Question 1

2 out of 2 points

Which of the following would cause prices and real GDP to rise in the
short run?
Selected Answer:

c.

aggregate demand shifts right

Answers:

a.

short-run aggregate supply shifts right

b.

aggregate demand shifts left

c.

aggregate demand shifts right

d.

short-run aggregate supply shifts left

Question 2
2 out of 2 points

If U.S. residents purchase $500 billion of foreign assets and foreigners

purchase $1300 billion of U.S. assets,
Selected
Answer:

Answers:

d.

U.S. net capital outflow is -$800 billion; capital is flowing

into the U.S.
a.

U.S. net capital outflow is $800 billion; capital is flowing

into the U.S.
b.

U.S. net capital outflow is $800 billion; capital is flowing

out of the U.S.
c.

U.S. net capital outflow is -$800 billion; capital is flowing

out of the U.S.
d.

U.S. net capital outflow is -$800 billion; capital is flowing

into the U.S.

Question 3
2 out of 2 points

When conducting an open-market sale, the Fed

Selected
Answer:

a.

sells government bonds, and in so doing decreases the

money supply.
Answers:

a.

sells government bonds, and in so doing increases the

money supply.
b.

sells government bonds, and in so doing decreases the

money supply.
c.

buys government bonds, and in so doing decreases the

money supply.
d.

buys government bonds, and in so doing increases the

money supply.

Question 4
2 out of 2 points

If U.S. exports are $300 billion and U.S. imports total $350 billion,
which of the following is correct?
Selected Answer:

d.

The U.S. has a trade deficit of $50 billion.

Answers:

a.

The U.S. has a trade surplus of $350 billion.

b.

The U.S. has a trade deficit of $350 billion.

c.

The U.S. has a trade surplus of $50 billion.

d.

The U.S. has a trade deficit of $50 billion.

Question 5
2 out of 2 points

The Stock Market Boom of 2015

Imagine that in 2015 the economy is in long-run equilibrium. Then
stock prices rise more than expected and stay high for some time.
Refer to Stock Market Boom 2015. In the short run what happens
to the price level and real GDP?
Selected Answer:

b.

both the price level and real GDP rise.

Answers:

a.

both the price level and real GDP fall.

b.

the price level falls and real GDP rises.

c.

the price level rises and real GDP falls.

d.

both the price level and real GDP rise.

Question 6
2 out of 2 points

In which of the following cases was the inflation rate 10 percent over
the last year?
Selected
Answer:

d.

One year ago the price index had a value of 120 and now
it has a value of 132.

Answers:

a.

One year ago the price index had a value of 120 and now
it has a value of 132.
b.

One year ago the price index had a value of 145 and now
it has a value of 163.
c.

One year ago the price index had a value of 110 and now
it has a value of 120.
d.

One year ago the price index had a value of 126 and now
it has a value of 140.

Question 7
2 out of 2 points

In a fractional-reserve banking system, a decrease in reserve

requirements
Selected
Answer:

a.

increases both the money multiplier and the money

supply.

Answers:

a.

increases both the money multiplier and the money

supply.
b.

increases the money multiplier, but decreases the

money supply.
c.

decreases both the money multiplier and the money

supply.
d.

decreases the money multiplier, but increases the

money supply.

Question 8
2 out of 2 points

Keynes believed that economies experiencing high unemployment

should adopt policies to
Selected Answer:

d.

increase aggregate demand.

Answers:

a.

reduce government expenditures.

b.

reduce the money supply.

c.

increase aggregate supply.

d.

increase aggregate demand.

Question 9
2 out of 2 points

During some year a country had exports of $50 billion, imports of $70
billion, and domestic investment of $100 billion. What was its saving
during the year?
Selected Answer:

d.

$80 billion
Answers:

a.

$150 billion
b.

$80 billion
c.

$120 billion
d.

$100 billion

Question 10

Table 28-1

2 out of 2 points

Labor Data for Aridia

Year
Adult population
Number of employed
Number of unemployed

2010
2000
1400
200

2011
3000
1300
600

2012
3200
1600
200

Refer to Table 28-1. The labor-force participation rate of Aridia in

2012 was
Selected Answer:

b.

56.25%.
Answers:

a.

88.9%.
b.

50%.
c.

53.3%.
d.

56.25%.

Question 11
2 out of 2 points

Based on the quantity equation, if M = 3,000, P = 2, and Y = 4,500,

then V =
Selected Answer:

c.

3.
Answers:

a.

1.33.
b.

1.5.
c.

3.
d.

6.75.

Question 12
2 out of 2 points

Other things the same, an increase in the price level makes the
dollars people hold worth

Selected Answer:

b.

less, so they can buy less.

Answers:

a.

less, so they can buy more.

b.

more, so they can buy more.

c.

less, so they can buy less.

d.

more, so they can buy less.

Question 13
2 out of 2 points

When the Fed conducts open-market purchases,

Selected
Answer:

Answers:

d.

it buys Treasury securities, which increases the money

supply.
a.

it lends money to member banks, which decreases the

money supply.
b.

it buys Treasury securities, which decreases the money

supply.
c.

it buys Treasury securities, which increases the money

supply.
d.

it borrows money from member banks, which increases

the money supply.

Question 14
2 out of 2 points

If velocity = 5, the price level = 1.5, and the real value of output is
2,500, then the quantity of money is
Selected Answer:

c.

750.00.
Answers:

a.

750.00.
b.

1,050.00.

c.

8,333.33.
d.

333.33.

Question 15
2 out of 2 points

Suppose a stock market crash makes people feel poorer. This

decrease in wealth would induce people to
Selected
Answer:

Answers:

a.

decrease consumption, which shifts aggregate demand

left.
a.

increase consumption, which shifts aggregate supply

right.
b.

decrease consumption, which shifts aggregate supply

left.
c.

decrease consumption, which shifts aggregate demand

left.
d.

increase consumption, which shifts aggregate demand

right.

Question 16
2 out of 2 points

A situation in which the Feds target interest rate has fallen as far as it
can fall is sometimes described as a
Selected Answer:

b.

liquidity trap.
Answers:

a.

open-market trap.
b.

liquidity trap.
c.

liquidity preference.
d.

interest-rate contraction.

Question 17
2 out of 2 points

Suppose some country had an adult population of about 46 million, a

labor-force participation rate of 75 percent, and an unemployment
rate of 8 percent. How many people were unemployed?
Selected Answer:

c.

2.76 million
Answers:

a.

8 million
b.

3.68 million
c.

2.76 million
d.

2.54 million

Question 18
2 out of 2 points

If the United States had negative net exports last year, then it
Selected
Answer:

Answers:

a.

bought more abroad than it sold abroad and had a trade

deficit.
a.

sold more abroad than it purchased abroad and had a

trade deficit.
b.

bought more abroad than it sold abroad and had a trade

deficit.
c.

bought more abroad than it sold abroad and had a trade

surplus.
d.

sold more abroad than it purchased abroad and had a

trade surplus.

Question 19
2 out of 2 points

The shoeleather cost of inflation refers to

Selected
Answer:

Answers:

b.

the waste of resources used to maintain lower money

holdings.
a.

the redistributional effects of unexpected inflation.

b.

the waste of resources used to maintain lower money

holdings.
c.

the time spent searching for low prices when inflation

rises.
d.

the increased cost to the government of printing more

money.

Question 20
2 out of 2 points

Darla puts her money into a bank account that earns interest. One
year later she sees that the account has 6 percent more dollars and
that her money will buy 7.5 percent more goods.
Selected
Answer:

Answers:

b.

The nominal interest rate was 6 percent and the inflation

rate was -1.5 percent.
a.

The nominal interest rate was 13.5 percent and the

inflation rate was 7.5 percent.
b.

The nominal interest rate was 6 percent and the inflation

rate was -1.5 percent.
c.

The nominal interest rate was 13.5 percent and the

inflation rate was 1.5 percent.
d.

The nominal interest rate was 6 percent and the inflation

rate was 7.5 percent.

Question 21
2 out of 2 points

If the central bank in some country lowered the reserve requirement,

then the money multiplier for that country
Selected Answer:

a.

would increase.
Answers:

a.

would increase.
b.

would not change.

c.

would decrease.
d.

could do any of the above.

Question 22
2 out of 2 points

Mark, a U.S. citizen, buys stock in a British Shipping company. This

purchase is an example of
Selected
Answer:
Answers:

c.

saving for Mark and U.S. foreign portfolio investment.

a.

investment for Mark and U.S. foreign portfolio

investment.
b.

investment for Mark and U.S. foreign direct investment.

c.

saving for Mark and U.S. foreign portfolio investment.

d.

saving for Mark and U.S. foreign direct investment.

Question 23
2 out of 2 points

Other things the same, if the exchange rate changes from 75 Algerian
dinar per dollar to 72 Algerian dinar per dollar, the dollar has
Selected Answer:

c.

depreciated and so buys fewer Algerian goods.

Answers:

a.

appreciated and so buys more Algerian goods.

b.

appreciated and so buys fewer Algerian goods.

c.

depreciated and so buys fewer Algerian goods.

d.

depreciated and so buys more Algerian goods.

Question 24

If the Federal Reserve decided to lower interest rates, it could

2 out of 2 points

Selected Answer:

c.

buy bonds to raise the money supply.

Answers:

a.

buy bonds to raise the money supply.

b.

sell bonds to lower the money supply.

c.

sell bonds to raise the money supply.

d.

buy bonds to lower the money supply.

Question 25
2 out of 2 points

When Microsoft establishes a distribution center in France, U.S. net

capital outflow
Selected
Answer:

Answers:

d.

increases because Microsoft makes a direct investment in

capital in France.
a.

decreases because Microsoft makes a portfolio

investment in France.
b.

increases because Microsoft makes a portfolio investment

in France.
c.

decreases because Microsoft makes a direct investment

in capital France.
d.

increases because Microsoft makes a direct investment in

capital in France.

Question 26
2 out of 2 points

In the last half of 1999, the U.S. unemployment rate was about 4
percent. Historical experience suggests that this is
Selected
Answer:

Answers:

d.

below the natural rate, so real GDP growth was likely

high.
a.

above the natural rate, so real GDP growth was likely

low.

b.

below the natural rate, so real GDP growth was likely

low.
c.

above the natural rate, so real GDP growth was likely

high.
d.

below the natural rate, so real GDP growth was likely

high.

Question 27
2 out of 2 points

If an unemployed person quits looking for work, then, eventually the

unemployment rate
Selected
Answer:
Answers:

c.

and the labor-force participation rate both decrease.

a.

and the labor-force participation rate are both

unaffected.
b.

is unaffected and the labor-force participation rate

decreases.
c.

and the labor-force participation rate both decrease.

d.

decreases and the labor-force participation rate is

unaffected.

Question 28
2 out of 2 points

A country sells more to foreign countries than it buys from them. It

has
Selected Answer:

c.

a trade surplus and positive net exports.

Answers:

a.

a trade deficit and positive net exports.

b.

a trade surplus and negative net exports.

c.

a trade deficit and negative net exports.

d.

a trade surplus and positive net exports.

Question 29
2 out of 2 points

When the money market is drawn with the value of money on the
vertical axis, as the price level increases, the value of money
Selected
Answer:

b.

decreases, so the quantity of money demanded

increases.

Answers:

a.

decreases, so the quantity of money demanded

increases.
b.

increases, so the quantity of money demanded

increases.
c.

decreases, so the quantity of money demanded

decreases.
d.

increases, so the quantity of money demanded

decreases.

Question 30
2 out of 2 points

If money demand shifted to the right and the Federal Reserve desired
to return the interest rate to its original value, it could
Selected Answer:

a.

buy bonds to increase the money supply.

Answers:

a.

buy bonds to increase the money supply.

b.

sell bonds to decrease the money supply.

c.

sell bonds to increase the money supply.

d.

buy bonds to decrease the money supply.

Question 31
2 out of 2 points

If the reserve ratio is 5 percent, then $2,500 of additional reserves can

create up to

Selected Answer:

d.

$50,000 of new money.

Answers:

a.

$45,600 of new money.

b.

$37,500 of new money.

c.

$50,000 of new money.

d.

$62,500 of new money.

Question 32
2 out of 2 points

John, a U.S. citizen, opens up a Sports bar in Tokyo. This is an example

of U.S.
Selected Answer:

a.

foreign direct investment.

Answers:

a.

imports.
b.

foreign direct investment.

c.

foreign portfolio investment.

d.

exports.

Question 33
2 out of 2 points

During recessions, taxes tend to

Selected Answer:

d.

fall and thereby increase aggregate demand.

Answers:

a.

rise and thereby decrease aggregate demand.

b.

fall and thereby increase aggregate demand.

c.

fall and thereby decrease aggregate demand.

d.

rise and thereby increase aggregate demand.

Question 34

2 out of 2 points

You buy a new car built in Sweden. Other things the same, your
purchase by itself
Selected Answer:

a.

raises U.S. imports and lowers U.S. net exports.

Answers:

a.

raises U.S. imports and lowers U.S. net exports.

b.

raises U.S. exports and lowers U.S. net exports.

c.

raises both U.S. imports and U.S. net exports.

d.

raises both U.S. exports and U.S. net exports.

Question 35
2 out of 2 points

People are likely to want to hold more money if the interest rate
Selected
Answer:

c.

decreases, making the opportunity cost of holding

money fall.

Answers:

a.

increases, making the opportunity cost of holding

money rise.
b.

increases, making the opportunity cost of holding

money fall.
c.

decreases, making the opportunity cost of holding

money fall.
d.

decreases, making the opportunity cost of holding

money rise.

Question 36
2 out of 2 points

An increase in the MPC

Selected
Answer:

Answers:

d.

increases the multiplier, so that changes in government

expenditures have a larger effect on aggregate demand.
a.

decreases the multiplier, so that changes in government

expenditures have a smaller effect on aggregate demand.
b.

increases the multiplier, so that changes in government

expenditures have a smaller effect on aggregate demand.
c.

decreases the multiplier, so that changes in government

expenditures have a larger effect on aggregate demand.
d.

increases the multiplier, so that changes in government

expenditures have a larger effect on aggregate demand.

Question 37
2 out of 2 points

A depreciation of the U.S. real exchange rate induces U.S. consumers

to buy
Selected Answer:

a.

more domestic goods and fewer foreign goods.

Answers:

a.

fewer domestic goods and more foreign goods.

b.

fewer domestic goods and fewer foreign goods.

c.

more domestic goods and more foreign goods.

d.

more domestic goods and fewer foreign goods.

Question 38
2 out of 2 points

A Japanese firm buys lumber from the United States and pays for it
with yen. Other things the same, Japanese
Selected
Answer:

b.

net exports decrease, and U.S. net capital outflow

increases.

Answers:

a.

net exports decrease, and U.S. net capital outflow

increases.
b.

net exports decrease, and U.S. net capital outflow

decreases.

c.

net exports increase, and U.S. net capital outflow

decreases.
d.

net exports increase, and U.S. net capital outflow

increases.

Question 39
2 out of 2 points

The country of Sylvania has a GDP of $900, investment of $200,

government purchases of $200, and net capital outflow of -$100.
What is consumption?
Selected Answer:

b.

$600
Answers:

a.

$500
b.

$600
c.

$700
d.

$300

Question 40
2 out of 2 points

If the reserve ratio is 2.5 percent, then the money multiplier is

Selected Answer:

d.

40.
Answers:

a.

1.25.
b.

2.5.
c.

40.
d.

25.

Question 41

The federal funds rate is the interest rate

2 out of 2 points

Selected
Answer:

a.

banks charge each other for short-term loans of reserves.

Answers:

a.

banks charge each other for short-term loans of reserves.

b.

on newly issued one-year Treasury bonds.

c.

the Federal Reserves charges for loans it makes to the

federal government.
d.

the Federal Reserve charges banks for short-term loans.

Question 42
2 out of 2 points

Currently, U.S. currency is

Selected Answer:

a.

fiat money with no intrinsic value.

Answers:

a.

commodity money with no intrinsic value.

b.

fiat money with intrinsic value.

c.

commodity money with intrinsic value.

d.

fiat money with no intrinsic value.

Question 43
2 out of 2 points

When the Fed decreases the money supply, we expect

Selected Answer:

d.

interest rates to rise and stock prices to fall.

Answers:

a.

interest rates to rise and stock prices to fall.

b.

interest rates and stock prices to rise.

c.

interest rates to fall and stock prices to rise.

d.

interest rates and stock prices to fall.

Question 44

2 out of 2 points

If a country has net exports of $8 billion and sold $40 billion of goods
and services abroad, then it has
Selected Answer:

d.

$40 billion of exports and $32 billion of imports.

Answers:

a.

$48 billion of imports and $40 billion of exports.

b.

$40 billion of imports and $32 billion of exports.

c.

$48 billion of exports and $40 billion of imports.

d.

$40 billion of exports and $32 billion of imports.

Question 45
2 out of 2 points

John and Jane decide to go on a vacation. As a result, they withdraw

$2,500 from their savings account. As a result of this transfer by itself
Selected Answer:

c.

M1 increases by $2,500 and M2 stays the same.

Answers:

a.

M1 increases by $2,500 and M2 stays the same.

b.

M1 decreases by $2,500 and M2 stays the same.

c.

M1 increases by $2,500 and M2 decreases by $2,500.

d.

M1 decreases by $2,500 and M2 decreases by $2,500.

Question 46
2 out of 2 points

If the Fed conducts open-market purchases, the money supply

Selected Answer:

b.

increases and aggregate demand shifts right.

Answers:

a.

increases and aggregate demand shifts left.

b.

increases and aggregate demand shifts right.

c.

decreases and aggregate demand shifts right.

d.

decreases and aggregate demand shifts left.

Question 47
2 out of 2 points

In a certain economy, when income is $100, consumer spending is

$60. The value of the multiplier for this economy is 3. It follows that,
when income is $101, consumer spending is
Selected Answer:

d.

$60.67.
Answers:

a.

$60.60.
b.

$63.00.
c.

$61.33.
d.

$60.67.

Question 48
2 out of 2 points

The costs of changing price tags and price listings are known as
Selected Answer:

a.

menu costs.
Answers:

a.

shoeleather costs.
b.

menu costs.
c.

relative-price variability costs.

d.

inflation-induced tax distortions.

Question 49
2 out of 2 points

If the price level increased from 120 to 150, then what was the
inflation rate?
Selected Answer:

b.

25 percent

Answers:

a.

30 percent
b.

25 percent
c.

20 percent
d.

None of the above is correct.

Question 50
2 out of 2 points

An increase in the minimum wage

Selected
Answer:

Answers:

d.

decreases the quantity of labor demanded but increases

the quantity of labor supplied.
a.

increases both the quantity demanded and the quantity

supplied of labor.
b.

increases the quantity of labor demanded but decreases

the quantity of labor supplied.
c.

decreases both the quantity demanded and the quantity

supplied of labor.
d.

decreases the quantity of labor demanded but increases

the quantity of labor supplied.
Thursday, May 22, 2014 3:07:30 PM PDT