Macro Test 2 Quiz

If the Fed decreases the reserve requirement from 10 percent to 5 percent, the money multiplier will ________ and the money supply will most likely _______. 1. increase; increase 2. increase; decrease 3. decrease; increase 4. decrease; decrease

1. increase; increase

If the GDP deflator is less than 100 in 2013, then nominal GDP ________ real GDP in 2013. 1. is less than 2. is equal to 3. may be greater or less than 4. is greater than

1. is less than

Buying a ticket to a football game with a $20 bill means money is functioning as a: 1. medium of exchange. 2. standard of deferred payment. 3. store of value. 4. unit of account.

1. medium of exchange.

The most frequently used tool of monetary policy is: 1. open-market operations. 2. changes in interest rate paid on reserves 3. changes in reserve requirements. 4. changes in the discount rate.

1. open-market operations.

Workers unemployed as a result of wage rigidity are: 1. waiting for a job to become available 2. not eligible to receive unemployment insurance benefits 3. relocating to another part of the country as a result of sectoral shifts 4. actively searching for a job to match their skills

1. waiting for a job to become available

Suppose that Mel is not working, but looked for a job as recently as 3 months ago. Mel would like a job and is available for work. Mel is considered 1. unemployed but not a member of the labor force 2. a marginally attached worker 3. a member of the labor force, but not unemployed 4. a member of the labor force and unemployed

2. a marginally attached worker

The reserve ratio is the fraction of its: 1. loans that a bank holds as reserves. 2. deposits that a bank holds as reserves. 3. loans that a bank is required to hold. 4. assets that a bank is required to hold.

2. deposits that a bank holds as reserves.

The money demand curve will shift to the right if the price level _______ or if the real GDP ________. 1. decreases; decreases 2. increases; increases 3. increases; decreases 4. decreases; increases

2. increases; increases

If the Federal Reserve increases the discount rate, the: 1. federal funds rate must decrease. 2. money supply is likely to decrease. 3. money supply is likely to increase. 4. money supply is not likely to change.

2. money supply is likely to decrease.

Discouraged workers are counted as: 1. employed 2. out of the labor force 3. unemployed 4. part of the labor force

2. out of the labor force

An increase in the price of goods bought by firms and the government will show up in: 1. the CPI but not in the GDP deflator 2. the GDP deflator but not in the CPI. 3. both the CPI and the GDP deflator. 4. neither the CPI nor the GDP deflator.

2. the GDP deflator but not in the CPI.

An important factor in the evolution of commodity money to fiat money is: 1. a desire to increase transaction costs. 2. the fact that gold is no longer highly valued. 3. a desire to reduce transaction costs. 4. a desire to use gold for jewelry.

3. a desire to reduce transaction costs.

People use money as a store of value when they: 1. use money as a measure of economic transactions. 2. hold money to gain power and esteem 3. hold money to transfer purchasing power into the future. 4. use money to buy goods and services.

3. hold money to transfer purchasing power into the future.

If wage rigidity holds the real wage above the equilibrium level, an increase in the supply of labor will ______ the number unemployed. 1. decrease 2. not change 3. increase 4. possibly increase, decrease, or leave unchanged

3. increase

Inflation is a(n): 1. expansion of output. 2. rise in the unemployment rate. 3. rising aggregate price level. 4. rise in wages.

3. rising aggregate price level.

One efficiency-wage theory implies that firms pay high wages because: 1. paying high wages promotes job migration 2. in wealthy countries, it is important to pay workers high wages to improve their health 3. the more a firm pays its workers, the greater their incentive to stay with the firm 4. this practice increases the problem of unethical behavior of workers

3. the more a firm pays its workers, the greater their incentive to stay with the firm

Frictional unemployment is unemployment caused by: 1. clashes between the motives of insiders and outsiders. 2. wage rigidity. 3. the time it takes workers to search for a job. 4. minimum-wage legislation.

3. the time it takes workers to search for a job.

Currency equals: 1. the sum of funds in checking accounts. 2. the sum of checking accounts and paper money. 3.the sum of coins and paper money. 4. M1.

3.the sum of coins and paper money.

Assume the Federal Reserve has set a reserve requirement at 26%. The change in the money supply brought about by a deposit of $3300 is approximately: 1. 858 2. 85800 3. 4158 4. 12692.31

4. 12692.31

Category Number of people (in millions) Total Population 300 Less than 16 years of age 35 Institutionalized 10 Part-time workers 10 Full-time workers 125 Looking for work 25 In the Armed Forces 10 1. 78.1 2. 53.3 3. 15.6 4. 65.3

4. 65.3

Since 2004, the Fed has focused on a core price index that excludes food and energy prices to measure inflation because 1. food and energy prices tend to remain stable in the short run, so are not relevant to the calculation of inflation. 2. food and energy are necessities, so consumers have no choice but to purchase these. 3. including food and energy prices tends to overstate the true inflation rate by 0.5% to 1%. 4. food and energy prices tend to fluctuate up and down for reasons that may not be related to the general causes of inflation.

4. food and energy prices tend to fluctuate up and down for reasons that may not be related to the general causes of inflation.

The eligible population of of people over the age of 16 can be divided into two groups, people 1. employed and unemployed 2. in the labor force and people who are unemployed 3. in the labor force and people with a job 4. in the labor force and people not in the labor force 5. looking for work and people in the Armed Forces

4. in the labor force and people not in the labor force

In a fractional-reserve banking system, banks create money when they: 1. accept deposits. 2. hold reserves. 3. exchange currency for deposits. 4. make loans.

4. make loans.

The equation of exchange states that 1. money supply times the price level equals real GDP divided by the velocity of money 2. money supply times the price level equals real GDP times the velocity of money 3. money supply divided by the velocity of money equals the price level divided by real GDP 4. money supply times the velocity of money equals the price level times real GDP

4. money supply times the velocity of money equals the price level times real GDP

Credit card balances are included in: 1. both M1 and M2. 2. M2 only. 3. M1 only. 4. neither M1 nor M2.

4. neither M1 nor M2.

People who are working 30 hours per week but would like to work more are considered 1. job leavers 2. discouraged wokers 3. unemployed 4. under-employed 5. job seekers

4. under-employed

According to the quantity theory of money, if the money supply grows at 25% while the velocity of money is constant and the inflation rate is 20%, the growth in real GDP is _______%.

5%

If the real interest rate is 5% and the expected inflation rate is 4%, then the nominal interest rate is _____%.

9%

If the CPI is 180 in year 1 and 190 in year 2, the inflation rate between year 1 and year 2 is about: 1. 5.56 percent 2. 5.26 percent 3. 6.5 percent 4. 10 percent

1. 5.56 percent

Which of the following persons is NOT considered a part of the labor force? 1. Danielle, a wealthy hedge fund manager who just took early retirement 2. Lucy, the full-time manager at a restaurant 3. James, an accountant who has been temporarily laid off during the holiday season 4. Mary, who has a part-time job, but would rather work full-time 5. Larry, and unemployed mechanic looking for a new job

1. Danielle, a wealthy hedge fund manager who just took early retirement