You are the Minister of Trade for a small island country with the following annual PPC:
You are negotiating a trade agreement with a neighboring island with the following annual PPC: 
Both islands specialize exclusively in the product for which they have a comparative advantage. You have agreed to give 350 coconuts to the other island in exchange for 1,300 fish. After the trade the other island has a total of ________ coconuts and ________ fish.
A. 850; 1,200
B. 350; 1,500
C. 350; 1,200
D. 500; 1,200
Answer: C
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Smoothing the peaks and troughs of the business cycle with fiscal policy is
A. difficult, because the government lacks important information about the economy. B. difficult, because economists have not developed any theoretical models of the macroeconomy. C. relatively simple, because the political process usually works smoothly and without significant lags. D. relatively simple, because the government has access to the best information available.
In the monetary small open-economy model, a flexible exchange rate insulates the domestic price level from
A) both real and nominal shocks from abroad. B) real shocks from abroad, but not from nominal shocks from abroad. C) nominal shocks from abroad, but not from real shocks from abroad. D) neither real nor nominal shocks from abroad.
Suppose the real gross domestic product (GDP) equals $100 billion this year and the nominal gross domestic product (GDP) is $200 billion. This implies that the price level has increased by _____
a. $200 billion b. 50 percent c. $100 billion d. 100 percent e. 200 percent
If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by
a. buying bonds. This buying would increase the money supply. b. buying bonds. This buying would reduce the money supply. c. selling bonds. This selling would increase the money supply. d. selling bonds. This selling would reduce the money supply.