Equations for C, I, G, and NX are given below. If the equilibrium level of GDP is 21,500, what is the marginal propensity to consume?
C = 1,500 + (MPC)Y
I = 1,000
G = 2,000
NX = -200
A) 0.67 B) 0.75 C) 0.8 D) 0.9
Ques. 2Refer to Figure 29-3. Consider the market for U.S. dollars against the Japanese yen shown above. An event which could have caused the changes shown in the graph would be
A) an economic expansion in the United States.
B) an increase in U.S. real income.
C) a decrease in Japanese interest rates.
D) speculators expect the dollar to depreciate in value in the near future.
Ques. 3A provision of the Dodd-Frank Act of 2010 revised the Federal Reserve Act to
A) restrict the Fed's ability to make loans except to commercial banks.
B) allow the Fed to buy commercial paper issued by nonfinancial firms.
C) allow the Fed to make loans to investment banks.
D) allow the Fed to make loans to any individual, partnership, or corporation in unusual and exigent circumstances.
Ques. 4How do open market operations work?
What will be an ideal response?
Ques. 5Two actions by the Fed during Alan Greenspan's term as chairman have been identified as possibly contributing to the financial crisis in 2008. Which of the following was one of those actions?
A) working in concert with the European Central Bank to stabilize the dollar / euro exchange rate
B) financing the first Gulf War by printing money and generating rapid inflation
C) decreasing the money supply to fight the possibility of disinflation
D) the decision to keep the federal funds rate at 1 percent from June 2003 to June 2004
Ques. 6How does an increase in the relative price of a country's goods in terms of foreign goods, or real exchange rate, affect its balance of trade?
A) An increase in the real exchange rate reduces imports, raises exports, and increases the balance of trade.
B) An increase in the real exchange rate raises imports, reduces exports, and reduces the balance of trade.
C) An increase in the real exchange rate reduces imports, raises exports, and reduces the balance of trade.
D) An increase in the real exchange rate raises imports, reduces exports, and increases the balance of trade.
Ques. 7Describe the structure of the Fed's Open Market Committee (FOMC). What is this committee's primary responsibility?
What will be an ideal response?
Ques. 8If the consumption function is defined as C = 5,500 + 0.9Y, what is the marginal propensity to consume?
A) 0.1 B) 0.9 C) 5.5 D) 6.1
Ques. 9If the amount you owe on your house is greater than the price of the house, you have
A) negative equity in your house. B) no value to your house.
C) a reverse mortgage on your house. D) a mortgage rate that is too high.
Ques. 10Refer to Figure 29-2. Consider the market for U.S. Dollars against the British pound shown in the graph above. From this graph we can conclude that the dollar price of a British pound has ________ to ________ dollars per pound
A) decreased; 2.00 B) decreased; 0.46 C) increased; 0.50 D) increased; 2.17
Ques. 11Which of the following would increase the size of the government purchases multiplier?
A) an increase in the quantity of imports purchased by households from an increase in income
B) a decrease in the amount saved by households from an increase in income
C) an increase in the tax rate
D) a decrease in the amount of consumption spending by households from an increase in income
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