question
Suppose you take a trip during spring break. To determine the benefit of taking the trip, you...
a. Calculate the value of the next best alternative foregone
b. Determine the sunk cost of taking the trip.
c. Calculate the opportunity cost of the trip.
d. Must measure what the trip is worth to you and then subtract the cost of the trip.
e. Measure what you are willing to give up to take the trip.
a. Calculate the value of the next best alternative foregone
b. Determine the sunk cost of taking the trip.
c. Calculate the opportunity cost of the trip.
d. Must measure what the trip is worth to you and then subtract the cost of the trip.
e. Measure what you are willing to give up to take the trip.
answer
e. Measure what you are willing to give up to take the trip.
question
Items that are purchased by individuals for their own enjoyment are called..
a. Consumption goods and services
b. Government good and services
c. Exports of goods and services
d. Capital goods
e. Private goods
a. Consumption goods and services
b. Government good and services
c. Exports of goods and services
d. Capital goods
e. Private goods
answer
a. Consumption goods and services
question
An incentive is...
a. The marginal benefit of some course of action.
b. The marginal cost of some course of action.
c. An inducement to take a particular action.
d. The net gain of some course of action.
e. A constraint that society imposes on those who make self-interested choices.
a. The marginal benefit of some course of action.
b. The marginal cost of some course of action.
c. An inducement to take a particular action.
d. The net gain of some course of action.
e. A constraint that society imposes on those who make self-interested choices.
answer
c. An inducement to take a particular action.
question
Items bought by businesses to help produce other goods and services are called...
a. Government goods and services
b. Productive goods
c. Exports of goods and services
d. Consumption goods and services
e. Capital goods
a. Government goods and services
b. Productive goods
c. Exports of goods and services
d. Consumption goods and services
e. Capital goods
answer
e. Capital goods
question
What two groups of decision makers are represented in the basic circular flow model?
a. bankers and regulators
b. lenders and borrowers
c. governments and financial institutions
d. households and firms
e. wholesalers and retailers
a. bankers and regulators
b. lenders and borrowers
c. governments and financial institutions
d. households and firms
e. wholesalers and retailers
answer
d. households and firms
question
The circular flow model is used to show the ...
a. flow of supply and the flow of demand
b. recycling process of production materials
c. expansions an contractions of economic activity
d. flow of renewable natural resources
e. flow of expenditures and incomes in the economy
a. flow of supply and the flow of demand
b. recycling process of production materials
c. expansions an contractions of economic activity
d. flow of renewable natural resources
e. flow of expenditures and incomes in the economy
answer
e. flow of expenditures and incomes in the economy
question
In the circular flow model, which of the following owns the factors of production?
a. firms, households, and all levels of government
b. both firms and households
c. only federal, state, and local governments
d. only firms
e. only households
a. firms, households, and all levels of government
b. both firms and households
c. only federal, state, and local governments
d. only firms
e. only households
answer
e. only households
question
A production possibilities frontier shows...
a. the various combinations of output a nation can produce a certain time, given its available resources and technology.
b. that it is impossible to produce inefficiently.
c. the limits to future growth of a nation.
d. that if price of one good decreases, the price of the other has to rise.
e. how money can be allocated among two kinds of goods.
a. the various combinations of output a nation can produce a certain time, given its available resources and technology.
b. that it is impossible to produce inefficiently.
c. the limits to future growth of a nation.
d. that if price of one good decreases, the price of the other has to rise.
e. how money can be allocated among two kinds of goods.
answer
a. the various combinations of output a nation can produce a certain time, given its available resources and technology.
question
When all of the available factors of production are being efficiently employed, the ....
a. economy is producing at a point within its PPF
b. opportunity cost of changing production is infinite
c. PPF disappears
d. economy is producing at a point on its PPF
e. economy is producing at a point beyond its PPF
a. economy is producing at a point within its PPF
b. opportunity cost of changing production is infinite
c. PPF disappears
d. economy is producing at a point on its PPF
e. economy is producing at a point beyond its PPF
answer
d. economy is producing at a point on its PPF
question
The law of demand implies that, other things remaining the same,....
a. as the price of a cheeseburger rises, the quantity of cheeseburgers demanded increases.
b. as the demand for cheeseburgers increases, the price of a cheeseburger falls.
c. as the price of a cheeseburger rises, the quantity of cheeseburgers demanded decreases.
d. as income decreases, the quantity of cheeseburgers demanded increases.
e. as more people demand cheeseburgers. the quantity demanded increases.
a. as the price of a cheeseburger rises, the quantity of cheeseburgers demanded increases.
b. as the demand for cheeseburgers increases, the price of a cheeseburger falls.
c. as the price of a cheeseburger rises, the quantity of cheeseburgers demanded decreases.
d. as income decreases, the quantity of cheeseburgers demanded increases.
e. as more people demand cheeseburgers. the quantity demanded increases.
answer
c. as the price of a cheeseburger rises, the quantity of cheeseburgers demanded decreases.
question
Market demand curves are obtained by...
a. averaging the quantities every consumer is willing to buy at each different price.
b. summing the quantities every consumer is willing to buy at each different price
c. observing the prices in quantities sold in a market over time and plotting those price-quantity combinations in a graph
d. determining the price each consumer is willing to pay for the good and summing those prices across all consumers
e. observing the behavior of an individual consumer in a market.
a. averaging the quantities every consumer is willing to buy at each different price.
b. summing the quantities every consumer is willing to buy at each different price
c. observing the prices in quantities sold in a market over time and plotting those price-quantity combinations in a graph
d. determining the price each consumer is willing to pay for the good and summing those prices across all consumers
e. observing the behavior of an individual consumer in a market.
answer
b. summing the quantities every consumer is willing to buy at each different price
question
Market equilibrium occurs when...
a. The quantity demanded equals the quantity supplied
b. the market is changing rapidly
c. buyers get the lowest possible price
d. other things remain the same
e. everyone who wants the good gets the quantity he/she wants.
a. The quantity demanded equals the quantity supplied
b. the market is changing rapidly
c. buyers get the lowest possible price
d. other things remain the same
e. everyone who wants the good gets the quantity he/she wants.
answer
a. The quantity demanded equals the quantity supplied
question
A country has a comparative advantage in the production of a good if it can...
a. produce the good on and remain on its production possibilities frontier.
b. produce more of the good than another country
c. produce the good at the lowest opp cost.
d. produce more of the good most efficiently.
e. trade off producing the good for another good.
a. produce the good on and remain on its production possibilities frontier.
b. produce more of the good than another country
c. produce the good at the lowest opp cost.
d. produce more of the good most efficiently.
e. trade off producing the good for another good.
answer
c. produce the good at the lowest opp cost.
question
When measuring GDP...
a. only the federal governments expenditure on goods and services are included.
b. the expenditure on goods and services by all levels of government are included.
c. the government sector is not included because it is the public sector, not the private sector.
d. the government sector is counted, and the value of the government sector in GDP is equal to its tax revenue.
e. the government sector is not counted because it does not produce goods and services.
a. only the federal governments expenditure on goods and services are included.
b. the expenditure on goods and services by all levels of government are included.
c. the government sector is not included because it is the public sector, not the private sector.
d. the government sector is counted, and the value of the government sector in GDP is equal to its tax revenue.
e. the government sector is not counted because it does not produce goods and services.
answer
b. the expenditure on goods and services by all levels of government are included.
question
If a firm does not sell all of the goods that it produces in a given time period then the goods...
a. count negatively in GDP as inventory investment
b. do not count in GDP ever
c. count positively in GDP as inventory investment
d. do not count in GDP for that time period, but always count next period.
e. count in GDP the period they are sold to the final user.
a. count negatively in GDP as inventory investment
b. do not count in GDP ever
c. count positively in GDP as inventory investment
d. do not count in GDP for that time period, but always count next period.
e. count in GDP the period they are sold to the final user.
answer
c. count positively in GDP as inventory investment
question
The largest expenditure category in the US is..
a. consumption expenditure
b. government expenditure on goods and services
c. investments
d. net exports of goods and services
e. wages
a. consumption expenditure
b. government expenditure on goods and services
c. investments
d. net exports of goods and services
e. wages
answer
a. consumption expenditure
question
If we use GDP to measure our standard of living, then our procedure is...
a. accurate because our standard of living depends solely on goods and services
b. inaccurate because our standard of living depends on used goods and services
c. inaccurate because our standard of living has nothing to do with goods and services.
d. inaccurate because our standard of living does not depend only on goods and services.
e. accurate only if we use nominal GDP rather than real GDP
a. accurate because our standard of living depends solely on goods and services
b. inaccurate because our standard of living depends on used goods and services
c. inaccurate because our standard of living has nothing to do with goods and services.
d. inaccurate because our standard of living does not depend only on goods and services.
e. accurate only if we use nominal GDP rather than real GDP
answer
d. inaccurate because our standard of living does not depend only on goods and services.
question
During the business cycle...
a. trend GDP fluctuates around real GDP
b. real GDP fluctuates around its trend
c. real GDP falls after the trough
d. nominal GDP fluctuates around real GDP
e. real GDP fluctuates around nominal GDP
a. trend GDP fluctuates around real GDP
b. real GDP fluctuates around its trend
c. real GDP falls after the trough
d. nominal GDP fluctuates around real GDP
e. real GDP fluctuates around nominal GDP
answer
b. real GDP fluctuates around its trend
question
Goods and services such as environmental quality, leisure time, and household production are not included in GDP because they are not...
a. for consumption
b. bought in markets
c. made for profit
d. really durable goods
e. productive activities
a. for consumption
b. bought in markets
c. made for profit
d. really durable goods
e. productive activities
answer
b. bought in markets
question
The labor force consists of...
a. the number of people who are unemployed and who are actively seeking work
b. the number of people who are employed, minus the number of people who are unemployed.
c. all people in the population, aged over 16 who are not in jail, a hospital, or an institution, or in the US armed forces.
d. the number of people who are employed
e. the number of people in the working-age population who are employed or unemployed.
a. the number of people who are unemployed and who are actively seeking work
b. the number of people who are employed, minus the number of people who are unemployed.
c. all people in the population, aged over 16 who are not in jail, a hospital, or an institution, or in the US armed forces.
d. the number of people who are employed
e. the number of people in the working-age population who are employed or unemployed.
answer
e. the number of people in the working-age population who are employed or unemployed.
question
The unemployment rate measures the percentage of...
a. people in the labor force who cant find a job
b. employed people who cant find a job
c. the working age population who cant find a job
d. the working age population who cant find a full time job
e. people who want full time jobs, but cant find them.
a. people in the labor force who cant find a job
b. employed people who cant find a job
c. the working age population who cant find a job
d. the working age population who cant find a full time job
e. people who want full time jobs, but cant find them.
answer
a. people in the labor force who cant find a job
question
Unemployment rates in the US during the past 60 years...
a. have risen steadily and today are near all time highs
b. have risen and fallen in a range between approx 4 and 10 percent
c. have fallen steadily from approx 10 percent, 40 years ago to near 2 percent today
d. have remained between 4 and 6 percent
e. have risen and fallen in a range between approx 10 and 25 percent.
a. have risen steadily and today are near all time highs
b. have risen and fallen in a range between approx 4 and 10 percent
c. have fallen steadily from approx 10 percent, 40 years ago to near 2 percent today
d. have remained between 4 and 6 percent
e. have risen and fallen in a range between approx 10 and 25 percent.
answer
b. have risen and fallen in a range between approx 4 and 10 percent
question
Which type of unemployment is the consequence of downturns in the business cycle?
a. frictional
b. expansionary
c. natural
d. structural
e. cyclical
a. frictional
b. expansionary
c. natural
d. structural
e. cyclical
answer
e. cyclical
question
The CPI measures the change of the....
a. prices paid by consumers for a fixed market basket of consumer goods and services
b. quantities of a fixed market basket of goods produced by businesses
c. prices paid by all businesses for a fixed market basket of production resources
d. prices paid by consumers and businesses for a fixed market basket of goods and services
e. lowest price paid by consumers for a fixed market basket of consumer goods and services.
a. prices paid by consumers for a fixed market basket of consumer goods and services
b. quantities of a fixed market basket of goods produced by businesses
c. prices paid by all businesses for a fixed market basket of production resources
d. prices paid by consumers and businesses for a fixed market basket of goods and services
e. lowest price paid by consumers for a fixed market basket of consumer goods and services.
answer
a. prices paid by consumers for a fixed market basket of consumer goods and services
question
The CPI is biased because it..
a. accurately measures the cost of living but not the cost of producing
b. does not always take into account the changes in product quality
c. does not include services
d. takes into account the changes in technology
e. takes into account the changes in product quality.
a. accurately measures the cost of living but not the cost of producing
b. does not always take into account the changes in product quality
c. does not include services
d. takes into account the changes in technology
e. takes into account the changes in product quality.
answer
b. does not always take into account the changes in product quality
question
if you get an 8% increase in your nominal income, your real income...
a. increases only if the inflation rate is more than 8%
b. definitely increases
c. increases if the inflation rate is more than or equal to 8%
d. increases only if the inflation rate is equal to 8%
e. increases only if the inflation rate is less than 8%
a. increases only if the inflation rate is more than 8%
b. definitely increases
c. increases if the inflation rate is more than or equal to 8%
d. increases only if the inflation rate is equal to 8%
e. increases only if the inflation rate is less than 8%
answer
e. increases only if the inflation rate is less than 8%
question
the keynesian macro economic model states that...
a. fluctuations in a quantity of money are responsible for most economical recessions.
b. the economy is fairly stable
c. markets work efficiently to produce the best macro outcomes
d. changes in technology generate business cycles
e. the economy is inherently unstable and government intervention is required to maintain continued economic growth
a. fluctuations in a quantity of money are responsible for most economical recessions.
b. the economy is fairly stable
c. markets work efficiently to produce the best macro outcomes
d. changes in technology generate business cycles
e. the economy is inherently unstable and government intervention is required to maintain continued economic growth
answer
e. the economy is inherently unstable and government intervention is required to maintain continued economic growth
question
Potential GDP is...
a. another name for real GDP
b. a measure of the short term fluctuations in real GDP
c. equal to the maximum amount of goods and services that can be produced at any given time
d. another name for nominal GDP
e. the level of output produced when the economy is fully employed.
a. another name for real GDP
b. a measure of the short term fluctuations in real GDP
c. equal to the maximum amount of goods and services that can be produced at any given time
d. another name for nominal GDP
e. the level of output produced when the economy is fully employed.
answer
e. the level of output produced when the economy is fully employed.
question
the production function describes the relationship between..
a. real and nominal GDP
b. real GDP and the quantity of labor employed
c. potential GDP and the real wage rate
d. the real wage rate and the quantity of labor supplied
e. real and potential GDP
a. real and nominal GDP
b. real GDP and the quantity of labor employed
c. potential GDP and the real wage rate
d. the real wage rate and the quantity of labor supplied
e. real and potential GDP
answer
b. real GDP and the quantity of labor employed
question
diminishing returns means that...
a. hiring more labor must lower the real wage rate
b. each additional unit of labor produces successively less real GDP
c. hiring more labor results in less real GDP
d. each additional unit of labor produces successively more real GDP
e. each extra unit of real GDP produced requires less labor
a. hiring more labor must lower the real wage rate
b. each additional unit of labor produces successively less real GDP
c. hiring more labor results in less real GDP
d. each additional unit of labor produces successively more real GDP
e. each extra unit of real GDP produced requires less labor
answer
b. each additional unit of labor produces successively less real GDP
question
the benefit to the firm of hiring another worker is...
a. the real wage
b. the price level
c. the extra output produced by the worker
d. measured as the height of the production function
e. the nominal wage
a. the real wage
b. the price level
c. the extra output produced by the worker
d. measured as the height of the production function
e. the nominal wage
answer
c. the extra output produced by the worker
question
The demand for labor reflects the point that the...
a. lower the real wage rate the greater the quantity of labor demanded
b. real wage rate does not effect the quantity demanded of labor
c. demand for labor depends on the supply of labor
d. nominal wage rate and not the real wage rate determines the quantity of labor demanded
e. higher the real wage rate the greater the quantity of labor demanded
a. lower the real wage rate the greater the quantity of labor demanded
b. real wage rate does not effect the quantity demanded of labor
c. demand for labor depends on the supply of labor
d. nominal wage rate and not the real wage rate determines the quantity of labor demanded
e. higher the real wage rate the greater the quantity of labor demanded
answer
a. lower the real wage rate the greater the quantity of labor demanded
question
households increase the quantity of labor supplied when the...
a. nominal wage rate falls because the opp cost of not working rises
b. real wage rate rises because the opp cost of not working rises
c. income tax rises because an increase in the income tax increases the demand for labor
d. nominal wage rate rises because the real wage rate must also rise
e. real wage rate rises because the opp cost of not working falls.
a. nominal wage rate falls because the opp cost of not working rises
b. real wage rate rises because the opp cost of not working rises
c. income tax rises because an increase in the income tax increases the demand for labor
d. nominal wage rate rises because the real wage rate must also rise
e. real wage rate rises because the opp cost of not working falls.
answer
b. real wage rate rises because the opp cost of not working rises
question
the rule of 70 states that the level of a variable will double in...
a. 70 years
b. the number of years equal to the variables annual growth minus 70
c. the number of years equal to the variables annual rate divided by 70
d. the number of years equal to 70 divided by the variables annual growth rate
e. the number of years equal to 70 multiplied by the variables annual growth rate expressed as a decimal
a. 70 years
b. the number of years equal to the variables annual growth minus 70
c. the number of years equal to the variables annual rate divided by 70
d. the number of years equal to 70 divided by the variables annual growth rate
e. the number of years equal to 70 multiplied by the variables annual growth rate expressed as a decimal
answer
d. the number of years equal to 70 divided by the variables annual growth rate
question
labor productivity is equal to the quantity of..
a. real GDP consumed by the total population in one hour
b. workers employed during one hour
c. real GDP
d. workers who are gainfully employed
e. real GDP produce by one hour of labor
a. real GDP consumed by the total population in one hour
b. workers employed during one hour
c. real GDP
d. workers who are gainfully employed
e. real GDP produce by one hour of labor
answer
e. real GDP produce by one hour of labor
question
a key element of the classical growth theory is that..
a. an increase in population leads to increase in the labor supply and a decline in real GDP per person
b. low taxes promote economic growth
c. increase in technology drive economic growth
d. economic growth can be sustained as long as government intervention does not occur
e. market forces drive economic growth
a. an increase in population leads to increase in the labor supply and a decline in real GDP per person
b. low taxes promote economic growth
c. increase in technology drive economic growth
d. economic growth can be sustained as long as government intervention does not occur
e. market forces drive economic growth
answer
a. an increase in population leads to increase in the labor supply and a decline in real GDP per person
question
a key reason why some nations show little or no growth is..
a. over population that overuses limited resources
b. patents and rich nations that keep technology only for the rich
c. lack of incentives to undertake actions toward growth
d. too much private property not directed by the government
e. too much international trade so that all economic growth spills over to foreigners
a. over population that overuses limited resources
b. patents and rich nations that keep technology only for the rich
c. lack of incentives to undertake actions toward growth
d. too much private property not directed by the government
e. too much international trade so that all economic growth spills over to foreigners
answer
c. lack of incentives to undertake actions toward growth
question
economic freedom requires...
a. that the government be a democracy
b. the rule of law and the ability to enforce the laws
c. strong labor unions
d. that there are no regulations and restrictions set on businesses and households by the government
e. freedom to bribe government officials
a. that the government be a democracy
b. the rule of law and the ability to enforce the laws
c. strong labor unions
d. that there are no regulations and restrictions set on businesses and households by the government
e. freedom to bribe government officials
answer
b. the rule of law and the ability to enforce the laws
question
financial capital is used to help finance..
a. that investment but not gross investment
b. people savings
c. gross investment but not net investment
d. consumption expenditures by households
e. the purchase of physical capital by firms
a. that investment but not gross investment
b. people savings
c. gross investment but not net investment
d. consumption expenditures by households
e. the purchase of physical capital by firms
answer
e. the purchase of physical capital by firms
question
wealth is...
a. the value of all the things that a person owns
b. equivalent to savings
c. the same as investment in financial capital
d. another name for income
e. defined as the money in your savings account
a. the value of all the things that a person owns
b. equivalent to savings
c. the same as investment in financial capital
d. another name for income
e. defined as the money in your savings account
answer
a. the value of all the things that a person owns
question
what happens to the demand for loanable funds curve when the economy enters a recession?
a. the demand for loanable funds curve shifts rightward because the real interest rate falls
b. the demand for loanable funds curve shifts leftward because the real interest rate falls
c. the demand for loanable funds curve shifts leftward because expected profit falls
d. the demand for loanable funds curve shifts leftward because wealth decreases
e. the demand for loanable funds curve shifts rightward because expected profit falls
a. the demand for loanable funds curve shifts rightward because the real interest rate falls
b. the demand for loanable funds curve shifts leftward because the real interest rate falls
c. the demand for loanable funds curve shifts leftward because expected profit falls
d. the demand for loanable funds curve shifts leftward because wealth decreases
e. the demand for loanable funds curve shifts rightward because expected profit falls
answer
b. the demand for loanable funds curve shifts leftward because the real interest rate falls
question
the quantity of loanable funds supplied increases if the real interest rate rises, all other things remaining the same, because the...
a. cost of living is determined by real interest rate
b. real interest rate is the opp cost of saving
c. real interest rate is the opp cost of consumption
d. real interest rate is inversely related to the cost of buying on credit
e. demand for investment increases when the real interest rate rises
a. cost of living is determined by real interest rate
b. real interest rate is the opp cost of saving
c. real interest rate is the opp cost of consumption
d. real interest rate is inversely related to the cost of buying on credit
e. demand for investment increases when the real interest rate rises
answer
c. real interest rate is the opp cost of consumption
question
when disposable income increases, saving will..
a. increase, and there is a movement upward along the supply of loanable funds curve
b. not change
c. increase, and the supply of the loanable funds curve shifts rightward
d. decrease, and there is a movement downward along the supply of loanable funds curve
e. decrease, and the supply of loanable funds curve shifts leftward.
a. increase, and there is a movement upward along the supply of loanable funds curve
b. not change
c. increase, and the supply of the loanable funds curve shifts rightward
d. decrease, and there is a movement downward along the supply of loanable funds curve
e. decrease, and the supply of loanable funds curve shifts leftward.
answer
c. increase, and the supply of the loanable funds curve shifts rightward
question
if a government has a budget deficit it must...
a. decrease its expenditures
b. increase taxes
c. lower the real interest rate
d. borrow in the loanable funds market
e. decrease taxes
a. decrease its expenditures
b. increase taxes
c. lower the real interest rate
d. borrow in the loanable funds market
e. decrease taxes
answer
d. borrow in the loanable funds market
question
the objects we use for money today include..
a. currency outside the banks and bank deposits
b. only deposits inside the banks
c. credit cards and debit cards
d. currency inside banks and bank deposits
e. only currency outside the banks
a. currency outside the banks and bank deposits
b. only deposits inside the banks
c. credit cards and debit cards
d. currency inside banks and bank deposits
e. only currency outside the banks
answer
a. currency outside the banks and bank deposits
question
banks earn a profit by...
a. keeping as many reserves on hand as possible
b. making loans at a higher interest rate than the rates that they offer on their deposits
c. making loans at a lower interest rate than the rate that they offer on their deposits
d. not paying interest on their reserves
e. charging an interest rate on their depositors accounts
a. keeping as many reserves on hand as possible
b. making loans at a higher interest rate than the rates that they offer on their deposits
c. making loans at a lower interest rate than the rate that they offer on their deposits
d. not paying interest on their reserves
e. charging an interest rate on their depositors accounts
answer
b. making loans at a higher interest rate than the rates that they offer on their deposits
question
The FED is a central bank and as such..
a. does business only with the FED government
b. provides banking services to banks but not individuals
c. is where the FED government turns when it needs to borrow
d. provides banking services to individuals and firms
e. does business with international organizations such as the United Nations
a. does business only with the FED government
b. provides banking services to banks but not individuals
c. is where the FED government turns when it needs to borrow
d. provides banking services to individuals and firms
e. does business with international organizations such as the United Nations
answer
b. provides banking services to banks but not individuals
question
the monetary base is equal to the sum of coins...
a. currency and banks reserves at the FED reserve
b. currency, banks reserves at the FED reserve and checkable deposits at banks
c. currency and checkable deposits at banks
d. US government securities owned by the FED reserve and FED reserve notes
e. checkable deposits at banks
a. currency and banks reserves at the FED reserve
b. currency, banks reserves at the FED reserve and checkable deposits at banks
c. currency and checkable deposits at banks
d. US government securities owned by the FED reserve and FED reserve notes
e. checkable deposits at banks
answer
a. currency and banks reserves at the FED reserve
question
banks create money by...
a. printing money up to their required reserve limit
b. making loans and creating deposits, a process that is limited by the size of banks excess reserves
c. creating deposits without limit
d. buying US government securities with cash
e. printing dollar bills without limit
a. printing money up to their required reserve limit
b. making loans and creating deposits, a process that is limited by the size of banks excess reserves
c. creating deposits without limit
d. buying US government securities with cash
e. printing dollar bills without limit
answer
b. making loans and creating deposits, a process that is limited by the size of banks excess reserves
question
banks can make loans as long as they have...
a. reserves
b. deposits
c. required reserves
d. excess government securities
e. excess reserves
a. reserves
b. deposits
c. required reserves
d. excess government securities
e. excess reserves
answer
e. excess reserves
question
when the FED buys government securities, the immediate effect of the purchase is that banks....
a. reserves decrease
b. assets increase
c. reserves increase
d. deposits increase
e. loans decrease
a. reserves decrease
b. assets increase
c. reserves increase
d. deposits increase
e. loans decrease
answer
c. reserves increase
question
the quantity of money demanded..
a. changes only when real GDP changes
b. is the total currency in circulation
c. is equal to real GDP
d. is the money that people choose to hold
e. is the same as the money supply
a. changes only when real GDP changes
b. is the total currency in circulation
c. is equal to real GDP
d. is the money that people choose to hold
e. is the same as the money supply
answer
d. is the money that people choose to hold
question
the opp cost of holding money is that you..
a. run a greater risk of being robbed
b. forgo interest on an alternative asset
c. have trouble balancing your checkbook
d. must take more trips to the bank to manage the money
e. pay a higher tax rate
a. run a greater risk of being robbed
b. forgo interest on an alternative asset
c. have trouble balancing your checkbook
d. must take more trips to the bank to manage the money
e. pay a higher tax rate
answer
b. forgo interest on an alternative asset
question
the real interest rate equals the...
a. nominal interest rate / inflation rate
b. inflation rate - nominal interest rate
c. nominal interest rate - inflation rate
d. (nominal interest rate * inflation rate)/100
e. (nominal interest rate/ inflation rate)*100
a. nominal interest rate / inflation rate
b. inflation rate - nominal interest rate
c. nominal interest rate - inflation rate
d. (nominal interest rate * inflation rate)/100
e. (nominal interest rate/ inflation rate)*100
answer
c. nominal interest rate - inflation rate
question
as the economy enters a strong expansion in which real GDP increases, which of the following occurs...
a. the demand for money increases and there is a movement downward along the demand for money curve
b. the demand for money curve shifts rightward
c. the demand for money decreases and there is a movement upward along the demand for money curve
d. the nominal interest rate falls as the demand for money curve shifts leftward
e. the demand for money curve shifts leftward
a. the demand for money increases and there is a movement downward along the demand for money curve
b. the demand for money curve shifts rightward
c. the demand for money decreases and there is a movement upward along the demand for money curve
d. the nominal interest rate falls as the demand for money curve shifts leftward
e. the demand for money curve shifts leftward
answer
b. the demand for money curve shifts rightward
question
in the long run an increase in the quantity of money, other things remaining the same,...
a. increase real GDP
b. decrease the price level
c. decrease real GDP
d. increase the price level
e. has no effect on the price level or real GDP
a. increase real GDP
b. decrease the price level
c. decrease real GDP
d. increase the price level
e. has no effect on the price level or real GDP
answer
d. increase the price level
question
the uncertainty cost of inflation cause people to...
a. focus on the long run, which increases investment and speeds growth
b. focus on the short run, which decreases investment and slows growth
c. increase investment causing economic growth to decrease
d. increase their demand for money
e. incur more shoe leather costs
a. focus on the long run, which increases investment and speeds growth
b. focus on the short run, which decreases investment and slows growth
c. increase investment causing economic growth to decrease
d. increase their demand for money
e. incur more shoe leather costs
answer
b. focus on the short run, which decreases investment and slows growth
question
what are 3 classes of economic agents in the circular flow model of the economy
answer
households
firms
government
international
firms
government
international
question
in addition to peak and trough.. the business cycle identifies two other periods of GDP change.....?
answer
expansion
recession
recession
question
what are the three factors that change labor productivity and create growth?
answer
technology advances
encourages trade
incentive mechanisms
encourage r and d
improve education
improve health and living conditions
encourages trade
incentive mechanisms
encourage r and d
improve education
improve health and living conditions
question
what are 3 tools the FED has to create and control the money supply in the US economy?
answer
fractional reserve banking
open market operations
discount rate
extraordinary measures
open market operations
discount rate
extraordinary measures
question
when banks make loans, what happens to the money supply?
answer
increase
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