Macroeconomics Test 2

Suppose a basket of goods and services has been selected to calculate the CPI and Year 1 has been selected as the base year. In Year 1, the basket's cost was $50; in Year 2, the basket's cost was $52; and in Year 3, the basket's cost was $55. The value of the CPI in Year 3 was

110

Suppose that some country had an adult population of about 50 million, a labor-force participation rate of 60 percent, and an unemployment rate of 5 percent. How many people were employed?

28.5 million

Suppose that the adult population in the country of Atlantis is 115 million. If 80 million people are employed and 5 million are unemployed, then

30 million are not in the labor force

If the consumer price index was 100 in the base year and 106 in the following year, then the inflation rate was

6 percent

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because the

CPI better reflects the goods and services bought by consumers

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can, given the reserve requirement.

It has $800 in reserves and $9,200 in loans

Which of the following is not a function of money?

Protection against inflation

Tatiana is waiting to be recalled to a job from which she was laid off. Ivan was fired but has not looked for work during the last two months. Who does the Bureau of Labor Statistics count as "unemployed"?

Tatiana but not Ivan

Suppose private saving in a closed economy is $12b and investment is $10b.

The government budget deficit must equal $2b

If Year 1 is the base year and Year 2 is the following year, then the inflation rate in Year 2 equals

[(CPI in Year 2 − CPI in Year 1)/CPI in Year 1] × 100

Matilda just graduated from college. In order to devote all her efforts to college, she didn't hold a job. She is going to tour around the country on her motorcycle for a month before she starts looking for work. Other things the same, the unemployment rate

and the labor-force participation rate are both unaffected

The economy's two most important financial markets are

bond market and stock market

Which of the following best represents fiat money?

euro

The consumer price index is used to

monitor changes in the cost of living over time

The labor force equals the

number of people employed plus the number of people unemployed

The inflation rate is defined as the

percentage change in the price level from the previous period

A bond that never matures is known as

perpetuity

In a closed economy, what does the difference between the tax revenue and government purchases, (T − G), represent?

public saving

Long-term bonds are

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

Given that Monika's income exceeds her expenditures, Monika is best described as a

saver or as a supplier of funds

Which of the following is not included in M1?

savings deposits

If the government's expenditures exceeded its receipts, it would likely

sell bonds directly to the public

Cyclical unemployment refers to

short-run fluctuations around the natural rate of unemployment

Money is

the most liquid asset but an imperfect store of value

Bank capital is

the resources that owners have put into the bank