If tastes for a good increased and the price of a substitute good decreased at the same time, as a result:
a. prices would rise.
b. prices would fall.
c. larger quantities to be exchanged.
d. we would not know which direction either prices or quantities exchanged would be altered without more information.
Question 2There is a positive correlation between a nation's average annual inflation and the degree of independence of its central bank.
a. True
b. False
Indicate whether the statement is true or false
Question 3If the U.S. dollar depreciates against the yen below the targeted exchange rate, the U.S. Federal Reserve has to intervene in the foreign exchange market such that:
a. the U.S. demand for yen rises.
b. the supply of U.S. dollars rises.
c. U.S. exports to Japan fall.
d. the U.S. dollar is devalued.
e. the supply of U.S. dollars falls.
Question 4Which of the following would cause a decrease in both the price and quantity of a good exchanged?
a. A strike by production workers in the industry.
b. A subsidy to the industry from the government.
c. A decrease in advertising expenditures by the industry.
d. A decrease in the price of a complement good.
Question 5America's banking system is called a fractional reserve system.
a. True
b. False
Indicate whether the statement is true or false
Question 6Assume that there is an unexpected increase in the demand for U.S. dollars in Switzerland. If the foreign currency price of the U.S. dollar is fixed, the U.S. Federal Reserve must intervene in the foreign exchange market such that:
a. the supply of U.S. dollars increases.
b. the U.S. demand for the Swiss franc falls.
c. the supply of U.S. dollars decreases.
d. Swiss imports from the United States are reduced.
e. the Swiss currency is devalued.
Question 7Which of the following could not cause an increase in both the equilibrium price and quantity of a good exchanged?
a. Increased input prices.
b. Decreased incomes for an inferior good.
c. An increase in the price of a substitute good.
d. Increased tastes for the good.
Question 8In general, a bank that held excess reserves would earn lower profits as a result.
a. True
b. False
Indicate whether the statement is true or false
Question 9To keep the U.S. dollar from depreciating against the euro, the U.S. Federal Reserve must:
a. buy euros and sell U.S. dollars.
b. buy both euros and U.S. dollars.
c. sell euros and buy U.S. dollars.
d. sell both euros and U.S. dollars.
e. buy U.S. government bonds
Question 10If the price of apples falls and apples and oranges are substitutes, we would expect:
a. The quantity of apples demanded to increase and the demand for oranges to increase.
b. The quantity of oranges demanded to decrease and the demand for apples to increase.
c. The quantity of apples demanded to increase and the demand for oranges to decrease.
d. The quantity of oranges demanded to decrease and the demand for apples to decrease.
Question 11The larger the fraction of an investment financed by borrowing, the greater the potential for both profits and losses from that investment.
a. True
b. False
Indicate whether the statement is true or false
Question 12When the foreign exchange value of the Mexican peso is above its equilibrium rate, the peso will:
a. tend to be revalued.
b. tend to increase in value over other currencies.
c. be high demand in the foreign exchange market.
d. tend to depreciate.
e. tend to appreciate.
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