Refer to Figure 24-4. Given the economy is at point A in year 1, what will happen to the price level in year 2?
A) It will remain constant. B) It will fall.
C) It will rise. D) not enough information to answer the question
Ques. 2Which of the following is not a consequence of the Fed changing the reserve requirement?
A) Changes in the ratio are easily incorporated into banks' routine management.
B) Changes in the ratio effectively places a tax on banks' deposit taking and lending activities.
C) Decreasing the ratio will increase excess reserves.
D) Increasing the ratio will decrease the amount of reserves banks have to loan.
Ques. 3Describe how a lender can lose during inflation if the inflation is unanticipated and the loan is a fixed-interest-rate loan. How would a variable-interest-rate loan (one that adjusts over the contract period) eliminate these loses?
What will be an ideal response?
Ques. 4If the dollar appreciates against the Mexican peso
A) U.S. exports to Mexico become less expensive.
B) The value of Mexican imports to the United States does not change.
C) Mexican imports to the U.S. become more expensive.
D) U.S. exports to Mexico become more expensive.
Ques. 5The passage of the ________ in 1930 sparked a trade war that caused net exports to decrease and real GDP to decrease.
A) Sherman Antitrust Act B) Clayton Act
C) Smoot-Hawley Tariff D) Cellar-Kefauver Act
Ques. 6Suppose the equilibrium real federal funds rate is 2 percent, the target rate of inflation is 2 percent, the current inflation rate is 4 percent, and real GDP is 2 percent above potential real GDP.
If the weights for the inflation gap and the output gap are both 1/2, then according to the Taylor rule the federal funds target rate equals
A) 4 percent. B) 6 percent. C) 8 percent. D) 10 percent.
Ques. 7The National Restaurant Association states that the restaurant industry has an economic effect of more than 1.7 trillion annually in the United States,
with every dollar spent in restaurants generating an estimated total of 2.05 in spending in the economy. This indicates that the spending multiplier for the restaurant industry is equal to
A) 1.21. B) 1.70. C) 2.05. D) 4.25.
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