If your local bank buys a few billion dollars worth of government securities, what happens to the economy’s money supply? What will be an ideal response? ANSWER If the seller of the bonds is another private business, there is no effect on the money supply. The money that might have supported spending and lending […]
Date: September 10th, 2020
If the nominal interest rate is above the equilibrium level ________. A) the supply of real money balances will fall B) the quantity of real money balances people are holding is too low, and is rising C) people are selling financial assets in order to increase real money balances D) all of the above E) […]
Date: September 10th, 2020
The utility function captures A) how consumers interact. B) how an individual consumer ranks consumption bundles. C) how output is produced from labor and capital inputs. D) how happy a consumer is about a given consumption bundle. ANSWER B
Date: September 10th, 2020
Suppose you have a collection of gold coins from the 19th century. Comment on their suitability to provide for you each of the three functions of money. What will be an ideal response? ANSWER The coins are an exceptional store of value. They would serve well as a medium of exchange, eagerly accepted by […]
Date: September 10th, 2020
The acquisition of a domestic financial asset by a foreign resident is called A) foreign direct investment. B) foreign capital investment. C) a portfolio inflow. D) a portfolio outflow. ANSWER C
Date: September 10th, 2020
The balance of payments improves A) when there is an exchange rate appreciation. B) when there is an exchange rate depreciation. C) when the interest rate rises. D) never. ANSWER D
Date: September 10th, 2020
The Federal Reserve System consists of ________. A) eleven district banks and a board of governors B) ten district banks and the FOMC C) eleven district banks D) twelve district banks and a board of governors E) none of the above ANSWER D
Date: September 10th, 2020
The main reason that many businesses fail when the price level is falling is that ________. A) deflation causes a decline in short-run aggregate supply B) as prices fall, businesses are unable to predict the quantity of output they will be able to sell C) the real value of the firms assets declines in proportion […]
Date: September 10th, 2020
In modern economies, the supply of money depends mainly on the economy’s ________. A) tax rates B) mining of precious metals C) net exports D) growth of output of goods and services E) none of the above ANSWER E
Date: September 10th, 2020
The principle that consumers and firms optimize A) is not helpful because some economic agents may behave irrationally. B) is helpful because it allows us to analyze how economic agents respond to changes in their environment. C) only applies to perfectly competitive markets. D) is helpful because it determines the available technology. ANSWER B
Date: September 10th, 2020
