BUSA 201: Final Exam Review

Stealth bank has deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. If the bank sells its loans at market value of $400 million, what will its total assets equal?

$510 million

The membership of the WTO includes about __________ nations.

150

The following table shows the aggregate supply and demand data for a country. What is the equilibrium output?

7,000

___________ is a completely inadequate mechanism ____________________ in a modern advanced economy.

Barter; for trying to coordinate trades

The ___________________ is the institution designed to control the quantity of money in the economy and also to oversee the:

Central Bank; safety and stability of the banking system.

__________ means selling goods below their cost of production.

Dumping

__________________ happens when the economy is producing at its potential and unemployment is at the natural rate of unemployment.

Full employment GDP

____________ are numerical limitations on the quantity of products that can be imported.

Import quotas

Which of the following terms is considered to be a narrow definition of the money supply that includes, among other things, currency?

M1

________________ are economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the _____________ .

Neoclassical economists; long run

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?

Northern's loan assets increase by $30 million

________ are funds that the bank keeps on hand that are not loaned out or invested in bonds.

Reserves

________________ results when an economy experiences high unemployment and high inflation at the same time.

Stagflation

What do goods like gasoline, tobacco, and alcohol typically share in common?

They are all subject to government excise taxes.

Which of the following is the best example of a tariff?

a $1000-per-car fee imposed on all small cars imported

If the government for the state of Washington collects $65.8 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be:

a budget deficit.

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

Which of the following is the best example of a quota?

a limit imposed on the number of men's suits that can be imported from a foreign country

A rule that every imported product must be opened by hand and inspected with a magnifying glass, by one of just three government inspectors available at any given time might be referred to as __________________ .

a non-tariff barrier

A tariff differs from a quota in that a tariff is:

a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

Which of the following is considered to be a relatively weak tool of monetary policy?

altering the discount rate

Which of the following would function as a store of value, and also provide a medium of exchange, and unit of account?

an estate

The government can use _____________ in the form of ____________________ to increase the level of aggregate demand in the economy.

an expansionary fiscal policy; an increase in government spending

The graph above reflects a significant increase in world oil prices. What will the impact on aggregate supply most likely lead to?

an increase in input prices

A ______________________ means that government spending and taxes are equal.

balanced budget

If the central bank increases the amount of reserves banks are required to hold to 20%, then:

both the money multiplier and supply of money in the economy will decrease.

In 2010, Microsoft will pay corporate income tax to the federal government based on the company's __________________ .

corporate profits

When the economy of a country is operating close to its full capacity:

cyclical unemployment is close to zero.

Which of the following would be classified in the M1 category of the money supply?

demand deposits

What term is used to describe the interest rate charged by the central bank when it makes loans to commercial banks?

discount rate

If Bill performs plumbing upgrades for Alice in exchange for her incorporating his business, then their _________________________ will be satisfied.

double coincidence of wants

If the price level of what firms produce is rising across an economy, but the costs of production are constant, then:

higher profits will induce expanded production.

An import quota or tariff on French wine that raises the prices for wine will probably:

hurt domestic wine drinkers but help domestic wineries, which will gain from the higher prices.

Tariffs are taxes imposed on _________________.

imported products

By June, 2010, the U.S. government owed $13.6 trillion dollars ________________ that, over time, has remained unpaid.

in accumulated government debt

A new American import quota on imported steel would be likely to:

increase American production of steel.

In an economy with _______________ , money loses some buying power each year, but it remains money.

inflation

"Tariffs and other trade restrictions increase the domestic scarcity of products from abroad. Such policies benefit domestic producers of the restricted products at the expense of domestic consumers." This statement:

is essentially correct.

Economists would say tariffs:

limit voluntary exchanges.

If mollusk shells were accepted as a method of payment in modern-day markets, what economic role would they play in the financial system?

medium of exchange

Which of the following is a traditional tool used by the Fed during recessions?

open market operations

In uncertain economic times, ____________________ serves as a way of preserving economic value that can be spent or consumed in the future.

owning gold

The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions,is called:

potential GDP.

If government tax policy requires Bill to pay $20,000 in taxes on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is:

proportional.

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?

quantitative easing

A central bank that desires to reduce the quantity of money in the economy can:

raise the reserve requirement.

If South Dakota's governor reports a budget surplus in 2011, that state government likely:

received more in taxes than it spent in that year.

When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is ____________________ .

regressive

If government tax policy requires Peter to pay $15,000 in tax on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is:

regressive.

Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank?

reserve requirements

The market in which loans are bought and sold is called the:

secondary loan market.

Lance paid $175,000 for his house in 2003 and sold it for $325,000 in 2006. What function did the house serve during the time Lance owned it?

store of value

The quantitative easing policies adopted by the Federal Reserve are usually thought of as:

temporary emergency measures.

The graph above refers to a significant increase in individual income taxes, taking them to their highest level in 50 years. Which of the following is likely to result?

the economy will experience lower economic growth

The central bank requires Southern to hold 10% of deposits as reserves. Southern Bank's policy prohibits it from holding excess reserves. If the central bank sells $25 million in bonds to Southern Bank which of the following will result?

the money supply in the economy decreases

Tariffs result in a decrease in consumer surplus because:

the price of the protected good increases and quantity consumed decreases.

If Japan does not have a comparative advantage in producing rice, the consequences of adopting a Japanese policy reducing or eliminating imports of rice into the country would include:

the real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall.

Potential GDP in the U.S. will be unaffected by ____________________ .

the unemployment rate

Aggregate supply (AS) denotes the relationship between the __________________ that firms choose to produce and sell and the _________________ , holding the price of inputs fixed.

total quantity; price level for output

If Keynes' law applies during economic contractions and Say's law applies during economic expansion, how will the three goals of macroeconomics be affected?

trade-offs and connections may differ in the short run and the long run

Say's Law argues that a given ____________________ must create an equivalent ________________________ somewhere else in the economy.

value of supply; value of demand

Despite interlocking import quotas, tariffs, and nontariff barriers, the share of apparel sold in the United States that is imported rose from about _________ in 1999 to about ________ today.

50%;75%

The following table shows the initial aggregate supply and demand data for a country. If input prices rise and AS shifts to the left by 2,000 units at each price level, what output level will equal the new equilibrium price?

7000

Economic production has fallen to less than full potential due to inadequate incentives for firms to produce. The duration of this economic condition will likely be:

short-term