Econ Chapter 10-13

unemployment rate formula

100 x (# of unemployed/ labor force)

labor force participation rate formula

100 x (labor force/adult population)

A country has $60 million of saving and domestic investment of $40 million. Net exports are a. $20 million. b. -$20 million. c. $100 million. d. -$100 million.

a. $20 million

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets, then France's net capital outflow is a. -.3 trillion euros, so it must have a trade deficit. b. -.3 trillion euros, so it must have a trade surplus. c. .3 trillion euros, so it must have a trade deficit. d. .3 trillion euros, so it must have a trade surplus

a. -.3 trillion euros, so it must have a trade defecit

If the government imposes a minimum wage of $4, how many workers will be unemployed? a. 0 b. 3,000 c. 4,000 d. 7,000

a. 0

Refer to Figure 28-3. At the equilibrium wage, how many workers are unemployed? a. 0 b. 4,000 c. 5,000 d. 8,000

a. 0 (equilibrium means laborers= jobs available)

If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $3 in the U.S. and 6 pesos in Argentina what is the real exchange rate? a. 2 b. 3/2 c. 2/3 d. 1/2

a. 2

An MP3 player in Singapore costs 200 Singaporean dollars. In the U.S. it costs 100 US dollars. What is the nominal exchange rate if purchasing-power parity holds? a. 2.0 b. 1.0 c. .50 d. None of the above is correct.

a. 2.0

If M = 2,000, P = 2.25, and Y= 6,000, what is velocity? a. 6.75. b. 3.00. c. 1.33. d. 1.50.

a. 6.75

If a country has saving of $2 trillion and investment of $1.5 trillion, then it has a. a trade surplus and its net capital outflow = $.5 trillion. b. a trade surplus and its net capital outflow = -$.5 trillion. c. a trade deficit and its net capital outflow = $.5 trillion. d. a trade deficit and its net capital outflow = -$.5 trillion

a. a trade surplus and its net capital outflow is $.5 trillion

Which of the following statements is correct? a. All items that are included in M1 are included also in M2. b. All items that are included in M2 are included also in M1. c. Credit cards are included in both M1 and M2. d. Savings deposits are included in both M1 and M2.

a. all of the items that are in M1 are included in M2

Some persons are counted as out of the labor force because they have made no serious or recent effort to look for work. However, some of these individuals may want to work even though they are too discouraged to make a serious effort to look for work. If these individuals were counted as unemployed instead of out of the labor force, then a. both the unemployment rate and labor-force participation rate would be higher. b. the unemployment rate would be higher ,and the labor-force participation rate would be lower. c. the unemployment rate would be lower, and the labor-force participation rate would be higher. d. both the unemployment rate and labor-force participation rate would be lower.

a. both the unemployment rate and the labor-force participation rate would be higher

When conducting an open-market purchase, the Federal Reserve a. buys government bonds, and in so doing increases the money supply. b. buys government bonds, and in so doing decreases the money supply. c. sells government bonds, and in so doing increases the money supply. d. sells government bonds, and in so doing decreases the money supply

a. buys government bonds, and in doing so increases the money supply

Which of the following is a source of frictional unemployment? a. changes in the composition of demand among industries or regions b. minimum wages c. labor unions d. None of the above is correct.

a. changes in the composition of demand along industries or regions

If inflation is higher than what was expected, a. creditors receive a lower real interest rate than they had anticipated. b. creditors pay a lower real interest rate than they had anticipated. c. debtors receive a higher real interest rate than they had anticipated. d. debtors pay a higher real interest rate than they had anticipated.

a. creditors receive a lower real interest rate than they had anticipated

If the natural rate of unemployment is 5.2 percent and the actual rate of unemployment is 5.7 percent, then by definition there is a. cyclical unemployment amounting to 0.5 percent of the labor force. b. frictional unemployment amounting to 0.5 percent of the labor force. c. structural unemployment amounting to 0.5 percent of the labor force. d. search unemployment amounting to 0.5 percent of the labor force

a. cyclical unemployment amounting to 0.5 percent of the labor force

Credit cards a. defer payments. b. are a store of value. c. have led to wider use of currency. d. are part of the money supply

a. defer payments

If the number of Japanese yen a dollar buys falls, but neither country's price level changes, then the real exchange rate a. depreciates which causes U.S. net exports to increase. b. depreciates which causes U.S. net exports to decrease. c. appreciates which causes U.S. net exports to increase. d. appreciates, which causes U.S. net exports to decrease.

a. depreciates which causes US net exports to increase

U.S- based Dell sells computers to an Irish company that pays with previously obtained U.S. currency. This exchange a. increases U.S. net capital outflow because the U.S. acquires foreign-owned assets. b. decreases U.S. net capital outflow because the U.S. acquires foreign-owned assets. c. increases U.S. net capital outflow because the U.S. sells capital goods. d. decreases U.S. net capital outflow because the U.S. sells capital goods

a. increases US net capital outflow because the US acquires foreign-owned assets

The Federal Reserve's policy decisions have an important influence on a. inflation in the long run and employment and production in the short run. b. inflation in the long run and employment and production in the long run. c. inflation in the short run and employment and production in the short run. d. inflation in the short run and employment and production in the long run

a. inflation in the long run and employment and production in the short run

When the Fed conducts open-market purchases, a. it buys Treasury securities, which increases the money supply. b. it buys Treasury securities, which decreases the money supply. c. it borrows money from member banks, which increases the money supply. d. it lends money to member banks, which decreases the money supply.

a. it buys treasury securities, which increases the money supply

In the U.S., taxes on capital gains are computed using a. nominal gains. This is one way by which higher inflation discourages saving. b. nominal gains. This is one way by which higher inflation encourages saving. c. real gains. This is one way by which higher inflation discourages saving. d. real gains. This is one way by which higher inflation encourages saving.

a. nominal gains. This is one way by which higher inflation discourages saving

Frictional unemployment is inevitable because a. sectoral shifts are always happening. b. there is a federal minimum-wage law in the U.S. c. some people do not want to be employed. d. unions are very popular in the U.S

a. sectoral shifts are always happening

Efficiency wages create a labor a. surplus and so increase unemployment. b. surplus and so decrease unemployment. c. shortage and so increase unemployment. d. shortage and so decrease unemployment

a. surplus and so increase unemployment

Liquidity refers to a. the ease with which an asset is converted to the medium of exchange. b. the measurement of the intrinsic value of commodity money. c. the measurement of the durability of a good. d. how many time a dollar circulates in a given year.

a. the ease with which an asset is converted to the medium of exchange

Ariana is the CEO of a corporation that hires nonunion labor. According to the theory of efficiency wages, if she decides to pay her workers more than the competitive equilibrium wage, then a. the profits of her firm might increase. b. she will face a shortage of labor. c. the turnover of her workers may increase. d. None of the above is correct.

a. the profits of her firm might increase

Eric was laid off two months ago. He has not searched for other work because he is expecting to be recalled to work. The Bureau of Labor Statistics counts Eric 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

Sam deposits money into an account with a nominal interest rate of 4 percent. He expects inflation to be 1.5 percent. His tax rate is 32 percent. Sam's after-tax real rate of interest a. will be 1.2 percent if inflation turns out to be 1.5 percent; it will be higher if inflation turns out to be lower than 1.5 percent. b. will be 1.2 percent if inflation turns out to be 1.5 percent; it will be lower if inflation turns out to be lower than 1.5 percent. c. will be 1.7 percent if inflation turns out to be 1.5 percent; it will be higher if inflation turns out to be lower than 1.5 percent. d. will be 1.7 percent if inflation turns out to be 1.5 percent; it will be lower if inflation turns out to be lower than 1.5 percent

a. will be 1.2 percent if the inflation turns out to be 1.5 percent; it will be higher if the inflation turns out to be lower than 1.5 percent.

Your boss gives you an increase in the number of dollars you earn per hour. This increase in pay makes a. your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your real wage also increased. b. your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your real wage decreased. c. your real wage increase. If your real wage rose by a greater percentage than the price level, then your nominal wage also increased. d. your real wage decrease. If your real wage rose by a greater percentage than the price level, then your nominal wage decreased.

a. your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your real wage also increased.

10. A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to a. $8. b. $80. c. $92. d. $920

b. $80

A country has $45 million of domestic investment and net capital outflow of -$60 million. What is its saving? a. $15 million b. -$15 million c. $105 million d. -$105 million

b. -$15 million

If M = 9,000, P = 6, and Y = 1,500, what is velocity? a. 0.167. b. 1. c. 4. d. 36

b. 1

The number of adults not in the labor force of Aridia in 2012 was a. 200. b. 1,400. c. 1,600. d. 3,000

b. 1,400 ( adult population- (# of employed + unemployed))

The labor force of Aridia in 2011 was a. 1,300. b. 1,900. c. 2,400. d. 3,000.

b. 1,900 (add # of unemployed + employed)

If the exchange rate is 2 Brazilian reals per dollar and a meal in Rio costs 20 reals, then how many dollars does it take to buy a meal in Rio? a. 40 and your purchase will increase Brazil's net exports. b. 10 and your purchase will increase Brazil's net exports. c. 40 and your purchase will decrease Brazil's net exports. d. 10 and your purchase will decrease Brazil's net exports.

b. 10 and your purchase will increase Brazil's net exports

The reserve ratio for this bank is a. 8 percent. b. 12.5 percent. c. 87.5 percent. d. 25 percent

b. 12.5 percent

13. If the reserve ratio is 4 percent, then the money multiplier is a. 24. b. 25. c. 26. d. 4.

b. 25 (money multiplier = 1/R)

Suppose that some country had an adult population of about 50 million, a labor-force participation rate of 60 percent, and an unemployment rate of 5 percent. How many people were employed? a. 1.5 million b. 28.5 million c. 30 million d. 47.5 million

b. 28.5 million

Suppose that the adult population is 4 million, the number of unemployed is 0.25 million, and the labor force participation rate is 75%. What is the unemployment rate? a. 6.25% b. 8.3% c. 9.1% d. 18.75%

b. 8.3%

The bank's reserve ratio is a. 17.5 percent. b. 8.5 percent. c. 91.5 percent. d. 100 percent

b. 8.5 percent

The adult population in the town of Shelbyville is 150 thousand. If 100 thousand people are employed and 20 thousand are unemployed, then the labor force participation rate is approximately a. 67%. b. 80%. c. 16%. d. 13%.

b. 80%

Which of the following is an example of U.S. foreign portfolio investment? a. Disney builds a new amusement park near Barcelona, Spain. b. A U.S. citizen buys bonds issued by the British government. c. A Dutch hotel chain opens a new hotel in the United States. d. A citizen of Singapore buys a bond issued by a U.S. corporation.

b. A US citizen buys bonds issued by the British government

The real exchange rate is the nominal exchange rate, defined as foreign currency per dollar, times a. U.S. prices minus foreign prices. b. U.S. prices divided by foreign prices. c. foreign prices divided by U.S. prices. d. None of the above is correct

b. US prices divided by foreign prices

If you go to the bank and notice that a dollar buys more Japanese yen than it used to, then the dollar has a. appreciated. Other things the same, the appreciation would make Americans less likely to travel to Japan. b. appreciated. Other things the same, the appreciation would make Americans more likely to travel to Japan. c. depreciated. Other things the same, the depreciation would make Americans less likely to travel to Japan. d. depreciated. Other things the same, the depreciation would make Americans more likely to travel to Japan

b. appreciated. other things the same, the appreciation would make americans more likely to travel to japan

If purchasing-power parity holds, a dollar will buy a. more goods in foreign countries than in the United States. b. as many goods in foreign countries as it does in the United States. c. fewer goods in foreign countries than it does in the United States. d. None of the above is implied by purchasing-power parity.

b. as many goods in foreign countries as it does in the United States

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money a. being a unit of account. b. being a medium of exchange. c. serving as a store of value. d. having intrinsic value.

b. being a medium of exchange

If the number of dollars needed to buy a representative basket of goods falls, the price level a. falls, so the value of money falls. b. falls, so the value of money rises. c. rises, so the value of money falls. d. rises, so the value of money rises.

b. falls, so the value of money rises

11. A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement. a. It has $25 in reserves and $4,975 in loans. b. It has $250 in reserves and $4,750 in loans. c. It has $1,000 in reserves and $4,000 in loans. d. None of the above is correct.

b. it has $250 in reserves and $4,750 in loans

If $800 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its a. reserves will increase by $100. b. liabilities will increase by $800. c. assets will decrease by $800. d. loans will increase by $800.

b. liabilities will increase by $800

Marginally attached workers are people who are a. looking for a better job than they currently have. b. not working and are not looking for work, but would work if asked. c. working part-time while they go to school or get training for a better job. d. only a few years from retirement.

b. not working and are not looking for work, but would work if asked

Which tool of monetary policy does the Federal Reserve use most often? a. term auctions b. open-market operations c. changes in reserve requirements d. changes in the discount rate

b. open-market operations

If the Mexican nominal exchange rate does not change, but prices rise faster in Mexico than in all other countries, then the Mexican real exchange rate a. does not change. b. rises. c. declines. d. There is not enough information to answer the question

b. rises

Cyclical unemployment refers to a. the portion of unemployment created by job search. b. short-run fluctuations around the natural rate of unemployment. c. changes in unemployment due to changes in the natural rate of unemployment. d. the portion of unemployment created by wages set above the equilibrium level.

b. short-run fluctuations around the natural rate of unemployment

People who are unemployed because wages are, for some reason, set above the level that brings labor supply and demand into equilibrium are best classified as a. cyclically unemployed. b. structurally unemployed. c. frictionally unemployed. d. discouraged workers.

b. structurally unemployed

When the Mexican peso gets "stronger" relative to the dollar, a. the U.S. trade deficit with Mexico rises. b. the U.S. trade deficit with Mexico falls. c. the U.S. trade deficit with Mexico is unchanged. d. None of the above necessarily happens

b. the US trade deficit with mexico falls

Nominal GDP measures a. the total quantity of final goods and services produced. b. the dollar value of the economy's output of final goods and services. c. the total income received from producing final goods and services measured in constant dollars. d. the overall level of prices.

b. the dollar value of the economys output of final goods and services

If velocity and output were nearly constant, then a. the inflation rate would be much higher than the money supply growth rate. b. the inflation rate would be about the same as the money supply growth rate. c. the inflation rate would be much lower than the money supply growth rate. d. any of the above would be possible.

b. the inflation rate would be about the same as the money supply growth rate

In the long run, money demand and money supply determine a. the price level and the real interest rate. b. the price level but not the real interest rate. c. the real interest rate but not the price level. d. neither the price level nor the real interest rate.

b. the price level but not the real interest rate

When the Consumer Price Index falls from 110 to 100 a. there is inflation of 9.1% and the value of money decreases. b. there is deflation of 9.1% and the value of money increases. c. there is deflation of 10% and the value of money increases. d. there is inflation of 10% and the value of money decreases.

b. there is deflation of 9.1% and the value of money increases

Suppose every good costs $8 per unit and Molly holds $120. What is the real value of the money she holds? a. $120. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars. b. $120. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars. c. 15 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars. d. 15 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars.

c. 15 units of goods. if the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars

12. A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is a. 2.5 percent. b. 33.3 percent. c. 25 percent. d. 75 percent.

c. 25 %

14. If $300 of new reserves generates $800 of new money in the economy, then the reserve ratio is a. 2.7 percent. b. 12.5 percent. c. 37.5 percent. d. 40 percent

c. 37.5 percent

In the U.S. a candy bar costs $1. If the nominal exchange rate were 6 Chinese yuan per dollar and the real exchange rate were 1.2, then, what would be the price of a candy bar in China? a. 7.2 yuan b. 6 yuan c. 5 yuan d. 3.6 yuan

c. 5 yuan

At the equilibrium wage, how many workers are employed? a. 0 b. 1,000 c. 5,000 d. 9,000

c. 5,000

What is the adult labor-force participation rate in Meditor? a. 37.5% b. 62.5% c. 66.7% d. 95.8%

c. 66.7%

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 has not 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 there 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 is an example of U.S. foreign direct investment? a. A Swedish car manufacturer opens a plant in Tennessee. b. A Dutch citizen buys shares of stock in a U.S. company. c. A U.S. based restaurant chain opens new restaurants in India. d. A U.S. citizen buys stock in companies located in Japan.

c. a US based restaurant chain opens new restaurants in India

The term hyperinflation refers to a. the spread of inflation from one country to others. b. a decrease in the inflation rate. c. a period of very high inflation. d. inflation accompanied by a recession.

c. a period of high inflation

When a minimum-wage law forces the wage to remain above the equilibrium level, the result is a. both a shortage of labor and a shortage of jobs. b. a shortage of labor and a surplus of jobs. c. a surplus of labor and a shortage of jobs. d. both surplus of labor and a surplus of jobs.

c. a surplus of labor and a shortage of jobs

The deviation of unemployment from its natural rate is called a. the normal rate of unemployment. b. deviant unemployment. c. cyclical unemployment. d. fluctuating unemployment

c. cyclical unemployment

If the Canadian nominal exchange rate does not change, but prices rise faster abroad than in Canada, then the Canadian real exchange rate a. does not change. b. rises. c. declines. d. None of the above is necessarily correct.

c. declines

When the price level falls, the number of dollars needed to buy a representative basket of goods a. increases, so the value of money rises. b. increases, so the value of money falls. c. decreases, so the value of money rises. d. decreases, so the value of money falls.

c. decreases, so the value of money rises

If P = domestic prices, P* = foreign prices, and e is the nominal exchange rate, which of the following is implied by purchasing-power parity? a. P = e/P* b. 1 = e/P* c. e = P*/P d. None of the above is correct

c. e= P*/P

An appreciation of the U.S. real exchange rate induces U.S. consumers to buy a. fewer domestic goods and fewer foreign goods. b. more domestic goods and fewer foreign goods. c. fewer domestic goods and more foreign goods. d. more domestic goods and more foreign goods.

c. fewer domestic goods and more foreign goods

When Haley states that inflation by itself always reduces the real return on her saving, she a. has expressed the idea of the inflation tax. b. has expressed the idea behind menu costs. c. has committed the inflation fallacy. d. has expressed the idea behind shoeleather costs.

c. has committed the inflation fallacy

Unemployment insurance tends to a. decrease structural unemployment. b. decrease cyclical unemployment. c. increase frictional unemployment. d. increase the number of discouraged workers

c. increase frictional employment

The source of hyperinflations is primarily a. lower output growth. b. continuing declines in velocity. c. increases in money-supply growth. d. continuing increases in money demand.

c. increases in money-supply growth

The real interest rate is 4 percent and the nominal interest rate is 6 percent. Is there inflation or deflation? What is the inflation or deflation rate? a. deflation; 2 percent b. deflation; 10 percent c. inflation; 2 percent d. inflation; 10 percent

c. inflation; two percent

In a fractional-reserve banking system, a bank a. does not make loans. b. does not accept deposits. c. keeps only a fraction of its deposits in reserve. d. None of the above is correct.

c. keeps only a fraction of its deposits in reserve

.Reserves increase if the Federal Reserve a. raises the discount rate or auctions more credit. b. raises the discount rate but not if it auctions more credit. c. lowers the discount rate or auctions more credit. d. lowers the discount rate but not if it auctions more credit

c. lowers the discount rate or auctions more credit

People can reduce the inflation tax by a. reducing savings. b. increasing deductions on their income tax. c. reducing cash holdings. d. None of the above is correct

c. reducing cash holdings

Shoeleather cost refers to a. the cost of more frequent price changes induced by higher inflation. b. the distortion in resource allocation created by distortions in relative prices due to inflation. c. resources used to maintain lower money holdings when inflation is high. d. the tendency to expend more effort searching for the lowest price when inflation is high

c. resources used to maintain lower money holdings when inflation is high

To decrease the money supply, the Fed can a. buy government bonds or increase the discount rate. b. buy government bonds or decrease the discount rate. c. sell government bonds or increase the discount rate. d. sell government bonds or decrease the discount rate.

c. sell government bonds or decrease the discount rate

Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate rises, then a. both the nominal and the real interest rate rise. b. neither the nominal nor the real interest rate rise. c. the nominal interest rate rises, but the real interest rate does not. d. the real interest rate rises, but the nominal interest rate does not.

c. the nominal interest rate rises, but the real interest rate does not.

Suppose that a country imports $90 million worth of goods and services and exports $80 million worth of goods and services. What is the value of net exports? a. $170 million b. $80 million c. $10 million d. -$10 million

d. -10 million

If all banks in the economy have the same reserve ratio as this bank, then the value of the economy's money multiplier is a. 9.33. b. 1.09. c. 10.76. d. 11.76

d. 11.76

In France a loaf of bread costs 3 euros. In Great Britain a loaf of bread costs 4 pounds. If the exchange rate is .9 pounds per euro, what is the real exchange rate? a. 4/2.7 loaves of British bread per loaf of French bread b. 3.6/3 loaves of British bread per loaf of French bread c. 3/3.6 loaves of British bread per loaf of French bread d. 2.7/4 loaves of British bread per loaf of French bread

d. 2.7/4 loaves of British Bread per loaf of French Bread

What is the adult population in Meditor? a. 90 million b. 160 million c. 230 million d. 240 million

d. 240 million

In the United States, a three-pound can of coffee costs about $5. If the exchange rate is 0.8 euros per dollar and a three-pound can of coffee in Belgium costs 7 euros. What is the real exchange rate? a. 7/4 cans of Belgian coffee per can of U.S. coffee b. 5.6/5 cans of Belgian coffee per can of U.S. coffee c. 5/5.6 cans of Belgian coffee per can of U.S. coffee d. 4/7 cans of Belgian coffee per can of U.S. coffee

d. 4/7 cans of Belgian coffee per can of US coffee

If the price level increased from 120 to 130, then what was the inflation rate? a. 1.1 percent. b. 7.7 percent. c. 10.0 percent. d. 8.3 percent

d. 8.3%

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the United States costs $40, how many florins must a basket of goods in Aruba cost for purchasing-power parity to hold? a. 20 florin b. 40 florin c. 60 florin d. 80 florin

d. 80 florin

Last year, Jane spent all of her income to purchase 200 units of corn at $5 per unit. This year, she spent all of her income to purchase 180 units of corn at $6 per unit. a. Jane's nominal income and real income decreased this year. b. Jane's nominal income decreased this year, but her real income increased. c. Jane's nominal income and real income increased this year. d. Jane's nominal income increased this year, but her real income decreased

d. Janes nominal income increased this year, but her real income decreased

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

Which of the following equations is always correct in an open economy? a. NX = Y - C - G - I b. NX = S - I c. NX = NCO d. All of the above are correct.

d. all of the above are correct

If Saudi Arabia had negative net exports last year, then it a. sold more abroad than it purchased abroad and had a trade surplus. b. sold more abroad than it purchased abroad and had a trade deficit. c. bought more abroad than it sold abroad and had a trade surplus. d. bought more abroad than it sold abroad and had a trade deficit

d. bought more abroad than it sold abroad and had a trade defecit

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

d. credit cards

A Japanese bank buys U.S. government bonds, this purchase a. increases U.S. net capital outflow and has no affect on Japanese net capital outflow. b. increases U.S. net capital outflow and increases Japanese net capital outflow. c. increases U.S. net capital outflow, but decreases Japanese net capital outflow. d. decreases U.S. net capital outflow, but increases Japanese net capital outflow.

d. decreases US net capital outflow, but increases japanese net capital outflow

. Deflation a. increases incomes and enhances the ability of debtors to pay off their debts. b. increases incomes and reduces the ability of debtors to pay off their debts. c. decreases incomes and enhances the ability of debtors to pay off their debts. d. decreases incomes and reduces the ability of debtors to pay off their debts

d. decreases incomes and reduces the ability of debtors to pay off their debts

A decrease in the money supply creates an excess a. supply of money that is eliminated by rising prices. b. supply of money that is eliminated by falling prices. c. demand for money that is eliminated by rising prices. d. demand for money that is eliminated by falling prices.

d. demand for money that is eliminated by falling prices

Some individuals would like to have a job, but they have given up looking for a job after an unsuccessful search. These individuals are called a. detached workers, and they are classified by the Bureau of Labor Statistics as unemployed. b. detached workers, and they are not classified by the Bureau of Labor Statistics as unemployed. c. discouraged workers, and they are classified by the Bureau of Labor Statistics as unemployed. d. discouraged workers, and they are not classified by the Bureau of Labor Statistics as unemployed.

d. discouraged workers, and they are not classified by the Bureau of Labor Statistics as unemployed

Wealth is redistributed from debtors to creditors 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.

d. high and it turns out to be low

The effects of unionization on wages in the sectors of the economy that are unionized causes the supply of labor in other sectors of the economy to a. decrease, raising wages in industries that are not unionized. b. decrease, reducing wages in industries that are not unionized. c. increase, raising wages in industries that are not unionized. d. increase, reducing wages in industries that are not unionized.

d. increase, reducing wages in industries that are not unionized

Which of the following is an explanation for the existence of frictional unemployment? a. efficiency wages b. minimum-wage laws c. unions d. job search

d. job search (unemployed looking for better opportunities)

If the discount rate is raised then banks borrow a. more from the Fed so reserves increase. b. more from the Fed so reserves decrease. c. less from the Fed so reserves increase. d. less from the Fed so reserves decrease

d. less from the Federal Reserve so reserves decrease

Marta lends money at a fixed interest rate and then inflation turns out to be higher than she had expected it to be. The real interest rate she earns 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 than she had expected, and the real value of the loan is lower than she had expected

The costs of changing price tags and price listings are known as a. inflation-induced tax distortions. b. relative-price variability costs. c. shoeleather costs. d. menu costs.

d. menu costs

Consider two labor markets in which jobs are equally attractive in all respects other than the wage rate. All workers are equally able to do either job. Initially, both labor markets are perfectly competitive. If a union organizes workers in one of the markets, then the wage rates will tend to a. rise in both markets. b. fall in both markets c. rise for the union jobs, but remain unchanged for the nonunion jobs. d. rise for the union jobs and fall for the nonunion jobs.

d. rise for the union jobs and fall for the non union jobs

Norma complains that she is not receiving the full benefit of her six percent raise, because inflation is two percent. You tell her that nominal incomes tend to rise with inflation, therefore a. she really is worse off. b. her real income increased eight percent. c. menu costs have reduced her purchasing power. d. she is committing the inflation fallacy.

d. she is committing the inflation fallacy

Minimum wages create unemployment in markets where they create a a. shortage of labor. Unemployment of this type is called frictional. b. shortage of labor. Unemployment of this type is called structural. c. surplus of labor. Unemployment of this type is called frictional. d. surplus of labor. Unemployment of this type is called structural

d. surplus of labor. Unemployment of this type is called structural

The Fed's control of the money supply is not precise because a. Congress can also make changes to the money supply. b. there are not always government bonds available for purchase when the Fed wants to perform open-market operations. c. the Fed does not know where all U.S. currency is located. d. the amount of money in the economy depends in part on the behavior of depositors and bankers.

d. the amount of money in the economy depends in part on the behavior of depositors and bankers

The velocity of money is a. the rate at which the Fed puts money into the economy. b. the same thing as the long-term growth rate of the money supply. c. the money supply divided by nominal GDP. d. the average number of times per year a dollar is spent

d. the average number of times per years a dollar is spent

The rate at which the Federal Reserve lends money to banks is a. the prime rate. b. fixed at 4%. c. the federal funds rate. d. the discount rate.

d. the discount rate

A problem that the Fed faces when it attempts to control the money supply is that a. the 100-percent-reserve banking system in the U.S. makes it difficult for the Fed to carry out its monetary policy. b. the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools. c. the Fed does not have a tool that it can use to change the money supply by either a small amount or a large amount. d. the Fed does not control the amount of money that households choose to hold as deposits in banks.

d. the fed does not control the amount of money that households choose to hold as deposits in banks

Suppose that some people report themselves as unemployed when, in fact, they are working in the underground economy. If these persons were counted as employed, then a. both the unemployment rate and labor-force participation rate would be higher. b. both the unemployment rate and labor-force participation rate would be lower. c. the unemployment rate would be higher, and the labor-force participation rate would be higher. d. the unemployment rate would be lower, and the labor-force participation rate would be unaffected.

d. the unemployment rate would be lower, and the labor-force participation rate would be unaffected

Net capital outflow equals a. the value of domestic assets purchased by foreigners. b. the value of foreign assets purchased by domestic residents. c. the value of domestic assets purchased by foreigners - the value of foreign assets purchased by domestic residents. d. the value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners.

d. the value of foreign assets purchased by domestic residents- the value of domestic assets purchased by foreigners

Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of a. two percent and prices fell one percent. b. two percent and prices rose one percent. c. three percent and prices rose one percent. d. three percent and prices fell one percent.

d. three percent and prices fell one percent

velocity of money formula

v= (P x Y)/ M