econ

Which of the following people purchased the correct asset to meet his or her objective? a. Michelle wanted to be a part owner of Mamma Rosa's Pizza, so she purchased a bond issued by Mamma Rosa's Pizza. b. Tim wanted a high return, even if it meant taking some risk, so he purchased stock issued by Specific Electric instead of bonds issued by Specific Electric. c. Jennifer wanted to buy equity in Honda, so she purchased bonds sold by Honda. d. All of the above are correct.

b. Tim wanted a high return, even if it meant taking some risk, so he purchased stock issued by Specific Electric instead of bonds issued by Specific Electric.

Which list ranks assets from most to least liquid? a. currency, fine art, stocks b. currency, stocks, fine art c. fine art, currency, stocks d. fine art, stocks, currency

b. currency, stocks, fine art

A national chain of grocery stores wants to finance the construction of several new stores. The firm has limited internal funds, so it likely will a. demand the required funds by buying bonds. b. demand the required funds by selling bonds. c. supply the required funds by buying bonds. d. supply the required funds by selling bonds.

b. demand the required funds by selling bonds.

Suppose a country had a smaller budget deficit in 2011 than it had in 2010. Then other things the same, we would expect a. lower interest rates and investment in 2011 than in 2010. b. lower interest rates and greater investment in 2011 than in 2010. c. higher interest rates and greater investment in 2011 than in 2010. d. higher interest rates and lower investment in 2011 than in 2010.

b. lower interest rates and greater investment in 2011 than in 2010.

The slope of the demand for loanable funds curve represents the a. positive relation between the real interest rate and investment. b. negative relation between the real interest rate and investment. c. positive relation between the real interest rate and saving. d. negative relation between the real interest rate and saving.

b. negative relation between the real interest rate and investment.

Brian is the owner of a firm that produces bottled water in Washington state. There are many other such firms in the area. Brian decides that if he pays his workers a wage higher than the going market wage, his profits will increase. Which of the following is a likely explanation for his decision? a. The higher the wage, the less often his workers will choose to leave his firm. b. The higher the wage, the lower will be the cost of obtaining needed supplies. c. The higher the wage, the more he can charge for his water. d. The higher the wage, the more he will have to monitor his workers for shirking.

a. The higher the wage, the less often his workers will choose to leave his firm.

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income? a. There would be an increase in the amount of loanable funds borrowed. b. There would be a reduction in the amount of loanable funds borrowed. c. There would be no change in the amount of loanable funds borrowed. d. The change in loanable funds is uncertain.

a. There would be an increase in the amount of loanable funds borrowed.

Tami knows that people in her family die young, and so she buys life insurance. Preston knows he is a reckless driver and so he applies for automobile insurance. a. These are both examples of adverse selection. b. These are both examples of moral hazard. c. The first example illustrates adverse selection, and the second illustrates moral hazard. d. The first example illustrates moral hazard, and the second illustrates adverse selection.

a. These are both examples of adverse selection.

Which of the following best illustrates the unit of account function of money? a. You list prices for candy sold on your Web site, www.sweettooth.com, in dollars. b. You pay for your theater tickets with dollars. c. You hold currency even though you don't intend to spend it right away. d. None of the above is correct.

a. You list prices for candy sold on your Web site, www.sweettooth.com, in dollars.

Larry buys stock in A to Z Express Company. Curly Corporation builds a new factory. Whose transaction would be an act of investment in the language of macroeconomics? a. only Larry's b. only Curly Corporation's c. Larry's and Curly Corporation's d. neither Larry's nor Curly Corporation's

b. only Curly Corporation's

When inflation rises, the nominal interest rate a. rises, and people desire to hold more money. b. rises, and people desire to hold less money. c. falls, and people desire to hold more money. d. falls, and people desire to hold less money

b. rises, and people desire to hold less money.

The Fed sets the interest that borrowers pay on loans from a. the discount window and the term auction facility b. the discount window but not the term auction facility c. the term auction facility but not the discount window d. neither the discount window nor the term auction facility

b. the discount window but not the term auction facility

Ben decided to increase the number of stocks in his portfolio. In doing so, Ben reduced a. both the firm-specific risk and the market risk of his portfolio. b. the firm-specific risk, but not the market risk of his portfolio. c. the market risk, but not the firm-specific risk of his portfolio. d. neither the market risk nor the firm-specific risk of his portfolio.

b. the firm-specific risk, but not the market risk of his portfolio.

A bank loans Kellie's Print Shop $350,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is a. an asset for the bank and a liability for Kellie's Print Shop. The loan increases the money supply. b. an asset for the bank and a liability for Kellie's Print Shop. The loan does not increase the money supply. c. a liability for the bank and an asset for Kellie's Print Shop. The loan increases the money supply. d. a liability for the bank and an asset for Kellie's Print Shop. The loan does not increase the money supply.

a. an asset for the bank and a liability for Kellie's Print Shop. The loan increases the money supply.

If Research in Motion, Inc. sells a bond it is a. borrowing directly from the public. b. borrowing indirectly from the public. c. lending directly to the public. d. lending indirectly to the public.

a. borrowing directly from the

Rosa deposits $100 in a bank account that pays an annual interest rate of 20 percent. A year later, after Rosa has accumulated $20 in interest, she withdraws her $120. Rosa's purchasing power a. did not change if the inflation rate was 20 percent. b. decreased if the inflation rate was -5 percent. c. increased if the inflation rate was 22 percent. d. More than one of the above is correct.

a. did not change if the inflation rate was 20 percent.

Suppose the money supply tripled, but at the same time velocity fell by half and real GDP was unchanged. According to the quantity equation the price level a. is 1.5 times its old value. b. is 3 times its old value. c. is 6 times its old value. d. is the same as its old value.

a. is 1.5 times its old value.

The Federal Reserve a. is responsible for conducting the nation's monetary policy, and it plays a role in regulating banks. b. is responsible for conducing the nation's monetary policy, but it plays no role in regulating banks. c. is not responsible for conducting the nation's monetary policy, and it plays a role in regulating banks. d. is not responsible for conducing the nation's monetary policy, and it plays no role in regulating banks.

a. is responsible for conducting the nation's monetary policy, and it plays a role in regulating banks.

If the money multiplier is 2 and the Fed buys $50,000 worth of bonds, what happens to the money supply? a. it increases by $100,000 b. it increases by $150,000 c. it decreases by $100,000 d. it decreases by $150,000

a. it increases by $100,000

When inflation falls, people a. make less frequent trips to the bank and firms make less frequent price changes. b. make less frequent trips to the bank while firms make more frequent price changes. c. make more frequent trips to the bank while firms make less frequent price changes. d. make more frequent trips to the bank and firms make more frequent price changes.

a. make less frequent trips to the bank and firms make less frequent price changes.

Edgar is working part-time. Diane is on temporary layoff. Who is included in the Bureau of Labor Statistics' "employed" category? a. only Edgar b. only Diane c. both Edgar and Diane d. neither Edgar nor Diane

a. only Edgar

To diversify, a homeowner with a variable-rate mortgage should choose investments that a. pay higher returns when interest rates rise and lower returns when interest rates fall. b. pay lower returns when interest rates rise and higher returns when interest rates fall. c. provide a higher return than the market average. d. provide a lower return than the market average.

a. pay higher returns when interest rates rise and lower returns when interest rates fall.

The Fed can decrease the money supply by conducting open-market a. sales or by raising the discount rate. b. sales or by lowering the discount rate. c. purchases or by raising the discount rate. d. purchases or by lowering the discount rate.

a. sales or by raising the discount rate.

Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate? a. store of value b. medium of exchange c. unit of account d. None of the above is correct.

a. store of value

Which of the following can banks use to borrow from the Federal Reserve? a. the discount window or the term auction facility b. the discount window but not the term auction facility c. the term auction facility but not the discount window d. Banks can not borrow from the Federal Reserve, only the government can.

a. the discount window or the term auction facility

Suppose that over the past year, the real interest rate was 3 percent and the inflation rate was -1 percent. It follows that a. the dollar value of savings increased at 2 percent, and the purchasing power of savings increased at 3 percent. b. the dollar value of savings increased at 2 percent, and the purchasing power of savings increased at 4 percent. c. the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 2 percent. d. the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 3 percent.

a. the dollar value of savings increased at 2 percent, and the purchasing power of savings increased at 3 percent.

Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was -2 percent. It follows that a. the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 6 percent. b. the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 8 percent. c. the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 4 percent. d. the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 6 percent.

a. the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 6 percent.

The money supply is 4,000, nominal GDP is 8,000, and real GDP is 4,000, Which of the following is 2? a. the price level and velocity b. the price level but not velocity c. the price level and velocity d. neither the price level nor velocity

a. the price level and velocity

Other things the same, an increase in velocity means that a. transactions per dollar increase so the price level rises. b. transactions per dollar increase so the price level falls. c. transactions per dollar decrease so the price level rises. d. transactions per dollar decrease so the price level falls.

a. transactions per dollar increase so the price level rises.

Mario was laid off two months ago. He has not searched for other work because he is expecting to be recalled to work. In the U.S. labor force statistics Mario is counted as a. unemployed and in the labor force. b. unemployed and not in the labor force. c. employed and in the labor force. d. not in the labor force.

a. unemployed and in the labor force.

When a union bargains successfully with employers, in that industry, a. wages and unemployment increase. b. wages increase and unemployment decreases. c. wages decrease and unemployment increases. d. wages and unemployment decrease.

a. wages and unemployment increase.

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $100. If customers deposit $50 into the bank, what is the value of the money supply? a. $50 b. $100 c. $150 d. $200

b. $100

If the interest rate is 7.5 percent, then what is the present value of $4,000 to be received in 6 years? a. $2,420.68 b. $2,591.85 c. $2,996.33 d. $3,040.63

b. $2,591.85

If you put $125 into an account that paid 3.25 percent interest, then how much money would you have in the account after 20 years? a. $285.83 b. $236.98 c. $202.04 d. $145.65

b. $236.98

. Suppose you will receive $500 at some point in the future. If the annual interest rate is 7.5 percent, then the present value of the $500 is a. $411.26 if the $500 is to be received in 5 years and $338.95 if the $500 is to be received in 10 years. b. $348.28 if the $500 is to be received in 5 years and $242.60 if the $500 is to be received in 10 years. c. $291.11 if the $500 is to be received in 5 years and $272.89 if the $500 is to be received in 10 years. d. $291.11 if the $500 is to be received in 5 years and $236.49 if the $500 is to be received in 10 years.

b. $348.28 if the $500 is to be received in 5 years and $242.60 if the $500 is to be received in 10 years.

If the reserve ratio is 5 percent, then $2,500 of additional reserves can create up to a. $62,500 of new money. b. $50,000 of new money. c. $45,600 of new money. d. $37,500 of new money.

b. $50,000 of new money.

If the nominal interest rate is 6 percent and the rate of inflation is 4 percent, then the real interest rate is a. -4 percent. b. 2 percent. c. 4 percent. d. 8 percent.

b. 2 percent.

You put money into an account and earn a real interest rate of 4 percent. Inflation is 2 percent, and your marginal tax rate is 20 percent. What is your after-tax real rate of interest? a. 1.2 percent b. 2.8 percent c. 4.8 percent d. None of the above is correct.

b. 2.8 percent

If the price level increased from 120 to 126, then what was the inflation rate? a. 3 percent b. 5 percent c. 6 percent d. None of the above is correct.

b. 5 percent

Suppose each good costs $5 per unit and Megan holds $40. What is the real value of the money she holds? a. $40. If the price of goods rises, to maintain the real value of her money holdings she need to hold more dollars. b. 8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars. c. $40. If the price of goods rises, to maintain the real value of her money holdings she need to hold fewer dollars. d. 8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars.

b. 8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars.

A bank has a 10 percent reserve requirement, $4,000 in deposits, and has loaned out all it can given the reserve requirement. a. It has $40 in reserves and $3,960 in loans. b. It has $400 in reserves and $3,600 in loans. c. It has $444 in reserves and $3,556 in loans. d. None of the above is correct.

b. It has $400 in reserves and $3,600 in loans.

A bank has a 10 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement. a. It has $50 in reserves and $4,950 in loans. b. It has $500 in reserves and $4,500 in loans. c. It has $555 in reserves and $4,445 in loans. d. None of the above is correct.

b. It has $500 in reserves and $4,500 in loans.

In which of the following cases was the inflation rate 10 percent over the last year? a. One year ago the price index had a value of 110 and now it has a value of 120. b. One year ago the price index had a value of 120 and now it has a value of 132. c. One year ago the price index had a value of 126 and now it has a value of 140. d. One year ago the price index had a value of 145 and now it has a value of 163.

b. One year ago the price index had a value of 120 and now it has a value of 132.

On a given morning, Franco sold 40 pairs of shoes for a total of $80 at his shoe store. a. The $80 is a real variable. The quantity of shoes is a nominal variable. b. The $80 is a nominal variable. The quantity of shoes is a real variable. c. Both the $80 and the quantity of shoes are nominal variables. d. Both the $80 and the quantity of shoes are real variables.

b. The $80 is a nominal variable. The quantity of shoes is a real variable.

If real output in an economy is 1,000 goods per year, the money supply is $300, and each dollar is spent an average of 3 times per year, then according to the quantity equation, the average price level is a. $0.90. b. $1.00. c. $1.11. d. $1.33.

a. $0.90.

Assuming the interest rate is 5 percent, which of the following has the greatest present value? a. $240 paid in three years b. $225 paid in two years c. $210 paid in one year d. $200 today

a. $240 paid in three years

Suppose that in a closed economy GDP is 11,000, consumption is 7,500, and taxes are 2,000. What value of government purchases would make national savings equal to 1,000 and at that value would the government have a deficit or surplus? a. 2,500, deficit b. 2,500, surplus c. 1,000, deficit d. 1,000, surplus

a. 2,500, deficit

In 2009, based on concepts similar to those used to estimate U.S. employment figures, the Italian adult non-institutionalized population was 51.070 million, the labor force was 24.710 million, and the number of people employed was 22.765 million. According to these numbers, the Italian labor-force participation rate and unemployment rate were about a. 48.4% and 7.9%. b. 48.4% and 3.8%. c. 44.6% and 7.9% d. 44.6% and 3.8%

a. 48.4% and 7.9%

An associate professor of physics gets a $200 a month raise. She figures that with her new monthly salary she can buy more goods and services than she could buy last year. a. Her real and nominal salary have risen. b. Her real and nominal salary have fallen. c. Her real salary has risen and her nominal salary has fallen. d. Her real salary has fallen and her nominal salary has risen.

a. Her real and nominal salary have risen.

What would happen in the market for loanable funds if the government were to increase the tax on interest income? a. Interest rates would rise. b. Interest rates would be unaffected. c. Interest rates would fall. d. The effect on the interest rate is uncertain.

a. Interest rates would rise.

On a Sunday morning, Tom sold 300 cups of coffee for a total of $750. a. The $750 is a nominal variable. The 300 cups of coffee is a real variable. b. The $750 is a real variable. The 300 cups of coffee is a nominal variable. c. Both the $750 and the 300 cups of coffee are nominal variables. d. Both the $750 and the 300 cups of coffee are real variables.

a. The $750 is a nominal variable. The 300 cups of coffee is a real variable.

John is a stockbroker. He has had several job offers, but he has turned them down because he thinks he can find a firm that better matches his tastes and skills. Curtis has looked for work as an accountant for some time. While the demand for accountants doesn't appear to be falling, there seems to be more people applying than jobs available. a. John and Curtis are both frictionally unemployed. b. John and Curtis are both structurally unemployed. c. John is frictionally unemployed, and Curtis is structurally unemployed. d. John is structurally unemployed, and Curtis is frictionally unemployed.

c. John is frictionally unemployed, and Curtis is structurally unemployed.

In a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits, then a. M1 would increase. b. M1 would decrease. c. M1 would not change. d. M1 might rise or fall.

c. M1 would not change.

Meredith is looking for work as a computer programmer. Although her prospects are good, she hasn't yet taken a job. Julie is looking for work in a steel mill. Every time she shows up for an interview, there are more people looking for work than their are openings. Someone waiting in line with her tells her it has been that way for a long time. a. Meredith and Julie are both frictionally unemployed. b. Meredith and Julie are both structurally unemployed. c. Meredith is frictionally unemployed, and Julie is structurally unemployed. d. Meredith is structurally unemployed, and Julie is frictionally unemployed.

c. Meredith is frictionally unemployed, and Julie is structurally unemployed.

Which of the following would be an investment? a. the government buys goods from another country b. someone buys stock in an American company c. a firm increases its capital stock d. All of the above are correct.

c. a firm increases its capital stock

Mary worked part-time for her mother's business without pay. Larry was absent from work because he had the flu. Who is counted as employed by the BLS? a. Mary but not Larry b. Larry but not Mary c. both Marry and Larry d. neither Mary nor Larry

c. both Marry and Larry

Which of the following does the Federal Reserve not do? a. conduct monetary policy b. act as a lender of last resort c. convert Federal Reserve Notes into gold d. serve as a bank regulator

c. convert Federal Reserve Notes into gold

Ava owns her own business. The Bureau of Labor Statistics counts Ava as a. unemployed and in the labor force. b. unemployed and not in the labor force. c. employed and in the labor force. d. employed and not in the labor force.

c. employed and in the labor force.

Abby buys health insurance because she knows that she has health risks that wouldn't be obvious to an insurance company. Brad buys home owners insurance and then is less careful to make sure he's put out his cigarettes. The example with Abby a. and the example with Brad illustrate adverse selection. b. and the example with Brad illustrate moral hazard. c. illustrates adverse selection; the example with Brad illustrates moral hazard. d. illustrates moral hazard; the example with Brad illustrates adverse selection.

c. illustrates adverse selection; the example with Brad illustrates moral hazard.

Satchel loses his job and immediately begins looking for another. Other things the same, the unemployment rate a. increases and the labor-force participation rate decreases. b. and the labor-force participation rate both increase. c. increases and the labor-force participation rate is unaffected. d. is unaffected and the labor-force participation rate decreases.

c. increases and the labor-force participation rate is unaffected.

If the minimum wage is currently above the equilibrium wage, then a decrease in the minimum wage a. increases both the quantity demanded and the quantity supplied of labor. b. decreases both the quantity demanded and the quantity supplied of labor. c. increases the quantity of labor demanded but decreases the quantity of labor supplied. d. decreases the quantity of labor demanded but increases the quantity of labor supplied.

c. increases the quantity of labor demanded but decreases the quantity of labor supplied.

Which of the following is an asset of a bank and a liability for its customers? a. deposits of its customers and loans to it customers b. deposits of its customers but not loans to its customers c. loans of its customers but not the deposits of its customers d. neither the deposits of its customers nor the loans to its customers

c. loans of its customers but not the deposits of its customers

Wealth is redistributed from creditors to debtors when inflation was expected to be a. high and it turns out to be high. b. low and it turns out to be low. c. low and it turns out to be high. d. high and it turns out to be low.

c. low and it turns out to be high.

According to the efficient markets hypothesis, worse-than-expected news about a corporation will a. have no effect on its stock price. b. raise the price of the stock. c. lower the price of the stock. d. change the price of the stock in a random direction.

c. lower the price of the stock.

Other things the same, when the interest rate rises, a. people would want to lend more, making the supply of loanable funds increase. b. people would want to lend less, making the supply of loanable funds decrease. c. people would want to lend more, making the quantity of loanable funds supplied increase. d. people would want to lend less, making the quantity of loanable funds supplied decrease.

c. people would want to lend more, making the quantity of loanable funds supplied increase.

If Japan goes from a small budget deficit to a large budget deficit, it will reduce a. private saving and so shift the supply of loanable funds left. b. investment and so shift the demand for loanable funds left. c. public saving and so shift the supply of loanable funds left. d. None of the above is correct.

c. public saving and so shift the supply of loanable funds left.

A larger budget deficit a. raises the interest rate and investment. b. reduces the interest rate and investment. c. raises the interest rate and reduces investment. d. reduces the interest rate and raises investment.

c. raises the interest rate and reduces investment.

Which of the following is not included in M1? a. currency b. demand deposits c. savings deposits d. traveler's checks

c. savings deposits

Suppose government expenditures on goods and services increase, transfers are unchanged, and taxes rise by less than the increase in expenditures. These changes in the government's budget cause a. both the equilibrium interest rate and the equilibrium quantity of loanable funds to fall. b. both the equilibrium interest rate and the equilibrium quantity of loanable funds to rise. c. the equilibrium interest rate to rise and the equilibrium quantity of loanable funds to fall. d. the equilibrium interest rate to fall and the equilibrium quantity of loanable funds to rise.

c. the equilibrium interest rate to rise and the equilibrium quantity of loanable funds to fall.

If there is a surplus of loanable funds, then a. the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. b. the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. c. the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. d. the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium.

c. the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above

Other things the same, an increase in velocity means that a. the rate at which money changes hands falls, so the price level rises. b. the rate at which money changes hands falls, so the price level falls. c. the rate at which money changes hands rises, so the price level rises. d. the rate at which money changes hands rises, so the price level falls.

c. the rate at which money changes hands rises, so the price level rises.

Assuming the interest rate is 6 percent, which of the following has the greatest present value? a. $300 paid in two years b. $150 paid in one year plus $140 paid in two years c. $100 paid today plus $100 paid in one year plus $100 paid in two years d. $285 today

d. $285 today

. When you were 10 years old, your grandparents put $500 into an account for you paying 7 percent interest. Now that you are 18 years old, your grandparents tell you that you can take the money out of the account. What is the balance to the nearest cent? a. $1,200.00 b. $1,111.77 c. $983.58 d. $859.09

d. $859.09

In a small closed economy investment is $50 billion and private saving is $55 billion. What are public saving and national saving? a. $60 billion and $5 billion b. $50 billion and -$5 billion c. $5 billion and $60 billion d. -$5 billion and $50 billion

d. -$5 billion and $50 billion

Suppose over some period of time the money supply tripled, velocity fell by half, and real GDP doubled. According to the quantity equation the price level is now a. 6 times its old value. b. 3 times its old value. c. 1.5 times its old value. d. 0.75 times its old value.

d. 0.75 times its old value.

Jake loaned Elwood $5,000 for one year at a nominal interest rate of 10 percent. After Elwood repaid the loan in full, Jake complained that he could buy 4 percent fewer goods with the money Elwood gave him than he could before he loaned Elwood the $5,000. From this, we can conclude that the rate of inflation during the year was a. -4 percent. b. 4 percent. c. 6 percent. d. 14 percent.

d. 14 percent.

In 2009, based on concepts similar to those used to estimate U.S. employment figures, the Japanese adult non-institutionalized population was 110.272 million, the labor force was 65.362 million, and the number of people employed was 62.242 million. According to these numbers, the Japanese labor-force participation rate and unemployment rate were about a. 56.4% and 2.8%. b. 56.4% and 4.8%. c. 59.3% and 2.8%. d. 59.3% and 4.8%.

d. 59.3% and 4.8%

Who is included in the labor force by the Bureau of Labor Statistics? a. Juan, who works most of the week in a steel factory b. Molly, who is on temporary layoff c. Charlie, who does not have a job, but is looking for work d. All of the above are included in the labor force.

d. All of the above are included in the labor force.

Which of the following is not a reason that paying efficiency wages may increase a firm's profit? a. Efficiency wages increase worker health and therefore increase worker productivity. b. Efficiency wages decrease worker turnover and therefore decrease hiring and training costs. c. Efficiency wages decrease worker shirking and therefore increase worker productivity. d. Efficiency wages are below the equilibrium wage rate, but still attract a sufficient number of workers.

d. Efficiency wages are below the equilibrium wage rate, but still attract a sufficient number of workers.

An assistant manager at a restaurant gets a $100 a month raise. He figures that with his new monthly salary he cannot buy as many goods and services as he could buy last year. a. His real and nominal salary have risen. b. His real and nominal salary have fallen. c. His real salary has risen and his nominal salary has fallen. d. His real salary has fallen and his nominal salary has risen.

d. His real salary has fallen and his nominal salary has risen.

Halvorson Construction has an investment project that would cost $150,000 today and yield a one-time payoff of $167,000 in three years. What is the highest interest rate at which Halvorson would find this project profitable? a. 7% b. 6% c. 5% d. It is not profitable at any of these interest rates.

d. It is not profitable at any of these interest rates.

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,500, consumption equals 7,500, and government purchases equal 2,000. What is national saving? a. -500 b. 0 c. 2,000 d. None of the above is correct.

d. None of the above is correct.

Which of the following both increase the money supply? a. an increase in the discount rate and an increase in the interest rate on reserves b. an increase in the discount rate and a decrease in the interest rate on reserves c. a decrease in the discount rate and an increase in the interest rate on reserves d. a decrease in the discount rate and a decrease in the interest rate on reserves

d. a decrease in the discount rate and a decrease in the interest rate on reserves

Matilda just graduated from college. In order to devote all her efforts to college, she didn't hold a job. She is going to tour around the country on her motorcycle for a month before she starts looking for work. Other things the same, the unemployment rate a. increases and the labor-force participation rate decreases. b. and the labor-force participation rate both increase. c. increases and the labor-force participation rate is unaffected. d. and the labor-force participation rate are both unaffected.

d. and the labor-force participation rate are both unaffected.

An increase in the minimum wage a. increases both the quantity demanded and the quantity supplied of labor. b. decreases both the quantity demanded and the quantity supplied of labor. c. increases the quantity of labor demanded but decreases the quantity of labor supplied. d. decreases the quantity of labor demanded but increases the quantity of labor supplied.

d. decreases the quantity of labor demanded but increases the quantity of labor supplied.

A high-ranking corporate official of a well-known company is unexpectedly sentenced to prison for criminal activity in trading stocks. This should a. raise the price and raise the present value of the corporation's stock. b. raise the price and lower the present value of the corporation's stock. c. lower the price and raise the present value of the corporation's stock. d. lower the price and lower the present value of the corporation's stock.

d. lower the price and lower the present value of the corporation's stock.

Jennifer took out a fixed-interest-rate loan when the CPI was 100. She expected the CPI to increase to 103 but it actually increased to 105. The real interest rate she paid is a. higher than she had expected, and the real value of the loan is higher than she had expected. b. higher than she had expected, and the real value of the loan is lower than she had expected. c. lower than she had expected, and the real value of the loan is higher than she had expected. d. lower then she had expected, and the real value of the loan is lower than she had expected.

d. lower then she had expected, and the real value of the loan is lower than she had expected.

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold a. fewer reserves, so the reserve ratio will fall. b. fewer reserves, so the reserve ratio will rise. c. more reserves, so the reserve ratio will fall. d. more reserves, so the reserve ratio will rise.

d. more reserves, so the reserve ratio will rise.

The Fed can increase the money supply by conducting open-market a. sales or by raising the discount rate. b. sales or by lowering the discount rate. c. purchases or by raising the discount rate. d. purchases or by lowering the discount rate.

d. purchases or by lowering the discount rate.

The introduction of a union into an industry a. raises wages and employment in that industry. b. lowers wages and employment in that industry. c. lowers wages and raises employment in that industry. d. raises wages and lowers employment in that industry.

d. raises wages and lowers employment in that industry.

If stock prices follow a random walk, it means a. long periods of declining prices are followed by long periods of rising prices. b. the greater the number of consecutive days of price declines, the greater the probability prices will increase the following day. c. stock prices are unrelated to random events that shock the economy. d. stock prices are just as likely to rise as to fall at any given time.

d. stock prices are just as likely to rise as to fall at any given time.

Suppose that over the past year, the real interest rate was 5 percent and the inflation rate was 3 percent. It follows that a. the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 2 percent. b. the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 8 percent. c. the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 2 percent. d. the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 5 percent.

d. the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 5 percent.

Suppose the market for loanable funds is in equilibrium. What would happen in the market for loanable funds, other things the same, if the Congress and President increased the maximum contribution limits to 401(k) and 403(b) tax-deferred retirement accounts? a. the interest rate and quantity of loanable funds would increase b. the interest rate and quantity of loanable funds would decrease. c. the interest rate would increase and the quantity of loanable funds would decrease. d. the interest rate would decrease and the quantity of loanable funds would increase.

d. the interest rate would decrease and the quantity of loanable funds would increase.

If there is a surplus of loanable funds, then a. the quantity demanded is greater than the quantity supplied and the interest rate will rise. b. the quantity demanded is greater than the quantity supplied and the interest rate will fall. c. the quantity supplied is greater than the quantity demanded and the interest rate will rise. d. the quantity supplied is greater than the quantity demanded and the interest rate will fall.

d. the quantity supplied is greater than the quantity demanded and the interest rate will fall.

If there is a shortage of loanable funds, then a. the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. b. the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. c. the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. d. the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium.

b. the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium.

If the reserve ratio is 5 percent, then $1,000 of additional reserves can create up to a. $200 of new money. b. $2,000 of new money. c. $20,000 of new money. d. None of the above is correct.

c. $20,000 of new money.

Which of the following is not included in M1? a. a $5 bill in your wallet b. $100 in your checking account c. $500 in your savings account d. All of the above are included in M1.

c. $500 in your savings account

You put money into an account that earns a 5 percent nominal interest rate. The inflation rate is 3 percent, and your marginal tax rate is 20 percent. What is your after-tax real rate of interest? a. 3.4 percent b. 1.6 percent c. 1.0 percent d. None of the above is correct.

c. 1.0 percent

If bank assets fall from $90 to $81 while its capital is $3, the owner's loss rate is a. 3 percent. b. 9 percent. c. 100 percent. d. 300 percent.

c. 100 percent.

You put money into an account and earn a real interest rate of 5 percent. Inflation is 2 percent, and your marginal tax rate is 40 percent. What is your after-tax real rate of interest? a. 1 percent b. 1.8 percent c. 2.2 percent d. 4.2 percent

c. 2.2 percent

. Dobson Construction has an investment project that would cost $150,000 today and yield a one-time payoff of $167,000 in three years. Among the following interest rates, which is the highest one at which Dobson would find this project profitable? a. 5 percent b. 4 percent c. 3 percent d. 2 percent

c. 3 percent

Table 16-5. Bank of Pleasantville Assets Liabilities Reserves $2,000 Deposits $15,000 Loans 18,000 Capital 5,000 77.Refer to Table 16-5. From the table it follows that the Bank of Pleasantville has a leverage ratio of a. 2 b. 3 c. 4 d. 9

c. 4

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is a. -5 percent. b. 1.67 percent. c. 5 percent. d. 11 percent.

c. 5 percent.

If bank assets increase from $100 to $105 while its capital is $10, the bank owner's profit rate is a. 5 percent. b. 10 percent. c. 50 percent. d. 100 percent.

c. 50 percent.

Table 16-6. Bank of Pleasantville Assets Liabilities Reserves $6,000 Deposits $50,000 Loans 54,000 Capital 10,000 78. Refer to Table 16-6. From the table it follows that the Bank of Pleasantville has a leverage ratio of a. 50 b. 10 c. 6 d. 5

c. 6

Which of the following would a macroeconomist consider as investment? a. Marisa purchases a bond issued by Proctor and Gamble Corp. b. Karlee purchases stock issued by Texas Instruments, Inc. c. Charlie builds a new coffee shop. d. All of the above are correct.

c. Charlie builds a new coffee shop.

. Who is included in the labor force by the Bureau of Labor Statistics? a. Chris, an unpaid homemaker not looking for other work b. Marcus, a full-time student not looking for work c. Gabe, who does not have a job, but is looking for work d. None of the above is correct.

c. Gabe, who does not have a job, but is looking for work