Economic chapter 26-30 multiple choice

Which of the following sets of government policies is the most growth oriented? A. Lower taxes on the return to saving, provide investment tax credits, and lower the deficit B. Lower taxes on the returns to saving, provide investment tax credits, and increase the deficit C. Increase taxes on the returns to saving, provide investment tax credits, and lower the deficit D. Increase taxes on the returns to saving, provide investment tax credits, and increase the deficit

A. lower taxes on the return to saving, provide investment tax credits, and lower the deficit

If the nominal interest rate is 6% and the inflation rate is 3%, the real interest rate is A. 3% B. 6% C. 9% D. 18% E. None of the above

A. 3%

An increase in the budget deficit A. A decrease in public saving B. An increase in public saving C. A decrease in private saving D. An increase in private saving E. None of the above

A. A decrease in public saving

The M1 money supply is composed of A. Currency, demand deposits, travelers checks, and other checkable accounts B. Currency, demand deposit, savings deposit, money market mutual funds, and smalltime deposits C. Currency, government bonds, gold certificates, and coins D. Currency, now accounts, savings accounts, and government bonds E. None of the above

A. Currency, demand deposit, travelers checks, and other checkable accounts

Sectoral shifts tend to raise which type of unemployment? A. Frictional unemployment B. Structural unemployment C. Unemployment due to unions D. Unemployment due to efficiency wages

A. Frictional unemployment

Unions tend to increase the disparity in pay between insiders in outsiders by A. Increasing the wage in the unionized sector, which may create an increase in the supply of workers in a non-unionized sector B. Increasing the wage in the unionized sector, which may create a decrease in supply of workers in a nonunionized sector C. Decreasing the demand for workers in the unionized sector D. Increase in the demand for workers in the unionized sector

A. Increasing the wage in the unionized sector, which may create an increase in supply workers in the non-unionized sector

Which of the following statements is true? A. Prime-age men and women tend to have similar unemployment rates B. The labor-force participation rate of men is rising C. Blacks have a lower unemployment rate than whites D. Most spells of unemployment are long term, but most unemployment observed at any given time is short term E. All of the above are true

A. Prime-age men and women tend to have similar unemployment rates

National saving (or just saving) is equal to A. Private saving + public saving B. Investment + consumption expenditures C. GDP - government purchases D. GDP + consumption expenditures + government purchases E. None of the above

A. Private saving + public saving

An increase in the budget deficit will A. Raise the real interest rate and decrease the quantity of loanable funds demanded for investment B. Raise the real interest rate and increases the quantity of loanable funds demanded for investment C. Lower the real interest rate and increase the quantity of loanable funds demanded for investment D. Lower the real interest rate and decrease the quantity of loanable funds demanded for investment

A. Raise the real interest rate and decrease the quantity of loanable funds demanded for investment

Which of the following policy actions by the Fed is likely to increase the money supply? A. Reducing reserve requirements B. Selling government bonds C. Increasing the discount rate D. Increasing interest on reserves E. All of these will increase the money supply

A. Reducing reserve requirements

If GDP = $1000, consumption = $600, taxes = $100, and government purchases = $200, how much is saving and interest? A. Saving=$200, investment=$200 B. Saving=$300, investment=$300 C. Saving=$100, investment=$200 D. Saving=$200, investment=$100 E. Saving=$0, investment=$0

A. Saving = $200, investment = $200

Which one of the following types of unemployment results from the wage being held above the competitive equilibrium wage? A. Structural unemployment B. Cyclical unemployment C. Frictional unemployment D. Sectoral unemployment E. None of the above is correct

A. Structural unemployment

Velocity is A. The annual rate of turnover of the money supply B. The annual rate of turnover of output C. The annual rate of turnover of business inventories D. Highly unstable E. Impossible to measure

A. The annual rate of turnover of the money supply

In the long run, the demand for money is most dependent upon A. The level of prices B. The availability of credit cards C. The availability of banking outlets D. The interest rate

A. The level of prices

If a bank increases their holdings of excess reserves, A. The money multiplier and the money supply decrease B. The money multiplier and the money supply increase C. The money multiplier decreases, and the money supply increases D. The money multiplier increases, and the money supply decreases

A. The money multiplier and the money supply decrease

Suppose all banks maintain 1 100% reserve ratio. If an individual deposits $1000 of currency in a bank, A. The money supply is unaffected B. The money supply increases by more than $1000 C. The money supply increases for less than $1000 D. The money supply decreases by more than $1000 E. The money supply decreases by less than $1000

A. The money supply is unaffected

If the reserve ratio is 25%, the value of the money multiplier is A. 0.25 B. 4 C. 5 D. 25 E. None of the above

B. 4

The labor force is A. 92.3 million B. 98.0 million C. 134.0 million D. 139.7 million E. None of the above

B. 98.0 million

The quantity theory of money concludes that an increase in the money supply causes A. A proportional increase in velocity B. A proportional increase in prices C. A proportional increase in real output D. A proportional decrease in velocity E. A proportional decrease in prices

B. A proportional increase in prices

If the supply of loanable funds is very inelastic (steep), which policy would likely increase saving and investment the most? A. An investment tax credit B. A reduction in the budget deficit C. An increase in the budget deficit D. None of the above

B. A reduction in the budget deficit

An inflation tax is A. An explicit tax paid quarterly by businesses based on the amount of increase in the prices of their products B. a tax on people who hold money C. A tax on people who hold interest bearing savings accounts D. Usually employed by governments with balanced budgets E. None of the above

B. A tax on people who hold money

Which of the following statements about a banks balance sheet is true? A. An increase in a banks capital increases its leverage ratio B. Assets minus liabilities equals owners equity or capital C. The largest liability on the banks balance sheet is it's loans D. Because the bank is highly leveraged, a large change in a value of its assets have a little impact on its capital E. None of the above is correct

B. Assets minus liabilities equals owners equity or capital

A minimum-wage law tends to A. Create more unemployment in high-skill job markets than in low-skill job markets B. Create more unemployment in low-skill job markets than in high-skill job markets C. Have no impact on unemployment as long as it is set above the competitive equilibrium wage D. Help all teenagers because they receive a higher wage than they would otherwise

B. Create more unemployment in low-skill job markets than in high-skill job markets

Commodity money A. Has no intrinsic value B. Has intrinsic value C. Is used exclusively in the United States D. Is used as reserves to back fiat money

B. Has intrinsic value

When prices rise at an extraordinarily high rate, it is called A. Inflation B. Hyper inflation C. Deflation D. Hypo inflation E. Disinflation

B. Hyper inflation

If the money supply grows 5% and real output grows 2%, prices should rise by A. 5% B. Less than 5% C. More than 5% D. None of the above

B. Less than 5%

Unions my increase efficiency in the case where they A. Raise the wage for insiders above the competitive equilibrium B. Offset the market power of a large firm in a company town C. Lower the wage of local outsiders D. Threaten a strike but don't actually follow through, so there are no lost hours of work

B. Offset the market power of a large firm in a company town

An example of fiat money is A. Gold B. Paper dollars C. Solid silver coins D. Cigarettes in a prisoner of war camp

B. Paper dollars

Credit risk refers to a bond's A. Term to maturity B. Probability of default C. Tax treatment D. Dividend E. Price-earnings ratio

B. Probability of default

The discount rate is A. The interest rate the Fed pays on reserves B. The interest rate the Fed charges on loans to banks C. The interest rate banks pay on the public's deposits D. The interest rate the public pays when borrowing from banks E. The interest rate paid by things at the term auction facility

B. The interest rate the Fed charges on loans to banks

If unemployment insurance were so generous that it paid laid off workers 95% of the regular salary, A. The official unemployment rate would've probably understate true unemployment B. The official unemployment rate would probably overstate true unemployment C. There would be no impact on the official unemployment rate D. Frictional unemployment would fall E. None of the above are true

B. The official unemployment rate would probably overstay true unemployment

Investment is A. The purchase of stocks and bonds B. The purchase of capital equipment and structures C. When we place pour saving in the bank D. The purchase of goods and services

B. The purchase of capital equipment and structures

An example of a real variable is A. The nominal interest rate B. The ratio of the value of wages to the price of soda C. The price of corn D. The dollar wage E. None of the above

B. The ratio of the value of wages to the price of soda

If Americans become more thrifty, we would expect A. The supply of loanable funds to shift to the right and the real interest rate to rise B. The supply of loanable funds to shift to the right and the real interest rate to fall C. The demand for loanable funds to shift to the right and the real interest rate to rise D. The demand for loanable funds to shift to the right and the real interest rate to fall

B. The supply of loanable funds to shift to the right and the real interest rate to fall

If government spending exceeds tax collections, A. There is a budget surplus B. There is a budget deficit C. Private saving is positive D. Public saving is positive E. None of the above was true

B. There is a budget deficit

If actual inflation turns out to be greater than people had expected, then A. Wealth was re-distributed to lenders from borrowers B. Wealth was re-distributed to borrowers from lenders C. No redistribution occurred D. The real interest rate is unaffected

B. Wealth was re-distributed to borrowers from lenders

Suppose the Fed purchase is a $1000 government bond from you. If you deposit the entire $1000 in your bank, what is the total potential change in the money supply as a result of the feds actions if we reserve requirements are 20%? A. $1000 B. $4000 C. $5000 D. $0

C. $5000

Supposed to nominal interest rate is 7% while the money supply is growing at a rate of 5% per year. Assuming real output remains fixed, if the government increases the growth rate of the money supply from 5% to 9%, the fish are effect suggest that, in the long run, the nominal interest rate should become A. 4% B. 9% C. 11% D. 12% E. 16%

C. 11%

The unemployment rate is A. 3.2% B. 5.7% C. 5.8% D. 6.2% E. Not enough information is available to answer this question

C. 6.2%

Required reserves of things are fixed percentage of their A. Loans B. Assets C. Deposits D. Government bonds

C. Deposits

Which of the following is not a characteristic of minimum-wage workers? They tend to be A. Young B. Less educated C. Full time D. In the food service and drinking place industry

C. Full time

Countries that employ an inflation tax do so because A. The government doesn't understand the causes and consequences of inflation B. The government has a balanced budget C. Government expenditures are high and the government has inadequate tax collections and difficulty borrowing D. And inflation tax is the most equitable of all taxes E. And inflation tax is the most progressive, paid by the rich, of all taxes

C. Government expenditures are high and the government has in adequate tax collections and difficulty borrowing

In the long run, inflation is caused by A. Banks that have market power and refuse to lend money B. Governments that raise taxes so high that increases the cost of doing business and, hence, raises prices C. Governments that print too much money D. Increases in the price of inputs, such as labor and oil E. None of the above

C. Governments that print too much money

The quantity equation states that A. Money X price level = velocity X real output B. Money X real output = velocity X price level C. Money X velocity = price level X real output D. None of the above is true

C. Money X velocity = price level X real output

If an increase in the budget deficit reduces National saving and investment, we have witnessed a demonstration of A. Equity finance B. The mutual fund effect C. Intermediation D. Crowding out

D. Crowding out

Which of the following statements is true? A. A stock index is a directory used to locate information about selected stocks. B. Longer-term bonds tend to pay less interest than shorter-term bonds C. Municipal bonds pay less interest than comparable corporate bonds D. Mutual funds are riskier than single stock purchases because the performance of so many different firms can affect the return of a mutual fund

C. Municipal bonds pay less interest than comparable corporate bonds

According to the bureau of labor statistics, a husband who chooses to stay home and take care of the household is A. Unemployed B. Employed C. Not in the labor force D. A discouraged worker

C. Not in the labor force

An accountant with a CPA designation who has been unable to fund work for so long that she has stopped looking for work is considered to be A. Employed B. Unemployed C. Not in the labor force D. Not in the adult population

C. Not in the labor force

Which of the following is not a function of money? A. Unit of account B. Store of value C. Protection against inflation D. Medium of exchange

C. Protection against inflation

If Americans become less concerned with the future and save less at each real interest rate, A. Real interest rates fall, and investment falls B. Real interest rates fall, and investment rises C. Real interest rates rise, and investment falls D. Real interest rates rise, and investment rises

C. Real interest rates risen and investment falls

If the public consumes $100 billion less and the government purchases $100 billion more (other things unchanging), which of the following statements is true? A. There is an increase in saving, and the economy should grow more quickly B. There is a decrease in saving, and the economy should grow more slowly C. Saving is unchanged D. There is not enough information to determine what will happen to saving

C. Saving is unchanged

An increase in the budget deficit that causes the government to increase its borrowing A. Shifts the demand for loanable funds to the right B. Shifts the demand for loanable funds to the left C. Shifts the supply of loanable funds to the left D. Shifts the supply of is able funds to the right

C. Shifts the supply of loanable funds to the left

Which of the following is an example of equity finance? A. Corporate bonds B. Municipal bonds C. Stock D. Bank loan E. All of the above are equity finance

C. Stock

A decrease in the reserve requirement causes A. Reserves to rise B. Reserves to fall C. The money multiplier to rise D. The money multiplier to fall E. None of the above

C. The money multiplier to rise

If, for any reason, the wage is held above the competitive equilibrium wage, A. Unions will likely strike, and the wage will fall to equilibrium B. The quality of workers in the applicant pool will tend to fall C. The quantity of labor supplied will exceed the quantity of labor demanded, and there will be unemployment D. The quantity of labor demanded will exceed the quantity of labor supplied, and there will be a labor shortage

C. The quantity of labor supplied will exceed the quantity of labor demanded, and there will be unemployment

Some frictional unemployment is inevitable because A. Efficiency wage may hold the wage above the equilibrium wage B. Of minimum wage laws C. There are changes in the demand for labor among different firms D. Of unions E. All of the above

C. There are changes in the demand for labor among different firms

Which of the following statements is true? A. The FOMC meets once per year to discuss monetary policy B. The federal reserve was created in 1871 in response to the Civil War C. When the Fed sells government bonds, the money supply decreases D. The primary two of monetary policy is the reserve requirement

C. When the Fed sells government bonds, the money supply decreases

Suppose Joe changes his $1000 demand deposit from Banqueta bank fee. If the reserve requirement is 10%, what is the potential change in demand deposits as a result of Joe's actions? A. $1000 B. $9000 C. $10,000 D. $0

D. $0

The labor-force participation rate is A. 47.1% B. 50.2% C. 65.9% D. 70.2% E. None of the above

D. 70.2%

Which of the following financial market securities should likely pay the highest interest rate? A. A municipal bond issued by the state of Texas B. A mutual fund with a portfolio of blue chip bonds C. A bond issued by a blue chip company D. A bond issued by a start-up company

D. A bond issued by a start-up company

If money is neutral, A. An increase in the money supply does nothing B. The money supply cannot be changed because it is tied to A commodity such as gold C. A change in the money supply only affects real variables such as real output D. A change in the money supply only affects nominal variables such as prices and dollar wages E. A change in the money supply reduces velocity proportionately, therefore, there is no effect on either prices or real output

D. A change in the money supply only affects nominal variables such as prices and dollar wages

A financial intermediary is a middle person between A. Labor unions and firms B. Husbands and wives C. Buyers and sellers D. Borrowers and lenders

D. Borrowers and lenders

Which of the following policy combinations would consistently work to increase the money supply? A. Sell government bonds, decrease reserve requirements, decrease the discount rate B. Sell government bonds, increase reserve requirements, increase the discount rate C. Buy government bonds, increase reserve requirements, decrease the discount rate D. Buy government bonds, decrease reserve requirements, decrease the discount rate E. None of the above

D. Buy government bonds, decrease reserve requirements, decrease the discount rate

The board of governors of the federal reserve system consist of A. Seven members appointed by Congress and seven appointed by the president B. Seven members elected by the federal reserve banks C. 12 members appointed by Congress D. Seven members appointed by the president E. Five members appointed by the president and seven rotating presidents of the federal reserve banks

D. Five members appointed by the president and seven rotating presidents of the federal reserve banks

Which of the following types of unemployment will exist even if the wage is at the competitive equilibrium? A. Unemployment due to minimum-wage laws B. Unemployment due to unions C. Unemployment due to efficiency wages D. Frictional unemployment

D. Frictional unemployment

The feds tools and monetary control are A. Government expenditures, taxation, reserve requirements, and interest rates B. The money supply, government purchases, and taxation C. Coin, currency, demand deposits, and commodity money D. Open market operations, lending to banks, reserve requirements, and paying interest on reserves E. Fiat, commodity, and deposit money

D. Open market operations, lending to banks, reserve requirements, and paying interest on reserves

Which of the following statements about efficiency wage theory is true? A. Firms do not have a choice about whether they pay efficiency wages or not because these wages are determined by law B. Paying the lowest possible wage is always the most efficient (profitable) C. Paying about the competitive equilibrium wage tends to cause workers to shrink their responsibilities D. Paying above the competitive equilibrium wage may improve worker health, lower worker turnover, improve worker quality, and increase worker effort

D. Paying about the competitive equilibrium wage may improve worker health, lower worker turnover, improve worker quality, and increase worker effort

Which of the following government policies would fail to lower the unemployment rate? A. Reduce unemployment benefits B. Establish employment agencies C. Establish worker training programs D. Raise the minimum wage E. Establish right to work laws

D. Raise the minimum wage

An increase in the budget surplus A. Shifts the demand for loanable funds to the right and increases the real interest rate B. Shifts the demand for loanable funds to the left and reduces the real interest rate C. Shifts the supply of loanable funds to the left and increase the real interest rate D. Shifts the supply of loanable funds to the right and reduces the real interest rate

D. Shift the supply of loanable funds to the right and reduces the real interest rate

To insulate the federal reserve from political pressure, A. The board of governors are elected by the public B. The board of governors have lifetime tenure C. The board of governors are supervised by the house banking committee D. The board of governors are appointed to 14 year terms

D. The board of governors are appointed to 14 year terms

If the government increases investment tax credits and reduces taxes on the return to saving at the same time, A. The real interest rate should rise B. The real interest rate should fall C. The real interest rate should not change D. The impact on the real interest rate is indeterminate

D. The impact on the real interest rate is indeterminate

The amount of unemployment that the economy normally experiences is known as A. Efficiency wage unemployment B. Frictional unemployment C. Cyclical unemployment D. The natural rate of unemployment

D. The natural rate of unemployment

If the price level doubles, A. The quantity demanded of money falls by half B. The money supply has been cut by half C. Nominal income is unaffected D. The value of money has been cut by half E. None of the above is true

D. The value of money has been cut by half

If the Fed engages in an open market purchase, and at the same time, it raises reserve requirements, A. The money supply should rise B. The money supply should fall C. The money supply should remain unchanged D. We cannot be certain what will happen to the money supply

D. We cannot be certain what what happened to the money supply

Which of the following is an example of a reason why firms might pay efficiency wages? A. At equilibrium wages, workers often quit to find better jobs B. At equilibrium wages, worker sleep on the boss is not looking because workers are not deeply concerned about being fired C. At equal living wages, only minimally qualified workers apply for the job D. At equal living wages, workers cannot afford a healthy diet so they fall asleep at work due to lack of energy E. All of the above are true

E. All of the above are true