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Economic
Q:
In economics, investment is defined asA) the spending by businesses on capital goods and inventories.B) the spending by households on human capital and durable goods.C) disposable income minus consumption. D) disposable income plus consumption.
Q:
Other things being equal, the economyʹs aggregate demand curve shows thatA) as the price level falls, total planned expenditures fall as well. B) a change in the general price level causes the curve to shift.C) a change in the general price level causes a change in the quantity of final goods and services purchased.D) real Gross Domestic Product (GDP) and the price level are not related.
Q:
Which one of the following does NOT contribute to economic growth?A) the growth of capital and labor productivityB) the growth of the capital stock C) the growth of the labor force D) increases in the price level
Q:
GDP can be calculated usingA) the expenditure approach and the production approach. B) the expenditure approach and the income approach.C) the expenditure approach and the factor of production approach. D) the expenditure approach and the resource approach.
Q:
Which of the following statements is FALSE?A) The value of total income is equal in value to total output because profit is a cost of production.B) In the circular flow model, households sell factor services to businesses in return for factor payments.C) Businesses sell goods and services to households who use their income to pay for them. D) Total income is always greater than total output.
Q:
Cyclical unemployment is
A) related to job search difficulties for potential workers.
B) a result of a poor match of workerʹs abilities and skills with current requirements of
employers.
C) a result of business recessions that occur when aggregate demand is insufficient to create
full employment.
D) a result of the seasonal pattern of work in specific industries.
Q:
The World Bank isA) composed of five separate institutions.B) the central bank of the U.S. government.C) the official name of the International Monetary Fund. D) the central bank of the United Nations.
Q:
Describe and explain the real business cycle theory.
Q:
A reduction in the rate of growth of potential real GDP willA) cause the neutral federal funds rate to decrease.B) cause the neutral federal funds rate to increase. C) have no effect on the neutral federal funds rate.D) have an ambiguous effect on the neutral federal funds rate.
Q:
What does the demand curve for money look like? Why?
Q:
Fractional reserve banking beganA) in the early twentieth century. B) in the early nineteenth century.C) in the Middle Ages. D) in ancient Greece.
Q:
Which of the following is a checkable and debitable account?
A) A brokerage account with your stockbroker
B) A savings account
C) A checking account
D) All of the above are checkable and debitable accounts.
Q:
The Keynesian perspective on the effect of an increase in taxes is that this policy action
A) generates reductions in consumption and in saving.
B) generates reductions in consumption and an increase in saving to pay for the new taxes.
C) has no impact on consumption.
D) increases current consumption and reduces future consumption.
Q:
Fiscal policy involves which of the following?
A) Tax policy
B) Interest rates
C) Buying and selling government-agency bonds
D) None of the above
Q:
Which of the following is false?A) 1 - MPC = MPS B) 1 + MPC = MPS C) 1 - APS = APC D) APC + APS = 1
Q:
An example of an aggregate supply shock isA) inflation caused by a surge in demand.B) the cutoff of oil by the OPEC nations in the early 1970s.C) the increase in the labor force due to the baby -boomer generation reaching working age. D) the increase in candy sales every February.
Q:
According to classical theory, desired saving always equals investment due to changes inA) prices. B) wages. C) the interest rate. D) taxes.
Q:
All of the following explain the downward slope of the aggregate demand curve EXCEPT A) changes in the stock of real wealth held by individuals.B) the effect of changing interest rates on the quantity demanded of interest -rate-sensitive goods.C) the availability of foreign substitute goods.D) the presence of unused production capacity and unemployment.
Q:
An increase in human capital will tend to cause which of the following?A) increase economic growth B) increase the standard of livingC) increase labor productivity D) all of the above
Q:
If no other national income variables change when increase, then GDP will decrease.A) inventories B) importsC) investments D) levels of pollution
Q:
Which of the following statements is FALSE?A) One definition of total income is that it is the annual cost of producing the entire output of final goods and services.B) Transactions in which households buy final goods and services occur in the factor market.C) The value of total output is identical to total income.D) Saving is the difference between consumer income and expenditures.
Q:
Structural unemployment isA) due to the fact that workers must search for appropriate job offers.B) a result of a poor match of workerʹs abilities and skills with current requirements of employers.C) a result of business recessions that occur when aggregate demand is insufficient to create full employment.D) a result of the seasonal pattern of work in specific industries.
Q:
Where does the World Bank get its funds?
A) from selling internal reports to the public
B) from tariffs collected on goods traded internationally
C) from governments of the wealthiest nations and from private financial markets
D) from seizing dead capital in developing nations and selling it at auction
Q:
Using a graph, show and explain the difference between an anticipated and an unanticipated increase in aggregate demand.
Q:
Suppose the actual equilibrium federal funds rate is greater than the neutral federal funds rate. Given this information, we would expect thatA) real GDP will grow at a rate greater than the potential real GDP growth rate.B) real GDP will grow at a rate less than the potential real GDP growth rate. C) real GDP will grow at a rate equal to the potential real GDP growth rate. D) the inflation rate will tend to increase.
Q:
What are three reasons people want to hold money balances?
Q:
In a fractional reserve banking system,A) banks are required to keep all deposits on hand so that they can pay their depositors when they desire to withdraw funds.B) banks are required to keep a fraction of deposits in bonds.C) banks are required to keep a fraction of all deposits on hand and send the rest to the Fed.D) banks do not keep sufficient reserves on hand to cover 100 percent of their depositorsʹ accounts.
Q:
A checkable and debitable accountA) is a very illiquid asset.B) is one on which the holder can write checks.C) must be traded on the stock exchange. D) cannot serve as a store of value.
Q:
According to the Keynesian approach, a decrease in taxes
A) will increase consumption exactly by the amount of the taxes.
B) will increase consumption by an amount of less than the change in taxes.
C) will not impact consumption, as most consumption is autonomous.
D) will decrease consumption, as the government will have to spend less.
Q:
Fiscal policy refers to theA) manipulation of the money supply in order to increase the amount of paper currency in circulation.B) adjustment of government spending and taxes in order to achieve certain national economic goals.C) adjustment of national income data to account for price level changes.D) changing the way unemployment data is calculated so as to make it appear that unemployment is lower than it actually is.
Q:
Which of the following is false?A) APC + MPS = 1 B) MPC + MPS = 1C) 1 - APC = APS D) APC + APS = 1
Q:
A recessionary gap occurs whenA) aggregate demand falls, but other things remain constant.B) short-run aggregate supply falls, but other things remain constant.C) the short-run equilibrium level of real GDP is greater than the level consistent with the long-run aggregate supply curve.D) the short-run equilibrium level of real GDP is less than the level consistent with the long-run aggregate supply curve.
Q:
The classical economists argued that planned saving and planned investment will always be equal because of changes inA) the level of real disposable income. B) the interest rate. C) the price level. D) wages.
Q:
The total level of all planned expenditures in the economy best describesA) aggregate supply. B) aggregate demand.C) aggregate expenditures. D) both B and C are correct.
Q:
Labor productivity is commonly measured asA) the number of workers divided by real GDP.B) the change in real GDP divided by change in number of workers.C) nominal GDP divided by number of workers. D) real GDP divided by number of workers.
Q:
Indirect business taxes includeA) property taxes and corporate income taxes. B) sales taxes and income taxes.C) business property taxes and sales taxes. D) income taxes and Social Security taxes.
Q:
The value of total output and total income in the simple circular flow modelA) are measures of the economyʹs level of savings.B) include only intermediate goods. C) are equal to each other.D) are related in the sense that national income is less than national product.
Q:
To prevent frictional unemployment, we would have toA) make sure that market demand for goods is stable over time. B) eliminate the business cycle.C) prevent people from leaving their jobs before finding another job. D) make sure everyone went to college.
Q:
The World BankA) determines the price level in each of its member nations.B) determines the labor force participation rate in each of its member nations.C) mediates contracts regarding minimum prices for various globally-traded commodities. D) extends long-term loans for capital investment projects to developing nations.
Q:
When a supply shock is permanentA) only the long-run aggregate supply curve shifts leftward. B) only the short-run aggregate supply curve shifts leftward.C) both the long-run and short-run aggregate supply curves shift leftward.D) there are no shifts in either the long-run or short-run aggregate supply curve.
Q:
If the actual federal funds rate is less than the neutral federal funds rate, we would expect that
A) the rate of growth of real GDP will be less than its potential rate of growth.
B) the rate of growth of real GDP will be greater than its potential rate of growth.
C) the rate of growth of real GDP will be equal to its potential rate of growth.
D) the rate of growth of real GDP may be above or below its potential rate of growth.
Q:
ʺThe demand for money is infinite since everyone wants more money.ʺ Do you agree or disagree with this statement? Why?
Q:
Jane has just deposited $2,000 in her checking account. She knows that the bank will keep part of these funds on hand and loan out the rest. This is an example ofA) the Federal Reserve System. B) a sweep account.C) fractional reserve banking. D) excess reserves.
Q:
A system in which the value of currency issued by the government is based entirely on public faith that the currency will be acceptable in trade isA) a fiduciary system. B) a private property system. C) a Gresham system. D) a socialistic system.
Q:
According to the Keynesian approach, an increase in taxesA) will reduce consumption exactly by the amount of the taxes.B) will reduce consumption by an amount less than the change in taxes. C) will not impact consumption, as most consumption is autonomous.D) will increase consumption, as the government will spend the extra tax revenue and that increases consumption.
Q:
Suppose the economy is experiencing a recessionary gap at the current level of GDP. Which of the following fiscal policy actions would be most appropriate given this recessionary gap?A) decreasing interest ratesB) increasing the money supplyC) decreasing taxesD) a simultaneous and equal reduction in taxes and reduction in government spending
Q:
The part of consumption that is independent of disposable income is calledA) automatic consumption. B) fixed consumption.C) personal consumption. D) autonomous consumption.
Q:
Refer to the above figure. Suppose the economy had been at point A and now is at B. What could have caused the movement to B?A) Unusually good weather causes the wheat crop to be larger than normal. B) Government spending increased causing aggregate demand to increase.C) Winter storms cause factories in the north to be shut down for several weeks.D) Both the labor force and the population increased.
Q:
In the classical model, desired savingA) exceeds investment. B) is inversely related to real income.C) is equal to desired investment. D) is less than desired investment.
Q:
Which of these questions does aggregate demand help us answer?I. What determines the total amount of our output that individuals, firms, governments and foreigners want to buy?II. What is the economyʹs long -run real Gross Domestic Product (GDP)?III. What determines the economyʹs equilibrium price level and the rate of inflation?A) I only B) I and II C) II and III D) I and III
Q:
Improvements in labor productivityA) affect the level of wages, but do not affect the rate of economic growth. B) affect the level of profit, but do not affect the rate of economic growth. C) hinder economic growth, because they cause unemployment.D) contribute to economic growth.
Q:
Net exports is equal toA) total exports minus total imports. B) total imports minus total exports.C) total exports adjusted for price changes. D) total exports minus transfer payments.
Q:
Which of the following would most likely be sold in the product markets?A) A new car B) Stocks and bondsC) Iron ore D) Entrepreneurial ability
Q:
A worker who has quit her job to obtain a higher paying job would be included in which unemployment category?A) Frictional unemployment B) Cyclical unemploymentC) Structural unemployment D) Seasonal unemployment
Q:
Because of the problems of adverse selection and moral hazard, it has been suggested that the World Bank and International Monetary FundA) make loans to the riskiest nations so that private investors will not be tempted to take a risk.B) loan only to countries that have free elections.C) not make loans to risky nations because there is a high demand for funds from safer nations.D) impose tougher preconditions on borrowers.
Q:
In the above figure, starting at E3, if there is an increase in technology that causes a temporary increase in production capabilitiesA) aggregate supply would shift to SRAS0 and LRAS1 would shift to LRAS0.B) aggregate supply would shift to SRAS1 and LRAS1 would shift to LRAS1. C) aggregate supply would shift to SRAS2 and LRAS1 would shift to LRAS1. D) aggregate supply would shift to SRAS1 and then return to SRAS2.
Q:
For the United States, the neutral federal funds rate hasA) varied over time. B) been roughly constant over time. C) increased over time. D) decreased over time.
Q:
What is meant by the demand for money?
Q:
A system in which depository institutions hold reserves that are less than the amount of total deposits isA) the Federal Reserve System. B) the federal funds market. C) sweep accounts. D) fractional reserve banking.
Q:
Which of the following is a correct reason for stating that the United States has a fiduciary monetary system?I. Our money is convertible to a fixed amount of silver or gold. II. Our money has a predictable value.A) I only B) II only C) Both I and II D) Neither I nor II
Q:
In the traditional Keynesian model, an increase in taxes leads to all of the following EXCEPT A) a decrease in aggregate demand. B) a lower price level.C) a decrease in consumption. D) lower real GDP.
Q:
An increase in government spending would cause which of the following to happen?A) The aggregate demand curve would shift to the right.B) The aggregate demand curve would shift to the left. C) The aggregate supply curve would shift to the right. D) The aggregate supply curve would shift to the left.
Q:
The relationship that tells us how much a person intends to spend at various levels of income isA) the spending function. B) the expenditure function. C) the consumption function. D) the buying function.
Q:
The gap that exists when equilibrium real GDP is greater than the level of real GDP shown by the position of the long-run aggregate supply curve isA) the short-run aggregate supply curve. B) money illusion.C) a recessionary gap. D) an inflationary gap.
Q:
Individuals will increase their saving asA) the interest rate falls. B) business investment falls. C) the rate of unemployment increases. D) the interest rate increases.
Q:
What is the shape of the long -run aggregate supply curve? Why?
Q:
In the United States, the main contributor to economic growth is due to the growth inA) physical capital. B) education (human capital).C) labor resources. D) capital and labor productivity.
Q:
Which of the following is from the calculation of investment for GDP purposes?A) the purchase of new capital goods B) changes in business inventoriesC) new home construction D) all of the above
Q:
In the product markets, households
A) are the buyers of goods and services.
B) are the sellers of resources.
C) are neither buyers nor sellers in the market.
D) none of the above is correct.
Q:
Frictional unemployment is
A) related to job search difficulties for potential workers.
B) a result of a poor match of workerʹs abilities and skills with current requirements of employers.
C) a result of business recessions that occur when aggregate demand is insufficient to create full employment.
D) a result of the seasonal pattern of work in specific industries.
Q:
It is believed that in order to promote growth, a top priority of the World Bank and the International Monetary Fund is toA) promote the increase of dead capital. B) make more loans.C) focus on basic market foundations of guaranteeing property and contract rights. D) join forces and merge into one unit.
Q:
In the above figure, starting at E3, if there is an increase in technology that causes a permanent increase in production capabilitiesA) aggregate supply would shift to SRAS0 and LRAS1 would shift to LRAS0.B) aggregate supply would shift to SRAS1 and LRAS0 would shift to LRAS1. C) aggregate supply would shift to SRAS2 and LRAS0 would shift to LRAS1. D) aggregate supply would shift to SRAS1 and then return to SRAS0.
Q:
Suppose the actual equilibrium federal funds rate is above the rate implied by a particular inflation goal. In this situation, the Taylor rule implies thatA) fiscal policy is contractionary. B) fiscal policy is expansionary.C) monetary policy is expansionary. D) monetary policy is contractionary.
Q:
As interest rates rise, the quantity of money demandedA) falls. B) rises.C) stays the same. D) does not react to interest rate changes.
Q:
Under a fractional reserve banking system,A) banks keep a fraction of their deposits on hand as reserves. B) banks keep a fraction of their reserves on hand as deposits. C) banks keep all of their deposits on hand as reserves.D) banks keep all of their reserves on hand as deposits.
Q:
A fiduciary monetary standard exists when the value of a currency
A) is determined by law.
B) is convertible to a fixed quantity of gold.
C) depends upon the publicʹs confidence that the currency can be exchanged for goods and services.
D) increases with inflation.
Q:
In the traditional Keynesian model, an income tax cut raises real GDP becauseA) consumption spending depends negatively on after -tax income. B) consumption spending depends positively on after -tax income. C) consumption spending is not related to after -tax income.D) of the crowding-out effects of taxes.
Q:
Which of the following fiscal policy actions would be appropriate if the economy is experiencing an inflationary gap?A) An increase in government spending B) An increase in taxesC) A decrease in interest rates D) An increase in the money supply
Q:
The consumption function shows the relationship betweenA) interest rates and planned real consumption. B) employment and planned real consumption. C) the price level and planned real consumption.D) real disposable income and planned real consumption.
Q:
The gap that exists when equilibrium real GDP is less than full-employment real GDP isA) the short-run aggregate supply curve. B) money illusion.C) a recessionary gap. D) an inflationary gap.