Survey of Economics
Exam Answer Key
Course Introduction
Survey of Economics provides an introduction to the fundamental principles of both microeconomics and macroeconomics, equipping students with a foundational understanding of how economies function at individual and societal levels. The course explores topics such as supply and demand, market structures, consumer and producer behavior, national income, unemployment, inflation, fiscal and monetary policy, and the global economy. Emphasis is placed on the practical application of economic concepts to real-world issues, enabling students to analyze current events and understand the economic forces that shape decision-making and public policy. This course is designed for students from a variety of disciplines seeking a broad overview of economic theory and its relevance in everyday life.
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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Page 2
Chapter 1: What Is Economics
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178 Verified Questions
178 Flashcards
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Sample Questions
Q1) The term capital,as used by economists,refers to
A) money
B) the physical space in which production occurs
C) the time allocated to producing goods and services
D) financial securities such as stocks and bonds
E) machinery and equipment that is not used up during the production process
Answer: E
Q2) A statement of fact that can be verified by observation is
A) an abstraction
B) a positive statement
C) a normative statement
D) a philosophical conundrum
E) the basis of an assumption
Answer: B
Q3) The opportunity cost of a particular activity is the sum of the benefits that could have been received from all foregone activities.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Scarcity,choice,and Economic Systems
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146 Flashcards
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Sample Questions
Q1) Using the information in Figure 2-11,Jill's opportunity cost of fetching each additional pail is
A) 2 boards sawed
B) 1/2 of a board sawed
C) 8 boards sawed
D) 1/5 of a board sawed
E) 10 boards sawed
Answer: A
Q2) When all resources used in production are not perfectly substitutable,
A) specialization does not lead to greater production
B) the economy or firm is producing at a point outside of its production possibilities frontier
C) there will be constant opportunity costs
D) the production possibilities frontier will be concave (bowed outward)
E) the economy or firm will only produce one good in equilibrium
Answer: D
Q3) An economy's production possibilities frontier is fixed in the long run.
A)True
B)False
Answer: False
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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) Bread and butter are complements.A decrease in the price of bread results in a(n)
A) decrease in the supply of break
B) increase in the demand for butter
C) increase in the demand for bread
D) increase in resource prices
E) violation of the law of demand
Answer: B
Q2) Assuming the most typical shapes of the demand and supply curves,which of the following could lead to an increase in the current equilibrium price for personal computers?
A) a decrease is the price of computer chips
B) a decrease in buyers' incomes,assuming that computers are a normal good
C) a technological improvement that reduces manufacturing costs
D) expectations of a higher future price
E) an increase in the price of computer software
Answer: D
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Chapter 4: Working With Supply and Demand
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58 Flashcards
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Sample Questions
Q1) When analyzing the housing market,the supply curve
A) will be upward sloping because the higher the price of a house the more that will exist
B) will be horizontal to illustrate that the supply of housing is a stock variable
C) will be downward sloping;that is what went wrong with the housing market
D) will be vertical to illustrate that the supply of housing is a stock variable
E) could be horizontal,vertical or upward sloping depending upon the housing market in question
Q2) To say that the housing market is in equilibrium means that A) there are no vacant houses
B) the number of houses that are being constructed is equal to the housing stock
C) the number of houses that are currently empty is equal to the number of households currently looking to buy a house
D) the quantity demanded of houses is equal to the number of houses currently under construction
E) the number of houses that people want to own is equal to the housing stock
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Chapter 5: Elasticity
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Sample Questions
Q1) If the demand curve is a straight line with a negative slope,then demand is more elastic at higher prices than lower prices.
A)True
B)False
Q2) The price elasticity of demand will be larger in absolute value if
A) expenditure on the good represents a smaller proportion of the consumer's total expenditure
B) we define the good more broadly
C) we define the good more narrowly
D) the number of substitutes is smaller
E) the number of consumers is larger
Q3) 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
Q4) An inferior good is defined by an income elasticity less than 1.
A)True
B)False
Page 7
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Chapter 6: Consumer Choice
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Sample Questions
Q1) The feature of preferences that "more is better"
A) is a logical consequence of transitivity
B) is shared by most people,most of the time.
C) implies that 5 apples will always be preferred to 4 oranges
D) implies that 5 apples will always be preferred to 5 oranges
E) means that,when dining,people always try to eat as much as they possibly can
Q2) Joe spends all of his money on concert tickets and compact disks.Figure 6-1 shows his budget constraint when his income is $100.The price of a ticket is $20,while the price of a compact disk is $10.If Joe currently buys 3 tickets and would like to purchase a fourth,his opportunity cost would be
A) 1 compact disk
B) $20
C) $10
D) 2 compact disks
E) 4 compact disks
Q3) For a normal good,the substitution and income effects of a price decrease work in the same direction to increase the quantity demanded of that good.
A)True
B)False
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Page 8
Chapter 7: Production and Cost
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127 Verified Questions
127 Flashcards
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Sample Questions
Q1) A firm's total cost of production is
A) the owners' opportunity cost
B) labor costs plus the cost of materials
C) the payments for its inputs
D) depreciation plus payments for inputs
E) taxes plus depreciation plus payments for inputs
Q2) In comparing long-run and short-run costs,which of the following statements is true at each level of output?
A) long-run total cost is always less than short-run total costs
B) long-run total cost cannot exceed short-run total cost
C) long-run and short-run total costs are equal when fixed costs are large
D) firms usually make decisions about production levels based on long-run costs rather than short-run costs
E) short-run total cost cannot exceed long-run total cost
Q3) The marginal product of labor is the
A) total output produced when one more worker is hired
B) change in average output produced when one more worker is hired
C) total output per worker when one more worker is hired
D) change in total output when one more worker is hired
E) maximum quantity of output when one more worker is hired
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Chapter 8: How Firms Make Decisions: Profit Maximization
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118 Verified Questions
118 Flashcards
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Sample Questions
Q1) All of the following,except one,are included in the profit earned by a firm's owners.Which is the exception?
A) the reward for developing new products
B) the reward for moving an established business into new geographic markets
C) the reward for risk taking
D) salaries that compensate for the owners' time
E) dividend payments to the stockholders
Q2) Whenever marginal cost exceeds marginal revenue,
A) profit declines if the firm reduces output
B) profit increases if the firm increases output
C) the firm should shut down
D) losses decrease if the firm increases output
E) profit declines if the firm increases output
Q3) 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
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Chapter 9: Perfect Competition
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248 Verified Questions
248 Flashcards
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Sample Questions
Q1) A perfectly competitive firm in long run equilibrium will earn
A) zero economic profit.
B) a small positive economic profit.
C) a large positive economic profit.
D) zero accounting profit.
Q2) All of the following are characteristics of a perfectly competitive market,except one.Which is the exception?
A) a large number of sellers
B) a standardized product
C) no barriers to entry
D) sellers can easily exit the market
E) an intensive rivalry among the sellers
Q3) In a perfectly competitive market,the number of sellers must be large enough that
A) none of them ever earns positive economic profits.
B) none of them can significantly alter the price of the product.
C) they each end up selling a slightly different product.
D) it is easy for a particular firm to leave the market.
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11
Chapter 9: Perfect Competition: Part A
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5 Verified Questions
5 Flashcards
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Sample Questions
Q1) Which of the following is not a characteristic of a perfectly competitive market
A) buyers and sellers are well informed about the market
B) standardized product
C) many buyers and few sellers
D) easy exit out of the industry
E) easy entry into the industry
Q2) 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.
Q3) Diminishing marginal returns are the reason why some industries have positively-sloped long-run average cost curves.
A)True
B)False
Q4) In a perfectly competitive market,a technological advance allows all firms to earn higher economic profits in the long run.
A)True
B)False
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Chapter 10: Monopoly
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210 Verified Questions
210 Flashcards
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Sample Questions
Q1) In Figure 10-29,the monopolist will sell its output at a price of
A) $10.
B) $15.
C) $20.
D) $25.
Q2) Patents allow manufacturers to block the entry of new firms into an industry through
A) infringement suits
B) economies of scale
C) limit pricing
D) price discrimination
E) a government franchise
Q3) Which of the following would be the most difficult consumer characteristic for firms to use in price discrimination?
A) gender
B) age
C) height
D) educational attainment
E) weight
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Chapter 11: Monopolistic Competition and Oligopoly
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192 Verified Questions
192 Flashcards
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Sample Questions
Q1) Cecilia's Cafe is a monopolistic competitor.If Cecilia's is currently producing at the output level at which her average total cost is minimized and the cafe is earning an economic profit,then,in the long run,output will
A) decline and average total cost will increase
B) decline and average total cost will decrease
C) remain unchanged as Cecilia's strives to minimize costs
D) increase and average total cost will be greater
E) increase and average total cost will be smaller
Q2) The Department of Justice and the Federal Trade Commission use the HHI to determine whether to challenge mergers.
A)True
B)False
Q3) In the short run,a monopolistic competitor can
A) not earn an economic profit because of competition
B) use limit pricing to reduce competition
C) maximize profits by charging the highest price the market will bear
D) earn an economic profit
E) maximize profit by selecting the minimum efficient scale
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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) The relationship between the marginal product of labor (MP),the product price (P),and marginal revenue product of labor (MRP)in a perfectly competitive market is
A) MP = P x MRP
B) MP = MRP / P
C) MRP = P + MP
D) MRP = P / MP
E) MP = P + MRP
Q2) An increasing marginal product of labor would be most commonly found
A) at high levels of employment
B) in perfect competition
C) at low levels of employment
D) when a product price is rising
E) when a product price is falling
Q3) A firm can maximize profit by hiring labor up to the point where
A) the marginal revenue product equals the wage rate
B) the marginal product equals marginal cost
C) total revenue equals total cost
D) the marginal revenue product equals marginal product
E) the marginal revenue product is zero
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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) Consider two labor markets in which jobs are equally attractive in all respects other than the wage rate.All workers are equally able to do either job.Initially,both labor markets are perfectly competitive.If a union organizes workers in one of the markets,then wage rate will tend to
A) rise in both markets
B) fall in both markets
C) rise for the union job,but remain unchanged for the nonunion job
D) fall for the nonunion job,but remain unchanged for the union job
E) rise for the union job and fall for the nonunion job
Q2) Advocates of comparable worth favor eliminating all differences in wage rates among employees of the same firm.
A)True
B)False
Q3) The Earned Income Tax Credit
A) is targeted to poor families
B) is less targeted to poor families than the minimum wage
C) is just a different name for the minimum wage
D) operates on the labor market in exactly the same as the minimum wage
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Page 16
Chapter 13: Capital and Financial Markets
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) Travel Expert is a corporation that specializes in selling vacation packages in Transylvania and Stansylvania.There are a fixed number of shares of Travel Expert's stock available to the public.If the two countries go to war,making it much more dangerous to travel there,what will most likely happen to the Travel Expert's share price and the number of shares outstanding?
A) Price will fall;number of shares will fall.
B) Price will fall;number of shares will rise.
C) Price will rise;number of shares will remain the same.
D) Price will remain the same;number of shares will fall.
E) Price will fall;number of shares will remain the same.
Q2) Microsoft issues a 2-year bond with a face value of $5,000.In addition to the principal paid at maturity,the bond has 2 annual coupon payments of $500 each,to be received at the end of the first and second year respectively.If the interest rate is 10 percent (0.10)per year,what is the value of the newly issued bond?
A) $5,000.00
B) $6,000.00
C) $5,886.68
D) $4,901.48
E) $41.32
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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) A buyer's consumer surplus on a unit of a good is its value to that buyer minus the market price.
A)True
B)False
Q2) A Pareto improvement
A) cannot take place unless a side payment is made
B) cannot take place unless a market is perfectly competitive
C) cannot occur unless both parties to a transaction enjoy positive net benefits
D) will increase the total net benefits available in a perfectly competitive market
E) occurs whenever the sum of market consumer surplus and market producer surplus is positive
Q3) An efficient economy
A) is a fair economy
B) can only be a capitalist economy
C) is not necessarily a fair economy
D) would never experience air or water pollution
E) would not have a government sector
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18
Chapter 15: Governments Role in Economic Efficiency
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Sample Questions
Q1) If firms make agreements that reduce the amount of competition in a market,
A) the market price usually falls
B) they would face penalties under antitrust legislation
C) mergers will result
D) there must be diseconomies of scale in the industry
E) they would face penalties under contract law
Q2) One problem with average cost pricing for a natural monopoly is that
A) it requires a side payment
B) maximizes the firm's revenue
C) makes the firm's total cost equal to zero
D) maximizes the firm's profit
E) it provides no incentive for the firm to economize on capital
Q3) Because there are positive externalities from higher education,
A) the private market would provide too little of it
B) the private market would provide too much of it
C) the government should impose a tax on college students
D) the government should impose a tax on students' families
E) higher education should not be produced
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Chapter 16: Comparative Advantage and the Gains From International Trade
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) In an Israeli factory,each worker can produce 2/5 of a shirt in an hour or 1/3 of a pair of pants in an hour.If there are 500 workers in the factory,then the maximum number of shirts that can be made in an hour is
A) 100
B) 200
C) 50
D) 250
E) 300
Q2) Tariffs are government policies designed to encourage international trade.
A)True
B)False
Q3) An effective import quota will
A) increase the revenue received by the exporting nation
B) eliminate all incentives for trade between nations
C) reduce the quantity demanded of the imported good
D) lead to a lower domestic price
E) lead to a higher price in the exporting nation
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 inflation rate in the United States has always been positive.
A)True
B)False
Q2) Since 1959,the U.S.has experienced severe recessions in which three periods?
A) 1964-65,1981-82,and 1990-91
B) 1974-75,1981-82,and 2008-09
C) 1960-61,1974-75,and 2008-09
D) 1960-61,1981-82,and 2008-09
E) 1969-70,1981-82,and 2008-09
Q3) During the 1990s and the first decade of the 2000s
A) polls have shown that U.S.citizens are more concerned about inflation than any other national problem
B) the U.S.inflation rate reached double digits (10 percent or higher)
C) the U.S.economy consistently experienced deflation (a falling price level)
D) the U.S.inflation rate averaged about 8 percent per year
E) the U.S.inflation rate averaged less than 3 percent per year
Q4) "Output fell 2 percent last quarter" is an example of a positive economic statement.
A)True
B)False
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Chapter 18: Production, income, and Employment
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Sample Questions
Q1) Which of the following statements about U.S.unemployment is true?
A) All racial groups experience approximately the same rate of unemployment.
B) Black and white teenagers experience equally high rates of unemployment.
C) Blacks as a group experience higher rates of unemployment than do white teenagers.
D) Blacks experience higher rates of unemployment than do Hispanics.
E) White teenagers experience higher rates of unemployment than do any other group in the population.
Q2) When a recession begins and ends is determined by a committee within the A) Office of Management and Budget
B) Bureau of Economic Analysis
C) Council of Economic Advisors
D) National Bureau of Economic Research
E) Bureau of Labor Statistics
Q3) If an economy has been operating below its potential output level,
A) frictional unemployment is too high
B) more individuals should begin entering the labor force
C) the government should create more jobs
D) unemployment is likely rising.
E) the production possibilities frontier will shift
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Page 22
Chapter 19: The Price Level and Inflation
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Sample Questions
Q1) Suppose workers agreed to a contract that guaranteed a real wage increase of 3 percent per year.If the inflation rate was 7 percent over the following year,what is the required increase in the nominal wage to meet the contract requirements?
A) 10 percent
B) 3 percent
C) 4 percent
D) 7 percent
E) 1 percent
Q2) In what sense is it a cost that people must spend time and resources coping with inflation?
A) Because the loss of time and resources frustrates people unnecessarily
B) Because the time and resources could have been used to produce something else instead
C) Because the time and resources could have been wasted elsewhere
D) Because the time and resources are a sunk cost
E) Because the time and resources are insufficient to cope with the problem
Q3) The real wage can increase only if the nominal wage increases.
A)True
B)False
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Page 23
Chapter 20: The Classical Long-Run Model
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Sample Questions
Q1) Suppose the current equilibrium real wage is $15 an hour.Which of the following is true?
A) A real wage above $15 an hour would lead to an excess demand for labor
B) A real wage above $15 an hour would lead to an excess supply of labor
C) The real wage must fall to prevent unemployment
D) The real wage must rise to prevent unemployment
E) A real wage below $15 an hour would lead to an excess supply of labor
Q2) Because markets may not clear for several months or even several years,the classical model
A) is no longer considered valuable by mainstream economists
B) has no value when explaining a situation where excess supply exists
C) is irrelevant to any discussion of a market in which excess demand exists
D) does a better job of explaining short-term fluctuations than long-run growth
E) does a better job of explaining long-run growth than short-run fluctuations
Q3) The Classical model
A) is now discredited
B) was developed by John Maynard Keynes
C) has been completely displaced by the short-run macro model
D) helps us to understand the performance of the economy in the long run
E) is most useful in helping us to predict when an economic downturn will occur
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Chapter 20: Part A: The Classical Model in an Open Economy
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Sample Questions
Q1) In the classical model with an open economy,an increase in the trade deficit as a result of a tax cut,causes a decline in the interest rate,attracting more loanable funds from abroad.
A)True B)False
Q2) In the classical model with an open economy,an increase in government purchases may not cause complete crowding out,but crowding out will be complete worldwide.
A)True B)False
Q3) In the classical model,when an open economy has balanced trade,Say's law holds. A)True B)False
Q4) 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
Page 25
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Chapter 21: Economic Growth and Rising Living Standards
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Sample Questions
Q1) Refer to Figure 9-9.The production possibilities frontier tells us that there is a trade-off between investment in capital and
A) investment in human capital
B) research and development expenditures
C) leisure time available to workers
D) higher living standards in the future
E) living standards in the present
Q2) Government budget deficits
A) discourage household saving,which increases interest rates and reduces planned investment spending
B) encourage household saving,which increases the funds available for planned investment spending
C) reduce the demand for funds,lower interest rates,and increase planned investment spending
D) discourage planned investment spending by putting upward pressure on interest rates
E) stimulate economic growth by encouraging capital investment
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Chapter 22: Economic Fluctuations
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Sample Questions
Q1) The reason a shock to one sector can spread to the whole economy is that
A) a decrease in production in one sector leads to an overall decrease in spending
B) firms will need to help bail out other firms that are having troubles
C) an increase in production in one sector will lead to an overall decrease in spending
D) most shocks are not sector-specific but economy-wide
E) workers laid off in the one sector will purchase more goods in another sector
Q2) Over time the full-employment level of output in the United States has risen steadily.
A)True
B)False
Q3) Assume the economy is at full employment.Which of the following would you expect if oil prices suddenly decreased?
A) A recession
B) A decrease in employment below its full-employment level
C) An economic contraction
D) A technological breakthrough
E) An increase in employment above its full-employment level
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Chapter 23: The Short-Run Macro Model
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Sample Questions
Q1) The marginal propensity to consume is always
A) greater than 1
B) between 0 and 1
C) less than 0
D) between 0 and -1
E) between 0 and 0.6
Q2) Aggregate expenditure includes final spending by households,businesses,and government on final goods and services.
A)True
B)False
Q3) Use the graph shown in Figure 11-5 to determine equilibrium in the economy.
A) $1,000
B) $2,000
C) $3,000
D) $3,250
E) There is no equilibrium in this economy.
Q4) A spending shock is a change in spending that ultimately affects the entire economy.
A)True
B)False
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Chapter 24: Fiscal Policy
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Sample Questions
Q1) Ricardian equivalence refers to
A) the equivalence of taxes and revenues in fiscal policy.
B) the fact the households incorporate inflationary expectations in calculating interest payments.
C) the equivalence of imports and exports in an open economy.
D) the possibility that households may say save now so that they can pay the higher taxes later if there is a tax cut at the present time which drives up future interest payments.
E) none of the above.
Q2) Recessions are associated with budget deficits.
A)True
B)False
Q3) Government expenditures are larger than government outlays.
A)True
B)False
Q4) Government expenditures are a subcategory of government outlays.
A)True
B)False
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Chapter 25: Money,banks,and the Federal Reserve
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Sample Questions
Q1) Credit cards
A) are considered money because they are a means of payment
B) are not considered money and thus are not of importance to the monetary authority
C) are not considered money but are important because they may affect how much people hold in M1 and M2
D) are counted in the money supply as part of M3
E) are considered money when held by the public
Q2) The demand deposit multiplier is the number by which we must multiply the
A) injection of reserves to get the total change in demand deposits
B) total amount of demand deposits to get the total change in the money supply
C) level of required reserves to get the total change in the money supply
D) total amount of currency in circulation to find total demand deposits
E) change in demand deposits to find the total change in the money supply
Q3) When was the first U.S.paper currency,the greenback,created?
A) During the Revolutionary War
B) During World War I
C) During World War II
D) During the Civil War
E) During the war of 1812.
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Page 30
Chapter 26: The Money Market and Monetary Policy
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Sample Questions
Q1) If the interest rate is below its equilibrium value,the price of A) bonds will fall.
B) money will fall.
C) bonds will rise.
D) stocks will fall.
E) real estate will fall.
Q2) Which of the following is the opportunity cost of money?
A) The use of money as a means of payment
B) The trouble of having to get money out of the bank
C) The interest forgone by holding money
D) The ability to purchase things at a moment's notice
E) Commissions paid to brokers
Q3) Equilibrium GDP and the interest rate are interdependent.
A)True
B)False
Q4) An increase in the money supply will increase both the amount of money demanded and output.
A)True
B)False
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Chapter 26: Feedback Effects From GDP to the Money
Market
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Sample Questions
Q1) An increase in government spending leads to a(n)
A) downward shift of the aggregate expenditure line and a leftward shift of the money demand curve
B) upward shift of the aggregate expenditure line and a rightward shift of the money demand curve
C) downward shift of the aggregate expenditure line and a rightward shift of the money demand curve
D) upward shift of the aggregate expenditure line and a leftward shift of the money demand curve
E) upward shift of the aggregate expenditure line but no shift of the money demand curve
Q2) The equilibrium interest rate will change if
A) the money demand curve shifts
B) there is a movement along the money demand curve
C) crowding out becomes so serious that the dollar loses value
D) the federal funds rate fluctuates rapidly
E) Congress threatens to put a cap on interest rates
Q3) Crowding out is important only in the classical model.
A)True
B)False
Page 32
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Chapter 27: Aggregate Demand and Aggregate Supply
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Q1) Which of the following would shift the aggregate demand curve to the right?
A) An increase in government purchases
B) An increase in investment spending
C) An open market purchase of bonds by the Fed
D) All of the above
E) None of the above
Q2) An increase in the price level will increase the interest rate,which will decrease investment spending and shift aggregate demand to the left.
A)True
B)False
Q3) A decrease in oil prices is considered a demand shock because it would lead to a shift of the aggregate demand curve.
A)True
B)False
Q4) An increase in oil prices is considered a supply shock because it would lead to a shift of the aggregate supply curve.
A)True
B)False
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Chapter 28: Inflation and Monetary Policy
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Q1) The Fed does not try to reduce frictional unemployment because it
A) is easier to eliminate with fiscal policy
B) is not a serious social problem
C) has microeconomic solutions
D) signals a strong economy
E) rarely exceeds a 1 percent rate
Q2) The natural rate of unemployment never changes.
A)True
B)False
Q3) If the inflation rate is lower than expected,real income is redistributed from borrowers to lenders.
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
Page 34
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Chapter 29: Exchange Rates and Macroeconomic Policy
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Q1) A decrease in the price of a foreign currency is represented graphically as
A) rightward movement along the demand curve for that currency
B) an upward shift of the demand curve
C) a downward shift of the demand curve
D) a horizontal line
E) a vertical line
Q2) If the U.S.purchased $100 billion in foreign assets and foreigners purchased $50 billion of U.S.assets,which of the following is true?
A) Net exports equal -$50 billion.
B) Exports total $100 billion.
C) There is a trade deficit.
D) Net exports equal $50 billion.
E) Imports total $50 billion.
Q3) Managed floats are equivalent to fixed exchange rates.
A)True
B)False
Q4) An appreciating currency is always a sign of economic health.
A)True
B)False
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Chapter 30: Appendix-finding Equilibrium GDP
Algebraically
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Sample Questions
Q1) 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
Q2) 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
Q3) 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
Page 36
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Chapter 31: Appendix: Capital and Leverage
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Q1) One way to decrease leverage is increasing capital.
A)True
B)False
Q2) In the aftermath of the 2008 financial crisis,everyone agreed that lower leverage ratios would be a good thing.
A)True
B)False
Q3) A financial institution's leverage ratio is defined as:
A) Profit / Revenue.
B) Total Assets / Shareholders' Equity.
C) Shareholders' Equity / Total Assets.
D) Value of Delinquent Loans / Value of All Loans.
E) Total Debt / Total Revenue.
Q4) Deleveraging is the process of reducing leverage,and therefore reducing the risk to capital from any further declines in asset prices.
A)True
B)False
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