ECON 2105 Final

The government can use _____________ in the form of ____________________ to increase the level of aggregate demand in the economy. A. an expansionary fiscal policy; an increase in government spending B. a contractionary fiscal policy; a reduction in taxes C. a contractionary fiscal policy; an increase in taxes D. an expansionary fiscal policy; an increase in corporate taxes

A. an expansionary fiscal policy; an increase in government spending

A ______________________ is created each time the federal government spends more than it collects in taxes in a given year. A. budget deficit B. budget surplus C. corporate tax D. regressive tax

A. budget deficit

If loans become far less available, then sectors of the economy that ______________ like business investment, home construction, and car manufacturing can be dealt a crushing blow. A. depend on borrowed money B. typically generate extraordinary gains C. make loans to financial capital markets D. failed to diversify risk

A. depend on borrowed money

The _________ is the only price where quantity demanded is equal to quantity supplied. A. equilibrium price B. horizontal axis intercept C. vertical axis intercept D. market price

A. equilibrium price

Regardless of the outcome in the long run, ______________________ always has the effect of stimulating the economy in the short run. A. expansionary monetary policy B. contractionary monetary policy C. reverse quantitative easing policy D. tight monetary policy

A. expansionary monetary policy

When a Central Bank makes a decision that will cause an increase in both the money supply and aggregate demand, it is: A. following a loose monetary policy. B. following a tight monetary policy. C. following a contractionary monetary policy. D. reversing quantitative easing.

A. following a loose monetary policy.

The "law of supply" functions in labor markets; that is, a higher ___________ for labor leads to a higher quantity of labor supplied. A. price B. demand C. supply D. quantity

A. price

As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good. A. the production possibilities frontier B. allocative efficiency C. scarcity D. utility

A. the production possibilities frontier

Which of the following is not counted as a part of GDP? A. the purchase of 100 shares of AT&T stock by your grandfather. B. the purchase of a snow plough by the city of Minneapolis. C. the unsold additions to inventory at an appliances store D. the purchase of a loaf of bread by a consumer

A. the purchase of 100 shares of AT&T stock by your grandfather.

Stealth bank holds deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. The current market value of the bank's loans is $400 million. What is the value of the bank's total liabilities? A. $600 million B. $110 million C. $200 million D. $90 million

A. $600 million

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible. A. consumption set B. budget constraint C. original budget D. income cap

B. budget constraint

In 2010, Microsoft will pay corporate income tax to the federal government based on the company's __________________. A. proportional tax rate B. corporate profits C. optional tax rate D. excise profits

B. corporate profits

If Bill performs plumbing upgrades for Alice in exchange for her incorporating his business, then their _________________________ will be satisfied. A. balance of trade B. double coincidence of wants C. convenience of exchange D. division of labor

B. double coincidence of wants

Scarcity implies that: A. consumers would be willing to purchase the same quantity of a good at a higher price B. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available C. at the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce D. consumers are too poor to afford the goods and services available.

B. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available

In November 2010 the labor force in Siouxtown, was 14,800. There were 14,483 persons employed. The local unemployment rate: A. was 1.2%. B. was 2.1%. C. was 5.6%. D. was 7.1%.

B. was 2.1%.

If macroeconomics looks at the economy as a whole, it focuses on which of the following? A. households B. business firms C. unemployed people D. the division of labor

C. unemployed people

If GDP is 3600 and the money supply is 300, what is the velocity? A. 18 B. 84 C. 57 D. 12

D. 12

If the government for the state of Washington collects $65.8 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be: A. an increase in payroll tax. B. an increase in excise tax. C. a budget surplus. D. a budget deficit.

D. a budget deficit.

Stealth bank has deposits of $350 million. It holds reserves of $30 million and government bonds worth $70 million. If the bank sells its loans at market value of $400 million, what will its total assets equal? A. $500 million B. $750 million C. $450 million D. $380 million

A. $500 million

At the beginning of 2009, a government had a total debt of $540 billion dollars. It ended 2009 with a $6 billion dollar budget surplus. In 2010, its budget surplus reached $8 billion dollars. What is the total debt of the government equal to at the end of 2010? A. $554 billion B. $540 billion C. $0 D. $14 billion

B. $540 billion

_____________ are a form of financial instrument through which corporations and governments borrow money from financial investors and promise to repay with interest. A. Certificates of deposit B. Bonds C. Money market funds D. Time deposits

B. Bonds

___________ is about two-thirds of the demand side of GDP, but it moves relatively little over time. A. Government B. Consumption C. Investment D. Services

B. Consumption

Which of the following is least likely to benefit the civilian economy? A. R&D carried out in government laboratories B. R&D aimed at producing new weapons C. direct private sector R&D spending D. tax policy promoting civilian R&D spending

B. R&D aimed at producing new weapons

___________are funds that the bank keeps on hand that are not loaned out or invested in bonds. A. Certificates of deposit B. Reserves C. Time deposits D. Demand deposits

B. Reserves

_________ are now the largest single component of the supply side of GDP, representing over half of GDP. A. Durable goods B. Services C. Nondurable goods D. Structures

B. Services

Which of the following is true? A. A depression is a recession that is mild and relatively brief. B. The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude. C. The timing of business fluctuations is regular and therefore easily predictable. D. During the contractionary phase of the business cycle, the rate of unemployment is generally quite low.

B. The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude.

Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel? A. There is an increase in the cost of producing steel, which shifts the supply curve of steel to the right, thereby increasing the price of steel. B. There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel. C. There is a decrease in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel. D. The increase in wage costs will shift the demand curve for steel to the left, increasing the cost of steel.

B. There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel.

Which of the following would most likely shift the production possibilities curve inward? A. an increase in the number of hours factories are in use B. a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time C. an increase in the production of capital goods D. technological progress

B. a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time

The supply curve of textbooks (which are produced using paper made from trees) will shift to the left in response to: A. a decline in college tuition. B. a sharp increase in the demand for and construction of wood-frame homes. C. an increase in the supply of lumberjacks. D. an end to government regulations that limit timber harvesting in national forests.

B. a sharp increase in the demand for and construction of wood-frame homes.

After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is: A. no change; only the supply curve for beef is likely to be affected. B. a shift of the demand curve for beef to the left. C. a movement down along the demand curve for beef to the right. D. a shift of the demand curve for beef to the right.

B. a shift of the demand curve for beef to the left.

Banks typically come under financial stress because of: A. the money multiplier effect. B. a widespread decline in the value of their assets. C. diversification of loan assets. D. risks associated with extraordinary economic gains.

B. a widespread decline in the value of their assets.

Any given demand or supply curve is based on the ceteris paribus assumption that_________________________. A. everything is variable. B. all else is held equal C. no one knows which variables will change and which will remain constant. D. what is true for the individual is not necessarily true for the whole.

B. all else is held equal

Which of the following is considered to be a relatively weak tool of monetary policy? A. quantitative easing B. altering the discount rate C. reserve requirements D. reducing the money supply

B. altering the discount rate

If the U.S. economy is producing at a level that is substantially less than potential GDP and the government's budget deficits are increasing aggregate demand, then ____________________________ is not much of a danger. A. a tight monetary policy B. an inflationary increase in the price level C. international financial investment D. the central bank's contractionary monetary policy

B. an inflationary increase in the price level

Many cooks view butter and margarine to be substitutes. If the price of butter rises, then in the market for margarine: A. the equilibrium price will fall and the equilibrium quantity will fall. B. both the equilibrium price and quantity will rise. C. the equilibrium price will rise and the equilibrium quantity will decrease. D. the equilibrium price will rise, while the change to equilibrium quantity is indeterminate.

B. both the equilibrium price and quantity will rise.

If the state of Washington's government collects $75 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be a: A. budget deficit. B. budget surplus. C. decrease in payroll tax. D. decrease in proportional taxes.

B. budget surplus.

How are the specific interest rates for the lending and borrowing markets determined? A. U.S. Treasury Department Board policy B. by the forces of supply and demand C. through open market operations D. by altering the discount rate

B. by the forces of supply and demand

The demand measure of GDP accounting adds together: A. wages and salaries, rent, interest, and profit. B. consumption, investment, government purchases, and trade balance. C. consumption, government purchases, wages and salaries, and trade balance. D. consumption, interest, government purchases, and trade balance.

B. consumption, investment, government purchases, and trade balance.

An increase in government borrowing can: A. allow private investment to expand. B. crowd out private investment in physical capital. C. increase the incentive to invest in technology. D. cause a substantial decrease in interest rates.

B. crowd out private investment in physical capital.

The definition of market equilibrium states that at the _______________, the quantity of labor demanded by employers will equal the quantity supplied. A. efficiency wage B. equilibrium wage C. sticky wage D. natural rate of unemployment

B. equilibrium wage

If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ________________. A. excess supply B. excess demand C. ceteris paribus D. a price ceiling

B. excess demand

On April 1, 2009, in the middle of a recession, the government of the province of Ontario, Canada increased the provincial minimum wage from $8.75 to $9.50. What will the likely effect of this policy be? A. Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate. B. Low income workers will be better able to survive the recession at the new, higher wage rate. C. More people will be hired at the higher wage rate offsetting the effects of the recession. D. The higher wage will increase the supply of labor offsetting the effects of the recession.

A. Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate.

_________________ results when an economy experiences high unemployment and high inflation at the same time. A. Stagflation B. Deflation C. Reflation D. Recession

A. Stagflation

If individual income tax accounts for more total revenue than the payroll tax in the U.S., why would over half the households in the country pay more in payroll taxes than in income taxes? A. income tax is a proportional tax B. income tax is a progressive tax C. payroll tax is a regressive tax D. payroll tax is a progressive tax

B. income tax is a progressive tax

The ____________ describes a situation where sufficient credit is available, but the economy experiences a reduction in consumption and investment. A. inflation rate effect B. interest rate effect C. wealth effect D. price effect

B. interest rate effect

When banks hold excess reserves because they don't see good lending opportunities: A. it negatively affects contractionary monetary policy. B. it negatively affects expansionary monetary policy. C. expansionary monetary policy is unaffected. D. contractionary monetary policy is unaffected.

B. it negatively affects expansionary monetary policy.

Economists refer to this pattern, the ___________________________________, which means that as a person receives more of a good, the additional or marginal utility from each additional unit of the good declines. A. law of trade-offs B. law of diminishing marginal utility C. production possibilities frontier D. law of increasing marginal utility

B. law of diminishing marginal utility

_______________________________ can set the stage for international financial investors first to send their funds to a country and cause an appreciation of its exchange rate and then to pull their funds out and cause a depreciation of the exchange rate and a financial crisis as well. A. Trade balance B. Twin deficits C. Trade deficits D. Crowding out

A. Trade balance

The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called: A. real GDP. B. potential GDP. C. aggregate supply. D. aggregate demand.

B. potential GDP.

Which of the following will not result in a rightward shift of the market supply curve for labor? A. a decrease in non-wage income B. an increase in the working-age population C. an increase in labor productivity D. an increase in immigration

A. a decrease in non-wage income

When the interest rate in an economy increases, it is likely the result of either: A. a decrease in the government's budget surplus or an increase in its budget deficit. B. a decrease in the government budget surplus or its budget deficit. C. an increase in the government budget surplus or a decrease in its budget deficit. D. an increase in the government budget surplus or its budget deficit.

A. a decrease in the government's budget surplus or an increase in its budget deficit.

If an economy has a budget surplus of 1,500, private savings of 3,000, and investment of 5,000, what will the balance of trade in this economy equal? A. deficit of 500 B. surplus of 500 C. surplus of 1,500 D. deficit of 1,500

B. surplus of 500

The quantitative easing policies adopted by the Federal Reserve are usually thought of as: A. short term loans to fill out reserves. B. temporary emergency measures. C. traditional monetary policies. D. a relatively weak tool.

B. temporary emergency measures.

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________. A. allocative efficiency B. the production possibilities frontier C. trade-offs D. scarcity

A. allocative efficiency

The federal government levies _____________________________ on people who pass assets ____________________________, either after death or during life. A. an estate and gift tax; to the next generation B. a regressive tax; to non-family members C. an excise tax; to their children D. a progressive tax; to non-family members

A. an estate and gift tax; to the next generation

Which of the following is a valid criticism of the use of money as a store of value in modern economies? A. annual inflationary loss of buying power B. money supply is too narrowly defined C. storing money is wasteful D. imperfect as a unit of account

A. annual inflationary loss of buying power

When governments are borrowers in financial capital markets, which of the following is least likely to be a possible source of the funds from a macroeconomic point of view? A. central bank prints more money B. increase in household savings C. decrease in borrowing by private firms D. foreign financial investors

A. central bank prints more money

Which of the following is included in GDP? A. revenue from the sale of a three-year old car B. the fees charged for a stock broker's services C. the receipts from a sale of land D. the value of lawn care service provided by a sixteen-year-old as part of his weekly chores

B. the fees charged for a stock broker's services

The type of unemployment that occurs because of a recession is called: A. cyclical unemployment. B. the natural rate of unemployment. C. seasonal unemployment. D. frictional unemployment.

A. cyclical unemployment.

What term is used to describe the interest rate charged by the central bank when it makes loans to commercial banks? A. discount rate B. reserve requirement C. Fed rate D. open market rate

A. discount rate

In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers. A. division of labor B. interconnected economy C. task economy D. modern economy

A. division of labor

The circular flow diagram of economic activity is a model of the: A. flow of goods, services, and payments between households and firms. B. influence of government on business behaviour. C. role of unions and government in the economy. D. interaction among taxes, prices, and profits.

A. flow of goods, services, and payments between households and firms.

According to the basic quantity equation of money, if price and output fall while velocity increases, then: A. the quantity of money will rise. B. the quantity of money will fall. C. the quantity of money will rise before it falls. D. the quantity of money will rise slowly.

B. the quantity of money will fall.

If new manufacturers enter the computer industry, then (ceteris paribus): A. the supply curve shifts to the left. B. the supply curve shifts to the right. C. the demand curve shifts to the left. D. some established manufacturers must exit the industry.

B. the supply curve shifts to the right.

In an economy with _______________, money loses some buying power each year, but it remains money. A. inflation B. currency C. deflation D. a market orientation

A. inflation

Which of the following best describes a monetary policy tool? A. interest rates B. taxes C. household savings D. government spending

A. interest rates

Currently, the US government accumulated debt to GDP ratio: A. is lower than its historical high point. B. is higher than it has ever been. C. is lower than it has ever been. D. has remained relatively steady for the past decade.

A. is lower than its historical high point.

The unemployment rate may underestimate the true extent of unemployment if: A. many part-time employees would like to work fulltime, but are unable to get the additional work. B. employees increase the number of hours they work overtime. C. there are a large number of people working in the underground economy. D. people are pretending to look for work so that they can continue receiving unemployment benefits.

A. many part-time employees would like to work fulltime, but are unable to get the additional work.

If Keynes' law applies during economic contractions and Say's law applies during economic expansion, how will the three goals of macroeconomics be affected? A. determinates of total supply for the economy will be traded-off B. trade-offs and connections may differ in the short run and the long run C. the economy will face genuine limits to how much can be produced D. institutional and market structures will connect factors of production

B. trade-offs and connections may differ in the short run and the long run

Many states do have ____________, which impose an upper limit on the interest rate that lenders can charge. A. price ceiling laws B. usury laws C. price floor laws D. minimum interest rate

B. usury laws

In economics, the demand for a good refers to the amount of the good that people: A. would like to have if the good were free. B. will buy at various prices. C. need to achieve a minimum standard of living. D. will buy at alternative income levels.

B. will buy at various prices.

If a nation's labor force receives a significant influx of young workers: A. the natural rate of unemployment is likely to increase. B. the natural rate of unemployment is likely to decrease. C. the natural rate of unemployment is unlikely to change D. frictional unemployment will likely decrease to zero.

A. the natural rate of unemployment is likely to increase.

A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of: A. the supply curve. B. the demand curve, as consumers try to economize because of the shortage. C. both the supply and demand curves. D. the supply curve and a rightward shift of the demand curve, resulting in a higher equilibrium price.

A. the supply curve.

In macroeconomics, a _______________ describes the common way in which market values are measured in an economy. A. unit of account B. medium of exchange C. store of value D. unit of exchange

A. unit of account

According to the quantity theory, if constant growth in the money supply is combined with fluctuating velocity, which of the following is most likely to result? A. unpredictable rises and falls in nominal GDP B. monetary policy will become inevitably imprecise C. quantity of credit rises above where it otherwise be D. innovations relating to banking and finance

A. unpredictable rises and falls in nominal GDP

India has a GDP of 23,000 billion Indian rupees, and a population of 1.1 billion. The exchange rate is 50 rupees per U.S. dollar. Calculate the GDP per capita of India as measured in U.S. dollars. A. $20.90 B. $20,909 C. $418 D. $4.18

C. $418

Which of the following is the percentage of annual US government spending allocated to foreign aid? A. 21% B. 10% C. 1% D. 17%

C. 1%

Once every __________, the Census Bureau does a comprehensive survey of housing and residential finance. A. month B. 5 years C. 10 years D. 20 years

C. 10 years

The unemployment rate in a town in which 65,400 persons are employed and 11,000 are unemployed equals: A. 20.2 %. B. 16.8%. C. 14.4%. D. 11%.

C. 14.4%.

The people in an economy have $10 million in money. There is only one bank that all the people deposit their money in and it holds 5% of the deposits as reserves. What is the money multiplier in this economy? A. 5 B. 1 C. 20 D. 10

C. 20

If the unemployment rate is 8 percent, then this means: A. 8 percent of the population is unemployed. B. 8 percent of the population age over sixteen is unemployed. C. 8 percent of the labor force is unemployed. D. the number of unemployed persons equals 8 percent of the employed persons.

C. 8 percent of the labor force is unemployed.

____________ is a completely inadequate mechanism ____________________ in a modern advanced economy. A. Currency; for providing a medium of exchange B. Money; for providing a store of value C. Barter; for trying to coordinate trades D. Money; to use as a unit of account

C. Barter; for trying to coordinate trades

Why is there scarcity? A. Because the opportunity set determines this. B. Because theory dictates it. C. Because our unlimited wants exceed our limited resources D. Because human wants are limited.

C. Because our unlimited wants exceed our limited resources

Which of the following institutions determines the quantity of money in the economy as its most important task? A. U.S. Department of the Treasury B. Federal Open Market Committee C. Central Bank D. Federal Reserve Board of Governors

C. Central Bank

_______________________ are economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the _____________. A. Keynesian economists; long run B. Keynesian economists; short run C. Neoclassical economists; long run D. Neoclassical economists; short run

C. Neoclassical economists; long run

___________________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling. A. Rent controls B. Price ceilings C. Price floors D. Subsidies

C. Price floors

Due to inflationary pressures, the national income of households has been spread across a higher overall price base for goods and services. How will this affect be shown in an AD/ASAD/AS model? A. nearly vertical AS slope at the far right B. nearly horizontal AD curve at the far left C. a downward sloping AD curve D. a downward sloping AS curve

C. a downward sloping AD curve

The imposition of a price ceiling on a market often results in: A. an increase in investment in the industry. B. a surplus C. a shortage D. a decrease in discrimination on the part of sellers.

C. a shortage

Which of the following will not result in a leftward shift of the market demand curve for labor? A. a decrease in labor productivity B. a decrease in demand for the firm's product C. an increase in the wage rate D. a decrease in the firm's product price

C. an increase in the wage rate

If the central bank decreases the amount of reserves banks are required to hold from 20% to 10%, then: A. the money multiplier will increase and the supply of money in the economy will decrease. B. both the money multiplier and the supply of money in the economy will decrease. C. both the money multiplier and the supply of money in the economy will increase. D. the money multiplier will decrease and the supply of money in the economy will increase.

C. both the money multiplier and the supply of money in the economy will increase.

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good. A. Opportunity cost B. productive efficiency C. budget constraint D. production possibilities frontier

C. budget constraint

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good. A. personal preference B. utility level C. budget constraint D. opportunity set

C. budget constraint

The labor __________ curve(s) will shift ____________ if there is an increase in productivity or an increase in the demand for the final product. A. demand; left B. supply; left C. demand; right D. supply; right

C. demand; right

Changes in the price level of the different components of aggregate demand are reflected in the AD/ASAD/AS macroeconomic model by a ________________________. A. flatter top portion of AD curve B. longer distance to equilibrium point C. downward sloping AD curve D. shorter distance to equilibrium point

C. downward sloping AD curve

If a Central Bank decides it needs to decrease both the aggregate demand and the money supply, then it will: A. follow expansionary monetary policy. B. follow loose monetary policy. C. follow tight monetary policy. D. follow quantitative easing policy.

C. follow tight monetary policy.

If a country's GDP decreases, but its debt increases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes. A. decrease B. increase or decrease C. increase D. decrease because GDP decreased

C. increase

In the ____________, households work and receive payment from firms. A. financial investment market B. financial capital market C. labor market D. savings market

C. labor market

When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being: A. balanced budget B. prudent monetary policy C. low inflation D. assuring competition between firms

C. low inflation

The basic difference between macroeconomics and microeconomics is that: A. microeconomics looks at the forest (aggregate markets) while macroeconomics looks at the trees (individual markets). B. macroeconomics is concerned with groups of individuals while microeconomics is concerned with single countries. C. microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets). D. macroeconomics is concerned with generalization while microeconomics is concerned with specialization.

C. microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).

A __________________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes. A. proportional tax B. regressive tax C. progressive tax D. excise tax

C. progressive tax

If government tax policy requires Bill to pay $20,000 in taxes on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is: A. regressive. B. progressive. C. proportional. D. optional.

C. proportional.

A straightforward example of a ____________, often used for simplicity, is the interest rate. A. price ceiling B. financial investment C. rate of return D. price floor

C. rate of return

The nominal value of any economic statistic refers to the number that is actually announced at that time, while the ________________ refers to the statistic after it has been adjusted for inflation. A. empirical value B. adjusted value C. real value D. net value

C. real value

Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank? A. discount requirements B. deposit requirements C. reserve requirements D. monetary requirements

C. reserve requirements

Antonio tries to limit his risk of overexposure to debt by using a ________________ to store a certain amount of value that he then uses to make purchases. A. debit card B. credit card C. smart card D. chip card

C. smart card

Lance paid $175,000 for his house in 2003 and sold it for $325,000 in 2006. What function did the house serve during the time Lance owned it? A. medium of exchange B. unit of account C. store of value D. unit of exchange

C. store of value

As the _______________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left. A. high-skill labor B. lower wage C. technology D. market

C. technology

If Brent uses his credit card to purchase a new television, then the money to pay the retailer is taken from: A. his M1 funds. B. his M2 funds. C. the credit card company's M1 funds. D. the credit card company's M2 funds.

C. the credit card company's M1 funds.

When the central bank decides it will sell bonds using open market operations: A. interest rates decrease. B. the money supply increases. C. the money supply decreases. D. the money supply is unaffected.

C. the money supply decreases.

When consumers and businesses have greater confidence that they will be able to repay in the future, ___________________. A. the quantity demanded of financial capital at any given interest rate will remain unchanged. B. the quantity demanded of financial capital at any given interest rate will shift to the left. C. the quantity demanded of financial capital at any given interest rate will shift to the right. D. the quantity demanded of financial capital at any given interest rate will achieve equilibrium.

C. the quantity demanded of financial capital at any given interest rate will shift to the right.

Whenever there is a shortage at a particular price, the quantity sold at that price will equal: A. the quantity demanded at that price. B. the quantity supplied minus the quantity demanded. C. the quantity supplied at that price. D. (quantity demanded plus quantity supplied)/2.

C. the quantity supplied at that price.

If the economy is producing less than its potential GDP, _____________________ will show a larger deficit than the actual budget. A. discretionary fiscal policy B. the automatic stabilizers C. the standardized employment budget D. expansionary fiscal policy

C. the standardized employment budget

In the national savings and investment identity framework, an inflow of savings from abroad is, by definition, equal to: A. private sector investment. B. the trade surplus. C. the trade deficit. D. domestic household savings.

C. the trade deficit.

When increasing oil prices cause aggregate supply to shift to the left, then: A. unemployment and inflation decrease. B. unemployment decreases and inflation increases. C. unemployment and inflation increase. D. unemployment increases and inflation decreases.

C. unemployment and inflation increase.

The _________________ means that a higher price level leads to lower real wealth. A. employment effect B. interest rate effect C. wealth effect D. foreign price effect

C. wealth effect

If labor demand is downward sloping and labor supply is upward sloping, then when labor demand rises faster than labor supply, it is expected that real wages _______________. A. will stay the same B. will decrease C. will increase D. may increase, decrease or stay the same depending on the relative slopes.

C. will increase

Banks can protect themselves against an unexpectedly high rate of loan defaults and against the risk of ____________________ by adopting a strategy that will ______________. A. rising interest rates; diversify its loans B. rising interest rates; provide loans to a variety of customers C. an increased reserve requirement; provide loans to a variety of customers D. an asset-liability time mismatch; diversify its loans

D. an asset-liability time mismatch; diversify its loans

The nature of demand indicates that as the price of a good increases: A. suppliers wish to sell less of it. B. more of it is produced. C. more of it is desired. D. buyers desire to purchase less of it.

D. buyers desire to purchase less of it.

If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used? A. discretionary B. contractionary C. standardized D. expansionary

D. expansionary

In modern economies, _____________________ receive money from savers and provide funds to borrowers. A. governments B. credit unions C. banks D. financial intermediaries

D. financial intermediaries

When the Central Bank acts in a way that causes the money supply to increase while aggregate demand remains unchanged, it is: A. following a contractionary monetary policy. B. following quantitative easing policy. C. following a tight monetary policy. D. following an expansionary monetary policy.

D. following an expansionary monetary policy.

If Evelyn uses her debit card to buy an iPod, then the money to pay the retailer will come from: A. the debit card company's M1 funds. B. the debit card company's M2 funds. C. her M2 funds. D. her M1 funds.

D. her M1 funds.

Improvements in the productivity of labor will tend to: A. decrease wages. B. decrease the supply of labor. C. increase wages. D. increase the supply of labor.

D. increase the supply of labor.

The demand schedule for a good: A. indicates the quantity that people will buy at the prevailing price. B. indicates the quantities that suppliers will sell at various market prices. C. is determined primarily by the cost of producing the good. D. indicates the quantities that will be purchased at alternative market prices.

D. indicates the quantities that will be purchased at alternative market prices.

When government policy moves from a budget surplus to a budget deficit and the trade deficit remains constant: A. savings will decrease no matter what happens to investment. B. savings will decrease if investment remains constant. C. investment will increase if savings also remains constant. D. investment will decrease if savings also remains constant.

D. investment will decrease if savings also remains constant.

The opportunity cost of an action: A. can be determined by considering both the benefits that flow from as well as the monetary costs incurred as a result of the action. B. can be determined by adding up the bills incurred as a result of the action. C. can be objectively determined only by economists. D. is a subjective valuation that can be determined only by the individual who chooses the action.

D. is a subjective valuation that can be determined only by the individual who chooses the action.

Why is productivity growth considered to be the most important factor in the AD/ASAD/AS model? A. it shifts the AD curve in the long-term B. it shifts the AD curve in the short-term C. it shifts the AS curve in the short-term D. it shifts the AS curve in the long-term

D. it shifts the AS curve in the long-term

Other things being equal, a _____________ supply of workers tends to _________ real wages. A. smaller; not change B. larger; increase C. smaller; decrease D. larger; decrease

D. larger; decrease

Which of the following is described as an innovative and nontraditional method used by the Federal Reserve to expand the quantity of money and credit during the recent U.S. recession? A. increased discount rate B. increased reserves requirements C. open market operations D. quantitative easing

D. quantitative easing

In an AD/AS model: A. the GDP deflator always slopes upwards. B. the potential GDP always slopes downwards. C. the CPI is shown on the vertical axis. D. real GDP is shown on the horizontal axis.

D. real GDP is shown on the horizontal axis.

When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is ____________________. A. optional B. proportional C. progressive D. regressive

D. regressive

If government tax policy requires Peter to pay $15,000 in tax on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is: A. optional. B. progressive. C. proportional. D. regressive.

D. regressive.

Economic production has fallen to less than full potential due to inadequate incentives for firms to produce. The duration of this economic condition will likely be: A. indefinite B. unknown C. long-term D. short-term

D. short term

A ___________________________________ can lead to disruptive economic patterns and heavy strains on a country's banking and financial system. A. prolonged period of trade surpluses B. sustained pattern of large trade deficits C. prolonged period of budget surpluses D. sustained pattern of large budget deficits

D. sustained pattern of large budget deficits

Whenever there is a surplus at a particular price, the quantity sold at that price will equal: A. (quantity demanded plus quantity supplied)/2. B. the quantity supplied at that price. C. the quantity supplied minus the quantity demanded. D. the quantity demanded at that price.

D. the quantity demanded at that price.

When quantity demanded decreases in response to a change in price: A. the demand curve shifts to the right. B. the demand curve shifts to the left. C. there is a movement down along the demand curve. D. there is a movement up along the demand curve.

D. there is a movement up along the demand curve.

Scarcity exists because of: A. the market mechanism. B. specialization and division of labor. C. the allocation of goods by prices D. unlimited wants and limited resources.

D. unlimited wants and limited resources.

Stealth bank has deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. If the bank sells its loans at market value of $400 million, what will its total assets equal? A. $110 million B. $710 million C. $480 million D. $510 million

D. $510 million

If GDP is 1800 and the money supply is 300, then what is the velocity? A. 18 B. 384 C. 57 D. 6

D. 6

When an economy's output increases and the price level decreases, the _________ curve has shifted to the ____________. A. AS; left B. AD; left C. AD; right D. AS; right

D. AS; right

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect: A. Andy's demand for pizza to increase. B. Andy's demand for pizza to decrease. C. Andy's quantity of pizza demanded to decrease. D. Andy's demand for beer to increase.

D. Andy's demand for beer to increase.

During a recession, if a government uses an expansionary fiscal policy to increase GDP, the: A. aggregate supply curve will shift to the right. B. aggregate supply curve will shift to the left. C. aggregate demand curve will shift to the left. D. aggregate demand curve will shift to the right.

D. aggregate demand curve will shift to the right.

__________________ pool the deposits of many investors together and invest them in a safe way like short-term government bonds. A. Money market funds B. Savings deposits C. Time deposits D. Certificates of deposit

A. Money market funds

If Sarah uses her smart card to purchase movies over the internet, then the money to pay the retailer will come from: A. Sarah's M1 funds. B. the smart card company's M1 funds. C. the smart card company's M2 funds. D. Sarah's M2 funds.

A. Sarah's M1 funds.

Reginald looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment he is considered: A. out of the labor force. B. unemployed. C. employed in the underground economy. D. underemployed.

A. out of the labor force.

A central bank that desires to reduce the quantity of money in the economy can: A. raise the reserve requirement. B. buy bonds in open market operations. C. lower the discount rate. D. engage in quantitative easing.

A. raise the reserve requirement.

As the _______________ complement for high-skill labor becomes cheaper, the demand curve for high- skill labor will shift to the right. A. technology B. low-skill labor C. market D. lower wage

A. technology

The opportunity cost of attending university is likely to include all except which of the following? A. the cost of haircuts received during the school term B. the income you forgo in order to attend classes C. tuition fees D. the cost of required textbooks

A. the cost of haircuts received during the school term

The central bank requires Southern to hold 10% of deposits as reserves. Southern Bank's policy prohibits it from holding excess reserves. If the central bank sells $25 million in bonds to Southern Bank which of the following will result? A. the money supply in the economy decreases B. Southern's net worth increases by $25 million C. decrease in Southern's bond assets by $25 million D. increase in Southern's loan assets of $25 million

A. the money supply in the economy decreases

The people in an economy have $10 million in money. There is only one bank that all the people deposit their money in and it holds 10% of the deposits as reserves. What is the money multiplier in this economy? A. 5 B. 10 C. 20 D. 1

B. 10

If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals: A. 32%. B. 25%. C. 20%. D. 8%.

B. 25%.

The U.S. unemployment rate moves up and down as the economy moves in and out of recessions. But over time, the unemployment rate seems to return to a range of ____________. A. 2%-4% B. 4%-6% C. 6%-8% D. 8%-10%

B. 4%-6%

_______________, which can be approximated by the growth of gross domestic product, ultimately determines the prevailing standard of living in a country. A. Trade balance B. Inflation C. Education D. Economic growth

D. Economic growth