Decent Essays
Week 5 quiz

1. In the U.S. current account, most of the trade deficit results from an excess of imported
B. merchandise

2. What is the difference between the balance of trade and the balance of payments?
A. The balance of trade is only part of the balance of trade.

3. If a government has implemented significantly higher trade tariffs, but does not want this action to affect the value of its currency, it will
B. buy foreign currency because the tariffs will tend to make the domestic currency appreciate

4. During 2007, the United States and Japan announced possible limits on Chinese imports through higher tariff rates on Chinese products. To avoid these limits, China would have to
D. increase the value of the yuan and
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more money because prices will likely fall

2. The interest rate is the price paid for the use of a
D. financial asset
3. Which of the following do policy makers tend to target when setting monetary policy?
B. Interest rates

4. If the Federal Reserve reduced its reserve requirement from 6.5 percent to 5 percent, this policy would most likely
A. Increase both the money multiplier and the money supply

5. If banks hold excess reserves whereas before they did not, the money multiplier
B. will become smaller

6. The process of money multiplier depends on
B. the banks holding all the currency

7. Quantitative easing refers to
D. non-standard monetary policy design to extend credit in the economy

8. If the Fed wants an easier monetary policy, it might
D. buy government securities to reduce the federal funds rate

9. When the Fed raised the interest rates between 2004 and 2007, the Federal Reserve
B. sold U.S. government securities, thereby contracting funds to the federal funds market


1. The globalized AS/AD curve is the standard AS/AD model with an added
C. world supply curve

2. According to Say 's Law, people
A. supply goods in order to obtain other good

3. A shift in the long-run aggregate supply curve will change
C. both output and the price level

4. The hypothesis about the macroeconomy that sees the recent problems with the U.S. economy directly
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