What happens to the price of bonds when the Fed is selling bonds? What happens to the interest rate? What happens to the money supply?
What will be an ideal response?
Ques. 2When money serves as a standard for comparing values of different things, it is functioning as a
A) store of value.
B) hedge against inflation.
C) standard of deferred payment.
D) unit of accounting.
Ques. 3The merger of two pizza restaurant chains would be an example of
A) a horizontal merger.
B) a vertical merger.
C) a conglomerate merger.
D) an independent merger.
Ques. 4Suppose the Fed conducts an open market purchase of bonds. This monetary policy action will tend to cause
A) the price of bonds to increase, and the interest rate to increase.
B) the price of bonds to increase, and the interest rate to decrease.
C) the price of bonds to decrease, and the interest rate to increase.
D) the price of bonds to decrease, and the interest rate to decrease.
Ques. 5According to economist Paul Romer, economies that wish to experience growth must
A) invest most of their savings in national defense.
B) invest in knowledge.
C) drastically lower their standards of living.
D) become command economies.
Ques. 6Describe the major types of unemployment.
What will be an ideal response?
Ques. 7An effective price ceiling occurs when
A) the government sets a maximum price for a good above the equilibrium price.
B) the government sets a minimum price for a good above the equilibrium price.
C) the government sets a minimum price for a good below the equilibrium price.
D) the government sets a maximum price for a good below the equilibrium price.
Ques. 8Whenever productive resources are used to make capital goods
A) society is not producing efficiently.
B) society is giving up current consumption.
C) the production possibilities curve becomes flatter.
D) absolute advantage occurs.
Ques. 9Why are international investors who have invested in developing nations favoring foreign direct investment and portfolio investment over loans?
A) The process of making loans is usually more difficult for investors to do than foreign direct and portfolio investment.
B) The interest rate charged on the loans is usually lower than what can be earned in the U.S.
C) It is illegal for banks to make loans to foreign firms.
D) Investors have an aversion to owning dead capital and want to make sure that the resources they own do not become dead capital.
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