A high-wage country cannot afford free trade with a low-wage country.The highwage country will either be undersold or its workers will be forced to accept lower living standards.
A)True
B)False
Q2) Assume that India has a comparative advantage in producing a computer game.The United States has an absolute advantage in producing the same game.Mutually advantageous trade will have India producing and exporting the game while the United States will specialize in producing something else.
A)True
B)False
Q3) The ratio (in physical units)at which two countries trade goods is known as the A) opportunity cost
B) marginal social cost
C) price to earnings ratio
D) comparative advantage ratio
E) terms of trade
Q4) In general,a society will benefit more,the more self-sufficient it is.
A)True
B)False
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Chapter 17: What Macroeconomics Tries to Explain
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Sample Questions
Q1) The country that suffered an extreme inflation rate of 89,700,000,000,000,000,000,000 percent in November 2008 was
A) England
B) Zimbabwe
C) Germany
D) Egypt
E) the former Soviet Union
Q2) For the average living standard of a nation to rise,the only thing that needs to happen is for nominal GDP to increase faster than the price level.
A)True
B)False
Q3) Output per person rises when
A) the population increases faster than real GDP
B) real GDP rises faster than the number of employed workers
C) real GDP increases at the same rate as the population
D) real GDP rises slower than the population
E) real GDP rises faster than the population
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21
Chapter 18: Production, income, and Employment
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227 Verified Questions
227 Flashcards
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Sample Questions
Q1) Which of the following groups would not be considered part of the labor force?
A) U.S.senators
B) Self-employed individuals
C) Individuals who are employed five hours (or less)per week
D) Individuals who have given up looking for work because they have been unable to find a job
E) Social Security recipients who work part time
Q2) According to economists,changes in the quality of goods
A) leads to overestimates of the measured value of GDP because these goods last for shorter amounts of time
B) leads to underestimates of the measured value of GDP because these goods last for shorter amounts of time
C) leads to overestimates of the measured value of GDP because these goods last for longer amounts of time
D) have no effect on the measured value of GDP
E) leads to underestimates of the measured value of GDP because these goods last for longer amounts of time
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22
Chapter 19: The Price Level and Inflation
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Sample Questions
Q1) If prices (as measured by the CPI)fell by one-half and nominal wages fell by one-third,what would happen to real wages?
A) They would fall by one-third
B) They would remain unchanged
C) They would decrease
D) They would increase
E) They would fall by one-half
Q2) Assume that the professors at a local college have gone without a pay increase for 4 years during a tough time.Suppose that things start to look up and the President of the college wants to make up for lost time.If the CPI in 2002 was 150 and 175 in 2006,how much will salaries have to increase to bring the faculty back up to their real income from 2002?
A) 175.0%
B) 150.0%
C) 25.0%
D) 16.7%
E) 14.3%
Q3) The CPI is the price index used to calculate real GDP.
A)True B)False
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Chapter 20: The Classical Long-Run Model
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Sample Questions
Q1) In the classical model,
A) markets do not automatically clear.
B) business demand for loanable fund exceeds business planned investment spending.
C) there is no government sector,only private consumption and planned investment.
D) businesses engage in interest-free borrowing.
E) the government's demand for funds is vertical.
Q2) What condition must be met in order for total spending to equal total output?
A) The sum of saving and government purchases must equal the sum of planned investment and net taxes.
B) The sum of saving and net taxes must equal the sum of planned investment and government purchases.
C) The sum of saving and planned investment must equal the sum of government purchases and net taxes.
D) Saving must equal net taxes.
E) The sum of saving and net taxes must equal planned investment minus government purchases.
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Chapter 20: Part A: The Classical Model in an Open Economy
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Sample Questions
Q1) When a country runs a trade deficit,
A) it must be running a budget surplus.
B) its imports will become injections instead of leakages.
C) its exports will become leakages instead of injections.
D) foreigners will demand loanable funds from the country.
E) foreigners will supply loanable funds to the country equal to its trade deficit
Q2) Which of the following is a leakage in an open economy?
A) Planned investment
B) Imports
C) Exports
D) Government purchases
E) Money
Q3) In the classical model,when an open economy has balanced trade,Say's law does not hold.
A)True
B)False
Q4) In the classical model,when an open economy has balanced trade,Say's law holds.
A)True
B)False
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Chapter 21: Economic Growth and Rising Living Standards
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Sample Questions
Q1) Which of the following would shift the production function downward?
A) An improvement in technology
B) A decrease in the interest rate
C) An increase in number of workers
D) An increase in the stock of human capital
E) A decrease in the stock of physical capital
Q2) If a nation uses all of its resources to produce capital goods,that will
A) force the government to increase its spending
B) leave the production function unchanged
C) rapidly increase the profitability of business firms
D) raise income and capital gains taxes
E) leave no resources available to produce consumption goods
Q3) Which of the following is not among the factors that lead to economic growth?
A) Increases in employment
B) Increases in the capital stock
C) Improvements in technology
D) Government transfer programs
E) Political stability and an efficient legal system
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26
Chapter 22: Economic Fluctuations
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Sample Questions
Q1) Which of the following occurs during a recession?
A) Output rises,employment rises and unemployment falls.
B) Output falls,employment falls and unemployment rises.
C) Output rises,employment falls and unemployment falls.
D) Output rises,employment rises and unemployment rises.
E) Output rises,employment rises and tax revenues fall.
Q2) When GDP is rising,the economy is experiencing
A) a contraction
B) a recession
C) a financial crisis
D) an expansion
E) equilibrium
Q3) The classical model does not do a good job of explaining short-run fluctuations in the level of economic activity.
A)True
B)False
Q4) The classical model does a good job of explaining short-run fluctuations in the level of economic activity.
A)True
B)False
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Chapter 23: The Short-Run Macro Model
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Sample Questions
Q1) If disposable income decreased,which of the following changes in the consumption-function line would occur?
A) A rightward movement along the line
B) A leftward movement along the line
C) The entire line would shift upward
D) The entire line would shift downward
E) The entire line would shift downward and there would be a rightward movement along the new line
Q2) If aggregate expenditure is less than GDP,inventories will
A) grow and prices will fall
B) grow and GDP will rise
C) grow and GDP will fall
D) shrink and GDP will rise
E) shrink and GDP will fall
Q3) The value of the expenditure multiplier in the long run is
A) 1
B) 0
C) -1
D) equal to the MPC
E) equal to the 1/MPC
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Chapter 24: Fiscal Policy
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Sample Questions
Q1) Looking at their ratio of debt to GDP,which following five countries should be expected to face serious economic trouble in the future?
A) Fredonia: 40 percent
B) Syldavia: 70 percent
C) Borduria: 120 percent
D) Ruritania: 20 percent
E) Dystopia: 100 percent.
Q2) The federal government's revenue has declined steadily relative to GDP since 1960. A)True
B)False
Q3) We expect a rise in transfer payments when A) the needs of the poor receive more publicity
B) taxes rise
C) GDP rises and inflation soars
D) the retirement age remains unchanged over time
E) recessions occur
Q4) When negative spending shocks occur,transfer payments automatically fall. A)True B)False
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Chapter 25: Money,banks,and the Federal Reserve
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Sample Questions
Q1) In the United States between 1790 and the Civil War,who issued paper currency?
A) The Federal Reserve System
B) The U.S.Treasury Department
C) The U.S.Congress
D) The British government
E) Private banks.
Q2) Suppose the Federal Reserve wants to decrease the money supply by $100,000.If the required reserve ratio is 0.1,which of the following actions will achieve the Fed's goal?
A) The Fed must purchase $100,000 in bonds.
B) The Fed must sell $100,000 in bonds.
C) The Fed must purchase $10,000 in bonds.
D) The Fed must sell $10,000 in bonds.
E) The Fed must sell $90,000 in bonds.
Q3) In any monetary system,the means of payment must be the same as the unit of value.
A)True
B)False
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Chapter 26: The Money Market and Monetary Policy
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Sample Questions
Q1) An excess supply of money in the economy implies an excess demand for A) stocks
B) mortgages
C) consumer nondurables
D) consumer durables
E) bonds
Q2) Which of the following would lead to a rightward movement along a stationary money demand curve?
A) A decrease in the interest rate
B) A decrease in the price level
C) An increase in the interest rate
D) An increase in the price level
E) An increase in real income
Q3) Consider Figure 14-7 above.Which of the following would cause a movement from point A to point B on the diagram?
A) An increase in the price level.
B) A decrease in the interest rate.
C) An increase in the interest rate.
D) An increase in real income.
E) A decrease in the price level.
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Chapter 26: Feedback Effects From GDP to the Money
Market
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Sample Questions
Q1) Which of the following statements about the effects of an increase in government purchases is most accurate?
A) In the classical model,it will cause complete crowding out.In the short-run macro model,crowding out will be incomplete.
B) In the classical model,it will cause incomplete crowding out.In the short-run macro model,crowding out will be complete.
C) Crowding out will be complete in both the classical and short-run macro model.
D) Crowding out will be incomplete in both the classical and short-run macro model.
E) In the classical model,the increase in government spending will lead to a decrease in investment spending and autonomous consumption.In the short-run macro model,it will not.
Q2) Increases in the interest rate reduce the multiplier effect of an increase in government purchases.
A)True
B)False
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Chapter 27: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) The aggregate demand curve
A) is a horizontal line if the economy is perfectly competitive
B) depicts the economy's equilibrium output level at each possible price level
C) depicts the economy's equilibrium output at each possible interest rate
D) shifts whenever the price level changes
E) can slope upward if the Fed changes the money supply
Q2) Wages often respond slowly to changes in output.
A)True
B)False
Q3) Due to the multiplier effect,a decrease in investment spending
A) is greater than the resulting decrease in GDP
B) has a minimal impact on the economy
C) causes the money supply to increase
D) leads to an even larger decrease in output
E) results in increased autonomous consumption
Q4) A decrease in the price level will reduce business confidence and cause a decrease in equilibrium GDP.
A)True
B)False
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Chapter 28: Inflation and Monetary Policy
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Sample Questions
Q1) For the Fed,price stability means a low and stable rate of inflation.
A)True
B)False
Q2) The Federal Reserve Banking Act of 1978
A) attempted to guarantee stability of the banking system
B) was a reaction to the savings and loan crisis
C) added full employment to the list of objectives for the Fed
D) strengthened deposit insurance programs
E) pledged the Fed to keep the inflation rate low
Q3) If the inflation rate is higher than expected,real income is redistributed from lenders to borrowers.
A)True
B)False
Q4) If money demand falls on its own (i.e. ,not in response to a spending shock),what must the Fed do to stabilize GDP?
A) Increase the money supply
B) Decrease the money supply
C) Leave the money supply and money demand unchanged
D) Increase money demand
E) Decrease money demand
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Chapter 29: Exchange Rates and Macroeconomic Policy
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Sample Questions
Q1) If U.S.imports total $100 billion and exports total $150 billion,which of the following would be true?
A) U.S.net exports equal -$50 billion.
B) The U.S.has a trade surplus of $50 billion.
C) The U.S.has a trade deficit of $100 billion.
D) The U.S.has a trade deficit of $50 billion.
E) The U.S.has a trade surplus of $150 billion.
Q2) If Americans expect the dollar price of the British pound to rise,this expectation will cause
A) a rightward movement along the U.S.demand curve for pounds
B) a leftward shift of the U.S.demand curve for pounds
C) a rightward shift the U.S.demand curve for pounds
D) a leftward movement along the U.S.demand curve for pounds
E) no change in the U.S.demand curve for pounds
Q3) The International Monetary Fund was established in part to help avoid foreign currency crises.
A)True
B)False
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Chapter 30: Appendix-finding Equilibrium GDP
Algebraically
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Q1) If I = $2,000,G = $4,000,T = $1,000,NX = $0,autonomous consumption = $1,000 and the marginal propensity to consume is 0.6,what is the equilibrium value of output?
A) $16,000
B) $7,000
C) $6,400
D) $3,840
E) $8,000
Q2) If autonomous consumption is $5,000,the MPC is 0.7,net taxes are $2,000,investment spending is $4,000,and government purchases equal $2,500,and NX = $0,what is equilibrium GDP?
A) $14,428.6
B) $33,666.7
C) $40,800
D) $43,000
E) $45,000
Q3) If net taxes are included in the model,the equation that shows consumption at each level of income is: C = a + b(Y - T)or C = a + bY - bT.
A)True
B)False
Page 36
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Chapter 31: Appendix: Capital and Leverage
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Sample Questions
Q1) It was the rapid and system-wide deleveraging that contributed to the downward spiral of the 2008 financial crisis.
A)True
B)False
Q2) Just as greater leverage multiplies a bank's potential profits,it also multiplies a bank's potential losses.
A)True
B)False
Q3) One way to decrease leverage is increasing capital.
A)True
B)False
Q4) It is easy for one financial institution to reduce its leverage by acting alone,but when many financial institutions try to do the same thing at once,asset prices fall rapidly and bank capital declines for all such institutions.
A)True
B)False
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