In January, 2,500 quarts of ice cream are sold in Boston at 2 per quart. In February, 3,000 quarts ...

In January, 2,500 quarts of ice cream are sold in Boston at 2 per quart. In February, 3,000 quarts are sold at 2.50 a quart. This change in the price and quantity sold of ice cream may have been caused by:
 a. a reduction in wages in the Boston area.
 b. the introduction of labor-saving, automated ice cream packing machinery.
 c. the release of a medical study showing that ice cream consumption improves mental health.
  d. the decision by Boston ice cream sellers to eliminate discount coupons.

Question 2

During a boom expansionary economy, public assistance payments and unemployment compensation payments automatically decrease while income taxes automatically increase. Which of the following best describes the effect of these changes on aggregate demand?
 a. Aggregate demand will be less than it would be without these automatic stabilizers.
  b. Aggregate demand will be the same as it was before the expansion.
 c. Aggregate demand will be less than it was before the expansion.
 d. none of the above

Question 3

The main advantage of the Eurocurrency market is that investment funds cannot be subject to foreign government controls.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 4

Pork from pigs can be used to produce bacon or sausage, but not both. If the price of bacon falls for some reason, then, everything else equal:
 a. the price of sausage will rise.
 b. the price of sausage will fall.
 c. the resources used to raise pigs will become more expensive.
  d. the demand for bacon will increase.

Question 5

The primary benefit of the automatic stabilizers is:
 a. they provide public assistance through legislative decision making.
 b. they require no new legislative action, so there is no legislative lag before these tools respond to fluctuations in the business cycle.
  c. they require legislative action, so there is a lag in response to these tools to fluctuations in the business cycle, and there is time to identify the spillover effects.
  d. none of the above.

Question 6

In the 1980s, the number of bank failures increased dramatically in the United States, most of which were uninsured.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 7

Pork from pigs can be used to produce bacon or sausage, but not both. If the price of bacon rises for some reason, then, everything else equal:
 a. the price of sausage will rise.
 b. the price of sausage will fall.
 c. the resources used to raise pigs will become less expensive.
  d. the demand for bacon will decrease.

Question 8

During a recession, total public assistance payments and unemployment compensation payments automatically increase while income taxes automatically decrease. Which of the following best describes the effect of these changes on aggregate demand?
 a. Aggregate demand will be less than it would be without these automatic stabilizers.
  b. Aggregate demand will be the same as it was before the recession.
 c. Aggregate demand will be more than it would be without these automatic stabilizers.
  d. Aggregate demand will be greater than it was before the recession.

Question 9

Banks that operate under Islamic law are no longer considered intermediaries between borrowers and lenders because they are not allowed to charge interest.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 10

The invention of machinery that can double the amount of gold extracted from raw ore will likely:
 a. raise the world price of gold to pay for the new machinery.
 b. lower the world price of gold because any given amount can now be produced more cheaply.
  c. raise the world price of gold because miners' wages must double as their productivity doubles.
  d. lower the world price of gold only if new mining companies are not allowed to enter the industry.

Question 11

Contractionary fiscal policy, other things being equal, will tend to:
 a. increase interest rates.
  b. increase investment.
 c. increase net exports.
 d. do both (b) and (c).