ECON 209 Module 1-15 Quizzes
Cyclically unemployed.
A U.S. worker who loses his or her job in an import industry because aggregate demand decreases would be classified as, ceteris paribus:
Transactions account.
A bank account that permits direct payment to a third party is a:
Buying shares of common stock in a rival bank.
A bank can acquire additional reserves by all of the following methods except:
Small macro disturbances can lead to much larger macro problems.
A basic conclusion of Keynesian analysis is that:
recession.
A decline in total output for two or more consecutive quarters is referred to as:
Contractionary monetary policy.
A decrease in aggregate demand could be cause by:
Increase; encourage.
A decrease in marginal tax rates will ________ after-tax profits and ________ more investment.
An increase rightward.
A decrease in marginal tax rates will cause _______ in investment and a ________ shift in AS.
Increase, right.
A decrease in marginal tax rates will cause entrepreneurship to _______ and AS to shift to the _______.
Can help overcome a shortage of skilled workers in the labor market.
A decrease in restrictions on immigration:
Left causing more undesired investment.
A decrease in sales expectations may shift the AD curve to the:
Decrease physical capital investment.
A decrease in the marginal propensity to save is likely to:
Further limits deposit creation.
A higher reserve requirement:
Keynesian.
A horizontal aggregate supply curve below the level of full employment is most consistent with which of the following views of the economy?
Non-interference by the government.
A laissez faire policy approach during a recession would advocate:
$100 billion stimulus for the economy.
According to Greenspan's policy guide, a full-point decrease in long-term interest rates results in a:
Much aggregate demand.
According to Keynes, demand-pull inflation is caused by too:
Decrease government purchases.
According to Keynes, which of the following can be used to slow down an overheated economy?
Macroeconomic goals are achieved.
According to Keynesian theory, which of the following is not true at macro equilibrium?
10 percent.
According to Okun's Law, if unemployment rises by 5 percent, the economy will lose output equal to:
A 1 percent increase in unemployment will cause a 2 percent decrease in output
According to Okun's Law:
AS curve to the left.
According to supply-side economists, employee benefits mandated by the government shift the:
Produce more.
According to supply-side theorists, a decrease in marginal tax rates will provide the incentive to:
Aggregate supply equals aggregate demand.
According to the Keynesian view of the macro economy, which of the following is always true at equilibrium?
Will increase total spending because the effect of the extra government spending is larger than the effect on consumer spending.
According to the balanced budget multiplier, a pay-as-you-go (balanced) budget initiative:
Both the price level and real GDP increase.
According to the consensus view, when demand increases:
Has a negative slope.
According to the law of demand, a demand curve:
Increases as its price falls, ceteris paribus.
According to the law of demand, the quantity of a good demanded in a given time period:
In order to produce additional units of a particular good, it is necessary for society to sacrifice increasingly larger amounts of alternative goods.
According to the law of increasing opportunity costs:
Seasonal unemployment.
After Christmas retail sales fall and many clerks are laid off until the following Christmas. This is an example of which of the following types of unemployment?
A discouraged worker.
After a fruitless two-year search for a job, a former executive gives up and decides to live off the land in the Rocky Mountains. This former executive could be:
Frictional unemployment.
After being fired from a job, some people find that it may take several months to find a new job. This is an example of which of the following types of unemployment?
Is the total quantity of output demanded at alternative price levels.
Aggregate demand:
Decreased stress levels.
All of the following are considered to be possible side effects of increased unemployment except:
The result of recurrent shifts of aggregate demand and aggregate supply.
Alternating periods of economic growth and contraction are:
The business cycle.
Alternating periods of economic growth and contraction in real GDP define:
An injection.
An addition of spending to the circular flow of income is:
A rightward or upward shift of the Phillips curve.
An increase in the misery index would definitely result from:
Reduce the interest rates and increase aggregate demand.
An increase in the money supply will:
Movement up the supply curve.
An increase in the price of a good causes a:
The Fed to meet less often.
An inflation goal set at a low rate but greater than zero allows all of the following except:
Hyperinflation.
An inflation rate in excess of 200 percent, lasting at least one year is:
Much smaller than the eventual decline in spending.
An initial (autonomous) decrease in aggregate demand will likely be:
Market failure.
Any imperfection in the market mechanism that prevents optimal outcomes is known as:
Tight supplies of factors of production.
As output rises, the cost effect results from:
An increase in the demand for the other.
Assume Pepsi and Dr. Pepper are substitutes. An increase in the price of one will result in:
Be caused by increases in induced expenditures.
Assume a decrease in interest rates causes an initial increase in desired investment and aggregate demand. Additional increases in aggregate demand will:
Demand for baseballs to decrease.
Assume a series of forest fires reduces the supply of lumber which is an input in the production of wooden bats. Baseballs and wooden bats are complements. If the price of wooden bats increases, we can expect the:
Increase spending by $50 billion.
Assume the MPC is 0.75. To eliminate an AD shortfall of $200 billion, the government should:
An amount greater than the recessionary GDP gap because the spending increase raises the price level.
Assume the equilibrium level of output is less than full employment. To achieve a full-employment equilibrium the aggregate demand curve must shift to the right by:
Decreased.
Assume the real U.S. GDP in 1929 was $942 billion and the U.S. population was 122 million, and the real U.S. GDP in 1930 was $858 billion and the U.S. population was 123 million. From 1929 to 1930, the per capita real GDP:
Increased.
Assume the real U.S. GDP in 1997 was $7,269 billion and the U.S. population was 268 million, and the real U.S. GDP in 1998 was $7,552 billion and the U.S. population was 270 million. From 1997 to 1998, the per capita real GDP:
Increased.
Assume the real U.S. GDP in 1998 was $7,552 billion and the U.S. population was 270 million, and the real U.S. GDP in 2000 was $10 trillion and the U.S. population was 280 million. From 1998 to 2000, the per capita real GDP:
A deficiency of reserves equal to $68 million.
Assume the reserve requirement is 25 percent, demand deposits are $500 million, and total reserves are $32 million. If the reserve requirement is decreased to 20 percent, the banking system will experience:
Saving plus taxes is greater than investment plus government spending.
Assume there is no foreign trade and the economy is in equilibrium. If actual investment is greater than desired investment then it is most likely that:
Increases and the price level decreases.
Assuming an upward-sloping aggregate supply curve, when aggregate demand decreases, unemployment:
Decreases and the price level increases.
Assuming an upward-sloping aggregate supply curve, when aggregate demand increases, unemployment:
Higher P.
Assuming full employment and a constant velocity of money, a decrease in the required reserve ratio would result in:
$50 billion.
At full employment in Figure 9.8, how much saving is there?
$100 billion.
At full employment in Figure 9.8, there is a recessionary gap equal to:
102.14 percent.
At the beginning of 1989 the GDP deflator was 93.6. At the end of 2004 it was 189.2. The approximate rate of change over the period was:
The quantity of money demanded equals the quantity of money supplied.
At the equilibrium rate of interest:
Increase spending during recessions and reduce spending during inflationary periods.
Automatic stabilizers tend to stabilize the level of economic activity because they:
National income.
"Total income earned by the current factors of production" is known as:
A deep recession.
Banks and customers are most likely to be reluctant to use the full lending capacity made available by the Federal Reserve when the economy experience:
The Federal Reserve for deposit creation.
Banks make loans to all of the following except:
Is the direct exchange of one good for another.
Barter:
Three.
Because resources are scarce, how many key issues must society resolve?
The quantities of the good that market participants are willing and able to exchange.
Both a demand schedule and a supply schedule for a good indicate for a given period of time at different prices, ceteris paribus:
Decrease and equilibrium quantity to increase.
Ceteris paribus, an increase in the number of sellers of running shoes causes equilibrium price to:
A decrease in the demand for soccer balls.
Ceteris paribus, if buyers expect the price of soccer balls to fall in the future, then right now there should be:
Government spending by less than $600 billion.
Ceteris paribus, if the AD shortfall equals $600 billion, then the federal government can close it by increasing:
Supply curve should shift leftward.
Ceteris paribus, if the Fed sells bonds through open market operations, the money:
Falling.
Ceteris paribus, if the employment rate is falling, then the GDP per capita is
Demand curve shifts to the left.
Ceteris paribus, the price level will decrease if the aggregate:
An increase in income.
Ceteris paribus, which of the following is most likely to cause an increase in the demand for boots?
Stable prices, inflation or deflation.
Changes in relative prices may occur in a period of:
20 percent.
China has roughly how much of the world's population?
Property taxes.
Cities and other local governments receive most of their tax revenues from:
Account for over two-thirds of total spending.
Consumption expenditures:
Full employment.
Crowding out is complete only when the economy is experiencing:
Borrows, making it more difficult for the private sector to borrow.
Crowding out occurs when the government:
Issues debt, thus making it more difficult for the private sector to issue debt.
Crowding out occurs when the government:
M2.
Currency held by the public, balances in transactions accounts, plus balances in most savings accounts and money market mutual funds added together is:
Finances expenditures that exceed tax revenues.
Deficit spending results whenever the government:
A movement along the Phillips curve.
Demand-side policies alone result in which of the following?
Banks make loans to borrowers.
Deposit creation occurs when:
Purchases of new plant and equipment plus desired changes in business inventories.
Desired investment equals:
Lending reserves to private banks.
Discounting refers to the Fed's practice of:
Do not actively seek employment, although they desire to be employed.
Discouraged workers:
Cyclically unemployed.
During an economic downturn, consumers spend considerably less on goods and services. This results in layoffs, and the laid off workers are classified as:
Shifts the production possibilities curve outward.
Economic growth, in the long run:
Potential GDP.
Economists define economic growth in terms of changes in:
To distinguish a shift in the demand curve from a movement along the demand curve.
Economists make a distinction between a change in "demand" and a change in the "quantity demanded":
Efficient.
Every point on the production-possibilities curve is considered to be:
Bank reserves in excess of required reserves.
Excess reserves are:
Total reserves less required reserves.
Excess reserves are:
The difference between social and private costs (benefits).
Externalities are:
Are the costs or benefits of market activities that "spill over" onto third parties.
Externalities:
Scarce in every society.
Factors of production are:
The bank will not have enough required reserves.
First National Bank has zero excess reserves. Ceteris paribus, if the required reserve ratio increases, which of the following will happen immediately?
Shifts of the AD curve.
Fiscal policy works primarily through:
A worker quits one job in order to search for another.
Frictional unemployment goes up when:
Get consumers to spend more on goods and services.
From a Keynesian perspective, the way out of recession is to:
Is a basic source of investment financing.
From the long-run perspective of economic growth, saving:
At full employment.
Full employment GDP is the value of total output produced:
Total GDP divided by total population.
GDP per capita is:
Is equal to a nation's GDP divided by its population.
GDP per capita:
Public goods.
Governments usually build highways because it is difficult to exclude individuals who don't pay for the highways from using them. What type of failure is involved?
Total investment expenditure in a given time period.
Gross investment is:
A rightward or upward shift of the Phillips curve.
Higher unemployment and higher inflation rates will most likely occur with:
Real GDP has increased.
If GDP grows more rapidly than population for a particular country over a period of time, then we can determine that:
Good with an external cost.
If Good X has social demand that is less than market demand, then Good X must be a:
If it is consumed by one person, it can also be consumed by another person.
If Good X is a public good, then:
The social demand is greater than the market demand.
If a good yields external benefits, then:
Federal funds rate.
If a large bank borrows reserves from another bank, the interest rate it must pay is called the:
Nominal interest rate of 5 percent.
If a lender desires to earn a return of 3 percent on a loan and the anticipated rate of inflation is 2 percent, the lender should charge a:
6.0.
If a new tax policy 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:
-32.76 percent.
If a price index changed from 35.1 in 1929 to 23.6 in 1935, what would the inflation rate be over the period?
2.0.
If a tax cut of 3 percent causes the output supplied to increase by 6 percent, the absolute value of the tax elasticity of supply is:
Decrease, but the price level may increase, decrease, or stay the same.
If aggregate demand decreases and aggregate supply decreases, the level of real output will:
A recessionary GDP gap will still exist.
If aggregate demand increases by the amount of the recessionary GDP gap and aggregate supply is upward sloping:
Decrease their demand for laptops today.
If consumers expect laptop manufacturers to offer rebates next month, consumers will:
MPC is 0.90.
If consumers spend 90 cents out of every extra dollar received, the:
$20,000.
If excess reserves are $10,000, demand deposits are $100,000, and the required reserve ratio is 10 percent, then total reserves are:
$250,000.
If excess reserves are $50,000, demand deposits are $1,000,000, and the required reserve ratio is 20 percent, then total reserves are:
lower price level and a higher level of output.
If full employment is greater than the macro equilibrium, which of the following best describes the impact of a rightward shift of the aggregate supply curve, ceteris paribus?
The economy will expand.
If injections exceed leakages:
$8,903.7 billion.
If nominal GDP was $9,126.3 billion in 2002 and the price level in 2002 was 102.5, then real GDP would have been approximately:
A public good.
If people are free-riders of Good X, then we know that Good X is:
Income will fall until planned leakages equal planned injections.
If planned leakages exceed planned injections, then Keynesians believe:
Everyone would wait for someone else to pay.
If public goods were marketed like private goods, then:
-6.25 percent.
If real GDP falls from $400 billion to $375 billion, then the economic growth rate is:
Nominal GDP decreased.
If real GDP falls from one period to another and the price level stays the same we can conclude that:
2 percent.
If real GDP rises from $500 billion to $510 billion, then the economic growth rate is:
($704-$700)/$700.
If real GDP rises from $700 billion to $704 billion, then the economic growth rate is:
13.6 percent.
If the CPI increases from 110 to 125 for one year, the rate of inflation for that year is:
Increase by $3,000 billion.
If the Fed buys $150 billion of U.S. bonds in the open market and the reserve requirement is 5 percent, M1 will eventually:
Decrease by $100 billion.
If the Fed sells $10 billion of U.S. bonds in the open market and the reserve requirement is 10 percent, M1 will eventually:
Decrease by $50 billion.
If the Fed sells $7.5 billion of U.S. bonds in the open market and the reserve requirement is 15 percent, M1 will eventually:
$160 billion.
If the MPC equals 0.80, a $200 billion tax decrease will increase consumption in the first round by:
$1,200 billion.
If the MPC is 0.60 and disposable income increases from $20,000 billion to $22,000 billion, then consumption will increase by:
$1,250.
If the MPC=0.60, the total change in spending resulting from an initial $500 decrease in aggregate spending will be:
Decrease output by 5 percent and increase tax revenues.
If the absolute value of the tax elasticity of supply is 0.5, a tax increase of 10 percent would:
Increase output by 8 percent and decrease tax revenues.
If the absolute value of the tax elasticity of supply is 0.8, a tax decrease of 10 percent would:
A decrease in the price level and an increase in unemployment.
If the aggregate supply curve is upward sloping, a decrease in aggregate demand will cause:`
10.0 percent.
If the annual interest rate printed on the face of a bond is 12 percent, the face value of the bond is $1,000, and you purchase the bond for $1,200, what is the current yield on the bond?
80.0 percent.
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 you purchase the bond for $200, what is the current yield on the bond?
28 percent.
If the annual interest rate printed on the face of a bond is 7 percent, the face value of the bond is $1,000, and you purchase the bond for $250, what is the current yield on the bond?
10.0 percent.
If the annual interest rate printed on the fact of a bond is 12 percent, the face value of the bond is $1,000, and you purchase the bond for $1,200, what is the current yield on the bond?
2 percent.
If the anticipated inflation rate is 3 percent and the nominal interest rate is 5 percent, the real interest rate will be:
5 percent.
If the anticipated inflation rate is 3 percent and the nominal interest rate is 8 percent, the real interest rate will be:
$7.2 trillion.
If the average worker's productivity is $12 per hour and the labor force is employed for $600 billion hours, then GDP is equal to:
10.0.
If the banking system has a required reserve ratio of 10 percent, then the money multiplier is:
4.0.
If the banking system has a required reserve ratio of 25 percent, then the money multiplier is:
Income will increase by the amount of the increase in government spending.
If the government increases spending and maintains a balanced budget at the same time:
2.50
If the marginal propensity to consume is 0.60, then the multiplier equals:
$3 million.
If the multiplier equals 2 and the AD shortfall is $6 million, then the desired fiscal stimulus is:
Government spending decreased by $125 million.
If the multiplier is 4 and a change in government spending leads to a $500 million decrease in aggregate demand, we can conclude that:
Stays the same but your real income falls.
If the number of dollars you receive every year in income is the same, but prices are rising, then your nominal income:
Increases
If the price of legal services rises 19 percent during a period when the level of average prices rises 7 percent, the relative price of legal services compared with other goods and services:
Stays the same.
If the price of tires falls 8 percent during a period when the level of average prices falls 8 percent, the relative price of tires:
Additional excess reserves x money multiplier.
If the required reserves ratio is reduced, the additional lending capacity of the banking system can be determined by:
5.
If total reserves for a bank are $25,000, excess reserves are $5,000, and demand deposits are $100,000, then the money multiplier must be:
Increased but your real income has decreased.
If your rent increases from $500 to $600 over a period of one year and your income rises from $2000 to $2050, then it is true that your nominal income has:
MPC is 0.88.
If, in the aggregate, consumers spend 88 cents out of every extra dollar received, the:
25 percent.
In 1933, the U.S. unemployment rate was approximately:
Reduced; more profitable.
In 2003, tax rates on dividends and capital gains were _____, making investment _____.
The demand for MP3 players increased from 2007 to 2008.
In 2007 a company sold 35,000 MP3 players at $150 each. In 2008 the same company sold 40,000 MP3 players at $170 each. This information suggests that:
Average price levels decreased.
In Figure 5.1, during the period between the early 1970s and 1980, real GDP grew at a faster rate than nominal GDP. This is an indication that:
Rise as a result of undesired investment.
In Figure 9.8 if full-employment income is produced, we can expect inventories to:
Horizontal distance between the aggregate demand curve necessary for full employment and the aggregate demand curve at the equilibrium price.
In a diagram of aggregate demand and supply curves, the AD shortfall is measured as the:
Are willing to pay the highest price.
In a market economy, the people who receive the goods and services that are produced are those who:
Society's desires exceed the want-satisfying capability of the resources available to satisfy those desires.
In economics, scarcity means that:
CPI.
In order to compute the real income of a household, the index that should be used is the:
Exceed percentage increases in real GDP.
In periods of rising prices, percentage increases in nominal GDP will:
Growth recession.
In which of the following situations is the percentage change in real GDP always positive?
Namibia.
In which of the following would the top quintile of the population be most likely to receive the highest percentage of the country's income?
Real income.
Income in constant prices is:
Often greatest in the poorest countries.
Income inequality is:
A leakage.
Income not spent directly on domestic output is:
Transfer payments.
Income payments for which no current goods or services are exchanged are known as:
Both the aggregate supply and aggregate demand to the right.
Increased investment in infrastructure will shift:
Handle emergencies.
Individuals hold precautionary balances in order to:
Decreases.
Inflation ________________ the purchasing power of money.
An increase in the average level of prices of goods and services.
Inflation is:
Average prices are rising, but it is not certain what is happening to relative prices.
Inflation means:
Exports.
Injections include:
Factories.
Investment goods, as defined by economists, include:
The investment demand curve shifts to the left because of pessimistic expectations.
Investment spending might actually decrease even as interest rates fall if:
Not part of the labor force and is not counted in the unemployment rate
Jack graduated from college last month, but he has not yet started looking for a job. Jack is:
Macro failure is likely to occur and it isn't likely to go away.
John Maynard Keynes argued that:
Precautionary demand for money.
John keeps an extra $3,000 in his checking account to pay for unexpected health care expenses. This represents the:
Caused recurring business cycles.
Keynes believed that abrupt changes in spending behavior:
The willingness of customers to increase consumption when interest rates fall.
Keynes believed that monetary stimulus would be ineffective during a recession because of all of the following except:
Neither full employment nor price stability.
Keynes was concerned that at macroeconomic equilibrium the economy would experience:
And price stability might not continue.
Keynes was concerned that at macroeconomic equilibrium, full employment:
Fiscal and monetary policy.
Keynesian levers would include:
Consumer saving.
Leakages include:
The number of potential sellers.
Market demand is determined by all of the following except for:
Public goods being underproduced.
Market failure leads to:
Ensure political independence.
Members of the Board of Governors are appointed for long terms and cannot be reappointed in order to:
More difficult to achieve full employment with stable prices.
Minimum wage laws make it:
The velocity of money is constant.
Monetarists argue that:
Money and credit controls to alter macroeconomic outcomes.
Monetary policy is the use of:
The investment demand curve is inelastic.
Monetary stimulus may be ineffective because:
Speculative demand for money.
Money held to buy bonds in the future represents the:
May be beneficial to society if they are natural monopolies and are regulated.
Monopolies:
Consumers.
Most of the United States GDP is used by:
Education and welfare.
Most of the spending at the state government level is on:
The amount of new output currently available for use without reducing the economy's stock of capital.
Net domestic product is defined as:
Three.
On average, U.S. output has grown roughly ____ times faster than population growth.
A decrease in aggregate demand.
One In the News article is titled "Slack Demand Hinders Economy." This implies that there has been:
Were producing inside their production possibilities curves.
One World View article states "The Great Depression was not confined to the U.S. economy." This implies that many other countries:
Madagascar.
One country that has experienced a recent decline in GDP per capita is:
Transferring money from savers to spenders.
One of the essential functions a bank performs is that of:
Rightward; AS.
Only a ________ shift of the ________ curve can reduce unemployment and inflation at the same time.
Underemployed but do not contribute to the unemployment statistic.
Part-time workers who desire full-time employment are:
An increase in the demand for the other.
Peanut butter and jelly are complements. A decrease in the price of one will result in:
Market participation allows individuals to specialize and, ultimately, consume more.
People benefit by participating in the market because:
A measure of output divided by the total population.
Per capita GDP is:
The rate of economic growth is less than the rate of population growth.
Per capita GDP will definitely fall if:
The population falls.
Per capita GDP will definitely rise if:
Increases more rapidly than the population increases.
Per capita GDP will rise if GDP:
Maximum output of a good produced from the available resources.
Production efficiency can be defined as the:
Output per labor hour.
Productivity is best measured using:
Analyze the growth rate of the economy over time.
Real GDP is used most effectively to:
Point c.
Refer to Figure 11.1. Assume aggregate demand is initially represented by AD1 and full employment output is $6.0 trillion. If aggregate demand increases by the amount of the GDP gap, equilibrium will occur at:
$5.8 trillion.
Refer to Figure 11.1. Assume aggregate demand is represented by AD1 and full employment output is $6.0 trillion. The equilibrium level of income is:
$52,000.
Refer to Table 13.1. With a required reserve ratio of 12 percent, XYZ Bank would have excess reserves of:
$50,000.
Refer to Table 13.2. If ABC Bank has a required reserve ratio of 15 percent, it can legally increase its loans by a maximum of:
$60,000.
Refer to table 13.1. If XYZ Bank has a required reserve ratio of 10 percent, it can legally increase its loans by:
Cashing checks for large corporations.
Regional Fed banks are responsible for all of the following except:
The price of one good in comparison with the price of other goods.
Relative price is:
Leftward or downward Phillips curve shifts.
Rightward AS shifts will cause
Investment.
Seventeen percent of U.S. output consists of:
Moves the economy onto the production possibilities curve, while long-run growth shifts that curve outward.
Short-run growth:
Average about 37 percent of each worker's wages.
Social Security taxes:
The simultaneous occurrence of inflation and unemployment.
Stagflation refers to:
Fewer bad debts.
Studies have shown that unemployment causes all of the following except:
Reduce marginal tax rates.
Supply-side tax cuts are designed to:
$81,000.
Suppose DVD players cost consumers $40 and computers cost consumers $750. What contribution does the production of 150 DVD players and 100 computers make to the GDP?
$16,000.
Suppose a bank has $160,000 in deposits and a required reserve ratio of 10 percent. Then required reserves are:
$60,000.
Suppose a bank has $600,000 in deposits, a required reserve ratio of 5 percent, and bank reserves of $90,000. Then the bank can make new loans in the amount of:
$380 million.
Suppose a banking system has $120 million in deposits, a required reserve ratio of 20 percent, and total bank reserves for the whole system of $100 million. Then the potential deposit creation for the whole system is equal to:
$150,000.
Suppose a banking system has $200 million in deposits, a required reserve ratio of 10 percent, and total bank reserves of $35 million. Then the potential deposit creation for the whole banking system is equal to:
$6.67 billion.
Suppose a banking system has a required reserve ratio of 0.15. How much can the money supply increase in response to a $1 billion increase in excess reserves for the whole banking system?
$20 billion.
Suppose a banking system has a required reserve ratio of 10 percent. What is the maximum possible increase in the money supply in response to a $2 billion increase in excess reserves for the whole banking system?
0.15.
Suppose a consumption function is given as C = $175 + 0.85YD. The marginal propensity to save is:
12.0 percent.
Suppose a country has 1 billion people, 75 percent of whom are in the labor force, with 90 million unemployed. Full employment occurs at 2 percent. Based on the information above, what is the unemployment rate?
Right. GDP will increase, ceteris paribus.
Suppose a friend claims he is helping the economy by throwing trash on the street rather than in trash cans because the extra expenditures necessary to clean up the streets will increase GDP. Your friend is:
$25 billion.
Suppose all of the banks in the Federal Reserve System have $100 billion in transactions accounts, the required reserve ratio is 0.25 and there are no excess reserves in the system. If the required reserve ratio is changed to 0.20, then the total lending capacity of the system is increased by:
$100 billion.
Suppose all of the banks in the Federal Reserve System have $500 billion in transactions accounts, the required reserve ratio is 0.30, and there are no excess reserves in the system. If the required reserve ratio is changed to 0.25, then the total lending capacity of the system is increased by:
Demand must have increased while supply remained constant.
Suppose that during the 2005-2007 time period, the number of motorcycles sold increased despite an increase in price. How can this be explained using demand and supply analysis?
$50,000.
Suppose the bank has $200,000 in deposits, a required ratio of 25 percent and bank reserves of $100,000. Then this bank can make new loans in the amount of:
Positive $10 billion.
Suppose the banks in the Federal Reserve System have $200 billion in transactions accounts, the required reserve ratio is 0.15, and there are no excess reserves in the system. If the required reserve ratio is changed to 0.10, then the amount of excess reserves would be:
$1,000
Suppose the consumption function is C = $100 + 0.75YD. Savings will be $150 if the level of disposable income is:
$1,000 billion.
Suppose the consumption function is C = 100 + 0.90YD. If the government stimulates the economy with $100 billion in increased government purchases, aggregate expenditure will rise by:
111,750,000.
Suppose the population of a country is 1,000 million, and the labor force is 850 million, 700 million of whom are employed. Assume that full-employment occurs at a 4.5 percent unemployment rate at a real GDP level of $100 trillion. Based on the information above, how many more members of the labor force must find jobs for the economy to achieve full employment?
Increase directly by $1 million and additional lending capacity of $4 million will be created for the banking system.
Suppose the required reserve ratio is 20 percent, and the Fed buys $1 million worth of bonds from the public. If the public deposits this amount into transactions accounts, the money supply will:
Remain unchanged since this is a nonmarket activity.
Suppose you take care of your neighbor's children while she works and you do not charge her. A day care center would charge her $300 per week for this. Your efforts cause the GDP of the economy to:
3
The 20 percent of families with the lowest income in the U.S. receive approximately ______ percent of total income.
Money demand decreases.
The Fed could sell bonds in the open market in an effort to keep interest rates constant when:
The Federal Reserve Act in 1913.
The Federal Reserve System was created by:
Banks.
The Federal Reserve holds deposits from:
Is the broadest price index, covering all output.
The GDP deflator:
Measures average GDP.
The GDP per capita:
Was ended by massive government spending during World War II.
The Great Depression in the United States:
M1 plus balances in most savings accounts and money market mutual funds.
The M2 money supply is defined as:
A historical (inverse) relationship between the rate of unemployment and the rate of inflation.
The Phillips curve shows
NDP.
The account that gives the most accurate understanding of the economy's potential for growth over the long-term is:
Cost effect.
The aggregate supply curve is upward-sloping because of the:
Marginal propensity to consume.
The amount of additional income generated by increased government spending depends on the:
Nominal income.
The amount of money income received in a given time period, measured in current dollars is:
An increase in government spending paid for by a tax cut of equal size shifts aggregate demand rightward.
The balanced budget multiplier says that:
Banks are required to keep only a fraction of deposits on reserve.
The banking system can lend more than the sum of its excess reserves because:
Unlimited wants for goods and services but resources are limited.
The best description of the origin of the economic problem of scarcity is that humans have:
A portfolio decision.
The choice of how and where to hold idle funds is:
Results in forgone interest.
The choice to hold money in the form of cash:
The sale of bonds by the federal government will raise interest rates and cause firms to invest less.
The concept of crowding out refers to the idea that:
The National Monetary Commission.
The creation of a Federal Reserve System was recommended by:
Recessionary GDP gap.
The difference between full-employment GDP and equilibrium GDP is the:
70 percent.
The disposable income consumers receive is equal to about what percentage of total income?
A retirement portfolio of stocks and bonds.
The economic definition of investment includes all of the following except:
Increased the employment rate and caused per capita GDP to rise.
The entry of Baby Boomers into the labor force and increased labor-force attachment of women:
Monetary policy affects only the rate of inflation.
The existence of a natural rate of unemployment implies that in the long run:
The scarcity of resources relative to human wants.
The free market produces an unequal distribution of income.
Utility, profits, and the general welfare of society.
The goals of market participants include the maximization of:
Satisfaction from purchases for consumers, profits for businesses, and society's general welfare for government.
The goals of the market participants are the maximization of:
Externalities.
The government's role in limiting smoking in many buildings is justified by considerations of:
The consensus view of the economy.
The idea that a shift in aggregate demand affects both inflation and unemployment is consistent with:
The trial-and-error process by which a market reaches equilibrium.
The invisible hand explains:
The allocation of resources by market forces.
The invisible hand refers to:
All persons over the age 16 who are either working for pay or actively seeking paid employment.
The labor force includes:
In the labor force divided by the total population.
The labor-force participation rate is the number:
Savings accounts.
The majority of M2 in the United States is in the form of:
The change in consumption divided by the change in disposable income.
The marginal propensity to consume is:
The fraction of each additional dollar of disposable income spent on consumption.
The marginal propensity to consume is:
Tax rate imposed on the last dollar of income earned.
The marginal tax rate is the:
A downward sloping demand curve, where more money is held at lower interest rates.
The market demand curve for money is:
The use of market prices and sales to signal desired output.
The market mechanism may be defined as:
Allows buyers to communicate with producers indirectly.
The market mechanism:
Joint consumption allows those who do not pay for the good to still benefit from the good.
The market tends to underproduce public goods because:
On its own may not always provide the optimal mix of goods and services.
The market:
GDP of the United States.
The measure of the value of goods and services produced in the United States is the:
Required reserves.
The minimum amount of reserves a bank is required to hold is:
Currency in circulation plus balances in transactions accounts.
The money supply (M1) includes:
Saving accounts and money market mutual funds.
The money supply (M2) includes M1 plus balances in:
Plus balances in saving accounts and money market mutual funds.
The money supply M2 includes M1:
The Great Depression.
The most prolonged departure from the long-term growth path for the United States occurred during:
Okun's Law.
The observation that a one percent increase in unemployment leads to a two percent decrease in output is known as:
May be the same as the market mix.
The optimal mix of goods and services:
Most desired combination on a production-possibilities curve.
The optimal mix of output is always the same as the:
Public goods.
The optimal mix of output may not be produced by an economy because of the existence of:
Market forces and government policy.
The pace of economic growth is determined by:
Saving.
The part of disposable income not spent on current consumption is:
Relative price.
The price of one good in comparison with the price of other goods is known as:
Interest rate.
The price paid for the use of money is the:
Transfer command over resources from the private sector to the public sector.
The primary function of taxes is to:
Investment and saving.
The primary source of macro instability, when there is no government and no foreign trade, is the relationship between:
The tax-and-transfer system.
The principal mechanism for redistributing incomes is:
If society is efficient, it can produce more of one good only if it reduces output of another good.
The production-possibilities curve illustrates that:
Unemployment rate
The proportion of the labor force that is unemployed is the:
Unemployment rate.
The proportion of the labor force that is unemployed is the:
Reserve ratio.
The ratio of a bank's reserves to its total transactions deposits is known as the:
Value of the goods and services that could be produced but were not due to unemployed resources.
The recessionary GDP gap represents the:
The slope and position of the aggregate supply curve.
The response of producers to an AD shift is expressed in:
Market demand curve for money.
The speculative, transactions, and precautionary demands for money added together give the:
Federal revenues at full employment minus federal expenditures at full employment under current fiscal policy.
The structural deficit represents:
Changes in long-term interest rates mirror changes in short-term interest rates.
The success of Fed intervention depends on how well:
Reserves being a small fraction of total transactions account balances.
The term fractional reserves refers to:
Payments to individuals which are not in exchange for current goods and services being produced.
The term transfer payments refers to:
Gross domestic product.
The total market value of all final goods and services produced in an economy during a given time period is the definition of:
Cyclical changes and changes in discretionary fiscal policy.
The two components responsible for the total budget balance reflect:
Seasonal unemployment.
The type of unemployment that increases most when teenagers look for temporary summer jobs is:
Consumption, saving, and investment behavior.
The uncertainty that results from inflation causes changes in:
Macro equilibrium.
The unique situation in which the behavior of buyers and sellers is compatible is referred to as:
Deficit spending.
The use of borrowed funds to finance government expenditures that exceed tax revenues is:
Fiscal policy.
The use of government taxes and spending to alter economic outcomes is known as:
Nominal GDP.
The value of final output produced in a given period, measured in current prices is:
Smaller the slope of the savings function.
The value of the multiplier will be larger the:
Employed.
Those who work part-time and do not desire full-time employment are referred to as:
Portfolio decisions.
Through open market operations, the Fed is able to influence:
Add the quantities supplied for each individual supply schedule horizontally.
To calculate market supply we:
$25 billion.
To eliminate an AD shortfall of $100 billion when the economy has an MPC of 0.80, the government should increase transfer payments by:
Income inequality.
Transfer payments and in-kind benefits represent a U.S. attempt to address:
They are a payment for which no goods or services are exchanged.
Transfer payments are part of personal income but not national income because:
People seeking full-time paid employment who work only part-time or are employed at jobs below their capability.
Underemployment is defined as:
A person who is not able to use her full capabilities in her job.
Underemployment refers to:
An excess supply of money of $100 billion.
Using Figure 15.2, at an interest rate of 9 percent there is:
Equilibrium interest rate should decrease, and equilibrium rate of investment should increase.
What should happen to the equilibrium interest rate and the corresponding rate of investment if the Fed decreases the discount rate?
Creates a transactions account balance for the borrower.
When a bank makes a loan, it:
Producers reduce the level of output and reduce price.
When a surplus exists for a product:
Producers reduce price in an attempt to decrease excess inventory.
When a surplus exists:
Cyclical.
When aggregate expenditures fall below the full-employment level of output, which of the following types of unemployment is most likely to increase?
More output could be produced with existing resources.
When an economy is producing inside its production possibilities curve, this is an indication that:
A surplus exists at the old equilibrium price.
When demand decreases, ceteris paribus, the equilibrium price will also decrease because:
There is macro instability.
When the economy experiences unemployment:
"Crowding in" effect that contributes to the growth of capital investment.
When the federal government runs a budget surplus, there may be a:
Individual supply curves remain unchanged, but the market supply curve shifts.
When the number of sellers in a market changes, ceteris paribus:
Has fallen while its absolute price has risen.
When the price of a good is increasing more slowly than an index of average prices, then generally the good's relative price:
Number of buyers.
Which of the following is a market-demand determinant but not an individual-demand determinant?
A decrease in the deficit during an expansion.
Which of the following is a possible effect of automatic stabilizers on the federal budget?
Improved management.
Which of the following is a potential source of increased productivity?
Decrease in M1, increase in interest rate, decrease in 1.
Which of the following is a series of events that accurately describes the steps by which restrictive policy is effective?
Classical economics failed to explain a prolonged depression.
Which of the following is a situation in which economic theory failed to explain a change in the economy?
Market power.
Which of the following is a source of market failure?
The consensus view is that it begins horizontal, then starts to slope upward to the right as the economy approaches full employment, and eventually becomes vertical.
Which of the following is an accurate statement about the aggregate supply curve?
The supply of resources is fixed.
Which of the following is an assumption under which the production-possibilities curve is drawn?
Flood control.
Which of the following is an example of a public good?
Keisha takes care of the neighbor's children and the neighbor mows Keisha's yard as repayment.
Which of the following is an example of barter?
The help a sales clerk provides when you buy a pair of pants.
Which of the following is considered a service in the calculation of GDP?
The real GDP gap.
Which of the following is eliminated when the economy's output is equal to full-employment GDP?
How total quantity of output demanded varies with the average price level.
Which of the following is illustrated by the aggregate demand curve?
An increase in business inventories.
Which of the following is investment, according to an economist?
Wages earned by a fast food worker.
Which of the following is most likely to be included in GDP?
A decrease in marginal tax rates.
Which of the following is most likely to cause the aggregate supply curve to shift to the right?
An increase in electricity imported into California.
Which of the following is most likely to occur because of an increase in the price of electricity in California?
Disposable income.
Which of the following is not a determinant of autonomous consumption?
Real GDP.
Which of the following is not a determinant of autonomous consumption?
Defense spending.
Which of the following is not an automatic stabilizer?
The real balance effect.
Which of the following is not associated with the aggregate supply curve?
Price.
Which of the following is not held constant along a given demand curve for a good?
Savings account balances at a federal savings bank.
Which of the following is not included in M1?
It is shown graphically with a curve that is upward sloping to the right.
Which of the following is not true about aggregate demand?
It allows people to obtain more goods than they would under a money-payment system.
Which of the following is not true about barter?
It is the same as your real income.
Which of the following is not true about your nominal income?
it is the same as your real income.
Which of the following is not true about your nominal income?
There is a tendency for the money demand curve to shift to the right.
Which of the following is not true at the equilibrium rate of interest?
They usually serve two or three terms.
Which of the following is not true for members of the Federal Reserve Board of Governors?
The mix of goods and services is on the production-possibilities curve.
Which of the following is possible when the market fails?
The federal income tax is progressive but sales, property and other taxes tend to be regressive.
Which of the following is the best description of the U.S. tax system?
A computer used by an insurance agent to service her customers.
Which of the following is the best example of capital and no other factor of production?
Rising unemployment rate, rising inflation rate.
Which of the following is the best indication that stagflation is occurring?
The money supply decreases, interest rates increase, investment decreases, AD decreases.
Which of the following is the correct sequence of events when restrictive monetary policy is implemented?
Cars that create an excessive amount of exhaust fumes.
Which of the following is the government most likely to discourage because of the existence of externalities?
Open market operations.
Which of the following is the principal mechanism used by the Federal Reserve to directly alter the reserves of the banking system?
Open market operations.
Which of the following is the tool used most frequently by the Fed?
It signals the Federal Reserve's desire to restrain money growth.
Which of the following is true about an increase in the discount rate?
The economy is working beyond normal capacity.
Which of the following is true if equilibrium exceeds full employment?
The economy is producing on the production-possibilities curve.
Which of the following is true when an economy is producing efficiently?
Rising ratios of labor to capital.
Which of the following might reduce labor productivity?
Macro instability.
Which of the following occurs when the economy experiences inflation?
Inflationary gap.
Which of the following occurs when the spending on final goods and services exceeds full-employment GDP?
Greater government expenditure and lower taxes.
Which of the following policies will definitely increase the budget deficit, while achieving greater fiscal stimulus?
The inoculation of college students against the flu.
Which of the following produces external benefits?
The Fed governors are appointed for 14 year terms and cannot be reappointed.
Which of the following provides evidence that the Federal Reserve System is politically insulated?
(Total reserves - required reserves) x money multiplier.
Which of the following represents the lending capacity of an entire banking system?
1 ÷ (required reserve ratio).
Which of the following represents the money multiplier?
The 12 Federal Reserve banks.
Which of the following serves as the central banker for private banks in the United States?
Holding bank reserves.
Which of the following services is performed by the regional Federal Reserve banks?
Most people who become unemployed find jobs in a relatively short period of time (approximately 2 to 3 months).
Which of the following statements is most accurate?
The U.S. produces approximately one-fifth of the world's production.
Which of the following statements is true about the United States economy?
The free market produces an unequal distribution of income.
Which of the following statements is true concerning income inequality?
Characterized by joint consumption.
Which of the following statements refers to public goods?
Seasonal unemployment.
Which of the following types of unemployment would best characterize a snow ski instructor's unemployment during the summer months?
High inflation.
Which of the following was not characteristic of the U.S. economy during the Great Depression?
Real GDP increased.
Which of the following was not characteristic of the U.S. economy during the Great Depression?
Unemployment reached 50 percent.
Which of the following was not characteristic of the U.S. economy during the Great Depression?
An increase in foreign consumer income.
Which of the following will cause an increase in U.S. gross exports?
An increase in foreign wealth.
Which of the following will cause an increase in U.S. gross exports?
Reduced expectations of future sales.
Which of the following will cause the investment function to shift to the left?
A decrease in business taxes.
Which of the following will cause the investment-demand curve to shift to the right?
An improvement in technology.
Which of the following will cause the investment-demand curve to shift to the right?
Greater stagflation.
Which of the following will definitely cause the value of the misery index to increase?
A decrease in U.S. imports.
Which of the following will not cause an increase in U.S. gross exports?
Some of the output produced by a U.S.-owned firm operating in Canada.
Which of the following would be included in Canada's GDP but excluded from Canada's GNP?
An increase in the number of participants in the labor force.
Which of the following would not increase labor productivity, ceteris paribus?
AD curve should shift leftward.
Which shift is most likely to occur if the Fed increases the discount rate?
The Keynesian view, the monetarist view, and the hybrid view.
Which view of aggregate supply predicts that the outcomes of fiscal and monetary policy depend on how close the economy is to full employment?
John Maynard Keynes.
Who believed that disturbances in output, prices, or unemployment were capable of being magnified in the aggregate economy?
John Maynard Keynes.
Who believed the government could "prime the pump" when the economy falters?
Only those resources that are privately owned are counted as factors of production.
With respect to factors of production, which of the following statements is not true?
The purchasing power of the money you receive.
Your real income is:
Upward sloping to the right.
A leftward shift in aggregate demand will cause a decrease in both output and price level if aggregate supply is:
The amount by which the quantity demanded exceeds the quantity supplied at a given price.
A market shortage is:
The amount by which the quantity supplied exceeds the quantity demanded at a given price.
A market surplus is:
Consumer Price Index.
A measure of changes in the average price of consumer goods and services is the:
There is only one producer of a particular good or service.
A monopoly occurs when:
Inversely related to each other.
A movement along the Phillips curve shows that the unemployment rate and inflation rate are:
The total value added at all stages of production.
A nation's GDP can be calculated as:
An industry in which one firm can achieve economies of scale over the entire range of market supply.
A natural monopoly is:
The rising costs associated with increased capacity utilization.
A positively sloped aggregate supply curve reflects:
Is consumed by one person and excludes consumption by others.
A private good:
Horizontal distance between full-employment GDP and equilibrium GDP.
A recessionary GDP gap is the:
Absolute value of the tax elasticity of supply is greater than 1.0.
A reduction in marginal tax rates will yield larger tax revenues if the:
Signals the Federal Reserve's desire for additional credit expansion.
A reduction in the discount rate:
Reduce unemployment and inflation.
A rightward AS shift will:
Upward sloping to the right.
A rightward shift in aggregate demand will cause an increase in output and price level if aggregate supply is:
Deflation and a lower unemployment rate.
A rightward shift in the aggregate supply curve should result in:
Raises the CPI and reduces real income.
A sudden increase in inflation, ceteris paribus:
Supply curve shifts to the right.
A sustained increase in total output is possible only if the aggregate:
Contains less fiscal stimulus than an increase in government spending of the same size.
A tax cut:
Required reserves, excess reserves, lending capacity.
When the reserve requirement changes, which of the following will change for an individual bank?
The economy moves closer to the production possibilities curve.
When there is a decrease in the unemployment rate:
Unemployment.
When unwanted inventories pile up in retail stores, retail managers will take actions that lead to greater:
Price level changes.
When using the GDP from two consecutive years to determine the economic growth rate of the economy, adjustments should be made for:
The money supply becomes smaller.
When you pay off a loan at the bank, ceteris paribus:
Demand shifts to the right and supply shifts to the right.
Which combination of shifts of aggregate demand and supply would definitely cause an increase in real GDP?
Number of buyers.
Which determinant of demand changes in the personal computer market as more individuals become interested in "surfing the Internet"?
B.
Which diagram in Figure 15.1 best represents the monetarist assumption about the aggregate supply curve in the long run?
b.
Which diagram in Figure 15.1 best represents the monetarist assumption about the aggregate supply curve in the long run?
Money market mutual funds.
Which of the following appears in M2 but not in M1?
The price of the good itself.
Which of the following can change without shifting either demand or supply, ceteris paribus?
A leftward shift in the aggregate supply curve.
Which of the following causes stagflation?
An increase in demand and a decrease in supply.
Which of the following changes in the electricity market can best explain an increase in the equilibrium price of electricity?
Farming and manufacturing.
Which of the following contains the two sectors whose percentage contribution to the GDP has declined since 1900?
Haiti.
Which of the following countries experienced a decline in total output from 2000 to 2005?
Tax revenues fall short of expenditures over the fiscal year.
Which of the following describes a budget deficit?
The Fed's ability to change reserve requirements.
Which of the following does not constrain the effectiveness of Fed policy?
Supply-side.
Which of the following economic perspectives focuses on the need for government to shift aggregate supply to correct problems of unemployment and inflation?
To maximize profits.
Which of the following explains why banks try to keep their holdings of excess reserves low?
It is not divisible and therefore cannot be kept from people who do not pay.
Which of the following explains why flood control is a public good?
Excess capacity gives businesses little incentive to expand production capacity.
Which of the following explains why small reductions in interest rates may not lead to an increase in investment spending?
Disposable income.
Which of the following forces did Keynes assert had the strongest influence on consumption decisions?
Greater government expenditures to increase GDP
Which of the following government programs would be most appropriate to counteract cyclical unemployment?
A lower rate of inflation at every unemployment rate.
Which of the following is a goal of supply-side policy?
Uncertainty is greater.
Which of the following is a macro consequence of sudden changes in the average level of prices?
Move toward the production possibilities curve.
Which of the following is a major goal of short-run macroeconomic policy?