question
The reference base period for the CPI is
answer
the period of time the CPI is defined to equal 100.
question
In 2013, the reference base period for the CPI for the nation of Wobet, a typical consumer spent $30 on potatoes and $150 on steak. Which of the following is TRUE?
answer
We cannot say exactly how many of each good are in the basket.
question
If the cost of the CPI market basket at current period prices is $1,000 and the cost of the CPI market basket at base period prices is $250, the CPI is
answer
400
question
Suppose that the cost of the CPI basket of goods and services rises from $137 in 2010, which is the base year, to $159 in 2011. The CPI in 2011 is ________ and the inflation rate from 2010 to 2011 is ________.
answer
116; 16 percent
question
Consumers in a country buy only two goods, sneakers and manicures. The prices and quantities purchased by urban households are in the table above. The reference base year is 2018. For these data, the CPI for 2019 is
answer
110.
question
The inflation rate is the
answer
percentage change in the CPI from one year to the next year.
question
Suppose in year 1 the CPI is 90, in year 2 the CPI is 100, and in year 3 the CPI is 110. Then, inflation is
answer
11 percent between years 1 and 2
question
Which of the following is NOT a source of bias in the CPI?
i. quality change bias
ii. new goods bias
iii. quantity change bias
answer
iii only
question
February 2010, the price of gasoline in the Florida was $2.629 per gallon and the CPI was 202.4 with a base period of 1982 to 1984. What was the real price of gasoline per gallon in base period dollars?
answer
$1.29 per gallon
question
A change in the real wage rate measures the change in the
answer
quantity of goods and services that an hour's work can buy.
question
The total amount spent on new capital goods is called
answer
gross investment.
question
On January 1, Rick's Photo owned $50,000 of equipment. During the year, the value of the equipment fell by $10,000, plus Rick bought $25,000 in new equipment. Rick's company experienced
answer
$10,000 of depreciation.
question
Bill's Lawn service starts the year with 20 lawn mowers. During the year, 3 mowers break and are not worth fixing. Bill also expands his business and buys 10 more mowers. Bill's net investment is ________ mowers.
answer
7
question
Economists use the term wealth to mean
answer
what a person owns.
question
To acquire financial capital, a firm can
i. obtain a loan from a bank.
ii. issue stock.
iii. issue bonds.
answer
i, ii, and iii
question
Other things remaining the same, the ________ the real interest rate, the ________.
answer
lower; greater the quantity of loanable funds demanded
question
Which of the following decreases the demand for loanable funds and shifts the demand for loanable funds curve leftward?
answer
The economy experiences a recession.
question
In the figure above, the rightward shift from the demand for loanable funds curve DLF1 to the demand for loanable funds curve DLF2, could be the result of
answer
an increase in expected profit.
question
If expected future income increases, then
answer
the supply of loanable funds decreases.
question
Which of the following factors does NOT shift the supply of loanable funds curve?
i. change in disposable income
ii. change in wealth
iii. change in expected profit
answer
iii only
question
Which of the following best represents fiat money?
answer
The euro
question
You receive money as payment for mowing your neighbor's lawn. Which function of money does this best illustrate?
answer
Medium of exchange
question
Which of the following is not included in M1?
answer
Savings deposits
question
Susan just sold her text books for $200 cash and deposited the cash she received in her checking account. This transaction has
answer
not changed either M1 or M2.
question
Which of the following are assets of commercial banks?
i. reserves
ii. loans
iii. deposits
answer
i and ii
question
A bank has $400 in checkable deposits, $800 in savings deposits, $900 in loans to businesses, $300 in outstanding credit card balances, $500 in government securities, $10 in currency in its vault, and $20 in deposits at the Fed. The bank's deposits that are part of M1 are equal to
answer
$400
question
The Fed influences the interest rate by using which of the following tools?
i. open market operations
ii. taxes on bank accounts
iii. changes in required reserve ratios
answer
i and iii
question
If the Federal Reserve lowers the required reserve ratio, people will end up taking out ________ because the interest rates ________.
answer
more loans; will fall
question
The Commerce Bank of Beverly Hills has total deposits of $1,000,000 and total reserves of $220,000. The desired reserve ratio is 10 percent. The bank's excess reserves are
answer
$120,000.
question
Assume the desired reserve ratio is 10 percent, banks loan all excess reserves and the currency drain is zero. If the Fed sells $100 million of U.S. government securities to Boise Bank, the monetary base increases by
answer
$100 million.
question
Suppose the currency drain ratio is 33.33 percent and the desired reserve ratio is 10 percent. The money multiplier equals
answer
3.08.
question
Refer to the Figure. If the money supply is MS2 and the value of money is 5, then there is an excess
answer
supply of money that is represented by the distance between points D and A.
question
If the relevant money-demand curve is the one labeled MD2, then the equilibrium value of money is
answer
0.61 and the equilibrium price level is 1.6.
question
An associate professor of physics gets a $200 a month raise. With her new monthly salary she can buy more goods and services than she could buy last year.
answer
Her real and nominal salary have risen.
question
According to the classical dichotomy, which of the following increases when the money supply increases?
answer
The nominal wage
question
If M = 5,000, P = 5.5, and Y = 9,000, what is velocity?
answer
10
question
According to the assumptions of the quantity theory of money, if the money supply increases by 7 percent, then
answer
nominal GDP would rise by 7 percent; real GDP would be unchanged
question
The inflation tax refers to
answer
the revenue a government creates by printing money.
question
Katarina puts money into an account. One year later she sees that she has 6 percent more dollars and that her money will buy 4 percent more goods. The nominal interest rate was
answer
6 percent and the inflation rate was 2 percent.
question
If the Fed is worried about inflation and wants to raise the interest rate, in the short run it can
answer
decrease the quantity of money.
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