econ quick quizzes
If the required reserve ratio is 10 percent, a $100 deposit will ultimately allow the banking system to create how much money?
$1,000.
Samantha buys a bond in the amount of $1,000 with a promised interest rate of 18 percent. If the market interest rate decreases to 3 percent, Samantha can sell his bond for up to
$6,000.
If the marginal propensity to consume is 0.75, then the multiplier equals The multiplier can be found by using this formula: Multiplier = 1 / (1 - MPC).
1/(1 - 0.75).
China, 100 soybeans, 300 computer United States, 150 soybeans, 750 computer Based on the information in Table 35.1, assume China and the United States have the same amount of resources with which to produce soybeans and computers and they produce no other goods. The opportunity cost of producing 1 ton of soybeans in the United States is One ton of soybeans produced in the United States has an opportunity cost of 5 computers since 150S = 750PC, 1S = 5PC.
5 computers.
If a new tax policy relatively raises the tax rate 2.5 percent but causes the output supplied to fall by 15 percent, the absolute value of the tax elasticity of supply is The tax elasticity of supply is equal to the percentage change in the amount supplied, divided by the percentage change in the tax rate. In this case, a 2.5 percent increase in the tax rate causes output supplied to fall by 15 percent; so the tax elasticity of supply is 6.0 (=15%/2.5%).
6.0.
If the annual interest rate printed on the face of a bond is 16 percent, the face value of the bond is $1,000, and the current market price of the bond is $200, what is the current yield on the bond? The current yield is equal to the fixed annual interest payment divided by the current market price of the bond times 100, which in this case is ($160/$200) *100 equals 80.0 percent.
80.0 percent.
Supply-side policies are designed to achieve
A leftward shift in the Phillips curve.
According to the Keynesian view of the macro economy, which of the following is always true at equilibrium?
Aggregate supply equals aggregate demand.
The total quantity of output producers are willing and able to supply at alternative price levels in a given time period is
Aggregate supply.
In which of the following situations is expansionary monetary policy most effective?
Banks are willing to lend excess reserves.
Transactions account balances are included in Transactions accounts are the most basic form of money, and as such are included in M1 and therefore M2 (as M2 is defined as M1 plus balances in most savings accounts and money market mutual funds).
Both M1 and M2.
Specialization in production and then trading with other countries
Change the mix of output for each country and increase total world output.
The success of Fed intervention depends on how well
Changes in long-term interest rates closely follow changes in short-term interest rates.
If the required reserve ratio is 5 percent and the Federal Reserve sells $10,000 worth of bonds, the money supply can potentially By removing $10,000 in reserves from the banking system through the money multiplier, the Fed reduces the total deposits, part of the money supply, from the banking system by $200,000. ($10,000/.05= $200,000)
Decrease by $200,000.
Which of the following is less sensitive to interest rate changes?
Food and other household items.
When a country imposes tariffs, it is likely to cause
Higher prices for the import-competing goods both domestically and abroad.
Assume the MPC is 0.75, taxes increase by $100 billion, and government spending increases by $100 billion. Aggregate demand will
Increase by $100 billion
Which of the following is not true about barter?
It allows people to obtain more goods than they would under a money payment system.
Ceteris paribus, which of the following is true about the concept of crowding out?
It reduces the private sector's ability to raise the level of output.
Keynes believed that abrupt changes in spending behavior
Lead to responses by market participants that may make the market outcome worse.
If aggregate demand shifts to the left by $400 billion and aggregate supply is upward-sloping, then real output will decrease by
Less than $400 billion, and the price level will fall.
According to supply-side theorists, a decrease in marginal tax rates will provide the incentive to
Produce more.
A bond is a
Promise to repay borrowed funds.
The term fractional reserves refers to
Reserves being a small fraction of total transactions account balances.
C eteris paribus, if the Fed sells bonds through open market operations, the money
Supply curve should shift leftward.
When the macro equilibrium is above full employment, fiscal policy should be used to shift aggregate demand by the amount of
The AD excess, which also allows for price level changes.
The terms of trade between two countries refer to
The amount of good A given up for good B.
Assuming the aggregate supply curve is vertical, which of the following is most likely to occur if the Fed pursues expansionary monetary policy?
The equilibrium price level will increase but output will stay the same.
The marginal propensity to consume is
The fraction of each additional dollar of disposable income spent on consumption.
Which of the following explains why the government should not increase spending by the entire amount of the AD shortfall to move the economy to full employment?
The multiplier process will contribute to an additional increase in aggregate demand that will cause an inflationary gap.
Which of the following formulas is used to find the cumulative increase in AD from a particular fiscal stimulus?
The multiplier × fiscal stimulus.
The tax elasticity of supply is
The percentage change in quantity supplied divided by the percentage change in tax rates.
Initially a bank has a required reserve ratio of 10 percent and no excess reserves. If $1,000 is deposited into the bank, then, ceteris paribus,
This bank can increase its loans by $900.
The primary method for controlling the money supply in the United States is to limit the
Volume of loans the banking system can make