ECON Exam 2 - Macroeconomics

If your nominal wage rises faster than the price level, we can say your real wage has ________ and the purchasing power of your income has ________. a. fallen; fallen b. risen; fallen c. risen; risen d. fallen; risen

risen; risen

Which aggregate supply curve has a positive slope? a. both long run and short run b. neither long run nor short run c. short run only d. long run only

short run only

The basic aggregate demand and aggregate supply curve model helps explain a. price fluctuations in an individual market. b. short term fluctuations in real GDP and the price level. c. output fluctuations in an individual market. d. long term growth.

short term fluctuations in real GDP and the price level

The Federal Reserve was established in 1913 to a. stimulate the economy by increasing bank reserves. b. stop bank panics by acting as a lender of last resort. c. prevent bad loans by requiring banks to hold reserves. d. prevent inflation by decreasing the money supply.

stop bank panics by acting as a lender of last resort

The average price of goods and services in the economy is also known as a. the price level. b. a market basket. c. the cost of living. d. the inflation rate.

the price level

The major shortcoming of a barter economy is a. the requirement of a double coincidence of wants. b. that money loses value from inflation. c. the requirement of specialization and exchange. d. that goods and services are not traded.

the requirement of a double coincidence of wants

The ________ shows the relationship between the price level and quantity of real GDP demanded. a. consumer price index b. aggregate demand curve c. aggregate expenditure line d. 45-degree line

aggregate demand curve

The labor force participation rate equals the a. (number of employed divided by the labor force) × 100. b. (labor force divided by the number of people not in the labor force) × 100. c. (labor force divided by the total population) × 100. d. (labor force divided by working-age population) × 100.

(labor force divided by working-age population) x 100

The nominal GDP of the U.S. in 2012 was approximately $16.2 trillion. This means that A. total income in 2012 was around $16.2 trillion. B. total spending in 2012 was around $16.2 trillion. C. the value of output in 2012 was around $16.2 trillion. D. all of the above are true.

All of the above are true

Fiscal policy is determined by a. Congress and the president. b. Congress and the Federal Reserve. c. the Federal Reserve. d. the president and the Federal Reserve.

Congress and the President

Monetary policy refers to the actions the a. Federal Reserve takes to manage government spending and taxes to pursue its economic objectives. b. Federal Reserve takes to manage the money supply and interest rates to pursue its macroeconomic policy objectives. c. President and Congress take to manage the money supply and interest rates to pursue their economic objectives. d. President and Congress take to manage government spending and taxes to pursue their economic objectives.

Federal reserve takes to manage the money supply and interest rates to pursue its macroeconomic policy objectives

A transfer payment is a payment by the government to an individual for a debt owed. A. for an investment good. B. for a service. C. for a consumption good. D. for which the government does not receive a good or service in return.

For which the government does not receive a good or service in return

The Federal Reserve's narrowest definition of the money supply is a. M0. b. M1. c. M2. d. M3.

M1

The M2 measure of the money supply equals a. M1 plus savings account balances plus small-denomination time deposits plus noninstitutional money market fund shares. b. M1 plus savings account balances plus small-denomination time deposits. c. savings account balances plus small-denomination time deposits plus traveler's checks. d. savings account balances plus small-denomination time deposits plus noninstitutional money market fund shares.

M1 plus savings account balances plus small-denomination time deposits plus noninstitutional money market fund shares

The seven members of the Board of Governors of the Federal Reserve are appointed by a. the Governors of the States. b. Congress. c. the Treasury Department. d. the President. e. leaders in the banking industry.

The President

Open market operations refer to the purchase or sale of ________ to control the money supply. a. U.S. Treasury securities by the Federal Reserve b. corporate bonds and stocks by the U.S. Treasury c. corporate bonds and stocks by the Federal Reserve d. U.S. Treasury securities by the U.S. Treasury

U.S. Treasury securities by the Federal Reserve

Which of the following transactions represents the purchase of a final good? A. Your father buys a new John Deere riding lawn mower. B. Starbucks purchases coffee beans. C. Delta buys a new European-made jetliner. D. Apple computer buys computer processors from Intel.

Your father buys a new John Deere riding lawn mower.

Because of the slope of the aggregate demand curve, we can say that a. a decrease in the price level leads to a higher level of real GDP demanded. b. an increase in the price level leads to a higher level of real GDP demanded. c. a decrease in the price level leads to a lower level of real GDP demanded. d. an increase in the price level leads to no change in the level of real GDP demanded.

a decrease in the price level leads to a higher level of real GDP demanded

Which of the following is an example of a worker experiencing cyclical unemployment? a. A worker that changes jobs to move closer her family. b. An assembly line worker who loses his job because of automation. c. A freightliner employee that got laid off because of the recession of 2007-2009. d. A worker quits his job because he does not get along with his boss. e. A lifeguard who was hired during the summer season is laid off after summer is over.

a freightliner employee that got laid off because of the recession of 2007-2009

The situation in which short-term interest rates are pushed to zero, leaving the central bank unable to lower them further is known as a. a zero-sum game. b. the Taylor rule. c. a liquidity trap. d. an interest rate panic.

a liquidity trap

Structural unemployment is the result of a. the ups and downs in inflation. b. the search process of matching workers with jobs. c. a slowdown in the economy. d. a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs.

a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs

Which of the following describes a situation in which the person is hurt by inflation? a. a person who borrows money during a period when inflation is under-predicted b. a person paid a fixed income during an inflationary period c. a person who lends money during a period when inflation is over-predicted d. a retiree whose pension is adjusted for inflation

a person paid a fixed income during an inflationary period

Cyclical unemployment is the result of a. a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs. b. the ups and downs in inflation. c. a slowdown in the economy. d. the search process of matching workers with jobs.

a slowdown of the economy

The statement, "My iPhone is worth $300" represents money's function as a. a store of value. b. a unit of account. c. a standard of deferred payment. d. a medium of exchange.

a unit of account

An example of a transfer payment is A. a purchase of a new bridge in Alaska. B. a welfare payment. C. a paycheck for a member of the National Guard. D. a teacher's paycheck.

a welfare payment

Increases in real GDP would understate the well-being of a country over time if, over that time period, the A. amount of pollution decreased. B. percentage of people addicted to illegal drugs increased. C. crime rate increased. D. average hours worked per week decreased.

amount of pollution decreased

The international trade effect states that a. an increase in the price level will raise net exports. b. an increase in the price level will lower imports. c. an increase in the price level will raise exports. d. an increase in the price level will lower net exports.

an increase in the price level will lower net exports

In economics, money is defined as a. any asset people generally accept in exchange for goods and services. b. the total value of one's assets in current prices. c. the total value of one's assets minus the total value of one's debts, in current prices. d. the total amount of salary, interest, and rental income earned during a year.

any asset people generally accept in exchange for goods and services

The increase in the amount that the government collects in taxes when the economy expands and the decrease in the amount that the government collects in taxes when the economy goes into a recession is an example of a. automatic stabilizers. b. discretionary monetary policy. c. discretionary fiscal policy. d. automatic monetary policy.

automatic stabilizers

Increases in real GDP would overstate the increase in the well-being of a country over time if, over that time period, the A. average hours worked per week increased. B. crime rate decreased. C. amount of pollution decreased. D. price level increased

average hours worked per week increased.

The GDP deflator is a measure of the A. average level of prices of intermediate goods and services in the economy. B. total production of the economy adjusted for inflation. C. total production of the economy unadjusted for inflation. D. average level of prices of final goods and services in the economy.

average level of prices of final goods and services in the economy

Macroeconomics, as opposed to microeconomics, includes the study of what determines the A. quantity of Dell employees. B. average price levels of goods and services in the economy. C. wages paid to employees by Dell. D. price charged for laptop computers by Dell.

average price levels of goods and services in the economy

Economies where goods and services are traded directly for other goods and services are called ________ economies. a. direct b. trade c. barter d. seigniorage

barter

In an economy with ________, there are more prices than in an economy with ________. a. fiat money; barter b. money; barter c. fiat money; commodity money d. barter; money

barter; money

When actual inflation is less than expected inflation a. borrowers lose and lenders gain. b. borrowers and lenders both lose. c. borrowers and lenders both gain. d. borrowers gain and lenders lose.

borrowers lose and lenders gain

To evaluate the size of the federal budget deficit or surplus over time, it would be best to look at the a. budget deficit or surplus as a percentage of GDP. b. budget deficit or surplus as a percentage of government spending. c. budget deficit or surplus as a percentage of tax revenues. d. absolute size of the budget deficit or surplus.

budget deficit or surplus as a percentage of GDP

Investment, as defined by economists, would not include which of the following? Ford A. builds another assembly plant in the United States. B. buys a new robotic machine (from a plant in Ohio) to assemble cars. C. buys U.S. government bonds. D. adds 1,000 new cars to inventories.

buys U.S. government bonds

The level of aggregate supply in the long-run is not affected by a. changes in the price level. b. changes in technology. c. changes in the number of workers. d. changes in the capital stock

changes in the price level

The largest liability on the balance sheet of most banks is its a. deposits with the Federal Reserve. b. vault cash. c. holdings of securities. d. loans. e. checking account and savings account deposits of its customers.

checking account and savings account deposits of its customers

Silver is an example of a a. barter money. b. commodity money. c. fiat money. d. representative money.

commodity money

Investment, as defined by economists, would include the purchase of a A. government bond. B. computer by an accounting firm. C. corporate bond. D. share of stock in ExxonMobil.

computer by an accounting firm

Which of the following price indices comes closest to measuring the cost of living of the typical household? a. household price index b. GDP deflator c. producer price index d. consumer price index

consumer price index

What is the largest component of spending in the United States? A. net investment spending B. government spending C. investment spending D. consumption spending

consumption spending

To calculate GDP by the expenditure method, one must add A. consumption spending, investment spending, government spending and exports. B. labor, natural resources, entrepreneurship, and capital. C.consumption spending, investment spending, government spending and net exports. D. wages, rents, interest, and profits.

consumption spending, investment spending, government spending, and net exports

The largest proportion of M1 is made up of a. traveler's checks. b. checking account deposits. c. savings account deposits. d. currency. e. time deposits.

currency

The M1 measure of the money supply equals a. currency plus checking account balances. b. paper money plus coins in circulation. c. currency plus checking account balances plus traveler's checks plus savings account balances. d. currency plus checking account balances plus traveler's checks.

currency plus checking account balances plus traveler's checks

If households in the economy decide to take money out of checking account deposits and put this money into savings accounts, this will initially a. increase M1 and decrease M2. b. decrease M1 and not change M2. c. decrease M1 and decrease M2. d. decrease M1 and increase M2.

decrease M1 and not change M2

If a country passes a labor law limiting the number of hours of work per week, GDP would ________ and leisure would ________. A. increase; decrease B. increase; increase C. decrease; increase D. decrease; decrease

decrease; increase

An economic expansion tends to cause the federal budget deficit to ________ because tax revenues ________ and government spending on transfer payments ________. a. increase; fall; rises b. increase; rise; falls c. decrease; fall; rises d. decrease; rise; falls

decrease; rise; falls

Since 1948, the labor force participation rate for adult men has ________ and for adult women has ________. a. decreased; increased b. decreased; decreased c. increased; decreased d. increased; increased

decreased; increased

The required reserves of a bank equal its ________ the required reserve ratio. a. deposits divided by b. deposits multiplied by c. loans multiplied by d. loans divided by

deposits multiplied by

The impact of crowding out may be the least a. during an expansion. b. during a deep recession. c. when real GDP is above but close to potential GDP. d. when real GDP is below but close to potential GDP.

during a deep recession

Macroeconomics, as opposed to microeconomics, includes the study of what determines the level of A. output of a specific industry. B. employment in the economy. C. employment in a specific industry. D. output of a specific firm.

employment in the economy

In the circular flow model, the value of total income for an economy ________ the value of total production. A. is less than B. equals C. may be greater than or less than D. is greater than

equals

In the circular flow model, the value of total production for an economy ________ the value of total expenditures on final goods and services. A. may be greater than or less than B. equals C. is greater than D. is less than

equals

If your nominal wage rises more slowly than the price level, we can say your real wage has ________ and the purchasing power of a dollar has ________. a. fallen; risen b. risen; fallen c. risen; risen d. fallen; fallen

fallen; fallen

Fiscal policy refers to changes in a. federal taxes and purchases that are intended to fund the war on terrorism. b. the money supply and interest rates that are intended to achieve macroeconomic policy objectives. c. state and local taxes and purchases that are intended to achieve macroeconomic policy objectives. d. federal taxes and purchases that are intended to achieve macroeconomic policy objectives.

federal taxes and purchases that are intended to achieve macroeconomic policy objectives

If inflation is completely anticipated a. lenders lose in the economy. b. borrowers lose in the economy. c. firms lose because they incur menu costs. d. no one loses in the economy.

firms lose because they incur menu costs

Jack just told his boss that he thinks his boss is an idiot. It is likely that Jack will be experiencing ________ unemployment in the near future. a. cyclical b. frictional c. permanent d. structural

frictional

An increase in government purchases will increase aggregate demand because a. the decline in the price level will increase demand. b. the decline in the interest rate will increase demand. c. consumption expenditures are a component of aggregate demand. d. government expenditures are a component of aggregate demand.

government expenditures are a component of aggregate demand

Automatic stabilizers refer to a. changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives. b. the money supply and interest rates that automatically increase or decrease along with the business cycle. c. changes in the money supply and interest rates that are intended to achieve macroeconomic policy objectives. d. government spending and taxes that automatically increase or decrease along with the business cycle.

government spending and taxes that automatically increase or decrease along with the business cycle

The federal budget deficit acts as an automatic stabilizer because a. government tax revenues decrease during a recession. b. Medicaid payments increase during expansionary periods. c. food stamp payments increase during expansionary periods. d. unemployment insurance payments decrease during a recession.

government tax revenues decrease during a recession

Commodity money a. is backed by a valuable commodity such as gold. b. has little to no value independent of its use as money. c. can be used to purchase commodities, but not services. d. has value independent of its use as money.

has value independent of its use as money

Federal government purchases as a percentage of GDP a. rose from the early 1950s until the mid 1980s, and then fell. b. have remained roughly the same since the early 1950s. c. have risen since the early 1950s. d. have fallen since the early 1950s.

have fallen since the early 1950s

The goals of monetary policy tend to be interrelated. For example, when the Fed pursues the goal of ________, it also can achieve the goal of ________ simultaneously. a. high employment; economic growth b. stability of financial markets; a low current account deficit c. economic growth; a low current account deficit d. high employment; lowering government spending

high employment; economic growth

Gross domestic product understates the total production of final goods and services because of the omission of A. inflation. B. household production. C. intermediate goods. D. exports.

household production

Nominal GDP will increase A. only if the quantity of final goods and services produced rises. B. only if the price level falls. C. if either the price level or the quantity of goods and services produced rises. D. only if the price level rises.

if either the price level or the quantity of goods and services produced rises

During 1970-1997, the U.S. federal government was a. balanced every year. b. in deficit most of those years. c. in surplus every year. d. in deficit every year.

in deficit every year

An advantage of the household survey over the establishment survey of the labor market is that the household survey a. omits persons employed at newly opened firms. b. includes the number of self-employed persons. c. includes the number of discouraged workers. d. is based on actual payrolls, rather than on unverified answers.

includes the number of self-employed persons

Legalizing all forms of illegal activities A. reduces GDP and increases the size of the underground economy. B. reduces GDP and the size of the underground economy. C. increases GDP and increases the size of the underground economy. D. increases GDP and reduces the size of the underground economy.

increases GDP and reduces the size of the underground economy

An increase in the interest rate a. decreases the percentage yield of holding money. b. decreases the opportunity cost of holding money. c. increases the percentage yield of holding money. d. increases the opportunity cost of holding money.

increases the opportunity cost of holding money

The largest source of federal government revenue in 2016 was a. individual income taxes. b. corporate income taxes. c. sales taxes. d. payroll taxes to fund Social Security and Medicare programs.

individual income taxes

The percent increase in the CPI from one year to the next is a measure of the a. GDP deflator. b. real interest rate. c. unemployment rate. D. inflation rate.

inflation rate

Which of the following is not a function of the Federal Reserve System, or the "Fed"? a. taking actions to control the money supply b. acting as a banker's bank c. performing check clearing services d. acting as a lender of last resort e. insuring deposits in the banking system

insuring deposits in the banking system

Which of the following is not directly counted in GDP? A. investment expenditures B. intermediate goods C. government purchases D. consumer goods

intermediate goods

The "interest rate effect" can be described as an increase in the price level that raises the interest rate and chokes off a. government spending. b. net exports. c. government spending and unplanned investment. d. investment and consumption spending.

investment and consumption spending

The purchase of a new house is included in A. consumption expenditures. B. net exports. C. government purchases. D. investment expenditures.

investment expenditures

Which of the following information about fiat money is false? Fiat money a. is authorized by a central bank or governmental body. b. is backed by gold. c. serves as a medium of exchange. d. has little to no value except as money.

is backed by gold

An advantage of the establishment survey over the household survey of the labor market is that the establishment survey a. is based on actual payrolls, rather than on unverified answers. b. includes persons employed at newly opened firms. c. provides an estimate of the number of persons unemployed. d. includes the number of self-employed persons.

is based on actual payrolls, rather than on unverified answers

The cost to firms of changing prices a. is called a menu cost. b. is small even when there is rapid inflation. c. does not exist if inflation is perfectly anticipated. d. all of the above

is called a menu cost

People hold money as opposed to financial assets because money a. earns a higher return than other financial assets. b. is perfectly liquid. c. earns interest. d. earns no interest.

is perfectly liquid

The long-run aggregate supply curve a. is horizontal. b. is vertical. c. has a negative slope. d. has a steep but positive slope.

is vertical

Which of the following statements regarding the use of gold as money is false? a. It has standardized quality. b. It has value other than money. c. It is durable. d. It is acceptable to traders.

it has standardized quality

Banks can make additional loans when required reserves are a. less than total deposits. b. greater than total reserves. c. less than total reserves. d. less than total loans.

less than total reserves

Fiat money has a. little to no intrinsic value but is backed by the quantity of gold held by the central bank. b. value, because it can be redeemed for gold by the central bank. c. little to no intrinsic value and is authorized by the central bank or governmental body. d. a great intrinsic value that is independent of its use as money.

little to no intrinsic value and is authorized by the central bank or governmental body

The Federal Reserve's two main ________ are the money supply and the interest rate. a. fiscal policy targets b. monetary policy targets c. fiscal tools d. policy tools

monetary policy targets

The money demand curve has a a. positive slope because an increase in the interest rate increases the quantity of money demanded. b. negative slope because an increase in the price level decreases the quantity of money demanded. c. positive slope because an increase in the price level increases the quantity of money demanded. d. negative slope because an increase in the interest rate decreases the quantity of money demanded.

negative slope because an increase in the interest rate decreases the quantity of money demanded.

In 2012, which component of GDP had a negative value? A. investment B. net exports C. consumption D. government spending

net exports

The stated interest rate on a loan is the a. real interest rate. b. actual inflation rate. c. nominal interest rate. d. expected inflation rate.

nominal interest rate

Real GDP will increase A. only if the price level falls. B. only if the quantity of final goods and services produced rises. C. only if the price level rises. D. if either the price level rises or the quantity of final goods and services produced rises.

only if the quantity of final goods and services produced rises

The main tool that the Federal Reserve uses to conduct monetary policy is a. acting as the lender of last resort. b. discount policy. c. setting reserve requirements. d. open market operations. e. check clearing.

open market operations

The three main monetary policy tools used by the Federal Reserve to manage the money supply are a. open market operations, discount policy, and reserve requirements. b. interest rates, tax rates, and government spending. c. open market operations, the exchange rate of the dollar against foreign currencies, and government purchases. d. tax rates, government purchases, and government transfer payments.

open market operations, discount policy, and reserve requirements.

Full employment is not considered to be zero unemployment, because a. people do not find jobs instantaneously. b. there are not enough jobs for everyone who wants one. c. some cyclical unemployment always exists. d. some people do not want a job.

people do not find jobs instantaneously

The nominal interest rate equals the real interest rate ________ the inflation rate. a. plus b. minus c. times d. divided by

plus

The short-run aggregate supply curve has a(n) ________ slope because as prices of ________ rise, prices of ________ rise more slowly. a. infinite; inputs; final goods and services b. infinite; final goods and services; inputs c. positive; inputs; final goods and services d. positive; final goods and services; inputs

positive; final goods and services; inputs

Full-employment GDP is also known as a. potential GDP. b. realized GDP. c. balanced-budget GDP. d. politico-economic GDP.

potential GDP

When the Federal Reserve System was established in 1913, its main policy goal was a. keeping employment high. b. encouraging strong economic growth. c. preventing bank panics. d. promoting price stability.

preventing bank panics

The Federal Reserve System's four monetary policy goals are a. price stability, high employment, economic growth, and stability of financial markets and institutions. b. a low rate of bank failures, high reserve ratios, price stability, and economic growth. c. price stability, low government budget deficits, low current account deficits, and a low rate of bank failures. d. low government budget deficits, low current account deficits, high employment, and a high foreign exchange value of the dollar.

price stability, high employment, economic growth, and stability of financial markets and institutions.

Crowding out refers to a decline in ________ as a result of an increase in ________. a. government purchases; tax rates b. private expenditures; government purchases c. tax revenues; unemployment d. government purchases; private expenditures

private expenditures; government purchases

With the federal funds rate near zero and the economy still struggling, in response to already low interest rates doing little to stimulate the economy, the Fed began buying 10-year Treasury notes and certain mortgage-backed securities to keep interest rates low. This policy is known as a. securities-bubble deflating. b. inflation targeting. c. quantitative easing. d. contractionary monetary policy

quantitative easing

The GDP deflator is the A. ratio of nominal GDP to real GDP multiplied by 100. B. difference between real GDP and nominal GDP multiplied by 100. C. difference between nominal GDP and real GDP divided by 100. D. ratio of real GDP to nominal GDP multiplied by 100.

ratio of nominal GDP to real GDP multiplied by 100

To examine how the total production of an economy has changed over time, it would be better to examine A. real GDP. B. GDP at current prices. C. the GDP deflator. D. nominal GDP.

real GDP

Potential GDP refers to the level of a. nominal GDP in the short run. b. real GDP in the short run. c. real GDP in the long run. d. nominal GDP in the long run.

real GDP in the long run

Suppose the labor force stays constant, and the working-age population stays constant, but a greater number of persons who were unemployed become employed. The labor force participation rate will a. decrease. b. remain constant. c. increase. d. not change in a way that can be predicted.

remain constant

The major assets on a bank's balance sheet are its a. reserves, checking and savings account deposits. b. checking and savings account deposits. c. reserves, loans, and holdings of securities. d. reserves, loans, and checking account deposits. e. loans, and checking and savings account deposits.

reserves, loans, and holdings of securities

If whole tomatoes were money, which of the following functions of money would be the hardest for tomatoes to satisfy? a. unit of account b. certificate of gold c. store of value d. medium of exchange

store of value

Which of the following functions of money would be violated if inflation were high? a. medium of exchange b. store of value c. certificate of gold d. unit of account

store of value

People who lost their jobs as hand-drawn animators because of the popularity of computer-generated 3D animation are examples of persons who are suffering a. frictional unemployment. b. unnatural unemployment. c. structural unemployment. d. cyclical unemployment. e. seasonal unemployment.

structural unemployment

The Federal Reserve can directly affect its monetary policy ________, which then affect its monetary policy ________. a. goals; tools b. targets; tools c. targets; goals d. goals; targets

targets; goals

The use of fiscal policy to stabilize the economy is limited because a. the Internal Revenue Service (IRS) resists changes in tax rates because of all the changes they would have to make to the tax code. b. changes in government spending and tax rates have a small effect on aggregate demand. c. the legislative process can be slow, which means that it is difficult to make fiscal policy actions in a timely way. d. changes in government spending and tax rates have a small effect on interest rates.

the legislative process can be slow, which means that it is difficult to make fiscal policy actions in a timely way

The unemployment rate is a. the percentage of the number employed that is unemployed. b. the percentage of the working-age population that is unemployed. c. the percentage of the labor force that is unemployed. d. the percentage of the working-age population that is employed. e. the percentage of the labor force that is employed.

the percentage of the labor force that is unemployed

Frictional unemployment is the result of a. the search process of matching workers with jobs. b. the ups and downs in inflation. c. a slowdown in the economy. d. a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs.

the search process of matching workers with jobs

Gross domestic product understates the total production of final goods and services because of the omission of A. the underground economy. B. intermediate goods. C. exports. D. inflation.

the underground economy

According to the text, economists consider full employment to occur when a. the unemployment rate consists of only frictional and structural unemployment. b. frictional unemployment equals zero. c. the sum of frictional unemployment and structural unemployment equals zero. d. everyone who wants a job has a job.

the unemployment rate consists of only frictional and structural unemployment

If inflation is positive and is perfectly anticipated a. those that lend money lose. b. no one in the economy loses. c. those that hold paper money lose. d. those that borrow money lose.

those that hold paper money lose

The largest and fastest-growing category of federal government expenditures is a. grants to state and local governments. b. transfer payments. c. interest on the national debt. d. national park spending.

transfer payments

All of the following are reasons why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services except a. menu costs make some prices sticky. b. contracts make prices and wages "sticky." c. firms are often slow to adjust wages. d. unions are successful in pushing up wages.

unions are successful in pushing up wages

Soldiers in a World War II prisoner-of-war camp a. used cowrie shells as money. b. used U.S. dollars as a commodity money. c. used gold as a fiat money. d. used cigarettes as money.

used cigarettes as money

Nominal GDP is GDP in a given year A. adjusted for inflation. B. valued in the prices of that year. C. adjusted for anticipated inflation. D. valued in the prices of the base year.

valued in the prices of that year

Real GDP is GDP in a given year a. valued in the prices of the base year. b. adjusted only for anticipated inflation. c. adjusted only for unanticipated inflation. d. valued in the prices of that year.

valued in the prices of the base year

In calculating gross domestic product, the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced. This means that the BEA A. values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up. B. values goods at their market prices, multiplies them by the quantity produced, and then adds them up. C. simply counts the total number of goods produced in the market place and then adds them up. D. simply counts the total number of goods and services produced in the marketplace and then adds them up.

values goods and services at their market prices, multiplies them by the quantity produced, then adds them up

Bank reserves include a. loans to bank customers and deposits with the Federal Reserve. b. customer checking accounts and vault cash. c. vault cash and loans to bank customers. d. deposits with the Federal Reserve and holdings of securities. e. Correct Answer vault cash and deposits with the Federal Reserve.

vault cash and deposits with the Federal Reserve

Which of the following best describes the "wealth effect"? a. When the price level falls, the nominal value of household wealth falls. b. When the price level falls, the real value of household wealth falls. c. Correct Answer When the price level falls, the real value of household wealth rises. d. When the price level falls, the nominal value of household wealth rises.

when the price level falls, the real value of household wealth rises