When the Federal Reserve System wants to increase the money supply, which of the following actions would the Fed choose?
A. It purchases U.S. government securities.
B. It increases the discount rate.
C. It increases the required reserve ratio.
D. It sells bonds on the open market.
Answer: A
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If the Fed sells government securities, in the short run the nominal interest rate ________ and the real interest rate ________
A) rises; does not change B) rises; rises C) does not change; rises D) falls; falls E) rises; falls
Answer the following statements true (T) or false (F)
1) Effective managers use marginal analysis to determine how much to spend on actions to lower the probability of bad outcomes.
2) The expected marginal benefit of reducing the probability of an accident is equal to the decrease in the expected cost of the accident.
3) 
The above table shows the quantity of patents reviewed by a firm's attorney and the corresponding probability that the firm will infringe on another firm's patent. The cost of infringement is $50,000.
The expected marginal benefit of reviewing additional patents increases as the number of patents reviewed increases.
4) If actions to reduce the expected cost of an accident are equally effective, managers should authorize the most expensive actions first.
5) It is not optimal to drive the probability of a patent infringement to zero.
6) In some situations, managers cannot make incremental actions to prevent product failure and must either decide to take preventative action or not.
The group of countries more likely to have a high number of telephone lines per 1,000 people is
a. high-income countries b. zero-income countries c. infinite-income countries d. low-income countries e. middle-income countries
Figure 10-7
Given the aggregate demand and aggregate supply curves for the economy depicted in , the economy's output and price level are
a.
output y1 and price level P1.
b.
output y2 and price level P2
c.
output y1 and price level P3.
d.
output y2 and price level P1.