Macro Test 2 Questions

According to the assumptions of the quantity theory of money, if the money supply increases 5 percent, then

the price level would rise by 5 percent and real GDP would be unchanged

If a price floor is not binding, then

the equilibrium price is above the price floor.

At the Federal Reserve

the nation's monetary policy is made by the Federal Open Market Committee, which meets about every six weeks.

The Fisher effect says that

the nominal interest rate adjusts one for one with the inflation rate.

Of the following groups, who is eligible for unemployment insurance benefits?

the unemployed who were laid off because their previous employers no longer needed their skills

Net capital outflow equals

the value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners.

A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to

$80

The labor-force participation rate is computed as

(Labor Force ÷ Adult Population) × 100.

Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

the FOMC

If M = 6,000, P = 3, and Y = 3,000, what is velocity?

1.5

If the reserve ratio is 5 percent, then $500 of additional reserves can create up to

$10,000 of new money.

A country has $3 billion of domestic investment and net exports of $2 billion. What is its saving?

$5 billion

In June 2009 the Bureau of Labor Statistics reported an adult population of 234.9 million, a labor force of 154 million and employment of 141.6 million. Based on these numbers the unemployment rate was

12.4/154

If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $3 in the U.S. and 6 pesos in Argentina what is the real exchange rate

2

If the reserve ratio is 4 percent, then the money multiplier is

25.

First National Bank Assets Liabilities and Owners' Equity Reserves $1,200 Deposits $9,000 Loans $8,000 Debt $800 Short-term securities $800 Capital (owners' equity) $200 This bank's leverage ratio is

50

Wanda quit her job because she was unhappy at work. Arnold was fired from his landscaping job because his company was downsizing. Who is eligible for unemployment insurance benefits?

Arnold but not Wanda

The agency responsible for regulating the money supply in the United States is

the Federal Reserve

A central bank's setting (or altering) of the money supply is known as

monetary policy.

A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement

It has $250 in reserves and $4,750 in loans.

If a country has Y > C + I + G, then

S > I and it has a trade surplus.

Which of the following is correct?

The Federal Reserve has 12 regional banks. The Board of Governors has 7 members who serve 14-year terms.

Which list ranks assets from most to least liquid?

money, bonds, cars, houses

Economists call an institution designed to oversee the banking system and regulate the quantity of money in the economy

a central bank.

You bought some shares of stock and, over the next year, the price per share increased by 5 percent, as did the price level. Before taxes, you experienced

a nominal gain, but no real gain, and you paid taxes on the nominal gain.

A country purchases more goods and services from residents of foreign countries than residents of foreign countries purchase from it. This country has

a trade deficit and negative net exports

When in France you notice that prices are posted in euros, this best illustrates money's function as

a unit of account

An economy's natural rate of unemployment is the

amount of unemployment that the economy normally experiences.

If an unemployed person quits looking for work, then, eventually the unemployment rate

and the labor-force participation rate both decrease

If you go to the bank and notice that a dollar buys more Japanese yen than it used to, then the dollar has

appreciated. Other things the same, the appreciation would make Americans more likely to travel to Japan.

The members of the Federal Reserve's Board of Governors

are appointed by the president of the U.S. and confirmed by the U.S. Senate

Paper dollars

are fiat money and gold coins are commodity money

Carl and Carly are American residents. Carl buys stock of a corporation in Austria. Carly opens a coffee shop in Austria. Whose purchase, by itself, decreases Austria's net capital outflow?

both Carl's and Carly's

Esmerelda worked part-time for her mother's business without pay. Tabitha was absent from work because she had strep throat. Who is counted as "employed" by the Bureau of Labor Statistics?

both Esmerelda and Tabitha

If business opportunities in a country become relatively less attractive relative to those of other countries, then

both its net exports and net capital outflows rise

When conducting an open-market purchase, the Fed

buys government bonds, and in so doing increases the money supply.

If inflation is higher than what was expected,

creditors receive a lower real interest rate than they had anticipated.

If the U.S. real exchange rate appreciates, U.S. exports

decrease and U.S. imports increase

All saving in the U.S. economy shows up as

either investment in the U.S. economy or U.S. net capital outflow.

Suppose the money market, drawn with the value of money on the vertical axis, is in equilibrium. If the money supply increases, then at the old value of money there is an

excess supply of money that will result in an increase in spending

At any given time, the voting members of the Federal Open Market Committee include

five of the presidents of the regional Federal Reserve banks. the president of the Federal Reserve Bank of New York. the seven members of the Board of Governors.

Suppose that consumers decide to walk to work more frequently and drive cars less. Companies that make walking shoes hire workers, while automobile companies lay off workers. This is an example of

frictional unemployment created by sectoral shifts

Over the past several decades, the difference between the labor-force participation rates of men and women in the U.S. has

gradually decreased.

Wealth is redistributed from debtors to creditors when inflation was expected to be

high and it turns out to be low.

Shoe leather costs arise when higher inflation rates induce people to

hold less money.

When there is inflation, the number of dollars needed to buy a representative basket of goods

increases, and so the value of money falls.

The inflation tax

is an alternative to income taxes and government borrowing. taxes most those who hold the most money. is the revenue created when the government prints money

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

medium of exchange

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold

more reserves, so the reserve ratio will rise.

Other things the same, if a country saves less, then

net capital outflow falls, so net exports fall.

Economic variables whose values are measured in monetary units are called

nominal variables.

The Bureau of Labor Statistics counts discouraged workers as

out of the labor force. If they were counted as unemployed the unemployment rate would be higher.

The New York Federal Reserve Bank

president always gets to vote at the FOMC meetings. conducts open market transactions. is one of 12 regional Federal Reserve Banks

An increase in the money supply might indicate that the Fed had

purchased bonds in an attempt to reduce the federal funds rate.

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations. Other things the same, these actions

raise both U.S. net exports and U.S. net capital outflows

Labor unions

raise wages in unionized industries

measured in goods

real variables

The regional Federal Reserve Banks

regulate banks in their regions

Dollar bills, rare paintings, and emerald necklaces are all

stores of value

Who of the following is not included in the Bureau of Labor Statistics' "employed" category?

those waiting to be recalled to a job from which they had been laid off

The Federal Reserve

was created in 1913. is the U.S.'s central bank. has other duties in addition to controlling the money supply