Currency includes coins and paper money in circulation and stored in the federal reserve vaults.

Currency includes coins and paper money in circulation and stored in the federal reserve vaults.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 2

Cold weather in the Midwestern and eastern United States increases the popularity of vacations in sunny California. At the same time, the hotel employees' union in California negotiates a significant pay increase for its members. The likely impact on the hotel market in California is:
 a. an increase in the price of hotel rooms and an increase in hotel room rentals.
 b. an increase in the price of hotel rooms and a decrease in hotel room rentals.
 c. an uncertain effect on the price of hotel rooms, but an increase in the quantity of hotel rooms rented.
  d. an increase in the price of hotel rooms, but an uncertain effect on the quantity of hotel rooms rented.

Question 3

The smaller the MPC:
 a. the smaller the fraction of an increase in AD due to an increase in government purchases that is consumption.
  b. the greater the fraction of an increase in AD due to an increase in government purchases that is consumption.
  c. the greater the change in government purchases required to achieve a given change in AD.
 d. (a) and (c)

Question 4

Outstanding U.S. dollar-denominated travelers' checks issued by non-bank institutions are not counted as part of the M1 money supply.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 5

A major grocery store chain switches from bagging groceries in paper sacks to bagging them in plastic bags. As a result, the grocery chain demands more plastic bags than are available at the current market price. As a result:
 a. the market price for paper sacks is likely to increase.
 b. the market price for plastic bags is likely to increase.
 c. the quantity of paper sacks purchased by the chain is likely to increase.
  d. none of the above

Question 6

The greater the MPC:
 a. the greater the fraction of an increase in AD due to an increase in government purchases that is consumption.
  b. the smaller the fraction of an increase in AD due to an increase in government purchases that is consumption.
  c. the greater the change in government purchases required to achieve a given change in AD.
 d. none of the above

Question 7

The available credit limit we have in a credit card reflects the amount of money we hold in our savings account.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 8

If the price of peanut butter decreases substantially (ceteris paribus), the equilibrium quantity of jelly, a complement, is likely to:
 a. increase, and the equilibrium price of jelly is likely to decrease.
  b. increase, and the equilibrium price of jelly is likely to increase.
  c. decrease, and the equilibrium price of jelly is likely to decrease.
  d. decrease, and the equilibrium price is of jelly likely to increase.

Question 9

To offset the effect of a steep rise in net exports on the economy, the government might:
 a. increase government purchases.
  b. decrease government purchases.
  c. increase taxes.
 d. both (b) and (c) above

Question 10

In high-inflation countries, workers prefer to spend their income faster compared to low-inflation countries.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 11

If the price of ice cream increases substantially (ceteris paribus), the equilibrium quantity of hot fudge sauce, a complement, is likely to:
 a. increase, and the equilibrium price of hot fudge is likely to decrease.
  b. increase, and the equilibrium price of hot fudge is likely to increase.
  c. decrease, and the equilibrium price of hot fudge is likely to decrease.
  d. decrease, and the equilibrium price of hot fudge is likely to increase.

Question 12

To offset the effect of a steep fall in net exports on the economy, the government might:
 a. increase government purchases.
  b. decrease government purchases.
  c. increase taxes.
 d. none of the above.

Question 13

The higher the rate of inflation in Cuba, the greater the probability that Cuban residents will substitute U.S. currency for Cuban currency.
 a. True
  b. False
  Indicate whether the statement is true or false