Mutiple choice:

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Velocity of money is computed as

(P x Y)/ M

The labor-force participation rate is computed as

(labor force/adult population) x 100

What is the correct formula for calculating the labor force participation rate?

(labor force/adult population) x 100

In national income accounting, we use which of the following pairs of terms interchangeably? -"investment" and "private saving" -"investment" and "purchases of stocks and bonds" -"private saving" and "national saving" -"public saving" and "government tax revenue minus government spending"

-"public saving" and "government tax revenue minus government spending"

Which of the following statements about GDP is correct? -Nominal GDP values production at constant prices, whereas real GDP values production at current prices. -Nominal GDP values production at market prices, whereas real GDP values production at the cost of the resources used in the production process. -Nominal GDP consistently underestimates the value of production, whereas real GDP consistently overestimates the value of production. -Nominal GDP values production at current prices, whereas real GDP values production at constant prices.

-Nominal GDP values production at CURRENT prices, whereas real GDP values production at CONSTANT prices.

What influences the position of the long-run aggregate supply curve?

-the quantity of raw materials available for production -the quantity of capital used in production -the quantity of the labor force -the size of the labor force

Which of the following can be measured by the level of real GDP per person? -productivity and the standard of living -productivity but not the standard of living -the standard of living but not productivity -neither the standard of living nor productivity

-the standard of living but not productivity

Pauline is offered a Job in Minneapolis that pays $80,000. She is offered a similar job in Louisville that pays $71,200. Which pair of CPIs would ensure that the two salaries have the same purchasing power?

100 in Minneapolis and 89 in Louisville

What is included in the aggregate demand for goods and services?

Consumption demand, investment demand, net exports

Fractional reserve banking occurs when...

a bank has reserves that are LESS than its deposits

Suppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desire

increased consumption, which shifts the aggregate demand curve right

When taxes decrease, consumption

increases and so aggregate demand shifts right.

The marginal propensity to consume

is the change in consumption relative to a change in disposable income

Human Capital is

knowledge and skills that workers have acquired.

Money's principal role is to serve as a

medium of exchange

For an economy as a whole,

income must equal expenditure

An open-market sale...

DECREASES the number of DOLLARS in the hands of the public and INCREASES the number of BONDS in the hands of the public.

An increase in the budget deficit would cause a

Shortage of loanable funds at the original interest rate, which would lead to rising interest rates

Suppose private saving in a closed economy is $12b and investment is $10b.

The government budget deficit must equal $2b

What if there are diminishing returns and a country increases its capital by one unit?

The output will RISE but by LESS than it did when the previous unit was added.

A firm's level of investment depends on the market interest rate...

because the interest rate represents the opportunity cost of investing in capital

When the Fed wants to expand the money supply through open market operation, it

buys government securities from member banks and dealers

which of the following is NOT included in GDP? -carrots purchased at a farmers market and eaten by your family -carrots purchased at a grocery store and eaten by your family -carrots grown in your garden and eaten by your family -None of the above are included in GDP

carrots grown in your garden and eaten by your family

Other things the same, when an economy increases its saving rate

consumption falls now and production rises later

The deviation of unemployment from its natural rate is called

cyclical unemployment

Efficiency-wage theory suggests that paying

high wages might be profitable because they raise the efficiency of a firm's workers.

During a recession the economy experiences

falling employment and income

federal budget deficit occurs when...

federal government purchases exceed net taxes

Federal Reserve notes are

fiat money

The natural rate of unemployment is the economist's notion of...

full employment

Fiat money

has no intrinsic value

If a country's saving rate increases, then in the long run

productivity and real GDP per person are both higher

If the government instituted an investment tax credit, then which of the following would be higher in equilibrium?

saving and the interest rate

Which of the following is NOT included in M1?

savings deposits

The Federal Open Market Committee (FOMC) consists of...

the Board of Governors and some of the Federal Reserve Bank presidents

Open-market operations involve...

the Fed's purchase and sale of government securities

A policy that induces people to save more shifts

the SUPPLY of loanable funds and REDUCES interest rates.

Economist use the term inflation to describe a situation in which...

the economy's overall price level is rising

Which of the following items is the one type of household expenditure that is categorized as an investment rather than consumption? -spending on education -the purchase of stocks and bonds -the purchase of a new house -the purchase of durable goods such as stoves and washing machines

the purchase of a new house

When a price level increases,

the purchasing power of money decreases


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