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Question 33. Question : If an economy is at long-run equilibrium, and consumers' confidence in the economy rises:

Student Answer: aggregate demand will shift leftward and the price level will rise. aggregate demand will shift leftward and the price level will fall. aggregate demand will shift rightward and the price level will rise. aggregate demand will shift rightward and the price level will fall.

Question 35. Question : A result of a positive externality in the production of a good is that:

Student Answer: the price system will over-allocate resources to the production of that good or service. the price system will under-allocate resources to the production of that good or service. the market supply will be too high. the market demand will be too high.

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Question 36. Question : Under a market system, the decision of resource allocation is made by:

Student Answer: the head of the government. a queen or king. individuals who own the resources. no one.

Comments:

Question 37. Question : In the automobile industry, workers have just negotiated a new contract giving workers a large raise. There has also been an increase in the number of licensed drivers who are in the market for a new car. In the market for new automobiles, the effects that these changes will have on the equilibrium price and quantity include:

Student Answer: price will increase, and quantity will decrease. price will increase, and the effect on quantity is indeterminate. price will decrease, and quantity will increase. price will decrease, and the effect on quantity is indeterminate.

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Question 38. Question : When a Chinese company builds an auto plant in the United States, the immediate result of this Chinese investment in the United States is a __________ item in the U.S. __________ account.

Student Answer: surplus; current surplus; capital deficit; current deficit; capital

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Question 39. Question : The infant-industry argument for tariff protection is that tariffs should be imposed to protect from competition:

Student Answer: industries that are essential if a country is to become an industrial nation. industries needed for national defense. industries that cannot compete with foreign competitors at this point in time, but will be able to once they gain some size and experience. industries that can compete with foreign competitors at this point in time and are deemed essential by the government.

Question 41. Question : If you knew the stock market was going to increase next year, which of the following portfolios should you purchase (according to CAPM theory)?

Student Answer: A portfolio with a beta of 2 A portfolio with a beta of 1 A portfolio with a beta of 0 A portfolio with a beta of -1

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Question 42. Question : What is the term used to describe a currency exchange rate with a future delivery date?

Student Answer: The ex-poste rate The option rate The spot rate The forward rate

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Question 43. Question : What feature permits a bond issuer to repurchase bonds at a stated price prior to maturity?

Student Answer: Par Conversion Put Call