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Economic
Q:
A key assumption in the classical model isA) sticky wages.B) pure competition exists. C) sticky prices.D) the government plays a major role in economic problems.
Q:
Long-run aggregate supply and a countryʹs production possibility curve (PPC) A) are closely related. B) are inversely related.C) have no relationship. D) are examples of microeconomic models.
Q:
Labor productivity isA) the average amount produced times the number of workers.B) the average amount produced times the number of people in the labor force. C) the average amount produced per worker.D) the rate of change in the total amount produced per worker.
Q:
The income approach to measuring GDPA) adds the dollar value of final goods and services.B) adds the income received by all factors of production.C) excludes durable consumer goods since they last more than a year.D) excludes profits since profits are a cost of production.
Q:
The simple circular flow of income shows that the total income in an economy equals
A) total profits earned by firms.
B) all taxes paid by households.
C) the total amount of money supplied by the government.
D) total expenditures.
Q:
Environmental regulation reduces the demand for West Virginia coal and the unemployment rate in West Virginia increases. This is an example ofA) frictional unemployment. B) cyclical unemployment.C) structural unemployment. D) regulatory unemployment.
Q:
Which of the following statements is true?
A) All nations that belong to the International Monetary Fund have equal voting power.
B) The voting power of a nation in the International Monetary Fund is determined by its quota subscription.
C) The voting power of a nation in the International Monetary Fund is called special drawing rights.
D) The voting procedure in the International Fund is determined by the World Bank.
Q:
Which of the following would NOT cause a real business cycle?
A) a change in technology
B) a change in the composition of the labor force
C) a change in the money supply
D) a sustained change in the price of oil
Q:
The neutral federal funds rate isA) the federal funds rate that will result in the growth rate of GDP being equal to its potential rate of growth.B) the nominal federal funds rate minus inflation. C) the real federal funds rate plus inflation.D) the federal funds rate consistent with zero inflation.
Q:
Travis always carries $100 in his wallet to pay for groceries. This is an example of theA) precautionary demand for money. B) asset demand for money.C) transactions demand for money. D) wealth demand for money.
Q:
Total reserves areA) deposits held by Federal Reserve district banks for depository institutions, plus depository institutionsʹ vault cash.B) reserves that a depository institution must hold in the form of vault cash. C) reserves that depository institutions are allowed to claim as reserves.D) any item that legally functions as money.
Q:
If an asset can be obtained or disposed of without much risk of losing its nominal value, it is said to beA) fiduciary. B) liquid. C) wealth. D) valuable.
Q:
According to the traditional Keynesian approach, if the government increases taxes, then A) real Gross Domestic Product (GDP) will fall and the price level will remain constant. B) real Gross Domestic Product (GDP) will fall but the price level will rise.C) both real Gross Domestic Product (GDP) and the price level will fall.D) real Gross Domestic Product (GDP) will remain constant but the price level will rise.
Q:
In the Keynesian model, a decrease in real autonomous spending results in a more than proportional decrease in real Gross Domestic Product (GDP) becauseA) consumption decreases as a result of lower real disposable income. B) consumption increases while real disposable income decreases.C) real autonomous spending decreases further as real disposable income decreases. D) government spending also decreases.
Q:
Suppose autonomous consumption decreases. This reduction in autonomous consumption will cause which of the following to occur?A) The consumption function shifts down. B) The consumption function shifts up.C) The consumption function becomes steeper.D) The consumption function becomes less steep.
Q:
If aggregate demand and nominal GDP increase while the price level is constant, we would conclude thatA) the economy is already at full employment.B) the aggregate supply curve is upward sloping.C) the aggregate supply curve is horizontal. D) the aggregate demand curve is vertical.
Q:
A classical model of the economy predictsA) full employment in the long run.B) a 15 to 20 percent unemployment level whenever the economy is in equilibrium. C) the same unemployment rates as the Keynesian model.D) cyclical changes in the unemployment rate.
Q:
Long-run aggregate supply isA) the possible combinations of real GDP and inputs after full adjustments have been made.B) the extraction of natural resources.C) the real production of goods and services after full adjustments have been made. D) all of the physical and human resources in the economy.
Q:
Labor productivity is computed asA) per capita real GDP divided by the number of workers.B) real GDP divided by population.C) per capita real GDP divided by population.D) real GDP divided by the number of workers.
Q:
Which of the following statements is true?A) GDP = NDP B) GDP = NI C) GDP = GDI D) GDP = PI
Q:
What is the business cycle? How ʺcyclicalʺ is it? What causes the business cycle?
Q:
A person quits her job in order to spend time looking for a better paying job. This is an example ofA) frictional unemployment. B) cyclical unemployment.C) seasonal unemployment. D) structural unemployment.
Q:
To be a member of the Internal Monetary Fund a nation must deposit funds based on
A) its national income.
B) the amount of funds it wants to deposit.
C) the need to loan money to developing nations.
D) rules set up by the World Bank.
Q:
Real business cycles could be a result of
A) discretionary fiscal policy.
B) abrupt changes in monetary policy.
C) increases in the budget deficit and national debt.
D) shocks to the aggregate supply side of the economy.
Q:
Suppose the economy is in long-run and short-run equilibrium. The Fed changes its policy by raising the difference between the discount rate and the federal funds rate. In the long run we would expect to observeA) a lower price level. B) a higher price level.C) a lower real national income. D) a higher real national income.
Q:
Warren always carries a one hundred dollar bill in case of emergencies. This is an example of theA) precautionary demand for money. B) asset demand for money.C) transactions demand for money. D) wealth demand for money.
Q:
Banks do not need to keep all of their deposits on hand as reserves becauseA) only a fraction of deposits are withdrawn at any one time. B) FDIC protects banks from excessive withdrawal demands. C) there is too much risk of bank robberies.D) they can always generate new reserves through the money creation process.
Q:
A corporate bond is not as liquid as cash because the bondA) cannot be converted to spendable dollars either until it matures or is sold to another investor.B) can be exchanged only for the goods or services produced by the company that issued the bond.C) must be exchanged for a stock certificate before it can be converted to spendable funds.D) represents an exchange for gold only.
Q:
The traditional Keynesian approach concludes that an increase in government spendingA) generates a greater increase in investment spending.B) generates an equal increase in total spending because government spending makes up part of total spending.C) generates a greater increase in total spending because consumption spending increases as incomes increase.D) has no effect on total spending because consumers increase saving by an equal amount.
Q:
According to the Keynesian model, an increase in autonomous investment leads toA) a more than proportional decrease in real Gross Domestic Product (GDP). B) a less than proportional decrease in real Gross Domestic Product (GDP). C) a proportional increase in real Gross Domestic Product (GDP).D) a reduction in taxes, autonomous government spending, and a fall in real Gross Domestic Product (GDP).
Q:
If the average propensity to consume is initially 1.0, the marginal propensity to consume is 0.75, and real disposable income increases by $1000, the new value of saving isA) 0. B) $250. C) $750. D) $1000.
Q:
Suppose we observe rising nominal GDP, a rising price level, and constant unemployment as a result of an increase in aggregate demand. We would conclude that the aggregate supply curve isA) upward sloping. B) downward sloping.C) vertical. D) horizontal.
Q:
Which of the following is NOT an assumption of the classical model?A) Wages and prices are flexible. B) People are motivated by self-interest. C) Money illusion exists. D) Pure competition exists.
Q:
Why is the long-run aggregate supply curve a vertical line?
A) At that level of real GDP, the unemployment rate is 0 percent.
B) At that level of real GDP, the inflation rate is 0 percent.
C) At that level of real GDP, the production costs are at their lowest level.
D) At that level of real GDP, resource costs have fully adjusted to price changes.
Q:
Which of the following will cause an increase in economic growth?A) an increase in human capitalB) a reduction in the stock of physical capitalC) a reduction in the unemployment rateD) a reduction in labor force participation
Q:
Excluding indirect business taxes and depreciation, Gross Domestic Income (GDI) A) is the sum of all income paid to the factors of production.B) never equals GDP.C) would equal GDP if there was no depreciation. D) cannot be computed.
Q:
A war in the Middle East that disrupts U.S. economic activity is known asA) an external shock. B) an expansion.C) a demand shock. D) an internal shock.
Q:
Unemployment that is caused by business recessions is calledA) frictional unemployment. B) cyclical unemployment.C) seasonal unemployment. D) structural unemployment.
Q:
The funds that nationʹs have on account at the International Monetary Fund is measured inA) U.S. dollars.B) the currency of the nation that has deposited the funds. C) a quota subscription.D) an international unit of accounting called special drawing rights.
Q:
Which of the following holds that business cycles are primarily due to changes in technology and does not invoke any monetary or demand -side forces?A) the real business cycle theory B) the efficiency wage theoryC) rational expectations hypothesis D) Keynesian economics
Q:
If the Fed thought the economy was experiencing a recessionary gap, and it wanted to correct this gap, it wouldA) sell bonds.B) lower the differential between the discount rate and the federal funds rate.C) raise the reserve requirement. D) increase aggregate supply.
Q:
If the interest rate increases, theA) quantity of money demanded will remain unchanged. B) money demand curve will shift to the right.C) money demand curve will shift to the left. D) quantity of money demanded will fall.
Q:
A bank with $200 million in transaction deposits keeps $20 million in cash in the bank vault, $10 million in deposits at the Fed, and $5 million in government securities in the bank vault. Its total reserves equalA) $10 million. B) $20 million. C) $30 million. D) $35 million.
Q:
The cost of holding money is best described as
A) the cost of printing money.
B) the cost which price decreases impose on money holders.
C) the yield which is paid to money holders by the U.S. government.
D) the yield that could have been earned had the asset been held in another form.
Q:
In the traditional Keynesian model, an increase in government spending leads to all of the following EXCEPTA) an increase in aggregate demand. B) a higher price level. C) an increase in consumption. D) higher real GDP.
Q:
How does an increase in the price level affect the position of the C + I + G + X curve and in turn the equilibrium level of real GDP?A) The C + I + G + X curve shifts down, thereby reducing the equilibrium level of real GDP. B) The C + I + G + X curve shifts down, thereby increasing the equilibrium level of real GDP. C) The C + I + G + X curve shifts up, thereby reducing the equilibrium level of real GDP.D) The C + I + G + X curve shifts up, thereby increasing the equilibrium level of real GDP.
Q:
An increase in autonomous consumption means thatA) the consumption function shifts down. B) the consumption function shifts up.C) the consumption function becomes steeper.D) the consumption function becomes less steep.
Q:
Holding the level of prices fixed implies that a given increase in aggregate demandA) will have a smaller effect on real GDP than would be the case if prices were more flexible.B) will have a larger effect on real GDP than would be the case if prices were more flexible. C) has the same effect on real GDP as when prices are more flexible.D) has a smaller effect on nominal GDP than when prices are more flexible.
Q:
If you feel you are better off because you receive a 20 percent raise even when the price level also increases by 20 percent, then you are a victim of theA) real income effect. B) money income effect.C) money illusion. D) real purchasing power effect.
Q:
The slope of the long-run aggregate supply curve isA) positive. B) negative. C) zero. D) undefined.
Q:
Suppose a country experiences an increase in output per worker. Such a development represents which of the following?A) a decrease in economic growth B) an increase in labor productivityC) a reduction in the saving rate D) an increase in population growth
Q:
All of the following are included in the calculation of gross domestic income (GDI) EXCEPT A) consumer expenditures. B) wages.C) profits. D) indirect business taxes.
Q:
A business fluctuation when the pace of business activity is speeding up is known asA) a contraction. B) a trough. C) an expansion. D) a recession.
Q:
Which of the following explains why frictional unemployment exists?A) Some workers have skills that have become obsolete.B) There are individuals who work part-time but prefer to work full-time. C) There are costs associated with searching for jobs .D) Policy makers have been unable to prevent recessions.
Q:
A nationʹs account with the International Monetary Fund denominated in special drawing rights isA) the quota subscription. B) the account at the World Bank. C) portfolio investment. D) the account at the Fed.
Q:
The real business cycle theory is based on all of the assumptions below EXCEPT A) small menu costs. B) flexible wages.C) pure competition. D) flexible prices.
Q:
In addition to open market operations and the required reserve ratio, another tool of monetary policy available to the Fed is
A) fiscal policy.
B) tax rates and the progressivity of the income-tax system.
C) government spending and various transfer-payment programs.
D) the difference between the discount rate and the federal funds rate.
Q:
The interest rate is the opportunity costA) of investing in stocks. B) of investing in Treasury securities. C) of using credit cards. D) of holding money.
Q:
With fractional reserve banking,A) banks can not generate profits.B) monetary policy will be ineffective.C) banks retain only a portion of their deposits in their vaults or at Federal Reserve banks. D) banks can act as securities brokers.
Q:
A highly liquid asset
A) has high transaction costs associated with its sale.
B) must be held for a substantial period of time.
C) generally has a very limited market for its resale.
D) can be disposed of easily without loss of value.
Q:
In the traditional Keynesian model, an increase in government spending raises total planned real expenditures by more than the original increase in government spending becauseA) consumption spending depends negatively on real GDP. B) consumption spending depends positively on real GDP. C) consumption spending is not related to real GDP.D) of the crowding-out effect on consumption spending.
Q:
How does a reduction in the price level affect the position of the C + I + G + X curve and in turn the equilibrium level of real GDP?A) The C + I + G + X curve shifts down, thereby reducing the equilibrium level of real GDP. B) The C + I + G + X curve shifts down, thereby increasing the equilibrium level of real GDP. C) The C + I + G + X curve shifts up, thereby reducing the equilibrium level of real GDP.D) The C + I + G + X curve shifts up, thereby increasing the equilibrium level of real GDP.
Q:
Real Disposable IncomePlanned Real Consumption03,0002,0004,4004,0005,8006,0007,2008,0008,60010,00010,00012,00011,40014,00012,800Refer to the above table. The table gives the combinations of real disposable income and real consumption for a college student for a year. What is the value of the average propensity to save equal when real disposable income equals $14,000?A) 0.09 B) 0.7 C) 0.91 D) 1.1
Q:
Suppose the current situation is such that the price level is 120, real GDP is $14 trillion, and long-run aggregate supply is $13.6 trillion. We can conclude thatA) the price level will fall until long-run aggregate supply shifts to $14 trillion.B) the price level will fall and input prices will rise until real GDP pulls long-run aggregate supply up to $14 trillion.C) input prices will rise until real GDP is $13.6 trillion.D) aggregate demand will increase until both short-run and long-run aggregate supply equal $14 trillion.
Q:
Which of the following statements about the classical model of the economy is FALSE?A) Savings and investment will always be equal. B) Wages and prices are flexible.C) The economy will always move toward, or be at, full employment.D) Individuals pursue the public interest, not their own self-interest.
Q:
Long-run aggregate supply curve corresponds toA) nominal GDP when all resource costs have adjusted fully to a change in the price level.B) real GDP when all resource costs have adjusted fully to a change in the price level.C) potential real national income. D) potential real personal income.
Q:
Labor productivity increases whenA) the average number of hours people work goes up.B) the unemployment rate decreases.C) the average output produced per worker during a specified time period increases.D) the average output produced per worker during a specified time period decreases.
Q:
The components of GDP using the income method (excluding indirect business taxes and depreciation) areA) consumption expenditures, investment expenditures, and government expenditures.B) consumption expenditures, investment expenditures, government expenditures, and net exports.C) wages and interest.D) wages, interest, rents, and profits.
Q:
Refer the above figure. Stage ʺ4ʺ of the economy is calledA) a maturity. B) a spreading out. C) an expansion. D) a development.
Q:
Structural unemployment results whenA) a reduction in consumer income reduces demand for products.B) individuals enter the labor market in June following graduation. C) workers face layoffs following a decrease in economic activity.D) the introduction of a product substitute leads to a large decline in the market demand for a product so that workers specializing in the production of that product find themselves out of work.
Q:
A quota subscription isA) the maximum amount of funds that can be drawn at the World Bank without a formal proposal.B) the maximum amount that a private investor can invest in foreign firms. C) a nationʹs account at the International Monetary Fund.D) when an investor sets limits on the proportion of their portfolio that will contain foreign investments.
Q:
The real business cycle theoryA) indicates that supply side shocks cause most business cycles. B) indicates that demand side shocks cause most business cycles.C) indicates that rapid changes in the money supply cause most business cycles. D) indicates that faulty fiscal policy creates most business cycles.
Q:
Operations of the Trading Desk of the Federal Reserve Bank of New York are typically conductedA) no more often than once per month. B) once a year.C) no more often than once per week.D) within a one-hour period during each day.
Q:
Asset demand for money is related to money functioning as aA) unit of accounting. B) medium of exchange.C) store of value. D) medium of deferred payment.
Q:
A fractional reserve banking system is a system whereby
A) banks keep at least 100 percent of their deposits on hand as reserves.
B) banks keep only a fraction of their deposits on hand as reserves.
C) a central bank tells all banks what fraction of the population they can serve.
D) banks specialize so that one type of bank handles one kind of deposit and another type of bank handles another type of deposit.
Q:
Which of the following is the most liquid asset?A) small denomination time deposits B) currencyC) short-term treasury bonds D) shares of stock
Q:
In the traditional Keynesian model, if the government increases government spending,A) the C + I + G + X line will shift down but the aggregate demand curve will not shift.B) the C + I + G + X line will shift down and the aggregate demand curve will shift to the left.C) the C + I + G + X line will shift up and the aggregate demand curve will shift to the right. D) the C + I + G + X line will shift up but the aggregate demand curve will not shift.
Q:
If society wants aggregate demand to increase without changes in the price level, then there must beA) a gap between full employment and the current level of real GDP and an increase in autonomous spending.B) an increase in autonomous spending combined with an increase in the marginal propensity to save.C) an increase in autonomous saving so that autonomous investment spending can increase.D) an increase in autonomous spending and a horizontal short -run aggregate supply curve.
Q:
Real Disposable IncomePlanned Real Consumption03,0002,0004,4004,0005,8006,0007,2008,0008,60010,00010,00012,00011,40014,00012,800Refer to the above table. The table gives the combinations of real disposable income and real consumption for a college student for a year. What is the value of the average propensity to consume when real disposable income equals $14,000?A) 0.09 B) 0.7 C) 0.91 D) 1.1
Q:
Refer to the above figure. Suppose the original long -run equilibrium was at point B. What could have caused the move to the current equilibrium?A) Decreases in the price level caused short-run aggregate supply to fall.B) Input prices must have increased, causing long -run aggregate supply to increase. C) Aggregate demand must have decreased.D) A temporary reduction in production due to bad weather.