Question 36 Which of these statements about the policy tools of the U.S. Federal Reserve is most accurate?
A) Decreasing the required reserve ratio is one method by which the Federal Reserve can reduce the money supply. B) The most common method the Federal Reserve uses to increase short-term interest rates is buying Treasury securities in the open market. C) If the required reserve ratio is 20% and the Federal Reserve increases excess reserves by $1 billion, the money supply can expand by as much as $8 billion. D) The Federal Reserve can encourage bank lending by reducing the discount rate.
The correct answer was D) The Federal Reserve can encourage bank lending by reducing the discount rate. Reducing the discount rate encourages banks to borrow reserves from the Fed to support increased lending. Decreasing the required reserve ratio would increase the amount of funds that banks can lend, which would increase the money supply. When the Fed buys securities it tends to decrease short-term rates. With a required reserve ratio of 20%, the potential deposit expansion multiplier is 1/0.20 = 5 and the potential expansion of the money supply is 5 × $1 billion = $5 billion. This question tested from Session 6, Reading 24, LOS d, (Part 1)
Question 37 To benefit from price discrimination, a monopolist least likely needs to have:
A) two identifiable groups of consumers with different price elasticities of demand for the product. B) a procedure in place to prevent the group charged the lower price from reselling to the group charged the higher price. C) a perfectly elastic demand curve for its product. D) a downward-sloping demand curve for its product.
The correct answer was C) a perfectly elastic demand curve for its product. Since the two choices “perfectly elastic demand curve” and “downward-sloping demand curve” contradict each other, one of them must be false. As long as the company faces a downward-sloping demand curve, can identify at least two groups of customers with different price elasticities of demand, and can prevent customers from reselling the product, the company can profit from price discrimination.
This question tested from Session 5, Reading 19, LOS c
Question 38 Which of the following statements regarding money demand and supply is least accurate?
A) As nominal GDP increases as the result of inflation or increasing output, the demand for money increases. B) The supply of money is determined by the monetary authority and is not affected by changes in interest rates. C) The supply curve for money is vertical. D) As the Fed reduces the money supply, short-term interest rates decrease.
The correct answer was D) As the Fed reduces the money supply, short-term interest rates decrease. As the Fed reduces the money supply, short-term interest rates increase. The other statements concerning the demand and supply for money are true.
This question tested from Session 6, Reading 25, LOS a, (Part 1)
Question 39 Consider the following financial information for Cabrillo & Third Diversified: - Annual sales of $250,000
- Opportunity cost of capital of $25,000
- Fixed costs (excluding depreciation) of $70,000
- Variable costs at 35% of sales
- Value of owner’s financial advice estimated at $15,000
- Depreciation of $35,000
- Corporate tax rate of 40%
Based on this information, Cabrillo and Third Diversified:
A) is earning the normal rate of return. B) has positive economic profits. C) has negative accounting profits. D) is not earning the normal rate of return.
The correct answer was D) is not earning the normal rate of return. The company is not earning the normal rate of return because economic profits are negative (revenues do not cover both the company’s implicit and explicit costs). The other statements are false. Calculations are as follows: - Accounting profits = (Sales – variable costs – fixed costs – depreciation) × (1 − tax rate) = (250,000 – 0.35 × 250,000 – 70,000 – 35,000) × (1 - 0.4) = 34,500.
- Economic profits = Accounting profits – opportunity cost of capital – owner provided services = 34,500 – 25,000 – 15,000 = -5,500.
This question tested from Session 4, Reading 16, LOS a
Question 40 Which of the following is least likely consistent with utilitarianism?
A) A CEO and a common laborer should receive the same income. B) Everyone wants and needs the same things. C) The marginal benefit of a dollar is the same for both the poor and the rich. D) The value of the economy is maximized when each person owns an equal amount of the resources.
The correct answer was C) The marginal benefit of a dollar is the same for both the poor and the rich. Proponents of utilitarianism argue that the marginal benefit of a dollar is greater for the poor than the rich, so the gain in marginal benefit to the poor from the transfer of wealth is greater than the loss of marginal benefit to the rich. All of the other statements are consistent with utilitarianism.
This question tested from Session 4, Reading 14, LOS f | 
发表于 2008-5-26 11:54
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