Intro to Economics Final Exam

The U.S. economy has two main sources for financial capital; _______________________ and ____________________________. A. private savings from U.S. households and firms; inflows of foreign financial investment. B. private sector investment; government borrowing C. private savings from U.S. households and firms; government borrowing D. private sector investment; inflows of foreign financial investment from abroad

A. private savings from U.S. households and firms; inflows of foreign financial investment.

A __________________ often results in an outflow of financial capital leaving the domestic economy and being invested in the global economy? A. trade surplus B. trade deficit C. fiscal deficit D. twin surplus

A. trade surplus

______ is a completely inadequate mechanism ______ in a modern advanced economy.

If Bill performs plumbing upgrades for Alice in exchange for her incorporating hisbusiness, then their _________________________ will be satisfied. a double coincidence of wants ______ is a completely inadequate mechanism ______ in a modern advanced economy. barter; for trying to coordinate trades

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible. Select one: a. budget constraint b. consumption set c. income cap d. original budget

a. budget constraint

The unemployment rate in a town in which 65,400 persons are employed and 11,000 are unemployed equals: Select one: a. 14.4% b. 11% c. 20.2% d. 16.8%

a. 14.4%

Assuming a country's economy maintains an 8% rate of growth, young adults starting at age 20 would see the average standard of living in their country more than double by the time they had reached age __________. Select one: a. 30 b. 40 c. 60 d. 50

a. 30

If nominal GDP is 1800 and the money supply is 450, then what is velocity? Select one: a. 4.5 b. 4 c. 25 d. 22

b. 4

If the neoclassical argument that the economy always moves back to potential GDP is accepted, then which of the following will be more important? Select one: a. fighting recession b. encouraging long-term growth c. fighting unemployment d. encouraging higher wages

b. encouraging long-term growth

If a Keynesian expenditure-output model shows that aggregate demand for both goods and labor has shifted to the left to D1, while wages remained at w0 and prices remained at P0, what will be the result? Select one: a. coordinated wage reductions b. excess supply c. natural rate of unemployment d. depression

b. excess supply

A business cycle reflects changes in economic activity, particularly real GDP. The stages of a business cycle are: Select one: a. expansion, trough, recession, peak b. expansion, peak, recession, trough c. trough, expansion, recession, peak d. contraction, recession, expansion, boom

b. expansion, peak, recession, trough

The market in which loans are bought and sold is called the: Select one: a. money market. b. secondary loan market. c. loan market. d. primary loan market.

b. secondary loan market.

Say's Law argues that a given ____________________ must create an equivalent ________________________ somewhere else in the economy. Select one: a. natural rate of unemployment; full employment GDP b. value of supply; value of demand c. total quantity of goods; price level for output d. potential GDP; value of supply

b. value of supply; value of demand

If a technological leader's economy produces per capita growth rates of about 2% per year, multiplying per capita GDP by a factor of five would take about: Select one: a. 50 years. b. 70 years. c. 80 years. d. 30 years.

c. 80 years.

_______________, which can be approximated by the growth of gross domestic product, ultimately determines the prevailing standard of living in a country. Select one: a. Inflation b. Education c. Economic growth d. Trade balance

c. Economic growth

High income countries are classified as having a GDP per capita that is greater than Select one: a. $21,556 b. $17,964 c. $14,970 d. $12,475

d. $12,475

At the beginning of 2009, a government had a total debt of $540 billion dollars. It ended 2009 with a $6 billion dollar budget surplus. In 2010, its budget surplus reached $8 billion dollars. What is the total debt of the government equal to at the end of 2010? Select one: a. $0 b. $554 billion c. $14 billion d. $540 billion

d. $540 billion

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

B. R&D aimed at producing new weapons

When a government records a budget surplus, the national savings and investment identity is written as: A. S = I + (G - T) + (X - M) B. S + (M - X) + (T - G) = I C. S - (G - T) = I - (X - M) D. S + (T - G) = 1 + (X - M)

B. S + (M - X) + (T - G) = I When gov has budget surplus , it has spare money for investment.

If the quantity of financial capital supplied is equal to the quantity of financial capital demanded then, the national savings and investment identity is written as: A. (M - X) - S = (G + T) - I B. S + (M - X) = I + (G - T) C. S + (G - T) = I - (X - M) D. S = (X - M) - (G - T) Note: X = exports, M = imports, I = investment, G = gov spending, T = gov taxes... or something like that.

B. S + (M - X) = I + (G - T) When fin cap supplied = fin cap demanded.

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

B. an inflationary increase in the price level

If an economy has a budget surplus of 400, private savings of 1,200, and investment of 1,600, what will the balance of trade in this economy equal? A. 0 B. deficit of 1,600 C. deficit of 1,200 D. deficit of 400

A. 0

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

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

In most developed countries, the government plays a large role in society's investment in human capital through _________________________. A. direct spending B. the education system C. tax incentives D. private sector R&D

B. the education system

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

A. central bank prints more money

Ricardian equivalence means that: A. changes in private savings offset any changes in the government deficit. B. changes in exports offset any changes in the government deficit. C. changes in imports offset any changes in the government deficit. D. changes in investment offset any changes in the government deficit.

A. changes in private savings offset any changes in the government deficit.

If a country's economic data shows private savings of $300 million, government spending of $350 million, tax revenue of $400 million, and a trade surplus of $75 million, then what does investment equal?A. $775 million B. $475 million C. $275 million D. $700 million

C. $275 million

When a government records a trade surplus, the national savings and investment identity is written as: A. S = (G - T) + (X - M) - I B. S - (G - T) = I - (X - M) C. S = I + (G - T) + (X - M) D. S + (G - T) = I - (X - M)

C. S = I + (G - T) + (X - M) When gov has trade surplus.

If David Ricardo's theory holds completely true, then any change in budget deficits or budget surpluses would be completely offset by which of the following? A. a change in currency exchange rates B. a sustained pattern of trade imbalances C. a corresponding change in private saving D. a dependence on inflows of capital

C. a corresponding change in private saving

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

C. an increase in the government budget surplus or a decrease in its budget deficit.

If the government initiates an expansionary monetary policy at the same time that its budget deficit decreases, then the interest rate will ______________________. A. increase B. either increase or decrease C. decrease D. remain unchanged

C. decrease

**Which of the following is least likely to be the result of economic disruptive patterns caused by a prolonged period of government budget deficits? A. high inflation B. substantial inflows of foreign financial capital C. increasing exchange rates D. strains on a country's financial system

C. increasing exchange rates

If a government decides to finance an investment in ________________ with higher taxes or ____________________ in other areas, it need not worry that it is crowding out private investment. A. roads and bridges; increased borrowing B. water supply and sewers; by raising capital spending C. public physical capital; lower government spending D. hydroelectric dams and windmills; government R&D

C. public physical capital; lower government spending

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

C. the trade deficit.

An increase in the government's budget surplus will cause the interest rate to: A. either increase or decrease. B. remain the same. C. increase. D. decrease.

D. decrease.

From a macroeconomic point of view, which of the following is a source of demand for financial capital? A. savings by households and firms B. foreign financial investment C. domestic household private savings D. government borrowing

D. government borrowing

CH14 In macroeconomics, ___________________________ describes a situation in which two people each want to exchange some good or service that the other can provide.

a double coincidence of wants

The change in inventories, a component of aggregate supply, comprises roughly __________ of GDP. Select one: a. 0.5% b. 10% c. 1% d. 20%

a. 0.5%

The people in an economy have $10 million in money. There is only one bank that all the people deposit their money in and it holds 10% of the deposits as reserves. What is the money multiplier in this economy? Select one: a. 10 b. 20 c. 1 d. 5

a. 10

The high-income economies of the world contain approximately __________ of the world's population and produce and consume ___________ of the World's GDP. Select one: a. 12%; over 60% b. 14%; over 50% c. 14%; over 70% d. 12%; over 80%

a. 12%; over 60%

In macroeconomics, a _______________ describes the common way in which market values are measured in an economy. Select one: a. unit of account b. medium of exchange c. store of value d. unit of exchange

a. unit of account

In the neoclassic model, economic growth over time shifts potential GDP and the ______________ gradually to the right. Select one: a. vertical AS curve b. vertical Phillips curve c. 45 degree AD curve d. vertical AD curve

a. vertical AS curve

Stealth bank holds deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. The current market value of the bank's loans is $400 million. What is the value of the bank's total liabilities? Select one: a. $110 million b. $600 million c. $200 million d. $90 million

b. $600 million

Which of the following is the percentage of annual US government spending allocated to foreign aid? Select one: a. 10% b. 1% c. 21% d. 17%

b. 1%

Of the world's population of 6.7 billion people, _________ are scraping by on incomes that average less than $2 per day. Select one: a. 5 billion b. 2.6 billion c. 260 million d. 6.2 billion

b. 2.6 billion

Craigburg has a working age population of 20 million. Of those, 11 million are employed and 1 million are unemployed. The unemployment rate is ________ and the participation rate is __________. Select one: a. 5%; 60%. b. 8.3%; 60%. c. 8.3%; 55%. d. 5%; 55%.

b. 8.3%; 60%.

In which of the following countries will the national government have the greatest influence with respect to the nation's economy? Select one: a. Chile b. Cuba c. China d. Canada

b. Cuba

___________________________ in high-income countries is caused by the economy being in a recession. Select one: a. The natural rate of unemployment b. Cyclical unemployment c. A cyclical standard of living d. A natural literacy rate

b. Cyclical unemployment

____________________________ will often cause monetary policy to be considered counterproductive because it makes it hard for the central bank to know when the policy will take effect? Select one: a. Quantitative easing b. Long and variable time lags c. Reserve requirements d. Altering the discount rate

b. Long and variable time lags

Despite many negative feelings, a number of governments have decided that reducing barriers to trade is at least potentially beneficial to their economy. Which of the following is an example of countries reducing barriers through free trade? Select one: a. G20 b. NAFTA c. NATO d. GTO

b. NAFTA

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

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

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

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

To compare the GDP of two different countries with different currencies, it is necessary to use _________________________. Select one: a. per capita GDP b. an exchange rate c. foreign currency d. currency rates

b. an exchange rate

Which of the following are most likely classified by economists as consumer durable goods? Select one: a. stocks, bonds b. automobiles, furniture c. drugs, toys, magazines, books d. food, clothing

b. automobiles, furniture

Which of the following is not included in GDP? Select one: a. the replacement of brake pads on your six-year-old vehicle b. cash income paid to a day laborer that is not reported to the tax authorities c. the fees for legal services rendered by your lawyer d. the payments for a chiropractor's services

b. cash income paid to a day laborer that is not reported to the tax authorities

From a neoclassical viewpoint, government should focus less on: Select one: a. long-term growth. b. cyclical unemployment. c. aggregate supply. d. controlling inflation.

b. cyclical unemployment.

With respect to measuring the money supply, which of the following terms describes a checking account? Select one: a. demand certificates b. demand deposits c. cash certificates d. currency deposits

b. demand deposits

The U.S. trade deficit can disappear without raising legitimate concerns over disruption to the economy if: Select one: a. all tariffs are doubled and import quotas are reduced by half. b. domestic savings rates increases and foreign investment gradually decreases. c. foreign investors sell their U.S. dollar investments and stop investing in the U.S. economy. d. the U.S. immediately ceases trade with all foreign countries.

b. domestic savings rates increases and foreign investment gradually decreases.

Which of the following most likely contributed to the early economic development for the Netherlands? Select one: a. higher proportion of youth and young adults b. geographically located in Europe with coastlines c. only about 2% of GDP comes from agriculture

b. geographically located in Europe with coastlines

Some recent economic research has suggested that African countries' economic growth may have been limited by __________________. Select one: a. population b. geography and climate c. government interventionism d. technological challenges

b. geography and climate

If a Phillip curve shows that unemployment is low and inflation is high in the economy, then that economy: Select one: a. is producing at a point where output is less than potential GDP. b. is producing at a point where output is more than potential GDP. c. is producing at its equilibrium point. d. is producing at its potential GDP.

b. is producing at a point where output is more than potential GDP.

Since Baltimore passed the first _______________ in 1994, several dozen cities enacted similar laws in the late 1990s and into the 2000s. Select one: a. minimum wage b. living wage law c. price ceiling d. price floor

b. living wage law

Antonio tries to limit his risk of overexposure to debt by using a ________________ to store a certain amount of value that he then uses to make purchases. Select one: a. debit card b. smart card c. chip card d. credit card

b. smart card

One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer's true cost of living, is: Select one: a. complimentary bias b. substitution bias c. attribution bias d. preference bias

b. substitution bias

The quantitative easing policies adopted by the Federal Reserve are usually thought of as: Select one: a. traditional monetary policies. b. temporary emergency measures. c. short term loans to fill out reserves. d. a relatively weak tool.

b. temporary emergency measures.

Because China and the East Asian tigers are _________________________, their economies have all experienced rapid economic growth rates. Select one: a. technologically disconnected, they encourage their firms to participate in world markets b. the highest savers in the world, often saving one-third or more of GDP c. overly reliant on a legacy of government economic controls d. rely on using technology developed by technological leaders

b. the highest savers in the world, often saving one-third or more of GDP

Stealth bank holds deposits of $200 million. It holds reserves of $15 million. It has purchased government bonds worth $75 million. The current value of its loans, if sold at market value, is $130 million. What is the value of the Stealth bank's liabilities? Select one: a. $5 million b. $330 million c. $200 million d. $20 million

c. $200 million

Stealth bank has deposits of $350 million. It holds reserves of $30 million and government bonds worth $70 million. If the bank sells its loans at market value of $400 million, what will its total assets equal? Select one: a. $450 million b. $750 million c. $500 million d. $380 million

c. $500 million

If nominal GDP is 2700 and the money supply is 900, what is velocity? Select one: a. 25 b. .33 c. 3 d. 13.5

c. 3

If GDP is 2400 and the money supply is 600, then what is the velocity? Select one: a. 4.57 b. 18.3 c. 4 d. 12

c. 4

|a-b | c\ e |__f_______d_____ Refer to Figure 2-1. Along the production possibilities frontier, the most efficient point of production depicted is: Select one: a. Point D b. Point B c. All points on the production possibilities frontier are equally efficient. d. Point C

c. All points on the production possibilities frontier are equally efficient.

If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that: Select one: a. Goods X and Y are substitute goods. b. the price of Good Y will increase. c. Goods X and Y are complement goods. d. Goods X and Y are normal goods.

c. Goods X and Y are complement goods.

Which of the following terms is considered to be a narrow definition of the money supply that includes, among other things, currency? Select one: a. savings b. M2 c. M1 d. money

c. M1

A vertical aggregate supply curve, where the quantity of output is consistent with many different price levels, also implies: Select one: a. a vertical aggregate demand curve. b. an upward sloping Phillips curve. c. a vertical Phillips curve. d. a downward sloping aggregate demand curve.

c. a vertical Phillips curve.

The Central Bank has raised its reserve requirements from 10% to 12%. If Southern Bank finds that it is not holding enough in reserves to meet the higher requirements, then it will likely: Select one: a. buy bonds to increase the size of its reserve assets. b. reduce the quantity of money and loans on the balance sheet. c. borrow for the short term from the central bank. d. keep track of whether money is flowing in or out of the bank.

c. borrow for the short term from the central bank.

Price D 1 D 2 S 1 S 2 $12 5 9 19 14 $10 8 12 17 12 $8 11 15 15 10 $6 13 18 13 8 $4 16 21 11 6 $2 18 24 9 4 Refer to Table 4-1. Suppose that D2 and S1 are the prevailing demand and supply curves for a product. If the demand schedule changes from D2 to D1, then: Select one: a. equilibrium quantity increases from 13 to 18 b. equilibrium price decreases from $6 to $4. c. equilibrium quantity decreases from 15 to 13. d. equilibrium price increases from $6 to $8.

c. equilibrium quantity decreases from 15 to 13.

Which of the following data would be analyzed to determine whether any shift in the MPI has occurred over the course of the past 5 year period? Select one: a. foreign income b. interest rates c. exchange rates d. MPS

c. exchange rates

When the Federal Reserve announces that it is implementing a new interest rate policy, the ____________________ will be affected? Select one: a. nominal interest rate b. consumer lending rate c. federal funds rate d. real interest rate

c. federal funds rate

If you were to survey central bankers from around the world and ask them what they believe the primary task of monetary policy should be, what would the most popular answer likely be? Select one: a. bank runs b. leverage cycle c. fighting inflation d. bank supervision

c. fighting inflation

The development of a nationwide computerized job bank listing of all job openings would be most likely to reduce: Select one: a. natural unemployment. b. seasonal unemployment. c. frictional unemployment. d. cyclical unemployment.

c. frictional unemployment.

If a country's GDP increases, but its debt decreases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes. Select one: a. increase because GDP increased b. decrease c. increase or decrease d. decrease because its debt decreased

c. increase or decrease

Improvements in the productivity of labor will tend to: Select one: a. increase the supply of labor. b. decrease wages. c. increase wages. d. decrease the supply of labor.

c. increase wages.

After reports of the subprime mortgage crisis began to appear in the media, which of the following most likely caused housing prices to fall? Select one: a. cyclical expectations b. Keynesian theory c. rational expectations d. neoclassical theory

c. rational expectations

In low and middle-income countries, workers who are not connected to a labor market are often unable to: Select one: a. receive social benefits. b. be "officially" employed. c. specialize very much. d. collect old-age payments.

c. specialize very much.

Which of the following will have the greatest influence on the slope of the demand curve in a single market model? Select one: a. full employment b. wealth effects c. substitute goods d. higher wages

c. substitute goods

When an economy is experiencing higher real interest rates, business firms will most likely be discouraged from investing in: Select one: a. mechanical devices. b. specialized services. c. tangible and/or intangible capital. d. computer or other technologies.

c. tangible and/or intangible capital.

Growth policies that mainly focus on both finding appropriate technology and on getting connected through communications and transport infrastructure are generally associated with: Select one: a. nations that are technology leaders. b. neoclassical economic theory c. technologically disconnected nations. d. Keynesian economic theory

c. technologically disconnected nations.

When the central bank decides it will sell bonds using open market operations: Select one: a. the money supply is unaffected. b. interest rates decrease. c. the money supply decreases. d. the money supply increases.

c. the money supply decreases.

Insofar as government public policy is concerned, the best way to battle unemployment would be __________________. Select one: a. to maximize unemployment insurance duration b. to minimize labor unions c. to minimize recessions d. to maximize unemployment payments

c. to minimize recessions

When inflation begins to climb to unacceptable levels in the economy, the government should: Select one: a. use expansionary fiscal policy to shift aggregate demand to the right. b. use contractionary fiscal policy to shift aggregate demand to the left. c. use contractionary fiscal policy to shift aggregate demand to the right. d. use expansionary fiscal policy to shift aggregate demand to the left.

c. use contractionary fiscal policy to shift aggregate demand to the right.

Which of the following is a building block of neoclassical economics? Select one: a. sticky wages and prices b. aggregate demand model c. wages and prices will adjust in a flexible manner d. the size of the economy is determined by real GDP

c. wages and prices will adjust in a flexible manner

In a number of middle to low-income economies around the world, governments may run an expansionary policy of huge and sustained budget deficits. This policy Select one: a. will begin a cycle of heavy reliance on economic growth from a few exported products. b. uses the central bank as a mechanism for making loans to politically favored firms. c. will shift aggregate demand to the right, so that output is beyond the potential GDP level. d. counters inflation without regard to the shift to the left in aggregate demand.

c. will shift aggregate demand to the right, so that output is beyond the potential GDP level.

In Sub-Saharan Africa, the population is 910 million, and the average GDP per capita is: Select one: a. $7,308. b. $5,399. c. $2,733. d. $1,415.

d. $1,415.

In certain African countries like Niger, Tanzania, Nigeria, and Sudan, for example, GDP per capita at the start of the 2000s was still less than $___________. Select one: a. 30 b. 30,000 c. 3000 d. 300

d. 300

The following table (nope) shows the aggregate supply and demand data for a country. If input prices decrease and AS shifts to the right by 3,000 units at each price level. What will the new price equal? Select one: a. 300 b. 800 c. 400 d. 600

d. 600

North American and the European Union have about _________% of the world's population and their combined economic statistics show that they produce and consume about _________% of the world's GDP. Select one: a. 80, 70 b. 16, 16 c. 70, 16 d. 9, 70

d. 9, 70

Which of the following institutions determines the quantity of money in the economy as its most important task? Select one: a. Federal Open Market Committee b. U.S. Department of the Treasury c. Federal Reserve Board of Governors d. Central Bank

d. Central Bank

The GDP deflator is a price index that includes the following components of GDP: Select one: a. Consumption plus Investment but not Exports b. Consumption c. Consumption, Investment, Government plus Exports minus Imports d. Consumption, Investment plus Exports minus Imports

d. Consumption, Investment plus Exports minus Imports

_____________ a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines. Select one: a. Division of labor b. Specialization c. Skill d. Economies of scale

d. Economies of scale

The ____________________ is based on the prices of merchandise that are exported or imported. Select one: a. Producer Price Index b. International Product Index c. Foreign Price Index d. International Price Index

d. International Price Index

Central Bank policy requires Northern Bank to hold 10% of its deposits as reserves. Northern Bank policy prevents it from holding excess reserves. If the central bank purchases $30 million in bonds from Northern Bank what will be the result? Select one: a. Northern's bond assets increase by $30 million b. Northern's net worth changes by $30 million c. the money supply in the economy decreases d. Northern's loan assets increase by $30 million

d. Northern's loan assets increase by $30 million

_________________________ are included in the aggregate amount of MI money currently in circulation. Select one: a. Short-term bonds b. Savings deposits c. Foreign currency deposits d. Traveler's checks

d. Traveler's checks

Which of the following best denotes the reason for the existence of substantial black markets? Select one: a. a market-oriented economy b. government laws and rules c. the microeconomy d. a command economy

d. a command economy

Which of the following events would cause interest rates to increase? Select one: a. an open market operation to buy bonds b. lower tax rates c. lower reserve requirements d. a higher discount rate

d. a higher discount rate

If the economy is in recession with high unemployment and output below potential GDP, then __________________ would cause the economy to return to its potential GDP? Select one: a. a tight monetary policy b. higher interest rates c. fewer loanable funds d. a loose monetary policy

d. a loose monetary policy

If an economy experiences a decrease in aggregate demand due to a decline in consumer confidence and output falls below potential GDP, which of the following is likely to occur? Select one: a. more consumption and less saving b. adjustment back to potential GDP c. increase in price inflation d. a rise in unemployment

d. a rise in unemployment

Frictional unemployment occurs when: Select one: a. a large corporation transfers a worker to another city. b. college students go back to school at the end of the summer. c. there is friction between an employer and employee. d. a worker decides to quit one job to seek a different job.

d. a worker decides to quit one job to seek a different job.

In macroeconomics, the connection from inputs to outputs for the entire economy is called _______________. Select one: a. a production function b. human capital c. physical capital d. an aggregate production function

d. an aggregate production function

In macroeconomics, _____________________________ describes a situation where a bank's liabilities can be withdrawn in the short-term while its assets are being repaid in the long-term. Select one: a. a negative net worth b. reserve ratio c. diversification d. an asset-liability time mismatch

d. an asset-liability time mismatch

When __________________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right. Select one: a. there is a population increase b. prices rise c. equilibrium is achieved d. costs of production fall

d. costs of production fall

Country Able and Country Baker initially have the same real GDP per capita. Country Able experiences no economic growth, while Country Baker grows at a sustained rate of 7 percent. In 12 years, Country Baker's GDP will be approximately ___________ that of Country Able. Select one: a. one-fourth b. one-half c. triple d. double

d. double

In macroeconomics, a _________________ is used to show the relationship between output and the input price level. Select one: a. microeconomic model b. Keynesian framework c. Phillips curve d. expenditure-output model

d. expenditure-output model

In an economy with _______________, money loses some buying power each year, but it remains money. Select one: a. deflation b. currency c. a market orientation d. inflation

d. inflation

If a neoclassical model shows increasing wages in the economy over the long run, what else will likely occur? Select one: a. substantial short-term off-setting decrease in output b. change in government policy to decrease in aggregate demand c. short-run decrease in cyclical unemployment d. inflationary increase in price level

d. inflationary increase in price level

The ____________ describes a situation where sufficient credit is available, but the economy experiences a reduction in consumption and investment. Select one: a. price effect b. inflation rate effect c. wealth effect d. interest rate effect

d. interest rate effect

When the central bank decides to increase the discount rate, the: Select one: a. interest rates decrease. b. money supply increases. c. interest rates are unaffected. d. interest rates increase.

d. interest rates increase.

If mollusk shells were accepted as a method of payment in modern-day markets, what economic role would they play in the financial system? Select one: a. capital exchange b. unit of exchange c. currency exchange d. medium of exchange

d. medium of exchange

Which of the following is described as an innovative and nontraditional method used by the Federal Reserve to expand the quantity of money and credit during the recent U.S. recession? Select one: a. increased reserves requirements b. open market operations c. increased discount rate d. quantitative easing

d. quantitative easing

In a Keynesian cross diagram, what name is given to the distance between an output level that is below potential GDP and the level of potential GDP? Select one: a. inflationary gap b. expenditure-output c. national income (Y) d. recessionary gap

d. recessionary gap

Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank? Select one: a. monetary requirements b. discount requirements c. deposit requirements d. reserve requirements

d. reserve requirements

Most contracts, wage levels, and interest rates are either indexed to inflation, or involve using the currency of another country to sidestep the problem of inflation in some converging economies. Following these policies caused Select one: a. a moderate but substantial current account trade imbalance to control inflation b. indexed inflation policy trade-offs that led to substantial restrictions on trade c. the net flow of foreign investment in and out of the economy reached zero d. solid levels of economic growth for sustained periods of time with 10-30% inflation

d. solid levels of economic growth for sustained periods of time with 10-30% inflation

Of all the arguments for placing limitations on trade, which of the following would most likely be characterized as being the most controversial among economists? Select one: a. bank/financial sector regulation argument b. quantitative easing argument c. floating currency argument d. the infant industry argument

d. the infant industry argument

Whenever there is a shortage at a particular price, the quantity sold at that price will equal: Select one: a. the quantity supplied minus the quantity demanded. b. the quantity demanded at that price. c. (quantity demanded plus quantity supplied)/2. d. the quantity supplied at that price.

d. the quantity supplied at that price.

According to the law of supply: Select one: a. there is an inverse relationship between price and the quantity supplied. b. there is an inverse relationship between price and quantity demanded. c. there is a direct relationship between price and quantity demanded. d. there is a direct relationship between price and the quantity supplied.

d. there is a direct relationship between price and the quantity supplied.

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

d. unpredictable rises and falls in nominal GDP

When other factors such as health and illiteracy rates are added to global comparisons of GDP and population, which of the following is likely to be revealed? Select one: a. the similarity in the low degree of urbanization b. rough comparisons between regions as data are not available c. 2% of the world's GDP comes from agriculture in low-income countries d. very wide differences in the standard of living

d. very wide differences in the standard of living

If labor demand is downward sloping and labor supply is upward sloping, then when labor demand rises faster than labor supply, it is expected that real wages __________. Select one: a. may increase, decrease or stay the same depending on the relative slopes. b. will stay the same c. will decrease d. will increase

d. will increase

In 2010, Tara used $50,000.00 from funds she had invested in certificates of deposit as a down payment to buy a house. What function did this portion of her investments serve when she made the down payment?

medium of exchange

In modern economies, credit cards are a _________________ because of their wide acceptance as a method of payment for both goods and services.

medium of exchange

________________ serves society in three functions: medium of exchange, unit of account, and store of value.

money

An additional investment in human capital, especially for the low-income nations of the world, will likely directly increase which of the following? A. productivity and economic growth B. increased levels of R&D spending C. consumer orientated spin-offs D. highly qualified teachers

A. productivity and economic growth

_______________________ that require the depositor to commit to leaving their funds in the bank for a certain period of time, in exchange for a higher rate of interest are also called ________________. Select one: a. Certificates of deposit; time deposits b. Demand deposits; certificates of deposit c. Money market funds; time deposits d. Bonds; term deposits

a. Certificates of deposit; time deposits

______________________ argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate. Select one: a. Efficiency wage theory b. Employee wage theory c. Employer wage theory d. Equilibrium wage theory

a. Efficiency wage theory

__________ implies that pressure for price increases reaches across _______________markets, not just one. Select one: a. inflation; most b. deflation; most c. deflation; all d. inflation; all

a. inflation; most

**_________ is calculated by taking _________ and then subtracting the value of how much physical capital is worn out, or reduced in value because of aging, over the course of a year. Select one: a. NNP; GNP b. NNP; GDP c. GNP; NNP d. GDP; NNP

a. NNP; GNP

In an AD/ASAD/AS diagram, __________________________ could explain a rise in cyclical unemployment? Select one: a. a shift to the left in either AS or AD b. a shift in AD to the left c. a shift in AS to the left d. a shift in AS to the right

a. a shift to the left in either AS or AD

Consumption, investment, government spending, exports, and imports are: Select one: a. all components of aggregate demand. b. some of the opposing elements found in a market-orientated economy. c. all complementary elements of a market-orientated economy. d. some of the building blocks of Keynesian analysis.

a. all components of aggregate demand.

According to the Keynesian framework, ________________ in __________________ may cause inflation, but not a recession. Select one: a. an increase; domestic investment b. a decrease; a major trading partner's economy c. a decrease; a major trading partner's export prices d. decrease; interest rates

a. an increase; domestic investment

Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good. Select one: a. marginal analysis b. consumption c. utility d. the budget constraint

a. marginal analysis

Along with the general growth-oriented agenda, some central Asian nations need an improved infrastructure of _________________, along with research into ___________ focused on their particular economic realities. Select one: a. communication and transportation; technology b. foreign aid; foreign investment c. market-oriented institutions; economic and legal stability d. health and medical research; foreign aid

a. communication and transportation; technology

Many _____________ countries have a legacy of government economic controls. Select one: a. converging b. technologically disconnected c. high-income d. Sub-Saharan

a. converging

| / / / | e/ /a / |_/__/___/_________ Refer to Figure 3-3. A change from Point A to Point E represents a: Select one: a. decrease in supply. b. decrease in quantity supplied. c. increase in supply. d. increase in quantity supplied.

a. decrease in supply.

Which of the following will cause the multiplier to be smaller and cause changes in investor confidence to have a smaller effect in an economy? Select one: a. decreased trade b. bigger leakages c. increased trade d. smaller leakages

a. decreased trade

When the government passes a new law that explicitly changes overall tax or spending levels, it is enacting: Select one: a. discretionary fiscal policy. b. regressive fiscal policy. c. fiscal policy. d. progressive fiscal policy.

a. discretionary fiscal policy.

If Bill performs plumbing upgrades for Alice in exchange for her incorporating his business, then their _________________________ will be satisfied. Select one: a. double coincidence of wants b. convenience of exchange c. balance of trade d. division of labor

a. double coincidence of wants

Changes in the price level of the different components of aggregate demand are reflected in the AD/ASAD/AS macroeconomic model by a ________________________. Select one: a. downward sloping AD curve b. shorter distance to equilibrium point c. longer distance to equilibrium point d. flatter top portion of AD curve

a. downward sloping AD curve

By about 2050, the ___________ populations in _____________ are expected to boom. Select one: a. elderly; low-income countries b. youth; high income countries c. elderly; high income countries d. youth; low income countries

a. elderly; low-income countries

In modern economies, _____________________ receive money from savers and provide funds to borrowers. Select one: a. financial intermediaries b. credit unions c. governments d. banks

a. financial intermediaries

If a Central Bank decides it needs to decrease both the aggregate demand and the money supply, then it will: Select one: a. follow tight monetary policy. b. follow loose monetary policy. c. follow expansionary monetary policy. d. follow quantitative easing policy.

a. follow tight monetary policy.

The Producer Price Index is based on prices paid for supplies and inputs by: Select one: a. producers of goods and services b. the small business sector c. consumers d. government

a. producers of goods and services

The value of what businesses provide to other businesses is captured in the final products at the end of the __________ chain. Select one: a. production b. value c. supply d. service

a. production

_________________ refers to the total number of units that are purchased at that price. Select one: a. quantity demanded b. quantity c. supply d. market quantity

a. quantity demanded

A central bank that desires to reduce the quantity of money in the economy can: Select one: a. raise the reserve requirement. b. buy bonds in open market operations. c. engage in quantitative easing. d. lower the discount rate.

a. raise the reserve requirement.

Why do neoclassical economists tend to put relatively more emphasis on long-term growth than on fighting recession? Select one: a. standard of living is ultimately determined by long-term growth b. upward trend of potential GDP determines the rate of inflation c. government focuses more on recession and cyclical unemployment d. price and wage stickiness is reasonable in the short run

a. standard of living is ultimately determined by long-term growth

The ____________________ in an AD/AS diagram is most relevant to Say's Law. Select one: a. steep portion of the AS curve b. flat portion of the AS curve c. AS curve d. AD curve

a. steep portion of the AS curve

When per capita GDP is used as a rough measure to compare the economic regions of the World, the richest region is _________________ and the poorest region is ________________. Select one: a. the United States, Western Europe and Japan; Sub-Saharan Africa b. East Asia and the Pacific; South Asia c. the United States, Western Europe and Japan; South Asia d. East Asia and the Pacific; Sub-Saharan Africa

a. the United States, Western Europe and Japan; Sub-Saharan Africa