1) The higher the interest rate, the greater the preference for liquidity. True or false

2) The demand for money is a relationship between: A. the interest rate and how much money people earn during a certain time period. B. the price level and the amount of cyclical unemployment. C. the price level and the actual output produced in an economy. D. the interest rate and how much money people choose to hold.

3) The opportunity cost of holding money is measured by the: A. inflation rate. B. money supply curve. C. interest rate. D. liquidity lost by holding money.

4) In the aggregate demand-aggregate supply model in the short run, an increase in the money supply will lead to a(n): A. decrease in real GDP and an increase in the price level. B. increase in real GDP and a decrease in the price level. C. increase in both the price level and real GDP. D. decrease in both the price level and real GDP.

5) When the Fed decreases the money supply: A. aggregate demand increases, which leads to movement along the short-run aggregate supply curve. B. aggregate supply increases, which leads to movement along the aggregate demand curve. C. aggregate demand decreases, which leads to movement along the short-run aggregate supply curve. D. aggregate demand and aggregate supply both increase.

6) International trade is most likely to occur whenever: A. each of the trading nations gains from trade. B. all of the trading nations are self-sufficient. C. world production equals world consumption. D. nations have an absolute advantage in the production of goods.

7) Which of the following reasons explains why many countries with relatively small populations import automobiles from Japan, U.S., and Germany rather than produce them domestically? A. Differences in tastes B. Differences in resource endowments C. Import quotas D. Economies of scale

8) Tariffs and quotas: A. reduce consumer surplus and increase producer surplus in the importing country. B. increase consumer surplus and reduce producer surplus in the importing country. C. are imposed when there are differences in the opportunity cost of production across countries. D. reduce both consumer surplus and producer surplus in the exporting country.

9) The World Trade Organization (WTO): A. was established in 1947 by 23 member countries to reduce trade restrictions. B. was established in 1980 to oppose and counteract the policies of the General Agreement on Tariffs and Trade (GATT). C. meets in different countries every few years to analyze each country's trade policies and restrictions. D. became, in 1995, the institutionalized and more comprehensive successor to the General Agreement on Tariffs and Trade (GATT).

10) Some countries export products at prices below the cost of production or the price charged in the domestic market. This practice is called: A. import substitution. B. cream skimming. C. monopoly pricing. D. dumping.