Macro Exam 2
. Frictional unemployment is inevitable because a. sectoral shifts are always happening. b. there is a federal minimum-wage law in the U.S. c. some people do not want to be employed. d. unions are very popular in the U.S.
A
According to the classical dichotomy, when the money supply doubles which of the following doubles? a. the price level and nominal GDP b. the price level and real GDP c. only real GDP d. only the price level
A
An increase in the budget deficit a. makes investment spending fall. b. makes investment spending rise. c. does not affect investment spending. d. may increase, decrease, or not affect investment spending.
A
An organization that tries to encourage the flow of investment to poor countries is the a. World Bank. b. Organization of Less Developed Countries. c. Alliance of Developing Countries. d. International Development Alliance.
A
At any meeting of the Federal Open Market Committee, that committee's voting members consist of a. 5 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. b. 5 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors. c. 12 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. d. 12 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors.
A
Athens and Troy both produce only ribs and baked potatoes. Athens Troy Quantities Ribs 300,000 200,000 Baked Potatoes 400,000 250,000 Base year prices Ribs $10 $10 Baked Potatoes $4 $4 Population and Employment Population 12,000 8,000 Total hours of employment 80,000 48,000 46. Refer to Table 12-1. Which of the following is correct? a. Both real GDP and real GDP per person are higher in Athens than Troy. b. Real GDP is higher in Athens while real GDP per person is higher in Troy c. Real GDP is higher in Troy while real GDP per person is higher in Athens. d. Both real GDP and real GDP per person are higher in Troy than Athens.
A
Based on the quantity equation, if Y = 3,000, P = 4, and V = 3, then M = a. $4,000. b. $2,250. c. $250. d. $36,000.
A
Human capital is the a. knowledge and skills that workers acquire through education, training, and experience. b. stock of equipment and structures that is used to produce goods and services. c. total number of hours worked in an economy. d. same thing as technological knowledge.
A
If M = 5,000, P = 3, and Y = 10,000, what is velocity? a. 6 b. 1.5 c. 2/3 d. 1/6
A
If P = 2 and Y = 1000, then which of the following pairs of values are possible? a. M = 500, V = 4 b. M = 1500, V = 3 c. M = 2000, V = 2 d. M = 500, V = 1
A
If a Brazilian. company opens a new factory in Peru, it makes a. foreign direct investment. The factory will make a bigger impact on Peru's GDP than on its GNP. b. foreign direct investment. The factory will make a bigger impact on Peru's GNP than on its GDP. c. foreign portfolio investment. The factory will make a bigger impact on Peru's GDP than on its GNP. d. foreign portfolio investment. The factory will make a bigger impact on Peru's GNP than on its GDP.
A
If the inflation rate is 2 percent and the real interest rate is 3 percent, then the nominal interest rate is a. 5 percent. b. 1 percent. c. 1.5 percent d. 0.67 percent.
A
If the money multiplier is 2 and the Fed buys $50,000 worth of bonds, what happens to the money supply? a. it increases by $100,000 b. it increases by $150,000 c. it decreases by $100,000 d. it decreases by $150,000
A
If the natural rate of unemployment is 5.2 percent and the actual rate of unemployment is 5.7 percent, then by definition there is a. cyclical unemployment amounting to 0.5 percent of the labor force. b. frictional unemployment amounting to 0.5 percent of the labor force. c. structural unemployment amounting to 0.5 percent of the labor force. d. search unemployment amounting to 0.5 percent of the labor force.
A
If the reserve ratio is 8 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed purchases $20 million of government bonds, bank reserves a. increase by $20 million and the money supply eventually increases by $250 million. b. decrease by $20 million and the money supply eventually increases by $250 million. c. increase by $20 million and the money supply eventually decreases by $250 million. d. decrease by $20 million and the money supply eventually decreases by $250 million.
A
In a system of 100-percent-reserve banking, a. banks do not make loans. b. currency is the only form of money. c. deposits are banks' only assets. d. All of the above are correct.
A
In which case below does a person's purchasing power from saving increase the least? a. the nominal interest rate = 10% and inflation = 8% b. the nominal interest rate = 9% and inflation = 6% c. the nominal interest rate = 8% and inflation = 4% d. the nominal interest rate = 7% and inflation = 2%
A
Minimum-wage laws can keep wages a. above equilibrium and cause a surplus of labor. b. above equilibrium and cause a shortage of labor. c. below equilibrium and cause a surplus of labor. d. below equilibrium and cause a shortage of labor.
A
Money demand depends on a. the price level and the interest rate. b. the price level but not the interest rate. c. the interest rate but not the price level. d. neither the price level nor the interest rate.
A
Prisoners sometimes determine a single good to be used as money. This good becomes a. a medium of exchange and a unit of account. b. a medium of exchange, but not a unit of account. c. a unit of account, but not a medium of exchange. d. neitehr a unit of account nor a medium of exchange.
A
Sample Population Person Status Allen Unpaid stay at home dad. Has not looked for a job in several years. Ben College president. Allison Part-time welder. Actively looking for full time work. Brittany Self-employed full-time wedding singer. Cathy Full-time physician's assistant. Calvin Retired finance professor. Last applied for work 10 weeks ago. Diane Laid-off fork-lift operator expecting to be recalled. David Works for a bicycle store. Age 70. Evelyn Manager of health food store. Eli Museum guard. Was not at work last week due to illness. Flora Has never been employed. Looked for a job last week. Frank Fired from job as an investment banker. Last looked for work three weeks ago. Refer to Sample Population. How many in the sample are in the labor force? a. 10 b. 9 c. 8 d. None of the above is correct.
A
Scenario 13-1. Assume the following information for an imaginary, closed economy. GDP = $120,000; consumption = $70,000; private saving = $9,000; national saving = $12,000. Refer to Scenario 13-1. This economy's government is running a a. budget surplus of $3,000. b. budget surplus of $6,000. c. budget deficit of $3,000. d. budget deficit of $6,000.
A
Suppose the Fed requires banks to hold 10 percent of their deposits as reserves. A bank has $20,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves? a. $29,000 b. $28,100 c. $19,100 d. $11,000
A
Table 16-2. An economy starts with $10,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $9,250. The T-account of the bank is shown below. Assets Liabilities Reserves $750 Deposits $10,000 Loans 9,250 69. Refer to Table 16-2. The bank's reserve ratio is a. 7.50 percent. b. 8.12 percent. c. 92.50 percent. d. 100 percent.
A
The discount rate is a. the interest rate the Fed charges banks. b. one divided by the difference between one and the reserve ratio. c. the interest rate banks receive on reserve deposits with the Fed. d. the interest rate that banks charge on overnight loans to other banks.
A
The inflation tax refers to a. the revenue a government creates by printing money. b. higher inflation which requires more frequent price changes. c. the idea that, other things the same, an increase in the tax rate raises the inflation rate. d. taxes being indexed for inflation.
A
The labor-force participation rate measures the percentage of the a. total adult population that is in the labor force. b. total adult population that is employed. c. labor force that is employed. d. labor force that is either employed or unemployed.
A
The legal tender requirement means that a. people are more likely to accept the dollar as a medium of exchange. b. the government must hold enough gold to redeem all currency. c. people may not make trades with anything else. d. All of the above are correct.
A
The members of the Federal Reserve's Board of Governors a. are appointed by the president of the U.S. and confirmed by the U.S. Senate. b. serve six-year terms. c. are also the presidents of the regional Federal Reserve banks. d. share power equally, with no governor having any more influence or power than any other governor.
A
The natural unemployment rate includes a. both frictional and structural unemployment. b. neither frictional nor structural unemployment. c. structural, but not frictional unemployment. d. frictional, but not structural unemployment.
A
The supply of loanable funds slopes a. upward because an increase in the interest rate induces people to save more. b. downward because an increase in the interest rate induces people to save less. c. downward because an increase in the interest rate induces people to invest less. d. upward because an increase in the interest rate induces people to invest more.
A
To explain the long-run determinants of the price level and the inflation rate, most economists today rely on the a. quantity theory of money. b. price-index theory of money. c. theory of hyperinflation. d. disequilibrium theory of money and inflation.
A
Velocity is computed as a. (P * Y)/M. b. (P * M)/Y. c. (Y * M)/P. d. (Y * M)/V.
A
When opening a print shop you need to buy printers, computers, furniture, and similar items. Economists call these expenditures a. capital investment. b. investment in human capital. c. business consumption expenditures. d. personal saving.
A
When the Fed decreases the discount rate, banks will a. borrow more from the Fed and lend more to the public. The money supply increases. b. borrow more from the Fed and lend less to the public. The money supply decreases. c. borrow less from the Fed and lend more to the public. The money supply increases. d. borrow less from the Fed and lend less to the public. The money supply decreases.
A
Which of the following would be considered physical capital? a. the refrigerators at Uncle Bob's restaurant b. rivers on which goods are transported c. the skills and knowledge of a lawyer d. All of the above are correct.
A
Who in the adult population is counted as employed in U.S. labor statistics? a. people who are temporarily absent from their job and people who work without pay in a family member's business b. people who are temporarily absent from their job but not people who work without pay in a family member's business c. people who work without pay in a family member's business but not people who are temporarily absent from their job d. neither people who are temporarily absent from their job nor people who work without pay in a family member's business
A
You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money? a. medium of exchange b. unit of account c. store of value d. liquidity
A
. Economists use the word "money" to refer to a. income generated by the production of goods and services. b. those assets regularly used to buy goods and services. c. financial assets such as stocks and bonds. d. any type of wealth.
B
7. Consider five individuals with different occupations. Allen prepares taxes wants ribs Betty does dry cleaning wants computer fixed Calvin fixes computers wants bread Diedre bakes bread wants taxes prepared Eric barbecues ribs wants dry cleaning If this economy has money a. Allen will buy from Betty b. Betty will buy from Calvin c. Eric will buy from Allen d. None of the above are correct.
B
A bank has $200,000 in deposits and $190,000 in loans. It has loaned out all it can. It has a reserve ratio of a. 2.5 percent. b. 5 percent. c. 9.5 percent. d. 10 percent.
B
A bank has a 10 percent reserve requirement, $4,000 in deposits, and has loaned out all it can given the reserve requirement. a. It has $40 in reserves and $3,960 in loans. b. It has $400 in reserves and $3,600 in loans. c. It has $444 in reserves and $3,556 in loans. d. None of the above is correct.
B
A bank has a 10 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement. a. It has $50 in reserves and $4,950 in loans. b. It has $500 in reserves and $4,500 in loans. c. It has $555 in reserves and $4,445 in loans. d. None of the above is correct.
B
A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $100. If customers deposit $50 into the bank, what is the value of the money supply? a. $50 b. $100 c. $150 d. $200
B
A bond is a a. financial intermediary. b. certificate of indebtedness. c. certificate of partial ownership in an enterprise. d. None of the above is correct.
B
A nation's standard of living is best measured by its a. real GDP. b. real GDP per person. c. nominal GDP. d. nominal GDP per person.
B
According to the assumptions of the quantity theory of money, if the money supply increases by 5 percent, then a. nominal and real GDP would rise by 5 percent. b. nominal GDP would rise by 5 percent; real GDP would be unchanged. c. nominal GDP would be unchanged; real GDP would rise by 5 percent. d. neither nominal GDP nor real GDP would change.
B
An open-market purchase a. increases the number of dollars and the number of bonds in the hands of the public. b. increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public. c. decreases the number of dollars and the number of bonds in the hands of the public. d. decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.
B
Based on the quantity equation, if M = 100, V = 3, and Y = 200, then P = a. 1. b. 1.5. c. 2. d. None of the above is correct.
B
Consider five high school students working on homework in study hall. Rosie has math homework wants science homework Bob has English homework wants history homework Piper has math homework wants science homework Dewey has science homework wants English homework Molly has science homework wants math homework Which of the following pairs of students has a double coincidence of wants? a. Rosie and Piper b. Piper and Molly c. Dewey and Molly d. Bob and Dewey
B
Currently, U.S. currency is a. fiat money with intrinsic value. b. fiat money with no intrinsic value. c. commodity money with intrinsic value. d. commodity money with no intrinsic value.
B
If P = 4 and Y = 450, then which of the following pairs of values are possible? a. M = 800, V = 4 b. M = 600, V =3 c. M = 400, V =2 d. M = 200, V =1
B
If a bank posts a nominal interest rate of 11 percent, and inflation is expected to be 4 percent, then a. the expected real interest rate is 11 percent. b. the expected real interest rate is 7 percent. c. the expected real interest rate is 4 percent. d. the expected real interest rate is 15 percent.
B
If the demand for loanable funds shifts to the left, then the equilibrium interest rate a. and quantity of loanable funds rise. b. and quantity of loanable funds fall. c. rises and the quantity of loanable funds falls. d. falls and the quantity of loanable funds rises.
B
If the money multiplier is 2 and the Fed wants to increase the money supply by $900,000, it could a. buy $300,000 worth of bonds. b. buy $450,000 worth of bonds. c. sell $300,000 worth of bonds. d. sell $450,000 worth of bonds.
B
If the nominal interest rate is 10 percent and the inflation rate is 4 percent, then the real interest rate is a. 14 percent. b. 6 percent. c. 2.5 percent. d. .4 percent.
B
If the nominal interest rate is 5 percent and the rate of inflation is 2 percent, then the real interest rate is a. 7 percent. b. 3 percent. c. 2.5 percent. d. .4 percent.
B
If the nominal interest rate is 7 percent and the real interest rate is 2 percent, then what is the inflation rate? a. 9.0 percent b. 5 percent c. 3.5 percent d. None of the above is correct.
B
If the reserve ratio is 10 percent, the money multiplier is a. 100. b. 10. c. 9/10. d. 1/10.
B
If the reserve ratio is 12.5 percent, the money multiplier is a. 6.25. b. 8. c. 12.5. d. 25.
B
If velocity = 5, the price level = 1.5, and the real value of output is 2,500, then the quantity of money is a. 333.33. b. 750.00. c. 1,050.00. d. 8,333.33.
B
Long-term bonds are a. riskier than short-term bonds, and so interest rates on long-term bonds are usually lower than interest rates on short-term bonds. b. riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds. c. less risky than short-term bonds, and so interest rates on long-term bonds are usually lower than interest rates on short-term bonds. d. less risky than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds.
B
Monetary neutrality implies that an increase in the quantity of money will a. increase employment. b. increase the price level. c. increase the incentive to save. d. not increase any of the above.
B
Money is a. the most liquid asset and a perfect store of value. b. the most liquid asset but an imperfect store of value. c. not the most liquid asset but a perfect store of value. d. neither the most liquid asset and nor a perfect store of value.
B
Municipal bonds pay a relatively a. low rate of interest because of their high default risk and because the interest they pay is subject to federal income tax. b. low rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax. c. high rate of interest because of their high default risk and because federal taxes must be paid on the interest they pay. d. high rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax.
B
Paper dollars a. are commodity money and gold coins are fiat money. b. are fiat money and gold coins are commodity money. c. and gold coins are both commodity monies. d. and gold coins are both fiat monies.
B
People who are unemployed because wages are, for some reason, set above the level that brings labor supply and demand into equilibrium are best classified as a. cyclically unemployed. b. structurally unemployed. c. frictionally unemployed. d. discouraged workers.
B
Printing money to finance government expenditures a. causes the value of money to rise. b. imposes a tax on everyone who holds money. c. is the principal method by which the U.S. government finances its expenditures. d. None of the above is correct.
B
Reserves decrease if the Federal Reserve a. raises the discount rate or auctions more credit. b. raises the discount rate but not if it auctions more credit. c. lowers the discount rate or auctions more credit. d. lowers the discount rate but not if it auctions more credit.
B
Short-term bonds are generally a. less risky than long-term bonds and so they feature higher interest rates. b. less risky than long-term bonds and so they feature lower interest rates. c. more risky than long-term bonds and so they feature higher interest rates. d. more risky than long-term bonds and so they feature lower interest rates.
B
Suppose the banking system currently has $300 billion in reserves; the reserve requirement is 10 percent; and excess reserves amount to $3 billion. What is the level of deposits? a. $3,300 billion b. $2,970 billion c. $2,700 billion d. $2,673 billion
B
The economy's two most important financial markets are a. the investment market and the saving market. b. the bond market and the stock market. c. banks and the stock market. d. financial markets and financial institutions.
B
The labor force equals the a. number of people employed. b. number of people employed plus the number of people unemployed. c. number of people employed plus the number of people unemployed plus teenagers between ages 14 and 16 who work at least 10 hours a week. d. adult population.
B
The slope of the demand for loanable funds curve represents the a. positive relation between the real interest rate and investment. b. negative relation between the real interest rate and investment. c. positive relation between the real interest rate and saving. d. negative relation between the real interest rate and saving.
B
Under a fractional-reserve banking system, banks a. hold more reserves than deposits. b. generally lend out a majority of the funds deposited. c. cause the money supply to fall by lending out reserves. d. All of the above are correct.
B
When the Fed conducts open-market sales, a. it sells Treasury securities, which increases the money supply. b. it sells Treasury securities, which decreases the money supply. c. it auctions term loans, which increases the money supply. d. it auctions term loans, which decreases the money supply.
B
When the Federal Reserve conducts open-market operations to increase the money supply, it a. redeems Federal Reserve notes. b. buys government bonds from the public. c. raises the discount rate. d. decreases its lending to member banks.
B
Which list ranks assets from most to least liquid? a. currency, fine art, stocks b. currency, stocks, fine art c. fine art, currency, stocks d. fine art, stocks, currency
B
Which of the following could explain a decrease in the equilibrium interest rate and in the equilibrium quantity of loanable funds? a. The demand for loanable funds shifted rightward. b. The demand for loanable funds shifted leftward. c. The supply of loanable funds shifted rightward. d. The supply of loanable funds shifted leftward.
B
Which of the following individuals serve a four-year term? a. the members of the Board of Governors b. the Chair of the Board of Governors c. the members of the FOMC d. All of the above are correct.
B
Which tool of monetary policy does the Federal Reserve use most often? a. term auctions b. open-market operations c. changes in reserve requirements d. changes in the discount rate
B
Workland has a population of 10,000, of whom 7,000 work 8 hours a day to produce a total of 224,000 final goods. Laborland has a population of 5,000, of whom 4,000 work 12 hours a day to produce a total of 120,000 final goods. a. Workland has higher productivity and higher real GDP per person than Laborland. b. Workland has higher productivity but lower real GDP per person than Laborland. c. Workland has lower productivity but higher real GDP per person than Laborland. d. Workland has lower productivity and lower real GDP per person than Laborland.
B
A bank has $10,000 in deposits and $8,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is a. 2 percent. b. 12.5 percent. c. 20 percent. d. 80 percent.
C
An increase in the budget deficit would cause a a. shortage of loanable funds at the original interest rate, which would lead to falling interest rates. b. surplus of loanable funds at the original interest rate, which would lead to rising interest rates. c. shortage of loanable funds at the original interest rate, which would lead to rising interest rates. d. surplus of loanable funds at the original interest rate, which would lead to falling interest rates.
C
Commodity money is a. backed by gold. b. the principal type of money in use today. c. money with intrinsic value. d. receipts created in international trade that are used as a medium of exchange.
C
If Japan goes from a small budget deficit to a large budget deficit, it will reduce a. private saving and so shift the supply of loanable funds left. b. investment and so shift the demand for loanable funds left. c. public saving and so shift the supply of loanable funds left. d. None of the above is correct.
C
If a bank has a reserve ratio of 8 percent, then a. government regulation requires the bank to use at least 8 percent of its deposits to make loans. b. the bank's ratio of loans to deposits is 8 percent. c. the bank keeps 8 percent of its deposits as reserves and loans out the rest. d. the bank keeps 8 percent of its assets as reserves and loans out the rest.
C
If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent, this action by itself initially makes the money supply a. and wealth increase by $100. b. and wealth decrease by $100. c. increase by $100 while wealth does not change. d. decrease by $100 while wealth decreases by $100.
C
If the discount rate is lowered, banks borrow a. less from the Fed so reserves increase. b. less from the Fed so reserves decrease. c. more from the Fed so reserves increase. d. more from the Fed so reserves decrease.
C
If the supply for loanable funds shifts to the left, then the equilibrium interest rate a. and quantity of loanable funds rise. b. and quantity of loanable funds fall. c. rises and the quantity of loanable funds falls. d. falls and the quantity of loanable funds rises.
C
In a fractional-reserve banking system, a bank a. does not make loans. b. does not accept deposits. c. keeps only a fraction of its deposits in reserve. d. None of the above is correct.
C
Inward-oriented policies a. are generally supported by economists. b. are primarily concerned with the development of human capital. c. in some ways are like prohibiting the use of certain technologies. d. All of the above are correct.
C
Last year a country had 800 workers who worked an average of 8 hours and produced 12,800 units. This year the same country had 1000 workers who worked an average of 8 hours and produced 14,000 units. This country's productivity was a. higher this year than last year. A possible source of this change in productivity is a change in the size of the capital stock. b. higher this year than last year. A change in the size of the capital stock does not affect productivity. c. lower this year than last year. A possible source of this change in productivity is a change in the size of the capital stock. d. lower this year than last year. A change in the size of the capital stock does not affect productivity.
C
Money demand refers to a. the total quantity of financial assets that people want to hold. b. how much income people want to earn per year. c. how much wealth people want to hold in liquid form. d. how much currency the Federal Reserve decides to print.
C
Productivity is defined as the quantity of a. labor required to produce a nation's GDP. b. labor required to produce one unit of goods and services. c. goods and services produced from each unit of labor input. d. goods and services produced per unit of time.
C
Refer to Table 12-1. Which of the following is correct? a. Both productivity and the standard of living are higher in Athens than Troy. b. Productivity is higher in Athens while the standard of living is higher in Troy c. Productivity is higher in Troy while the standard of living is higher in Athens. d. Both productivity and the standard of living are higher in Troy than Athens.
C
Reserves increase if the Federal Reserve a. raises the discount rate or auctions more credit. b. raises the discount rate but not if it auctions more credit. c. lowers the discount rate or auctions more credit. d. lowers the discount rate but not if it auctions more credit.
C
Sample Population Person Status Allen Unpaid stay at home dad. Has not looked for a job in several years. Ben College president. Allison Part-time welder. Actively looking for full time work. Brittany Self-employed full-time wedding singer. Cathy Full-time physician's assistant. Calvin Retired finance professor. Last applied for work 10 weeks ago. Diane Laid-off fork-lift operator expecting to be recalled. David Works for a bicycle store. Age 70. Evelyn Manager of health food store. Eli Museum guard. Was not at work last week due to illness. Flora Has never been employed. Looked for a job last week. Frank Fired from job as an investment banker. Last looked for work three weeks ago. Refer to Sample Population. How many in the sample are unemployed? a. 5 b. 4 c. 3 d. None of the above is correct.
C
Sandy has graduated from college and is devoting her time to searching for a job. She has seen plenty of openings, but has not yet been offered one that best suits her tastes and skills. Sandy is a. structurally unemployed. Structural unemployment exists even in the long run. b. structurally unemployed. There is no structural unemployment in the long run. c. frictionally unemployed. Frictional unemployment exists even in the long run. d. frictionally unemployed. There is no frictional unemployment in the long run.
C
Scenario 13-1. Assume the following information for an imaginary, closed economy. GDP = $120,000; consumption = $70,000; private saving = $9,000; national saving = $12,000. Refer to Scenario 13-1. For this economy, taxes amount to a. $28,000. b. $38,000. c. $41,000. d. $44,000.
C
Scenario 13-1. Assume the following information for an imaginary, closed economy. GDP = $120,000; consumption = $70,000; private saving = $9,000; national saving = $12,000. Refer to Scenario 13-1. For this economy, investment amounts to a. $4,000. b. $9,000. c. $12,000. d. $16,000.
C
Suppose that Congress were to institute an investment tax credit. What would happen in the market for loanable funds? a. The demand for loanable funds would shift left. b. The supply of loanable funds would shift left. c. The demand for loanable funds would shift right. d. The supply of loanable funds would shift right.
C
Table 16-2. An economy starts with $10,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $9,250. The T-account of the bank is shown below. Assets Liabilities Reserves $750 Deposits $10,000 Loans 9,250 Refer to Table 16-2. If all banks in the economy have the same reserve ratio as this bank, then an increase in reserves of $150 for this bank has the potential to increase deposits for all banks by a. $866.67. b. $1,666.67. c. $2,000.00. d. an infinite amount.
C
The Bureau of Labor Statistics is part of the U.S. Department of a. the Treasury. b. Commerce. c. Labor. d. the Interior.
C
The prices of stock traded on exchanges are determined by a. the Corporate Stock Administration. b. the administrators of NASDAQ. c. the supply of, and demand for, the stock. d. All of the above are correct.
C
The shoeleather cost of inflation refers to a. the redistributional effects of unexpected inflation. b. the time spent searching for low prices when inflation rises. c. the waste of resources used to maintain lower money holdings. d. the increased cost to the government of printing more money.
C
The source of hyperinflations is primarily a. lower output growth. b. continuing declines in velocity. c. increases in money-supply growth. d. continuing increases in money demand.
C
The supply of money increases when a. the value of money increases. b. the interest rate increases. c. the Fed makes open-market purchases. d. None of the above is correct.
C
The traditional view of the production process is that capital is subject to a. constant returns. b. increasing returns. c. diminishing returns. d. diminishing returns for low levels of capital, and increasing returns for high levels of capital.
C
When a bank loans out $1,000, the money supply a. does not change. b. decreases. c. increases. d. may do any of the above.
C
When the money market is drawn with the value of money on the vertical axis, if money demand shifts leftward, then initially there is an a. excess demand for money which causes the price level to rise. b. excess demand for money which causes the price level to fall. c. excess supply of money which causes the price level to rise. d. excess supply of money which causes the price level to fall.
C
When the price level falls, the number of dollars needed to buy a representative basket of goods a. increases, so the value of money rises. b. increases, so the value of money falls. c. decreases, so the value of money rises. d. decreases, so the value of money falls.
C
Which of the following could explain a decrease in the equilibrium interest rate and an increase in the equilibrium quantity of loanable funds? a. The demand for loanable funds shifted rightward. b. The demand for loanable funds shifted leftward. c. The supply of loanable funds shifted rightward. d. The supply of loanable funds shifted leftward.
C
Which of the following is an asset of a bank and a liability for its customers? a. deposits of its customers and loans to it customers b. deposits of its customers but not loans to its customers c. loans of its customers but not the deposits of its customers d. neither the deposits of its customers nor the loans to its customers
C
Which of the following is correct? a. Although levels of real GDP per person vary substantially from country to country, the growth rate of real GDP per person is similar across countries. b. Productivity is not closely linked to government policies. c. The level of real GDP per person is a good gauge of economic prosperity, and the growth rate of real GDP per person is a good gauge of economic progress. d. Productivity may be measured by the growth rate of real GDP per person.
C
Which of the following is not included in M1? a. currency b. demand deposits c. savings deposits d. traveler's checks
C
Which of the following would necessarily increase the equilibrium interest rate? a. The demand for and the supply of loanable funds shift right. b. The demand for and the supply of loanable funds shift left. c. The demand for loanable funds shifts right and the supply of loanable funds shifts left. d. The demand for loanable funds shifts left and the supply of loanable funds shifts right.
C
A bank's reserve ratio is 6.5 percent and the bank has $1,950 in reserve. Its deposits amount to a. $62.25. b. $126.75. c. $22,500.00 d. $30,000.00.
D
According to the classical dichotomy, which of the following is affected by monetary factors? a. nominal wages b. the price level c. nominal GDP d. All of the above are correct.
D
Based on past experience, if a country is experiencing hyperinflation, then which of the following would be a reasonable guess? a. The country has high money supply growth. b. Inflation is acting like a tax on everyone who holds money. c. The government is printing money to finance its expenditures. d. All of the above are correct.
D
Based on the quantity equation, if M = 150, V = 4, and Y = 200, then P = a. 1/3. b. 1/2. c. 2. d. 3.
D
Both Arnold and Will work 10 hours a day. Arnold can produce six baskets of goods per hour while Will can produce four baskets of the same goods per hour. It follows that Arnold's a. productivity is greater than Will's. b. output is greater than Will's. c. standard of living is higher than Will's. d. All of the above are correct.
D
Cyclical unemployment is caused by a. frictional and structural unemployment b. frictional but not structural unemployment c. structural but not frictional unemployment d. neither frictional nor structural unemployment
D
Higher inflation a. causes firms to change prices less frequently and makes relative prices less variable. b. causes firms to change prices less frequently and makes relative prices more variable. c. causes firms to change prices more frequently and makes relative prices less variable. d. causes firms to change prices more frequently and makes relative prices more variable.
D
If M = 3,000, P = 2, and Y = 12,000, what is velocity? a. 1/2 b. 2 c. 4 d. 8
D
If the discount rate is raised then banks borrow a. more from the Fed so reserves increase. b. more from the Fed so reserves decrease. c. less from the Fed so reserves increase. d. less from the Fed so reserves decrease.
D
If the government institutes policies that diminish incentives to save, then in the loanable funds market a. the demand for loanable funds shifts rightward. b. the demand for loanable funds shifts leftward. c. the supply of loanable funds shifts rightward. d. the supply of loanable funds shifts leftward.
D
If the government's expenditures exceeded its receipts, it would likely a. lend money to a bank or other financial intermediary. b. borrow money from a bank or other financial intermediary. c. buy bonds directly from the public. d. sell bonds directly to the public.
D
If the nominal interest rate is 7 percent and expected inflation is 4.5 percent, then what is the expected real interest rate? a. 11.5 percent b. 7 percent c. 4.5 percent d. 2.5 percent
D
If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $65 million worth of bonds to the public, bank reserves a. increase by $65 million and the money supply eventually increases by $266.67 million. b. increase by $65 million and the money supply eventually increases by $433.33 million. c. decrease by $65 million and the money supply eventually decreases by $266.67 million. d. decrease by $65 million and the money supply eventually decreases by $433.33 million.
D
If there are diminishing returns to capital, then a. capital produces fewer goods as it ages. b. old ideas are not as useful as new ones. c. increases in the capital stock eventually decrease output. d. increases in the capital stock increase output by ever smaller amounts.
D
In June 2009 the BLS reported a U.S. foreign-born population of 35.3 million. Of these, 22.7 million were employed and 1.4 million were unemployed. Based on these numbers what were the unemployment rate and the labor-force participation rate of the foreign-born U.S. population? a. 1.4/35.3 and 22.7/35.3 b. 1.4/35.3 and 24.1/35.3 c. 1.4/24.1 and 22.7/24.1 d. None of the above are correct.
D
In June 2009 the BLS reported an adult population of 234.9 million, a labor force of 154 million and employment of 141.6 million. Based on these numbers the unemployment rate was a. 93.3/234.9. b. 12.4/234.9. c. 93.3/154. d. 12.4/154.
D
In which case below is the real interest rate the highest? a. the nominal interest rate = 4% and inflation = 3% b. the nominal interest rate = 3% and inflation = 1% c. the nominal interest rate = 2% and inflation = -2% d. the nominal interest rate = 1% and inflation = -4%
D
M1 includes a. currency. b. demand deposits. c. traveler's checks. d. All of the above are correct.
D
Minimum wages create unemployment in markets where they create a a. shortage of labor. Unemployment of this type is called frictional. b. shortage of labor. Unemployment of this type is called structural. c. surplus of labor. Unemployment of this type is called frictional. d. surplus of labor. Unemployment of this type is called structural.
D
Money a. is more efficient than barter. b. makes trades easier. c. allows greater specialization. d. All of the above are correct.
D
Net exports must equal zero for any economy a. that is closed. b. for which Y = C + I + G. c. for which S = Y - C - G. d. All of the above are correct.
D
Scenario 13-1. Assume the following information for an imaginary, closed economy. GDP = $120,000; consumption = $70,000; private saving = $9,000; national saving = $12,000. Refer to Scenario 13-1. For this economy, government purchases amount to a. $12,000. b. $18,000. c. $28,000. d. $38,000.
D
Stock represents a. a claim to a share of the profits of a firm. b. ownership in a firm. c. equity finance. d. All of the above are correct
D
Suppose an economy produces only ice cream cones. If the price level rises, the value of currency a. rises, because one unit of currency buys more ice cream cones. b. rises, because one unit of currency buys fewer ice cream cones. c. falls, because one unit of currency buys more ice cream cones. d. falls, because one unit of currency buys fewer ice cream cones.
D
The amount of currency per person in the United States is about a. $125. b. $300. c. $2,500. d. $3,700.
D
The classical theory of inflation a. is also known as the quantity theory of money. b. was developed by some of the earliest economic thinkers. c. is used by most modern economists to explain the long-run determinants of the inflation rate. d. All of the above are correct.
D
The inflation tax a. is an alternative to income taxes and government borrowing. b. taxes most those who hold the most money. c. is the revenue created when the government prints money. d. All of the above are correct.
D
The level of real GDP person a. differs widely across countries, but the growth rate of real GDP per person is similar across countries. b. is very similar across countries, but the growth rate of real GDP per person differs widely across countries. c. and the growth rate of real GDP per person are similar across countries. d. and the growth rate of real GDP per person vary widely across countries.
D
The nominal interest rate is 4.5 percent and the inflation rate is 0.9 percent. What is the real interest rate? a. 5.4 percent b. 5 percent c. 4.1 percent d. 3.6 percent
D
The velocity of money is a. the rate at which the Fed puts money into the economy. b. the same thing as the long-term growth rate of the money supply. c. the money supply divided by nominal GDP. d. the average number of times per year a dollar is spent.
D
Unemployment insurance a. may improve the ability of the economy to match workers with appropriate jobs. b. reduces the job search efforts of the unemployed. c. increases the amount of frictional unemployment in the economy. d. All of the above are correct.
D
When the money market is drawn with the value of money on the vertical axis, a. money demand slopes upward and money supply is horizontal. b. money demand slopes downward and money supply is horizontal. c. money demand slopes upward and money supply is vertical. d. money demand slopes downward and money supply is vertical.
D
When the money market is drawn with the value of money on the vertical axis, an increase in the money supply causes the equilibrium value of money a. and equilibrium quantity of money to increase. b. and equilibrium quantity of money to decrease. c. to increase, while the equilibrium quantity of money decreases. d. to decrease, while the equilibrium quantity of money increases.
D
Which of the following could explain an increase in the equilibrium interest rate and a decrease in the equilibrium quantity of loanable funds? a. The demand for loanable funds shifted right. b. The demand for loanable funds shifted left. c. The supply of loanable funds shifted right. d. The supply of loanable funds shifted left.
D
Which of the following equations will always represent GDP in an open economy? a. S = I - G b. I = Y - C + G c. Y = C + I + G d. Y = C + I + G + NX
D
Which of the following is an example of a renewable natural resource? a. fish b. soybeans c. wood d. All of the above are correct.
D
Which of the following is an example of menu costs? a. deciding on new prices b. printing new price lists c. advertising new prices d. All of the above are examples of menu costs.
D
Which of the following is consistent with the catch-up effect? a. The United States had a higher growth rate before 1900 than after. b. After World War II the United States had lower growth rates than war-ravaged European countries. c. Although the United States has a relatively high level of output per person, its growth rate is rather modest compared to some countries. d. All of the above are correct.
D
Which of the following is correct? a. Lenders sell bonds and borrowers buy them. b. Long-term bonds usually pay a lower interest rate than do short-term bonds because long-term bonds are riskier. c. The term junk bonds refers to bonds that have been resold many times. d. None of the above is correct.
D
Which of the following is correct? a. The Federal Reserve has 14 regional banks. The Board of Governors has 12 members who serve 7-year terms. b. The Federal Reserve has 14 regional banks. The Board of Governors has 7 members who serve 14-year terms. c. The Federal Reserve has 12 regional banks. The Board of Governors has 12 members who serve 7-year terms. d. The Federal Reserve has 12 regional banks. The Board of Governors has 7 members who serve 14-year terms.
D
Which of the following is not a tool of monetary policy? a. open market operations b. reserve requirements c. changing the discount rate d. increasing the government budget deficit
D
Which of the following statements is correct? In 2008, a. real income per person in the U.S. was about 8 times that in China. b. real income per person in China was about 2 times that in India in 2008. c. the typical resident of India had less real income than the typical resident of England in 1870. d. All of the above are correct.
D
With the value of money on the vertical axis, the money supply curve is a. upward-sloping. b. downward-sloping. c. horizontal. d. vertical.
D
