Econ 202 Final LBCC
b. $80.
5. A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to a. $8. b. $80. c. $92. d. $920.
a. aggregate demand right.
1. From 2001 to 2005 there was a dramatic rise in the price of houses. If this rise made people feel wealthier, then it would have shifted a. aggregate demand right. b. aggregate demand left. c. aggregate supply right. d. aggregate supply left.
False
1. Full-time students and homemakers are included in the Bureau of Labor Statistics' "unemployed" category. a. True b. False
b. 25 percent
1. If the price level increased from 200 to 250, then what was the inflation rate? a. 50 percent b. 25 percent c. 20 percent d. None of the above is correct.
True
1. Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account. a. True b. False
a. store of value
1. Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate? a. store of value b. medium of exchange c. unit of account d. None of the above is correct.
True
1. The natural rate of unemployment is any type of unemployment that does not go away on its own even in the long run. a. True b. False
d. amount of unemployment that the economy normally experiences.
1. The natural rate of unemployment is the a. unemployment rate that would prevail with zero inflation. b. rate associated with the highest possible level of GDP. c. difference between the long-run and short-run unemployment rates. d. amount of unemployment that the economy normally experiences.
a. the price level and real output.
1. The variables on the vertical and horizontal axes of the aggregate demand and supply graph are a. the price level and real output. b. real output and employment. c. employment and the inflation rate. d. the value of money and the price level.
a. was commodity money.
1. When colonists in Virginia used tobacco as money, their money a. was commodity money. b. had no intrinsic value. c. was fiat money. d. had no store of value.
b. government purchases increase and shifts left if stock prices fall.
10. Aggregate demand shifts right if a. government purchases increase and shifts left if stock prices rise. b. government purchases increase and shifts left if stock prices fall. c. government purchases decrease and shifts left if stock prices rise. d. government purchases decrease and shifts left is stock prices fall.
c. 2.
10. Based on the quantity equation, if M = 150, V = 4, and Y = 300, then P = a. 8. b. 0.5. c. 2. d. 3.
a. its required reserves increase by $40.
10. If a bank desires to hold no excess reserves, the reserve requirement is 8 percent, and it receives a new deposit of $500, a. its required reserves increase by $40. b. its total reserves initially increase by $460. c. it will be able to make a new loan of up to $492. d. All of the above are correct.
a. 0
10. Refer to Table 28-7. If the local government imposed a minimum wage of $4 in Productionville, how many people would be unemployed? a. 0 b. 2,000 c. 3,000 d. 10,000
b. 12.5 percent.
10. Refer to Table 29-4. The reserve ratio for this bank is a. 8 percent. b. 12.5 percent. c. 87.5 percent. d. 25 percent.
d. frictional unemployment.
10. Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills is called a. the natural rate of unemployment. b. cyclical unemployment. c. structural unemployment. d. frictional unemployment.
c. the quantity of labor supplied exceeds the quantity of labor demanded.
10. When the wage is above the equilibrium level, a. the labor market is functioning more efficiently than it otherwise would function. b. there is a shortage of labor. c. the quantity of labor supplied exceeds the quantity of labor demanded. d. job search is the primary explanation for the unemployment that is observed.
d. an increase in taxes and at a given price level consumers feel less wealthy
10. Which of the following both shift aggregate demand left? a. a decrease in taxes and at a given price level consumers feel more wealthy b. a decrease in taxes and at a given price level consumers feel less wealthy c. an increase in taxes and at a given price level consumers feel more wealthy d. an increase in taxes and at a given price level consumers feel less wealthy
b. open-market operations
10. 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
d. production becomes more profitable so firms will hire more workers.
11. If the price level rises above what was expected and nominal wages are fixed, then a. production becomes less profitable so firms will hire fewer workers. b. production becomes less profitable so firms will hire more workers. c. production becomes more profitable so firms will hire fewer workers. d. production becomes more profitable so firms will hire more workers.
c. the price level would rise, so the value of money would fall.
11. In 2010 the U.S. government was running a large deficit. Some were concerned that pressures might be put on the Federal Reserve to purchase government bonds to help the government finance this deficit. If the Fed were to buy government bonds to help the government finance its expenditures, then a. the price level would fall, so the value of money would fall. b. the price level would fall, so the value of money would rise. c. the price level would rise, so the value of money would fall. d. the price level would rise, so the value of money would rise.
a. Jenna and Mary are both frictionally unemployed.
11. Jenna is searching for a job that suits her tastes about where to live. Mary is looking for a job that makes best use of her skills. a. Jenna and Mary are both frictionally unemployed. b. Jenna and Mary are both structurally unemployed. c. Jenna is frictionally unemployed, and Mary is structurally unemployed. d. Jenna is structurally unemployed, and Mary is frictionally unemployed.
a. frictional unemployment.
11. Providing training for unemployed individuals is primarily intended to reduce a. frictional unemployment. b. seasonal unemployment. c. structural unemployment. d. cyclical unemployment.
b. $437.50.
11. Refer to Table 29-4. Starting from the situation as depicted by the T-account, if someone deposits $500 into the First Bank of Fairfield, and if the bank makes new loans so as to keep its reserve ratio unchanged, then the amount of new loans that it makes will be a. $40. b. $437.50. c. $71.42. d. $428.57.
a. True
11. Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double-coincidence of wants. a. True b. False
b. False
11. Sandra routinely uses currency to purchase her groceries. She is using money as a medium of exchange. a. True b. False
b. rise, and the wages of retail salespeople will fall.
11. Suppose that neither food-service workers nor retail salespeople are unionized. If food-service workers unionize, then the supply of retail salespeople will a. rise, as will the wages of retail salespeople. b. rise, and the wages of retail salespeople will fall. c. fall, as will the wages of retail salespeople. d. fall, and the wages of retail salespeople will rise.
a. technology improves.
11. The long-run aggregate supply curve shifts right if a. technology improves. b. the price level decreases. c. the money supply increases. d. All of the above are correct.
d. All of the above are correct.
12. Caroline is the owner of a hair-styling salon and spa. She decides to raise the wages of her workers even though she faces an excess supply of labor. Her decision a. might increase profits if it attracts a better pool of workers to apply for jobs at her salon. b. will increase the excess supply of labor. c. may increase the quality of her work force. d. All of the above are correct.
d. None of the above is correct.
12. For the Bureau of Labor Statistics to place someone in the "unemployed" category, that person must a. have worked no more than 10 hours during the past week.. b. have tried to find employment during the previous year. c. not have been laid off. d. None of the above is correct.
a. 0 workers.
12. Refer to Figure 28-3. If the government imposes a minimum wage of $4, then unemployment will increase by a. 0 workers. b. 2,000 workers. c. 4,000 workers. d. 5,000 workers.
b. short run aggregate supply has increased.
12. Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P3 and Y3 , then it must be the case that a. short run aggregate supply has decreased. b. short run aggregate supply has increased. c. aggregate demand has increased. d. aggregate demand has decreased.
a. vertical in the long run and slopes upward in the short run.
12. The aggregate supply curve is a. vertical in the long run and slopes upward in the short run. b. upward sloping in the long run and vertical in the short run. c. vertical in the short run and in the long run. d. upward sloping in the short run and in the long run.
b. False
12. The money multiplier equals 1/(1 - R), where R represents the reserve ratio. a. True b. False
d. 3 percent
12. The nominal interest rate is 6 percent and the inflation rate is 3 percent. What is the real interest rate? a. 9 percent b. 2 percent c. 18 percent d. 3 percent
b. $528
12. The reserve requirement is 12 percent. Lucy deposits $600 into a bank. By how much do excess reserves change? a. $600 b. $528 c. $72 d. $12
a. it buys Treasury securities, which increases the money supply.
12. When the Fed conducts open-market purchases, a. it buys Treasury securities, which increases the money supply. b. it buys Treasury securities, which decreases the money supply. c. it borrows money from member banks, which increases the money supply. d. it lends money to member banks, which decreases the money supply.
b. purchased bonds in an attempt to reduce the federal funds rate.
13. An increase in the money supply might indicate that the Fed had a. purchased bonds in an attempt to increase the federal funds rate. b. purchased bonds in an attempt to reduce the federal funds rate. c. sold bonds in an attempt to increase the federal funds rate. d. sold bonds in an attempt to reduce the federal funds rate.
b. it increases by $150,000
13. If the money multiplier is 3 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 $200,000
c. $12.
13. Refer to Figure 28-4. If 4,000 workers are unemployed, then the minimum wage must be a. $6 b. $8. c. $12. d. $14.
c. 2 percent
13. The nominal interest rate is 5 percent and the real interest rate is 3 percent. What is the inflation rate? a. 8 percent b. 15 percent c. 2 percent d. 1.7 percent
a. (number unemployed / labor force) x 100
13. Which of the following is the correct formula for calculating the unemployment rate? a. (number unemployed / labor force) x 100 b. (cyclical unemployment / number unemployed) x 100 c. [(cyclical unemployment + frictional unemployment) / number employed)] x 100 d. (number unemployed / number employed) x 100
c. a decrease in the price of oil
13. Which of the following shifts short-run aggregate supply right? a. an increase in the price level b. an increase in the minimum wage c. a decrease in the price of oil d. more people migrate abroad than immigrate from abroad
c. 13.3.
14. If the reserve ratio is 7.5 percent, the money multiplier is a. 7.5. b. 10.3. c. 13.3. d. 11.3.
b. foreign economies expand and taxes decrease.
14. In which case can we be sure that real GDP and the price level rise in the short run? a. foreign economies expand and taxes increase. b. foreign economies expand and taxes decrease. c. foreign economies contract and taxes decrease. d. foreign economies contract and taxes increase.
d. lower then she had expected, and the real value of the loan is lower than she had expected.
14. Jennifer took out a fixed-interest-rate loan when the CPI was 100. She expected the CPI to increase to 103 but it actually increased to 105. The real interest rate she paid is a. higher than she had expected, and the real value of the loan is higher than she had expected. b. higher than she had expected, and the real value of the loan is lower than she had expected. c. lower than she had expected, and the real value of the loan is higher than she had expected. d. lower then she had expected, and the real value of the loan is lower than she had expected.
d. Bureau of Labor Statistics.
14. Measuring unemployment is the job of the a. Congressional Budget Office. b. Department of Commerce. c. Council of Economic Advisers. d. Bureau of Labor Statistics.
d. purchases or by lowering the discount rate.
14. The Fed can increase the money supply by conducting open-market a. sales or by raising the discount rate. b. sales or by lowering the discount rate. c. purchases or by raising the discount rate. d. purchases or by lowering the discount rate.
d. structural unemployment.
14. Unions contribute to a. cyclical unemployment. b. frictional unemployment. c. seasonal unemployment. d. structural unemployment.
c. $100
15. Kaitlyn purchased one share of Northwest Energy stock for $200; one year later she sold that share for $400. The inflation rate over the year was 50 percent. The tax rate on nominal capital gains is 50 percent. What was the tax on Kaitlyn's capital gain? a. $50 b. $75 c. $100 d. $200
b. Point B represents a short-run equilibrium, and Point A represents a long-run equilibrium.
15. Refer to Figure 33-5. In Figure 33-5, a. Point B represents a short-run equilibrium and a long-run equilibrium. b. Point B represents a short-run equilibrium, and Point A represents a long-run equilibrium. c. Point B represents a long-run equilibrium, and Point A represents a short-run equilibrium. d. Point B represents a long-run equilibrium, and Point C represents a short-run equilibrium.
b. 1,400.
15. Refer to Table 28-2. The number of adults not in the labor force of Aridia in 2012 was a. 200. b. 1,400. c. 1,600. d. 3,000.
15. The labor force is 100 million, and the adult population is 160 million. 16. 20%. 17. 62.5%.
15. Refer to Table 28-9. What is the size of the labor force, and the size of the adult population? 16. Refer to Table 28-9. What is the unemployment rate? 17. Refer to Table 28-9. What is the labor force participation rate?
c. 13 percent.
15. Refer to Table 29-5. If the bank is holding $4,000 in excess reserves, then the reserve requirement with which it must comply is a. 17 percent. b. 12 percent. c. 13 percent. d. 14 percent.
d. it decreases by $250,000
15. The reserve requirement is 4 percent, banks hold no excess reserves and people hold no currency. If the Fed sells $10,000 worth of bonds, what happens to the money supply? a. it increases by $250,000 b. it increases by $200,000 c. it decreases by $200,000 d. it decreases by $250,000
c. a rising price level and a falling level of output, as the economy moves to point A.
16. Refer to Figure 33-5. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience a. a falling price level and a falling level of output, as the economy moves to point C. b. a falling price level and a rising level of output, as the economy moves to point A. c. a rising price level and a falling level of output, as the economy moves to point A. d. a rising price level and a rising level of output, as the economy moves to point C.
c. 63.3%.
16. Refer to Table 28-2. The labor-force participation rate of Aridia in 2011 was a. 43.3%. b. 54.2%. c. 63.3%. d. 68.4%.
b. firms alter prices more frequently as inflation increases.
16. The idea of menu costs suggests that a. firms alter prices less frequently as inflation increases. b. firms alter prices more frequently as inflation increases. c. firms always alter prices when costs increase. d. firms alter prices as interest rates rise.
a. 2 and the reserve ratio is 50 percent.
16. If $500 of new reserves generates $1000 of new money in the economy, then the money multiplier is a. 2 and the reserve ratio is 50 percent. b. 2 and the reserve ratio is 2 percent. c. 0.5 and the reserve ratio is 50 percent. d. 0.5 and the reserve ratio is 2 percent.
b. $16,000 of new money.
17. If the reserve ratio is 12.5 percent, then $2,000 of additional reserves can create up to a. $8,000 of new money. b. $16,000 of new money. c. $32,000 of new money. d. None of the above is correct.
a. 71.2% and 7.7%
17. In 2016 based on people ages 15-74 the Swedish adult non-institutionalized population was about 7.3 million, the labor force was 5.2 million, and the number of people employed was 4.8 million. According to these numbers, the Swedish labor-force participation rate and unemployment rate were about a. 71.2% and 7.7% b. 71.2% and 5.5% c. 65.8% and 7.7% d. 65.8% and 5.5%
b. P2, Y1.
17. Refer to Figure 33-9. Suppose the economy starts where LRAS = AD1 = SRAS1. A decrease in short-run aggregate supply would be consistent with the movement to a. P1, Y1. b. P2, Y1. c. P1, Y2. d. P3, Y2.
b. more often, giving rise to shoeleather costs.
17. When inflation rises, people tend to go to the bank a. more often, giving rise to menu costs. b. more often, giving rise to shoeleather costs. c. less often, giving rise to redistribution costs. d. less often, thereby lessening the severity of the inflation tax.
Nominal interest rate = 6%, real interest rate = 2%, inflation rate = 4%
18. Jackie saves $100 and receives $106 the next year. During the same year, the price of the basket of goods that she purchases increases from $100 to $104. What is nominal interest rate on Jackie's saving? What is the real interest rate on Jackie's saving? What was the inflation rate?
b. Federal Reserve
18. The agency responsible for regulating the U.S. monetary system is the a. U.S. Treasury b. Federal Reserve c. Department of Justice d. Federal Trade Commission
c. a surplus of labor and a shortage of jobs.
18. When a minimum-wage law forces the wage to remain above the equilibrium level, the result is a. both a shortage of labor and a shortage of jobs. b. a shortage of labor and a surplus of jobs. c. a surplus of labor and a shortage of jobs. d. both surplus of labor and a surplus of jobs.
P = MV/Y. With the numbers given, P = 12. When the money supply increases to 25,000, P increases to 15. Yes, both the money supply and the price level rise by 25%.
19. If velocity is 6, real output is 10,000, and M is 20,000 what would the price level be? If M increases to 25,000 but V and Y do not change, what happens to the price level? Are the change in the money supply and the change in the price level proportional?
a. reduces search effort which raises unemployment.
19. Unemployment insurance a. reduces search effort which raises unemployment. b. reduces search effort which lowers unemployment. c. increases search effort which raises unemployment. d. increases search effort which decreases unemployment.
d. all other three options are correct.
19. Which of the following is a function of money? a. a unit of account b. a store of value c. medium of exchange d. all other three options are correct.
d. $45,600.
2. A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to a. $114. b. $2,166. c. $2,400. d. $45,600.
a. has no intrinsic value.
2. Fiat money a. has no intrinsic value. b. is backed by gold. c. is a medium of exchange but not a unit of account. d. is any close substitute for currency such as checkable deposits.
False
2. If the Fed buys bonds in the open market, the money supply decreases. a. True b. False
a. cyclical unemployment amounting to 0.5 percent of the labor force.
2. 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.
d. All of the above are correct.
2. The Bureau of Labor Statistics places people in the "employed" category if they a. have part-time jobs. b. are self-employed. c. work without pay in a family member's business. d. All of the above are correct.
False
2. The amount of unemployment varies little over time and across countries. a. True b. False
c. the slope of the aggregate-demand curve.
2. The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for a. the slope of short-run aggregate supply. b. the slope of long-run aggregate supply. c. the slope of the aggregate-demand curve. d. everything that makes the aggregate-demand curve shift.
d. vertical.
2. With the value of money on the vertical axis, the money supply curve is a. upward-sloping. b. downward-sloping. c. horizontal. d. vertical.
a. sloping downward.
2. The aggregate demand is described graphically as a. sloping downward. b. a vertical line. c. a horizontal line. d. sloping upward.
b. 1,900.
20. Refer to Table 28-2. The labor force of Aridia in 2011 was a. 1,300. b. 1,900. c. 2,400. d. 3,000.
c. It rises by $1,200 billion.
20. The banking system currently has $100 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed lowers the reserve requirement to 5 percent and at the same time buys $10 billion worth of bonds, then by how much does the money supply change? a. It rises by $200 billion. b. It rises by $800 billion. c. It rises by $1,200 billion. d. None of the above is correct.
c. 25 percent.
3. A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is a. 2.5 percent. b. 33.3 percent. c. 25 percent. d. 75 percent.
a. buy $300,000 worth of bonds.
3. If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, it could a. buy $300,000 worth of bonds. b. buy $225,000 worth of bonds. c. sell $300,000 worth of bonds. d. sell $225,000 worth of bonds.
c. gradually decreased
3. Over the past several decades, the difference between the labor-force participation rates of men and women in the U.S. has a. gradually increased. b. remained constant. c. gradually decreased. d. been eliminated.
a. 0
3. Refer to Figure 28-4. If the government imposes a minimum wage of $6, how many workers will be unemployed? a. 0 b. 4,000 c. 8,000 d. 12,000
d. moves to D.
3. Refer to Figure 33-4. If the economy is at A and there is a fall in aggregate demand, in the short run the economy a. stays at A. b. moves to B. c. moves to C. d. moves to D.
a. unemployed and in the labor force.
3. Sheila is on a temporary layoff from her automobile factory job but has not looked for work in the last four weeks. The Bureau of Labor Statistics counts Sheila as a. unemployed and in the labor force. b. unemployed and not in the labor force. c. employed and in the labor force. d. employed and not in the labor force.
c. movement to the left along a given aggregate-demand curve.
3. The effect of an increase in the price level on the aggregate-demand curve is represented by a a. shift to the right of the aggregate-demand curve. b. shift to the left of the aggregate-demand curve. c. movement to the left along a given aggregate-demand curve. d. movement to the right along a given aggregate-demand curve.
b. movement to the left along the money demand curve.
3. When the money market is drawn with the value of money on the vertical axis, a decrease in the price level causes a a. movement to the right along the money demand curve. b. movement to the left along the money demand curve. c. shift to the right of the money supply curve. d. shift to the left of the money supply curve.
b. store of value, unit of account, medium of exchange
3. 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. store of value, medium of exchange, unit of account b. store of value, unit of account, medium of exchange c. medium of exchange, unit of account, store of value d. medium of exchange, store of value, unit of account
b. aggregate supply left.
4. A decrease in the availability of an important major resource such as oil shifts a. aggregate supply right. b. aggregate supply left. c. aggregate demand right. d. aggregate demand left.
b. counted as unemployed but should be counted as out of the labor force.
4. A person who is not employed and claims to be trying hard to find a job but really is not trying hard to find a job is a. counted as out of the labor force but should be counted as unemployed. b. counted as unemployed but should be counted as out of the labor force. c. correctly counted as out of the labor force. d. correctly counted as unemployed.
a. 12.5.
4. If the reserve ratio is 8 percent, then the money multiplier is a. 12.5. b. 11.5. c. 13.5. d. 8.
d. 12.4/154.
4. In June 2009 the Bureau of Labor Statistics 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.
a. banks do not make loans.
4. 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.
a. both frictional and structural unemployment.
4. 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.
c. the slope of the aggregate-demand curve.
4. The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for a. the slope of short-run aggregate supply. b. the slope of long-run aggregate supply. c. the slope of the aggregate-demand curve. d. everything that makes the aggregate-demand curve shift.
b. the money supply increases and the federal funds rate decreases.
4. When the Fed buys government bonds, a. the money supply increases and the federal funds rate increases. b. the money supply increases and the federal funds rate decreases. c. the money supply decreases and the federal funds rate increases. d. the money supply decreases and the federal funds rate decreases.
b. shifts rightward, causing the value of money measured in terms of goods and services to fall.
4. When the money market is drawn with the value of money on the vertical axis, if the Federal Reserve buys bonds, then the money supply curve a. shifts rightward, causing the value of money measured in terms of goods and services to rise. b. shifts rightward, causing the value of money measured in terms of goods and services to fall. c. shifts leftward, causing the value of money measured in terms of goods and services to rise. d. shifts leftward, causing the value of money measured in terms of goods and services to fall.
c. people will want to hold less money, so the interest rate falls.
5. As the price level falls a. people will want to hold more money, so the interest rate rises. b. people will want to hold more money, so the interest rate falls. c. people will want to hold less money, so the interest rate falls. d. people will want to hold less money, so the interest rate rises.
c. $700 of new reserves.
5. If the reserve ratio is 12.5 percent, then $5,600 of money can be generated by a. $64 of new reserves. b. $448 of new reserves. c. $700 of new reserves. d. $800 of new reserves.
a. equilibrium exists when the value of money is 2.
5. Refer to Figure 30-1. If the current money supply is MS1, then a. equilibrium exists when the value of money is 2. b. equilibrium exists when the equilibrium is at point D. c. equilibrium exists when the value of money is 1. d. there is excess demand if the value of money is 2.
d. Z in the long run.
5. Refer to Figure 33-7. Suppose the economy starts at Y. If there is a fall in aggregate demand, then the economy moves to a. V in the long run. b. W in the long run. c. X in the long run. d. Z in the long run.
c. 90 million
5. Refer to Table 28-4. What is the adult male labor force in Meditor? a. 50 million b. 85 million c. 90 million d. 130 million
a. 0
5. Refer to Table 28-7. If the local government imposed a minimum wage of $4 in Productionville, how many people would be unemployed? a. 0 b. 2,000 c. 3,000 d. 10,000
b. 14.1 million
5. Suppose that some country had an adult population of about 25 million, a labor-force participation rate of 60 percent, and an unemployment rate of 6 percent. How many people were employed? a. 0.9 million b. 14.1 million c. 15 million d. 23.5 million
a. it buys Treasury securities, which increases the money supply.
5. When the Fed conducts open-market purchases, a. it buys Treasury securities, which increases the money supply. b. it buys Treasury securities, which decreases the money supply. c. it borrows money from member banks, which increases the money supply. d. it lends money to member banks, which decreases the money supply.
b. It has $800 in reserves and $9,200 in loans.
6. 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 $80 in reserves and $9,920 in loans. b. It has $800 in reserves and $9,200 in loans. c. It has $1,250 in reserves and $8,750 in loans. d. None of the above is correct.
b. 66.4% and 4.0%
6. In 2016 the Bureau of Labor Statistics reported that there were 57.1 million people over age 25 whose highest level of education was some college or an associate degree. Of these, 36.4 million were employed and 1.5 million were unemployed. What were the labor-force participation rate and the unemployment rate for this group? a. 66.4% and 2.6% b. 66.4% and 4.0% c. 63.7% and 2.6% d. 63.7% and 4.0%
c. more wealthy, so the quantity of goods and services demanded rises.
6. Other things the same, a decrease in the price level makes consumers feel a. less wealthy, so the quantity of goods and services demanded falls. b. less wealthy, so the quantity of goods and services demanded rises. c. more wealthy, so the quantity of goods and services demanded rises. d. more wealthy, so the quantity of goods and services demanded falls.
c. 10,000.
6. Refer to Figure 30-2. Suppose the relevant money-demand curve is the one labeled MD1; also suppose the velocity of money is 4. If the money market is in equilibrium, then the economy's real GDP amounts to a. 2,500. b. 7,500. c. 10,000. d. 40,000.
c. 66.7%
6. Refer to Table 28-4. What is the adult male labor-force participation rate in Meditor? a. 37% b. 63% c. 66.7% d. 96.3%
c. 6.0 percent.
6. Refer to Table 29-6. The Bank of Pleasantville's reserve ratio is a. 6.4 percent. b. 16.7 percent. c. 6.0 percent. d. 15.7 percent.
a. temporarily low and so supply a smaller quantity of labor.
6. Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things they consume have fallen by the same percentage. They may infer that the reward to working is a. temporarily low and so supply a smaller quantity of labor. b. temporarily low and so supply a larger quantity of labor. c. temporarily high and so supply a smaller quantity of labor. d. temporarily high and so supply a larger quantity of labor.
c. an above-equilibrium wage paid by a firm to reduce turnover costs
6. Which of the following is an example of an efficiency wage? a. a higher wage paid to a more experienced worker b. a below-equilibrium wage paid by a small business exempt from minimum-wage laws c. an above-equilibrium wage paid by a firm to reduce turnover costs d. a wage tied to participation in a government-sponsored job training program
d. All of the above are correct.
6. Which of the following is correct concerning the FOMC? a. the members of the Board of Governors have the majority of the votes b. the New York Federal Reserve Bank District President is always a voting member c. all Federal Reserve Bank presidents attend the meetings d. All of the above are correct.
a. 2.
Based on the quantity equation, if M = 150, V = 4, and Y = 300, then P = Select one: a. 2. b. 0.5. c. 3. d. 8.
b. 5 percent.
7. A bank has $500,000 in deposits and $475,000 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. 25 percent.
c. frictionally unemployed.
7. People who are unemployed because of job search are best classified as a. cyclically unemployed. b. structurally unemployed. c. frictionally unemployed. d. discouraged workers.
b. 2 and the equilibrium value of money is 0.5.
7. Refer to Figure 30-3. If the relevant money-supply curve is the one labeled MS1, then the equilibrium price level is a. 0.5 and the equilibrium value of money is 2. b. 2 and the equilibrium value of money is 0.5. c. 0.5 and the equilibrium value of money cannot be determined from the graph. d. 2 and the equilibrium value of money cannot be determined from the graph.
b. Y2
7. Refer to Figure 33-3. The natural rate of output occurs at a. Y1. b. Y2. c. Y3. d. both Y1 and Y3.
b. 1,900.
7. Refer to Table 28-2. The labor force of Aridia in 2011 was a. 1,300. b. 1,900. c. 2,400. d. 3,000.
d. $10,000.
7. Refer to Table 29-6. Assume the Fed's reserve requirement is 5 percent and all banks besides the Bank of Pleasantville are exactly in compliance with the 5 percent requirement. Further assume that people hold only deposits and no currency. Starting from the situation as depicted by the T-account, if the Bank of Pleasantville decides to make new loans so as to end up with no excess reserves, then by how much does the money supply eventually increase? a. $10,833.33. b. $13,000. c. $8,333.33. d. $10,000.
a. $500
7. Refer to Table 29-6. If the Fed's reserve requirement is 5 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold? a. $500 b. $250 c. $2,000 d. $3,600
d. increase, reducing wages in industries that are not unionized.
7. Suppose that roofers are not unionized. If roofers unionize, then the supply of labor in other sectors of the economy will a. decrease, raising wages in industries that are not unionized. b. decrease, reducing wages in industries that are not unionized. c. increase, raising wages in industries that are not unionized. d. increase, reducing wages in industries that are not unionized.
d. less foreign currency, and so buys fewer foreign goods.
7. When the dollar depreciates, each dollar buys a. more foreign currency, and so buys more foreign goods. b. more foreign currency, and so buys fewer foreign goods. c. less foreign currency, and so buys more foreign goods. d. less foreign currency, and so buys fewer foreign goods.
a. 6.75.
8. If M = 2,000, P = 2.25, and Y= 6,000, what is velocity? a. 6.75. b. 3.00. c. 1.33. d. 1.50.
b. 10.
8. If the reserve ratio is 10 percent, the money multiplier is a. 100. b. 10. c. 9/10. d. 1/10.
b. the unemployed who were laid off because their previous employers no longer needed their skills
8. Of the following groups, who is eligible for unemployment insurance benefits? a. the unemployed who quit their jobs b. the unemployed who were laid off because their previous employers no longer needed their skills c. the unemployed who were fired for cause d. the unemployed who just entered the labor force
c. 80%.
8. Refer to Table 28-2. The labor-force participation rate of Aridia in 2010 was a. 70%. b. 77.8%. c. 80%. d. 87.5%.
b. 12.5%.
8. Refer to Table 28-2. The unemployment rate in Aridia in 2010 was a. 10%. b. 12.5%. c. 14.3%. d. 80%.
b. sells Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.
8. The money supply decreases if the Fed a. sells Treasury bonds. The larger the reserve requirement, the larger the decrease will be. b. sells Treasury bonds. The smaller the reserve requirement, the larger the decrease will be. c. buys Treasury bonds. The larger the reserve requirement, the larger the decrease will be. d. buys Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.
a. firms want to borrow more for new plants and equipment and households want to borrow more for homebuilding.
8. When interest rates fall a. firms want to borrow more for new plants and equipment and households want to borrow more for homebuilding. b. firms want to borrow more for new plants and equipment and households want to borrow less for homebuilding. c. firms want to borrow less for new plants and equipment and households want to borrow more for homebuilding. d. firms want to borrow less for new plants and equipment and households want to borrow less for homebuilding.
b. the money supply increases and the federal funds rate decreases.
8. When the Fed buys government bonds, a. the money supply increases and the federal funds rate increases. b. the money supply increases and the federal funds rate decreases. c. the money supply decreases and the federal funds rate increases. d. the money supply decreases and the federal funds rate decreases.
a. exports decrease, while imports increase.
8. When the dollar appreciates, U.S. a. exports decrease, while imports increase. b. exports and imports decrease. c. exports and imports increase. d. exports increase, while imports decrease.
d. 2.
Based on the quantity equation, if M = 150, V = 4, and Y = 300, then P = Select one: a. 3. b. 0.5. c. 8. d. 2.
b. $80.
9. A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to a. $8. b. $80. c. $92. d. $920.
d. decrease by $25.5 million and the money supply eventually decreases by $170 million.
9. 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 $25.5 million worth of bonds to the public, bank reserves a. increase by $25.5 million and the money supply eventually increases by $382.5 million. b. increase by $25.5 million and the money supply eventually increases by $170 million. c. decrease by $25.5 million and the money supply eventually decreases by $382.5 million. d. decrease by $25.5 million and the money supply eventually decreases by $170 million.
c. $12,000 of new money.
9. If the reserve ratio is 5 percent, then $600 of additional reserves can create up to a. $30 of new money. b. $3,000 of new money. c. $12,000 of new money. d. None of the above is correct.
d. 32,000.
9. If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, then the real value of output is a. 2,000. b. 200,000. c. 12,500. d. 32,000.
c. 63.3%.
9. Refer to Table 28-2. The labor-force participation rate of Aridia in 2011 was a. 43.3%. b. 54.2%. c. 63.3%. d. 68.4%.
b. 31.6%.
9. Refer to Table 28-2. The unemployment rate of Aridia in 2011 was a. 20%. b. 31.6%. c. 46.2%. d. 63.3%.
c. decrease consumption, shown by shifting the aggregate-demand curve to the left.
9. Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to a. decrease consumption, shown as a movement to the left along a given aggregate-demand curve. b. increase consumption, shown as a movement to the right along a given aggregate-demand curve. c. decrease consumption, shown by shifting the aggregate-demand curve to the left. d. increase consumption, shown by shifting the aggregate-demand curve to the right.
b. exports increase, while imports decrease.
9. When the dollar depreciates, U.S. a. exports and imports increase. b. exports increase, while imports decrease. c. exports decrease, while imports increase. d. exports and imports decrease.
c. Sarah, who does not have a job but is looking for work
9. Who is included in the labor force by the Bureau of Labor Statistics? a. Dia, an unpaid homemaker not looking for other work b. Kevin, a full-time student not looking for work c. Sarah, who does not have a job but is looking for work d. None of the above is correct.
True
Hyperinflations are associated with governments printing money to finance expenditures. Select one: True False
b. 8. Velocity will rise if money changes hands more frequently.
If M = 12,000, P = 3, and Y = 32,000, then velocity = Select one: a. 8. Velocity will rise if money changes hands less frequently. b. 8. Velocity will rise if money changes hands more frequently. c. 1.125. Velocity will rise if money changes hands more frequently. d. 1.125. Velocity will rise if money changes hands less frequently.
a. 8. Velocity will rise if money changes hands more frequently.
If M = 12,000, P = 3, and Y = 32,000, then velocity = Select one: a. 8. Velocity will rise if money changes hands more frequently. b. 1.125. Velocity will rise if money changes hands more frequently. c. 1.125. Velocity will rise if money changes hands less frequently. d. 8. Velocity will rise if money changes hands less frequently.
d. M = 400, V = 2
If P = 4 and Y = 200, then which of the following pairs of values are possible? Select one: a. M = 200, V = 2 b. M = 150, V = 3 c. M = 800, V = 16 d. M = 400, V = 2
True
If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services. Select one: True False
a. creditors receive a lower real interest rate than they had anticipated.
If inflation is higher than what was expected, Select one: a. creditors receive a lower real interest rate than they had anticipated. b. debtors receive a higher real interest rate than they had anticipated. c. debtors pay a higher real interest rate than they had anticipated. d. creditors pay a lower real interest rate than they had anticipated.
True
If the money supply increased by 10% and at the same time velocity decreased by 10%, then according to the quantity equation there would be no change in the price level. Select one: True False
c. 8 percent
If the nominal interest rate is 5 percent and there is a deflation rate of 3 percent, what is the real interest rate? Select one: a. 15 percent b. 1.7 percent c. 8 percent d. 2 percent
a. there was deflation of 2.2 percent.
If the price level last year was 180 and this year it is 176, then Select one: a. there was deflation of 2.2 percent. b. there was deflation of 4.0 percent. c. there was inflation of 2.3 percent. d. there was inflation of 4.0 percent.
True
If the real interest rate is 5% and the inflation rate is 3%, then the nominal interest rate is 8%. Select one: True False
b. 4 percent
If the real interest rate is 6 percent and the price level is falling at a rate of 2 percent, what is the nominal interest rate? Select one: a. 8 percent b. 4 percent c. 6 percent d. 10 percent
a. purchasing bonds on the open market, which would have lowered the value of money.
In the 1970s, in response to recessions caused by an increase in the price of oil, the central banks in many countries increased their money supplies. The central banks might have done this by Select one: a. purchasing bonds on the open market, which would have lowered the value of money. b. selling bonds on the open market, which would have raised the value of money. c. purchasing bonds on the open market, which would have raised the value of money. d. selling bonds on the open market, which would have raised the value of money.
d. the nominal interest rate = 2% and inflation = -1%
In which case below is the real interest rate the highest? Select one: a. the nominal interest rate = 6% and inflation = 4% b. the nominal interest rate = 2% and inflation = 1% c. the nominal interest rate = 1% and inflation = 3% d. the nominal interest rate = 2% and inflation = -1%
a. The nominal interest rate was 6 percent and the inflation rate was 2 percent.
Katarina puts money into an account. One year later she sees that she has 6 percent more dollars and that her money will buy 4 percent more goods. Select one: a. The nominal interest rate was 6 percent and the inflation rate was 2 percent. b. The nominal interest rate was 10 percent and the inflation rate was 6 percent. c. The nominal interest rate was 4 percent and the inflation rate was 2 percent. d. The nominal interest rate was 10 percent and the inflation rate was 4 percent.
c. three percent and prices fell one percent.
Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of Select one: a. three percent and prices rose one percent. b. two percent and prices rose one percent. c. three percent and prices fell one percent. d. two percent and prices fell one percent.
d. None of the above is correct.
Refer to Figure 30-1. When the money supply curve shifts from MS1 to MS2, Select one: a. the equilibrium price level decreases. b. the demand for goods and services decreases. c. the economy's ability to produce goods and services increases. d. None of the above is correct.
c. 6.0
Refer to Figure 30-3. Suppose the relevant money-supply curve is the one labeled MS1; also suppose the economy's real GDP is 30,000 for the year. If the money market is in equilibrium, then the velocity of money is approximately Select one: a. 3.0 b. 9.0 c. 6.0 d. 1.5
b. $100
Serena purchased 10 shares of GLC, Inc. stock for $200 per share; one year later she sold the 10 shares for $220 a share. Over the year, the price level increased from 135.0 to 143.1. The tax rate on capital gains is 50 percent. If the capital gains tax is on nominal gains, how much tax does Serena pay on her gain? Select one: a. $95 b. $100 c. $90 d. None of the above is correct.
d. The nominal interest rate was 6 percent and the inflation rate was 1 percent.
Shawn puts money into an account. One year later he sees that he has 6 percent more dollars and that his money will buy 5 percent more goods. Select one: a. The nominal interest rate was 11 percent and the inflation rate was 5 percent. b. The nominal interest rate was 5 percent and the inflation rate was -1 percent. c. The nominal interest rate was 6 percent and the inflation rate was 5 percent. d. The nominal interest rate was 6 percent and the inflation rate was 1 percent.
d. menu costs.
The costs of changing price tags and price listings are known as Select one: a. inflation-induced tax distortions. b. relative-price variability costs. c. shoeleather costs. d. menu costs.
b. the supply of money increases and the value of money falls.
The economy of Mainland uses gold as its money. If the government discovers a large reserve of gold on their land Select one: a. the supply of money decreases and the value of money rises. b. the supply of money increases and the value of money falls. c. the demand for money decreases and the value of money falls. d. the demand for money increases and the value of money rises.
b. price level times real GDP divided by the money supply.
Velocity is computed as the Select one: a. real GDP times the money supply divided by the price level. b. price level times real GDP divided by the money supply. c. price level times the money supply divided by real GDP. d. real GDP times the money supply divided by the rate at which money changes hands.
d. the real interest rate is greater than the nominal interest rate.
When deflation exists, Select one: a. prices rise. b. the real interest rate is less than the nominal interest rate. c. the real interest rate and inflation are less than the nominal interest rate. d. the real interest rate is greater than the nominal interest rate.
a. spend less so the value of a dollar rises.
When the money market is drawn with the value of money on the vertical axis, a decrease in the money supply leads people to Select one: a. spend less so the value of a dollar rises. b. spend more so the value of a dollar falls. c. spend more so the value of a dollar rises. d. spend less so the value of a dollar falls.
a. money demand shifts right or money supply shifts left.
When the money market is drawn with the value of money on the vertical axis, the price level decreases if Select one: a. money demand shifts right or money supply shifts left. b. either money demand or money supply shifts left. c. money demand shifts left or money supply shifts right. d. either money demand or money supply shifts right.
c. a nominal interest rate of 8 percent and an inflation rate of 1 percent.
Which of the following combinations of nominal interest rates and inflation implies a real interest rate of 7 percent? Select one: a. a nominal interest rate of 5 percent and an inflation rate of 4 percent. b. a nominal interest rate of 4 percent and an inflation rate of 3 percent. c. a nominal interest rate of 8 percent and an inflation rate of 1 percent. d. a nominal interest rate of 14 percent and an inflation rate of 2 percent.
d. is a nominal variable, but the change in the number of goods you can buy with your savings is a real variable.
You put money in the bank. The increase in the dollar value of your savings Select one: a. is a real variable, but the change in the number of goods you buy with your savings is a nominal variable. b. and the change in the number of goods you can buy with your savings are both real variables. c. and the change in the number of goods you can buy with your savings are both nominal variables. d. is a nominal variable, but the change in the number of goods you can buy with your savings is a real variable.
a. nominal income increased, but their real income decreased.
Your spouse complains that her 6% raise this year will not keep up with the increase in prices. In other words, she is unable to buy the same basket of goods with her 6% raise. Therefore, she believes that her Select one: a. nominal income increased, but their real income decreased. b. nominal income and real income decreased. c. nominal income and real income increased. d. nominal income decreased, but their real income increased.
