AP Econ Exam
A college student who is not working or looking for a job is counted as A) neither employed nor part of the labor force. B) unemployed and in the labor force. C) unemployed, but not in the labor force. D) employed and in the labor force.
A
Between 2001 and 2002, the country of Aquilonia reported an increase in the number of people who were employed. It also reported an increase in the unemployment rate. Which of the following would best explain the two reports? A) There was an increase in the size of the labor force between 2001 and 2002. B) There was a decrease in the size of the labor force between 2001 and 2002. C) There was an increase in the size of the adult population between 2001 and 2002. D) The two reports are contradictory and can't be reconciled.
A
Brittany wants to have about $250,000 when she retires in 10 years. She has $100,000 to deposit now. Which of the following interest rates would get her within $100 of $250,000? A) 9.6 percent B) 9.8 percent C) 10 percent D) 10.2 percent
A
The primary advantage of mutual funds is that they A) always make a return that "beats the market." B) allow people with small amounts of money to diversify. C) provide customers with a medium of exchange. D) All of the above are correct.
B
Economists differ in their views of the role of the government in promoting economic growth. According to the text, at the very least, the government should A) lend support to the invisible hand by maintaining property rights and political stability. B) limit foreign investment to industries that don't already exist. C) impose trade restrictions to protect the interests of domestic producers and consumers. D) subsidize key industries.
A
Generally when economists and the text talk of the "interest rate," they are talking about the A) real interest rate. B) current nominal interest rate. C) real interest rate minus the inflation rate. D) equilibrium nominal interest rate.
A
If efficiency wages became more common, A) both the long-run Phillips curve and the long-run aggregate supply curve would shift right. B) both the long-run Phillips curve and the long-run aggregate supply curve would shift left. C) the long-run Phillips curve would shift right, and the long-run aggregate supply curve would shift left. D) the long-run Phillips curve would shift left, and the long-run aggregate supply curve would shift right.
A
If inflation is more than expected, A) creditors receive a lower real interest rate than they had anticipated. B) creditors pay a lower real interest rate than they had anticipated. C) debtors receive a higher real interest rate than they had anticipated. D) debtors pay a higher real interest rate than they had anticipated.
A
If the central bank in some country lowered the reserve ratio, the money multiplier A) would increase. B) would not change. C) would decrease. D) could do any of the above.
A
If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve, A) unemployment = the natural rate and expected inflation = actual inflation. B) unemployment is above the natural rate and expected inflation = actual inflation. C) unemployment = the natural rate and expected inflation is greater than actual inflation. D) None of the above is necessarily correct.
A
In the early 1970s, the short-run Phillips curve shifted A) right as inflation expectations rose. B) right as inflation expectations fell. C) left as inflation expectations rose. D) left as inflation expectations fell.
A
In the long run, which of the following would shift the long-run Phillips curve to the right? A) an increase in the minimum wage B) an increase in the money supply C) a decrease in the money supply D) tax cuts
A
Members of the Board of Governors A) are appointed by the U.S. president, while presidents of the Federal Reserve regional banks are appointed by the banks' boards of directors. B) are appointed by the banks' boards of directors while the presidents of the Federal Reserve regional banks are appointed by the U.S. president. C) and the presidents of the Federal Reserve regional banks are appointed by the U.S. president. D) and the presidents of the Federal Reserve regional banks are appointed by the banks' boards of directors.
A
Oscar deposited $500 into an account two years ago. The first year he earned 3 percent interest and the second year he earned 5 percent interest. How much money does Oscar have in his account now? A) $540.75 B) $540.80 C) $540.85 D) None of the above are correct to the nearest penny.
A
Sally is on a temporary layoff from the factory where she makes plastic tableware. If Sally participates in the BLS survey, she will be classified as A) unemployed and in the labor force. B) unemployed and out of the labor force. C) employed and in the labor force. D) employed and out of the labor force.
A
Some people are counted as out of the labor force because they have made no serious or recent effort to look for work. However, some of these people may want to work even though they are too discouraged to make a serious effort to look for work. If these persons were counted as unemployed instead of out of the labor force, A) both the unemployment rate and labor-force participation rate would be higher. B) the unemployment rate would be higher and the labor-force participation rate would be lower. C) the unemployment rate would be lower and the labor-force participation rate would be higher. D) None of the above are correct.
A
The 2002 CPI was 177 and the 1982 CPI was 96.5. If your parents put aside $1,000 for you in 1982, how much would you have needed in 2002 in order to buy what you could have with the $1,000 in 1982? A) $1,834.20 B) $1,777.77 C) $1,714.81 D) None of the above are correct.
A
The CPI and the GDP deflator A) generally move together. B) generally show different patterns of movement. C) always show identical changes. D) always show different patterns of movement.
A
The theory by which people optimally use all available information when forecasting the future is known as A) rational expectations. B) perfect expectations. C) momentum expectations. D) accommodating expectations.
A
Volume, as reported in stock tables refers to the A) number of shares traded. B) percentage of shares outstanding traded. C) number of shares traded times the price they sold at. D) number of shares of a company traded divided by the shares of all companies traded.
A
When opening a restaurant you may need to buy ovens, freezers, tables, and cash registers. Economists call these expenditures A) capital investment. B) investment in human capital. C) business consumption expenditures. D) None of the above are correct.
A
When the Fed conducts open market purchases, A) it buys Treasury securities, which increases the money supply. B) it buys Treasury securities, which decreases the money supply. C) it sells Treasury securities, which increases the money supply. D) it sells Treasury securities, which decreases the money supply.
A
When the consumer price index rises, the typical family A) has to spend more dollars to maintain the same standard of living. B) can spend fewer dollars to maintain the same standard of living. C) finds that its standard of living is not affected. D) can offset the effects of rising prices by saving more.
A
Which of the following is included in U.S. GDP? A) goods produced by foreign citizens working in the United States B) the difference in the price of the sale of an existing home and its original purchase price C) known illegal activities D) None of the above are correct.
A
Which of the following is the most accurate statement about real and nominal interest rates? A) Real interest rates can be either positive or negative, but nominal interest rates must be positive. B) Real interest rates and nominal interest rates must be positive. C) Real interest rates must be positive, but nominal interest rates can be either positive or negative. D) Real interest rates and nominal interest rates can be either positive or negative.
A
Which of the following would reduce the natural rate of unemployment? A) The Internet provides more readily available information about available jobs. B) Congress increases the minimum wage. C) Laws are passed that make it more difficult to monitor the efforts of workers. D) All of the above are correct.
A
Who would be included in the labor force? A) Derrick, who is waiting for his new job to start B) Brett, who has become discouraged looking for a job and has quit looking for awhile C) Homer, an unpaid homemaker D) None of the above would be included in the labor force.
A
Your accountant tells you that if you can continue to earn the current interest rate on your balance of $800 for the next two years you will have $898.88 in your account. What rate of interest do you need to earn to meet your accountant's expectations? A) 6 percent B) 7 percent C) 8 percent D) 9 percent
A
A bond is a A) financial intermediary. B) certificate of indebtedness. C) certificate of partial ownership in an enterprise. D) None of the above are correct.
B
A nation's standard of living is measured by its A) real GDP. B) real GDP per person. C) nominal GDP. D) nominal GDP per person.
B
According to Friedman and Phelps, policymakers face a tradeoff between inflation and unemployment A) only in the long run. B) only in the short run. C) in neither the long run nor short run. D) in both the short run and long run.
B
According to the quantity equation, if P = 12, Y = 6, M= 8, then V = A) 16. B) 9. C) 4. D) None of the above is correct.
B
An increase in the money supply growth rate increases A) inflation, nominal interest rates, and real interest rates. B) inflation and nominal interest rates, but does not change real interest rates. C) inflation and real interest rates, but does not change nominal interest rates. D) nominal and real interest rates, but does not change inflation.
B
An inflation rate calculated using the CPI shows the rate of change of A) all prices. B) the prices of all final goods and services. C) the prices of all consumer goods. D) the prices of some consumer goods.
D
Anna has just finished school and started looking for a job, but has not yet found one. As a result, the unemployment rate A) increases, and the labor-force participation rate is unaffected. B) increases, and the labor-force participation rate increases. C) is unaffected, and the labor-force participation rate increases. D) increases, and the labor-force participation rate decreases.
B
Anna, a U.S. citizen, works only in Germany. The value added to production from her employment is included A) only in U.S. GDP. B) only in German GDP. C) in both German and U.S. GDP. D) in neither German nor U.S. GDP
B
Compared to bonds, stocks offer the holder A) lower risk. B) partial ownership. C) the likelihood of a lower return. D) All of the above are correct.
B
Fed policy decisions have an important influence on A) both the rate of inflation and the level of employment in the short run. B) the rate of inflation in the long run and the level of employment in the short run. C) the rate of inflation in the short run and the level of employment in the long run. D) both the rate of inflation and the level of employment in both the short run and the long run.
B
If Susan decides to change the oil in her car herself instead of having Speedy Lube change the oil for her GDP A) necessarily rises. B) necessarily falls. C) will be unaffected because the same service is produced in either case. D) will be unaffected because car maintenance is not included in GDP.
B
If the U.S. government pays an economist at the U.S. Department of Commerce $50,000 in salary in 2003, and $30,000 in retirement benefits in 2004 A) each payment will be included in GDP as government purchases for the respective years. B) the 2003 payment is included in 2003 GDP as government purchases, but the 2004 payment is not included in 2004 GDP. C) the 2003 payment is included in 2003 GDP as government purchases, and the 2004 payment is included in 2004 GDP as government transfer payments. D) the 2003 payment is included in 2003 GDP as government purchases, and the 2004 payment is allocated to previous years' GDP according to the amount of work performed each year.
B
If the nominal interest rate is 5 percent and the rate of inflation is 2 percent, then the real interest rate is A) 7 percent. B) 3 percent. C) 2.5 percent. D) 2/5 percent.
B
If velocity and output were nearly constant, A) the inflation rate would be much higher than the money supply growth rate. B) the inflation rate would be about the same as the money supply growth rate. C) the inflation rate would be much lower than the money supply growth rate. D) any of the above would be possible.
B
Lois Steem puts money in a savings account at her bank earning 4.5 percent. One year later she takes her money out and notes that while her money was earning interest, prices rose 2.5 percent. Lois now has A) 4.5 percent more money with which she can purchase 7 percent more goods. B) 4.5 percent more money with which she can purchase 2 percent more goods. C) 7 percent more money with which she can purchase 7 percent more goods. D) 7 percent more money with which she can purchase 2 percent fewer goods.
B
Marcus puts a greater proportion of his portfolio into government bonds. This A) increases both risk and the average rate of return B) decreases both risk and the average rate of return C) increases risk, but decreases the average rate of return D) decreases risk, but increases the average rate of return
B
Minimum-wage laws A) are the major cause of natural unemployment. B) probably reduce teenage employment. C) mainly affect skilled workers. D) None of the above are correct.
B
Municipal bonds pay a A) low rate of interest because of their high-default risk and because the interest they pay is subject to federal income tax. B) low rate of interest because of their low-default risk and because the interest they pay is not subject to federal income tax. C) high rate of interest because of their high-default risk and because federal taxes must be paid on the interest they pay. D) high rate of interest because of their low-default risk and because the interest they pay is not subject to federal income tax.
B
Profits paid out to stockholders are A) retained earnings. B) dividends. C) the denominator in the price-earnings ratio. D) All of the above are correct.
B
Real GDP A) evaluates current production at current prices. B) evaluates current production at the prices that prevailed in some specific year in the past. C) is not a valid measure of the economy's performance, since prices change from year to year. D) is a measure of the value of goods only, hence, it excludes the value of services.
B
Reserve requirements are regulations concerning A) the amount banks are allowed to borrow from the Fed. B) the amount of reserves banks must hold against deposits. C) reserves banks must hold based on the number and type of loans they make. D) the interest rate at which banks can borrow from the Fed.
B
Right-to-work laws A) guarantee workers the right to form unions. B) give workers in a unionized firm the right to choose whether or not to join the union. C) prevent employers from hiring permanent replacements for workers who are on strike. D) say that workers can not be fired because of increases in wages brought about by collective bargaining.
B
Suppose that in a closed economy GDP is equal to 10,000, taxes are equal to 2,500 Consumption equals 6,500 and Government expenditures equal 2,000. What are private saving, public saving, and national saving? A) 1500, 1000, 500 B) 1000, 500, 1500 C) 500, 1500, 1000 D) None of the above are correct.
B
Technological knowledge refers to A) human capital. B) available information on how to produce things. C) resources expended transmitting society's understanding to the labor force. D) All of the above are technological knowledge.
B
The CPI is a measure of the overall cost of A) inputs purchased by a typical producer. B) goods and services bought by a typical consumer. C) goods and services produced in the economy. D) stocks on the New York Stock Exchange.
B
The price of CD players increases dramatically, causing a 1 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by A) more than 1 percent. B) less than 1 percent. C) 1 percent. D) It is impossible to make an informed guess without more information.
B
The theory of efficiency wages explains why A) setting wages at the equilibrium level may increase unemployment. B) it may be in the best interest of firms to offer wages that are above the equilibrium level. C) the most efficient way to pay workers is to pay them according to their skills. D) it is efficient for firms to set wages at the equilibrium level.
B
To move to a point on the Phillips curve where unemployment is lower, A) inflation must fall. B) the government could cut taxes. C) the Fed could decrease the money supply. D) None of the above is correct.
B
What is the basket of goods used to construct the CPI? A) a random sample of all goods and services produced in the economy B) the goods and services typically bought by consumers, according to Bureau of Labor Statistics surveys C) goods and services weighted by the ratio of expenditures on them relative to the consumption component of GDP D) the least and the most expensive goods and services in each major category of consumer expenditures
B
What is the future value of $750 one year from today if the interest rate is 3 percent? A) 772.73 B) 772.50 C) 773.33 D) None of the above are correct to the nearest penny.
B
What part of the Fed meets every six weeks to discuss changes in the economy and determine monetary policy? A) the Board of Governors B) the FOMC C) the regional Federal Reserve Bank presidents D) the Central Bank Policy Commission.
B
When the Fed conducts open market sales, A) it sells Treasury securities, which increases the money supply. B) it sells Treasury securities, which decreases the money supply. C) it borrows from member banks, which increases the money supply. D) it lends money to member banks, which decreases the money supply.
B
When the overall level of prices in the economy is increasing, we say that the economy is experiencing A) economic growth. B) inflation. C) unemployment. D) deflation.
B
Which of the following is a correct way to measure productivity? A) divide the number of hours worked by output B) divide output by the number of hours worked C) compute output growth D) divide the change in output by the change in number of hours worked
B
Which of the following is correct? A) The Federal Reserve has 14 regional banks. The Board of Governors has 12 members who serve 7-year terms. B) The Federal Reserve has 12 regional banks. The Board of Governors has 7 members who serve 14-year terms. C) The Federal Reserve has 12 regional banks. The Board of Governors has 14 members who serve 7-year terms. D) None of the above is correct.
B
Which of the following is human capital? A) breakfasts served in a company's cafeteria B) understanding how to use a company's accounting software C) training videos for new corporate employees D) All of the above are correct.
B
Which of the following is included in the Consumption component of GDP? A) Social Security payments B) purchases of foreign goods and services C) purchases of newly constructed homes D) All of the above are correct.
B
Which of the following is included in the investment component of GDP? A) purchases of stocks and bonds B) purchases of capital equipment that were manufactured in a foreign country by a foreign firm C) the estimated rental value of owner-occupied housing D) None of the above are correct.
B
Which of the following is incorrect? A) A union is a form of cartel. B) Union workers typically earn 20 to 30 percent more than similar nonunionized workers. C) The power of a union comes from its ability to strike if its demands are not met. D) Workers in unions reap the benefits of collective bargaining, while workers not in unions bear some of the cost.
B
You are expecting to receive $650 at some time in the future. Which of the following would decrease the present value of this future payment? A) Interest rates rise and you get the payment sooner. B) Interest rates rise and you have to wait longer for the payment. C) Interest rates fall and you get the payment sooner. D) Interest rates fall and you have to wait longer to get the payment.
B
A movie company makes 500,000 DVDs of one of its latest releases. It sells 300,000 of them before the end of the second quarter, and holds the others in its warehouse. A) Since the DVDs will eventually be bought by consumers, they are included as consumption in the second quarter. B) Since the DVDs were not purchased this quarter, they will be counted as an increase in third-quarter GDP. C) The DVDs will be counted as a change in inventory in the second quarter and so will be included in second-quarter GDP. D) The DVDs will be counted as a change in inventory in the second quarter, and when sold in the third quarter will raise GDP.
C
An increase in the price of domestically produced industrial robots will be reflected in A) both the GDP deflator and the consumer price index. B) neither the GDP deflator nor the consumer price index. C) the GDP deflator but not in the consumer price index. D) the consumer price index but not in the GDP deflator.
C
Cyclical unemployment refers to A) the relation between the probability of unemployment and a worker's changing level of experience. B) how often a worker is likely to be employed during her lifetime. C) year-to-year fluctuations of unemployment around its natural rate. D) long-term trends in unemployment.
C
GDP A) includes the value of intermediate goods so we can get a measure of sales. B) excludes the value of intermediate goods because they are too difficult to measure. C) excludes the value of intermediate goods because their value is already counted in the value of final goods. D) None of the above are correct.
C
Gasoline is A) always considered an intermediate good. B) counted as a final good if a company uses it to provide transportation services. C) counted as a final good if a consumer uses it to run a lawnmower to mow her yard. D) Both b and c are correct.
C
If Y and V are constant, and M doubles, the quantity equation implies that the price level A) more than doubles. B) less than doubles. C) doubles. D) might do any of the above; more information is needed.
C
If reserve requirements are decreased, the reserve ratio A) decreases, the money multiplier increases, and the money supply decreases. B) increases, the money multiplier increases, and the money supply increases. C) decreases, the money multiplier increases, and the money supply increases. D) increases, the money multiplier increases, and the money supply decreases.
C
If the consumer price index was 100 in the base year and 107 the following year, the inflation rate was A) 107 percent. B) 10.7 percent. C) 7 percent. D) None of the above are correct.
C
If the reserve ratio increased from 10 percent to 20 percent, the money multiplier would A) rise from10 to 20. B) rise from 5 to 10. C) fall from 10 to 5. D) not change because the multiplier is constant.
C
If the reserve ratio is 20 percent, and banks do not hold excess reserves, when the Fed sells $40 million of bonds to the public, bank reserves A) increase by $40 million and the money supply eventually increases by $200 million. B) increase by $40 million and the money supply eventually increases by $800 million. C) decrease by $40 million and the money supply eventually decreases by $200 million. D) decrease by $40 million and the money supply eventually decreases by $800 million.
C
If there is shortage of loanable funds, then A) the supply for loanable funds shifts right and the demand shifts left. B) the supply for loanable funds shifts left and the demand shifts right. C) neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. D) neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.
C
If total spending rises from one year to the next, then A) the economy must be producing a larger output of goods and services. B) prices at which goods and services are sold must be higher. C) either the economy must be producing a larger output of goods and services, or the prices at which goods and services are sold must be higher, or both. D) employment or productivity must be rising.
C
Merideth is looking for work as a computer programmer. Although her prospects are good she hasn't yet taken a job. Julie is looking for work in a steel mill, but there aren't many job ads for steel workers and every time she shows up for an interview, there are many more people than openings. A) Meredith and Julie are both frictionally unemployed. B) Meredith and Julie are both structurally unemployed. C) Meredith is frictionally unemployed, and Julie is structurally unemployed. D) Meredith is structurally unemployed, and Julie is frictionally unemployed.
C
Risk A) can be reduced by placing a large number of small bets rather than a small number of large bets. B) can be reduced by increasing the number of stocks in a portfolio. C) Both A and B are correct. D) Neither A nor B are correct.
C
Sectoral shifts in the economy A) create structural unemployment. B) immediately reduce unemployment. C) increase unemployment due to job search. D) on net leave unemployment unchanged.
C
Suppose that Congress were to institute an investment tax credit. What would happen in the market for loanable funds? A) The demand for loanable funds would shift left. B) The supply of loanable funds would shift left. C) The demand for loanable funds would shift right. D) The supply of loanable funds would shift right.
C
Suppose that in some country neither textile workers nor shoemakers are unionized. If textile workers unionize and so are able to raise their wages, then A) the demand for shoemakers will rise, and their wages will rise. B) the demand for shoemakers will fall, and their wages will fall. C) the supply of shoemakers will rise, and their wages will fall. D) the supply of shoemakers will fall, and their wages will rise.
C
The Federal Reserve does all except which of the following? A) control the supply of money B) control the value of money C) make loans to individuals D) regulate the banking system
C
The basket of goods in the consumer price index changes A) occasionally, as does the basket of goods used to compute the GDP deflator. B) yearly, as does the basket of goods used to compute the GDP deflator. C) occasionally while the basket of goods used to compute the GDP deflator changes yearly. D) yearly while the basket of goods used to compute the GDP deflator changes occasionally.
C
The economy is in long-run equilibrium when Senator Mefirst argues that the Fed should do more to fight unemployment. He argues that if the Fed increased the money supply faster, more workers would find jobs. The Senator's argument A) is completely correct. B) is completely wrong. C) is true for the short run but not the long run. D) is true for the long run but not the short run.
C
The interest rate the Fed charges on loans it makes to banks is called A) the prime rate. B) the federal funds rate. C) the discount rate. D) the LIBOR.
C
The large increase in oil prices in the 1970s was caused primarily by a(n) A) increase in demand for oil. B) decrease in demand for oil. C) decrease in the supply of oil. D) increase in the supply of oil.
C
The money supply in Freedonia is $100 billion. Nominal GDP is $800 billion and real GDP is $200 billion. What are the price level and velocity in Freedonia? A) Velocity is 2 and the price level is 1. B) Velocity is 4 and the price level is 8. C) Velocity is 8 and the price level is 4. D) There is insufficient information to answer the question
C
The natural rate of unemployment A) is constant over time. B) cannot be changed in any way by the actions of the government. C) is the unemployment rate that the economy tends to move to in the long run. D) depends on the rate at which the Fed increases the money supply.
C
The principle of monetary neutrality implies that an increase in the money supply will A) increase real GDP and the price level. B) increase real GDP, but not the price level. C) increase the price level, but not real GDP. D) increase neither the price level nor real GDP.
C
The sacrifice ratio is the A) sum of the inflation and unemployment rates. B) inflation rate divided by the unemployment rate. C) number of percentage points annual output falls for each percentage point reduction in inflation. D) number of percentage points unemployment rises for each percentage point reduction in inflation.
C
The shoeleather cost of inflation refers to A) the fall in real income associated with inflation. B) the time spent searching for low prices when inflation rises. C) the waste of resources used to maintain lower money holdings. D) the increased cost to the government of printing more money.
C
When a country saves a larger portion of its GDP, it will have A) less investment, and so have more capital and higher productivity. B) less investment, and so have less capital and higher productivity. C) more investment, and so have more capital and higher productivity. D) more investment, and so have less capital and higher productivity.
C
When the government runs a budget deficit, A) interest rates are lower than they would be otherwise. B) national saving is higher than it would be otherwise. C) investment is lower than it would be otherwise. D) All of the above are correct
C
Which list contains only actions that increase the money supply? A) raise the discount rate, make open market purchases B) raise the discount rate, make open market sales C) lower the discount rate, make open market purchases D) lower the discount rate, make open market sales
C
Which list includes all the categories into which the BLS divides the adult population? A) employed or unemployed B) discouraged workers, employed, or unemployed C) employed, unemployed, or not in the labor force D) discouraged workers, employed, or not in the labor force
C
Which of the following definitions is correct? A) Labor force = number of employed. B) Labor force = population - number of unemployed. C) Unemployment Rate = (number of unemployed [number of employed + number of unemployed]) 100. D) Unemployment Rate = (number of unemployed adult population) 100.
C
Which of the following is included in M2 but not in M1? A) currency B) demand deposits C) savings deposits D) All of the above are included in both M1 and M2
C
Which of the following would a macroeconomist consider as investment? A) Ernest purchases a bond issued by Star-Kist. B) Jerry purchases stock issued by IBM. C) Alice builds a new restaurant. D) All of the above are correct.
C
Which of these things would NOT be included in the components listed after them? A) Ruth buys a motorcycle made in Japan to ride on her weekends off-U.S. consumption and U.S. import. B) Shirley owns her own home which has an estimated rental value-U.S. consumption. C) Beverly buys a newly issued stock in a U.S. corporation-U.S. investment. D) Samantha produces some art work but doesn't sell them all in the current quarter and so adds them to her inventory-investment.
C
Who would be included in the labor force? A) Holly, an unpaid homemaker B) Tiffany, a full-time student not looking for work C) Cody, who does not have a job, but is looking for work D) None of the above are included in the labor force.
C
You buy stock and its price rises just as much as the price level, so before taxes you made A) a nominal and real gain, and you pay taxes on the nominal gain. B) a nominal and real gain, but you pay taxes only on the real gain. C) a nominal gain, but no real gain, yet you pay taxes on the nominal gain. D) a nominal gain, but no real gain, so you pay no taxes on the nominal gain.
C
Collective bargaining refers to A) the process by which the government sets exemptions from the minimum wage law. B) setting the same wage for all employees to prevent jealousy among workers. C) firms colluding to set the wages of employees in order to keep them below equilibrium. D) the process by which unions and firms agree on the terms of employment.
D
Credit card balances are included in A) M1 but not M2. B) M2 but not M1. C) M1 and M2. D) neither M1 nor M2.
D
Dan decides to hire some additional workers for his golf-ball factory. The equilibrium wage is $12 per hour. Efficiency wage theory suggests that it is reasonable for Dan to offer A) $12 per hour. B) less than $12 per hour, since some people would be willing to work for less. C) enough to attract the number of applicants necessary to fill the jobs available. D) more than $12 per hour, so as to attract a better pool of applicants.
D
Debit cards A) defer payments. B) are equivalent to credit cards. C) are included in M2, but not M1. D) are used as a method of payment
D
If a bank uses $80 of reserves to make a new loan when the reserve ratio is 25 percent, A) the money supply initially decreases by $80. B) the money supply initially increases by $20. C) the money supply will eventually increase by more than $20 but less than $80. D) the level of wealth in the economy will not change.
D
If a small country has current nominal GDP of $25 billion and the GDP deflator is 125, what is real GDP? A) $312.5 billion B) $207.5 billion C) $31.25 billion D) $20 billion
D
If policymakers accommodate an adverse supply shock, the unemployment rate A) and the inflation rate will rise. B) and the inflation rate will fall. C) will rise and the inflation rate will fall. D) will fall and the inflation rate will rise.
D
If policymakers expand aggregate demand, inflation A) falls, but unemployment rises. B) and unemployment fall. C) and unemployment rise. D) rises, but unemployment falls.
D
If the Fed sells government bonds to the public, bank reserves tend to A) increase and the money supply increases. B) increase and the money supply decreases. C) decrease and the money supply increases. D) decrease and the money supply decreases.
D
If the discount rate is raised, banks choose to borrow A) more from the Fed so reserves increase. B) more from the Fed so reserves decrease. C) less from the Fed so reserves increase. D) less from the Fed so reserves decrease.
D
If the reserve ratio is 5 percent and a bank receives a new deposit of $500, this bank A) must increase its required reserves by $25. B) will initially see its total reserves increase by $500. C) will be able to make a new loan of $475. D) All of the above are true.
D
In a closed economy, what does (Y - T - C) represent? A) national saving B) government tax revenue C) public saving D) private saving
D
In the long run, policy that changes aggregate demand changes A) both unemployment and the price level. B) neither unemployment nor the price level. C) only unemployment. D) only the price level.
D
President Bigego is running for re-election against Senator Pander. Bigego proclaims that more people are working now than when he took office. Pander says that the unemployment rate is higher now than when Bigego took office. You conclude that A) one of them must be lying. B) both of them could be telling the truth if the labor force participation rate and the labor force both fell. C) both of them could be telling the truth if the labor force grew slower than employment. D) both of them could be telling the truth if the labor force grew faster than employment.
D
The inflation rate is calculated A) from a survey of consumer spending. B) by adding up the price increases of all goods and services. C) by computing a simple average of the price increase in all goods and services. D) by determining the percentage increase in the price index from the preceding period.
D
The sale of stocks A) and bonds to raise money is called debt finance. B) and bonds to raise money is called equity finance. C) to raise money is called debt finance, while the sale of bonds to raise funds is called equity finance. D) to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance.
D
The supply curve of money is vertical because the quantity of money supplied increases A) when the value of money increases. B) when the value of money decreases. C) only if people desire to hold more money. D) only if the central bank increases the money supply.
D
The velocity of money is A) the rate at which the Fed puts money into the economy. B) the same thing as the long-term growth rate of the money supply. C) the money supply divided by nominal GDP. D) the average number of times per year a dollar is spent
D
To decrease the money supply, the Fed could A) sell government bonds. B) increase the discount rate. C) increase the reserve requirement. D) All of the above are correct.
D
Tom is looking for work after school, but everywhere he fills out an application he is told that so have lots of others. Simon has a law degree. Several firms have made him offers, but he thinks he might be able to find a firm where his talents could be put to better use. A) Tom and Simon are both frictionally unemployed. B) Tom and Simon are both structurally unemployed. C) Tom is frictionally unemployed, and Simon is structurally unemployed. D) Tom is structurally unemployed, and Simon is frictionally unemployed.
D
When the value of money rises, the number of dollars needed to buy a representative basket of goods A) increases, and so the price level rises. B) increases, and so the price level falls. C) decreases, and so the price level rises. D) decreases, and so the price level falls.
D
Which of the following explanations of the natural rate of unemployment is most important for the U.S. economy? A) job search B) minimum-wage laws C) unions D) Economists have not determined the answer to this question.
D
Which of the following is correct if there is an adverse supply shock? A) The aggregate supply curve and the short-run Phillips curve both shift right. B) The aggregate supply curve and the short-run Phillips curve both shift left. C) The aggregate supply curve shifts right and the short-run Phillips curve shifts left. D) The aggregate supply curve shifts left and the short-run Phillips curve shifts right.
D
Which of the following is not a tool of monetary policy? A) open market operations B) reserve requirements C) changing the discount rate D) increasing the deficit
D
Which of the following is true concerning a risk-averse person? A) She would not play games where the probability of winning and losing a dollar are the same. B) She might not buy health insurance if she thinks her risks are low. C) Her marginal utility of wealth decreases as her income increases. D) All of the above are correct.
D
person who is counted as unemployed by the BLS is A) also in the labor force. B) must be looking for work or on temporary layoff. C) be age 16 or over. D) All of the above are correct.
D
