econ exam 4

A bond that never matures is known as: a.) a perpetuity b.) an intermediary bond c.) an indexed bond d.) a junk bond

a.) a perpetuity

You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate? a.) medium of exchange b.) unit of account c.) store of value d.) liquidity

a.) medium of exchange

If the reserve ratio is 4 percent, then the money multiplier is: a.) 2.5 b.) 25 c. 0.04 d.) 10

b.) 25

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

d.) amount of unemployment that the economy normally experiences

Which of the following would necessarily create a surplus at the original equilibrium interest rate in the loanable funds market? a.) an increase in the supply of or a decrease in the demand for loanable funds b.) an increase in the supply of or an increase in the demand for loanable funds c.) a decrease in the supply of or a decrease in the demand for loanable funds d.) a decrease in the supply of or an increase in the demand for loanable funds

a.) an increase in the supply of or a decrease in the demand for loanable funds

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, there is a: a.) surplus and the interest rate is above the equilibrium level b.) surplus and the interest rate is below the equilibrium level c.) shortage and the interest rate is above the equilibrium level d.) shortage and the interest rate is below the equilibrium level

a.) surplus and the interest rate is above the equilibrium level

In a closed economy, private saving is: a.) the amount of income that households that have left after paying for their taxes and consumption b.) the amount of income that businesses have left after paying for the factors of production c.) the amount of tax revenue that the government has left after paying for its spending d.) always equal to investment

a.) the amount of income that households that have left after paying for their taxes and consumption

Aggregate demand includes: a.) the quantity of goods and services the government, households, firms, and customers abroad want to buy b.) neither the quantity of goods and services the government, households, nor firms want to buy nor the quantity of goods c.) the quantity of goods and services the government wants to buy, but not the quantity of goods and services households, firms, or customers abroad want to buy d.) the quantity of goods and services households and firms want to buy, but not the quantity of goods and services the government wants to buy

a.) the quantity of goods and services the government, households, firms, and customers abroad want to buy

The labor-force participation rate measures the percentage of the: a.) total adult population that is in the labor force b.) total adult population that is employed c.) labor force that is still employed d.) labor force that is either employed or unemployed

a.) total adult population that is in the labor force

The labor-force participation rate measures the percentage of the: a.) total adult population that is in the labor force b.) total adult population that is employed c.) labor force that is employed d.) labor force that is either employed or unemployed

a.) total adult population that is in the labor force

The natural rate of unemployment: a.) varies less than the measured unemployment rate b.) cannot be changed by government policy c.) is closely associated with the ups and downs in economic activity d.) is set by the Federal Reserve

a.) varies less than the measured unemployment rate

The leverage ratio is calculated as: a.) assets minus liabilities b.) assets divided by bank capital c.) the reciprocal of the required reserve ratio d.) the required reserve ratio multiplied by bank capital

b.) assets divided by bank captial

The economy's two most important financial markets are: a.) the investment market and the saving market b.) the bond market and the stock market c.) banks and stock market d.) financial markets and financial institutions

b.) the bond market and the stock market

Suppose that in a closed economy GDP is equal to 20,000, consumption is equal to 15,000, government purchases equal 4,000, and taxes equal 3,000. What are private saving, public saving, and national saving? a.) -2,000, 1,000, and 2,000, respectively b.) 1,000, 2,000, and 3,000, respectively c.) 2,000, -1,000, and 1,000, respectively d.) 2,000, 1,000, and 2,000, respectively

c.) 2,000, -1,000, and 1,000, respectively

Suppose that a large number of people who used to work or seek work no longer do either. Other things the same, this makes: a.) the number of people unemployed rise but does not change the labor force b.) the number of people unemployed rise but makes the labor force fall c.) both the number of people unemployed and in the labor force fall d.) the number of people unemployed fall but does not change the labor force

c.) both the number of people unemployed and in the labor force fall

A larger budget deficit: a.) raises the interest rate and investment b.) reduce the interest rate and investment c.) raises the interest rate and reduces the investment d.) reduces the interest rates and raises the investment

c.) raises the interest rate and reduces the investment

Frictional unemployment is thought to explain relatively: a.) short spells of unemployment as is structural unemployment b.) long spells of unemployment as is structural unemployment c.) short spells of unemployment, while structural unemployment is thought to explain relatively long spells of unemployment d.) long spells of unemployment, while structural unemployment is thought to explain relatively short spells of unemployment

c.) short spells of unemployment, while structural unemployment is thought to explain relatively long spells of unemployment

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.) shifts in the aggregate-demand curve

c.) the slope of the aggregate-demand curve

Financial intermediaries are: a.) the same as financial markets b.) individuals who make profits by buying a stock low and selling it high c.) a more general name for financial assets such as stocks, bonds, and checking accounts d.) financial institutions through which savers can indirectly provide funds to borrowers

d.) financial institutions through which savers can indirectly provide funds to borrowers

True or False. When output rises, unemployment falls.

True

Which of the following counts as part of the supply of loanable funds? a.) bank deposits and purchases of bonds b.) bank deposits but not purchases of bonds c.) purchases of bonds but not bank deposits d.) neither purchases of bonds nor bank deposits

a.) bank deposits and purchases of bonds

The natural rate of unemployment 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

a.) both frictional and structural unemployment

The money supply increases when the Fed: a.) buys bonds. The increase will be larger, the smaller is the reserve ratio b.) buys bonds. The increase will be larger, the larger is the reserve ratio c.) sells bonds. The increase will be larger, the smaller is the reserve ratio d.) sells bonds. The increase will be larger, the larger is the reserve ratio

a.) buys bonds. The increase will be larger, the smaller is the reserve ratio

When opening a print shop you need to buy printers, computers, furniture, and similar items. Economists call these expenditures: a.) capital investments b.) investment in human capital c.) business consumption expenditures d.) personal saving

a.) capital investments

Which of the following lists is included in what economists call "money"? a.) cash b.) cash and stocks and bonds c.) cash and stocks and bonds and real estate d.) cast and stock and bonds and real estate and other assets

a.) cash

Crowding out occurs when investment declines because a budget: a.) deficit makes interest rates rise b.) deficit makes interest rates fall c.) surplus makes interest rates rise d.) surplus makes interest rates fall

a.) deficit makes interest rates rise

Institutions that help you match one person's savings with another person's investments are collectively called the: a.) financial system b.) Federal Reserve System c.) banking system d.) monetary system

a.) financial system

When the Fed buys bonds, the supply of money: a.) increases and so aggregate demand shifts right b.) decreases and so aggregate demand shifts left c.) decreases and so aggregate demand shifts left d.) increases and so aggregate demand shifts left

a.) increases and so aggregate demand shifts right

The source of supply of loanable funds: a.) is saving and the source of demand for loanable funds is investment b.) is investment and the source of demand for loanable funds is saving c.) and the demand for loanable funds is saving d.) and the demand for loanable funds is investment

a.) is saving the source of demand for loanable funds is investment

An increase in the government's budget surplus means public saving is: a.) positive and increasing b.) positive and decreasing c.) negative and increasing d.) negative and decreasing

a.) positive and increasing

Other things the same, a higher interest rate induces people to: a.) save more, so the supply of loanable funds slopes upward b.) save less, so the supply of loanable funds slopes upward c.) invest more, so the supply of loanable funds slopes upward d.) invest less, so the supply of loanable funds slopes downward

a.) save more the the supply of loanable funds slopes upward

Given that Monika's income exceeds her expenditures, Monika is best describes as a: a.) saver or as a supplier of funds b.) saver or as a demander of funds c.) borrower or as a supplier of funds d.) borrower or as a demander of funds

a.) saver or as a supplier of funds

Frictional unemployment is inevitable because: a.) sectoral shifts are always happening b.) there is a federal minimum-wage law in the U.S. c.) some people do not want to be employed d.) unions are very popular in the U.S.

a.) sectoral shifts are always happening

Which of the following would shift the long-run aggregate supply curve right? a.) both an increase in the capital stock and an increase in the price level b.) an increase in the capital stock, but not an increase in the price level c.) an increase in the money supply, but not an increase in the capital shock d.) neither and increase in the money supply nor an increase in the capital stock

b.) an increase in the capital stock, but not an increase in the price level

The price of a stock will rise if: a.) managers of a stock exchange decide the price should be higher b.) demand for the stock rises c.) supply of the stock rises d.) demand for the stock falls

b.) demand for the stock rises

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 reserved and $9,920 in loans b.) it has $800 in reserved and $9,200 in loans c.) it has $1,250 in reserves and $8,750 in loans d.) it has $8,000 in reserves and $2,000 in loans

b.) it has $800 in reserved and $9,200 in loans

To be counted as "employed" in the U.S. labor force statistics, a person: a.) must be working for pay and be working full time b.) must be working for pay but does not have to be working full time c.) does not have to be working for pay if they are working for a family business but must be employed full time d.) does not have to be working for pay if they are working for a family business and do not have to be working full time

b.) must be working for pay but does not have to be working full time

In which case can we be sure aggregate demand shifts left overall? a.) people want to save more for retirement and the Fed increases the money supply b.) people who want to save more for retirement and the Fed decreases the money supply c.) people want to save less for retirement and the Fed increases the money supply d.) people want to save less for retirement and the Fed decreases the money supply

b.) people who to save more for retirement and the Fed decreases the money supply

Long-term bonds are: a.) riskier than short-term bond, and so interest rates on long term bonds are usually lower than interest rates on short-term bonds b.) riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds c.) less risky than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds d.) less risky than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds

b.) riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds

Cyclical unemployment refers to: a.) the portion of unemployment created by a job search b.) short-run fluctuations around the natural rate of unemployment c.) changes in unemployment due to changes in the natural rate of unemployment d.) the portion of unemployment created by wages set above the equilibrium level

b.) short-run fluctuations around the natural state of unemployment

Supposed that a large number of people who used to work or seek work no longer do either. Other things the same, this makes: a.) the number of people unemployed rise but does not change the labor force b.) the number of unemployed people rise but makes the labor force fall c.) both the number of people unemployed and in the labor force fall d.) the number of people unemployed fall but does not change the labor force

c.) both the number of people unemployed and in the labor force fall

Which of the following does the Federal Reserve not do? a.) conduct monetary policy b.) act as a lender of last resort c.) conduct fiscal policy d.) serve as a bank regulator

c.) conduct fiscal policy

Sandy has graduated from college and is devoting her time to searching for a job. She has seen plenty of opening but has not yet been offered one that best suits her tastes and skills. Sandy is: a.) structurally unemployed. Structural unemployment exists even in the long-run b.) structurally unemployed. There is no structural unemployment in the long-run c.) frictionally unemployed. Frictional unemployment can exist even in the long run d.) frictionally unemployed. There is not frictional unemployment in the long-run

c.) frictionally unemployed. Frictional unemployment can exist even in the long run

Esther is considering expanding her dress shop. If interest rates rise, she is: a.) less likely to expand. This illustrates why the supply of loanable funds slopes downward b.) more likely to expand. This illustrates why the supply of loanable funds slopes upward c.) less likely to expand. This illustrates why the demand for loanable funds slopes downward d.) more likely to expand. This illustrates why the demand for loanable funds slopes upwards

c.) less likely to expand. This illustrates why the demand for loanable funds slopes downward

When the government's budget deficit increases, the government is borrowing: a.) less and public saving falls b.) less and public saving increases c.) more and public saving falls d.) more and public saving increases

c.) more and public saving falls

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.) a 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

c.) movement to the left along the aggregate-demand curve

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.) shits in the aggregate-demand curve

c.) the slope of the aggregate-demand curve

What do economists call financial institutions through which savers can indirectly provide funds to borrowers? a.) stock markets b.) monetary institutions c.) financial markets d.) financial intermediaries

d.) financial intermediaries

Which of the following statements about the term of a bond is correct? a.) term refers to the various characteristics of a bond, including its interest rate and tax treatment b.) the term of a bond is determined entirely by its credit risk c.) the term of a bond is determined entirely by how much sales commission the buyer of the bond pays when he or she purchases the bond d.) interest rates on long-term bonds are usually higher than the interest rates on short-term bonds

d.) interest rates on long-term bonds are usually higher than the interest rates on short-term bonds

The Federal Reserve: a.) was created in 1896 b.) is part of the executive branch of government c.) is only responsible for controlling the money supply d.) is the central bank of the U.S.

d.) is the central bank of the U.S.

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

d.) medium of exchange, store of value, unit of accoutn

Josh is a full-time college student who is not working or looking for a job. The Bureau of Labor Statistics counts Josh as: a.) employed b.) unemployed c.) marginally attached worker d.) not in the labor force

d.) not in the labor force

In a closed economy, what does (Y - T - C) represent? a.) national saving b.) government tax revenue c.) public saving d.) private saving

d.) private saving

Which of the following is not a function of money? a.) unit of account b.) store of value c.) medium of exchange d.) protection against inflation

d.) protection against inflation

In a closed economy, what does the difference between the tax revenue and government purchases, (T - G), represent? a.) national saving b.) investment c.) private saving d.) public saving

d.) public saving

At the broadest level, the financial system moves the economy's scarce resources from: a.) the rice to the poor b.) financial institutions to business firms and government n c.) households to financial institutions d.) savers to borrowers

d.) savers to borrowers

Which of the following is NOT an example of monetary policy? a.) the Federal Open Market Committee decides to sell bonds b.) the Federal Open Market Committee decides to buy bonds c.) the Federal Reserve reduces the reserve requirement d.) the Federal Reserve facilitates bank transactions by clearing checks

d.) the Federal Reserve facilitates banks transactions by clearing checks

Consider the expressions T - G and Y - T - C. Which of the following statements is correct? a.) each one of these is equal to national saving b.) each one of these is equal to public saving c.) the first one of these is private saving; the second one is public saving d.) the first one of these is public saving; the second one of these is private saving

d.) the first one of these is public saving; the second one of these is private saving