1.Assume contractionary monetary policies have had the effect of lowering inflation rates from a 6% annual rate down to 2%. What do economists call this drop in inflation?

a. Deflation

b. Inflation

c. Devaluation

d. Depreciation

e. Disinflation

2.Country Alpha and Country Gamma are trade partners, each producing wheat and oil. Alpha is capable of producing 50 tons of wheat or 75 thousand barrels of oil in a month while Gamma can produce 10 tons of wheat or 40 thousand barrels of oil in the same month. Based on the theory of comparative advantage, which nation should produce each product?

a. Alpha should produce both because it has absolute advantage in both

b. Alpha should produce wheat and Gamma should produce oil

c. Alpha should produce oil and Gamma should produce wheat

d. Gamma should produce both because it has comparative advantage for both goods

e. Both nations should specialize in other products as neither has comparative advantage for either good.

3.Ceteris paribus, if consumer confidence in the market for a good were to rise, what would be the expected change in equilibrium price and quantity of that good?

a. Price increases and quantity decreases

b. Price decreases and indeterminate in quantity

c. Price increases and quantity increases

d. Price decreases and quantity decreases

e. Indeterminate in price and quantity increases