ECON 202 PT 2

D) national saving plus borrowing from the rest of the world.

A nation's investment must be financed by A) national saving only. B) the government's budget deficit. C) borrowing from the rest of the world only. D) national saving plus borrowing from the rest of the world.

B) real; decreases

As the ________ interest rate increases, the quantity of loanable funds demanded ________. A) real; increases B) real; decreases C) nominal; increases D) nominal; decreases

C) a large crop failure that boosts the prices of raw food materials

Assuming that GDP currently equals potential GDP, a cost-push inflation could result from which of the following? A) a decrease in tax rates B) an increase in the labor force C) a large crop failure that boosts the prices of raw food materials D) an increase in the nation's capital stock

D) actual reserves minus desired reserves.

Excess reserves are A) desired reserves minus actual reserves. B) required reserves minus actual reserves. C) liquidity funds minus actual reserves. D) actual reserves minus desired reserves.

B) are used to produce final goods and services

Intermediate goods and services ____. A) are double counted in GDP B) are used to produce final goods and services C) include used goods D) are directly included in GDP

D) inflation; quantity of money in circulation

One role of monetary policy is to control ____ by changing the ____. A) inflation; price level B) the price level; government spending C) unemployment; level of taxation D) inflation; quantity of money in circulation

D) None of the above answers is correct.

Regional Federal Reserve banks A) are located in each of the 50 states. B) are run by the governors of the states in which they are located. C) provide general banking services to the public. D) None of the above answers is correct.

B) a decrease in short-run aggregate supply.

Stagflation is the result of A) an increase in aggregate demand. B) a decrease in short-run aggregate supply. C) a decrease in aggregate demand. D) an increase in short-run aggregate supply.

D) decrease; increase

8) An economy currently has an inflationary gap. An increase in the money wage rate will ____ the inflationary gap and ____the price level. A) decrease; decrease B) increase; increase C) increase; decrease D) decrease; increase

D) frictionally unemployed.

A recent accounting graduate from a major business school is searching for a place to begin his career as an accountant. This individual is best considered as A) structurally unemployed. B) seasonally unemployed. C) cyclically unemployed. D) frictionally unemployed.

D) decrease; increase

An economy currently has an inflationary gap. An increase in the money wage rate will ____ the inflationary gap and ____the price level. A) decrease; decrease B) increase; increase C) increase; decrease D) decrease; increase

A) will cause frictional unemployment to increase.

An increase in unemployment benefits A) will cause frictional unemployment to increase. B) will cause frictional unemployment to decrease. C) will have no effect on frictional unemployment. D) might affect frictional unemployment but only if the economy is in a recession.

A) increase in prices of raw materials

Cost-push inflation is an inflation that results from an initial ________. A) increase in prices of raw materials B) decrease in taxes C) increase in investment D) increase in taxes

B) decreases during economic expansions.

Cyclical unemployment A) is the major part of the natural rate of unemployment. B) decreases during economic expansions. C) rises as a result of structural change in the economy. D) falls when unemployment compensation payments are increased. E) None of the above answers are correct.

D) market value of final goods and services produced in the economy in a given time period.

Gross domestic product (GDP) measures the A) number of final goods and services produced in the economy in a given time period. B) number of final goods and services sold in the economy in a given time period. C) market value of old and new final goods and services sold in the economy in a given time period. D) market value of final goods and services produced in the economy in a given time period.

C) decrease; rise

If oil prices increase, then in the short run, real GDP will ________ and the price level will ________. A) increase; rise B) increase; fall C) decrease; rise D) decrease; fall

A) the quantity of money will increase.

If the Fed buys U.S. Treasury bonds, A) the quantity of money will increase. B) the nominal interest rate will rise. C) bank reserves will decrease. D) the real interest rate will rise.

C) depreciation exceeds gross investment.

If the economy's capital stock decreases over time, A) net investment is positive. B) depreciation is less than zero. C) depreciation exceeds gross investment. D) gross investment equals net investment.

A) 6.7 percent.

In 2004 the CPI was 105; in 2005 it was 112. The inflation rate between 2004 and 2005 was A) 6.7 percent. B) 6.25 percent. C) 105 percent. D) 112 percent.

A) $100 million

In 2004, the country of Nerf had its imports equal its exports. Nerf's GDP was $500 million, its consumer expenditure was $380 million, and its investment was $20 million. Nerf's government purchases were ____. A) $100 million B) $900 million C) $500 million D) zero E) None of the above answers are correct.

A) short-run aggregate supply curve will shift rightward as the money wage rate falls.

In a short-run macroeconomic equilibrium, suppose that potential GDP exceeds real GDP. In this case the: A) short-run aggregate supply curve will shift rightward as the money wage rate falls. B) short-run aggregate supply curve will shift leftward as the money wage rate rises. C) long-run aggregate supply curve will shift leftward as the money wage rate rises. D) long-run aggregate supply curve will shift leftward as the money wage rate falls.

C) real GDP and the price level are determined by short-run aggregate supply and aggregate demand.

In short-run macroeconomic equilibrium A) real GDP equals potential GDP and aggregate demand determines the price level. B) the price level is fixed and short-run aggregate supply determines real GDP. C) real GDP and the price level are determined by short-run aggregate supply and aggregate demand. D) real GDP is less than potential GDP.

A) money wage rate is fixed.

In the short-run, real GDP can be greater than or less than potential GDP because in the short run the A) money wage rate is fixed. B) quantity of capital is fixed. C) full-employment level of employment is fixed. D) price level is fixed. E) None of the above answers are correct.

B) increase both the price level and increase real GDP.

Initially, demand-pull inflation will A) increase the price level and not change real GDP. B) increase both the price level and increase real GDP. C) increase the price level and decrease real GDP. D) shift the aggregate supply curve rightward.

B) A temporary increase in the price of oil.

Suppose that the economy begins at a long-run equilibrium. Which of the following events would raise the price level and decrease real GDP in the short run? A) An increase in interest rates. B) A temporary increase in the price of oil. C) An increase in the stock of capital. D) An increase in the value of real wealth.

B) 13.3 percent

Suppose the population is 220 million people, the labor force is 150 million people, the number of people employed is 130 million and the working-age population is 175 million people. What is the unemployment rate? A) 9.0 percent B) 13.3 percent C) 11.4 percent D) 15.4 percent

D) increasing aggregate demand.

Sustained inflation results from continually increasing the quantity of money, which leads to a continually A) decreasing long-run aggregate supply. B) increasing aggregate supply. C) decreasing aggregate demand. D) increasing aggregate demand.

C) adjust the quantity of money in circulation in Japan.

The Bank of Japan is Japan's central bank. As part of its duties, the Bank of Japan would A) provide banking services to Japan's citizens and firms. B) provide banking services to foreigners. C) adjust the quantity of money in circulation in Japan. D) change tax rates.

D) real; nominal; the inflation rate

The ________ interest rate approximately equals the ________ interest rate minus ________. A) nominal; real; depreciation B) nominal; real; the inflation rate C) real; nominal; depreciation D) real; nominal; the inflation rate

B) General Motors' purchases of tires for new automobiles.

The calculation of the final goods and services sold in an economy would NOT include A) the purchase of a lawnmower by a household. B) General Motors' purchases of tires for new automobiles. C) Ford Motor Company's purchase of a new industrial robot to be used to produce cars. D) the purchase of a service by a household. E) both B and C are correct.

C) Janet Yellen.

The current chairman of the Federal Reserve System is A) Alan Greenspan. B) Ben Bernanke. C) Janet Yellen. D) Milton Friedman.

B) real GDP and the price level will decrease.

The government increases taxes. As a result, in the short run A) real GDP will increase and the price level will rise. B) real GDP and the price level will decrease. C) real GDP will decrease and the price level will increase. D) real GDP will increase and the price level will fall.

B) the amount by which a change in the monetary base is multiplied to determine the change in the quantity of money.

The money multiplier is A) the amount by which a change in the quantity of money is multiplied to determine the change in the monetary base. B) the amount by which a change in the monetary base is multiplied to determine the change in the quantity of money. C) equal to bank reserves divided by the change in the monetary base. D) equal to bank reserves divided by the change the quantity of money.

D) real interest rate.

The opportunity cost of holding money is the A) level of wage and rental income. B) ease with which an asset can become money. C) price of goods and services. D) real interest rate.

C) I, II, and III

The quantity of real money that people choose to hold depends on which of the following? I. The nominal interest rate. II. The real interest rate. III. The inflation rate. A) I and II B) II C) I, II, and III D) I and III

B) 4; 6

The real interest rate is 4 percent a year. When the inflation rate is zero, the nominal interest rate is approximately ________ percent a year; and when the inflation rate is 2 percent a year, the nominal interest rate is approximately ________ percent a year. A) 0; 2 B) 4; 6 C) 6; 8 D) 6; 4

C) the members of the Board of Governors.

This group consists of seven members appointed by the President of the U.S. for 14-year terms: A) the presidents of the Federal Reserve Banks. B) the members of the Federal Open Market Committee. C) the members of the Board of Governors. D) None of the above answers are correct.

C) equal to the actual amount of unemployment.

When economists speak of full employment, they refer to the case in which the sum of frictional and structural unemployment is A) falling over time. B) equal to zero. C) equal to the actual amount of unemployment. D) greater than the level of deficient demand unemployment. E) None of the above answers are correct.

B) structural unemployment.

When the automobile replaced horse-drawn carriages as the principal means of transportation, firms producing horse-drawn carriages went bankrupt and permanently laid off all their workers, thereby increasing A) frictional unemployment. B) structural unemployment. C) frictional and cyclical unemployment. D) cyclical unemployment.

B) real interest rate is less than the nominal interest rate.

When the inflation rate is positive, the A) real interest rate is greater than the nominal interest rate. B) real interest rate is less than the nominal interest rate. C) nominal interest rate is zero. D) real interest rate equals the nominal interest rate.

B) 2.5

When the monetary base increases by $4 billion, the quantity of money increases by $10 billion. Thus, the money multiplier equals A) 0.4 B) 2.5 C) 40.0 D) None of the above.

A) people shift funds from money holdings to interest-bearing assets, like bonds.

When the nominal interest rate rises, the quantity of money demanded decreases because A) people shift funds from money holdings to interest-bearing assets, like bonds. B) people will buy more goods. C) people move funds from interest-bearing assets into money. D) the price level also rises and people decrease their demand for money.

A) can lend out additional funds.

Whenever actual reserves exceed desired reserves, the bank A) can lend out additional funds. B) needs to call in loans. C) will go out of business. D) must increase the amount of its required reserves by obtaining more cash.

D) Both answers A and C are correct.

Which of the following can start an inflation? A) an increase in aggregate demand B) an increase in aggregate supply C) a decrease in aggregate supply D) Both answers A and C are correct.

D) an increase in exports

Which of the following factors could start a demand-pull inflation ? A) an increase in tax rates B) a decrease in government expenditure C) a decrease in wage rates D) an increase in exports

C) It meets about every six weeks to decide on monetary policy.

Which of the following is TRUE regarding the Federal Open Market Committee (FOMC)? A) It is the main policy-making group of the U.S. Congress. B) Representatives from each state control its operation. C) It meets about every six weeks to decide on monetary policy. D) Both answers A and C are correct.

C) the public's checking deposits at commercial banks

Which of the following is not part of the monetary base? A) paper currency B) bank deposits at the Fed C) the public's checking deposits at commercial banks D) coins