econ 2010 exam ch 8-11

ON TEST: Which of the following is an example of the life-cycle motive for saving? A)Leslie puts $400 per month in her 401(k)-retirement account. B)Ann sets aside $200 per month in case she has to pay for a new roof for her house. C)Gerry and Terry put $2,000,000 in a trust fund that will go to their children when they die. D)Tom keeps $15,000 in a money market account to pay expenses in case he loses his job.

A)Leslie puts $400 per month in her 401(k)-retirement account.

ON TEST: Which of the following events will increase the domestic real interest rate in an open economy? A) An increase in domestic saving B) A decrease in the domestic saving C) A decrease in the profitability of capital investments in the domestic economy D) An increase in net capital inflow

B) A decrease in the domestic saving

Lisa owns a beautiful diamond ring she purchased for $2,500. When she has it appraised, she learns that it is now worth $3,000. Based on this information A)Lisa's saving this year has increased by $500. B)Lisa's saving this year has decreased by $500. C)Lisa has experienced a $500 capital gain. D)Lisa's wealth is unchanged.

C)Lisa has experienced a $500 capital gain.

An increase in net taxes (taxes paid by the private sector to the government less transfer payments and interest payments made by the government to the private sector) will A)increase private saving. B)decrease public saving. C)increase public saving. D)reduce investment in new capital equipment.

C)increase public saving.

capital inflow or capital outflow? When a Peruvian buys a U.S. government bond

capital inflow

capital inflow or capital outflow? When the Chinese government buys bonds issued by an American company

capital inflow

capital inflow or capital outflow? When an American buys stock in a French company

capital outflow

Jack is a server at a restaurant in New Orleans. When businesses shut down due to Covid-19, the restaurant he worked for was unable to operate and ended up shutting down for good, and Jack became unemployed. Jack would be considered _________ unemployed.

cyclical

increase or decrease the money supply? A.Banks increase the reserve-deposit ratio from 0.1 to 0.15.

decrease

increase or decrease the money supply? A.The Fed decreases bank reserves through open market operations

decrease

increase or decrease the money supply? A.The public decides to hold more currency, increasing the proportion they hold from 50 percent to 75 percent

decrease

Shannon's current income is $100 more per month than her current consumption needs. She decides to use the $100 to reduce her credit card debt. As a result, her liabilities will _____, and her wealth will ______

decrease increase

When an individual withdraws currency from a checking account, bank reserves ____, which reduces the amount banks can lend and reduces the growth of the _____

decrease money supply

ON TEST: Holding other factors constant, if a change in tax laws discourages people from saving more for retirement, then the real interest rate will ______ and the equilibrium quantity of saving and investment will _____.

decrease increase

In an open economy, a decrease in capital inflows ______ the equilibrium domestic real interest rate and ______ the quantity of domestic investment.

decreases increases

ON TEST: A decrease in the perceived riskiness of Company A stock ______ the risk premium investors require to purchase Company A stock and ______ the price of Company A stock.

decreases increases

If the United States has a $300 billion net capital inflow, then there must be a trade _____ of $300 billion

deficit

If household saving decreases by $4 million, business saving increases by $4 million, and the government budget deficit decreases by $4 million, then private saving ______ and public saving ______.

does not change increases

After the Federal Reserve increases reserves in the banking system, banks create new deposits through multiple rounds of lending and accepting deposits until the actual reserve-deposit ratio is _____ to the desired reserve-deposit ratio

equal

Shannon is a highly skilled software engineer who recently left her job because she wanted to move closer to her family. She has been searching for a job for two weeks and has had three offers she is considering but has not yet accepted. Shannon would be considered ________ unemployed.

frictional

When a U.S. restaurant purchases French wine and the French wine company uses the proceeds to buy U.S. government debt, U.S. ______ and there is a capital ______ the United States.

imports increase inflow to

Checking account balances are _________ the M1 measure of money and _________ the M2 measure of money.

included in excluded from

increase or decrease the money supply? A.The Fed decides to purchase government bonds

increase

increase or decrease the money supply? A.The public switches from using cash for most transactions to using checks instead.

increase

increase or decrease the money supply? Even though deposits have not changed, banks decide to make more loans.

increase

Stock prices increase when expected future dividends _____, interest rates _____, and/or the risk premium _____.

increase decrease decreases

ON TEST: Holding other factors constant, if Congress passes a 5% investment tax credit under which a firm receives $5 in tax refunds from the government for every $100 it spends on new capital equipment, then the real interest rate will ______ and the equilibrium quantity of national saving and investment will _____.

increase increase

At each value of the domestic interest rate, decreases in the riskiness of domestic assets ______ capital inflows, ______ capital outflows, and ______ net capital inflows.

increase decrease increase

In an open economy with a given level of real interest rates and risk, a decrease in real interest rates abroad will ______ net capital inflows and ______ the equilibrium domestic real interest rate.

increase decrease

ON TEST: Holding other factors constant, if state income tax is replaced with a consumption tax, then the real interest rate will ______ and the equilibrium quantity of saving and investment will _______.

increase increase

ON TEST: Suppose that Jordan wins $100,000 in the lottery. If he uses that money to pay off his mortgage, his wealth would_____; if he puts that money in his checking account, his wealth would_____.

increase by 100,000 increase by 100,000

When the central bank buys $1,000,000 worth of government bonds from the public, the money supply _____ by more than $1,000,000

increases

ON TEST: Suppose the price of Walter and Jesse's product increases relative to other goods. Holding other factors constant, then ________ increases, leading to ________ in the real interest rate and ________ in equilibrium quantity of national saving and investment.

investment an increase an increase

The Cub Scouts and Girl Scouts have so far sold 300 tickets for their upcoming raffle, but they sell an additional 32 tickets every day. The ______ is a stock variable, and the ______ is a flow variable.

number of tickets sold by the time of the raffle number of tickets sold each day

Lisa lost her job when the typewriter factory shut down 9 years ago and has been unemployed ever since. Lisa would be considered __________ unemployed.

structural

ON TEST: Which of the following is a stock variable? A. Saving B. Income C. Consumption D. Wealth

wealth