We can be sure that the equilibrium price will fall when:

We can be sure that the equilibrium price will fall when:
 a. supply and demand both increase.
 b. supply and demand both decrease.
 c. supply increases and demand decreases.
  d. supply decreases and demand increases.

Question 2

Financial institutions are not very heavily leveraged, to prevent risk to the banking system.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 3

Which of the following people is most likely to demand U.S. dollars in the foreign exchange market?
 a. A United States resident who is traveling to the Greek Islands
  b. An American investor who intends to buy Japanese government bonds
  c. A resident of Australia who is traveling to Belgium
  d. A British importer of U.S. beef
  e. A U.S. company that is importing avocados from Mexico

Question 4

An increase in the price of inputs used to produce good A will:
 a. increase supply, increase price and increase the quantity exchanged.
  b. increase demand, increase price and increase the quantity exchanged.
  c. decrease supply, increase price and decrease the quantity exchanged.
  d. decrease supply, decrease price and decrease the quantity exchanged.

Question 5

When a person pays a loan back to a bank by writing a check for the amount due, demand deposits decline and the money supply is reduced.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 6

In foreign exchange markets, a U.S. resident who imports New Zealand apples is:
 a. a demander and supplier of New Zealand dollars.
  b. a demander and supplier of U.S. dollars.
  c. a demander of New Zealand dollars and a supplier of U.S. dollars.
  d. a supplier of both New Zealand dollars and U.S. dollars.
  e. a supplier of New Zealand dollars and a demander of U.S. dollars.

Question 7

An increase in the price of a close substitute for good A will:
 a. increase demand, increase price and increase the quantity exchanged.
  b. increase demand, increase price and decrease the quantity exchanged.
  c. increase supply, increase price and increase the quantity exchanged.
  d. decrease demand, decrease price and decrease the quantity exchanged.

Question 8

New loans create money directly, but they also create excess reserves in other banks, which leads to still further increases in both loans and the supply of money.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 9

To fix the foreign currency price of domestic currency below the free market equilibrium rate, a government must:
 a. sell both its own currency and foreign exchange.
  b. buy its own currency and sell foreign exchange.
  c. buy both its own currency and foreign exchange.
  d. sell its own currency and buy foreign exchange.
  e. revalue its own currency.

Question 10

If the supply of a product decreases by more than the demand increases:
 a. the price will rise and the quantity traded will fall.
 b. the price will rise, but the quantity traded could either rise or fall.
  c. the price will fall, but the quantity traded could either rise or fall.
  d. the quantity traded will rise, but the price could either rise or fall.

Question 11

If the government requires banks to keep 100 percent of their deposits on reserve, a 1,000 deposit in a checking account would lead to a 100,000 increase in the money supply.
 a. True
  b. False
  Indicate whether the statement is true or false