ECON TEST 3
A measure defined at a point in time is called a(n) ______ variable. A. stock B. nominal C. aggregate D. flow
A
Assets of the commercial banking system include: A. reserves and loans. B. deposits. C. reserves and deposits. D. loans and deposits.
A
Government health and safety regulations or anti-discrimination laws can reduce real wages by: A. decreasing the demand for labor. B. decreasing the supply of labor. C. reducing employer costs. D. increasing worker productivity.
A
If the money supply equals 1,000, velocity equals 5, and real GDP equals 2,500, then the price level equals: A. 2. B. 2.5. C. 5. D. 5,000.
A
Savers may prefer to use financial intermediaries rather than lending directly to borrowers because financial intermediaries: A. reduce the cost of gathering information about borrowers. B. have a monopoly on lending. C. increase the risk of lending. D. offer higher rates of return than available elsewhere.
A
Steve uses $300 from his paycheck to pay off his credit card balance. Based on this information: A. Steve's saving has increased by $300. B. Steve's saving has decreased by $300. C. Steve's wealth is unchanged. D. Steve has a capital loss of $300
A
The Federal Open Market Committee makes decisions about ______ policy. A. monetary B. fiscal C. banking D. deposit insurance
A
The link between the money supply and prices is strongest in: A. the long run. B. the short run. C. a recession. D. a boom.
A
The marginal product of new capital depends on ______ and _____. A. productivity of capital; relative price of the firm's output B. price of new capital goods; real interest rate C. relative price of the firm's output; real interest rate D. productivity of new capital; real interest rate
A
When the Federal Reserve sells government bonds to the public, this is an example of a(n): A. open-market sale. B. open-market purchase. C. discount loan. D. bank panic.
A
Which of the following is a flow? A. Saving B. Wealth C. Assets D. Money
A
Which of the following is an example of structural unemployment? A. Dora lost her job when the textile factory closed. She does not have skills to work in another industry and has been unemployed for over a year. B. Marsha was laid off from her job with the airline because the recession has reduced the demand for airline travel. She expects to get her job back when the economy picks up. C. Alan, a software engineer, lost his job when the internet startup he worked for went bankrupt. He interviewed with five companies in the area before taking a job with another firm in the industry. D. Jim had a job as an engineer, but quit when his wife was transferred to another state. He looked for a month before finding a new job that he liked.
A
A regular payment received by stockholders for each share they own is called a: A. coupon payment. B. dividend. C. bond. D. capital gain.
B
An increase in the perceived riskiness of Company A stock ______ the risk premium investors require to purchase Company A stock and ______ the price of Company A stock. A. increases; increases B. increases; decreases C. decreases; increases D. decreases; decreases
B
As the real interest rate increases, the quantity of saving supplied ______ and the quantity of saving demanded ____. A. increases; increases B. increases; decreases C. does not change; does not change D. decreases; increases
B
Cyclical unemployment is: A. the additional unemployment not captured in official statistics resulting from discouraged workers and involuntary part-time workers. B. the extra unemployment that occurs during periods of recession. C. short-term unemployment that is associated with the process of matching workers with jobs. D. long-term and chronic unemployment that exists even when the economy is producing at a normal rate.
B
In the United States, there is evidence of: A. a decline in real wages. B. increasing wage inequality. C. increasing was equality. D. a decrease in the proportion of the population over the age of 16 that is employed.
B
M1 differs from M2 in that: A. M1 includes currency and balances held in checking accounts, which are not included in M2. B. M2 includes savings deposits, small-denomination time deposits, and money market mutual funds that are not included in M1. C. M1 is a broader measure of the money supply than M2. D. the assets in M2 are more liquid than the assets in M1.
B
The introduction of word processing software that increases the demand for workers with computer skills relative to those without such skills is an example of: A. increasing reservation prices. B. skill-biased technological change. C. the diminishing marginal product of labor. D. globalization.
B
The money supply will increase by a multiple of the increase in bank reserves created by the central bank unless: A. there is fractional reserve banking. B. there is 100 percent reserve banking. C. the public holds no currency. D. banks' desired reserve/deposit ratio is 0.20.
B
Total taxes minus transfer payments minus government interest payments is called: A. a budget surplus. B. net taxes. C. a budget deficit. D. national saving.
B
A legal promise to repay a debt is called: A. equity. B. a stock. C. a bond. D. a dividend
C
During the 1960s and 1970s, the U.S. trade balance was close to zero, but during the 1980s, the trade deficit ballooned to unprecedented levels due to: A. an inability of U.S. companies to compete in the international market. B. a decline in private saving that resulted from an upsurge in consumption. C. a decline in national saving caused largely by rapidly rising government budget deficits. D. a worldwide recession that made it difficult for American companies to sell their products abroad.
C
Elaine owns a beautiful diamond ring she purchased for $2,500. When she has it appraised she learns that it is now worth $3,000. Based on this information: A. Elaine's saving this year has increased by $500. B. Elaine's saving this year has decreased by $500. C. Elaine has experienced a $500 capital gain. D. Elaine's wealth is unchanged.
C
Globalization and skill-biased technological change have contributed to: A. the long-term growth in real wages. B. the slowdown in productivity since 1973. C. increasing wage inequality. D. high rates of employment in Western Europe.
C
Holding other factors constant, a decline in the price of new capital goods will: A. increase national saving. B. decrease national saving. C. increase investment. D. decrease investment.
C
Pat pays $10,000 for a newly issued two-year government bond with a $10,000 face value and a 6 percent coupon rate. One year later, after receiving the first coupon payment, Pat sells the bond. If the current one-year interest rate on government bonds is 5 percent, then the price Pat receives is: A. $10,000. B. $500. C. greater than $10,000. D. less than $10,000.
C
Payments by the government to the public for which the government receives no current goods or services in return are called: A. public saving. B. net taxes. C. transfer payments. D. capital losses.
C
The coupon rate is the: A. amount originally lent. B. regular payment of interest to a bondholder. C. interest rate promised when a bond is issued. D. maximum interest rate that can be paid on a bond.
C
The coupon rate on newly issued bonds is usually higher for bonds with ______ terms and ______ risk that the borrower will go bankrupt. A. shorter; greater B. shorter; smaller C. longer; greater D. longer; smaller
C
The opportunity cost of capital investment is the: A. value of the marginal product of capital. B. value of the marginal product of labor. C. real interest rate. D. price of new capital goods
C
The three broad reasons for saving, as identified by economists, relate to: A. consumption, investment, and exports. B. national, public, and private production. C. the life-cycle, precaution, and bequests. D. capital gains, capital losses, and deficits.
C
When a U.S. restaurant purchases French wine and the French wine company uses the proceeds to buy U.S. government debt, U.S. ______ and there is a capital ______ the United States. A. imports increase; outflow from B. imports decrease; inflow to C. imports increase; inflow to D. exports increase; outflow from
C
A financial intermediary that sells shares in itself to the public, and then uses the funds to buy a wide variety of financial assets is called a: A. commercial bank. B. credit union. C. stock exchange. D. mutual fund.
D
A war destroys much of the capital stock in the country of Omega. As a result, holding other factors constant, the real wage in Omega will ______ and employment in Omega will ______. A. increase; increase B. increase; decrease C. increase; not change D. decrease; decrease
D
An increase in unemployment insurance benefits will: A. increase the demand for labor. B. decrease the demand for labor. C. increase job search efforts of unemployed workers. D. decrease job search efforts of unemployed workers.
D
Financial systems in market economies improve the allocation of saving in each of the following ways EXCEPT by: A. providing information about which potential use of funds will be most productive. B. helping savers to share the risk of individual investment projects. C. evaluating the potential productivity of alternative capital investments. D. allowing potential favoritism to determine which projects are funded.
D
Firms will hire additional workers as long as the wage: A. is less than the marginal product of labor. B. equals the marginal product of labor. C. is greater than the marginal product of labor. D. is less than the value of the marginal product of labor.
D
Frictional unemployment is: A. the unemployment that results when people retire or leave the labor force. B. the additional unemployment not captured in official statistics resulting from discouraged workers and involuntary part-time workers. C. the extra unemployment that occurs during periods of recession. D. short-term unemployment that is associated with the process of matching workers with jobs.
D
From the point of view of a particular country, capital outflows are: A. purchases of domestic goods or services by foreigners. B. purchases of domestic assets by foreigners. C. purchases of foreign goods or services by domestic households or firms. D. purchases of foreign assets by domestic households or firms.
D
One of the serious drawbacks of the deposit insurance system in the United States is that: A. bank failures continue to occur regularly. B. the system took away the Federal Reserve's ability to conduct open-market operations. C. the system took away the Federal Reserve's ability to change reserve requirements. D. if insured intermediaries make many bad loans, the taxpayers may be responsible for covering the losses.
D
Purchases of domestic assets by foreign firms or households is called a: A. trade surplus. B. trade deficit. C. capital outflow. D. capital inflow.
D
The M2 measure of money consists of the sum of: A. savings deposits, small time deposits, and money market mutual funds. B. currency, checking and savings deposits, and small time deposits. C. currency, checking and savings deposits. D. M1, savings deposits, small time deposits, and money market mutual funds.
D
The demand for labor depends on ______ and _______. A. the supply of labor; the marginal product of labor B. the supply of labor; the price of output produced C. the rate of price inflation; the price of the output produced D. the marginal product of labor; the price of output produced
D
The principle of diminishing returns to labor is based on the: A. scarcity principle. B. cost-benefit principle. C. principle of comparative advantage D. principle of increasing opportunity cost
D
When your grandfather keeps a bundle of $100 dollar bills behind a brick in the basement, this is an example of dollars serving as: A. bank reserves. B. a medium of exchange. C. a unit of account. D. a store of value.
D
Which of the following is a liability of a family? A. Checking account balance B. Share of stock C. House D. Mortgage
D
