Some countries export products at prices below the cost of production or the price charged in the domestic market This practice is called A monopoly pricing B import substitution C cream skimming D dumping The World Trade Organization (WTO) A was established in 1980 to oppose and counteract the policies of the General Agreement on Tariffs and Trade (GATT) B became, in 1995, the institutionalized and more comprehensive successor to the General Agreement on Tariffs and Trade (GATT) C was established in 1947 by 23 member countries to reduce trade restrictions D meets in different countries every few years to analyze each country's trade policies and restrictions Tariffs and quotas A are imposed when there are differences in the opportunity cost of production across countries B reduce consumer surplus and increase producer surplus in the importing country C increase consumer surplus and reduce producer surplus in the importing country D reduce both consumer surplus and producer surplus in the exporting country 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 Import quotas B Economies of scale C Differences in resource endowments D Differences in tastes International trade is most likely to occur whenever A world production equals world consumption B nations have an absolute advantage in the production of goods C each of the trading nations gains from trade D all of the trading nations are self sufficient When the Fed decreases the money supply A aggregate supply increases, which leads to movement along the aggregate demand curve B aggregate demand and aggregate supply both increase C aggregate demand decreases, which leads to movement along the short run aggregate supply curve D aggregate demand increases, which leads to movement along the short run aggregate supply curve In the aggregate demand aggregate supply model in the short run, an increase in the money supply will lead to a(n) A increase in real GDP and a decrease in the price level B decrease in real GDP and an increase in the price level C increase in both the price level and real GDP D decrease in both the price level and real GDP The opportunity cost of holding money is measured by the A money supply curve B inflation rate C liquidity lost by holding money D interest rate 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 interest rate and how much money people choose to hold C the price level and the actual output produced in an economy D the price level and the amount of cyclical unemployment The higher the interest rate, the greater the preference for liquidity True False Open market operations involve A buying and selling government securities in the open market B opening new markets for commodities C opening the discount window D buying stocks in the stock market The simple money multiplier A equals required reserves plus excess reserves B assumes banks hold excess reserves C equals the reciprocal of the required reserve ratio D becomes larger as the required reserve ratio increases Which of the following is a liability for a bank A S government securities owned by the bank B Deposits with the Fed C Checkable deposits D Consumer and business loans All of the following are part of M2 except one Which is the exception A Traveler's checks B Money market deposit accounts C Coins D Large denomination time deposits The M1 money supply consists of A certificates of deposit only B money market mutual fund accounts, savings accounts, and other miscellaneous near monies C coins and currency held by the nonbank public, checkable deposits, and traveler's checks D only coins and currency held by the nonbank public The actions of the Fed A must be approved by the president alone B must be approved by Congress alone C are not subject to approval by any branch of government D must be approved by the president and Congress The Board of Governors of the Fed consists of A seven elected members B seven members appointed by the president C a representative from each of the 12 district banks D 12 members appointed by the president The members of the Board of Governors of the Fed are A appointed by the president with the approval of the Senate B all replaced after each Presidential election C chosen by the state governors D elected for seven year terms The reserve ratio is the ratio of A a bank's reserves to its total deposits B a bank's total deposits to its reserves C Federal Reserve member banks to nonmember banks D Federal Reserve member banks to all U S banks The three important functions of money are A store of value, facilitation of trade, and double coincidence of wants B medium of exchange, facilitation of trade, and unit of account C unit of account, facilitation of trade, and store of value D medium of exchange, unit of account, and store of value The national debt A includes the projected liabilities of Social Security, Medicare, and other federal retirement programs B is a stock variable measuring the net accumulation of past deficits C is a flow variable measuring the net accumulation of past deficits D measures the amount by which government revenues exceed outlays in a particular year A possible explanation for the persistence of the U S federal budget deficits is that A it is easier politically to increase government spending than to increase taxes B it is easier politically to increase government spending than to decrease taxes C it is easier politically to decrease government spending than to decrease taxes D the economy naturally tends toward recessions Transfer payments are included in the government budget deficit but not included in the government purchases component of GDP True False The budget of an economy is said to be in deficit when A there is a loss of value of a country's currency with respect to one or more foreign reference currencies B anticipated inflation rate exceeds its actual rate C federal revenues exceed outlays D federal outlays exceed revenues Problems with the federal government budget process include A an overly detailed budget that allows Congress to reward friends, thereby discouraging restraint on spending B a short review period for Congress that results in poor choices in funding programs C tough choices to be made by Congress each year on which entitlement programs will receive full support D the constitutional requirement of Congress to balance the budget on an annual basis

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Some countries export products at prices below the cost of production or the price charged in the domestic market. This practice is called: A.monopoly pricing.

Some countries export products at prices below the cost of production or the price charged in the domestic market. This practice is called:

	A.monopoly pricing.
	B.import substitution.
	C.cream skimming.
	D.dumping.

The World Trade Organization (WTO):

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

Tariffs and quotas:

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

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.Import quotas
	B.Economies of scale
	C.Differences in resource endowments
	D.Differences in tastes

International trade is most likely to occur whenever:

	A.world production equals world consumption.
	B.nations have an absolute advantage in the production of goods.
	C.each of the trading nations gains from trade.
	D.all of the trading nations are self-sufficient.

When the Fed decreases the money supply:

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

In the aggregate demand-aggregate supply model in the short run, an increase in the money supply will lead to a(n):

	A.increase in real GDP and a decrease in the price level.
	B.decrease in real GDP and an increase in the price level.
	C.increase in both the price level and real GDP.
	D.decrease in both the price level and real GDP.

The opportunity cost of holding money is measured by the:

	A.money supply curve.
	B.inflation rate.
	C.liquidity lost by holding money.
	D.interest rate.

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 interest rate and how much money people choose to hold.
	C.the price level and the actual output produced in an economy.
	D.the price level and the amount of cyclical unemployment.

The higher the interest rate, the greater the preference for liquidity.

		True
		False

Open market operations involve:

	A.buying and selling government securities in the open market.
	B.opening new markets for commodities.
	C.opening the discount window.
	D.buying stocks in the stock market.

The simple money multiplier:

	A.equals required reserves plus excess reserves.
	B.assumes banks hold excess reserves.
	C.equals the reciprocal of the required reserve ratio.
	D.becomes larger as the required reserve ratio increases.

Which of the following is a liability for a bank?

	A..S. government securities owned by the bank
	B.Deposits with the Fed
	C.Checkable deposits
	D.Consumer and business loans

All of the following are part of M2 except one. Which is the exception?

	A.Traveler's checks
	B.Money market deposit accounts
	C.Coins
	D.Large-denomination time deposits

The M1 money supply consists of:

	A.certificates of deposit only.
	B.money market mutual fund accounts, savings accounts, and other miscellaneous near-monies.
	C.coins and currency held by the nonbank public, checkable deposits, and traveler's checks.
	D.only coins and currency held by the nonbank public.

The actions of the Fed:

	A.must be approved by the president alone.
	B.must be approved by Congress alone.
	C.are not subject to approval by any branch of government.
	D.must be approved by the president and Congress.

The Board of Governors of the Fed consists of:

	A.seven elected members.
	B.seven members appointed by the president.
	C.a representative from each of the 12 district banks.
	D.12 members appointed by the president.

The members of the Board of Governors of the Fed are:

	A.appointed by the president with the approval of the Senate.
	B.all replaced after each Presidential election.
	C.chosen by the state governors.
	D.elected for seven-year terms.

The reserve ratio is the ratio of:

	A.a bank's reserves to its total deposits.
	B.a bank's total deposits to its reserves.
	C.Federal Reserve member banks to nonmember banks.
	D.Federal Reserve member banks to all U.S. banks.

The three important functions of money are _____.

	A.store of value, facilitation of trade, and double coincidence of wants
	B.medium of exchange, facilitation of trade, and unit of account
	C.unit of account, facilitation of trade, and store of value
	D.medium of exchange, unit of account, and store of value

The national debt:

	A.includes the projected liabilities of Social Security, Medicare, and other federal retirement programs.
	B.is a stock variable measuring the net accumulation of past deficits.
	C.is a flow variable measuring the net accumulation of past deficits.
	D.measures the amount by which government revenues exceed outlays in a particular year.

A possible explanation for the persistence of the U.S. federal budget deficits is that:

	A.it is easier politically to increase government spending than to increase taxes.
	B.it is easier politically to increase government spending than to decrease taxes.
	C.it is easier politically to decrease government spending than to decrease taxes.
	D.the economy naturally tends toward recessions.

Transfer payments are included in the government budget deficit but not included in the government purchases component of GDP.

		True
		False

The budget of an economy is said to be in deficit when:

	A.there is a loss of value of a country's currency with respect to one or more foreign reference currencies.
	B.anticipated inflation rate exceeds its actual rate.
	C.federal revenues exceed outlays.
	D.federal outlays exceed revenues.

Problems with the federal government budget process include:

	A.an overly detailed budget that allows Congress to reward friends, thereby discouraging restraint on spending.
	B.a short review period for Congress that results in poor choices in funding programs.
	C.tough choices to be made by Congress each year on which entitlement programs will receive full support.
	D.the constitutional requirement of Congress to balance the budget on an annual basis.