Macro Final

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(Figure: Aggregate Demand) Point B on this aggregate demand curve represents an inflation rate of:

4%.

For an aggregate demand curve with = 10% and = 0%, if inflation is 6%, then real growth is:

4%.

If the growth rate of money is 3% and the growth rate of velocity is 1%, the growth rate of nominal GDP is:

4%.

Suppose 80 experts flip a coin to predict whether the prices of stocks will rise or fall for the year. After 4 years, how many experts will have correctly predicted the direction of the stock market?

5

(Table: Employment, Unemployment, and Labor Force Participation) Refer to the table. What is the unemployment rate of the country in 2010?

5%

If the price level in 2016 is 140 and it falls to 133 in 2017, what has the economy experienced between 2016 and 2017?

5% deflation

(Figure: Aggregate Demand) Point A on this aggregate demand curve represents a real GDP growth rate of:

5%.

If the adult population of a country is 200 million, 100 million are employed, and 10 million are unemployed, this country's labor force participation rate is:

55%.

When inflation is 4% and the real GDP growth rate is 2%, what is the spending growth rate?

6%

Which definition of money has the greatest value in the money supply?

M2

The main difference between M1 and M2 is that:

M2 includes some less liquid assets in addition to the assets in M1.

What is the term for workers who have given up looking for a job but would still like one?

discouraged workers

Individuals who have given up looking for work but still would take a job are considered:

discouraged workers.

An unemployed person is one who:

does not have a job but is actively looking for one.

An unemployed person is best defined as an adult who:

does not have a job but is looking for work.

The aggregate demand curve is:

downward sloping.

In reference to the consumption-smoothing theory, a person typically saves the most:

during working years.

Reserves held by banks are mainly held in the form of:

electronic claims.

The labor force is made up of:

employed and unemployed workers.

The labor force consists of:

employed workers and adults who do not have jobs but who are looking for work.

If spending grows by 3%, real GDP grows by 5%, and velocity is stable, then prices will be _____ at a rate of _____ according to the aggregate demand curve.

falling; 2%

If spending grows by 2%, real GDP growth is 5%, and velocity is stable, then prices will be _____ at a rate of _____ according to the aggregate demand curve.

falling; 3%

The major difference between active and passive mutual funds is that active funds:

involve stock picks by managers, while passive funds match the movements of a broad market index.

Someone who is using information outside the efficient markets hypothesis:

while auditing a dishonest company realizes that its profit estimates are greatly inflated and immediately sells her stock in the company.

Which of the following is TRUE of mutual funds?I. Active funds generally give higher returns than passive funds.II. Most mutual funds generally give higher returns than broad stock indexes.

neither I nor II

Economic growth is smooth in:

neither developed nor developing countries.

Which of the following is NOT a price index often used to measure inflation?

net price index

Two of the challenging factors faced by the U.S. Bureau of Labor Statistics when computing the consumer price index are:

new goods and better-quality goods.

According to the Bureau of Labor Statistics, which of the following would be counted as unemployed?

new graduates who are looking for their first job

The efficient markets hypothesis implies that in the stock market:

no one can systematically earn more than the average market return.

Holding everything else constant, an increase in the growth rate of the money supply will cause the aggregate demand curve to:

shift outward.

Other things held constant, an increase in the velocity of money will cause the aggregate demand curve to:

shift outward.

Which is the LEAST liquid asset?

small-time deposits

Individuals typically enjoy _____ consumption.

smooth

Workers who put 10% of their income into a retirement account each year are:

smoothing consumption.

Which of the following individuals can be counted as part of the labor force?

someone who is collecting unemployment benefits

Which is NOT a means of payment in the United States?

stock options

China has a higher saving rate than the United States. One economic explanation for this fact is that:

there is a higher rate of time preference for Americans than for the Chinese.

The desire to have goods and services sooner rather than later is called:

time preference.

Which of the following is NOT a reason people save during their working lifetimes?

to allow for a more volatile consumption path over time

Which of the following is NOT a reason individuals typically choose to save?

to increase investment

The monetary base is equal to currency plus:

total reserves held at the Federal Reserve.

M1 refers to:

currency plus checkable deposits.

The monetary base (MB) refers to:

currency plus total reserves held at the Fed.

Which is included in M2?

currency, checkable deposits, and savings deposits

Which serves as a means of payment in the United States?

currency, checkable deposits, and savings deposits

An increase in spending growth will cause the aggregate demand curve to:

shift outward.

Individual saving contributes to:

the supply of loanable funds.

M2 refers to:

currency, checkable deposits, savings deposits, money market mutual funds, and small-time deposits.

The AIDS epidemic _____ the savings rate in Africa.

decreases

A 1% increase in real growth, ceteris paribus, _____ inflation by _____.

decreases; 1%

A 2% increase in real growth, ceteris paribus, _____ inflation by _____.

decreases; 2%

Which asset would you classify as being most liquid?

demand deposits

The average annual rate of growth of real GDP in the United States has fluctuated around ____ for the last 60 years.

3.2%

On the basis of their role in the financial system, venture capitalists are BEST described as:

savers.

When a person's income is greater than her spending on consumption goods, then she is:

saving.

What do we call income that is NOT spent on consumption goods?

savings

In the United States, the largest category of means of payment is:

savings accounts.

Which of the following best defines a nation's labor force?

the total number of employed and unemployed persons

(Table: Consumer Price Index) Refer to the CPI values in the table for the years 2005 to 2010. What was the approximate inflation rate over the period 2007 to 2008?

3.86%

Refer to the table. According to the data in the table, the total amount of M1 equals:

$1,450 billion.

(Table: Statistics for a Small Economy) Refer to the table. The table shows some statistics for a small economy. Using only the information provided, M2 in this country amounts to:

$105 million.

If $100 is saved at an annual interest rate of 10%, at the end of the one year, the saver will have:

$110.

(Table: Statistics for a Small Economy) Refer to the table. The table shows some statistics for a small economy. Using only the information provided, the monetary base amounts to:

$12 million.

(Table: Statistics for a Small Economy) Refer to the table. The table shows some statistics for a small economy. Using only the information provided, M1 in this country amounts to:

$57 million.

(Table: Employment, Unemployment, and Labor Force Participation) Refer to the table. What is the unemployment rate of the country in 2009?

3.9%

The aggregate demand curve is a straight line with a slope of:

-1.

If velocity is stable, then equals:

0%.

If spending growth is 3% and real GDP growth is 2%, what is the inflation rate?

1%

A country has 50 million people, 30 million of whom are adults. Of the adults, 5 million are not interested in working, another 5 million are interested in working but have given up looking for work, and 5 million are still looking for work. Of those who do have jobs, 5 million are working part time but would like to work full time, and the remaining 10 million are working full time. What is this country's unemployment rate?

25%

(Table: Consumer Price Index) Refer to the CPI values in the table for the years 2005 to 2010. What was the approximate inflation rate over the period 2009 to 2010?

1.68%

If the price level in 2018 is 150 and it rises to 165 in 2019, what is the rate of inflation between 2018 and 2019?

10%

If the price level in the year 2000 is 100, and the price level in the year 2001 is 110, what is the inflation rate in 2001?

10%

If a price index increased from 400 to 440 over the course of a year, then the inflation rate is:

10%.

A country has 24 million people in the labor force, and 21.5 million of them are employed. What is the unemployment rate in this country?

10.4%

If the adult population of a country is 200 million, 100 million are employed, and 10 million are unemployed, this country's labor force is:

110 million.

Suppose 1,000 experts flip a coin once each year, and half say the market will go up while the other half say the market will go down. After 6 years how many experts would have been correct every year?

15

Suppose a nation's inflation rate is 5.8% from Year 1 to Year 2. If the CPI in Year 2 is 200, what was the CPI in Year 1?

189

If you had to predict the U.S. inflation rate for next year and decided that a good way to make that prediction would be simply to use the average inflation rate over the past 10 years, what would be your prediction for U.S. inflation next year?

2.1%

From 2006 to 2016, the United States experienced average annual inflation of about:

2.1%.

A country has 50 million people, 30 million of whom are adults. Of the adults, 5 million are not interested in working, another 5 million are interested in working but have given up looking for work, and 5 million are still looking for work. Of those who do have jobs, 5 million are working part time but would like to work full time, and the remaining 10 million are working full time. How many people in this country are in the labor force?

20 million

Suppose a nation's CPI is 150 in Year 1 and 180 in Year 2. What is the rate of inflation?

20%

(Table: Consumer Price Index) Refer to the CPI values in the table for the years 2005 to 2010. In which year was the inflation rate the highest?

2008

(Table: Consumer Price Index) Refer to the CPI values in the table for the years 2005 to 2010. In which year(s) did the country experience deflation?

2009 only

What is the unemployment rate for a nation with 6 million employed and 2 million unemployed?

25%

If the growth rate of the money supply in an economy is 5%, the growth rate of output is 2%, and the velocity of money is constant, what will the inflation rate in this economy be?

3%

A country has 50 million people, 30 million of whom are adults. Of the adults, 5 million are not interested in working, another 5 million are interested in working but have given up looking for work, and 5 million are still looking for work. Of those who do have jobs, 5 million are working part time but would like to work full time, and the remaining 10 million are working full time. What is this country's underemployment rate?

60%

In a given year, the S&P 500 Index fund outperforms about ______ of all active funds.

60%

In a market of 2,000 investors who each year flip a coin to predict market success or failure, how many investors will have been consistently right after 5 years? (Assume the coin tosses yield heads exactly 50% of the time.)

62

A country has 50 million people, 30 million of whom are adults. Of the adults, 5 million are not interested in working, another 5 million are interested in working but have given up looking for work, and 5 million are still looking for work. Of those who do have jobs, 5 million are working part time but would like to work full time, and the remaining 10 million are working full time. What is this country's labor force participation rate?

66.7%

(Table: Labor Data) According to the accompanying labor data, the unemployment rate is:

7.5%.

(Table: Labor Data) According to the accompanying labor data, the labor force participation rate is:

75%.

(Table: Employment, Unemployment, and Labor Force Participation) Refer to the table. What is the labor force participation rate of this country in 2010?

76%

(Table: Employment, Unemployment, and Labor Force Participation) Refer to the table. What is the labor force participation rate of this country in 2009?

77%

If the average price level rises from 120 in year 1 to 130 in year 2, the inflation rate between years 1 and 2 will be:

8.33%.

Approximately how many prices of goods and services are measured by the CPI?

80,000

If the adult population of a country is 200 million, 100 million are employed, and 10 million are unemployed, this country's unemployment rate is:

9.1%.

John Stossel picked Wall Street stocks at random, and his portfolio outperformed what proportion of expert stockbrokers and fund managers?

90%

(Table: Employment, Unemployment, and Labor Force Participation) Refer to the table. What is the employment rate of the country in 2010?

95%

(Table: Employment, Unemployment, and Labor Force Participation) Refer to the table. What is the employment rate of the country in 2009?

96%

Over a 10-year span, the S&P 500 Index fund outperforms about ______ of all active funds.

97%

In a country where both the labor force participation rate and the unemployment rate are very low, which of the following answers explains why this may be the case?

A large percentage of the population is aging and thus has retired.

The life-cycle theory of savings predicts individuals will save during:

the working years of life.

According to the efficient markets hypothesis, the person who most likely earns the highest return for holding the stock of Company ABC on a single day is:

ABC's CEO who has inside information about the company's new projects.

The AD-AS model consists of the:

AD, SRAS, and LRAS curves.

Which statement is TRUE regarding active investing?

Active investments typically have higher fees and lower returns on average than passive investments.

Which of the following best represents time preference?

Alex smokes a pack of cigarettes per day even though he knows that he may face poor health down the road because of his smoking habit.

Which is helpful in stock investment strategies?

All of the answers are correct.

Which of the following explains why the supply of savings is upward sloping?

An increase in the interest rate leads to an increase in the quantity of saving.

Who was chair of Federal Reserve System during the financial crisis of 2008?

Ben Bernanke

Which index measures price increases that typical American consumers face when shopping?

CPI

Ben Bernanke was _____ during the financial crisis of 2008.

Chairman of the Federal Reserve

Why are debit cards not listed as money?

Debit cards draw on checkable deposits, which are already counted as money.

The government's bank and the bankers' bank in the United States are called the:

Federal Reserve System.

When the U.S. Treasury borrows, the borrowing is managed by the:

Federal Reserve.

The ratio of nominal economic output to real economic output multiplied by 100 is the:

GDP deflator.

Which of the following statements is TRUE?I. For every transaction in the stock market there is a buyer and a seller.II. At any point in time, the price of a stock tends to reflect all available public information about the company's future prospects.III. A revolutionary cancer treatment pill will be released next year. An investor will get rich by buying stock in that company now.

I and II only

Stocks are a good investment if:I. one is prepared to hold them for a while through market fluctuations.II. one can buy them immediately after prices have fallen.III. one is not averse to risk.

I and III only

Which of the following are advantages of saving your money in a mutual fund?I. You have professional fund management.II. Mutual funds have always outperformed the S&P 500.III. People with smaller amounts of money can diversify risk.

I and III only

Which of the following statements is TRUE?I. A mutual fund pools money from many different investors and uses that money to invest in many different firms.II. Mutual funds that are run by managers who try to pick the best performing stocks usually outperform the S&P 500.III. Passive mutual funds do not try to select winning stocks; they mimic broader markets like the S&P 500.

I and III only

About the only way to beat a well-functioning market and make money in the short run is:I. through the efficient markets hypothesis.II. if one has insider information.III. through extreme speed and foresight.

II and III only

Which is NOT true of the Federal Reserve System?

It carries out monetary policies passed by the federal government.

Which of the following is NOT a reason the unemployment rate is considered to be an incomplete indicator of the overall health of the labor market?

It does not correctly define the adult population.

The text argues that which statement is TRUE about Warren Buffett?

It has become harder for him to beat the market over time.

Which of the following would be considered unemployed?

Janice, a senior in college, started job hunting early in the hope that she would have secured a job by the time she graduates in May.

Which of the following is considered unemployed?

John, on temporary layoff from his work, awaits recall.

Which of the following individuals can be counted as unemployed?

Juan, a recent college graduate looking for his first job

In the Alfred Hitchcock Presents episode "Mail Order Prophet," a man receives mysterious letters that accurately predict the movements of certain stocks. After being correct several times in a row, the man, upon the letter's request, sends money to the market prophet in exchange for his latest stock tip. At the end of the episode we learn the "prophet" is actually a con man who sends a letter to many people with half the letters predicting a stock will increase and the other half predicting it will decrease. How does this Hitchcock episode illustrate one particular theory of Warren Buffet's wealth?

Like the letters in the story, Buffet happened to be right several times in a row.

Why did 36,000 travel agents lose their jobs between 1999 and 2006?

More people started making their travel arrangements online.

Why is saving so minimal in nations with a high population of AIDS victims?

People with a short life expectancy tend to save less.

______ mutual fund managers can consistently beat the market average.

Relatively few

Which of the following can be defined as saving, according to economics?

Sandra purchases a certificate of deposit from a bank.

Which of the following statements highlights the difference between the CPI (consumer price index) and the GDP deflator?

The CPI measures the average prices of goods and services consumed by typical consumers, whereas the GDP deflator measures the average prices of all goods and services in the economy.

Which is NOT a reason so much U.S. currency circulates in other countries?

The Federal Reserve makes loans to other countries.

Consider the market for ABC Company's stock. What should happen in this market after an announcement that the company is having financial difficulties?

The demand for the stock would shift to the left.

Consider the market for ABC Company's stock. What should happen to the stock for ABC Company after a merger with a highly successful supply firm is announced?

The demand for the stock would shift to the right.

Consider the market for ABC Company's stock. What should happen to the stock for this company if there is a rumor that the company is set to merge with another very profitable company?

The demand for the stock would shift to the right.

A country's total civilian noninstitutionalized adult population is 1 million, and 500,000 people in this country are working, with another 20,000 people looking for work. Which of the following statements about the labor force statistics in this country is accurate?

The employment rate is 96.15% and the labor force participation rate is 52%.

Which is NOT a reason people save during their working lifetimes?

They save to match income and spending from year to year.

A seasonal worker saves more when her income rises and saves less when her income falls. This behavior is referred to as:

consumption smoothing.

Which is the MOST liquid asset?

currency

The paper currency circulated in the United States is called:

a Federal Reserve note.

The consumer price index measures the prices of:

a basket of goods bought by a typical American consumer.

Which of the following would NOT be counted as employed?

a discouraged workera discouraged worker

The consumption-smoothing theory implies that a country whose people have a very low life expectancy has:

a low savings rate.

According to the quantity theory of money, if both the growth rate of the money supply and the velocity of money are fixed, then a higher inflation rate means:

a lower real growth rate.

Which of the following is part of the labor force?

a person who was laid off and is now looking for work

The main reason people save during their working years is:

a preference toward a smooth consumption path over time.

A real price is:

a price that has been corrected for inflation.

Which of the following is an example of an unemployed person?

a recent college graduate looking for her first job

A significant, widespread decline in real income and employment is called:

a recession.

Buying stock in a company is

a transfer of ownership rights.

A mutual fund run by a manager who picks stocks is termed a(n) ______ fund.

active

Which refers to a mutual fund for which its manager buys and sells stocks regularly in order to maximize the fund's returns?

active fund

The investment approach of one of T. Rowe Price's mutual funds is: "Reflecting a value approach to investing, the fund will seek the stocks of companies whose current stock prices do not appear to adequately reflect their underlying value as measured by assets, earnings, cash flow, or business franchises." This fund is a(n):

active fund.

When a fund manager tries to pick stocks to outperform the market averages, the mutual fund is called a(n):

active fund.

The aggregate demand curve shows the relationship between real GDP growth and the:

actual inflation rate.

All the combinations of inflation and real growth consistent with a specific rate of spending growth is called the:

aggregate demand curve.

Consider the three aggregate demand curves shown in the graph. Movement from Point A to Point D represents:

an increase in spending growth from 4% to 6%.

Inflation is:

an increase in the average level of prices.

Which of the following would cause the aggregate demand curve to shift to the right?

an increase in the growth rate of the money supply

A mutual fund is:

an investment fund that pools money from many investors and invests that money in the stocks of many firms.

If both the growth rate and the velocity of the money supply are fixed, then a higher inflation rate will cause:

an upward movement along the AD curve.

Money is best defined as:

anything that is a widely accepted means of payment.

As the government's bank, the Fed does NOT:

approve the transactions involving corporate bonds and stocks.

One of the problems with investment advice that claims you should buy stock in a certain company or sector of the economy is that:

asset prices likely reflect that information already.

Inflation is an increase in the:

average level of prices.

Inflation refers to an increase in the:

average level of prices.

The inflation rate is the rate of change of the:

average level of prices.

The consumer price index measures the:

average price of a basket of goods and services bought by a typical consumer.

Passively investing in the S&P 500 Index:

beats the rate of returns of the majority of all mutual funds in a typical year.

The S&P 500 Index fund performs ______ active funds.

better than most

Which is NOT included in the U.S. money supplies M1 and M2?

bond mutual funds

In financial markets, which group best represents the demand side of the market?

borrowers

Consumption smoothing means:

borrowing to consume more than one's income in low-income years and consuming less than one's income in high-income years.

(Table: Consumer Price Index) Refer to the CPI values in the table for the years 2005 to 2010. In which year(s) did the country experience disinflation?

both 2007 and 2009

People smooth their consumption over their lifetime by:

both borrowing and saving.

If the interest rate increases, then:

both the quantity saved and the quantity supplied of loanable funds will increase.

Variations in real GDP growth around its trend growth rate are called:

business fluctuations.

To compare the $1-an-hour your grandfather earned in 1950 with the $8-an-hour you earn today, you would need to:

calculate real wages in both 1950 and today.

The efficient markets hypothesis implies that an investor:

cannot systematically outperform the market as a whole over time.

The price level at the end of 2011 minus the price level at the end of 2010 is the _____ for the year 2011.

change in the price level

Which is MOST liquid?

checkable deposits in a bank

Demand deposits are:

checkable deposits.

Which of the following is NOT a price index used by economists to measure inflation?

commodity consumption indicator (CCI)

The Federal Reserve:

conducts monetary policy.

Which measure of the average price level most closely corresponds to a student's daily economic activities?

consumer price index

Which price index measures the average price for a basket of goods purchased by a typical American consumer?

consumer price index

The average price for a basket of goods bought by a typical U.S. consumer is measured by the:

consumer price index.

According to the life-cycle theory of savings, a typical person's:

consumption is smooth over their entire lifetime.

If each of the approximately 320,000 securities and financial service agents in the United States bet on whether the market would go up or down for each of the next 10 years by flipping a coin, we would expect that approximately 312 agents would have been right 10 years in a row. This example suggests that:

famous investors like Warren Buffett may have merely been lucky.

The Federal Reserve is the:

federal government's bank, central bank, and banker's bank in the United States.

The AD-AS model is most useful for explaining what causes:

fluctuations in GDP growth around its trend rate.

Discouraged workers are workers who have:

given up looking for work but would still like a job.

In the equation , what does stand for?

growth in the money supply

Business fluctuations are fluctuations in the:

growth rate of real GDP around its trend growth rate.

In the AD-AS model, represents the:

growth rate of real GDP.

The aggregate demand curve shows the relationship between the:

growth rate of real output and the inflation rate.

Discouraged workers are people who:

have given up looking for work but would still like to work.

All else equal, time preference is the desire to:

have goods and services sooner rather than later.

Time preference is the desire to:

have goods and services sooner rather than later.

According to the consumption-smoothing theory, people with a longer life expectancy:

have higher savings rates in their lifetimes than those with shorter life expectancy.

Politicians and especially the general public worry about recessions because of:

high unemployment.

Other things being equal, a person typically has the largest pool of savings:

immediately before retirement.

Saving is defined as:

income not spent on consumption goods.

Savings is:

income that is not spent on consumption goods.

Higher interest rates typically _____ saving, ceteris paribus.

increase

The unemployment rate is expected to _____ during a recession.

increase

An increase in life expectancy should cause saving in the United States to:

increase.

When a family's income becomes more uncertain, we expect its saving to:

increase.

When workers lose their jobs and become officially unemployed, the unemployment rate:

increases

What do we call an increase in the average level of prices in an economy?

inflation

The aggregate demand curve shows all the combinations of _____ that are consistent with a specified rate of spending growth.

inflation and real GDP growth rates

Which of the following combinations would be on an aggregate demand curve with a spending growth rate of 6%?

inflation rate of 8%, real growth rate of -2%

The percentage increase in a price index from one year to the next is the:

inflation rate.

If spending in an economy increases by 3% and real GDP increases by 1%, the result will be:

inflation.

The aggregate demand curve shows all the combinations of _____ and _____ that are consistent with a specified rate of _____.

inflation; real GDP growth; spending growth

Which is an example of passive investing?

investing in a mutual fund that tries to mimic the S&P 500

A passive fund is a fund that:

invests in the companies that constitute a broad market index.

Rank the major means of payment from the largest to the smallest amount of dollars.

savings deposits, money market mutual funds, small-time deposits

The basket of goods bought by the average consumer:

is changing all the time.

People will usually save more if the interest rate:

is higher.

The Federal Reserve acquires its exclusive powers through its ability to:

issue money.

The Federal Reserve acquires its unique powers through its ability to:

issue money.

An efficient stock market means that:

it is difficult to outperform the market, since stock prices convey all relevant public information about a company.

Some skeptical economists say that successful brokers like Warren Buffett are:

just lucky.

Refer to the figure. From this Mutual Funds figure (John Stossel dart-throwing experiment) we can say that:

knowledge of stock market behavior does not guarantee its predictability.

The percentage of adults in the labor force is the:

labor force participation rate.

During a recession:

land, labor, and capital are not fully utilized.

The supply curve for savings indicates that the higher the interest rate, the:

larger the quantity saved.

A mutual fund pools money from many customers and invests the money in many firms. The fees charged by fund managers are:

lower in passive funds.

Which is NOT a duty performed by the Federal Reserve System?

manage the federal budget deficit

The GDP deflator:

measures the average price of all final goods and services produced.

In the United States, the amount of cash per capita is about $4,300. This figure:

misrepresents actual currency holdings in the United States because a lot of dollars are held outside the country.

All else being equal, a working-age person who has more patience tends to have:

more savings.

The term business fluctuations refers to:

movement in real GDP around its long-term trend.

A comparison of historical performance of mutual funds and the S&P 500 suggests that:

mutual funds on average underperform the S&P 500 at least half of the time.

Which is NOT a duty performed by the Federal Reserve System?

set the prime interest rate

As a result of the changing variety and quality of goods that the typical consumer purchases each year, many economists argue that the consumer price index might:

overstate inflation.

The S&P 500 Index fund is a(n) ______ fund.

passive

Which investment strategy is typically more profitable over a long period of time?

passive

The investment approach of one of TIAA-CREF's mutual funds is: "[This fund]. . .seeks a favorable long-term rate of return from a diversified portfolio selected to track the overall market for common stocks publicly traded in the United States, as represented by a broad stock market index." This fund is a(n):

passive fund.

Which of the following is NOT considered saving?

paying tuition for a college education

The supply of savings is positively sloped because:

people are enticed to forgo consumption when interest rates are higher.

A discouraged worker is a:

person who has given up looking for work but would still like a job if one is available.

John Stossel's dart-throwing experiment showed that:

picking stocks at random can outperform the stock picks of major Wall Street experts.

John Stossel's investment strategy of ______ beat 90% of the experts' portfolios.

picking stocks by throwing darts at a newspaper's stock page

Economist Franco Modigliani's life-cycle theory of savings proposes that in order to maximize lifetime satisfaction, consumers:

practice consumption smoothing by borrowing and saving.

When the government of Zimbabwe ran out of money, President Robert Mugabe:

printed more money.

Which price index measures prices of both intermediate and final goods?

producer price index (PPI)

A measure of the average price received by suppliers is the:

producer price index.

Which is NOT a function of the Federal Reserve?

providing loans to small businesses

In economics, investment refers to the:

purchase of new capital goods.

If spending growth is 6% and inflation is also 6%, this means that:

real GDP did not increase.

In the graph of the AD-AS model, what is measured on the horizontal axis?

real GDP growth

Business fluctuations are variations in:

real income (GDP) growth around its trend growth rate.

A recession is defined as a widespread decline in:

real income (GDP).

According to the efficient markets hypothesis, stock prices:

reflect all publicly available information about the stock market.

When workers lose their jobs and become officially unemployed, the number of people in the labor force:

remains constant.

If spending grows by 3% while real growth is 1% and velocity is stable, then prices will be _____ at a rate of _____ according to the aggregate demand curve.

rising; 2%

If spending grows by 3%, real GDP growth is 0%, and velocity is stable, then prices will be _____ at a rate of _____ according to the aggregate demand curve.

rising; 3%

Fluctuations in income cause most people to:

save.

People with a high time preference are less likely to:

save.

What is an example of impatience in economic behavior?

taking the first job you are offered

The Federal Reserve can influence the economy by shifting:

the AD curve.

Which institution usually has the most influence over aggregate demand in the United States?

the Federal Reserve

Bank notes are issued by:

the Federal Reserve only.

Which measure of prices includes all of the final goods and services in a nation's output?

the GDP deflator

Which of the three price indexes measures the average price level of the largest total number of goods?

the GDP deflator

Which price index comprises the prices of all final goods and services produced within the economy?

the GDP deflator

The world's largest bank customer is:

the U.S. Treasury.

If the growth rate of spending increases from 3% to 5%, then:

the aggregate demand curve will shift to the right.

Inflation is best defined as an increase in:

the average price level.

Which of the following do economists consider an investment?

the construction of a new factory

Which of the following measures of inflation is based on a basket of goods and services for a typical household?

the consumer price index

Time preference is:

the desire to have goods and services sooner rather than later (all other things being equal).

The fact that the majority of stock mutual funds cannot outperform the stock market averages is consistent with:

the efficient markets hypothesis.

In the graph of the AD-AS model, what is measured on the vertical axis?

the inflation rate

The price of savings is:

the interest rate.

The supply of savings curve shows the relationship between savings and:

the interest rate.

The supply of savings function shows the relationship between saving and:

the interest rate.

Most individuals save during:

the middle and later years of life before retirement.

What part of the money supply does the Fed have direct control over?

the monetary base

The Fed has the most control over:

the monetary base.

The narrowest measure of the U.S. money supply is:

the monetary base.

Which price index measures the average price received by suppliers?

the producer price index

Investment is defined as:

the purchase of new capital goods.

Investment is:

the purchase of new capital goods.

The manager of a passive mutual fund:

tries to track a broad stock market index.

When computing the consumer price index, the Bureau of Labor Statistics takes into account changes in the:

type of goods and the quality of goods.

The presence of discouraged workers causes the measured unemployment rate to be:

understated

What population categories go into the formula for the unemployment rate?

unemployed and employed

Adults who do not have a job but who are looking for work are:

unemployed.

The supply of savings function is:

upward sloping

The savings supply curve is:

upward sloping.

An active fund is a fund that:

uses stock-picking techniques to buy stocks that are projected to beat market averages.

To be considered money, an asset must be:

widely accepted as a means of payment.

A person is classified as unemployed only if he or she is:

willing and able to work but cannot find a job.

Discouraged workers and underemployed workers are examples of:

workers not included in the unemployment rate.

If income and consumption are equal, saving must be:

zero.


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