Macro Economics - Test 3

If bank reserves equal $20,000 and the desired reserve-deposit ratio is 10 percent, then bank deposits will equal _____.

$200,000

If bank reserves equal $40,000 and the desired reserve-deposit ratio is 8 percent, then bank deposits will equal _____.

$500,000

Suppose bank reserves are $75,000, currency held by the public is $200,000, and the desired reserve-deposit ratio is 10 percent, then the total money supply will equal _____.

$950,000

If bank reserves equal $50,000 and the desired reserve-deposit ratio is 5 percent, then bank deposits will equal _____.

1,000,000

If banks' reserves equal $2,000 and their deposits equal $10,000, then the reserve-deposit ratio equals _____. a) 20 percent b) 10 percent c) 5 percent d) 2 percent

a) 20 percent

If banks' reserves equal $25,000 and their deposits equal $100,000, then the reserve-deposit ratio equals _____. a) 25 percent b) 400 percent c) $75,000 d) 4 percent

a) 25 percent

Select all that apply. In the U.S. economy, money is measured using which of the following? a) M1 b) credit scores c) inflation d) M2

a) M1 d) M2

Which of the following accurately describes the difference between M1 and M2? a) M1 is a narrower measure of money while M2 is a broader measure b) M1 is a broader measure of money while M2 is a narrower measure

a) M1 is a narrower measure of money while M2 is a broader measure

Select all that apply. Which of the following factors lead to a decrease in the demand for labor? a) a decrease in the relative price of the product b) an increase in wages c) an increase in worker productivity d) a decrease in the price of workers' output

a) a decrease in the relative price of the product d) a decrease in the price of workers' output

Select all that apply. Which of the following factors are likely to lead to an increase in the supply of labor? a) an increase in immigration b) an increase in the population c) a decrease in the retirement age d) an increase in the fraction of women who want to work

a) an increase in immigration b) an increase in the population d) an increase in the fraction of women who want to work

The large increase in real wages in industrialized countries over the last 100 years is primarily the result of: a) an increase in the demand for labor b) a decrease in the demand for labor c) a decrease in the supply of labor d) an increase in the supply of labor

a) an increase in the demand for labor

Money is defined as: a) any asset that can be used for purchases b) coins, bills, and debit cards c) gold, silver, and other commodities d) credit cards, debit cards, and checks

a) any asset that can be used for purchases

The reserve-deposit ratio equals _____. a) bank reserves divided by deposits b) deposits minus bank reserves c) deposits divided by bank reserves d) bank reserves minus deposits

a) bank reserves divided by deposits

Select all that apply. Which of the following are components of M1? a) checkable deposits b) money market mutual funds c) savings deposits d) currency in the hands of the public

a) checkable deposits d) currency in the hands of the public

Select all that apply. Skill-biased technological change will: a) create incentives for workers to acquire education and skills b) increase wage inequality c) increase the demand for lower-skilled workers relative to the demand for higher-skilled workers

a) create incentives for workers to acquire education and skills b) increase wage inequality

In general, the money supply is equal to: a) currency held by the public plus bank deposits b) currency held by the public plus bank reserves c) currency held by the public minus the reserve-deposit ratio d) currency held by the public minus bank deposits

a) currency held by the public plus bank deposits

As an economy moves out of a recession you would expect _____ to fall. a) cyclical b) seasonal c) structural d) frictional

a) cyclical

The demand for labor will decrease if the real price of workers' output _____. a) decreases b) increases

a) decreases

If a worker is unemployed because he has just quit is job in order to find another job that pays better, then this is a type of _____ unemployment. a) frictional b) structural c) cyclical

a) frictional

Select all that apply. Since WWII, the change in real wage rates: a) has been positive, but has slowed down b) has been consistently negative c) has been negative and has slowed down d) has been consistently positive

a) has been positive, but has slowed down d) has been consistently positive

Select all that apply. For workers who produce goods and services that are exported abroad, international trade leads to which of the following? a) higher employment b) higher wages c) lower employment d) lower wages

a) higher employment b) higher wages

International trade will decrease the demand for labor in _____ industries and increase the demand for labor in _____ industries. a) importing; exporting b) exporting; importing

a) importing; exporting

During the twentieth century, a measurable, substantial growth in real wages has occurred: a) in all industrialized countries b) only in developing countries c) primarily in developing countries d) only in western industrialized countries

a) in all industrialized countries

Bank deposits will _____ whenever the ratio of bank reserves to bank deposits is greater than the desired reserve-deposit ratio. a) increase b) decrease

a) increase

When labor unions successfully negotiate higher wages for their members, this is generally thought to _____ unemployment. a) increase b) have no effect on c) decrease

a) increase

The demand for labor will increase if worker productivity _____. a) increases b) decreases

a) increases

Skill-biased technological change increases wage inequality by _____ the wages of higher-skilled workers relative to the wages of lower-skilled workers. a) increasing b) decreasing

a) increasing

Select all that apply. Which of the following represent functions of money? a) it can be used to buy goods and services b) it serves as a means of holding wealth c) it protects consumers against inflation d) it's a basic measure of economic value

a) it can be used to buy goods and services b) it serves as a means of holding wealth d) it's a basic measure of economic value

Select all that apply. Which of the following are accurate statements about international trade? a) it hurts workers who produce goods and services that are imported from abroad b) it hurts workers who produce goods and services that are exported to other countries c) it is not efficient d) it increases efficiency

a) it hurts workers who produce goods and services that are imported from abroad d) it increases efficiency

Frictional unemployment may be desirable because: a) job search may lead to better matches between workers and jobs, leading to higher output b) workers may have to move from one geographic area to another to find a new job, which may increase the population of small suburban areas c) workers will be forced to learn new skills that will increase their income

a) job search may lead to better matches between workers and jobs, leading to higher output

Wage in equality in the U.S. and high unemployment rates in Europe suggests that: a) many workers are not sharing in worldwide economic growth and prosperity b) the income/wage gap between rich and poor is starting to shrink c) most workers are sharing in worldwide economic growth and prosperity d) developing countries account for the majority of economic growth and prosperity

a) many workers are not sharing in worldwide economic growth and prosperity

Which of the following are components of M2 but not M1? a) money market mutual funds b) savings deposits c) currency in the hands of the public d) short-term repurchase agreement e) small denomination time deposits

a) money market mutual funds b) savings deposits e) small denomination time deposits

Which of the following best describes recent trends in wage growth? a) over the last 100 years, there has been substantial wage growth in the United States, but since the early 1970s wage growth has slowed b) over the last 100 years, there was little wage growth in the United States until the early 1970s, and since then wages have been growing rapidly

a) over the last 100 years, there has been substantial wage growth in the United States, but since the early 1970s wage growth has slowed

If worker productivity increases, the labor demand curve will _____. a) shift to the right b) not change c) shift to the left

a) shift to the right

Select all that apply. Suppose that with one worker, you produce 100 bagels per day. With two workers, you produce 210 bagels per day. And with three workers, you produce 300 bagels per day. The addition of the third worker: a) suggests diminishing marginal product of labor b) adds a positive amount to total product c) suggests increasing marginal utility d) reduces total product by 90 bagels

a) suggests diminishing marginal product of labor b) adds a positive amount to total product

A firm will hire a worker if and only if: a) the value of the marginal product of labor is greater than or equal to the wage rate b) the wage rate is greater than or equal to the value of the marginal product of labor c) the marginal product of labor is greater than or equal to the wage rate

a) the value of the marginal product of labor is greater than or equal to the wage rate

European labor markets tend to be more regulated than those in the U.S. As a result: a) unemployment is higher in Europe b) unemployment is higher in the U.S. c) unemployment is about the same

a) unemployment is higher in Europe

Select all that apply. Which of the following are functions of money? a) unit of account b) hedge against inflation c) store of value d) medium of exchange

a) unit of account c) store of value d) medium of exchange

_____ will reverse some of the inequality caused by international trade. a) worker mobility between industries b) skill-biased technological change c) structural unemployment d) diminishing returns to labor

a) worker mobility between industries

If banks' reserves equal $2,000 and their deposits equal $10,000, then the reserve-deposit ratio equals _____. a) 10 percent b) 20 percent c) 2 percent d) 5 percent

b) 20 percent

Money is used in purchasing goods and services, and is therefore considered: a) not very liquid b) a medium of exchange c) a debt d) a checkable deposit

b) a medium of exchange

Which of the following is an example of frictional unemployment? a) a retail sales worker who is unemployed because of sluggish economic growth b) a worker who is unemployed while searching for a job that is a good match for her skill set c) a computer programmer who is unemployed for an extended period because the only programming language he knows has become obsolete

b) a worker who is unemployed while searching for a job that is a good match for her skill set

The value of marginal product of labor is the _____ generated by hiring an additional worker. a) total output b) additional revenue c) additional output d) total revenue

b) additional revenue

Select all that apply. Which of the following factors leads to an increase in the demand for labor? a) a decrease in wages b) an increase in worker productivity c) an increase in the relative price of the product d) a decrease in the price of workers' output

b) an increase in worker productivity c) an increase in the relative price of the product

Bank reserves: a) must equal the total amount that has been deposited in the bank b) are cash or similar assets held by banks to meet depositor withdrawals and payments c) are not part of a bank's balance sheet

b) are cash or similar assets held by banks to meet depositor withdrawals and payments

Cash or similar assets held by banks for the purpose of meeting depositor withdrawals and payments are called _____. a) liabilities b) bank reserves c) bank dividends d) bonds

b) bank reserves

Money supply M1 includes _____ in the hands of the public and balances held in checking accounts. a) bonds b) currency c) stocks d) savings deposits

b) currency

International trade increases wage inequality by increasing the wages of workers in _____ industries and decreasing the wages of workers in _____ industries. a) importing; importing b) exporting; importing c) exporting; exporting d) importing; exporting

b) exporting; importing

One benefit of _____ unemployment is that job search may lead to better matches between workers and jobs, leading to higher output. a) cyclical b) frictional c) structural

b) frictional

An individual is willing to supply labor whenever their real wage is _____ than their reservation price. a) less b) greater

b) greater

Bank deposits will increase whenever the ratio of bank reserves to bank deposits is _____ than the desired reserve-deposit ratio. a) less b) greater

b) greater

If the introduction of computers increases the marginal product of higher-skilled workers relative to that of lower-skilled workers, then the demand for _____ workers will increase relative to the demand for _____ workers. a) lower-skilled; higher-skilled b) higher-skilled; lower-skilled

b) higher-skilled; lower-skilled

Generally, if the value of the marginal product of labor is greater than the wage rate, the firm should _____. a) layoff workers it has already hired b) hire additional workers c) leave its employment level fixed

b) hire additional workers

Even though international trade increases economic efficiency, it will tend to hurt workers who produce goods and services that are _____. a) exported to other countries b) imported from abroad

b) imported from abroad

Minimum wage laws are generally thought to _____ unemployment. a) decrease b) increase c) have no effect on

b) increase

Over the last 100 years, technological progress and large increases in the capital stock have led real wages to _____. a) decrease b) increase c) change very little

b) increase

Skill-biased technological change will _____ workers' incentives to acquire education and training, provided they are at the early stages of career development. a) decrease b) increase c) have no effect on

b) increase

International trade will _____ the demand for labor in exporting industries and _____ the demand for labor in importing industries. a) decrease; decrease b) increase; decrease c) decrease; increase d) increase; increase

b) increase; decrease

In 2009, the U.S. government extended the number of weeks that unemployed workers could receive unemployment benefits from 26 weeks to 99 weeks. This policy change is likely to have _____ the duration of unemployment spells. a) had no effect on b) increased c) decreased

b) increased

Over the last several decades, the rise in women's labor force participation rates, the entry of baby boomers into the workforce and the increase in immigration have _____ labor supply. a) had little effect on b) increased c) decreased

b) increased

The demand for labor will increase if the real price of workers' output _____. a) decreases b) increases

b) increases

Select all that apply. Over the last several decades, the labor supply has increased because of _____. a) the decline in the age at which people retire b) increases in women's labor force participation rates c) immigration d) baby boomers entering the workforce

b) increases in women's labor force participation rates c) immigration d) baby boomers entering the workforce

If international trade lowers the wages of workers in importing industries and increases the wages of workers in exporting industries then this creates an incentive for workers to _____. a) leave exporting industries and find jobs in importing industries b) leave importing industries and find jobs in exporting industries

b) leave importing industries and find jobs in exporting industries

Select all that apply. Which of the following does international trade lead to for those workers in industries that face competition from imports? a) higher employment b) lower wages c) higher wages d) lower employment

b) lower wages d) lower employment

Any asset that can be used in exchange for goods and services is called _____. a) a credit card b) money c) a debit card d) currency

b) money

Select all that apply. Which of the following are components of M2 but not M1? a) currency in the hands of the public b) money market mutual funds c) small denomination time deposits d) short-term repurchase agreement e) savings deposits

b) money market mutual funds c) small denomination time deposits e) savings deposits

An increase in immigration will lead the labor supply curve to _____. a) shift to the left b) shift to the right

b) shift to the right

A glass blower who is unemployed because his skills are no longer marketable is an example of _____. a) cyclical unemployment b) structural unemployment c) frictional unemployment

b) structural unemployment

As firms hire more workers, diminishing returns to labor implies that the marginal product of each additional worker a firm hires will _____ when capital and other inputs are held constant. a) stay fixed b) increase c) decrease

c) decrease

Worker mobility between industries will _____ the wage inequality caused by international trade. a) mostly increase b) have no effect on c) decrease some of

c) decrease some of

International trade increases wage inequality by _____ the wages of workers who produce products that are imported and _____ the wages of workers who produce products that are exported. a) increasing; decreasing b) decreasing; decreasing c) decreasing; increasing d) increasing; increasing

c) decreasing; increasing

When we say that the Fed conducts U.S. monetary policy, we are referring to its role _____. a) setting taxes b) determining the interest rate c) determining the nation's money supply d) setting government spending

c) determining the nation's money supply

Governments can best deal with the problems in the domestic labor market created by international trade by _____. a) imposing tariffs on goods imported from abroad b) taking steps to limit international trade c) helping workers in negatively affected industries find new jobs

c) helping workers in negatively affected industries find new jobs

According to economic theory, an increase in the minimum wage will lead unemployment to _____. a) stabilize b) decrease c) increase

c) increase

By reducing worker's incentives to look for jobs, unemployment insurance is typically thought to _____ the duration of unemployment spells. a) decrease b) have no effect on c) increase

c) increase

In a fractional reserve banking system, if the public deposits cash into banks, then the money supply will _____. a) not change b) decrease c) increase

c) increase

Why might workers leave importing industries and seek skills/jobs in exporting industries? a) international trade increases the wages of workers in importing industries and lowers the wages of workers in exporting industries b) international trade increases the wages of workers in importing industries and increases the wages of workers in exporting industries c) international trade lowers the wages of workers in importing industries and increases the wages of workers in exporting industries

c) international trade lowers the wages of workers in importing industries and increases the wages of workers in exporting industries

A fractional-reserve banking system is one in which the reserve-deposit ratio is _____. a) greater than 100 percent b) equal to 100 percent c) less than 100 percent

c) less than 100 percent

In a fractional-reserve banking system, bank reserves are _____. a) greater than deposits b) equal to deposits c) less than deposits

c) less than deposits

International trade will lead to _____ in importing industries. a) higher wages and higher employment b) higher wages and lower employment c) lower wages and lower employment d) lower wages and higher employment

c) lower wages and lower employment

Over the past 50 years, _____ people in the U.S. have had jobs and the rate of job growth has _____. a) fewer; increased b) more; increased c) more; slowed d) fewer; remained the same e) fewer; slowed f) the same amount of; remained the same

c) more; slowed

The minimum level of compensation that leaves someone indifferent between working and not working is their _____. a) minimum wage b) unemployment rate c) reservation price d) employment rate

c) reservation price

The best explanation for the slowdown in real wage growth starting in the early 1970s despite rapid employment growth is _____ productivity growth combined with _____ in the supply of labor. a) accelerated; a decrease b) slower; a decrease c) slower; an increase d) accelerated; an increase

c) slower; an increase

The fact that money is a means of holding wealth explains money's role as a _____. a) unit of account b) medium of exchange c) store of value

c) store of value

The unemployment that consists of workers who lack marketable skills is and tends to be long-term and chronic is called: a) cyclical unemployment b) frictional unemployment c) structural unemployment

c) structural unemployment

Select all that apply. Select the five recent trends of the labor market. a) decreased U.S. wage inequality b) substantial decline in the real wages in industrialized countries c) the real wage growth rate has slowed d) Western Europe has experienced higher inflation than the U.S. e) substantial growth in the real wages in industrialized countries f) increased U.S. wage inequality g) Western Europe has experienced higher unemployment than the U.S. h) the rate of job growth has slowed

c) the real wage growth rate has slowed e) substantial growth in the real wages in industrialized countries f) increased U.S. wage inequality g) Western Europe has experienced higher unemployment than the U.S. h) the rate of job growth has slowed

When people measure the worth of various items in terms of money, money is performing the function of a what? a) store of value b) medium of exchange c) unit of account d) liquid asset

c) unit of account

The extra revenue gained by hiring an additional worker is the _____. a) average product of labor b) marginal product of labor c) value of the marginal product of labor

c) value of the marginal product of labor

The increase in unemployment in the United States that accompanied the recession that started in December 2007 is an example of _____ unemployment.

cyclical

Because money is a medium of exchange, society avoids: a) paychecks b) materialism c) the complications of having cash on hand d) barter

d) barter

The type of unemployment that is associated with the process of matching workers to jobs is called: a) cyclical unemployment b) seasonal unemployment c) structural unemployment d) frictional unemployment

d) frictional unemployment

International trade will lead to _____ in exporting industries. a) lower wages and lower employment b) higher wages and lower employment c) lower wages and higher employment d) higher wages and higher employment

d) higher wages and higher employment

The sum of all the currency held by the public and bank deposits is equal to: a) M2 b) M1 c) money demand d) money supply

d) money supply

Sluggish productivity growth since the 1970s combined with rapid increases in the supply of labor help explain the: a) slowdown in both real wage growth and unemployment growth since the 1970s b) increase in wage equality since the 1970s c) acceleration in real wage growth since the 1970s combined with rapid increases in employment growth d) slowdown in real wage growth since the 1970s despite rapid employment growth

d) slowdown in real wage growth since the 1970s despite rapid employment growth

An auto worker in Michigan who loses his job because the company relocated the plant to another country is an example of _____. a) cyclical unemployment b) frictional unemployment c) seasonal unemployment d) structural unemployment

d) structural unemployment

When money is used as a yardstick for measuring the relative worth of goods or services it is functioning as a _____. a) store of value b) medium of exchange c) form of barter d) unit of account

d) unit of account

In the labor market, firms _____ labor.

demand

Money is a medium of _____ that is used in purchasing goods and services.

exchange

True or False The best way for governments to deal with the problems in the domestic labor market created by international trade is to try to limit international trade.

false

As a medium of exchange, _____ allows society to escape the problem of having to find a double coincidence of wants.

money

M1 and M2 are two alternative definitions of _____.

money

History is replete with examples of workers who opposed _____ _____ out of fear that their skills would become less valuable.

new technologies

A situation in which bank reserves equal 100 percent of bank deposits is called 100 percent _____ _____.

reserve banking

A situation in which banks' _____ equal 100 percent of their deposits is known as 100 percent reserve banking.

reserves

The reserve deposit ratio equals bank _____ divided by _____.

reserves; deposits

In the labor market, households and individuals _____ labor.

supply

True or False M1 is a narrower measure of money and M2 is a broader measure that includes M1 along with several other relatively liquid assets.

true

Money serves as a store of _____ because it serves as a means of holding wealth.

value