question

the working of the entire economy or large sections of it

answer

macroeconomics deals with

question

the allocation of scarce resources, given unlimited wants

answer

the study of economics is primarily concerned with which of the following?

question

1 and 2

answer

For an economy with a straight line PPC, which of the following must be true? 1. the opportunity cost of producing another unit is constant 2. resources are completely adaptable to alternative uses 3. resources are used efficiently

question

1, 2, and 3

answer

An opportunity cost is entailed in which of the following? 1. a student decides to attend college full-time 2. a family uses its $20,000 savings to purchase an automobile 3. a farmer decides to grow more wheat and less corn

question

markets and the government

answer

in a mixed economy, what to produce and how to produce are determined by

question

girl shopping for shoes

answer

each of the following is a factor of production EXCEPT

question

the amount people want exceeds the amount available at a zero price

answer

goods are scarce if and only if

question

inputs

answer

resources are also known as

question

the natural dye that makes the eyeshadow blue

answer

Monica likes to wear red lipstick, and she always wears blue eyeshadow whenever she has red lips. a resource for the eye shadow is

question

good

answer

Ina likes to wear red lipstick, and she always wears blue eyeshadow whenever she has red lips. Te red lipstick is a

question

Adam Smith

answer

the 18th century enlightenment philosopher who wrote The Wealth of Nations, which included the idea of the "invisible hand," was

question

the added benefit of producing more dresses exceeds cost

answer

Donna Karan produces dresses, shoes, and tights. she will produce more dresses if

question

opportunity cost

answer

is measured by how much of one good/service you have to forgo in order to get some stated amount of another good/service

question

the dress

answer

when Rita decides to buy a $200 pair of high heels instead of a $400 dress to wear to prom, her opportunity cost is

question

all relevant factors except one change when studying an economic effect

answer

the "other things equal" assumption means

question

inward

answer

A decline in available natural resources (inputs) will cause the PPF to shift

question

that choosing to produce one good implies sacrificing production of other goods

answer

the Production Possibility Frontier (PPF) shows

question

1,2, and 3

answer

Changes in which of the following factors would affect the growth of an economy? 1. quantity and quality of human and natural resources 2. amount of capital goods available 3. technology

question

1 and 2

answer

Which of the following is an example of a resource? 1. petroleum 2. a factory 3. a cheeseburger diner

question

1 and 2

answer

which of the following situations represent(s) resource scarcity? 1. a growing economy needs large bodies of water to build dams for hydroelectric power 2. there is a finite amount of petroleum in the physical environment 3. casette tapes are no longer being produced

question

2

answer

which of the following statements is/are normative? 1. the price of gasoline is rising 2. the price of gasoline is too high 3. gas prices are expected to gall in the near future

question

money supply

answer

the long-run growth rate of an economy will be increased by an increase in all of the following EXCEPT

question

will not move; movement will be up the curve

answer

Dresses and skirts are substitutes. If the price of skirts increases, the demand curve for dresses

question

will not move; movement will be up the curve

answer

lipstick and eyeshadow are substitutes. If the price of lipstick increases, the demand curve for lipstick

question

when price increases, quantity demanded decreases

answer

the demand curve is downward sloping because

question

shifted to the right

answer

recently, Toms shoes have soared in popularity. When that happened, the demand curve for Toms shoes

question

girls can buy more makeup

answer

when the price of makeup falls, the quantity demanded of makeup increases because

question

incomes decrease

answer

the demand curve will shift to the left for normal goods when

question

will shift to the right

answer

if there is an increase in the population of girls, then the demand curve for high heels

question

will shift to the right

answer

if the expectations that the price of skirts will increase over the next year, then the demand curve for skirts right now

question

income increases

answer

the demand curve will shift to the left for inferior goods when

question

price effect

answer

each of the following is a reason that the Law of Demand exists EXCEPT

question

households are demanders in the product markets and suppliers in the factor markets

answer

which of the following is true according to the circular flow model?

question

the demand for one increases when the price of the other increases

answer

two goods are substitutes if

question

an increase in demand for new potatoes

answer

Raclette is essentially Raclette cheese over boiled new potatoes. if the price of this cheese is decreased we would expect

question

air travel is a normal good and vacation travel by car is an inferior good

answer

when the economy suffers a downturn, vacationers are more likely to take car trips than to fly. which of the following provides the most reasonable explanation for this phenomenon?

question

a decrease in the price of good X

answer

which of the following will not cause an increase in demand for good X?

question

when income increases, the demand decreases

answer

a good is inferior if:

question

induce producers to supply more

answer

the supply curve is upward sloping because higher prices

question

illustrates how quantity supplied rises as price rises

answer

the supply curve

question

more will be supplied at the same price as before

answer

an increase in supply means that

question

will shift to the left

answer

a manufacturer can make either dresses or skirts. If the price at which she can sell dresses increases, then (c.p.) the supply curve for skirts

question

will shift to the right

answer

Petroleum is used to make nylon. Glen Raven Mills uses nylon to make pantyhose and parachutes. If the price at which parachutes are sold decreases, then (c.p.) the supply curve for pantyhose

question

will not move; movement will be up the supply curve

answer

Petroleum is used to make nylon. Glen Raven Mills uses nylon to make pantyhose and parachutes. If the price at which parachutes are sold increases, then (c.p.) the supply curve for parachutes

question

will shift to the right

answer

Petroleum is used to make nylon. Glen Raven Mills uses nylon to make pantyhose and parachutes. If the government lowers taxes on petroleum, which decreases its cost, then (c.p.) the supply curve for pantyhose

question

will shift to the left

answer

Petroleum is used to make nylon. Glen Raven Mills uses nylon to make pantyhose and parachutes. If the government imposes new environmental regulations on the production of nylon, which increases its cost, then (c.p.) the supply curve for parachutes

question

will shift to the right

answer

if Coach adopts the new iPad technology to streamline production, the supply curve for Coach purses will

question

will shift to the right

answer

if there is an increase in the number of Louis Vuitton high heel sellers, then the supply curve for Louis Vuitton high heels

question

will shift to the right

answer

with summer coming to an end, producers believe that at the end of the month they will need to lower the price at which they sell bikinis. therefore, the current supply curve for bikinis

question

had shifted to the right

answer

Matilda killed a cow for its hide to make a leather mini-dress and treated herself to steak. When Matilda killed the cow for its hide, the supply curve for beef

question

will shift to the right

answer

dresses and skirts are substitutes. if the price at which dresses are sold increases, then (c.p.) the demand curve for skirts

question

will shift to the left

answer

Coach purses and Louis Vuitton heels are complements. if the price at which Coach purses are sold increases, then (c.p.) the demand curve for Louis Vuitton heels

question

rises; rises

answer

When demand increases, Price ___ and quantity ___

question

indeterminate; rises

answer

when demand and supply increase, Price ___ and quantity ___

question

rises; indetermiante

answer

when demand increases and supply decreases, Price ___ and quantity ___

question

rises; falls

answer

when supply decreases, Price ___ and quantity ___

question

indeterminate; falls

answer

when demand and supply decrease, Price ___ and quantity ___

question

falls; indeterminate

answer

when demand decreases and supply increase, Price ___ and quantity ___

question

falls; falls

answer

when demand decreases, Price ___ and quantity ___

question

falls; rises

answer

when supply increases, Price ___ and quantity ___

question

will shift to the right

answer

a manufacturer can make either dresses or skirts. if the price at which she can sell dress decreases, then (c.p.) the supply curve for skirts

question

will shift to the left

answer

Petroleum is used to make nylon. Glen Raven Mills uses nylon to make pantyhose and parachutes. If the price at which parachutes are sold increases, then (c.p.) the supply curve for pantyhose

question

will not move; movement will be down the supply curve

answer

Petroleum is used to make nylon. Glen Raven Mills uses nylon to make pantyhose and parachutes. If the price at which parachutes are sold decreases, then (c.p.) the supply curve for parachutes

question

will shift to the left

answer

Petroleum is used to make nylon. Glen Raven Mills uses nylon to make pantyhose and parachutes. If the government increases taxes on petroleum, which decreases its cost, then (c.p.) the supply curve for pantyhose

question

will shift to the right

answer

with summer coming to an end, producers believe that at the end of the month they will need to lower the price at which they sell bikinis. therefore, the current supply curve for bikinis

question

price is higher than equilibrium price (Quantity demanded < Quantity supplied)

answer

when market disequilibrium is caused by a price floor (i.e. minimum wage)

question

price is lower than equilibrium price (Quantity demanded > Quantity supplied)

answer

when market disequilibrium is caused by a price ceiling (i.e. rent control)

question

productive physical capital (i.e. machines)

answer

investment spending represents spending on

question

c+i+x-m

answer

which one of the following equations correctly measures GDP?

question

that involves double-counting

answer

the intermediate goods are not counted in the calculation of GDP because

question

your purchase of your neighbor's 2001 Toyota

answer

which of the following would NOT be included in this year's GDP?

question

imports from exports

answer

Net exports are calculated by subtracting

question

household production

answer

as a measure of economic welfare, gross domestic product underestimates a country's production of goods and services when there is an increase in

question

is adjusted for price-level changes (i.e. inflation)

answer

the major difference between real and nominal GDP is that real GDP

question

recipients of transfer payments have not produced of supplied goods and services in exchange for these payments

answer

which of the following best explains why transfer payments are not include in the calculation of GDP?

question

the government increases its domestic purchases of food for use by the military

answer

which of the following transactions would represent an addition to a nation's current GDP?

question

the price level is increasing

answer

if real GDP is increasing at 3% per year and nominal GDP is increasing at 7% per year, which of the following is necessarily true?

question

increased saving by individuals increases their chances of becoming unemployed

answer

in the "paradox of thrift":

question

output and employment are falling

answer

recessions are periods when

question

business cycle

answer

the short-run alternation between economic downturns, recessions, and economic upturns and expansions is known as the

question

during depressions employment falls faster than during recessions

answer

the basic difference between an economic resin and economic depression is that

question

an expansion

answer

if during a period of several months we observe the economy to be simultaneously increasing its level of output and unemployment, we could assume that the economy is in

question

higher employment

answer

a recession leads to all of the following EXCEPT

question

two consecutive quarter

answer

in many countries, economists adopt the rule that a recession is a period of at least ______, during which aggregate output falls

question

the economy did not experience another severe and prolonged economic downturn comparable to it

answer

according to official statistics for the U.S., after the experience of the Great Depression

question

expansion

answer

in a typical business cycle, the business cycle trough is immediately followed by the

question

the unemployment rate

answer

which of the following measure is typically used as an indicator of the conditions in the labor market?

question

recession

answer

in a typical business cycle, the business cycle peak is immediately followed by the recession

question

recession

answer

economists have identified several consecutive months of falling employment and forecasts for the next few months are for more of the same. at what point in the business cycle is the economy apparently located?

question

is a temporary minimum level of real GDP

answer

the trough of the business cycle

question

business cycle peak, recession, business cycle trough, expansion

answer

the sequence of the business cycle phases is

question

unemployment

answer

the most painful effect of a recession is

question

the total number of people actively working

answer

employment is

question

the total number of people employed and unemployed

answer

the labor force is

question

the percent of the labor force that is unemployed

answer

the unemployment rate is

question

be out of work and be actively looking for a job

answer

to be counted as unemployed, one must:

question

lower the official unemployment rate

answer

the presence of discouraged workers in the economy tends to

question

frictional unemployment

answer

unemployment that is due to the time workers spend in job search is considered

question

unemployment that results when people seeking jobs do not have the education or skills to do the job that are available or there are no jobs that need the skills of the people looking for work

answer

structural unemployment is

question

equal to the sum of frictional and structural unemployment

answer

the natural rate of unemployment is

question

there is no cyclical unemployment

answer

the natural rate of employment is achieved when

question

an autoworker who is laid off from an automobile company due to a decline in sales caused by a recession

answer

an example of cyclical unemployment is an

question

discouraged workers who have given up looking for a job

answer

the official unemployment rate ignores

question

it reduces the risk of losing the best workers

answer

firms pay efficiency wages because

question

the unequal distribution of wealth among members of society

answer

each of the following can be a cause of the business cycle EXCEPT

question

it can lead to inflation

answer

each of the following is a reason unemployment is bad EXCEPT

question

can only measure price changes of domestically produced goods

answer

a price index includes each of the following EXCEPT

question

123.07

answer

in the country of Incarnatia, a market basket of goods and services cost $130 in 2007, $140 in 2008, and $160 in 2009. Based on this information and considering 2007 as the base year, the price index in 2009 was

question

consumer price index

answer

the _____ is the most widely used measure of inflation in the U.S.

question

25%

answer

if the CPI is 120 in Year 1 and 150 in Year 2, then the rate of inflation from Year 1 to Year 2 is

question

changes in the prices of goods and services typically purchased by consumers

answer

the consumer price index reflects the

question

changes only in the base year, every 5-7 years

answer

which of the following is NOT true concerning the consumer price index? the consumer price index:

question

20% more than the same market basket purchased in the base year

answer

you read in the newspaper that the CPI in 2008 was 120, you will conclude that a typical market basket in 2008 would have cost

question

real wage

answer

the wage rate divided by the price level is the

question

real income

answer

income divided by the price level is

question

the Bureau of Labor Statistics collects data on the prices of only a few goods and services

answer

Many economists believe that the CPI overstates inflation for each of the following reasons EXCEPT

question

product price index

answer

which of the following statistics is used to measure changes in the prices that firms pay for goods and services

question

maintain the purchasing power of retirees

answer

the purpose of indexing Social Security payments to the CPI is to

question

increased cost of transactions due to inflation

answer

shoe-leather costs refer to the

question

unit-of-account costs

answer

the costs arising from the way inflation makes money a less reliable unit of measurement are known as

question

costs associated with business changing prices

answer

menu costs of inflation re the

question

hyperinflation

answer

an increase in the price level that is extremely rapid (say 400% per year) is called

question

4%

answer

suppose that the nominal rate of interest is 7% and the inflation rate is 3% then the real rate of interest is equal to

question

the lenders gain and the borrowers lose

answer

if a bank sets its nominal interest rate for lending and adjusts it for expected inflation, if the the actual inflation rate turns out to be less than the expected inflation rate, then:

question

3.3%

answer

suppose the real interest rate is 2.1% and the nominal interest rate is 5.4%. then the inflation rate is (R= N- ?)

question

the real interest rate plus the rate of inflation

answer

the nominal interest rate equals

question

aggregate price level

answer

a measure of the overall level of prices in the economy is the

question

consumption of final goods and services

answer

demand-pull inflation is caused by

question

increased production costs

answer

cost-push inflation is caused by

question

the CPI reflects the prices of all goods produced in an economy

answer

each of the following is a difference between the GDP deflator and the CPI EXCEPT

question

Borrowers, people whose incomes are indexed (COLA: cost of living adjustment)

answer

usually, when inflation rises very quickly, which TWO of the following will benefit?

question

a downward slope

answer

the negative relationship between the aggregate price level and aggregate output demanded gives the aggregate demand curve

question

rises; falls

answer

according to the aggregate demand curve, when the aggregate price level ____, the quantity of aggregate demand ____

question

a movement on the aggregate demand curve

answer

in general, a change in the price level, all other things unchanged, causes

question

decreases and consumer spending decreases

answer

according to the wealth effect, when the price level increases, the purchasing power of assets

question

C (consumption), I (investment), G (government expenditures), and X-I (net exports)

answer

the components of aggregate demand are

question

consumption and investment

answer

the aggregate demand curve is negatively sloped in part because of the impact of interest rates on

question

interest rates and thus affect the quantity of investment and consumption demanded

answer

the interest rate effect is the tendency for changes in the price level to affect

question

interest rates to rise, borrowing to fall, and aggregate demand to fall

answer

according to the interest rate effect, an increase in the price level causes

question

a fall in the price level will raise the interest rate and reduce investment spending

answer

which of the following is NOT true regarding the aggregate demand curve?

question

the aggregate demand curve shifts to the left

answer

suppose that the stock market crashes, which changes wealth. Which of the following is most likely to occur?

question

changes in the price level

answer

which of the following is a factor which cannot shift the aggregate demand curve?

question

lower labor productivity

answer

the aggregate demand curve would shift to the left for all of the following reasons EXCEPT

question

the aggregate demand curve shifts to the right

answer

if the government lowers income taxes,

question

the aggregate demand curve shifts to the right

answer

if the government increases its spending,

question

the aggregate demand curve shifts to the left

answer

a decrease in the money supply is likely to cause

question

the public becomes more optimistic about future income

answer

aggregate demand will increase if

question

Federal Reserve lowers the interest rate by increasing the money supply

answer

all of the following are examples of fiscal policy, EXCEPT when the

question

increase; decrease

answer

if the government wants to increase aggregate demand, it would ____ spending and _____ taxes

question

increases; right

answer

if the Fed increases the quantity of money in circulation, investment _____ and the aggregate demand curve shifts to the _____

question

saving increases by less than $x

answer

when disposable income increases by $x, which of the following could occur?

question

spending multiplier

answer

an increase in the marginal propensity to consume causes and increase in which of the following?

question

5

answer

if the MPC is .8, the multiplier is [1/(1-MPC)]

question

the marginal propensity to save increases

answer

the value of the spending multiplier decreases when

question

the marginal propensity to save increases

answer

the MPC decreases when

question

decrease; decrease

answer

if business taxes increase, aggregate supply will ____ and employment will ____

question

it suggests that increases in output can occur without increases in the price level

answer

which of the following is true of a horizontal supply curve?

question

purchasing power of wealth decreases

answer

the aggregate demand curve is downward sloping because as the price level increases the

question

a decrease in unemployment

answer

an increase in aggregate demand when the economy is in equilibrium will result in

question

taxes

answer

a decrease in which of the following will increase aggregate demand?

question

unemployment rate

answer

if an economy's aggregate supply curve is upward sloping, an increase in government spending will most likely result in a decrease in the

question

an increase in the money supply

answer

an inflationary gap can be eliminated by all of the following EXCEPT

question

a decrease in employment

answer

a contractionary supply shock would most likely result in

question

decrease; decrease; increase

answer

if aggregate demand decreases due to a decrease in consumption, then the price level will ____, output will ____, and the unemployment rate will ____

question

the cost of productive resources (inputs)

answer

the short-run aggregate supply curve is likely to shift to the left when there is an increase in

question

a decrease in aggregate supply

answer

Stagflation is caused by

question

real national output and the price level

answer

the intersection of the aggregate supply curve and the aggregate demand curve occurs at the economy's equilibrium level of

question

an across-the-board reduction of wages in the manufacturing sector

answer

which of the following would most likely cause a rightward shift in an economy's aggregate supply curve?

question

unemployment falls with little inflation

answer

equilibrium real GDP is FAR BELOW full employment and the government lowers household taxes. which is the likely result? (answer based on SRAS with three stages)

question

always vertical in the long run

answer

which is the best way to describe the AS curve in the long run?

question

real interest rate

answer

the long-run growth of an economy will be increased by an increase in all of the following EXCEPT

question

decrease; increase

answer

a decrease in energy costs will most likely cause the price level to ____ and real GDP to _____

question

negative supply shocks cause the factor prices to decrease

answer

which of the following best explains how an economy could simultaneously experience high inflation and high unemployment

question

2

answer

a change in which of the following will cause the short-run aggregate demand curve to shift? 1. price level 2. government spending 3. the cost of all inputs

question

increase; not change

answer

in an economy with a horizontal supply curve, an increase in government spending will cause output to ____ and price level to ___

question

increase; decrease; increase

answer

if private savings increase, the supply of loanable funds will _____, interest rates will _____, and the amount of borrowing will ______

question

savings

answer

physical capital is purchased through investment spending, which in turn is mostly financed out of

question

the total amount of borrowing decreases

answer

when the government runs a budget deficit, all of the following happen EXCEPT

question

the real interest rate

answer

the price in the loanable funds market is

question

reducing investment spending on physical capital

answer

crowding out negatively affects the economy by

question

the federal government spends more than it collects in taxes in a given year

answer

federal budget deficits occur when

question

the decrease in investment spending caused by an increase in government spending

answer

crowding out is best described as which of the following?

question

higher interest rate

answer

an increase in government spending and/or decrease in taxes leads to a

question

appreciating the value of the dollar

answer

when the U.S. government engages in deficit spending, that spending is primarily influenced by

question

decrease; decrease

answer

in the short run, a restrictive fiscal policy will cause aggregate demand to ____ and price level to ____

question

decreasing taxes to stimulate aggregate demand

answer

which of the following policies would a Keynesian recommend during a period of high unemployment and low inflation?

question

the size of the national debt will increase

answer

which of the following will occur if the federal government runs a budget deficit?

question

changes in the money supply

answer

which of the following does NOT come under the rubric of fiscal policy?

question

decrease taxes

answer

suppose the economy is experiencing a recessionary gap. to move equilibrium aggregate output closer to the level of potential output, the best fiscal policy option is to

question

an increase in government spending

answer

if the economy is at potential output, and consumption spending suddenly decreases due to a fall in consumer confidence, the appropriate fiscal policy is

question

decrease; decrease; increase

answer

if aggregate demand decreases due to a decrease in consumption, then the price level will ___, output will ___, and the unemployment rate will ____

question

decrease, decrease

answer

if business taxes increase, aggregate supply will __ and employment will ___

question

increasing/decreasing taxes

answer

each of the following is a tool of Monetary Policy EXCEPT

question

they encourage it

answer

what effect do low interest rates have on business investment?

question

interest rate

answer

the cost of money is the

question

actions the Fed takes to influence the economy

answer

what does "monetary policy" mean?

question

one that keeps only a small part of customers' deposits on hand

answer

what does a "fractional reserve system" mean?

question

the opportunity cost of holding money increases as interest rates get higher

answer

why does a high interest rate discourage people from holding their money in cash?

question

the portion of a deposit that a bank must keep on hand

answer

what is the required reserve ratio?

question

by reducing the discount rate

answer

one way the Fed encourages banks to loan more money is

question

the sale decreases the money supply

answer

how does a bond sale made by the Fed affect the money supply?

question

the board members are appointed for 14 year terms

answer

what provides the Federal Reserve Board a high degree of political independence?

question

the u.s. president

answer

who nominates (appoints) the members of the Board of Governors of the Fed?

question

the federal reserve

answer

who issues U.S. paper currency?

question

it can be disruptive to the whole banking system

answer

what is the major reason the Fed rarely changes the reserve requirement?

question

open market operations

answer

what is the policy used by the Fed to change the money supply?

question

decrease; increase

answer

an increase in the money supply will ____ real interest rates and ______ real output

question

lower interest rates and more investment

answer

an expansionary monetary policy will lead to

question

high inflation

answer

under which of the following conditions would a restrictive monetary policy be most appropriate?

question

$8,000

answer

assume that the reserve requirement is 20%. if a bank initially has no excess reserves and $10,000 cash is deposited in the bank, the maximum amount by which this bank may increase its loan is

question

the buying and selling of government bonds by the Fed

answer

open market operations refer to which of the following activities?

question

decrease; increase; decrease

answer

an open market sale of bonds by the Fed will most likely ____ the money supply, ____ the interest rate, and _____ aggregate demand

question

travel in the U.S. is less expensive for europeans

answer

when the dollar value of the euro is high

question

foreign exchange market

answer

the market in which foreign currencies are traded is known as the

question

the euro depreciated and the dollar appreciated during this period of time

answer

Suppose that the price of a euro was $1.47 on January 1, 2013 and decline to $1.40 for a euro on January 12, 2013. This implies that

question

.50 euros (€)

answer

if the rate of exchange is 1€ = US$2, then US$1=

question

price of currencies between two countries

answer

the exchange rate is the

question

americans will buy fewer goods from abroad

answer

if the U.S. dollar appreciates, we expect all of the following EXCEPT

question

the demand for euros to increase, appreciating the euro

answer

suppose that the US and the European Union (EU) are the only trading partners in the world. If interest rates in the US are significantly lower than those in the EU, we would expect

question

the US dollar will appreciate

answer

if the economy of europe expands rapidly and this increases european tourism to the US, which of the following will be the likely result?

question

an appreciation of the dollar, which will raise US imports

answer

suppose that europeans began to view the US as a more attractive investment opportunity. Which of the following is likely to be the next series of events?

question

demand curve for the euro to the right; appreciate

answer

in the forex, an increase in the rate of return available in the EU will shift the ____ and the euro will _____

question

an exchange rate regime

answer

the rule that governs a country's policy toward its exchange rate is known as the

question

set by the government

answer

a fixed exchange rate id

question

consumer tastes

answer

each of the following is a determinant of exchange rates EXCEPT

question

increase; appreciate

answer

if foreign investors increase their purchases of US government bond, the demand for dollars will ___ and the international value of the dollar will _____

question

decrease; increase; appreciate

answer

in a flexible system of exchange rates, an open market sale of bonds will most likely ____ the money supply, ____ the interest rate, and ____ the value of the dollar

question

increase; decrease

answer

if Mexicans increase their investment in the US (which means they have to buy dollars), the supply of Mexican pesos to the foreign exchange market will _____ and the follar price of the peso will ____

question

increase; decrease

answer

with an increase in investment demand in the US, the real interest rate and the demand for dollars rise. In this situation the money supply in the US will ___ and the international value of the dollar will ______

question

an increase in interest rates in the US

answer

which of the following would CAUSE the US dollar to increase in value compared to the Japanese yen? (that is, one of the following led to the US dollar being able to purchase more yen than before.)

question

decrease; increase

answer

assume that the supply of loanable funds increases in Vountry X, causing its interest rates to decline. Therefore, the international value of Country X's currency would ___, which would lead to a(n) _____ in Country X's exports

question

bondholders (buyers) gain some ownership of a corporation

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all of the following are true regarding bonds EXCEPT

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dividend payments, capital gains

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stock owners can earn money from TWO of the following

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maturity value of a bond

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par value is the

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is the interest rate earned on a bond

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a coupon payment

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expected to grow quickly and significantly in the future

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if a company's stock is selling at a high PE ratio, it could indicate that the company is

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the present value of the bond

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in order to calculate how much to pay now for a bond, one would need to know each of the following EXCEPT

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it is guaranteed by the federal government

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why is a FDIC insured certificate of deposit considered a safe investment?

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a device for combining the stock of many companies and offered as a single investment

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what is a mutual fund?

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a bond issued by a corporation as a way to borrow money

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what is a corporate bond?

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the risk of the money stock mutual fund is greater than that of the Treasury Bond

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How does the risk involved in a stock mutual fund com are with the risk of a US Treasury Bond?

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arranges stock trading of many of the largest and most established companies in the US

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what does the New York Stock Exchange do?

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an index that show the performance of a limited number but representative stocks

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what is the Dow Jones Industrial Average?

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are blue-chip stocks

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of the following, the safest stocks

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$95.24

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A $100 bond that earns 5% and matures in 1 year would cost Present Value= Future Value/ (1+i)^n

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less than

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the liquidity of bonds is ___ that of savings accounts

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when a company's stock is first available to the public

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an IPO is

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common

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most stock is ___ stock

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inversely

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the price of a bond varies ____ with its interest rate

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lose money

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if a person buys a bond paying 5% interest and then the interest rates go up, if the bondholder sells her bond, she would

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up; decreases

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Typically, when stock prices are going up, the interest rate of bonds goes ____ and the price of bonds ____

Macroeconomics midterm study guide – Flashcards

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