Real estate Economics (RE200)
Growth Vectors Growth occurs generally in the following ways:
Along Transportation Routes especially at Intersections In the area between major transportation routes In and Around established commercial activity hubs Areas within reasonable reach of employment centers Where the money is and there is available land
Opportunities come from three sources in Real Estate
Gaps Cycles Growth Patterns, changes and vectors
Central Place Analysis
"Comparing study areas with the same economic profile" This study compares, by ratio, land uses in similar areas to identify opportunities (Gaps) e.g. Restaurant sales per person
Money Multiplier in Banking
"Required Reserve Ratio" is the key Lever e.g. 20% Reserve = a Multiplier of 5 10% Reserve = a Multiplier of 10 4% Reserve = a Multiplier of 25 etc..
The Entire Purpose of Studying Demand and Supply is to Identify Opportunities!
"When demand exceeds supply an opportunity exists"
Economic Characteristics of Real Estate
* Fixed Supply in the Short Term * Immobile: Local Markets are key * Long Economic Life * Lack of a Standard Product
Perspective & Income/Expenses
* Location seeking a User * User seeking a location * Investor seeking an Investment * Investment seeking an Investor
Analyze Trends in economic factors affecting Real Estate
* Nationally * Regionally * Locally * Neighborhood
Trends affecting Demand e.g.
* Population Trends +,- * Income Trends +,- * Tastes * Availability and cost of Credit * Advertising * Etc...
Trends affecting Supply
* Price/Cost of Factors of Production * Demand changes (water in a bottle, big cars vs small cars etc...) * Future projections of need * International Impacts (Imports and Exports)
Supply and Real Estate
* They are not making anymore Land! * Increased Density is the only way to increase supply (NIMBY) * How Long does it take to create a significant Real Estate development? Supply of Real Estate is easily counted and Tracked
Tools of the Fed
1. Discount Rates 2. Open Market Operations 3. Required Reserve Ratio
The key to Understanding the Cycle is identifying where the market is in the Cycle
1. Vacancy: What is the trend? Reducing vacancy is a strong market, Rising Vacancy is a softening market and low vacancy may mean the top of the market cycle 2. Prices and Rents: Trend? 3. New Construction: Trend? 4. Oversupply = High Vacancies 5. Oversupply and High Vacancy Lead to Declining Prices, Rents and Construction 6. Absorption: When the market is absorbing excess supply at a rate faster than supply is being added, the market Cycle is in recovery
In the short run, the lower the value of the U.S. dollar versus the Japanese yen, the: A. more attractive are American products for the Japanese B. less likely Japanese investors will buy U.S. real estate C. more likely U.S. citizens will purchase Japanese products D. more likely the price of U.S. exports will rise in the Japanese market
A .more attractive are American products for the Japanese
Which economist predicted that capitalism was doomed to fail, because profit motivation would lower wages to a subsistence level, leading workers to overthrow the capitalistic system? A. Karl Marx B. John Stuart Mill C. John Maynard Keynes D. Adam Smith
A. Karl Marx
Recovery in the real estate market frequently begins before a full recovery in the general economy. A. true B. false
A. True
Greater productivity influences community growth by: A. allowing the same number of workers to produce more export goods B. reducing the number of jobs C. creating more instability through changes D. interrupting government efforts to limit growth
A. allowing the same number of workers to produce more export goods
The circular or concentric theory of growth has the city growing: A. around the downtown central core B. along transportation lines C. from several points such as suburban shopping centers D. from the highest to the lowest topographic point
A. around the downtown central core
The greatest percentage of the U.S. money supply is represented by: A. checking accounts B. coins C. paper currency D. certificates of deposit
A. checking accounts
If a region's population expands rapidly, while jobs and government spending decline, the per capita standard of living, as measured by goods and services, will probably: A. decrease B. increase C. remain the same D. escalate
A. decrease
In terms of economic base studies, a computer software company would be considered what kind of business? A. export B. import C. secondary D. local
A. export
The underlying principle of economic base studies states that for a region to grow economically, it must: A. export more than it imports B. import more than it exports C. increase secondary business faster than basic business D. decrease basic industries
A. export more than it imports
Solutions to economic problems may be: A. influenced by value judgments B. considered an absolutely precise answer C. reproduced uniformly with computers in a lab D. uniformly considered correct by all citizens
A. influenced by value judgments
In the short run, real estate cycles tend to be most influenced by changes in: A. mortgage interest rates B. death rates C. age brackets D. cost of construction
A. mortgage interest rates
Numerous and knowledgeable buyers and sellers, and neither party has control, describes which of the following? A. perfect market B. imperfect market C. mixed economoy D. command economy
A. perfect market
No-growth policies by city governments are an example of what type of force? A. political B. economic C. physical D. social
A. political
The payment for entrepreneurship is called: A. profit B. wages C. interest D. rent
A. profit
"Six months free rent" as a concession is in reality a: A. reduction in rent B. sign of an increase in the need for construction C. sign of an increase in demand D. sign of a decrease in supply
A. reduction in rent
Which of the following actions by The Fed tends to raise interest rates? A. selling government securities B. lowering the discount rate C. decreasing reserve requirements D. reducing the federal funds rate
A. selling government securities
A community location selected to be convenient to a resource is described as a: A. special-function town B. resort town C. node D. break-cargo location
A. special-function town
A city can grow in population, even if its export jobs are in industries that are not growing nationwide. A. true B. false
A. true
A shift of jobs in an industry from one city to another can cause some cities to grow, even when the industry's overall growth is in decline. A. true B. false
A. true
Accessibility and topography have strong influences on land-use patterns. A. true B. false
A. true
The ever-increasing use of electronic equipment such as the Internet, cell phones, and interactive TV could lessen the need for additional office buildings in downtown areas of major U.S. cities. A. true B. false
A. true
In real estate land use, accessibility means: A. similar zoning B. ability to get to a site, and from it to other places C. social factors to determine use D. nearness to other businesses
B. ability to get to a site, and from it to other places
When a community learns to make objects that previously had to be imported: A. the loss of imports hurts the local economy B. additional earnings are generated C. added jobs are tied up in local employment, hurting growth D. there is no net effect on the local economy
B. additional earnings are generated
Which transportation vehicle or system is considered random? A. trains B. automobiles C. subways D. streetcars
B. automobiles
The growth of a community along transportation lines, such as freeways or rapid transit routes, is best described as: A. spatial B. axial or linear C. sporadic D. circular
B. axial or linear
Each land use tends to seek that location that has the best combination of benefits and minimal problems. This is called: A. zoning B. comparative advantage C. eminent domain D. concentric growth
B. comparative advantage
If a community's export jobs are mostly in one industry: A. such concentration is considered desirable B. diversification should be a key community goal C. real estate investment potential is enhanced D. the town's future is guranteed
B. diversification should be a key community goal
In modern U.S. cities, land-use patterns are no longer influenced by major transportation systems. A. true B. false
B. false
The pattern of land use in cities is based solely on the interplay of private market forces. A. true B. false
B. false
To stimulate economic growth, an increase in local jobs must occur before there can be an increase in export jobs. A. true B. false
B. false
When land is allocated to the legal user who pays the highest price, economists call this the principle of: A. balance B. highest and best use C. economic succession D. change
B. highest and best use
Moderate increases in productivity are considered socially desirable by many people, if the increase in productivity: A. lowers per capita living standards B. improves per-person welfare C. fulfills government objectives for slow growth D. eliminates private jobs
B. improves per-person welfare
In an economic base study, a population forecast for a region is estimated by using a ratio of workers (or jobs) to people. This is called: A. job multiplier B. labor participation rate C. demography D. topography
B. labor participation rate
All other things being equal, if population increases and mortgage interest rates decline: A. office rents should decline B. more renters should start to buy homes C. the economy should be heading for a recession D. resale of existing homes should go down
B. more renters should start to buy homes
In real estate, a "buyer's market" usually occurs when: A. demand exceeds supply B. numerous properties are for sale C. internet rates are low D. there are plenty of qualified buyers
B. numerous properties are for sale
A market in which there are only a few sellers is called a(n): A. monopoly B. oligopoly C. monopsony D. oligopsony
B. oligopoly page 40
Two measures of community economic growth are: A. expansion and integration B. per capita and overall growth C. annexation and divestment D. local jobs and the multiplier
B. per capita and overall growth
A "central town": A. is located midway between two large cities B. performs a variety of services for a surrounding area C. contains the central government offices for the region D. is usually located at a river fork, mountain pass, or ocean port
B. performs a variety of services for a surrounding area
A group of cities or communities in a larger or surrounding area is usually called a: A. town B. region C. locality D. township
B. region
Which main transportation system allows the most flexibility in the location of manufacturing plants? A. railroads B. trucking C. waterways D. airlines
B. trucking
Leapfrogging is the label applied: A. when a new town is established B. when a new location is selected well away from existing central locations C. to the process of growth established by a new freeway D. when property is rezoned
B. when a new location is selected well away from existing central locations
If the banking system is using a 10 percent reserve requirement, an initial $1,000 deposit can expand to a maximum of how much in new loans? A. $1,000 B. $5,000 C. $9,000 D. $10,000
C. $9,000
The Federal Reserve System contains how many regional reserve banks? A. 5 B. 7 C. 12 D. 14
C. 12 A Federal Reserve Bank is a regional bank of the Federal Reserve System, the central banking system of the United States. There are twelve in total, one for each of the twelve Federal Reserve Districts that were created by the Federal Reserve Act of 1913.
Which government agency insures savings accounts at approved depository institutions? A. Federal Reserve System B. Federal Home Loan Bank C. Federal Deposit Insurance Corporation D. Federal Trust Association
C. Federal Deposit Insurance Corporation
Progressive income taxes and unemployment benefits are examples of the use of: A. monetary policy B. pure capitalistic theory C. automatic stabilizers D. Federal Reserve policies
C. automatic stabilizers
Growth of a region is most closely tied to what kind of jobs? A. local B. secondary C. basic D. internal
C. basic
Original locations of cities tend to be influenced by: A. topography B. transportation C. both a and b D. neither a nor b
C. both a and b
Fluctuations in economic activity, usually running from peak to peak in two to six years, are called: A. seasonal fluctuations B. secular trends C. business cycles D. GDP deflator
C. business cycles
The multiple nuclei theory of growth has the city growing: A. around the downtown central core B. along transportation lines C. from several points, including regional shopping centers D. from the highest to the lowest topographic point
C. from several points, including regional shopping centers
Comparative advantage means the: A. increased benefit that a particular building gives to a particular site B. locational benefit to a user gained by a site being in the central area of a town C. increased benefit to a user that a particular property gains from the advantages it may have over less desirable properties D. locational forces that shift town growth away from desirable areas
C. increased benefit to a user that a particular property gains from the advantages it may have over less desirable properties
The increased use of the Internet and other communication systems changes land-use patterns by: A. increasing the power of existing locations B. making cities more linear in shape C. reducing the need for physical proximity to other uses D. reducing the leapfrogging tendency
C. reducing the need for physical proximity to other uses
In a given real estate market, if the demand for commercial office space declines and the supply of office space also declines at the same ratio, market rent per square foot should: A. increase B. decrease C. remain the same D. shift to the right
C. remain the same
A command economy is commonly called: A. traditionalism B. capitalism C. socialism D. opportunism
C. socialism
Money has various functions. When money is used to describe what a debtor owes a creditor, this function of money is called a: A. medium of exchange B. measure of value C. standard of deferred payment D. store of value
C. standard of deferred payment
It is believed that the world's first towns and villages were located in: A. Europe B. Latin America C. the Middle East D. New Zealand
C. the Middle East
According to the law of demand, the higher the price of homes, the more likely it is that: A. the number of homes built will increase B. people will buy new homes C. the number of home sales will decline D. the number of homes built will decline
C. the number of home sales will decline
In a real estate "seller's market": A. supply exceeds demand B. prices are declining C. there are many qualified buyers but few properties for sale D. mortgage interest rates are very high
C. there are many qualified buyers but few properties for sale
Foreign ownership of real estate tends to increase when the: A. value of the dollar increases B. U.S. economy and the country of the potential foreign investor are in recession. C. value of foreign currency increases compared to U.S. currency D. barriers to free trade are increased
C. value of foreign currency increases compared to U.S. currency
Input-output analysis examines: A. whether production efficiency can be improved B. which jobs should be reclassified from basic to export C. what resources go into community economic activity, what goods and services are produced, and where they are distibuted D. how long it takes on average to convert inputs to outputs
C. what resources go into community economic activity, what goods and services are produced, and where they are distibuted
Unanticipated inflation tends to benefit buyers/borrowers: A. who wait to purchase real estate B. who acquire bonds C. with fixed interest rate loans D. with adjustable rate loans
C. who fixed interest rate loans
Demand and Real Estate
Changes in Demand happen fast and have the most significant impact in short term changes in value Changes in Demand are caused by Changes in Income, Population, Jobs, Credit, Government policy, Lifestyle etc... Forecasting changes in demand is complex yet key to creating opportunities in Real Estate
If the multiplier effect for a local economy is that 1 export job creates 1.5 secondary jobs, an increase of 100 basic export jobs should create a total of how many new jobs in the area? A. 67 B. 100 C .150 D. 250
D. 250
A famous economist, considered to be the founder of "new economics," who advocated using government fiscal policy to offset unemployment: A. Adam Smith B. Milton Friedman C. John Stuart Mill D. John Maynard Keynes
D. John Maynard Keynes
After a town is formed, the forces of proximity and __________________ are in a continual tug of war over the locations of new buildings. A. productivity B. import goods C. obsolescence D. accessiblity
D. accessibility
A change or shift in the demand for real estate can be caused by: A. changes in the availability of mortgage credit B. population changes C. income changes D. all of the above
D. all of the above
A decrease in mortgage interest rates tends to increase: A. home sales B. refinances C. home prices D. all of the above
D. all of the above
For some people, the disadvantages of economic growth include: A. more people B. traffic congestion C. additional pollution D. all of the above
D. all of the above
The advantages of economic growth include more: A. goods and services B. jobs C. financial security D. all of the above
D. all of the above
The future growth patterns of large U.S. cities will be heavily influenced by: A. transportation systems B. environmental concerns C. telecommunications systems D. all of the above
D. all of the above
The physical shape of a city can be changed by: A. new transportation systems B. topography C. new technology D. all of the above
D. all of the above
When an existing building is demolished and a new, more profitable building is constructed, this is an application of: A. the economics of succession B. the principle of change C. highest and best use D. all of the above
D. all of the above
When selecting a new location for a factory, a company will usually check which of the following items? A. environmental requirements B. community attitudes C. transportation systems D. all of the above
D. all of the above
Without zoning laws, similar land uses tend to cluster together: residential with residential, commercial with commercial, manufacturing with manufacturing, because of the principle of: A. change B. substitution C. decreasing returns D. comparative advantage
D. comparative advantage
The wedge describes the manner in which: A. a new transit system alters the pattern of land uses B. a shift of a major government building changes uses C. the principle of change influences government policies D. concentric rings of uses break into slices of different values
D. concentric rings of uses break into slices of different values
Which of the following is a characteristic of an imperfect real estate market? A. many and equal numbers of buyers and sellers B. highly knowledgeable buyers and sellers C. all products are alike D. fixed location
D. fixed location
Which of the following best describes a cause in the increase of foreign ownership of U.S. assets? A. very high value of the dollar B. disorganized U.S. consumer markets C. reduction in the U.S. budget deficit D. flight of capital seeking a safe haven
D. flight of capital seeking a safe haven
During times of recession, the government can attempt to stimulate the economy by: A. decreasing government spending B. increasing taxes C. increasing interest rates D. increasing the supply of money
D. increasing the supply of money
According to the classic study by Homer Hoyt, The Structure and Growth of Residential Neighborhoods in America Cities, higher-priced homes tend to be built: A. on flat land B. near transportation systems C. near industrial parks D. on hillsides
D. on hillsides
The four dominant factors shaping land-use patterns for small cities are: A. origins, social issues, politics, and change B. topography, transportation, economics, and politics C. topography, transportation, social issues, and change D. origins, accessibility, topography, and transportation
D. origins, accessibility, topography, and transportation
The impact that zoning has on community growth patterns is what type of force? A. economic B. physical C. social D. political
D. political
Which of the following is considered a real estate supply variable? A. consumer tastes B. population C. income D. rate of construction
D. rate of construction
In terms of economic base studies, a residential real estate brokerage business is what kind of business? A. export B. basic C. manufacturing D. secondary or local
D. secondary or local
Basic Gap Formulas
Demand Units Supply Units Industrial Sq.Ft./Employee Square Feet Office Sq.Ft./Employee Square Feet Retail Sales/GLA Gross Leasable Area Residential Households Units
Financial Feasibility
Estimate Income Estimate Costs Analyze Yield
Locations and Sites
Location: An area delineated by: A) Physical Boundary or Barrier B) Service Area or Trade Area C) Specific Community D) National, Regional, State, County, City, Zip Code, Census Tract, Block, etc... Site: A site is a specific property within a location *A site has a particular location yet a location has many sites
Patterns of Growth
Transportation: How most towns in the world were originally founded was based on that towns ability to transport products and people. Waterway, then railways then roadways, and airways. "The majority of the world's population still live within 50 miles of a major shoreline" Most towns have therefore grown up around a major transportation hub
Identifying Basic Employment
Two Methods to Identify Basic Employment: * Interview Method: Develop list of Major Employers in Study Area, Interview key personnel, identify good and or service, estimate impact on the study area, and forecast potential change (very time consuming). * Location Quotient: Compare Employment in the Study Area to Employment Nationally to identify industries which are over represented in the Study Area. e.g. The Technology industry in Santa Clara County compared to the National Technology Industry (%of workers in each area)
Location Analysis
What you need to Know: A) Geographical Factors 1) Physical Elements 2) The Patterns 3) Linkages B) Demographic and Economic factors C) Comparative Criteria
Site Analysis
What you need to know: A) Access B) Size C) Zoning D) Building? E) Tenants F) Management G) Economic Factors
For monitoring and analysis, the Federal Reserve classifies coins, paper money, and demand deposits as: A. M1 B. M2 C. M3 D. M4
A. M1 M1 includes cash and checking deposits, while near money refers to savings deposits, money market securities, mutual funds and other time deposits. These assets are less liquid than M1 and not as suitable as exchange mediums, but they can be quickly converted into cash or checking deposits.
Which of the following is true? A. U.S. paper currency is not backed by gold. B. Inflation is always good for real estate because prices go up. C. Government deficits decrease the government's need to borrow. D. All economists agree that monetary policy is better than fiscal policy for controlling the economy.
A. U.S. paper currency is not backed by gold.
A place in which buyers and sellers meet to bargain and exchange items of value at negotiated prices is called: A. a market B. an economy C. gross domestic product D. derived demand
A. a market
Price is set by: A. a movement along the demand curve B. a shift of the supply curve C. where the supply and demand curves cross D. where the supply and demand curves intersect the borders
A. a movement along the demand curve
Which of the following is a reason given to justify government intervention in private economic affairs? A. capitalism has a tendency to create imperfect markets B. citizens consistently vote for fewer government programs C. the market is the most efficient allocator of resources D. international peacekeeping is no longer needed
A. capitalism has a tendency to create imperfect markets
The type of unemployment that recovers as the economy recovers is called: A. cyclical B. structural C. chronic D. stifled
A. cyclical
When interest rates rise, the: A. demand for housing declines B. supply of housing increases C. demand for commercial real estate increases D. supply of commercial real estate increases
A. demand for housing declines
Depository institutions create money as a result of a concept known as: A. fractional reserve banking B. demand deposits C. reintermediations D. capitalization
A. fractional reserve banking
The total market value of all goods and services domestically produced in the U.S. economy in a given year is called: A. gross domestic product B. personal consumption expeditures C. net export D. gross private domestic investment
A. gross domestic product
If the demand for commercial real estate increases, but "no growth" controls prevent new construction, rents per square foot in the short run should: A. increase B. decrease C. remain the same D. shift downward
A. increase
In a purely competitive real estate market, if demand by renters for apartments increases, while the number of apartment units available for rent remains the same, apartment rents should; A. increase B. decrease C. remain in equilibrium D. become static
A. increase
According to fiscal theory, a tax decrease should: A. increase private spending B. decrease private savings C. fight inflation D. create unemployment
A. increase private spending
An increase in demand is illustrated by a: A. shift of the demand curve to the right B. shift of the demand curve to the left C. movement along the demand curve D. decrease in the quantity demanded
A. shift of the demand curve to the right
One of the key economic features of real estate is: A. short-run fixed supply B. fixed demand C. mobility D. low unit cost
A. short-run fixed supply
A change or shift in supply is caused by a change in: A. the cost of the factors of production B. population C. consumer tastes D. the amount of advertising
A. the cost of the factors of production
In the circular flow of the U.S. economy, individuals go to the resource markets as sellers and to the product and services markets as buyers. A. true B. false
A. true
The supply of land is fixed, but in time, the intensity of land use can be increased. A. true B. false
A. true
The total quantity that buyers are willing to buy at a given time at certain prices is called: A. supply B. demand C. equilibrium D. perfect competition
B. demand
A decrease in the rate of inflation is called: A. deflation B. disinflation C. disintermediation D. disintegration
B. disinflation Disinflation is a temporary slowing of the pace of price inflation. It is used to describe instances when the inflation rate has reduced marginally over the short term. It should not be confused with deflation, which can be harmful to the economy.
The flow of funds from depository institutions to the general money market is called: A. reintermediation B. disintermediation C. run on the bank D. recapitalization
B. disintermediation
After-tax income (take-home pay) is called: A. personal income B. disposable personal income C. discretionary income D. taxable income
B. disposable personal income
A social science concerned with how people produce, distribute, and consume goods and services is: A. history B. economics C. geography D. political science
B. economics
Which of the following actions by real estate agents tend to make the real estate market more competitive? A. establishing uniform rates for sales commissions B. encouraging more owners to list their homes for sale C. member-only access to multiple listing information D. not explaining information about the various options for home financing
B. encouraging more owners to list their homes for sale
That point at which supply and demand are matched at a price that will clear the market is called: A. open B. equilibrium C. comparative advantage D. surplus
B. equilibrium
Historically, in tight-money markets, real estate mortgages are attractive investments. A. true B. false
B. false
The increase in the use of foreign capital tends to motivate Congress and the president to solve the U.S. budget deficit problem. A. true B. false
B. false
The government's use of spending and taxing as a tool to control swings in the business cycle is called: A. automatic stabilizers B. fiscal policy C. monetary policy D. foreign policy
B. fiscal policy
Rapid unanticipated inflation is most harmful to real estate: A. lenders who grant ARM loans B. lenders who grant fixed rate loans C. borrowers who have fixed rate loans D. purchasers who pay cash
B. lenders who grant fixed rate loans
To decrease prevailing interest rates, The Fed: A. sells government notes B. lowers the discount rate C. increases reserve requirements D. increases the federal funds rate
B. lowers the discount rate
The major economic decisions are made by a government committee, but minor economic decisions are left to private individuals. This describes: A. pure socialism B. mixed socialism C. mixed capitalism D. pure capitalism
B. mixed socialism
The Federal Reserve's control over the economy is called: A. fiscal policy B. monetary policy C. fractional reserve policy D. market policy
B. monetary policy Monetary policy is the macroeconomic policy laid down by the central bank. It involves management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity.
A market consisting of a single buyer is called a: A. monopoly B. monopsony C. oligopsony D. oligopoly
B. monopsony
"No free lunch" is best explained by the concept of: A. diminishing returns B. opportunity costs C. highest and best use D. excess demand
B. opportunity costs
Fiscal and monetary policies run into problems because of structural difficulties, measurement problems, and: A. uniform applications B. political difficulties C. computer difficulties D. contractual applications
B. political difficulties
According to the law of demand, as local home prices drop, the: A. demand for homes should decrease B. quantity of homes demanded should increase C. supply of homes will increase in the short run D. vacancy rate for homes should increase
B. quantity of homes demanded should increase
In international trade, the price that the currency of one nation brings in terms of the currency of another nation is known as: A. balance of payments B. rate of exchange C. balance of trade D. principle of comparative advantage
B. rate of exchange
A decrease in supply is illustrated by a: A. shift of the supply curve to the right B. shift of the supply curve to the left C. movement along the supply curve D. increase in the quantity supplied
B. shift of the supply curve to the left
According to the circular flow of the economy, government: A. provides land, labor, and capital B. taxes businesses and households C. generates profits d. provides a vast array of consumer products
B. taxes businesses and households
According to the theory of pure capitalism, how goods and services are produced is determined by: A. buyers demand B. the lowest possible production cost C. who has the most money to spend D. government committees
B. the lowest possible production cost
A city that originally formed at a "break-cargo" point is called a(n): A. central town B. transportation service town C. special-function town D. economic town
B. transportation service town
If the Federal Reserve wishes to expand the money supply, it could: A. increase the reserve requirements B. raise the discount rate C. buy government bonds D. increase the federal funds rate
C. buy government bonds
The rate of interest that one bank charges another for the overnight use of excess reserves is called: A. prime rate B. discount rate C. federal funds rate D. commercial rate
C. federal funds rate
Real GDP is GDP adjusted for: A. taxes B. government expenditures C. inflation D. unemployment
C. inflation
In the short run, a reduction in the supply of money should increase: A. taxes B. government spending C. interest rates D. real estate construction rates
C. interest rates
The government's use of money, credit, and interest rates as a tool to control swings in the business cycle is called: A. automatic stabilizers B. fiscal policy C. monetary policy D. foreign policy
C. monetary policy
Multiple listing services of a local real estate association tend to make the real estate market: A. less than perfect B. more imperfect C. more nearly perfect D. does not influence the market one way or the other
C. more nearly perfect
The use of real estate brokers tends to make the real estate market: A. less than perfect B. more imperfect C. more nearly perfect D. does not influence the market one way or the other
C. more nearly perfect
An increase in demand will have what short-run impact on real estate prices and rents? A. prices and rents should decrease B. prices should decrease, but rents should increase C. prices and rents should increase D. prices should increase, but rents should decrease
C. prices and rents should increase
All of the following are principles of pure capitalism, except: A. private property B. laissez-faire C. public ownership of basic resources D. open and competitive markets for goods and services
C. public ownership of basic resources
All of the following can influence the demand for real estate except: A. population B. mortgage interest rates C. rates of construction D. lifestyles
C. rates of construction
The slope downward from the peak of a business cycle is called: A. depression B. recovery C. recession D. prosperity
C. recession
Famous capitalist who wrote The Wealth of Nations: A. Karl Marx B. John Stuart Mill C. Thomas Jefferson D. Adam Smith
D. Adam Smith
Regarding the circular flow of the economy, which of the following is true? A. Individuals and households sell goods and services and receive income. B. Business supplies resources and receives wages. C. The product market is where the factors of production are exchanged. D. In the resource market, land, labor, capital, and business skills are exchanged for income.
D. In the resource market, land, labor, capital, and business skills are exchanged for income.
Which mortgage market reform has insulated depository institutions from excessive disintermediation? A. adjustable rate mortgages B. money market certificate accounts C. an improved secondary mortgage market D. all of the above
D. all of the above
In measuring GDP, net exports refer to: A. foreign currency B. balance of payments C. comparative advantage D. balance of exports and imports
D. balance of exports and imports
A summary of all transactions between the citizens of one nation and the citizens of all other countries is called: A. free trade B. rate of exchange C. balance of trade D. balance of payments
D. balance of payments
During times of rapid inflationary prosperity, the government can attempt to slow down the economy by: A. increasing government spending B. decreasing taxes C. decreasing interest rates D. decreasing the supply of money
D. decreasing the supply of money
"Too much money chasing too few goods" is what kind of inflation? A. cost-push B. spiral-up C. twist-down D. demand-pull
D. demand-pull Demand-pull inflation is asserted to arise when aggregate demand in an economy outpaces aggregate supply. It involves inflation rising as real gross domestic product rises and unemployment falls, as the economy moves along the Phillips curve. This is commonly described as "too much money chasing too few goods."
Economic theory states that the United States can become self-sufficient, with no need for international trade, if the United States is willing to: A. drive up the price of domestic consumer goods and services B. limit the economic choices of U.S. citizens C. cancel all trade agreements D. do all of the above
D. do all of the above
Foreign ownership of U.S. real estate: A. provides needed capital for U.S. citizens B. in the short run, increases government revenues C. helps maintain real estate prices D. does all of the above
D. does all of the above
Under pure capitalism, goods and services are produced primarily for people who: A. need them B. desire them C. wish for them D. effectively demand them
D. effectively demand them
In the flow of the economy, government needs to generate money to pay for the benefits that society demands from government. Government raises revenue by all of the following except: A. borrowing B. taxes C. fees D. labor
D. labor
When The Fed buys and sells government notes and bonds, it is called: A. change in reserve requirements B. change in discount requirements C. supply of money operations D. open-market operations
D. open-market operations Open market operations (OMO) refer to the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system.
Which of the following is not considered a function of money? A. medium of exchange B. measure of value C. standard of deferred payment D. standard of tangible asset
D. standard of tangible asset
Overbuilding results when: A. demand exceeds supply B. lenders tighten up on construction credit C. government imposes "no growth" controls D. supply exceeds demand, but new construction continues
D. supply exceeds demand, but new construction continues
When government revenues exceed government spending, there should be a budget: A. deficit B. balance C. decline D. surplus
D. surplus
If individuals and societies make economic choices based on the way things have always been done, the economy is considered: A. communistic B. capitalistic C. socialistic D. traditional
D. traditional
