Which of the following is not an economic objective spelled out by the 1977 amendment to the Federal Reserve Act?
a) price stability
b) moderate long-term interest rates
c) stable short-term interest rates
d) maximum employment
If the Fed sells $5,000 of Treasury bonds to the GBP National Bank and the reserve requirement ratio equals 25%, the maximum change in the money supply would _____, ceteris paribus.
a) shrink by $20,000
b) grow by $3,750
c) shrink by $3,750
d) not change
Which of the following is the interest rate that banks pay for receiving a loan from the Fed?
a) the discount rate
b) the prime lending rate
c) the Federal funds rate
d) the T-bill rate
Which of the following is the interest rate that banks pay for receiving a loan from other banks?
a) the discount rate
b) the prime lending rate
c) the T-bill rate
d) the Federal funds rate
Which of the following is a correct relationship considering bank reserves?
a) bank reserves = excess reserves + required reserves
b) bank reserves = (excess reserves/required reserves)
c) required reserves = (bank reserves/excess reserves)
d) excess reserves = bank reserves × the reserve requirement
Which of the following is the interest rate that banks pay for receiving a loan from other banks?
a) the discount rate
b) the prime lending rate
c) the T-bill rate
d) the Federal funds rate
Which of the following is an example of near money?
a) savings accounts
b) traveler's checks
c) large certificates of deposit
d) a credit card
The total utility for water is higher than the total utility for diamonds. You can explain the diamond-water paradox (that diamonds are expensive but not necessary for survival / not as useful, while water is inexpensive yet necessary for survival / very useful) because _______.
a) prices do not have any relationship with utility
b) the marginal utilities of diamonds and water must be equal
c) the marginal utility of diamonds is lower than that of water because diamonds are scarce
d) the marginal utility of water is lower than that of diamonds because water is more abundant
Which of the following are included in the definition of M1?
i) demand deposits
ii) travelers checks
iii) savings accounts
iv) long term bank deposits
v) currency
a) i, ii, iv, v
b) i ,ii and v
c) i, ii, iii, v
d) All of the above are included in M1
Bad choices, such as shopping, drinking, or gambling to excess, ______.
a) show that the utility maximization model is not applicable to the behavior of addicts
b) show that utility only matters after a good is consumed, not before
c) cannot be replaced by good choices in the future
d) show that the perceptions of the utility provided by consumption can be incorrect
The total utility for water is higher than the total utility for diamonds. You can explain the diamond-water paradox (that diamonds are expensive but not necessary for survival / not as useful, while water is inexpensive yet necessary for survival / very useful) because _______.
a) prices do not have any relationship with utility
b) the marginal utilities of diamonds and water must be equal
c) the marginal utility of diamonds is lower than that of water because diamonds are scarce
d) the marginal utility of water is lower than that of diamonds because water is more abundant
Ceteris paribus, which of the following will result in demand for a good having a higher price elasticity of demand?
a) The time period under consideration is very short.
b) The good is a large part of your budget.
c) The good does not have many substitutes.
d) All of the above would all result in higher price elasticity of demand.
Companies sometimes use designers or celebrities to endorse their product through advertising or by putting their names on the product. Companies do this because they hope that these actions will _________.
a) increase the marginal utility consumers receive when buying the product
b) decrease the price elasticity
c) increase profit
d) all of the above
If the price of an inferior good decreases, ____________.
a) the substitution effect would lead the consumer to buy more of the good
b) the substitution effect would lead the consumer to buy less of the good
c) the income effect would lead the consumer to buy more of the good
d) it depends; any of the above may or may not occur
When Coke is on sale at Safeways grocery store, sales of Pepsi drop (and vice versa). This is because the two goods have a cross elasticity of demand that is ____________.
a) less than one
b) greather than one
c) positive
d) negative