Practice Questions for Last Five Weeks of Material

In the special case of the 100-percent-reserve banking, the money multiplier is

1 and banks do not create money

money multiplier

1/reserve ratio

Other things the same, which of the following would increase productivity

An increase in either human or physical capital

In a system of 100-percent-reserve banking

Banks do not influence the supply of money

Esmerelda worked part-time for her mother's business without pay. Tabitha was absent from work because she had strep throat. Who is counted as "employed" by the Bureau of Labor Statistics?

Both Esmerelda and Tabitha

Which of the following is included in GDP

Both the market value of rental housing services and the market value of owner-occupied housing services

For the purpose of calculating GDP, investment is spending on

Capital equipment, inventories and structures, including purchases of new housing.

which of the following functions has both a store of value and a medium of exchange

Cash, but not stocks

A newspaper article informs you that most businesses reduced production in the last quarter but also sold from their inventories during the last quarter. Based on this information GDP likely

Decreased

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"?

Eve but not Octavia

Which of the following demonstrates human capital and physical capital in that order?

For a restaurant: The chef's knowledge about preparing food and the equipment in the kitchen

If an American-based firm opens and operates a new factory in Honduras, then it is engaging in

Foreign direct investment

Real GDP

GDP values production at constant prices

In the actual economy, goods and services are purchased by

Households, firms, and the government

When the quality of a good improves while its price remains the same, the purchasing power of the dollar

Increases, so the CPI overstates the changes in the cost of living if the quality change is not accounted for

The federal funds rate is the

Interest rate at which banks lend reserves to each other overnight

A Farmer produces oranges and sells them to Fresh Juice, which makes orange Juice. The oranges produced by the farmer are called

Intermediate Goods

Human capital per worker:

Is a determinant of productivity

You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate

Medium of Exchange

An American buys a pair of shoes made in Italy. How do the U.S. national income accounts treat the transaction?

Net exports fall, while GDP does not change

Unemployment compensation is

Not part of GDP because it is a transfer payment

Productivity is the amount of goods and services

Produced for each hour of a worker's time. it is linked to a nation's economic policies.

What is the primary determinant of a nation's standard of living

Productivity

One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantity of goods that have become relatively more expensive. This problem is called

Substitution Bias

If the reserve requirement is 10 percent, which of the following pairs of changes would both allow a bank to lend out an additional $10,000?

The Fed buys a $10,000 bond from the bank or the Fed lends the bank $10,000.

Which of the following is NOT an example of monetary policy

The Federal Reserve facilitates bank transactions by clearing checks

Two common measures of the overall level of prices are

The GDP deflator and the consumer price index

The discount rate is

The interest rate the Fed charges banks

Which of the following is the best measure of economic prosperity

The level of real GDP

Bank Capital is

The resources that owners have put into the bank

Which of the following can be measured by the level of real GDP per person?

The standard of living but not productivity

Who of the following is NOT included in the Bureau of Labor Statistics' "employed" category

Those waiting to be recalled to a job from which they had been laid off

GDP is defined as the

Value of all final goods ad services produced within a country in a given period of time

Janet is a farmer. Which of the following are included in her human capital

What she's learned from experience, but not her tractor

The natural rate of unemployment is the

amount of unemployment that the economy normally experiences

Most goods and services produced at hoke

and most goods and services produced illegally are excluded from GDP

In determining living standards, productivity plays a key role for

both nations and individuals

The producer price index measures the cost of a basket of goods and services

bought by firms

What is the largest component of GDP

consumption

Continuing the scenario of the previous question, suppose the wage increases to $60 an hour. Compared to when the wage is $15 an hour, the firm's total spending on labor (the wage times the quantity of labor) will

decrease

If the public decided to hold more currency and few deposits in banks, bank reserves

decrease and the money supply eventually decreases

To be counted as "employed" in the US labor force statistics, a person

does not have to be working for pay if they are working for a family business and does not have to be working full time

Because every transaction has a buyer and a seller,

every transaction contributes equally to an economy's income and to its expenditure

For any given year, the CPI is the price of the basket of goods and services in the

given year divided by the price of the basket in the base year, then multiplied by 100

Over the past several decades, the difference between the labor force participation rates of men and women in the US has

gradually decreased

The existence of money lead to

greater specialization and higher standards of living

The theory of efficiency wages explains why

in may be in the best interest of firms to offer wages that are above the equilibrium level

Labor force

includes people who are already employed or actively seeking work

The CPI differs from the GDP deflator in that

increases in the prices of foreign produced goods that are sold to US consumers show up in the CPI but not the GDP deflator

GDP Deflator

reflects the prices of all final goods and services produced domestically

If over a short time there is an increase in the number of people retired and a decrease in the number of people working, then productivity

rises but real GDP per person falls

Dollar bills, rare paintings, and emerald necklaces are all

stores of value

Marginal Product of Labor

the change in output from hiring one additional unit of labor

CPI (Consumer Price Index) reflects

the prices of goods and services bought by consumers

The consumer price index is used to

turn dollar figures into meaningful measures of purchasing power

Double coincidence of wants

two traders are willing to exchange their products directly Tim: Has lettuce, wants cucumber Amy: Has cucumber, wants lettuce

Nominal GDP

values production at current prices