Econ test 2
A Luddite is: A. someone who opposes the introduction of new technologies. B. a worker whose real wage rises as a result of globalization. C. a fictional character from American folk history. D. a consumer who refuses to buy imported goods, even if they are cheaper.
A
A currency appreciation is a(n): A. increase in the value of a currency relative to other currencies. B. decrease in the value of a currency relative to other currencies. C. reduction in the official value of a currency in a fixed-exchange-rate system. D. increase in the official value of a currency in a fixed-exchange-rate system.
A
All of the following describe trends in labor markets EXCEPT: A. growing wage equality in the United States in recent decades. B. a slowdown in real wage growth since the 1970s. C. substantial growth in the level of employment in the United States. D. over-sixteen population growth rates that fall short of the growth rate of new jobs in the United States.
A
An increase in interest rates results in a(n) ______ in the required rate of return to hold stocks and ______ current stock prices. A. increase; reduces B. increase; raises C. decrease; raises D. decrease; reduces
A
An increase in the nominal exchange rate, e, defined as the number of units of the foreign currency that one unit of the domestic currency will buy, indicates that the domestic currency has ______ relative to the foreign currency. A. appreciated B. depreciated C. become overvalued D. become undervalued
A
An open-market purchase of government securities by the Fed will: A. increase bank reserves, and the money supply will increase. B. decrease bank reserves, and the money supply will increase. C. increase bank reserves, and the money supply will decrease. D. decrease bank reserves, and the money supply will decrease.
A
Crowding out is the tendency for increased government deficits to: A. reduce investment spending. B. increase investment spending. C. reduce consumption spending. D. increase consumption spending.
A
Current income minus spending on current needs equals: A. saving. B. wealth. C. transfers. D. investment.
A
Double coincidence of wants is avoided if money is used as a: A. medium of exchange. B. measure of value. C. standard of deferred payment. D. store of value.
A
Explanations for the high saving rate in Japan consistent with the life-cycle reason for saving include: A. long life expectancies and large down payments required for home purchases. B. lifetime employment. C. the desire to leave resources to children who provide support and attention to parents in their old age. D. low unemployment rates in Japan.
A
Following the 1960 and 1973 period, average real earnings of workers grew more ______ from 1973 to 1996 and then ______ from 1996 to 2004. A. slowly; grew more rapidly B. slowly; slowed even more C. slowly; grew at about the same rate D. rapidly; slowed
A
Government health and safety regulations or anti-discrimination laws can reduce real wages by: A. decreasing the demand for labor. B. decreasing the supply of labor. C. reducing employer costs. D. increasing worker productivity.
A
Holding other factors constant, an increase in the capital stock ______ the real wage and ______ employment. A. increases; increases B. increases; decreases C. increases; does not change D. decreases; increases
A
Holding other factors constant, if Congress passes a 5% investment tax credit under which a firm receives $5 in tax refunds from the government for every $100 it spends on new capital equipment, then the real interest rate will ______ and the equilibrium quantity of national saving and investment will _____. A. increase; increase B. increase; decrease C. increase; not change D. decrease; increase
A
Holding other factors constant, if computers allow factory workers to manufacture more products per hour, then the real wages of factory workers will ______ and employment of factory workers will _____. A. increase; increase B. increase; decrease C. decrease; not change D. decrease; increase
A
Holding other factors constant, if oil prices rise relative to the prices of other products, then the real wages of oil workers will ______ and employment of oil workers will _____. A. increase; increase B. increase; decrease C. decrease; not change D. decrease; increase
A
Holding other factors constant, if the education and skills of the typical worker in an economy increases, then the real wages of workers will ______ and employment of workers will _____. A. increase; increase B. increase; decrease C. decrease; not change D. decrease; increase
A
Holding other factors constant, technological progress ______ the real wage and ______ employment. A. increases; increases B. increases; decreases C. increases; does not change D. decreases; increases
A
If monetary policy must be used to set the market equilibrium value of the exchange rate equal to the official value, it A. is no longer available to stabilize the domestic economy. B. will be unable to stabilize the market equilibrium value of the exchange rate. C. will simultaneously stabilize the domestic economy. D. will increase the rate of growth in the economy.
A
If net taxes paid by households increase: A. private saving will decrease. B. private saving will increase. C. public saving will decrease. D. transfer payments to households will decrease.
A
If the Luddites had succeeded in ______ the introduction of labor-saving machinery, economic growth in Great Britain may have been ______. A. blocking; slower B. blocking; more rapid C. promoting; slower D. promoting; more rapid
A
If the money supply equals 1,000, velocity equals 5, and real GDP equals 2,500, then the price level equals: A. 2. B. 2.5. C. 5. D. 5,000.
A
If the money supply equals 2,000, velocity equals 3, and real GDP equals 4,000, then the price level equals: A. 1.5. B. 2. C. 3. D. 6,000.
A
If the nominal exchange rate is 4 Israeli shekels per U.S. dollar, and 0.178 Jordanian dinars per Israeli shekel, then there are ______ Jordanian dinars per U.S. dollar. A. 0.712 B. 0.045 C. 0.025 D. 5.618
A
If total government tax collections equal $200 billion, transfer payments equal $75 billion, and government interest payments equal $10 billion, then net taxes equal: A. $115 billion. B. $125 billion. C. $190 billion. D. $275 billion.
A
In an economy without international trade, investment must equal ______ saving. A. national B. private C. public D. life-cycle
A
In an open-market purchase the Federal Reserve ______ government bonds and the supply of bank reserves ______. A. buys; increases B. buys; decreases C. sells; decreases D. sells; increases
A
In the United Sates, the average annual rate of growth of real wages was fastest in the period: A. 1960-1973. B. 1960-1996. C. 1960-2001. D. 1973-1996.
A
Labor unions contribute to structural unemployment by: A. keeping wages above the market-clearing level. B. keeping wages below the market-clearing level. C. allowing unemployed workers to search longer or less intensively for jobs. D. forcing unemployed workers to take the first job offered to them.
A
Larger increases in the demand for labor than in the supply of labor explain: A. the substantial increase in real wages. B. the slowdown in real wage growth. C. increasing wage inequality. D. skill-biased technological change.
A
Long-term increases in productivity that have increased the demand for labor and the real wages of labor have resulted primarily from ______ and _____. A. technological progress; a modernized capital stock B. technological progress; an increased labor supply C. a modernized capital stock; skill-biased technological change D. a modernized capital stock; an increased labor supply
A
Minimum wage laws contribute to structural unemployment by: A. keeping wages above the market-clearing level. B. keeping wages below the market-clearing level. C. allowing unemployed workers to search longer or less intensively for jobs. D. forcing unemployed workers to take the first job offered to them.
A
Mo's current income is $100 more per month than his current consumption needs. He decides to use the $100 to reduce his credit card debt. As a result, his: A. liabilities will decrease and his wealth will increase. B. liabilities and his wealth will decrease. C. assets will decrease and his wealth will increase. D. assets and his wealth will increase.
A
Other things equal, the combination of a ______ saving rate and a ______ real interest rate will result in the largest accumulation of wealth over time. A. high; high B. high; low C. high; zero D. low; high
A
Periods of unusually low production in an economy result in ______ unemployment. A. cyclical B. environmental C. structural D. frictional
A
Proponents of fixed exchange rates, who argue that fixed exchange rates eliminate uncertainty and therefore promote international trade, sometimes fail to recognize: A. that fixed exchange rates may not remain fixed forever. B. that fixed exchange rates are more volatile than flexible exchange rates. C. that exchange rates do not matter to businesses, so the uncertainty has no impact. D. that international trade is bad for the economy and should not be promoted.
A
Steve takes $500 from his paycheck and uses it to purchase U.S. Savings Bonds. Based on this information: A. Steve's saving has increased by $500. B. Steve's saving has decreased by $500. C. Steve has a capital gain of $500. D. Steve's wealth is unchanged.
A
Steve uses $300 from his paycheck to pay off his credit card balance. Based on this information: A. Steve's saving has increased by $300. B. Steve's saving has decreased by $300. C. Steve's wealth is unchanged. D. Steve has a capital loss of $300.
A
Suppose you have $200 with which you can buy shares of stock from two companies: ABC Hot Chocolate Company and XYZ Lemonade. Each company's stock currently sells for $100 per share. If the temperature next year is lower than average, the stock price for ABC will increase by $20, and the stock price for XYZ will not change. If the temperature next year is higher than average, the stock price for XYZ will increase by $20, and the stock price for ABC will not change. There is a 50% chance that it will be colder than average next year, and a 25% chance that it will be warmer than average. If you purchase two shares of ABC stock and no shares of XYZ stock, there is a ______ chance that your gain will be $40. Otherwise, your gain will be ______. A. 50%; $0 B. 25%; $20 C. 75%; $30 D. 50%; $20
A
The Hatfields and the McCoys both earn $50,000 per year in real terms in the labor market, and both families are able to earn a 5% real interest rate on their savings. In the year 2000, both families began to save. The Hatfields saved 8% of their income each year; the McCoys saved 10%. In 2000, the Hatfields consumed ______ more than the McCoys; in 2001, the Hatfields consumed ______ than the McCoys. A. $1,000; $139 more B. $2,000; $139 more C. $1,000; $139 less D. $2,000; $139 less
A
The costs of unemployment are lowest (and perhaps even negative) for ______ unemployment. A. frictional B. cyclical C. structural D. cyclical and structural
A
The gold standard is an example of a ______ exchange rate system. A. fixed B. flexible C. nominal D. dollarized
A
The marginal product of new capital depends on ______ and _____. A. productivity of capital; relative price of the firm's output B. price of new capital goods; real interest rate C. relative price of the firm's output; real interest rate D. productivity of new capital; real interest rate
A
The money supply in Econland is 1,000, and currency held by the public equals bank reserves. The desired reserve/deposit ratio is 0.25. Bank reserves equal _____. A. 200 B. 250 C. 500 D. 800
A
The money supply in Macroland is currently 2,500, bank reserves are 200, currency held by public is 500, and banks' desired reserve/deposit ratio is 0.10. Assuming the values of the currency held by the public and the desired reserve/deposit ratio do not change, if the Central Bank of Macroland wishes to increase the money supply to 3,000, then it should conduct an open-market ______ government bonds. A. purchase of 50 B. purchase of 250 C. sale of 500 D. sale of 50
A
The principal amount of a bond is the amount: A. originally lent. B. of interest agreed upon when the bond was originally issued. C. paid to the bondholders on a regular basis. D. of interest the bondholder is entitled to when the bond matures.
A
The slowdown in the growth of real wages in the United States since 1973 is consistent with a concurrent: A. slowdown in productivity gains. B. slowdown in the growth of the working age population. C. slowdown in immigration into the country. D. speedup in the rate of inflation.
A
Wealth is the same as: A. net worth. B. assets. C. capital gains. D. savings.
A
When the nominal exchange rate changes from 4 francs per dollar to 6 francs per dollar, the dollar has: A. appreciated. B. depreciated. C. become overvalued. D. become undervalued.
A
Which of the following is an example of structural unemployment? A. Dora lost her job when the textile factory closed. She does not have skills to work in another industry and has been unemployed for over a year. B. Marsha was laid off from her job with the airline because the recession has reduced the demand for airline travel. She expects to get her job back when the economy picks up. C. Alan, a software engineer, lost his job when the internet startup he worked for went bankrupt. He interviewed with five companies in the area before taking a job with another firm in the industry. D. Jim had a job as an engineer, but quit when his wife was transferred to another state. He looked for a month before finding a new job that he liked.
A
Which of the following policies would be expected to increase private saving? A. Replacing the income tax with a consumption tax B. Increasing the tax rate on capital gains C. Providing more generous Social Security retirement benefits D. Reducing the size of down payments needed to buy a house
A
You originally required a risk premium of 6 percent in addition to the rate of return on safe assets before you would purchase shares of Techno Company stock. If you and other investors reduce the risk premium you require to 4 percent, the price of Techno Company stock will: A. increase. B. decrease. C. equal the old risk premium plus the new risk premium. D. equal the new risk premium plus the rate of return on safe assets.
A
You own shares in a well-managed and diversified company. If a booming economy decreases investors' concerns about market risk, then the price of your shares will _____, holding other factors constant. A. increase. B. decrease. C. not change. D. either increase or decrease.
A
A currency depreciation is a(n): A. increase in the value of a currency relative to other currencies. B. decrease in the value of a currency relative to other currencies. C. reduction in the official value of a currency in a fixed-exchange-rate system. D. increase in the official value of a currency in a fixed-exchange-rate system.
B
A decrease in the capital gains tax on income generated through investment in new capital will: A. shift the demand for investment curve to the left. B. shift the demand for investment curve to the right. C. shift the supply of saving curve to the left. D. shift the supply of saving curve to the right.
B
A decrease in the nominal exchange rate, e, defined as the number of units of the foreign currency that one unit of the domestic currency will buy, indicates that the domestic currency has ______ relative to the foreign currency. A. appreciated B. depreciated C. become overvalued D. become undervalued
B
A flexible exchange rate is an exchange rate whose value: A. is determined by the law of one price. B. varies according to the supply and demand for the currency in the foreign exchange market. C. is established annually by the International Monetary Fund. D. reflects the comparative advantage of the home country versus other foreign countries.
B
A long-term mismatch between the skills of some workers and the jobs available is a principal cause of ______ unemployment. A. cyclical B. structural C. global D. frictional
B
A regular payment received by stockholders for each share they own is called a: A. coupon payment. B. dividend. C. bond. D. capital gain.
B
An increase in the perceived riskiness of the stock of Company A ______ the risk premium investors require to purchase Company A stock and ______ the price of Company A stock. A. increases; increases B. increases; decreases C. decreases; increases D. decreases; decreases
B
As the real interest rate increases, the quantity of saving supplied ______ and the quantity of saving demanded ____. A. increases; increases B. increases; decreases C. does not change; does not change D. decreases; increases
B
As the real wage decreases, the quantity of labor demanded ______ and the quantity of labor supplied _______. A. increases; increases B. increases; decreases C. decreases; decreases D. decreases; increases
B
Assume that the union wage already exceeds the market-clearing wage. If the union wage is increased, holding other factors constant, then the number unemployed ______ and the number employed _____. A. increase; increases B. increases; decreases C. increases; does not change D. decreases; increases
B
Factors increasing the labor supply and thereby contributing to the slowdown in real-wage growth that began in the 1970s include ______ and _____. A. skill-biased technological change; globalization B. increased labor force participation by women; the coming-of-age of the baby-boom generation C. technological progress; diminishing returns to labor D. increasing wage inequality; globalization
B
Fred purchases a bond, newly issued by the Big Time Corporation, for $10,000. The bond pays $400 to its holder at the end of the first, second, and third years and pays $10,400 upon its maturity at the end of four years. The principal amount of this bond is ___, the coupon rate is ____, and the term of this bond is _____. A. $400; 40%; four years B. $10,000; 4%; four years C. $10,000; $400; 4% D. $10,400; 4%; four years
B
Globalization ______ the wages of workers in the exporting industries and ______ the wages of workers in the import-competing industries. A. raises; raises B. raises; lowers C. raises; does not change D. lowers; raises
B
Government regulations that increase the cost to the employer of hiring workers will: A. increase the demand for labor. B. decrease the demand for labor. C. increase the supply of labor. D. decrease the supply of labor.
B
Health and safety regulations in the labor market: A. are always efficient because they improve working conditions. B. should be evaluated by comparing their costs to their benefits. C. are necessarily inefficient if they impose additional costs on employers. D. can lead to an increase in frictional unemployment.
B
Holding other factors constant, if a change in tax laws discourages people from saving more for retirement, then the real interest rate will ______ and the equilibrium quantity of saving and investment will _____. A. increase; increase B. increase; decrease C. decrease; decrease D. decrease; increase
B
If a bank's desired reserve/deposit ratio is 0.33 and it has deposit liabilities of $100 million and reserves of $50 million, it: A. has too few reserves and will reduce its lending. B. has too many reserves and will increase its lending. C. has the correct amount of reserves and outstanding loans. D. should increase the amount of its reserves.
B
If a country pegs its currency to a foreign currency, it no longer has the ability to use monetary policy to stabilize the economy because: A. it no longer has a central bank. B. monetary policy must be used to keep the exchange rate's market equilibrium value at its official value. C. banks will begin to hold 100% of their deposits in reserves. D. it must eliminate its currency from circulation and replace it with the foreign currency.
B
If government spending increases by $1 million while net taxes are unchanged, then: A. public saving increases. B. public saving decreases. C. public saving does not change. D. private saving increases.
B
If the exchange rate moves from 10 Mexican pesos per U.S. dollar to 8 Mexican pesos per U.S. dollar, then the Mexican peso has ______ and the U.S. dollar has _____. A. appreciated; appreciated B. appreciated; depreciated C. depreciated; appreciated D. depreciated; depreciated
B
If the existence of alternative opportunities makes people become less willing to work in poultry processing plants, then the real wage of unskilled workers in poultry processing plants is predicted to ______ and the employment of unskilled workers in poultry processing plants is predicted to ______. A. increase; increase B. increase; decrease C. increase; not change D. decrease; decrease
B
If the nominal exchange rate is expressed as the number of units of domestic currency per unit of foreign currency, and that rate increases, then the domestic currency has: A. appreciated. B. depreciated. C. become overvalued. D. become undervalued.
B
If you use $1,000 to purchase silver bullion, which you plan to keep in a safe, you are using money as: A. bank reserves. B. a medium of exchange. C. a unit of account. D. a store of value.
B
In the United States the real wages of the least-skilled, least educated workers have ______ and the wages of best-educated, highest skilled workers have ______. A. increased; increased B. declined; increased C. increased; declined D. declined; remained constant
B
In the market for saving, the price is the: A. relative price. B. real interest rate. C. nominal interest rate. D. inflation rate.
B
Increasing wage inequality results when international trade leads to ______ wages for workers in exporting industries and ______ wages for workers in importing industries. A. higher; higher B. higher; lower C. lower; no change in D. lower; higher
B
Proponents of fixed exchange rates argue that the predictability of the fixed exchange rate: A. allows monetary policy to be used to stabilize the domestic economy. B. increases trade and economic integration. C. decreases trade and economic integration. D. prevents exchange rate overvaluation.
B
Psychological factors that may influence the saving rate are ______ and _______. A. the real interest rate; the demonstration effect B. self-control problems; the demonstration effect C. capital gains; the real interest rate D. the desire to leave a bequest; capital gains
B
Slower growth in labor demand in combination with increases in labor supply explains ____________ accompanied by __________. A. a slowdown in real wage growth; a decline in employment B. a slowdown in real wage growth; rapid employment growth C. a slowdown in real wage growth; increasing wage inequality D. accelerated real wage growth; a decline in employment
B
Structural unemployment will decrease when: A. the minimum wage is increased. B. the minimum wage is decreased. C. unemployment insurance benefits are increased. D. union wages are increased.
B
Suppose you have $200 with which you can buy shares of stock from two companies: ABC Hot Chocolate Company and XYZ Lemonade. Each company's stock currently sells for $100 per share. If the temperature next year is lower than average, the stock price for ABC will increase by $20, and the stock price for XYZ will not change. If the temperature next year is higher than average, the stock price for XYZ will increase by $20, and the stock price for ABC will not change. There is a 50% chance that it will be colder than average next year, and a 25% chance that it will be warmer than average. If you purchase two shares of XYZ stock and no shares of ABC stock, there is a ______ chance that your gain will be $40. Otherwise, your gain will be ______. A. 50%; $30 B. 25%; $0 C. 75%; $20 D. 50%; $20
B
Technological change that affects the marginal products of high-skilled and low-skilled workers differently is called ______ technological change. A. capital-labor B. skill-biased C. marginal-productivity D. high-low
B
The costs of investment depend on the ______ and the _______. A. marginal product of capital; relative price of the firm's output B. price of new capital goods; real interest rate C. relative price of the firm's output; real interest rate D. taxes levied on the revenue generated; relative price of the firm's output
B
The expected benefit of investment equals: A. private saving. B. the value of the marginal product of capital. C. the real interest rate. D. the price of the capital good.
B
The growth rate of average annual earnings in the United States from 1973 to 1996 was: A. higher than it was from 1960 to 1973. B. lower than it was from 1960 to 1973. C. the same as it was from 1960 to 1973. D. roughly equal to zero.
B
The introduction of word processing software that increases the demand for workers with computer skills relative to those without such skills is an example of: A. increasing reservation prices. B. skill-biased technological change. C. the diminishing marginal product of labor. D. globalization.
B
The maturation date of a bond is the date at which: A. coupon payments will be made. B. the principal will be repaid. C. dividend payments will be made. D. taxes on the bond are due.
B
The real rate of interest measures the ______ of capital investment. A. value of the marginal product B. opportunity cost C. marginal benefit D. relative price
B
The saving of the government sector is called ______ saving. A. private B. public C. national D. aggregate
B
The specialized information-gathering activities that banks use to evaluate borrowers are an example of the: A. cost-benefit principle. B. principle of comparative advantage. C. scarcity principle. D. principle of increasing opportunity cost.
B
The stock of wealth increases more rapidly the faster the flow of ______. A. income B. saving C. money D. assets
B
Total taxes minus transfer payments minus government interest payments is called: A. a budget surplus. B. net taxes. C. a budget deficit. D. national saving.
B
Two countries, Alpha and Beta, have the same levels of nominal and real GDP. Each dollar in Alpha is used more frequently than each dollar in Beta. Therefore, it must be the case that ______ in Alpha than in Beta. A. the rate of inflation is greater B. the money stock is smaller C. the price level is greater D. the velocity is lower
B
Two reasons savers keep deposits at banks are to: A. secure mortgages and to purchase stocks. B. earn a return on their savings and to facilitate making payments. C. lower interest rates and to increase the money supply. D. equalize loan supply and demand and to earn interest.
B
Wealth equals: A. current income minus spending on current needs. B. assets minus liabilities. C. saving minus investment. D. investment minus saving.
B
When the Fed sells government securities, the banks': A. reserves will increase and lending will expand, causing an increase in the money supply. B. reserves will decrease and lending will contract, causing a decrease in the money supply. C. reserve requirements will increase and lending will contract, causing a decrease in the money supply. D. reserves/deposit ratio will increase and lending will expand, causing an increase in the money supply.
B
When the coupon rate on newly-issued bonds increases from 5% to 6%, the prices of existing bonds: A. increase. B. decrease. C. remain unchanged. D. increase only if the coupon rate is less than 6%.
B
When the interest rate on newly issued bonds increases, the price of existing bonds: A. increases. B. decreases. C. increases only if the coupon rate is below the new rate. D. may either increase or decrease.
B
When the nominal exchange changes from 120 yen per dollar to 110 yen per dollar, the dollar has: A. appreciated. B. depreciated. C. become overvalued. D. become undervalued.
B
Which of the following is an example of cyclical unemployment? A. Dora lost her job when the textile factory closed. She does not have skills to work in another industry and has been unemployed for over a year. B. Marsha was laid off from her job with the airline because the recession has reduced the demand for airline travel. She expects to get her job back when the economy picks up. C. George is an unskilled worker who mows lawns in the summer, but is unemployed the rest of the year. D. Jim had a job as an engineer, but quit when his wife was transferred to another state. He looked for a month before finding a new job that he liked.
B
Which of the following is an example of the precautionary motive for saving? A. Pat puts $400 per month in his 401(k) retirement account. B. Jordan sets aside $200 per month in case she has to pay for a new roof for her house. C. Gerry and Terry put $2,000,000 in a trust fund that will go to their children when they die. D. Every month, Chris puts $400 into his saving account so that he can buy a new car in a few years.
B
Which of the following policies would be expected to increase private saving? A. Increasing the income tax. B. Reducing the tax rate on capital gains and dividends. C. Providing more generous Social Security retirement benefits. D. Increasing job security.
B
You expect a share of EconNews.Com to sell for $65 a year from now and to pay a $2 dividend per share in one year. What should you pay (rounded to the nearest dollar) for the stock today if you require an 8% return? A. $60 B. $62 C. $67 D. $70
B
You own shares in a start-up internet company. If large swings in the stock market increase financial investors' concerns about market risk, then the price of your shares will _____, holding other factors constant. A. increase B. decrease C. not change D. either increase or decrease
B
Your financial investments consist of U.S. government bonds maturing in twenty years and shares in a start-up internet company. If interest rates on newly issued government bonds increase, then the price of your bonds will ______ and the price of the shares you own will ____. A. increase; increase B. decrease; decrease C. increase; not change D. decrease; not change
B
A decrease in the perceived riskiness of the stock of Company A ______ the risk premium investors require to purchase Company A stock and ______ the price of Company A stock. A. increases; increases B. increases; decreases C. decreases; increases D. decreases; decreases
C
A fixed exchange rate is an exchange rate whose value: A. is established annually by the International Monetary Fund. B. varies according to the supply and demand for the currency in the foreign exchange market. C. is set by official government policy. D. reflects the comparative advantage of the home country versus other foreign countries.
C
According to the quantity equation, if velocity and output are constant, then an increase in the money supply leads to ______ in inflation. A. a less than proportional increase B. a less than proportional decreases C. the same percentage increase D. a greater than proportional increase
C
An exchange rate that is set by official government policy is called a ______ exchange rate. A. real B. nominal C. fixed D. flexible
C
An increase in the price of the output produced by labor will: A. increase the supply of labor. B. decrease the supply of labor. C. increase the demand for labor. D. decrease the demand for labor.
C
An increase in the size of the working-age population: A. increases labor demand. B. decreases labor demand. C. increases labor supply. D. decreases labor supply.
C
An increase in the value of a currency relative to other currencies is called a(n): A. evaluation. B. devaluation. C. appreciation. D. overvaluation.
C
Assume the minimum wage exceeds the market-clearing wage. If there is an increase in the labor supply, then the number of workers who are unemployed will ______ and the number of workers who are employed will _______. A. increase; increase B. increase; decrease C. increase, not change D. decrease; increase
C
Assume the union contract wage exceeds the market-clearing wage. If there is an increase in the labor supply, then the number of unemployed workers will ______ and the number of employed workers will _______. A. increase; increase B. increase; decrease C. increase; not change D. decrease; increase
C
At the national level, higher saving rates lead to ______ and higher standards of living. A. greater current consumption B. slower growth C. greater investment D. crowding out
C
Commercial banks create new money: A. when they increase their desired reserve/deposit ratio. B. by issuing checks. C. through multiple rounds of lending. D. when they buy government bonds from the Federal Reserve.
C
Elaine owns a beautiful diamond ring she purchased for $2,500. When she has it appraised she learns that it is now worth $3,000. Based on this information: A. Elaine's saving this year has increased by $500. B. Elaine's saving this year has decreased by $500. C. Elaine has experienced a $500 capital gain. D. Elaine's wealth is unchanged.
C
Explanations for the high saving rate in Japan consistent with the bequest reason for saving include: A. long life expectancies and large down payments required for home purchases. B. lifetime employment. C. the desire to leave resources to children who provide support and attention to parents in their old age. D. low unemployment rates in Japan.
C
Extremely rapid rates of money growth are usually the result of: A. rapid population growth. B. excessively high interest rates. C. large government budget deficits. D. sharp increases in productivity.
C
Frictional unemployment may be economically beneficial if: A. its psychological costs are borne only by the unemployed worker. B. losses in economic output are small. C. it leads to a better match between worker and job. D. the social costs are limited to smaller tax revenues collected.
C
From a macroeconomic perspective, the problem of low household saving has probably been overstated because: A. household saving is not related at all to an economy's ability to accumulate new capital. B. household saving has been increasing steadily over the last three decades. C. it is national saving, not household saving, that allows an economy to accumulate new capital. D. household saving represents a smaller share of national saving than does public saving.
C
From an economic perspective, the best response to increased wage inequality is to: A. block future technological change. B. stop all international trade. C. provide transition aid to disadvantaged workers. D. make skill-biased technological change illegal.
C
Globalization and skill-biased technological change have contributed to: A. the long-term growth in real wages. B. the slowdown in productivity since 1973. C. increasing wage inequality. D. high rates of employment in Western Europe.
C
High rates of saving today contribute to ______ in the future. A. higher tax rates B. more unemployment C. a higher standard of living D. more capital gains
C
If household saving decreases by $4 million, business saving increases by $4 million, and the government budget deficit decreases by $4 million, then private saving ______ and public saving ______. A. increases; increases B. increases; decreases C. does not change; increases D. does not change; decreases
C
If you post your car on eBay with a Buy-It-Now price of $1,800, you are using money as: A. bank reserves. B. a medium of exchange. C. a unit of account. D. a store of value.
C
In recent decades, slower growth in the demand for labor accompanied by an accelerated growth in the supply of labor in the U.S. explains: A. slower real wage growth and double-digit rates of unemployment. B. slower real wage growth and increasing wage inequality. C. slower real wage growth and an increase in the number of people with jobs. D. increasing wage inequality and double-digit rates unemployment.
C
In the United States between 1980 and 2007, employment: A. was constant, while the over-sixteen population increased. B. decreased, while the over-sixteen population increased. C. grew more rapidly than the over-sixteen population. D. grew at approximately the same rate as the over-sixteen population.
C
In the United States from 1960 to 2009, the largest positive contribution to national saving was from: A. the public sector. B. the government budget deficit. C. business saving. D. household saving.
C
In the twentieth century, average real wages have risen substantially: A. only in the United States. B. in industrial countries excluding the United States. C. in industrial countries including the United States. D. in neither the United States nor other industrial countries.
C
Initially, workers in the shoe industry and the computer industry earn the same wage. Reductions in trade barriers give domestic consumers access to cheaper shoes produced abroad, so domestic shoe prices fall. At the same time, foreign consumers purchase more computers, raising the relative price of computers. As a result of these changes, the demand for labor in the shoe industry ______ and the demand for labor in the computer industry ______. A. increases; increases B. increases; decreases C. decreases; increases D. decreases; decreases
C
Large economies, like the United States should ______ employ a flexible exchange rate, because giving up the power to stabilize the domestic economy via monetary policy _____. A. almost never; makes little sense B. almost never; is of little consequence C. nearly always; makes little sense D. nearly always; is of little consequence
C
Macroland produces dishes and glassware. Before trade, a set of dishes sells for $100 and a set of glasses sells for $50. When Macroland opens to trade, foreign demand for domestically produced china is strong, raising the price of a set of dishes to $125. But foreign competition reduces the demand for domestically produced glasses, so that they now sell for $25 a set. Assuming workers cannot move between industries, the wages of workers producing dishes will ______ and the wages of workers producing glasses will ____. A. increase; increase B. increase; not change C. increase; decrease D. decrease; increase
C
Most economists generally argue ______ trying to block technological advances because these technological advances ______. A. in favor of; cause the economy to grow to rapidly B. in favor of; increase wage inequality C. against; are necessary for improved standards of living D. against; promote wage equality
C
Pat pays $10,000 for a newly issued two-year government bond with a $10,000 face value and a 6 percent coupon rate. One year later, after receiving the first coupon payment, Pat sells the bond. If the current one-year interest rate on government bonds is 5 percent, then the price Pat receives is: A. $10,000. B. $500. C. greater than $10,000. D. less than $10,000.
C
Payments by the government to the public for which the government receives no current goods or services in return are called: A. public saving. B. net taxes. C. transfer payments. D. capital losses.
C
Privately-owned firms that accept deposits from individuals and businesses and use those deposits to make loans are called: A. mortgage banks. B. brokerage firms. C. commercial banks. D. investment banks.
C
Slower real wage growth since the 1970s accompanied by rapid job growth can be explained by: A. skill-biased technological change. B. globalization. C. a productivity slowdown accompanied by an increase in the labor supply. D. a productivity slowdown accompanied by a decrease in the labor supply.
C
Suppose you have $200 with which you can buy shares of stock from two companies: ABC Hot Chocolate Company and XYZ Lemonade. Each company's stock currently sells for $100 per share. If the temperature next year is lower than average, the stock price for ABC will increase by $20, and the stock price for XYZ will not change. If the temperature next year is higher than average, the stock price for XYZ will increase by $20, and the stock price for ABC will not change. There is a 50% chance that it will be colder than average next year, and a 25% chance that it will be warmer than average. If you purchase one share of ABC stock and one shares of XYZ stock, there is a ______ chance that your gain will be $20. Otherwise, your gain will be ______. A. 50%; $0 B. 25%; $30 C. 75%; $0 D. 50%; $40
C
The coupon rate on newly issued bonds is usually higher for bonds with ______ terms and ______ risk that the borrower will go bankrupt. A. shorter; greater B. shorter; smaller C. longer; greater D. longer; smaller
C
The demand for labor increases when the: A. real wage increases. B. real wage decreases. C. value of the marginal product of labor increases. D. value of the marginal product of labor decreases.
C
The direct trade of goods and services for other goods and services is called: A. financial intermediation. B. diversification. C. barter. D. using a medium of exchange.
C
The financial system consists of financial _____, such as commercial banks, and financial _____, such as the stock market. A. markets; intermediaries B. allocations; investments C. intermediaries; markets D. markets; institutions
C
The foreign exchange market is the market on which ______ of various nations are traded for one another. A. goods and services B. stocks and bonds C. currencies D. international financial securities
C
The introduction of a new technology that increases the productivity of labor will: A. increase the supply of labor. B. decrease the supply of labor. C. increase the demand for labor. D. decrease the demand for labor.
C
The large increase in household wealth in the United States in the 1990s was the result of: A. a high saving rate. B. a low saving rate. C. large capital gains. D. high rates of inflation.
C
The minimum payment you are willing to accept to do a job is your: A. nominal wage. B. real wage. C. reservation price. D. value of marginal product.
C
The most important tool of monetary policy is: A. reserve requirement ratios. B. the discount rate. C. open market operations. D. market interest rates.
C
The nominal exchange rate, e, is defined as the number of units of: A. domestic goods relative to the number of units foreign goods. B. foreign goods relative to the number of units of domestic goods. C. the foreign currency that one unit of domestic currency will buy. D. the domestic currency that one unit of foreign currency will buy.
C
The three broad reasons for saving, as identified by economists, are reasons relating to: A. consumption, investment, and exports. B. national, public, and private production. C. the life-cycle, precaution, and bequests. D. capital gains, capital losses, and deficits.
C
The two most important factors contributing to increased productivity in industrialized countries in the twentieth century were: A. higher relative prices and a larger labor supply. B. higher relative prices and technological progress. C. technological progress and increases in the capital stock. D. technological progress and increases in the labor supply.
C
The value of the marginal product of labor equals the marginal product of labor times the: A. real wage. B. nominal wage. C. price of output. D. quantity of labor.
C
Which of the following is an example of the bequest motive for saving? A. Pat puts $400 per month in his 401(k) retirement account. B. Jordan sets aside $200 per month in case she has to pay for a new roof for her house. C. Gerry and Terry put $2,000,000 in a trust fund that will go to their children when they die. D. Chris keeps $15,000 in a money market account to pay expenses in case he loses his job.
C
You expect a share of EconNews.Com to sell for $65 a year from now. If you are willing to pay $65.74 for one share of the stock today, and you require a return of 8%, what dividend payment must you expect to receive from the stock? A. $4.46 B. $5.20 C. $6.00 D. $9.25
C
A bond is a(n): A. regular payment made to owners of a firm. B. claim to partial ownership of a firm. C. agreement issued by a financial intermediary linking savers and investors. D. legal promise to repay a debt.
D
A decrease in the value of a currency relative to other currencies is called a(n): A. revaluation. B. devaluation. C. appreciation. D. depreciation.
D
A war destroys much of the capital stock in the country of Omega. As a result, holding other factors constant, the real wage in Omega will ______ and employment in Omega will ______. A. increase; increase B. increase; decrease C. increase; not change D. decrease; decrease
D
All of the following describe trends in labor markets EXCEPT: A. growing wage inequality in the United States in recent decades. B. a slowdown in real wage growth since the 1970s. C. substantial growth in the level of employment in the United States. D. over-sixteen population growth rates that exceed the growth rate of new jobs in the United States.
D
An exchange rate that varies according to the supply and demand for the currency in the foreign exchange market is called a ______ exchange rate. A. real B. nominal C. fixed D. flexible
D
An increase in the demand for workers producing computers for export versus producing agricultural products that can be imported more cheaply from abroad is an example of how increasing wage inequality can result from: A. the diminishing marginal product of labor. B. the diminishing marginal product of capital. C. increasing reservation prices. D. globalization.
D
As the real interest rate decreases, the quantity of saving supplied ______ and the quantity of saving demanded ____. A. increases; increases B. increases; decreases C. does not change; does not change D. decreases; increases
D
Bob has heard rumors that his employer will be merging with another firm and many employees may lose their jobs, and he wants to be prepared in case he loses his job. If he begins to save more in response to this rumor, it is a ______ reason for saving. A. life-cycle B. public C. private D. precautionary
D
Capital gains are ______, and capital losses are ______. A. increases in the flow of investment; decreases in the flow of investment B. increases in the flow of saving; decreases in the flow of saving C. additions to plant and equipment; the destruction of plant and equipment D. increases in the value of existing assets; decreases in the value of existing assets
D
Chris earns $1,500 per week and spends $1,000 per week on living expenses, puts $200 in a savings account, and buys $300 worth of shares in a stock mutual fund. Chris's saving is _____, and Chris's saving rate is _____. A. $200; 13.3% B. $200; 20.0% C. $300; 20.0% D. $500; 33.3%
D
Chris pays $10,000 for a newly issued two-year government bond with a $10,000 face value and a 6 percent coupon rate. One year later, after receiving the first coupon payment, Chris sells the bond. If the current one-year interest rate on government bonds is 7 percent, then the price Chris receives is: A. $10,000. B. $700. C. greater than $10,000. D. less than $10,000.
D
Features of the labor market that are likely to cause structural unemployment include all of the following EXCEPT: A. labor unions. B. minimum wage laws. C. unemployment compensation. D. differences in the skills and experience of workers.
D
Finding both parties to a trade who have something the other party wishes to trade for is called a: A. unit of account. B. store of value. C. medium of exchange. D. double coincidence of wants.
D
Firms that extend credit to borrowers using funds from savers are called: A. bond dealers. B. stock brokers. C. central banks. D. financial intermediaries.
D
Firms will hire additional workers as long as the wage: A. is less than the marginal product of labor. B. equals the marginal product of labor. C. is greater than the marginal product of labor. D. is less than the value of the marginal product of labor.
D
Globalization can increase wage inequality in the United States if international competition is primarily in industries requiring ______ workers. A. many B. few C. highly-skilled D. low-skilled
D
Heterogeneity and the dynamic nature of labor markets are the principal causes of ______ unemployment. A. cyclical B. chronic C. structural D. frictional
D
Holding other factors constant, if a larger proportion of the population enters the labor force as a result of a growing social acceptance of women working, then the real wages of workers will ______ and employment of workers will _____. A. increase; increase B. increase; decrease C. decrease; not change D. decrease; increase
D
Holding other factors constant, if a tax increase moves the government budget from deficit to surplus, then the real interest rate will ______ and the equilibrium quantity of national saving and investment will ____. A. increase; increase B. decrease; decrease C. increase; not change D. decrease; increase
D
Holding other factors constant, if growing concerns about job security raise precautionary saving, then the real interest rate will ______ and the equilibrium quantity of national saving and investment will ____. A. increase; increase B. increase; decrease C. decrease; decrease D. decrease; increase
D
If Alex deposits $1,000 from her paycheck into her checking account and, at the same time, increases her credit card balance by $1,500, then her saving is ______, and her wealth ______. A. +$1,000; decreases by $500 B. +$500; decreases by $1,000 C. -$500; increases by $2,500 D. -$500; decreases by $500
D
If Alex uses $800 from her checking account to pay her credit card balance, her wealth: A. increases by $800. B. decreases by $800. C. increases by $1,600. D. does not change.
D
If consumption spending increases by $10 million with no changes in net taxes, then: A. public saving increases. B. public saving decreases. C. private saving increases. D. private saving decreases.
D
If the price of tables sold by All-Oak Table Co. increases from $400 to $500, then the: A. supply of labor to All-Oak Table Co. increases. B. supply of labor to All-Oak Table Co. decreases. C. demand for labor by All-Oak Table Co. decreases. D. demand for labor by All-Oak Table Co. increases.
D
If the principal amount of a bond is $10,000,000, the coupon rate is 7%, and the inflation rate is 4%, then the annual coupon payment made to the holder of the bond is: A. $70,000. B. $300,000. C. $400,000. D. $700,000.
D
If you put a $20 bill in the pocket of your winter coat at the beginning of spring so that you will be surprised when you find it again next winter, you are using money as: A. bank reserves. B. a medium of exchange. C. a unit of account. D. a store of value.
D
In Macroland, currency held by the public is 2000 econs, bank reserves are 300 econs, and the desired reserve/deposit ratio is 10%. If the Central Bank prints an additional 200 econs and uses this new currency to buy government bonds from the public, the money supply in Macroland will increase from ______ econs to ______ econs, assuming that the public does not wish to change the amount of currency it holds. A. 20,000; 22,000 B. 5,000; 2,000 C. 3,000; 5,000 D. 5,000; 7,000
D
In an open-market sale the Federal Reserve ______ government bonds and the supply of bank reserves ____. A. buys; increases B. buys; decreases C. sells; increases D. sells; decreases
D
In the last two decades of the twentieth century, the number of people with jobs in the United States: A. declined more rapidly than the over-sixteen population. B. declined more slowly than the over-sixteen population. C. remained approximately constant. D. grew more rapidly than the over-sixteen population.
D
Joe's Taco Hut can purchase a delivery truck for $20,000 and he estimates it will generate a net income (after taxes, maintenance and operating costs) of $4,000 per year. His other option is to go to work for someone else earning net income of $3,000 per year. He should: A. purchase the truck if the real interest rate is less than 15%. B. not purchase the truck if the real interest rate is greater than 1%. C. purchase the truck if the real interest rate is greater than 5%. D. purchase the truck if the real interest rate is less than 5%.
D
National saving is saving by: A. households for retirement. B. the government. C. households and firms. D. the entire economy.
D
Net taxes equal the amount that: A. the government pays the private sector plus the amount of private sector pays the government. B. the government pays the private sector minus the amount the private sector pays the government. C. the business sector pays the government minus the amount the private sector pays the government. D. the private sector pays the government minus the amount the private sector receives from the government.
D
One trend in labor markets is: A. a decrease in average real wages in the United States and other industrial countries. B. decreasing wage inequality in the United States. C. weak rates of job creation in the United States since 1980. D. a slowdown in real wage growth in the United States since 1973.
D
One trend in labor markets is: A. a decrease in average real wages in the United States and other industrial countries. B. decreasing wage inequality in the United States. C. weak rates of job creation in the United States since 1980. D. a slowdown in the rate of real wage growth since the early 1970s.
D
Private saving is positive when: A. there is a government budget surplus. B. there is a government budget deficit. C. the government's budget is balanced. D. after-tax income of households and businesses is greater than consumption expenditures.
D
Skill-biased technological change increases wage inequality by altering the ______ high-skilled workers relative to low-skilled workers. A. reservation price of B. mobility of C. supply of D. demand for
D
Skill-biased technological has different effects on the marginal products of ______ workers and ______ workers. A. male; female B. union; nonunion C. government; private-sector D. highly trained; low-skilled
D
Social Security benefits, welfare payments, and farm support payments are examples of: A. consumption spending. B. public interest payments. C. investment spending. D. transfer payments.
D
Structural unemployment is increased when the wage is kept above the market-clearing wage by: A. unemployment insurance. B. worker mobility. C. skill-biased technological change. D. labor unions.
D
The Boy Scouts have so far sold 100 tickets for their upcoming raffle, but they sell an additional 12 tickets every day. The ______ is a stock variable, and the ______ is a flow variable. A. number of tickets sold each day; number of tickets sold so far B. number of tickets sold so far; total number of tickets sold by the time of the raffle C. number of tickets sold each day; total number of tickets available D. total number of tickets sold by the time of the raffle; number of tickets sold each day
D
The coupon rate on newly issued bonds is usually ______ for bonds with favorable tax treatment, such as municipal bonds, and ______ for bonds that are very risky, such as junk bonds. A. higher; lower B. higher; higher C. lower; lower D. lower; higher
D
The main disadvantage of using money as a store of value is that: A. other assets provide greater anonymity than cash. B. barter is a more efficient way to conduct transactions than using money. C. unlike other assets, money serves as a medium of exchange. D. other assets pay relatively higher rates of interest than money.
D
The nominal exchange rate is the: A. market on which currencies of various nations are traded for one another. B. price of the average domestic good or service relative to the price of the average foreign good or service, when prices are expressed in terms of a common currency. C. quantity of foreign currency assets held by a government for the purpose of purchasing the domestic currency in the foreign exchange market. D. rate at which two currencies can be traded for each other.
D
The saving rate equals saving divided by: A. wealth. B. assets. C. liabilities. D. income.
D
The value of the marginal product of new capital increases when the: A. price of new capital goods increases. B. real interest rate increases. C. the price of the good the firm produces decreases. D. productivity of new capital increases.
D
Two explanations for increasing wage inequality are ______ and ________. A. technological progress; a modernized capital stock B. increased labor supply; a slowdown in productivity growth C. increased worker mobility; transition aid D. globalization; skill-biased technological change
D
When your grandfather keeps a bundle of $100 dollar bills behind a brick in the basement, this is an example of dollars serving as: A. bank reserves. B. a medium of exchange. C. a unit of account. D. a store of value.
D
Which of the following is a liability of a family? A. Checking account balance B. Share of stock C. House D. Mortgage
D
Which of the following is a stock? A. Saving B. Income C. Consumption D. Wealth
D
Which of the following is an example of frictional unemployment? A. Dora lost her job when the textile factory closed. She does not have skills to work in another industry and has been unemployed for over a year. B. Marsha was laid off from her job with the airline because the recession has reduced the demand for airline travel. She expects to get her job back when the economy picks up. C. George is an unskilled worker who mows lawns in the summer, but is unemployed the rest of the year. D. Hector looked for a job for five weeks after finishing college. He turned down several jobs that didn't make good use of his skills, but now has a job that requires the expertise he gained in college.
D
