An increase in price will cause a firm's total revenue to increase if demand is price elastic.
a. True
b. False
Indicate whether the statement is true or false
Question 2A reserve requirement of 12.5 percent implies a potential money multiplier of:
a. 5.
b. 8.
c. 12.5.
d. 112.5.
Question 3Suppose workers do not believe the Fed will implement its announced monetary policy plans and the Fed wants to achieve low unemployment. In this situation the Fed would be best off:
a. implementing a policy of high money growth.
b. announcing and implementing a policy of low money growth.
c. announcing a policy of high money growth and implementing a policy of low money growth.
d. following a policy that forces the actual inflation rate to coincide with the expected inflation rate.
e. promoting a low rate of inflation and adjusting actual policy plans to economic conditions.
Question 4A decrease in price will cause a firm's total revenue to decrease if demand is price inelastic.
a. True
b. False
Indicate whether the statement is true or false
Question 5A reserve requirement of 50 percent means a money multiplier of:
a. 0.50.
b. 2.
c. 5.
d. 50.
Question 6Assume that a low-wage contract is in force in the society, and the central bank follows a low-money-growth policy. Which of the following will be observed?
a. The actual inflation rate will match the low rate that people had expected.
b. The actual inflation rate will be higher than the natural rate.
c. The actual inflation rate will be higher than the low rate that people had expected.
d. The actual inflation rate will be lower than the high rate that people had expected.
e. The unemployment rate will be lower than the natural rate.
Question 7If good A had twice as many good substitutes as good B, but good B consumed twice the amount of a buyers income as good A, goods A and B would have the same elasticity of demand.
a. True
b. False
Indicate whether the statement is true or false
Question 8A reserve requirement of 10 percent means a money multiplier of:
a. 1.
b. 9.
c. 10.
d. 11.1.
Question 9Which of the following gives the Fed a credibility problem because the Fed may change its planned policies in light of new economic developments?
a. Adaptive expectations
b. Time inconsistency
c. Wage expectations
d. Disinflation
e. Rational expectations
Question 10Demand tends to be more elastic, the greater the number of good substitutes, the greater the fraction of one's income devoted to a product and the greater the time allowed to respond to a price change.
a. True
b. False
Indicate whether the statement is true or false
Question 11Assume that the reserve requirement is 20 percent. First National Bank has vault cash and deposits with the Fed of 80 million, loans and securities of 320 million, and demand deposits of 400 million. First National:
a. could extend a maximum of 40 million of additional loans.
b. could extend a maximum of 20 million of additional loans.
c. could extend a maximum of 10 million of additional loans.
d. is not in a position to extend additional loans.
Question 12A time-inconsistent monetary policy is one that:
a. is set by congressional decree.
b. is based on monetary targets established by law.
c. changes over time as economic conditions change.
d. follows a zero percent inflation rate.
e. does not adapt to changing economic conditions.
Question 13A perfectly inelastic supply curve is vertical.
a. True
b. False
Indicate whether the statement is true or false
Quick Reply
