MACRO FINAL
(Table) According to the table, real GDP for 2014 is approximately: A) $6,552 billion. B) $7,052 billion. C) $7,552 billion. D) $8,052 billion.
C
(Table) According to the table, what is the labor force of this economy? A) 50 B) 300 C) 350 D) 500
C
A nominal GDP of $265 billion and an M1 of $12 billion result in a velocity of: A) 277. B) 3,108. C) 22.08. D) 253.
C
If the cost of a typical market basket is 400 in 2018, 450 in 2019, and 550 in 2020, then during this period the economy is undergoing: A) inflation. B) disinflation. C) deflation. D) hyperinflation.
A
(Figure: Determining SRAS Shifts) If there is a decrease in input prices, the short-run aggregate supply curve will shift from SRAS0 to _____ and the price level will become _____. A) SRAS1; P0 B) SRAS1; P1 C) SRAS2; P1 D) SRAS2; P2
B
(Figure: Predicting Aggregate Demand Shifts) Which of the following would shift the aggregate demand curve from AD2 to AD1? A) a tax cut B) an increase in interest rates C) an increase in government purchases D) an improvement of consumer expectations about the future
B
(Figure: Understanding Aggregate Graphs) This economy is currently at point a. This figure depicts an economy: A) in neither short-run nor long-run equilibrium. B) in short-run equilibrium only. C) in both short-run and long-run equilibrium D) in long-run equilibrium only.
B
(Table) According to the table, what is the unemployment rate of this economy? A) 10% B) 14.3% C) 16.67% D) 25%
B
(Table) The table shows data on consumption at various levels of income. The value of the APS at equilibrium is: A) −0.25. B) 0. C) 0.083. D) 0.125.
B
A production function of the sort that says output per worker equals A * f(L / L, K / L, H / L, N / L) tells us all of the following EXCEPT that ____________ will lead to a better standard of living. A) increases in capital B) more people C) more human capital D) more natural resources
B
Financial institutions: A) reduce information costs, set interest rates for bonds, and diversify assets. B) reduce information costs, reduce transaction costs, and diversify assets. C) pool funds from lenders, reduce transaction costs, and diversify assets. D) reduce information costs, reduce transaction costs, and pool funds from lenders.
B
For your purchasing power to stay the same, your wages must: A) increase faster than the rate of inflation. B) increase at the same rate as inflation. C) decrease as the rate of inflation increases. D) increase more slowly than the rate of inflation.
B
If AE = $7,600 and Y = $8,000, businesses will produce: A) more, raising both employment and income. B) less, lowering both employment and income. C) more, raising employment and lowering income. D) less, lowering employment and raising income.
B
If the growth rate in an economy is 3.5%, then its GDP will double in about: A) 3.5 years. B) 20 years. C) 70 years. D) 245 years.
B
If the reserve requirement is 20%, the money multiplier is: A) 4. B) 5. C) 0.2. D) 0.8.
B
In counteracting demand shocks, the Fed can achieve: A) price stability but not full employment. B) both full employment and price stability. C) full employment but not price stability. D) neither full employment nor stable prices.
B
In the simple Keynesian model, if desired investment is greater than desired saving: A) the multiplier effect will move the economy to a lower income level. B) income and output will rise. C) interest rates will fall. D) actual savings will fall as the economy moves to a lower output level.
B
In the simple Keynesian model, the only two things you can do with your income are: A) pay taxes and spend it. B) spend it and save it. C) spend it and invest it. D) save it and give it.
B
Increasing taxes to fight inflation is an example of: A) conservative fiscal policy. B) contractionary fiscal policy. C) expansionary fiscal policy. D) demand-braking policy.
B
Keynes believed that saving is a function of: A) the interest rate. B) income. C) GDP. D) the price of money.
B
Liquidity refers to: A) how fast money can be transferred from one account to another account. B) how quickly, easily, and reliably an asset can be converted into a medium of exchange. C) how easily cash can be transported across national borders. D) how fast money travels throughout the economy.
B
Most studies estimate the overall multiplier of the 2009 stimulus to be between: A) 0 and 1. B) 1.5 and 2. C) 3 and 3.5. D) 5 and 6.
B
Suppose the government raises income taxes, so consumers have less take-home pay. This policy action will cause a(n): A) increase in aggregate demand. B) decrease in aggregate demand. C) increase in short-run aggregate supply. D) decrease in short-run aggregate supply.
B
The government budget constraint can be depicted as _____, where G is government spending, T is tax revenues, M is the money supply, B is bonds held by the public entities, and A is government assets. A) ΔG - ΔT = M + B + A B) G - T = ΔM + ΔB + ΔA C) G - T = M + ΔB + A D) G - ΔT = ΔM + B + A
B
To slow down a high inflation rate, the Fed should use a(n) ______________ monetary policy by using open market _____________. A) expansionary; purchases B) restrictive; sales C) expansionary; sales D) restrictive; purchases
B
When the price of a product falls, causing consumers to purchase more of that product and less of other products, it is the: A) income effect. B) substitution effect. C) wealth effect. D) interest rate effect.
B
Which of the following changes will NOT result in economic growth according to the production function? A) improvements in the productivity of labor B) increases in consumption spending C) increases in capital D) improvements in technology
B
Which of the following statements is CORRECT? A) Keynesian economics is unrelated to the events of the Great Depression. B) Classical economics approaches the economy as three separate but interrelated sectors, while Keynesian economics looks at the economy as a whole. C) Keynesian economics was developed by the Scholastic School at Salamanca in the late medieval period. D) The classical school of economics was developed during the classical age of Greece.
B
Which of the following statements is FALSE? A) Economic growth leads to lower poverty rates. B) Economic growth always leads to a more equitable distribution of income. C) Economic growth leads to longer life expectancies. D) Economic growth leads to increased consumption of goods and services.
B
Which of the following technologies most strongly affected the growth in U.S. productivity in recent decades? A) railroads B) microcomputers C) ticker tape D) petrochemicals
B
______ are components of consumer spending that affect aggregate demand. A) Expected rates of return on investment B) Taxes C) Exchange rate changes D) Government spending programs
B
__________ government spending, _____ transfer payments, and ____ taxes are all examples of contractionary fiscal policy. A) Reducing; increasing; raising B) Reducing; reducing; raising C) Reducing; reducing; reducing D) Raising; increasing; raising
B
(Figure: Aggregate Demand Shift) The shift in aggregate demand depicted may be due to a(n): A) increase in consumer confidence. B) decrease in interest rates. C) increase in income taxes. D) increase in exports.
C
According to Keynesian analysis, if households intend to save more, they will: A) ultimately spend more. B) cause jobs to increase because investment will increase. C) ultimately cause job losses. D) cause the GDP to increase because inflation will decrease.
C
According to the Taylor rule, the more GDP falls below potential GDP, other things equal, the: A) higher the federal funds target rate. B) higher the discount rate. C) lower the federal funds target rate. D) lower the unemployment rate.
C
According to the crowding out effect, if the government sells bonds to finance spending, _____ can eventually fall. A) consumption and government expenditure B) government expenditure and investment C) consumption and investment D) exports and investment
C
As a rule, the more capital employed with workers, the ________ their productivity and the ________ their earnings. A) lower; higher B) lower; lower C) higher; higher D) higher; lower
C
At Christmas, people tend to draw money out of their checking accounts to pay for Christmas presents. As a result, the money multiplier will: A) increase. B) not change. C) decrease. D) become more volatile.
C
Cyclical unemployment occurs when: A) workers are fired. B) workers quit their job to raise a family. C) the economy slows down and workers are laid off. D) workers retire earlier than age 66.
C
Decreased interest rates will shift the aggregate demand curve to the _____ and _____ output demanded. A) left; decrease B) left; increase C) right; increase D) right; decrease
C
During the millennium scare of 2000, Rufus reduced his monthly spending by $1,000 and buried his money in the backyard. If the marginal propensity to consume is 0.75, by how much did national income fall? A) $1,000 B) 0 C) $4,000 D) It actually increased $4,000.
C
Economic growth is shown as a: A) shift to the left in the long-run aggregate supply curve. B) movement up along the short-run aggregate supply curve. C) shift to the right in the long-run aggregate supply curve. D) shift to the left in the short-run aggregate supply curve.
C
If the reserve requirement is 25%, then the potential money multiplier is ____ and the actual money multiplier is ____. A) 25; less than 25 B) 25; greater than 25 C) 4; less than 4 D) 250; greater than 250
C
In the United States, the Census Bureau computes the unemployment rate from: A) data on applications for unemployment compensation. B) data reported to it by firms when employees leave. C) the Current Population Survey. D) tax records.
C
Jody purchases a stock from her employer, Acme Corporation. This is an example of ________ finance: A) unregulated B) indirect C) direct D) investor
C
Loosening monetary policy causes interest rates to ____ and consumption and investment to ____. A) rise; increase B) rise; decrease C) fall; increase D) fall; decrease
C
M1 is the most _____ of all assets because as a medium of exchange it requires no conversion. A) illiquid B) insolvent C) liquid D) None of the answers is correct.
C
Money leakages tend to ____ during recessions, causing the actual money multiplier to ____. A) rise; rise B) rise; fall C) fall; rise D) fall; fall
C
Over the past 30 years, the highest inflation rates occurred under Fed chair _______________ during the ________________. A) Paul Volcker; late 1990s B) Alan Greenspan; late 1990s C) Paul Volcker; early 1980s D) Ben Bernanke; early 1990s
C
The crowding out effect recognizes that if the government sells bonds to finance spending, it can cause interest rates to ___________ investment. A) fall, reducing B) fall, stimulating C) rise, reducing D) rise, stimulating
C
The curve that shows how much GDP is demanded at various price levels is called: A) the aggregate expenditures schedule. B) the consumption line. C) aggregate demand. D) aggregate supply.
C
The proposition that federal expenditures and taxes would have to be equal to each other every year is called the ________ approach. A) functional finance B) cyclically balanced budget C) annually balanced budget D) equality concept
C
To say that interest rates represent the opportunity cost of holding money means that as interest rates rise: A) the demand for money shifts to the left. B) the demand for money shifts to the right. C) there is a movement upward along the demand curve for money. D) there is a movement downward along the demand curve for money.
C
When the Fed wants to decrease the money supply, it will: A) buy bonds. B) lower the federal funds rate. C) sell bonds. D) lower taxes.
C
Which U.S. presidents reduced marginal tax rates to promote work and business risk taking? A) Obama and Reagan B) Kennedy and Clinton C) Reagan and Kennedy D) Clinton and Obama
C
Which of the following factors is NOT generally viewed by economists as critical to economic growth? A) strong and fair legal system B) stable monetary system C) access to large amounts of natural resources D) economic freedom
C
Which of the following is a provision of the Federal Reserve Act or subsequent legislation that contributes to the independence of the Fed? A) The Fed's actions are subject to executive branch control. B) Appointments to the Federal Reserve Board are staggered so that one expires every other year. C) Members of the Federal Reserve Board cannot be reappointed. D) The Federal Reserve System is subject to Congressional oversight.
C
Which of the following is included in M1? A) savings deposits B) large-denomination certificates of deposit C) demand deposits D) deposits in money market accounts
C
Which of the following items is NOT an example of investment in human capital? A) policy of universal education B) on-the-job training C) acquisition of obsolete skills D) apprenticeship
C
Which of the following statements describes a difference between the consumer price index (CPI) and the producer price index (PPI)? A) Only the CPI is associated with the problem of quality changes. B) Only the PPI is associated with the problem of deleted products. C) Only the PPI measures net revenues received by firms. D) Only the PPI has a fixed market basket.
C
Which statement about inflation targeting is TRUE? A) Inflation targeting calls for the Fed to set the growth rate of the money supply equal to the long-term growth rate of the economy. B) Advocates of inflation targeting believe the economy is inherently stable. C) If the Fed pursues an inflation target, it increases the money supply when the actual inflation rate is below the target inflation rate. D) If the Fed pursues an inflation target, it does not change the money supply unless the actual or forecast inflation rate is above the target inflation rate.
C
Who recognized the need to develop tools to analyze the macroeconomy as a whole? A) Adam Smith B) Karl Marx C) John Maynard Keynes D) Milton Friedman
C
_____ occurs when a negative supply shock hits the economy, shifting the short-run aggregate supply curve leftward. A) Demand-pull inflation B) Demand-push inflation C) Cost-push inflation D) Cost-pull inflation
C
(Table) The table shows data on consumption at various levels of income. The value of the marginal propensity to consume is: A) 0.25. B) 0.75. C) 0.8. D) 0.9.
D
About ____ of U.S. currency is held outside the United States. A) one-quarter B) one-third C) half D) two-thirds
D
M1 includes: A) cash, savings deposits, demand deposits, money market deposit accounts, small-denomination time deposits, and shares in retail money market mutual funds. B) cash, demand deposits, and small-denomination time deposits. C) cash, demand deposits, and large-denomination time deposits. D) cash, demand deposits, and other checkable deposits.
D
Of the share of the U.S. national debt that is held by the public, __________ hold nearly _____________. A) foreigners; three times as much as do Americans B) foreigners; twice as much as do Americans C) Americans; twice as much as do foreigners D) foreigners; the same amount as do Americans
D
Prices from about ________ goods and services are collected each month by Bureau of Labor Statistics data collectors to be used in calculating the consumer price index. A) 800 B) 8,000 C) 80,000 D) 800,000
D
Sumit deposits $1,500 cash into his checking account. The reserve requirement is 25%. How much money can the banking system create? A) $1,500 B) $0 C) $1,125 D) $6,000
D
The fractional reserve banking system: A) makes possible the money creation process. B) helps to prevent bank runs. C) requires banks to hold a portion of their demand deposits in reserve. D) All of the answers are correct.
D
The housing bubble collapsed in: A) 1988-1999. B) 2001-2003. C) 2004-2006. D) 2007-2009.
D
The increase in aggregate spending needed to bring an economy to full employment is called: A) goal-oriented spending. B) the inflationary gap. C) gap closure spending. D) the recessionary gap.
D
The use of money as a medium of exchange helps reduce the inefficiencies inherent in: A) unstable commodity values. B) an inflationary period. C) a time of political uncertainty. D) barter.
D
What is the likely chain of events if asset prices rise? A) People feel poorer, so their spending falls and their saving rises, causing interest rates to fall. B) People feel wealthier, so their spending falls and their saving rises, causing interest rates to fall. C) People feel wealthier, so their spending rises and their saving rises, causing interest rates to fall. D) People feel wealthier, so their spending rises and their saving falls, causing interest rates to rise.
D
Which measure is NOT a channel through which the government can influence aggregate demand? A) direct spending on goods and services B) transfer payments to households and firms C) taxes on households and firms D) regulation on businesses
D
Which of the following institutions is the best example of public capital? A) accounting network of a public utility B) shopping mall C) Department of Motor Vehicles D) highway system
D
Which of the following statements concerning the function of money is INCORRECT? A) Money gives us a yardstick for measuring the values of goods and services. B) Money helps us avoid the problem of lack of a double coincidence of wants. C) Money helps us save time in purchasing goods and services. D) Money does not lose value when inflation occurs.
D
Which two important leakages helped reduce the real life spending multiplier during the stimulus that was implemented during 2009? A) exports and saving B) imports and saving C) exports and taxes D) imports and taxes
D
(Table) According to the table, real GDP for 2014 is approximately: A) $7,540 billion. B) $7,894 billion. C) $8,106 billion. D) $8,488 billion.
A
(Table) The table shows data on consumption at various levels of income. The value of the marginal propensity to save is: A) 0.1. B) 0.25. C) 0.75. D) 0.9.
A
(Table) When disposable income increases from $1,000 to $1,200, what is the value of the marginal propensity to save? A) 0.5 B) −0.5 C) 1.5 D) −1.5
A
A passive job search: A) entails merely talking to friends about jobs. B) means doing things like sending off résumés. C) entails the scheduling of job interviews. D) includes contacting a private employment agency.
A
A reduction in the interest rate causes consumption and investment to ____, which shifts the aggregate demand curve ____. A) rise; rightward B) rise; leftward C) fall; rightward D) fall; leftward
A
According to Malthus, what part of the economy might increase at a rate such that the data would show an increase from 1,000 to 2,000 to 4,000 to 16,000? A) population B) food C) GDP D) inflation
A
An economy has a population of 226,500. Of them, 12,500 are unemployed and actively seeking work, and 35,000 have given up looking for a job. Also, 28,000 people work part-time, and 151,000 people work full-time. This economy's unemployment rate is _______. (Round the percentage to one decimal place; for example, 0.0436 is 4.4%.) A) 6.5% B) 21.0% C) 5.5% D) 21.1%
A
Assume that the reserve requirement is 20% and the Federal Open Market Committee buys a $10,000 bond. The impact on the banking system is a(n): A) injection of $10,000 in new reserves. B) reduction of $50,000 in reserves. C) injection of $50,000 in new reserves. D) injection of $2,000 in new reserves.
A
Classical economists claim that ______ is the primary determinant of saving, and Keynes claimed that ______ is the primary determinant of saving. A) the interest rate; income B) income; the interest rate C) taxes; government spending D) GDP; disposable income
A
Figure: Determining Fiscal Policy) The best discretionary fiscal policy option is: A) expansionary fiscal policy that leads to full employment. B) contractionary fiscal policy that leads to full employment. C) a combination of expansionary and contractionary fiscal policies to achieve full employment and stable prices. D) only fiscal policies that lead to a lower price level.
A
If actual unemployment is at its natural rate: A) inflation is very low. B) there is deflation. C) the unemployment rate is zero. D) interest rates are rising.
A
If income is $5,000 per month and consumption spending is $4,500 per month, what is the average propensity to consume? A) 0.9 B) 1.11 C) 500 D) −500
A
If mangos were widely accepted for purposes of exchange: A) mangos would be money. B) mangos would lose value. C) people would not work for mangos. D) mango plantations would decrease in value.
A
If technology is held constant, an increase in capital concurrent with a decrease in labor input causes output to: A) rise, fall, or stay the same. B) rise. C) fall. D) stay the same.
A
If the Fed wants to raise the federal funds rate, it will ______ bonds, which ________ bond prices. A) sell; lowers B) sell; raises C) buy; lowers D) buy; raises
A
If the U.S. aggregate price level rises: A) U.S. imports rise. B) the aggregate demand curve shifts to the left. C) the aggregate demand curve shifts to the right. D) business investment increases.
A
If the federal government were required to balance its budget annually: A) a recession would lead to higher taxes or reduced spending. B) a recession would lead to lower taxes and higher spending. C) the government could easily conduct Keynesian aggregate demand policies. D) price problems would disappear.
A
If the real interest rate were below the equilibrium real interest rate in the loanable funds market, an excess ________ for loanable funds would exist and the real interest rate would _______. A) demand; rise B) demand; fall C) supply; rise D) supply; fall
A
In September 2013, the Federal Open Market Committee said it would wait for more evidence that progress had been made on the economic recovery before it cut back on open market purchases. The Bureau of Economic Analysis did not release its advanced estimate of the third quarter's GDP growth until a month after the quarter ended. The second estimate was released two months after the quarter ended, and a third revised estimate was released about three months after the quarter ended. This wait for accurate data to be collected is known as the: A) information lag. B) recognition lag. C) decision lag. D) implementation lag.
A
In his essay on population, Malthus argued that any improvement in the standard of living would lead to: A) an increase in the population that would outstrip the growth in food supply. B) a decrease in the population that would lead to utopia. C) an increase in the population matched by an increase in the food supply. D) a decrease in the population matched by a decrease in the food supply.
A
In the equation of exchange, if M = $2 trillion, P = 1.5, and Q = $8 trillion: A) the velocity of money (V) = 6. B) nominal GDP is $16 trillion. C) the velocity of money (V) = 4. D) real GDP is $12 trillion.
A
In the long run, attempts to expand beyond an economy's natural rate of unemployment tend to result in: A) increased inflation. B) increased output. C) both increased output and increased inflation. D) neither increased output nor increased inflation.
A
Increases in ___________ often lead to economic growth. A) technology B) public goods C) money supply D) government regulations
A
Investment spending: A) tends to be volatile. B) is the largest component of total spending. C) is not sensitive to interest rates. D) is limited to the stock and bond markets.
A
Joseph's Schumpeter's idea that waves of innovations lead to business cycles is called: A) creative destruction. B) innovative destruction. C) the theory of technological business cycle. D) the upward spiral.
A
Last year the consumer price index (CPI) was 115 and this year's CPI is 125. The rate of inflation is: A) 8.7%. B) 8%. C) 9.2%. D) 10.8%.
A
Milton Friedman and Anna Schwartz are most famous for: A) monetary theory. B) fiscal theory. C) comparative advantage theory. D) their tenures on the Federal Reserve Board.
A
Money: A) is anything that is accepted in exchange for other goods and services or for payment of debt. B) is anything that is backed by precious metal. C) is currency. D) has to have an intrinsic value.
A
One implication of a straight line aggregate expenditure curve is that: A) the marginal propensity to consume is constant. B) the average propensity to consume is constant. C) the average propensity to save is constant. D) All of the answers are correct.
A
Output definitely increases if aggregate demand ______ and aggregate supply ______. A) increases; increases B) rises; falls C) falls; rises D) decreases; decreases
A
Roughly half of unemployment normally consists of: A) people who lost their job. B) people who were job leavers. C) people reentering the job market. D) people who are new to the job market.
A
Since the invention of automatic teller machines, many bank tellers have lost their job. This is an example of ______ unemployment. A) structural B) frictional C) cyclical D) statistical
A
Suppose that anticipated inflation is 4% for the coming year, with loan contracts set at 7% in the expectation of a 3% return after inflation. If the actual inflation rate at the end of the year is 2%: A) creditors gain at debtors' expense. B) people on a fixed income see the purchasing power of their incomes rising. C) debtors gain at creditors' expense. D) there's a redistribution of income from creditors to debtors.
A
The World Bank defines extreme poverty as a person living on less than: A) $1.25 per day. B) $2 per day. C) $16 per day D) $5,763 per year.
A
The current consumer price index is: A) a cost-of-goods index. B) a true cost-of-living measure. C) based on a changing bundle of goods and services from one period to the next. D) calculated by dividing the market basket's cost in the base period by its cost in the current period.
A
The fractional reserve banking system refers to a system in which banks: A) hold reserves equal to a fraction of their deposit liabilities. B) keep 100% of their liabilities always on reserve. C) forbid the removal of more than a fraction of demand deposits per day. D) keep only a fraction of each person's demand deposits.
A
The growth of businesses such as Coinstar that convert coins into bank notes or gift cards caused money to ____ and the actual money multiplier to ____, ceteris paribus. A) reenter the banking system; rise B) reenter the banking system; fall C) leave the banking system; rise D) leave the banking system; fall
A
The idea that banks hold only a portion of deposits and lend the rest out is called the: A) fractional reserve banking system. B) partial banking system. C) double-entry bookkeeping system. D) loan-maximization system.
A
The phenomenon of hoarding money when the interest rate falls to low levels is an outcome of: A) the liquidity trap. B) the transactions demand for money. C) the precautionary demand for money. D) deflation.
A
When the government records a deed showing that ownership of a piece of property has passed from one party to another, it is acting in its role to promote economic growth by: A) ensuring a stable legal system. B) providing physical and human capital. C) ensuring a stable and secure financial system. D) promoting free and competitive markets.
A
Which are examples of automatic stabilizers? A) income tax revenues and transfer payments B) sales tax rates and transfer payments C) sales tax revenues and income security D) sales tax rates and income security
A
Which economists believe that fiscal policy is ineffective, while monetary policy is effective? A) monetarists B) Keynesians C) classical economists D) Fisherites
A
Which fiscal policy time lag can occur when the legislative process works slowly? A) decision lag B) implementation lag C) information lag D) recognition lag
A
Which is NOT one of the three basic functions of money? A) a means to collect taxes B) a medium of exchange C) a measure of value D) a unit of account
A
Which of the following Eurozone countries had to be bailed out by the European Central Bank? A) Ireland B) Germany C) France D) Luxembourg
A
Which of the following is true of macroeconomic equilibrium in the simple Keynesian model? A) AE = Y B) Y = C - S C) AE + C = I D) I = S + C
A
Which of the following items does NOT constrain the federal budget? A) the mortgage interest rate B) the amount of bonds the public is willing to purchase C) the money supply D) tax receipts
A
_____ is a measure of the change in average prices paid by urban consumers for a typical market basket of goods and services. A) The consumer price index B) The producer price index C) Personal consumption expenditure D) The GDP deflator
A
n the United States, Social Security and Medicare are examples of: A) pay-as-you-go programs. B) generationally balanced programs. C) fiscally balanced programs. D) fiscal sustainability.
A
A rising aggregate price level _______ an economy's interest rates and therefore _____ output demanded. A) increases; increases B) increases; reduces C) reduces; increases D) reduces; reduces
B
All of the following are included in the definition of M2 EXCEPT: A) coins. B) large time deposits. C) savings deposits. D) demand deposits.
B
An increase in the interest rate causes the aggregate _________ curve to shift _____. A) demand; rightward B) demand; leftward C) supply; rightward D) supply; leftward
B
Barter: A) works as well as money in all cases. B) satisfies the double coincidence of wants if an exchange takes place. C) serves as store of value in primitive societies. D) is any exchange, with or without the presence of money, in which the participants negotiate the terms of trade.
B
Cost-push inflation occurs because of a shift to the: A) right of the short-run aggregate supply curve. B) left of the short-run aggregate supply curve. C) right of the aggregate demand curve. D) left of the aggregate demand curve.
B
Demand-pull inflation is caused by: A) increases in wages pulling up prices. B) increases in aggregate demand. C) decreases in aggregate supply. D) consumers demanding better quality, which increases costs.
B
Every year in India: A) about a million people get out of poverty. B) tens of millions of people get out of poverty. C) tens of millions people fall into poverty. D) about a million people fall into poverty.
B
Financial institutions greatly increase the flow of funds to the economy by: A) increasing transaction costs. B) decreasing information costs. C) assuming all of the risk of lending funds. D) lending to whoever wants to borrow from them.
B
If Jack Sparrow buries a chest of gold bullion on a deserted island and plans to come back later, then the gold is functioning as a: A) unit of account. B) store of value. C) medium of exchange. D) barter tool.
B
If a pill is discovered that allows people to work twice as fast as they would ordinarily work, then the aggregate supply curve will: A) shift to the left. B) shift to the right. C) not change. D) become vertical.
B
If an economy is on the vertical portion of the aggregate supply curve, then it: A) is overheating. B) is at full employment. C) has high unemployment. D) is in a severe recession.
B
If consumption increases from $500 billion to $575 billion and income increases from $600 billion to $700 billion, the marginal propensity to save is: A) 0.2. B) 0.25. C) 0.75. D) There is not enough information to answer this question.
B
Rocky Gap Furniture employs 10 workers working eight hours each to produce 100 rocking chairs. What is the productivity of these workers? A) 2.5 chairs per hour B) 1.25 chairs per hour C) 100 chairs D) 50 chairs
B
Starting at equilibrium point d, if the cost of inputs rises, the short-run equilibrium will move to point _____, and thus real output will _____ and the price level will _____. A) a; decrease; stay the same B) b; decrease; increase C) c; stay the same; increase D) There is not enough information to answer this question.
B
Suppose policymakers wish to use fiscal policy to fight inflation. Which statement is MOST accurate? A) Using fiscal policy, the government can have the best of both worlds in the form of low inflation and economic growth. B) Essentially, the way to lower the inflation rate is to decrease aggregate demand and cause a recession. C) They should not use fiscal policy because in the long run the economy will always go back to its equilibrium. D) Policymakers should use an expansionary policy because jobs are more important than inflation.
B
The Federal Reserve can purchase ____ to fund fiscal policy, resulting in _____. A) bonds; a decrease in the money supply B) bonds; an increase in the money supply C) money; a decrease in the bond supply D) money; an increase in the bond supply
B
The output of all the goods and services demanded in an economy at various price levels is called: A) the quantity-price locus. B) aggregate demand. C) economic production. D) the price-output curve.
B
The proportion of additional income that consumers spend is known as the: A) marginal propensity to save. B) marginal propensity to consume. C) average propensity to save. D) average propensity to consume.
B
Unanticipated _____ is detrimental to economic growth. A) inflation but not deflation B) inflation or deflation C) deflation but not inflation D) Neither inflation nor deflation is detrimental to economic growth.
B
What is the amount of this bank's reserves? A) $2,500 B) $7,500 C) $10,000 D) $100,000
B
Which of the following is NOT a criticism of the Fed's handling of the 2007-2009 financial crisis? A) The Fed encouraged a housing bubble by keeping interest rates too low for too long. B) The Fed should have strengthened the dollar to shore up exports. C) The Fed overstepped its authority by exercising powers it did not legally have. D) The Fed should have recognized that there was a problem sooner.
B
Which statement about the Weekly Jobs Report is NOT true? A) It is released by the Department of Labor. B) It contains an estimate of the total number of people receiving unemployment benefits. C) It is used as a way to estimate trends in layoffs. D) It is used as a way to estimate trends in hiring.
B
(Figure: Market for Loanable Funds 2) If business taxes increase, the demand for loanable funds curve will shift from _____ to _____ and the new equilibrium will be at point _____, holding supply constant at S0. A) D0; D1; c B) D0; D1; b C) D1; D0; a D) D1; D0; d
C
Automatic stabilizers include all of the following EXCEPT: A) tax revenues. B) transfer payments. C) increased research and development. D) All of the answers are correct.
C
GDP is $10 trillion in 2001. The GDP deflator is 100 in 2000 and is 110 in 2001. What is real GDP? A) $10 trillion B) $11.1 trillion C) $9.09 trillion D) $110 trillion
C
If $1,000 of additional spending occurs (from investment, say) and the marginal propensity to consume is 0.8, the total effect on the economy is an increase of _____ in income or output. A) $800 B) $1,000 C) $5,000 D) $8,000
C
If a person borrows $3,000 at 8% interest and never makes any payments, how much will the loan balance be after 10 years? A) $4,500 B) $5,400 C) $6,476.77 D) $7,676.67
C
If autonomous investment spending falls by $1,000 and the marginal propensity to consume is 0.75, the total effect on the economy is a decrease of _____ in income or output. A) $750 B) $1,000 C) $4,000 D) $7,500
C
If the growth rate in an economy is 2%, its GDP will double in about: A) 70 years. B) 140 years. C) 35 years. D) 28 years.
C
Retirees and creditors: A) benefit from inflation because they are paid in cheaper dollars. B) benefit from inflation because interest rates rise. C) are hurt by inflation because their purchasing power drops. D) are hurt by inflation because taxes fall.
C
Student loans funded by the government typically offer ____ interest rates than similar bank loans and ____. A) higher; can be paid back later B) higher; must be paid back earlier C) lower; can be paid back later D) lower; must be paid back earlier
C
Sumit deposits $1,500 cash into his checking account. The reserve requirement is 25%. What is the change in his bank's excess reserves? A) $1,500 B) $375 C) $1,125 D) $0
C
Suppose a one-year bond with a face value of $200 is sold for $188. What is the bond's yield? A) 5.3% B) 6.0% C) 6.4% D) 12.0%
C
The Fed uses its tools to counteract: A) booms. B) recessions. C) booms and recessions. D) depressions.
C
The Federal Reserve System includes _____ regional banks. A) 50 B) 25 C) 12 D) 4
C
The Rule of 70 states that the number of years required for a value to double in size is: A) 70. B) 70 times the growth rate. C) 70 divided by the growth rate. D) the growth rate divided by 70.
C
The _____ lag can be expected to last 18 to 24 months. A) information B) recognition C) implementation D) decision
C
The classical form of the production function states that: A) Output = f(L / K) B) Output = f(N, K) C) Output = f(L, K) D) Output = f(N / K)
C
The government can finance a budget deficit by: A) buying bonds from the Federal Reserve. B) buying bonds from the public. C) selling assets. D) buying assets.
C
To say that the Fed is transparent means that the Fed: A) executes decisions in secrecy. B) has a "just trust us" approach to conducting monetary policy. C) is open regarding its monetary policy. D) uses a monetary growth rule.
C
Using the equation of exchange, if the money supply is $4 trillion, the price level is 2, and the level of output (real GDP) is $6 trillion, then the velocity of money is ___. A) 1.33 B) 2 C) 3 D) 12
C
When the Fed sells bonds, it is: A) quantitative easing. B) expansionary monetary policy. C) tight money policy. D) easy money policy.
C
Which of the following does NOT explain why the actual money multiplier and the potential money multiplier are different? A) Banks hold excess reserves during tough economic times. B) The interest rate that banks pay on deposits is very low. C) Foreign deposits in American banks aren't counted in the actual money multiplier. D) Foreign consumers, businesses, and governments hold U.S. dollars.
C
Which of the following statements is CORRECT? A) The Fed's actions are subject to executive branch control. B) Politically controlled banks are better at fighting inflation than are independent central banks. C) The Federal Reserve is considered to be an independent central bank. D) The Federal Reserve System is not subject to Congressional oversight.
C
Which of the following statements is NOT correct? A) Discouraged workers have stopped actively seeking work. B) Discouraged workers are not classified as unemployed. C) Discouraged workers are considered underemployed. D) Discouraged workers are considered part of the leisure class, not part of the labor force.
C
Which one of the following will cause the demand for loanable funds curve to shift leftward? A) an improvement in firms' expectations about the economy B) an increase in demand for new homes C) an end to a program that provides investment tax credits D) an increase in the government deficit
C
Which is NOT a characteristic of a stable financial system? A) stable prices B) flourishing credit markets C) ease of making financial transactions D) unanticipated high inflation
D
4. _____ is known for showing that reducing tax rates could increase tax revenues. A) Robert Lucas B) Irving Fisher C) John Galbraith D) Arthur Laffer
D
A bank has excess reserves of $5,000 and demand deposits of $40,000; the reserve requirement is 20%. If the reserve requirement is increased to 25%, the maximum amount of new loans this bank can make is: A) $1,500. B) $2,000. C) $2,500. D) $3,000.
D
All of the following are functions of money EXCEPT: A) a medium of exchange. B) a unit of account. C) a store of value. D) a standard value.
D
Assume the reserve requirement is 10%. If the Federal Open Market Committee buys a $10,000 bond from Bank A, Bank A's reserves: A) decrease by $10,000. B) increase by $9,000. C) increase by $1,000. D) increase by $10,000.
D
Economic growth is most commonly measured by: A) GDP. B) GDP per capita. C) Genuine Progress Indicator per capita. D) real GDP per capita.
D
Figure: Interpreting Aggregate Shifts) The graph shows: A) a decrease in aggregate quantity supplied. B) an increase in aggregate quantity supplied. C) a decrease in aggregate demand. D) an increase in aggregate demand.
D
Given that M represents the money supply, i represents interest rates, I represents investment, AD represents aggregate demand, V represents the velocity of money, C represents consumption, P represents the price level, and Q represents the economy's real output level, Friedman's monetarist transmission mechanism can be represented by: A) ↑ M → (↓i and/or ↓C) →↑ I →↑ AD →↑ Q and/or ↑ P. B) ↑ M →↑ i → (↓I and/or ↓V) →AD →↑Q and/or ↑ P. C) ↑ M →↓V → (↑ I and/or ↑ C) →AD →↑ Q and/or ↑ P. D) ↑ M →↓i → (↑ I and/or ↑ C) →AD →↑ Q and/or ↑ P.
D
If 2010 is the base year, then the consumer price index for 2012 is: A) 100. B) 114. C) 115. D) 125.
D
If the reserve requirement is 10%, then a $6,000 decrease in deposits means that the money supply: A) will decrease by $600. B) has the potential to decrease by $600. C) will decrease by $60,000. D) has the potential to decrease by $60,000.
D
If you spend $35,000 and your income is $60,000, what is your average propensity to save? A) 0.7 B) 0.3 C) 0.58 D) 0.42
D
In Keynesian macroeconomic equilibrium: A) AE = I and C = S. B) AE = S and C = I. C) AE = Y and C = S. D) AE = Y and S = I.
D
In the simple Keynesian model of the private economy, which of the following is assumed? A) The consumer price index can rise or fall. B) Households and firms are savers. C) The aggregate price level can change. D) There is considerable slack in the economy.
D
Land and natural resources include: A) the mental and physical talents of people. B) human capital. C) manufactured products that are used to produce other goods and services. D) water and minerals that come from the earth.
D
The _____ rate is the rate at which banks charge each other for overnight loans, while the _____ rate is the rate at which regional Federal Reserve banks charge depository institutions for short-term loans. A) bank prime; discount B) discount; federal funds C) bank prime; federal funds D) federal funds; discount
D
The membership of the Board of Governors of the Federal Reserve System consists of: A) the presidents of seven of the Federal Reserve district banks. B) the President of the United States, three members of the Senate, and three members of the House of Representatives. C) four government-appointed persons and three commercial bank presidents. D) seven persons appointed by the President of the United States.
D
What would cause the price level to decrease and employment to increase? A) a shift to the left of the AD curve B) a shift to the right of the AD curve C) a shift to the left of the SRAS curve D) a shift to the right of the SRAS curve
D
When current real output exceeds potential real output, the Fed will _____ interest rates in an effort to fight _____. A) increase; a recession B) decrease; a recession C) decrease; inflation D) increase; inflation
D
When the economy is overheating and policymakers pursue contractionary fiscal policy, they express willingness to trade off _________ output for a ________ price level. A) higher; higher B) higher; lower C) lower; higher D) lower; lower
D
Which country has changed from being a high-saving country to a low-saving one? A) China B) Germany C) India D) Japan
D
Which of the following is FALSE regarding the Keynesian model? A) Aggregate expenditures can be expressed as C + I + G + (X - M). B) GDP can be measured as the sum of all spending. C) The four main types of spending are consumer, investment, government, and net exports. D) Aggregate spending is always less than aggregate income.
D
Which of the following is NOT a financial intermediary? A) Citibank B) Schwab mutual funds C) Hartford Insurance D) Federal Reserve Bank
D
Which of the following is NOT a leakage that reduces the size of the spending multiplier? A) purchases of imports B) personal income tax C) savings D) personal investment in human capital
D
Which of the following statements does NOT describe a problem in measuring the consumer price index (CPI)? A) The CPI measures only private goods and services. B) The CPI uses a fixed market basket of goods determined by surveys that are three to five years old. C) Approximately 10% of the original market basket must be replaced each year by products that are improved or modified. D) The CPI quickly includes new products in its baskets.
D
Which of the following statements regarding the short-run aggregate supply curve is TRUE? A) The short-run aggregate supply curve shifts to the left when tax rates on businesses are lowered. B) The short-run aggregate supply curve shifts to the right when the costs of capital rise. C) The short-run aggregate supply curve shifts to the left when business expectations become more positive. D) The short-run aggregate supply curve shifts to the right with a reduction in burdensome regulations.
D
Why did the European Central Bank take extraordinary actions to prevent member countries from defaulting on their debt? A) to avoid imposing losses on depositors of major banks in the Eurozone B) to avoid large deposit outflows from Eurozone banks C) to prevent a resurgence of deflation in the Eurozone D) to prevent a loss of confidence in the euro
D
With a negative supply shock, the Federal Reserve has to decide whether to: A) reduce both inflation and unemployment. B) increase both inflation and unemployment. C) increase inflation or decrease employment. D) increase inflation and decrease unemployment or decrease inflation and increase unemployment.
D
