question
Minimum wages create unemployment in markets where they create a
a.
shortage of labor. Unemployment of this type is called structural.
b.
surplus of labor. Unemployment of this type is called frictional.
c.
shortage of labor. Unemployment of this type is called frictional.
d.
surplus of labor. Unemployment of this type is called structural.
a.
shortage of labor. Unemployment of this type is called structural.
b.
surplus of labor. Unemployment of this type is called frictional.
c.
shortage of labor. Unemployment of this type is called frictional.
d.
surplus of labor. Unemployment of this type is called structural.
answer
d.
surplus of labor. Unemployment of this type is called structural.
surplus of labor. Unemployment of this type is called structural.
question
Suppose that garbage collectors and landscaping workers have no unions. Now suppose that garbage collectors form unions. What does this do to the labor supply and wages of landscaping workers?
a.
Labor supply decreases, and wages increase.
b.
Both labor supply and wages decrease.
c.
Both labor supply and wages increase.
d.
Labor supply increases, and wages decrease.
a.
Labor supply decreases, and wages increase.
b.
Both labor supply and wages decrease.
c.
Both labor supply and wages increase.
d.
Labor supply increases, and wages decrease.
answer
d.
Labor supply increases, and wages decrease.
Labor supply increases, and wages decrease.
question
Table 28-3
Civilian labor force100 millionPersons unemployed 15 weeks or longer1.6 millionJob losers and persons who have completed temporary jobs (excludes job leavers)3.1 millionTotal unemployed6.2 millionTotal unemployed plus discouraged workers7.0 millionTotal unemployed plus all marginally attached workers8.1 millionTotal unemployed plus all marginally attached workers plus total employed part-time for economic reasons9.2 million
Refer to Table 28-3. What is the U-3 measure of labor underutilization?
a.
4.7%
b.
7.0%
c.
10.9%
d.
6.2%
Civilian labor force100 millionPersons unemployed 15 weeks or longer1.6 millionJob losers and persons who have completed temporary jobs (excludes job leavers)3.1 millionTotal unemployed6.2 millionTotal unemployed plus discouraged workers7.0 millionTotal unemployed plus all marginally attached workers8.1 millionTotal unemployed plus all marginally attached workers plus total employed part-time for economic reasons9.2 million
Refer to Table 28-3. What is the U-3 measure of labor underutilization?
a.
4.7%
b.
7.0%
c.
10.9%
d.
6.2%
answer
d.
6.2%
6.2%
question
Which of the following is not correct?
a.
There are always some workers without jobs, even when the overall economy is doing well.
b.
In an ideal labor market, wages would adjust to ensure that all workers are always fully employed.
c.
The unemployment rate occasionally falls to zero.
d.
Most people who become unemployed will soon find jobs.
a.
There are always some workers without jobs, even when the overall economy is doing well.
b.
In an ideal labor market, wages would adjust to ensure that all workers are always fully employed.
c.
The unemployment rate occasionally falls to zero.
d.
Most people who become unemployed will soon find jobs.
answer
c.
The unemployment rate occasionally falls to zero.
The unemployment rate occasionally falls to zero.
question
Who of the following is not included in the Bureau of Labor Statistics' "employed" category?
a.
Those who worked as unpaid workers in a family member's business
b.
Those waiting to be recalled to a job from which they had been laid off
c.
Those who were temporarily absent from work because of vacation
d.
Those who worked in their own business
a.
Those who worked as unpaid workers in a family member's business
b.
Those waiting to be recalled to a job from which they had been laid off
c.
Those who were temporarily absent from work because of vacation
d.
Those who worked in their own business
answer
b.
Those waiting to be recalled to a job from which they had been laid off
Those waiting to be recalled to a job from which they had been laid off
question
Evidence from research studies by economists
a.
is unclear regarding what increased unemployment benefits do to the job search efforts of the unemployed.
b.
shows that increased unemployment benefits decrease the job search efforts of the unemployed.
c.
shows that increased unemployment benefits increase the job search efforts of the unemployed.
d.
shows that increased unemployment benefits have virtually no effect on the job search efforts of the unemployed.
a.
is unclear regarding what increased unemployment benefits do to the job search efforts of the unemployed.
b.
shows that increased unemployment benefits decrease the job search efforts of the unemployed.
c.
shows that increased unemployment benefits increase the job search efforts of the unemployed.
d.
shows that increased unemployment benefits have virtually no effect on the job search efforts of the unemployed.
answer
b.
shows that increased unemployment benefits decrease the job search efforts of the unemployed.
shows that increased unemployment benefits decrease the job search efforts of the unemployed.
question
Which of the following includes everyone in the adult population that the Bureau of Labor Statistics counts as "unemployed"?
a.
Anyone who chose not to for work for the past two weeks
b.
Anyone who is not employed, is available for work, has looked for work in the past four weeks, and anyone who is waiting to be recalled from a job from which they have been laid off
c.
Anyone who is employed part time and has searched for full time employment in the past four weeks
d.
Anyone who is not currently employed
a.
Anyone who chose not to for work for the past two weeks
b.
Anyone who is not employed, is available for work, has looked for work in the past four weeks, and anyone who is waiting to be recalled from a job from which they have been laid off
c.
Anyone who is employed part time and has searched for full time employment in the past four weeks
d.
Anyone who is not currently employed
answer
b.
Anyone who is not employed, is available for work, has looked for work in the past four weeks, and anyone who is waiting to be recalled from a job from which they have been laid off
Anyone who is not employed, is available for work, has looked for work in the past four weeks, and anyone who is waiting to be recalled from a job from which they have been laid off
question
If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, it could
a.
buy $225,000 worth of bonds.
b.
sell $225,000 worth of bonds.
c.
sell $300,000 worth of bonds.
d.
buy $300,000 worth of bonds.
a.
buy $225,000 worth of bonds.
b.
sell $225,000 worth of bonds.
c.
sell $300,000 worth of bonds.
d.
buy $300,000 worth of bonds.
answer
d.
buy $300,000 worth of bonds.
buy $300,000 worth of bonds.
question
In the special case of the 100-percent-reserve banking, the money multiplier is
a.
1 and banks do not create money.
b.
1 and banks create money.
c.
2 and banks do not create money.
d.
2 and banks create money
a.
1 and banks do not create money.
b.
1 and banks create money.
c.
2 and banks do not create money.
d.
2 and banks create money
answer
a.
1 and banks do not create money.
1 and banks do not create money.
question
The money supply decreases when the Fed
a.
buys Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.
b.
buys Treasury bonds. The larger the reserve requirement, the larger the decrease will be.
c.
sells Treasury bonds. The larger the reserve requirement, the larger the decrease will be.
d.
sells Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.
a.
buys Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.
b.
buys Treasury bonds. The larger the reserve requirement, the larger the decrease will be.
c.
sells Treasury bonds. The larger the reserve requirement, the larger the decrease will be.
d.
sells Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.
answer
d.
sells Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.
sells Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.
question
The manager of the bank where you work tells you that the bank has $100 million in deposits and $22 million dollars in loans. If the reserve requirement is 8 percent, how much is the bank holding in excess reserves?
a.
$8 million
b.
$0 million
c.
$9 million
d.
$14 million
a.
$8 million
b.
$0 million
c.
$9 million
d.
$14 million
answer
d.
$14 million
$14 million
question
Suppose the banking system currently has $300 billion in reserves, the reserve requirement is 5 percent, and excess reserves are $30 billion. What is the level of loans?
a.
$6,000 billion
b.
$270 billion
c.
$5,100 billion
d.
$5,400 billion
a.
$6,000 billion
b.
$270 billion
c.
$5,100 billion
d.
$5,400 billion
answer
d.
$5,400 billion
$5,400 billion
question
Which of the following will help to prevent bank runs?
a.
100% reserve banking
b.
Fractional reserve banking
c.
A 0% reserve requirement
d.
Lack of government insurance of deposits
a.
100% reserve banking
b.
Fractional reserve banking
c.
A 0% reserve requirement
d.
Lack of government insurance of deposits
answer
a.
100% reserve banking
100% reserve banking
question
The Monetary Policy of Jaune is controlled by the country's central bank known as the Bank of Jaune. The local unit of currency is the Jaunian dollar. Aggregate banking statistics show that collectively the banks of Jaune hold $220 million of required reserves, $55 million of excess reserves, have issued $5,500 million of deposits, and hold $440 million of Jaunian Treasury bonds. Jaunians prefer to use only demand deposits and so all money is on deposit at the bank.
Refer to Scenario 29-1. Suppose the Bank of Jaune loaned the banks of Jaune $30 million. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply change?
a.
$245 million
b.
$600 million
c.
$615 million
d.
$30 million
Refer to Scenario 29-1. Suppose the Bank of Jaune loaned the banks of Jaune $30 million. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply change?
a.
$245 million
b.
$600 million
c.
$615 million
d.
$30 million
answer
b.
$600 million
$600 million
question
The Monetary Policy of Jaune is controlled by the country's central bank known as the Bank of Jaune. The local unit of currency is the Jaunian dollar. Aggregate banking statistics show that collectively the banks of Jaune hold $220 million of required reserves, $55 million of excess reserves, have issued $5,500 million of deposits, and hold $440 million of Jaunian Treasury bonds. Jaunians prefer to use only demand deposits and so all money is on deposit at the bank.
Refer to Scenario 29-1. Assume that banks desire to continue holding the same ratio of excess reserves to deposits. What is the reserve requirement and the reserve ratio for Jaunian Banks?
a.
5 percent, 4 percent
b.
4 percent, 5 percent
c.
5 percent, 8 percent
d.
4 percent, 8 percent
Refer to Scenario 29-1. Assume that banks desire to continue holding the same ratio of excess reserves to deposits. What is the reserve requirement and the reserve ratio for Jaunian Banks?
a.
5 percent, 4 percent
b.
4 percent, 5 percent
c.
5 percent, 8 percent
d.
4 percent, 8 percent
answer
b.
4 percent, 5 percent
4 percent, 5 percent
question
Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits?
a.
$4,995 billion
b.
$5,000 billion
c.
$4,937.5 billion
d.
$5,062.5 billion
a.
$4,995 billion
b.
$5,000 billion
c.
$4,937.5 billion
d.
$5,062.5 billion
answer
c.
$4,937.5 billion
$4,937.5 billion
question
Monetary neutrality means that a change in the money supply
a.
does not change nominal variables. Most economists think this is a good description of the economy in the long run but not the short run.
b.
does not change real variables. Most economists think this is a good description of the economy in the short run and in the long run.
c.
does not change real variables. Most economists think this is a good description of the economy in the long run but not the short run.
d.
does not change nominal variables. Most economists think this is a good description of the economy in the short-run and the long run.
a.
does not change nominal variables. Most economists think this is a good description of the economy in the long run but not the short run.
b.
does not change real variables. Most economists think this is a good description of the economy in the short run and in the long run.
c.
does not change real variables. Most economists think this is a good description of the economy in the long run but not the short run.
d.
does not change nominal variables. Most economists think this is a good description of the economy in the short-run and the long run.
answer
c.
does not change real variables. Most economists think this is a good description of the economy in the long run but not the short run.
does not change real variables. Most economists think this is a good description of the economy in the long run but not the short run.
question
According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also
a.
either a fall in output or a fall in velocity.
b.
either a rise in output or a rise in velocity.
c.
either a fall in output or a rise in velocity.
d.
either a rise in output or a fall in velocity.
a.
either a fall in output or a fall in velocity.
b.
either a rise in output or a rise in velocity.
c.
either a fall in output or a rise in velocity.
d.
either a rise in output or a fall in velocity.
answer
d.
either a rise in output or a fall in velocity.
either a rise in output or a fall in velocity.
question
Which of the following statements about U.S. inflation is not correct?
a.
Low inflation was viewed as a triumph of President Carter's economic policy.
b.
The U.S. inflation rate has varied over time, but international data show even more variation.
c.
The U.S. public has viewed inflation rates of even 7 percent as a major economic problem.
d.
There were long periods in the nineteenth century during which prices fell.
a.
Low inflation was viewed as a triumph of President Carter's economic policy.
b.
The U.S. inflation rate has varied over time, but international data show even more variation.
c.
The U.S. public has viewed inflation rates of even 7 percent as a major economic problem.
d.
There were long periods in the nineteenth century during which prices fell.
answer
a.
Low inflation was viewed as a triumph of President Carter's economic policy.
Low inflation was viewed as a triumph of President Carter's economic policy.
question
If there is inflation, then a firm that has kept its price fixed for some time will have a
a.
high relative price. Relative-price variability falls as the inflation rate rises.
b.
high relative price. Relative-price variability rises as the inflation rate rises.
c.
low relative price. Relative-price variability rises as the inflation rate rises.
d.
low relative price. Relative-price variability falls as the inflation rate rises.
a.
high relative price. Relative-price variability falls as the inflation rate rises.
b.
high relative price. Relative-price variability rises as the inflation rate rises.
c.
low relative price. Relative-price variability rises as the inflation rate rises.
d.
low relative price. Relative-price variability falls as the inflation rate rises.
answer
c.
low relative price. Relative-price variability rises as the inflation rate rises.
low relative price. Relative-price variability rises as the inflation rate rises.
question
Which of the following did NOT happen during the late 19th century in the U.S.?
a.
Falling crop prices reduced farmers' incomes
b.
Farmers lobbied for government policies to reduce inflation
c.
From 1880 to 1896, the price level fell by 23 percent
d.
Farmers had reduced ability to pay off debts
a.
Falling crop prices reduced farmers' incomes
b.
Farmers lobbied for government policies to reduce inflation
c.
From 1880 to 1896, the price level fell by 23 percent
d.
Farmers had reduced ability to pay off debts
answer
b.
Farmers lobbied for government policies to reduce inflation
Farmers lobbied for government policies to reduce inflation
question
The classical dichotomy argues that changes in the money supply
a.
affect both nominal and real variables.
b.
affect nominal variables, but not real variables.
c.
affect neither nominal nor real variables.
d.
do not affect nominal variables, but do affect real variables.
a.
affect both nominal and real variables.
b.
affect nominal variables, but not real variables.
c.
affect neither nominal nor real variables.
d.
do not affect nominal variables, but do affect real variables.
answer
b.
affect nominal variables, but not real variables.
affect nominal variables, but not real variables.
question
In the long run, money demand and money supply determine
a.
neither the price level nor the real interest rate.
b.
the price level but not the real interest rate.
c.
the real interest rate but not the price level.
d.
the price level and the real interest rate.
a.
neither the price level nor the real interest rate.
b.
the price level but not the real interest rate.
c.
the real interest rate but not the price level.
d.
the price level and the real interest rate.
answer
b.
the price level but not the real interest rate.
the price level but not the real interest rate.
question
High and unexpected inflation has a greater cost
a.
for those whose wages increase by as much as inflation than those who are paid a fixed nominal wage.
b.
for those who hold a little money than for those who hold a lot of money.
c.
for savers in low income tax brackets than for savers in high income tax brackets.
d.
for those who save than for those who borrow.
a.
for those whose wages increase by as much as inflation than those who are paid a fixed nominal wage.
b.
for those who hold a little money than for those who hold a lot of money.
c.
for savers in low income tax brackets than for savers in high income tax brackets.
d.
for those who save than for those who borrow.
answer
d.
for those who save than for those who borrow.
for those who save than for those who borrow.
question
Suppose one year ago the price index was 120 and Maria purchased $20,000 worth of bonds. One year later the price index is 126. Maria redeems her bonds for $22,700 and is in a 40 percent tax bracket. What is Maria's real after-tax rate of interest to the nearest tenth of a percent?
a.
5.1 percent
b.
3.1 percent
c.
2.1 percent
d.
2.4 percent
a.
5.1 percent
b.
3.1 percent
c.
2.1 percent
d.
2.4 percent
answer
b.
3.1 percent
3.1 percent
question
An associate professor of physics gets a $200 a month raise. She figures that with her new monthly salary she can buy more goods and services than she could buy last year.
a.
Her real and nominal salary have risen.
b.
Her real and nominal salary have fallen.
c.
Her real salary has risen and her nominal salary has fallen.
d.
Her real salary has fallen and her nominal salary has risen.
a.
Her real and nominal salary have risen.
b.
Her real and nominal salary have fallen.
c.
Her real salary has risen and her nominal salary has fallen.
d.
Her real salary has fallen and her nominal salary has risen.
answer
a.
Her real and nominal salary have risen.
Her real and nominal salary have risen.
question
Other things the same, if the exchange rate changes from 35 Thai bhat per dollar to 21 Thai bhat per dollar, then the dollar has
a.
depreciated and so buys more Thai goods.
b.
depreciated and so buys fewer Thai goods.
c.
appreciated and so buys fewer Thai goods.
d.
appreciated and so buys more Thai goods.
a.
depreciated and so buys more Thai goods.
b.
depreciated and so buys fewer Thai goods.
c.
appreciated and so buys fewer Thai goods.
d.
appreciated and so buys more Thai goods.
answer
b.
depreciated and so buys fewer Thai goods.
depreciated and so buys fewer Thai goods.
question
A company in Panama pays a U.S. architect to design a factory building. By itself this transaction
a.
increases Panama's exports and so decreases the Panama's trade balance.
b.
decreases Panama's exports and so increases the Panama's trade balance.
c.
increases Panama's imports and so decreases the Panama's trade balance.
d.
decreases Panama's imports and so increases the Panama's trade balance.
a.
increases Panama's exports and so decreases the Panama's trade balance.
b.
decreases Panama's exports and so increases the Panama's trade balance.
c.
increases Panama's imports and so decreases the Panama's trade balance.
d.
decreases Panama's imports and so increases the Panama's trade balance.
answer
c.
increases Panama's imports and so decreases the Panama's trade balance.
increases Panama's imports and so decreases the Panama's trade balance.
question
Purchasing-power parity describes the forces that determine
a.
prices in the short run.
b.
prices in the long run.
c.
exchange rates in the long run.
d.
exchange rates in the short run.
a.
prices in the short run.
b.
prices in the long run.
c.
exchange rates in the long run.
d.
exchange rates in the short run.
answer
c.
exchange rates in the long run.
exchange rates in the long run.
question
Gabrielle, an Italian citizen, uses some previously obtained dollars to purchase a bond issued by a U.S. company. This transaction
a.
increases U.S. net capital outflow by the value of the bond.
b.
increases U.S. net capital outflow by more than the value of the bond.
c.
decreases U.S. net capital outflow.
d.
does not change U.S. net capital outflow.
a.
increases U.S. net capital outflow by the value of the bond.
b.
increases U.S. net capital outflow by more than the value of the bond.
c.
decreases U.S. net capital outflow.
d.
does not change U.S. net capital outflow.
answer
d.
does not change U.S. net capital outflow.
does not change U.S. net capital outflow.
question
The nominal exchange rate is the
a.
ratio of a foreign country's interest rate to the domestic interest rate.
b.
real exchange rate minus the inflation rate.
c.
nominal interest rate in one country divided by the nominal interest rate in the other country.
d.
rate at which a person can trade the currency of one country for another.
a.
ratio of a foreign country's interest rate to the domestic interest rate.
b.
real exchange rate minus the inflation rate.
c.
nominal interest rate in one country divided by the nominal interest rate in the other country.
d.
rate at which a person can trade the currency of one country for another.
answer
d.
rate at which a person can trade the currency of one country for another.
rate at which a person can trade the currency of one country for another.
question
Suppose a country's net capital outflow does not change, but its investment declines by $420 billion. Its saving must have
a.
risen by $420 billion, but its net exports are unchanged.
b.
risen by $420 billion, so its net exports have fallen.
c.
fallen by $420 billion, so its net exports have risen.
d.
fallen by $420 billion, but its net exports are unchanged.
a.
risen by $420 billion, but its net exports are unchanged.
b.
risen by $420 billion, so its net exports have fallen.
c.
fallen by $420 billion, so its net exports have risen.
d.
fallen by $420 billion, but its net exports are unchanged.
answer
d.
fallen by $420 billion, but its net exports are unchanged.
fallen by $420 billion, but its net exports are unchanged.
question
According to purchasing-power parity, when a country's central bank decreases the money supply, a unit of money
a.
gains value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.
b.
loses value in terms of the domestic goods and services it can buy, but gains value in terms of the foreign currency it can buy.
c.
gains value in terms of the domestic goods and services it can buy, but loses value in terms of the foreign currency it can buy.
d.
loses value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.
a.
gains value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.
b.
loses value in terms of the domestic goods and services it can buy, but gains value in terms of the foreign currency it can buy.
c.
gains value in terms of the domestic goods and services it can buy, but loses value in terms of the foreign currency it can buy.
d.
loses value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.
answer
a.
gains value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.
gains value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.
question
If the nominal exchange rate is expressed as foreign currency per dollar, which of the following would both make Americans more willing to buy Italian goods? The nominal exchange rate
a.
rises, the price of goods in Italy falls.
b.
falls, the price of goods in Italy rises.
c.
rises, the price of goods in Italy rises.
d.
falls, the price of goods in Italy falls.
a.
rises, the price of goods in Italy falls.
b.
falls, the price of goods in Italy rises.
c.
rises, the price of goods in Italy rises.
d.
falls, the price of goods in Italy falls.
answer
a.
rises, the price of goods in Italy falls.
rises, the price of goods in Italy falls.
question
Last year a country had exports of $90 billion, imports of $60 billion, and purchased $115 billion worth of foreign assets. What was the value of domestic assets purchased by foreigners?
a.
$85 billion
b.
$55 billion
c.
$145 billion
d.
$25 billion
a.
$85 billion
b.
$55 billion
c.
$145 billion
d.
$25 billion
answer
a.
$85 billion
$85 billion
question
When Microsoft, a U.S. company, establishes a distribution center in Canada, U.S. net capital outflow
a.
decreases because Microsoft makes a foreign portfolio investment in Canada.
b.
increases because Microsoft makes a foreign direct investment in Canada.
c.
decreases because Microsoft makes a foreign direct investment in Canada.
d.
increases because Microsoft makes a foreign portfolio investment in Canada.
a.
decreases because Microsoft makes a foreign portfolio investment in Canada.
b.
increases because Microsoft makes a foreign direct investment in Canada.
c.
decreases because Microsoft makes a foreign direct investment in Canada.
d.
increases because Microsoft makes a foreign portfolio investment in Canada.
answer
b.
increases because Microsoft makes a foreign direct investment in Canada.
increases because Microsoft makes a foreign direct investment in Canada.
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