Macro Exam 2

Which of the following is a certificate of indebtedness? a. Stocks but not bonds b. Bonds but not stocks c. Neither stocks nor bonds d. Both stocks and bonds

B

Two of the economy's most important financial intermediaries are a. banks and the bond market. b. suppliers of funds and demanders of funds. c. the stock market and the bond market. d. banks and mutual funds.

D

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can, given the reserve requirement. a. It has $800 in reserves and $9,200 in loans. b. It has $8,000 in reserves and $2,000 in loans. c. It has $80 in reserves and $9,920 in loans. d. It has $1,250 in reserves and $8,750 in loans.

A

Each day Sue works 8 hours and produces 7 units of goods and services. Mary works 10 hours each day and produces 10 units of goods and services. It follows that a. Mary's productivity is higher than Sue's. b. Sue's income per hour will be higher than Mary's. c. Sue's productivity is higher than Mary's. d. Sue's income per day will be higher than Mary's.

A

Educated people may generate ideas that increase production. These ideas a. produce a return to society from education that is greater than the return to the individual. b. never justify government subsides for education. c. are the source of personal benefits of education. d. are generally irrelevant for economic growth.

A

If the Apple corporation sells a bond it is a. borrowing directly from the public. b. selling shares of ownership indirectly to the public. c. selling shares of ownership directly to the public. d. borrowing indirectly from the public.

A

Octavia does not currently have a job, but she has applied for several jobs in the previous week. Eve is an unpaid stay-at-home mom who has not searched for work in recent years. Who does the Bureau of Labor Statistics count as "not in the labor force"? a. Eve but not Octavia b. Neither Octavia nor Eve c. Octavia but not Eve d. Both Octavia and Eve

A

Suppose that a large number of people who used to work or seek work no longer do either. Other things the same, this makes a. both the number of people unemployed and in the labor force fall. b. the number of people unemployed rise but makes the labor force fall. c. the number of people unemployed fall but does not change the labor force. d. the number of people unemployed rise but does not change the labor force.

A

Suppose that a new government is elected in Eurnesia. The new government takes steps toward improving the court system and reducing government corruption. The citizens of Eurnesia find these efforts credible and outsiders believe these changes will be effective and long lasting. These changes will probably raise a. real GDP per person and productivity in Eurnesia. b. real GDP per person but not productivity in Eurnesia. c. neither productivity nor real GDP per person in Eurnesia. d. productivity but not real GDP per person in Eurnesia.

A

Greg learns how to bake from his grandmother. This is an example of a. neither human capital nor technological knowledge. b. ​human capital, but not technological knowledge. c. both human capital and technological knowledge. d. ​technological knowledge, but not human capital.

B

The natural rate of unemployment is the a. unemployment rate that would prevail with zero inflation. b. amount of unemployment that the economy normally experiences. c. rate associated with the highest possible level of GDP. d. difference between the long-run and short-run unemployment rates.

B

The traditional view of the production process is that capital is subject to a. increasing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries. b. increasing returns, so that other things the same, real GDP in poor countries should grow at a slower rate than in rich countries. c. diminishing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries. d. diminishing returns, so that other things the same, real GDP in poor countries should grow at a slower rate than in rich countries.

C

You saved $500 in currency in your piggy bank to purchase a new laptop. The $500 you kept in your piggy bank illustrates money's function as a _______. The laptop's price is posted as $500. The $500 price illustrates money's function as a _____. You use the $500 to purchase the laptop. This transaction illustrates money's function as a ______. a. medium of exchange, store of value, unit of account b. medium of exchange, unit of account, store of value c. store of value, unit of account, medium of exchange d. store of value, medium of exchange, unit of account

C

If the reserve ratio is 5 percent, then $500 of additional reserves would ultimately generate a. $9,500 of money. b. $2,500 of money. c. $10,500 of money. d. $10,000 of money.

D

The shoeleather cost of inflation refers to the a. time spent searching for low prices when inflation rises. b. increased cost to the government of printing more money. c. redistributional effects of unexpected inflation. d. waste of resources used to maintain lower money holdings.

D

Suppose that monetary neutrality and the Fisher effect both hold. An increase in the money supply growth rate increases a. the inflation rate and the nominal interest rate by the same number of percentage points. b. nominal interest rates but by less than the percentage point increase in the inflation rate. c. neither the inflation rate nor the nominal interest rate. d. the inflation rate but not the nominal interest.

A

The equipment and structures available to produce goods and services are called a. physical capital. b. technology. c. the production function. d. human capital.

A

The principle of monetary neutrality implies that an increase in the money supply will increase a. the price level, but not real GDP. b. real GDP and the price level. c. real GDP, but not the price level. d. neither the price level nor real GDP.

A

When inflation causes relative-price variability consumer decisions, a. are distorted and the ability of markets to efficiently allocate factors of production is impaired. b. are distorted, but markets are still able to efficiently allocate factors of production. c. are not distorted, but the ability of markets to efficiently allocate factors of production is impaired. d. are not distorted and markets are still able to efficiently allocate factors of production.

A

When the market for money is drawn with the value of money on the vertical axis and the quantity of money on the horizontal axis , the money demand curve slopes a. downward, because at higher prices people want to hold more money. b. upward, because at higher prices people want to hold less money. c. upward, because at higher prices people want to hold more money. d. downward, because at higher price people want to hold less money.

A

When the market for money is drawn with the value of money on the vertical axis and the quantity of money on the horizontal axis , the price level increases if money demand shifts a. left and decreases if money supply shifts left. b. right and decreases if money supply shifts left. c. left and decreases if money supply shifts right. d. right and decreases if money supply shifts right.

A

Which of the following both increase the money supply? a. A decrease in the discount rate and a decrease in the interest rate on reserves b. An increase in the discount rate and a decrease in the interest rate on reserves c. A decrease in the discount rate and an increase in the interest rate on reserves d. An increase in the discount rate and an increase in the interest rate on reserves

A

Which of the following does the Federal Reserve not do? a. Conduct fiscal policy b. Serve as a bank regulator c. Act as a lender of last resort d. Conduct monetary policy

A

Cyclical unemployment refers to a. the portion of unemployment created by job search. b. short-run fluctuations around the natural rate of unemployment. c. the portion of unemployment created by wages set above the equilibrium level. d. changes in unemployment due to changes in the natural rate of unemployment.

B

For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2.5 trillion and the government runs a surplus of $1 trillion. What are private saving and national saving? a. $1.5 trillion and $1.5 trillion, respectively b. $1.5 trillion and $2.5 trillion, respectively c. $2.5 trillion and $1.5 trillion, respectively d. $2.5 trillion and $2.5 trillion, respectively

B

Gwen is an unpaid worker in her family's restaurant. The Bureau of Labor Statistics counts Gwen as a. a discouraged worker . b. employed and in the labor force. c. a marginally attached worker . d. unemployed and in the labor force.

B

In 2018 the Bureau of Labor Statistics reported that there were 57.4 million people over age 25 whose highest level of education was some college or an associate degree. Of these, 36.3 million were employed and 1.2 million were unemployed. What were the labor-force participation rate and the unemployment rate for this group? a. 63.2% and 3.2% b. 65.3% and 3.2% c. 63.2% and 2.1% d. 65.3% and 2.1%

B

Minimum wages create unemployment in markets where they create a a. shortage of labor. Unemployment of this type is called structural. b. surplus of labor. Unemployment of this type is called structural. c. shortage of labor. Unemployment of this type is called frictional. d. surplus of labor. Unemployment of this type is called frictional.

B

Some poor countries appear to be falling behind rather than catching up with rich countries. Which of the following could explain the failure of a poor country to catch up? a. The poor country wasted resources fighting corruption. b. The poor country has a health epidemic such as the Zika virus. c. The poor country heavily invests in education. d. The poor country uses a lot of resources to promote free trade policies.

B

The catch-up effect refers to the idea that a. population eventually catches-up with increased output. b. it is easier for a country to grow fast and so catch-up if it starts out relatively poor. c. saving will always catch-up with investment spending. d. if investment spending is low, increased saving will help investment to "catch-up."

B

Wealth is redistributed from creditors to debtors when inflation is a. high, whether it is expected or not. b. unexpectedly high. c. low, whether it is expected or not. d. unexpectedly low.

B

What would happen, all else equal, in the market for loanable funds if the government were to decrease the tax rate on interest income? a. There would be no change in the equilibrium quantity of loanable funds. b. There would be an increase in the equilibrium quantity of loanable funds . c. The change in loanable funds is uncertain. d. There would be a reduction in the equilibrium quantity of loanable funds.

B

When colonists in Virginia used tobacco as money, their money a. was fiat money. b. was commodity money. c. had no intrinsic value. d. had no store of value.

B

You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate? a. Liquidity b. Medium of exchange c. Unit of account d. Store of value

B

A larger budget deficit a. raises the interest rate and investment. b. reduces the interest rate and investment. c. raises the interest rate and reduces investment. d. reduces the interest rate and raises investment.

C

If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, it could a. buy $225,000 worth of bonds. b. sell $225,000 worth of bonds. c. buy $300,000 worth of bonds. d. sell $300,000 worth of bonds

C

If the reserve ratio is 4 percent, then the money multiplier is a. 2.5. b. 0.04. c. 25. d. 10.

C

If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, then the real value of output is a. 200,000. b. 2,000. c. 32,000. d. 12,500.

C

Janet is a farmer. Which of the following are included in her human capital? a. Her tractor but not what she's learned from experience b. Her tractor and what she's learned from experience c. What she's learned from experience but not her tractor d. Neither her tractor nor what she's learned from experience

C

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 supply of loanable funds shifted right. b. The demand for loanable funds shifted left. c. The supply of loanable funds shifted left. d. The demand for loanable funds shifted right.

C

Which of the following provide benefits to society at large and not just to the person(s) who pursues it? a. Education, but not technological knowledge that is a public good b. Technological knowledge that is a public good, but not education c. Both technological knowledge that is a public good and education d. Neither education, nor technological knowledge that is a public good

C

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. neither nominal GDP nor real GDP would change. c. nominal GDP would be unchanged; real GDP would rise by 5 percent. d. nominal GDP would rise by 5 percent; real GDP would be unchanged.

D

Efficiency wages a. increase productivity and reduce unemployment. b. decrease productivity and increase unemployment. c. decrease productivity but reduce unemployment. d. increase productivity but increase unemployment.

D

In a closed economy, if Y and T remained the same, but G rose and C fell but by less than the rise in G, what would happen to public and national saving? a. Public and national saving would rise. b. Public saving would rise and national saving would fall. c. Public saving would fall and national saving would rise. d. Public and national saving would fall.

D

Other things the same, when the interest rate rises, people would want to lend a. more, making the supply of loanable funds increase. b. less, making the supply of loanable funds decrease. c. less, making the quantity of loanable funds supplied decrease. d. more, making the quantity of loanable funds supplied increase.

D

Sam has no job but keeps applying to get a job with a business that is unionized. He is qualified and he finds the pay attractive, but the firm is not hiring. Sam is a. frictionally unemployed. Frictional unemployment exists even in the long run. b. frictionally unemployed. Frictional unemployment does not exist in the long run. c. structurally unemployed. Structural unemployment does not exist in the long run. d. structurally unemployed. Structural unemployment exists even in the long run.

D

Suppose private saving in a closed economy is $12b and investment is $10b. a. National saving must equal $12b. b. Public saving must equal $2b. c. The government budget surplus must equal $2b. d. The government budget deficit must equal $2b.

D

The First Bank of Roswell has: Reserves $30,000 Deposits $200,000 Loans $170,000 If the bank faces a reserve requirement of 6 percent, then the bank a. has excess reserves of $30,000. b. has excess reserves of $12,000. c. is in a position to make new loans equal to a maximum of $12,000. d. is in a position to make new loans equal to a maximum of $18,000.

D

The economy of Mainland uses gold as its money. If the government discovers a large reserve of gold on their land the a. supply of money decreases, the value of money rises , and prices fall . b. demand for money increases, the value of money rises , and prices rise . c. demand for money decreases, the value of money falls , and prices fall . d. supply of money increases, the value of money falls , and prices rise .

D

Which of the following is an explanation for the existence of frictional unemployment? a. Unions b. Minimum-wage laws c. Efficiency wages d. Job search

D