ECO 1000 Exam 3

The largest budget deficit the U.S. federal government has ever had was A) $600 billion in 1997. B) $3.0 trillion in 2014. C) $1.4 trillion in 2009. D) $3.9 trillion in 1975.

C) $1.4 trillion in 2009.

Refer to Table 16.1. Consider the data in the table above (in billions of dollars) for an economy. Gross domestic product (in billions of dollars) for this economy equals A) $2,700. B) $2,525. C) $2,350. D) $2,100.

C) $2,350.

Refer to Figure 21.2. If area A = 2,000, area B = 400, and area C = 2,600, what is the Gini coefficient for Ruratania (rounded to two decimal places)? A) 0.08 B) 0.15 C) 0.48 D) 0.92

C) 0.48

A general formula for the spending multiplier is A) GDP/(MPC). B) MPC/(1 - MPC). C) 1/(1 - MPC). D) 1/(MPC).

C) 1/(1 - MPC)

Suppose that the basket of goods purchased by the typical consumer costs $188.80 this year and it cost $160 in the base year. The CPI this year would be A) 28.8. B) 85.11. C) 118.0. D) 348.8.

C) 118.0.

In which decade did the labor force participation rate for women in the United States first rise to above 50%? A) 1940s B) 1960s C) 1970s D) 1990s

C) 1970s

The town of Marble Falls has 10 workers, of which 8 are employed and 2 are actively seeking work. The unemployment rate in Marble Falls is A) 5%. B) 10%. C) 20%. D) 25%

C) 20%

In the United States, the top 1% of income earners face an average federal tax rate of ________ and contribute ________ of all federal tax dollars received. A) 20%; 5% B) 24%; 9.1% C) 29.4%; 24.2% D) 73%; 49.5%

C) 29.4%; 24.2%

From the beginning of the Great Recession in December 2007 until September 2013, the average duration of unemployment in the United States averaged A) 13.5 weeks. B) 22 weeks. C) 31.3 weeks. D) 41 weeks.

C) 31.3 weeks.

Refer to Table 16.2. Nominal GDP for Fredonia for 2016 equals A) $2,750. B) $3,500. C) $4,325. D) $5,500.

D) $5,500.

The unemployment rate is calculated as: A) (number of employed + number of unemployed) ÷ (labor force). B) (number of unemployed) ÷ (number of employed). C) (labor force) ÷ (number of unemployed). D) (number of unemployed) ÷ (number of employed + number of unemployed).

D) (number of unemployed) ÷ (number of employed + number of unemployed).

In countries that have a high degree of employment protection as measured by the World Bank's Rigidity of Employment Index, approximately ________ of jobless workers have been employed for more than one year. A) 5% B) 16% C) 27% D) 43%

D) 43%

GDP measures the total income a society generates

true

If it takes 35 years for real GDP to double, real GDP is growing at an annual rate of approximately 2%

true

In the United States in 2014, the highest marginal tax rate for individual income taxes was 39.6%.

true

In the United States, income taxes are collected from two different sources: households and corporations

true

In the United States, the rich pay a disproportionate share of the cost of government.

true

The cyclical unemployment rate changes with business cycle fluctuations.

true

The marginal propensity to consume is the proportion of each new dollar's worth of income that is spent

true

The more equal the income distribution in a society, the smaller the Gini coefficient

true

The organization that releases the official unemployment data in the United States is the Bureau of Labor Statistics.

true

Unlike with Social Security taxes, there is no threshold on earnings beyond which the Medicare tax collection stops.

true

The labor force participation rate is calculated as: A) (labor force) ÷ (adult population). B) (number of employed) ÷ (adult population). C) (number of employed + number of unemployed) ÷ (labor force). D) (number of unemployed) ÷ (labor force).

A) (labor force) ÷ (adult population).

131) Refer to Figure 21.1. The middle 20% of the population earn ________ of total income. A) 16% B) 23% C) 28% D) 32%

A) 16%

In 2012, the bottom one-fifth of U.S. households earned ________ of the nations total income. A) just over 3% B) just under 9% C) approximately 25% D) just under 50%

A) just over 3%

Liquidity refers to A) the ease with which an asset can be converted to cash. B) the number of times new issues of bonds are released. C) the number of shares of stock a corporation issues. D) the ease with which shares of stock can be traded for bonds.

A) the ease with which an asset can be converted to cash.

Refer to Figure 21.1. If Area I = 1,700 and Area J = 3,300, what is the Gini coefficient? A) 0.17 B) 0.34 C) 0.52 D) 2.94

B) 0.34

Payroll taxes are paid on A) investment income. B) earned income. C) inheritances. D) all of the above

B) earned income.

When the United States was under the gold standard, recessions were ________ and long-term inflation was ________. A) less frequent; prevalent B) less frequent; virtually nonexistent C) more frequent; virtually nonexistent D) more frequent; prevalent

C) more frequent; virtually nonexistent

The largest portion of discretionary spending is devoted to A) foreign aid. B) paying federal employees. C) national defense. D) the space program.

C) national defense.

Discouraged workers are ________ in the unemployment rate, and this tends to ________ the unemployment rate. A) counted; understate B) not counted; overstate C) not counted; understate D) counted; overstate

C) not counted; understate

To calculate gross domestic product, you use the sum of the market values of all final goods and services produced in a given year. This means you A) count the total number of final goods and services produced in the marketplace from every year including that given year and then add the numbers together. B) value the final goods and services at their market prices for that particular year, multiply them by the quantity produced from every year including that given year, and then add the numbers together. C) count the total number of final goods and services produced in the marketplace in that particular year and then add the numbers together. D) value the final goods and services at their market prices for that particular year, multiply them by the quantity produced that year, and then add the numbers together.

D) value the final goods and services at their market prices for that particular year, multiply them by the quantity produced that year, and then add the numbers together.

In the United States, the size of the underground economy is estimated to be as much as $2 trillion

True

An unexpected large increase in the price of crude oil is an example of a supply shock

true

Consumption spending includes spending on durable goods, nondurable goods, and services.

true

Expansionary monetary policy is designed to stimulate the economy by increasing the money supply, but not create much inflationary pressure.

true

Refer to Figure 21.1. The highest 20% of the population earn ________ of total income. A) 40% B) 44% C) 60% D) 80%

A) 40%

Suppose Gerald works for Lola as a production assistant. Gerald and Lola fall in love, get married and have children. Gerald stops working for Lola in order to care for the children. What will be the effect of this scenario on GDP? A) GDP will decrease. B) GDP will increase. C) GDP will not change. D) GDP may increase or decrease depending on the rate of inflation

A) GDP will decrease

Income inequality in the United States has increased in part due to technological change. How does technological change contribute to income inequality? A) It has created many higher-income jobs for skilled and trained workers, leaving the income of less-skilled workers relatively unchanged by comparison. B) It reduces the cost of producing goods and therefore lowers the value of labor services. C) It is responsible for a majority of new products on the market, and these products are only affordable to higher-income households. D) It allows manufacturers to produce products with less labor, and this reduction in the demand for labor lowers wages at all skill levels.

A) It has created many higher-income jobs for skilled and trained workers, leaving the income of less-skilled workers relatively unchanged by comparison

Which of the following statements is true? A) Lower infant mortality rates are related to income growth in countries. B) The higher the income per capita, the higher the infant mortality rate. C) There is no correlation between income per capita and infant mortality rates. D) Lower infant mortality rates are always a result of income growth in countries.

A) Lower infant mortality rates are related to income growth in countries.

Which of the following expenditures is classified as a mandatory expenditure of the U.S. federal government? A) Medicaid B) federal employee salaries C) foreign aid D) national defense

A) Medicaid

Gold is an example of A) commodity money. B) financial capital. C) fiat money. D) the M1 component of the money supply.

A) commodity money.

Which of the following is not included in M1? A) credit card balances B) checking account balances C) coins in circulation D) currency in circulation

A) credit card balances

A decline in which of the following types of spending was not generally considered a part of the beginning and continuation of the Great Recession? A) federal government spending B) consumer durables spending C) business investment spending D) residential investment spending

A) federal government spending

A student who just graduated from college during an economic expansion but has yet to find a job would most likely be A) frictionally unemployed. B) structurally unemployed. C) cyclically unemployed. D) seasonally unemployed.

A) frictionally unemployed.

A retirement system in which the benefits government pays to retirees are paid out of the contributions those retirees make during their working years is called a A) fully funded system. B) deferred retirement system. C) pay-as-you-go system. D) pension plan.

A) fully funded system.

Automatic stabilizers refer to A) government spending and taxes that automatically increase or decrease along with the business cycle. B) the money supply and interest rates that automatically increase or decrease along with the business cycle. C) changes in federal taxes and purchases that are intended to influence economic activity. D) changes in the money supply or interest rates that are intended to achieve economic stability.

A) government spending and taxes that automatically increase or decrease along with the business cycle.

When inflation begins to rise, people can prevent their wealth from deteriorating by doing all of the following except A) holding more cash. B) converting their cash into foreign currencies. C) investing in financial instruments such as stocks or precious metals. D) spending their cash on goods and services.

A) holding more cash.

When government decides to increase spending, interest rates generally ________ and this change in interest rates ________ investment spending. A) increase; decreases B) decrease; decreases C) decrease; increases D) increase; increases

A) increase; decreases

If the basket of goods purchased by the typical consumer costs $188.80 this year and it cost $160 in the base year, prices have risen ________ since the base year. A) 14.89% B) 18% C) 28.8% D) 188.8%

B) 18%

People who were working in the formal sector and now work in the underground economy but report being unemployed will cause the unemployment rate to ________, and this action tends to ________ the unemployment rate. A) increase; overstate B) increase; understate C) decrease; understate D) decrease; overstate

A) increase; overstate

Curly, Moe, Larry, and Shemp are the four inhabitants of a small island. Moe has 200 gold coins, the only money on the island. He takes the coins to Curly, a goldsmith, for storage and Curly issues Moe a receipt for the 200 coins he has deposited with Curly. Larry comes to Curly to borrow 100 gold coins, signing a legally binding promise to repay the coins, and Curly issues Larry a receipt saying that Larry now has 100 gold coins on deposit. Upon finding out that Larry borrowed gold coins from Curly, Shemp comes to Curly to borrow 200 gold coins. Since Curly has 200 actual gold coins on deposit, he gets Shemp to sign a legally binding promise to repay the 200 coins and then issues Shemp a receipt saying that Shemp now has 200 gold coins on deposit. 135) Refer to Scenario 18.1. When Curly made the loans to Larry and Shemp, the money supply A) increased by 300 coins. B) did not change. C) increased by 500 coins. D) decreased by 300 coins.

A) increased by 300 coins

Representative commodity money retained its value because A) it could be exchanged for an actual commodity. B) it was backed by the government. C) it was an actual commodity. D) it was a fiat money

A) it could be exchanged for an actual commodity.

When a bank takes money that you put in your checking account and gives it to someone else, at a cost, for a period of time, it is said to be A) making a loan. B) creating commodity money. C) internalizing an externality. D) making a deposit.

A) making a loan.

Globalization and growing technology have produced A) outsized, exponential rewards for superstar talent. B) equal opportunities for low-skilled and high-skilled labor. C) rewards for labor that have reduced income inequality. D) more opportunities for low-skilled labor than for high-skilled labor

A) outsized, exponential rewards for superstar talent.

Microeconomics, as opposed to macroeconomics, includes the study of what determines the A) profitability of the airline industry. B) unemployment rate in the United States. C) size of the federal deficit. D) rise or fall of the inflation rate.

A) profitability of the airline industry.

In response to already low short-term interest rates doing little to stimulate the economy during the Great Recession, the Fed began purchasing mortgage-backed securities and long-term government bonds to bring down long-term interest rates. This policy was called A) quantitative easing. B) inflation targeting. C) contractionary monetary policy. D) closed market operations

A) quantitative easing.

If, as your taxable income increases, you pay a smaller percentage of your taxable income in taxes, then the tax is A) regressive. B) progressive. C) proportional. D) unfair.

A) regressive.

The recognition lag for fiscal policy is ________ it is for monetary policy. A) roughly the same as B) generally shorter than C) generally longer than D) There is not a recognition lag for fiscal policy.

A) roughly the same as

Which of the following is not considered part of government spending? A) social security payments to retirees B) a nature preserve purchased by a state government C) a military jet purchased by the federal government D) teachers' salaries paid by a local government

A) social security payments to retirees

Suppose the measured unemployment rate is 7.5% and the true natural rate of unemployment is 5.1%. If the chair of the Fed believes the natural rate of unemployment to be 6.7%, then the chair will A) stimulate the economy, exactly as called for. B) stimulate the economy when it should be slowed. C) slow the economy when it should be stimulated. D) slow the economy, exactly as called for.

A) stimulate the economy, exactly as called for.

A central bank accepts deposits from A) the federal government and commercial banks. B) private businesses and individuals. C) individuals, private businesses, commercial banks, and the federal government. D) commercial banks and private businesses

A) the federal government and commercial banks.

Frictional unemployment is the result of A) the search process of matching workers with jobs. B) a slowdown in the economy. C) the unpredictability of inflation. D) more people looking for work in some labor markets than there are jobs available.

A) the search process of matching workers with jobs.

According to the Bureau of Labor Statistics, a person who does not have a job but is currently available for work and has been actively looking for a job in the past four weeks is considered A) unemployed. B) employed. C) not in the labor force. D) underemployed.

A) unemployed.

The belief that the ethically proper thing to do in any situation is the thing that maximizes society's overall happiness and minimizes society's overall suffering is called A) utilitarianism. B) diminishing marginal utility. C) the benefits-received principle. D) transcendentalism.

A) utilitarianism.

Economic growth is generally measured as the percentage increase in a country's A) annual employment rate. B) real GDP. C) nominal GDP. D) per-capita nominal GDP

B) real GDP.

Suppose that the basket of goods purchased by the typical consumer costs $188.80 this year and it cost $160 in the base year. The CPI in the base year would be A) 85.11. B) 100.0. C) 118.0. D) 348.8.

B) 100.0

If India decides to enact environmental laws to reduce air pollution, what would be the effect on GDP? A) GDP would increase reflecting the fact that the air would be cleaner. B) GDP would decrease if the pollution controls reduce productivity by more than the cost of the controls. C) GDP would increase as the environmental costs of pollution were not included in the calculation of GDP. D) GDP would increase as the citizens of India were made happier as the air pollution was reduced.

B) GDP would decrease if the pollution controls reduce productivity by more than the cost of the controls.

The M2 measure of the money supply equals A) savings account balances plus small certificates of deposit plus money market mutual fund balances. B) M1 plus savings account balances plus small certificates of deposit plus money market mutual fund balances. C) savings account balances plus small certificates of deposit. D) M1 plus savings account balances plus small certificates of deposit.

B) M1 plus savings account balances plus small certificates of deposit plus money market mutual fund balances.

Structural unemployment exists because something is holding wages A) naturally high. B) artificially high. C) artificially low. D) naturally low.

B) artificially high.

Suppose the measured unemployment rate is 7.4% and the natural rate of unemployment is 5.1%. In this situation, policymakers should A) not intervene in the economy. B) attempt to stimulate the economy. C) attempt to slow the economy. D) The actions of policymakers will depend on how much of the natural rate is frictional unemployment and how much is structural unemployment

B) attempt to stimulate the economy.

The implementation lag for fiscal policy ________ it is for monetary policy. A) is generally much shorter than B) can be much longer than C) is usually the same as D) There is not an implementation lag for fiscal policy.

B) can be much longer than

If the economy's resources are fully employed and prices are starting to rise, the Fed can ________ the money supply in an attempt to reduce inflationary pressure. If this action is well-calculated, output will ________. A) increase; remain close to its potential level B) decrease; remain close to its potential level C) increase; rise D) decrease; fall

B) decrease; remain close to its potential level

The first Taco Bell 7-layer burrito you ate was extraordinary. The second one was good. The third one was pretty good. The fourth one was just kind of okay. This illustrates A) utilitarianism. B) diminishing marginal utility. C) the benefits-received principle. D) transcendentalism.

B) diminishing marginal utility.

Macroeconomics includes the study of A) decisions made by individuals, businesses, and governments. B) economic growth, the unemployment rate, and inflation. C) product demand, product supply, and profit maximization. D) industry sales, corporate growth, and home prices.

B) economic growth, the unemployment rate, and inflation.

The time it takes to overcome the practical and procedural hurdles before the Fed can begin to fix the economy is called the A) recognition lag. B) implementation lag. C) impact lag. D) liquidity lag

B) implementation lag

An increase in the reserve requirement ________ required bank reserves and ________ the money supply. A) decreases; decreases B) increases; decreases C) decreases; increases D) increases; increases

B) increases; decreases

Due to the subjective nature of the questions that would be needed to determine if someone is underemployed or a discouraged worker, adjusting the unemployment rate to accurately reflect these situations A) is very easy to do. B) is impossible. C) is somewhat difficult. D) Since so few people are actually underemployed or discouraged workers, adjusting the unemployment rate to reflect these situations is considered an unnecessary waste of time.

B) is impossible.

Which of the following would not be considered an automatic stabilizer? A) rising income tax collections due to rising incomes during an expansion B) legislation increasing funding for job retraining passed during a recession C) declining food stamp payments due to more people finding jobs during an expansion D) decreasing unemployment insurance payments due to a decrease in unemployment during an expansion

B) legislation increasing funding for job retraining passed during a recession

The U.S. federal personal income tax is a ________ tax. A) proportional B) progressive C) flat D) regressive

B) progressive

The Social Security Administration estimates that the Social Security Trust Fund will ________ and that the Medicare Trust Fund will ________. A) grow slowly as more workers retire; decline slowly as medical costs rise B) run out of funds in about 20 years; run out of funds in about 10 years C) continue to get smaller as the number of retirees increases; start to grow once funds from Obamacare are funneled to the program D) become fully funded by 2036; become fully funded by 2024

B) run out of funds in about 20 years; run out of funds in about 10 years

For the U.S. federal government, mandatory spending refers to A) spending that must be authorized by Congress each year. B) spending that is not subject to Congress's annual appropriations process. C) spending that never changes in amount from year to year. D) spending on federal employee salaries.

B) spending that is not subject to Congress's annual appropriations process.

One difference between stocks and bonds is that A) stocks represent ownership in the government while bonds represent ownership in a company. B) stocks do not involve a promise to repay the purchase price of the stock but bonds represent a promise to repay the purchase price of the bond. C) stocks are financial securities while bonds are labor market securities. D) stocks are traded in financial markets while bonds are not

B) stocks do not involve a promise to repay the purchase price of the stock but bonds represent a promise to repay the purchase price of the bond.

Suppose the economy is producing above potential GDP and the Federal Reserve implements the appropriate change in monetary policy, but not until after the economy has started to slow down on its own. In this situation there is a real danger that A) the Fed's expansionary policy will result in too large of an increase in GDP. B) the Fed's contractionary policy will result in too large of a decrease in GDP. C) the Fed's contractionary policy will result in too small of a decrease in GDP. D) the Fed's expansionary policy will result in too small of an increase in GDP.

B) the Fed's contractionary policy will result in too large of a decrease in GDP.

The formula used to determine how long it will take a country to double its real GDP is called A) the double-or-nothing formula. B) the rule of 70. C) the nominal-to-real formula. D) the expenditure multiplier.

B) the rule of 70.

Business cycles ________, and recessions ________. A) vary in length; are of equal severity B) vary in length; differ in severity C) are of equal length; are of equal severity D) are of equal length; differ in severity

B) vary in length; differ in severity

When we compare shares of income earned by U.S. households, which of the following statements about the distribution of income is true? A) Shares of income decrease as we move from the lowest quintile to the highest quintile. B) Shares of income remain fairly constant as we move from the lowest quintile to the highest quintile. C) Shares of income increase as we move from the lowest quintile to the highest quintile. D) Shares of income decrease as we move from the lowest quintile to middle quintile, and then decrease from the middle quintile to the highest quintile.

C) Shares of income increase as we move from the lowest quintile to the highest quintile.

Which of the following is a reason for the existence of sticky wages? A) Increasing wages means reduced profits during economic expansions. B) Cutting wages during an economic downturn is illegal. C) Some wages are set by contract. D) By law, if one worker's wages are changed, all workers' wages must be changed.

C) Some wages are set by contract.

Which of the following would be directly counted in U.S. GDP for 2015? A) a 2015 Mini Cooper, built in Oxford, England, and sold to a computer programmer in San Jose, California B) a Tesla car battery, built in 2014 in California, to be installed in a new 2015 Tesla Model S C) a 2015 Harley-Davidson Softail Deluxe, built in Pennsylvania, and sold to a kindergarten teacher in Moose Jaw, Saskatchewan, Canada D) a 1957 Chevy Bel Air convertible sold by its original owner to a car collector in Nashville on March 1, 2015

C) a 2015 Harley-Davidson Softail Deluxe, built in Pennsylvania, and sold to a kindergarten teacher in Moose Jaw, Saskatchewan, Canada

From 1970 to 2006, average real income for the top 5% of U.S. households A) decreased by more than 10%. B) increased by about 5%. C) almost doubled. D) remained virtually unchanged.

C) almost doubled.

If people accurately speculate that a run on one bank will result in a run on all banks, the financial system would experience what is known as a A) commodity crisis. B) clearinghouse collapse. C) bank panic. D) financial death spiral.

C) bank panic.

The largest component of spending in GDP is A) government spending. B) net export spending. C) consumption spending. D) investment spending.

C) consumption spending.

If growing income inequality results from or encourages more rent seeking that, as a whole, make society worse off, this will A) result in complete income inequality as rent seeking continues to occur in the future. B) increase the size of the economic pie despite the income inequality. C) decrease the size of the economic pie. D) not change the size of the economic pie because the rent-seeking behavior will benefit enough parties to completely offset the effects of the increases in income inequality.

C) decrease the size of the economic pie.

If the Fed conducts an open market purchase of Treasury bonds, this will A) cause banks to reduce their loans and will increase the money supply. B) cause banks to reduce their loans and will decrease the money supply. C) encourage banks to make more loans and will increase the money supply. D) encourage banks to make more loans and will decrease the money supply.

C) encourage banks to make more loans and will increase the money supply

The total amount of money the government owes to its creditors is the A) federal fiscal IOU. B) federal withholding tax. C) federal debt. D) federal government budget deficit

C) federal debt.

Countries that are more open to international trade tend to have A) lower levels of economic growth. B) lower levels of physical capital. C) higher levels of economic growth. D) property rights that are not well defined.

C) higher levels of economic growth.

GDP data alluding to the start of a recession in January 2015 was published and analyzed by the Fed in July 2015. The Fed held meetings to formulate a monetary policy to deal with the recession, and then it enacted the chosen policy in September 2015. It was December 2015 before the policy actually began to affect the economy. The three-month period from September 2015 to December 2015 exemplifies a(n) A) recognition lag. B) implementation lag. C) impact lag. D) liquidity lag

C) impact lag.

The largest source of federal government revenue in the United States is A) excise taxes. B) payroll taxes. C) individual income taxes. D) corporate income taxes.

C) individual income taxes.

In 2012, the top one-fifth of U.S. households earned ________ of the nations total income. A) about 22% B) just under 35% C) just over half D) almost 90%

C) just over half

For the best indication of the material standard of living of the typical person in society, focus should be placed on A) nominal GDP per capita. B) nominal GDP. C) real GDP per capita. D) real GDP.

C) real GDP per capita

The Congressional Budget Office estimates that the ratio of publicly held debt to GDP will ________ by 2050 if no entitlement reforms are enacted. A) more than triple to about 250% B) remain close to the current high level of 73% C) rise to about 130% D) fall to only about 55%

C) rise to about 130%

Suppose the economy is producing below potential GDP and the Federal Reserve implements the appropriate change in monetary policy, but not until after the economy has started to recover from the recession. In this situation there is a real danger that A) the Fed's contractionary policy will result in too small of a decrease in GDP. B) the Fed's contractionary policy will result in too large of a decrease in GDP. C) the Fed's expansionary policy will result in too large of an increase in GDP. D) the Fed's expansionary policy will result in too small of an increase in GDP.

C) the Fed's expansionary policy will result in too large of an increase in GDP.

Of the following countries, in which one was the true marginal tax rate faced by the typical worker lowest and the average number of hours worked per week highest from 1993 through 1996? A) Italy B) Canada C) the United States D) Germany

C) the United States

Which of the following goods is directly counted in GDP? A) the boxes that Pizza Hut purchases to box its pizzas B) the pepperoni that Pizza Hut purchases for its pizzas C) the large Pizza Hut pizza purchased by a family for dinner D) the cheese that Pizza Hut purchases for its pizzas

C) the large Pizza Hut pizza purchased by a family for dinner

A barter economy refers to a situation in which goods and services are traded for other goods and services, with no money involved in transactions. The major shortcoming of a barter economy is A) government has no way of collecting taxes. B) transactions cannot take place without money. C) the requirement of a double coincidence of wants. D) goods and services have no way of storing value.

C) the requirement of a double coincidence of wants.

If the federal government implements programs to more quickly match the unemployed with jobs, then the natural rate of unemployment A) will disappear. B) will not change. C) will decrease. D) will increase.

C) will decrease.

Which of the following would be directly counted in GDP for 2015? A) windows built in 1945 which were salvaged from a 1945 house and are going to be used in a house built in 1950 B) windows built in 1945 which were salvaged from a 1945 house and are going to be used in a newly-built house C) windows purchased from Pella in 2015 to be installed in a house built in 1945 D) none of the above

C) windows purchased from Pella in 2015 to be installed in a house built in 1945

All of the following were provisions of the 2009 American Reinvestment and Recovery Act except A) a temporary extension of unemployment benefits. B) expanded tax credits for parents for their children's college tuition. C) a reduction in employees' payroll tax contributions. D) a reduction in government-funded infrastructure spending

D) a reduction in government-funded infrastructure spending

Among the groundbreaking contributions to economics made by John Maynard Keynes is A) the development of the spending multiplier. B) the insight that recessions can result from a lack of aggregate demand. C) the theory of sticky wages and prices. D) all of the above

D) all of the above

High inflation can do which of the following? A) distort consumption choices B) increase shoeleather costs C) arbitrarily redistribute income D) all of the above

D) all of the above

Which of the following is true of central banks? A) They control the amount of money in circulation. B) They are responsible for issuing currency. C) They have considerable influence over the level of interest rates. D) all of the above

D) all of the above

In our modern financial system, money is created A) only by central banks. B) only by federal governments. C) only by the banking system. D) by central banks and the banking system.

D) by central banks and the banking system

If Veronica withdraws $1,500 from her checking account and deposits it in her savings account, then M1 will ________ and M2 will ________. A) decrease; increase B) not change; not change C) increase; not change D) decrease; not change

D) decrease; not change

Spreading wealth across multiple investments is called A) arbitrage. B) speculation. C) asset liquification. D) diversification.

D) diversification.

A $100 bill is a A) partially representative commodity money. B) representative commodity money. C) commodity money. D) fiat money.

D) fiat money

Any profit earned by a corporation A) gets taxed five times. B) gets taxed once. C) does not get taxed. D) gets taxed twice.

D) gets taxed twice.

Deflation financially ________ borrowers of money and financially ________ lenders of money. A) harms; harms B) benefits; benefits C) benefits; harms D) harms; benefits

D) harms; benefits

A period of very high and accelerating inflation is known as A) deflation. B) nuclear inflation. C) disinflation. D) hyperinflation.

D) hyperinflation

In the United States, the Gini coefficient for the entire nation A) must be exactly equal to the coefficients for each of the 50 states. B) is considerably higher than the coefficients for each of the 50 states. C) is considerably lower than the coefficients for each of the 50 states. D) is in roughly the same range as the Gini Coefficients for each of the 50 states

D) is in roughly the same range as the Gini Coefficients for each of the 50 states

Using a Website created by the Sacramento Bee in 2008 that published the salaries of all California state employees, economists conducted research and found that A) no employees seemed to be unsatisfied with their jobs or the salaries they were earning. B) employees with above-median earnings were, surprisingly, the least satisfied with their jobs. C) job satisfaction depends only on a person's salary. D) knowing their co-workers' salaries affected employees' job satisfaction.

D) knowing their co-workers' salaries affected employees' job satisfaction.

The Fed can attempt to decrease the federal funds rate by A) raising the reserve requirement, which decreases the money supply. B) lowering the reserve requirement, which decreases the money supply. C) raising the reserve requirement, which increases the money supply. D) lowering the reserve requirement, which increases the money supply.

D) lowering the reserve requirement, which increases the money supply.

The income of the middle person in an income distribution is called the A) mean income. B) per capita income. C) average income. D) median income.

D) median income.

Structural unemployment is the result of A) the unpredictability of inflation. B) a slowdown in the economy. C) the search process of matching workers with jobs. D) more people looking for work in some labor markets than there are jobs available.

D) more people looking for work in some labor markets than there are jobs available.

All of the following are differences between partnerships and corporations except A) if an owner of a corporation dies, the corporation survives, but this is not necessarily true for partnerships. B) scale of ownership. C) in a partnership, partners make key business decisions, but in a corporation a board of directors generally make those decisions. D) partnerships pay income taxes on their earnings and corporations do not.

D) partnerships pay income taxes on their earnings and corporations do not.

The utilitarianism, Rawlsian, and benefits-received arguments all favor a ________ tax system. A) value-added B) proportional C) regressive D) progressive

D) progressive

The Social Security program is ________ in that it redistributes income from ________. A) regressive; high earners to low earners B) progressive; low earners to high earners C) regressive; low earners to high earners D) progressive; high earners to low earners

D) progressive; high earners to low earners

If the prices of goods and services were expressed in terms of coconuts, then coconuts would be serving as a A) store of value. B) medium of exchange. C) fiat money. D) standard of value.

D) standard of value.

If bananas were money, which of the following functions of money would be the most difficult for bananas to satisfy? A) medium of exchange B) serving as a commodity C) standard of value D) store of value

D) store of value

From 1970 to 2006, the largest percentage increase in average real income for households in the United States occurred in which quintile? A) the second quintile B) the middle quintile C) the bottom quintile D) the top quintile

D) the top quintile

A stock is an IOU and a bond represents ownership in a company

false

Due to the regularity of business cycles, implementing the correct monetary policy at the correct time has become relatively straightforward.

false

If government raised taxes on the rich and this resulted in a decrease in productivity, the increase in taxes will still definitely make society better off.

false

In describing the progress of the typical person in an economy, measuring the median income always does a better job than measuring the mean income.

false

Spending on new housing, which economists refer to as residential fixed investment, is included in the consumption expenditures component of GDP.

false

The measured unemployment rate tends to overstate the unemployment problem

false

U.S. paper currency is considered representative commodity money because it can be redeemed for gold by the U.S. government.

false

Unlike monetary policy, fiscal policy does not experience policy lags.

false