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Economic
Q:
When a bank sells a bond to the Fed,A) its liabilities decrease. B) its liabilities increase.C) its reserves initially decrease. D) its reserves initially increase.
Q:
The money supply isA) the rate at which the Federal Reserve Board prints currency. B) limited to currency and coins.C) the amount of money in circulation.D) the rate at which the Federal Reserve Board creates money.
Q:
Some economists believe that financing deficit spending by increasing taxes will lead to a lower level of national consumption and a higher level of national savings than deficit spending. The reason isA) people believe that they can consume the government provided goods and have future generations pay the bill.B) that people do not realize that taxes have increased also.C) people will forgo private consumption now as society substitutes government goods for private goods.D) the interest rate on the debt will increase.
Q:
By definition, a direct expenditure offset will occur whenever
A) the government increases spending in an area that competes with the private sector.
B) the government increases spending for the military. C) the interest rate rises.
D) the interest rate falls.
Q:
Investment spending isA) directly related to the interest rate. B) inversely related to the interest rate.C) directly related to real disposable income. D) inversely related to real disposable income.
Q:
Which of the following is considered investment?
A) Maina purchases a new car for commuting to and from work.
B) Jane purchases a new car for commuting to and from school. C) Johnny buys a new car for his wife as an anniversary gift.
D) James purchases a new car to replace an old car in his cab business.
Q:
According to the classical model, desired saving is
A) a function of real GDP.
B) equal to desired investment.
C) identical to the demand for saving at each level of real GDP.
D) affected by the money illusion at low income levels.
Q:
The total of all planned real expenditures in the economy is calledA) aggregate demand. B) aggregate spending.C) aggregate GDP. D) aggregate consumption.
Q:
Patents stimulate technological advance byA) making capital more productive.B) enabling the government to determine which potential technological advances firms should pursue.C) providing information about the status of technical knowledge in the economy.D) allowing inventors to capture the economic rewards of their inventions.
Q:
Consumption expenditures on goods and services $1,500Total government spending on goods and services 590Gross private domestic investment 355Imports 50Exports 70Depreciation (capital consumption allowance) 200Net U.S. income earned abroad -75To compute national income, which of the following items are added to net domestic product (NDP)?I. business income adjustments net of indirect business taxes and transfersII. capital consumption allowanceIII. U.S. net income earned abroadA) I only B) II only C) both I and III D) both II and III
Q:
A car sold from a used car lotA) would be counted in Gross Domestic Product (GDP).B) would fall under net exports, and would then be counted in Gross Domestic Product (GDP).C) would not be counted in Gross Domestic Product (GDP).D) would only be counted in Gross Domestic Product (GDP) if it was a foreign made car.
Q:
Deflation is the situation whenA) the rate at which prices increase falls. B) the average of all prices is declining. C) the real rate of interest is negative.D) some prices are increasing and some are declining.
Q:
How do rational expectations models differ from traditional classical economics? How does the new Keynesian model differ from the traditional Keynesian view?
Q:
The Phillips curve shows
A) a positive relationship in the long run between the rate of inflation and the rate of unemployment.
B) a negative relationship between the inflation rate and the unemployment rate, at least in the short run.
C) a positive relationship between contractionary monetary policy and higher price levels.
D) a positive relationship between price stability and constant, small -increment changes in the fiscal policy on the part of the Fed.
Q:
A recessionary gap currently exists. The Fed wants to bring the economy to a full employment level by using open market operations. The Fed shouldA) sell government securities. B) buy government securities.C) increase the differential between the discount rate and the federal funds rate. D) decrease the differential between the discount rate and the federal funds rate.
Q:
The Fedʹs buying and selling of existing government securities is calledA) market interventions.B) open market operations.C) changes in the reserve requirement ratio.D) changes in the difference between the discount rate and the federal funds rate.
Q:
ComponentAmount(Billions of dollars)Currency$600Coins35Transaction Deposits570Saving Deposits416Travelersʹ Checks8Small Denomination Time Deposits2,144Money Market Mutual Fund Shares1,430Overnight Eurodollars16Overnight Repurchase Agreements at Commercial Banks63Money Market Deposit Accounts500Available Credit on Credit Cards675According to the above table, the value of M2 isA) $5,303 billion. B) $5,782 billion. C) $5,325 billion. D) $9,000 billion.
Q:
Which of the following is the best statement about how the amount of the net public debt that a typical individual owes to the holders of the debt has varied in the recent past?A) The amount has not varied much over time. B) The amount has varied a lot over time.C) The amount has steadily increased over time.D) The amount has steadily decreased over time.
Q:
The Laffer curve shows a relationship between A) inflation rates and unemployment rates. B) interest rates and investment spending.
C) price level and real Gross Domestic Product (GDP).
D) tax rates and tax revenues.
Q:
A firm will invest in a project ifA) the interest rate exceeds the opportunity cost of the project. B) the firmʹs level of capital is at the desired level.C) the firmʹs level of capital is higher than the desired level.D) the rate of return of the project is greater than the opportunity cost of the investment.
Q:
The income-expenditure model of real GDP determination is due to the work ofA) Adam Smith. B) J. B. Say.C) John Maynard Keynes. D) Roger Miller.
Q:
Which of the following is NOT an assumption of the classical model?
A) Government intervention is necessary for economic stability.
B) No one buyer or seller of a good or service can affect the price of the good or service.
C) People are motivated by self-interest.
D) People are not fooled by the money illusion.
Q:
Which one of the following is NOT a component of aggregate demand?A) merchandise inventories B) consumption spendingC) investment expenditures D) government purchases
Q:
In the United States, a patent lastsA) 7 years. B) 14 years. C) 20 years. D) forever.
Q:
Consumption expenditures on goods and services $1,500Total government spending on goods and services 590Gross private domestic investment 355Imports 50Exports 70Depreciation (capital consumption allowance) 200Net U.S. income earned abroad -75Which of the following is a component of net domestic product (NDP), but NOT of national income?A) Capital consumption allowance B) Indirect business taxesC) Corporate taxes D) Personal taxes
Q:
Which of the following statements is FALSE?A) Gross Domestic Product (GDP) measures the market value of final goods and services produced during a particular time period.B) Transfers of used goods are not included in Gross Domestic Product (GDP).C) Private transfer payments, such as an inheritance, are included in the Gross Domestic Product (GDP).D) If statisticians counted intermediate goods, the estimate of Gross Domestic Product (GDP) would be too high.
Q:
Inflation refers to the situation when
A) the prices of necessities increase.
B) the average of all prices is increasing.
C) all prices rise by the same rate.
D) the rate at which prices are rising is rising.
Q:
Compare and contrast the arguments favoring active versus passive policy making.
Q:
Based on the work of economist A.W. Phillips, economists concluded that
A) there is no trade-off between inflation and unemployment.
B) high inflation rates are associated with low unemployment rates.
C) unemployment can be effectively combated by raising wages.
D) higher rates of inflation are associated with higher rates of unemployment.
Q:
Suppose the economy is operating below its full employment level. The FedA) is powerless to affect either aggregate demand or aggregate supply. Fiscal policy is needed.B) can move the economy toward the full employment level by expanding the money supply to increase aggregate supply.C) can move the economy toward the full employment level by expanding the money supply to increase aggregate demand and to hold prices constant.D) can move the economy toward the full employment level by expanding the money supply to increase aggregate demand through both its direct and its indirect effects.
Q:
If the FOMC decides to engage in the selling of government bonds, what is the effect on the money supply?A) a decrease B) an increase C) no changeD) an initial increase followed by an additional rise when the bonds mature
Q:
ComponentAmount(Billions of dollars)Currency$600Coins35Transaction Deposits570Saving Deposits416Travelersʹ Checks8Small Denomination Time Deposits2,144Money Market Mutual Fund Shares1,430Overnight Eurodollars16Overnight Repurchase Agreements at Commercial Banks63Money Market Deposit Accounts500Available Credit on Credit Cards675According to the above table, the value of M1 isA) $1,888 billion. B) $1,629 billion. C) $1,213 billion. D) $1,205 billion.
Q:
The difference between the gross public debt and the net public debt is that theA) gross public debt includes entitlements while the net public debt does not.B) gross public debt is based on budget deficit while the net public debt is not based on budget deficits.C) gross public debt includes government interagency borrowing while the net public debt does not.D) the gross public debt is expressed as a percentage of GDP while the net public debt is not.
Q:
The concept that increased government spending will lead to lower investment and consumer spending is referred to as the
A) inflationary effect. B) crowding-out effect. C) aggregate demand effect. D) Keynesian effect.
Q:
Of the relationships below, which is the least stable?A) Consumption B) Saving C) InvestmentD) Net exports
Q:
Thinking as an economist would, which is true of investment?
A) It is the portion of disposable income that is not used for consumption or saving.
B) Investment represents spending on capital goods.
C) Investment is putting money into stocks and bonds.
D) Investment is a stock concept.
Q:
In the classical model, how do shifts in aggregate demand affect real GDP?A) Real GDP will remain unchanged.B) Increases in aggregate demand increase real GDP. C) Increases in aggregate demand decrease real GDP. D) Decreases in aggregate demand increase real GDP.
Q:
Total planned expenditures for domestically produced goods and services consist of
A) government spending, business spending, and import spending only.
B) consumer spending, business spending, and net export spending only
C) consumer spending, business spending, government spending, and net export spending
D) consumer spending, business spending, government spending, and import spending.
Q:
The reason that patents are granted is
A) to encourage a high rate of consumption.
B) to protect new techniques developed through research and development.
C) to encourage free trade.
D) to increase the labor force.
Q:
Consumption expenditures on goods and services $1,500Total government spending on goods and services 590Gross private domestic investment 355Imports 50Exports 70Depreciation (capital consumption allowance) 200Net U.S. income earned abroad -75According to the above table, national income isA) $2,190. B) $2,550. C) $2,465. D) $2,750.
Q:
Social Security payments areA) included in Gross Domestic Product (GDP).B) not included in Gross Domestic Product (GDP), but are included in Gross Domestic Income accounts.C) not included in Gross Domestic Product (GDP).D) not included in Gross Domestic Product (GDP), but are included in Net Domestic Product.
Q:
If the Bureau of Labor Statistics changed the way it calculates the consumer price index (CPI) so as to take into account product quality changes and the changing mix of products and services purchased by the average family, the result would most likely
A) show a higher rate of inflation.
B) show a lower rate of inflation.
C) cause an increase in Social Security payments.
D) cause higher wage increases for union employees with contracts that specify automatic wage boosts when the CPI rises.
Q:
There is greater support for active policymaking whenA) pure competition is widespread. B) price flexibility is common. C) wage flexibility is common. D) none of the above
Q:
The Phillips Curve will shift when
A) the expected inflation rate changes.
B) the price level falls.
C) the overall employment rate remains unchanged.
D) none of the above.
Q:
Suppose the economy is operating below its full employment level. By using an expansionary monetary policy, the Fed canA) raise real GDP without increasing the price level. B) raise real GDP and the price level.C) raise real GDP and decrease the price level.D) raise the price level alone, but cannot increase real GDP.
Q:
If the Fed purchases $100,000 in government bonds from a bank, then theA) liabilities of the bank rise by $100,000. B) reserves of the bank rise by $100,000. C) assets of the bank rise by $100,000. D) reserves of the bank rise by $100,000.
Q:
Which of the following is NOT included in the MZM definition of money?A) currency. B) money market funds.C) travelers checks. D) small-denomination time deposits.
Q:
When the Social Security Administration holds U.S. Treasury BondsA) interagency borrowing has occurred and the government owes itself. B) there is a balanced budget.C) an entitlement has occurred.D) the gross public debt has increased.
Q:
The Ricardian equivalence theorem states that
A) an increase in government spending has no effect on aggregate supply.
B) increases in government spending have a larger impact on real Gross Domestic Product
(GDP) than decreases in taxes.
C) an increase in the government budget deficit created by a current tax cut has no effect on
aggregate demand.
D) an increase in the government budget deficit has no effect on real Gross Domestic Product
(GDP) because it only affects the price index.
Q:
In Keynesian analysis, if investment remains constant when income changes, the investment is calledA) planned. B) autonomous. C) unplanned. D) discretionary.
Q:
Which of the following statements is FALSE?A) Disposable income - saving = consumption B) Consumption + saving = disposable income C) Saving = disposable income - consumption D) Consumption = saving - disposable income
Q:
Which one of the following is true?A) The intersection of aggregate demand and aggregate supply identifies an equilibrium interest rate and an equilibrium wage level.B) The intersection of aggregate demand and aggregate supply identifies an equilibrium interest rate and an equilibrium level of exports.C) The intersection of aggregate demand and aggregate supply identifies an equilibrium level of employment and an equilibrium level of investment.D) The intersection of aggregate demand and aggregate supply identifies an equilibrium price level and an equilibrium level of real GDP.
Q:
What determines the total value of aggregate demand for U.S. real GDP?
A) the spending decisions of consumers, firms, and governments
B) the Congressional Budget Office
C) the Federal Reserve Board
D) Wall Street
Q:
A patent isA) a government protection that gives an inventor the exclusive right to the invention for a limited time period.B) a government protection that gives an inventor the exclusive right to the invention for an unlimited time period.C) the right to make a product and sell it at a reasonable price.D) a recognizable right to the profits associated with a new product or new way of making goods granted by business associations.
Q:
Consumption expenditures on goods and services $1,500Total government spending on goods and services 590Gross private domestic investment 355Imports 50Exports 70Depreciation (capital consumption allowance) 200Net U.S. income earned abroad -75According to the above table, net domestic product (NDP) isA) $1,995. B) $2,265. C) $2,550. D) $2,850.
Q:
Why might a homemaker be upset with the way Gross Domestic Product (GDP) is calculated?A) Because the government always underestimates the dollar value of the household services produced at home and outside the market that are included in the Gross Domestic Product (GDP) statisticB) Because household services produced at home and outside the market are only included in Gross Domestic Product (GDP) if the homemaker is a manC) Because household services produced at home and outside the market that are sold to others are not included in Gross Domestic Product (GDP)D) Because none of the household services produced for at home and outside the market are included in Gross Domestic Product (GDP) even though they contribute greatly to the welfare of the family
Q:
Market BasketQuantity2009 Price2010 PriceCDs10$32$24Gasoline200 gal$2.00$2.50The relationship between the producer price index (PPI) and the consumer price index (CPI) is such that, in the short run,A) the CPI usually increases before the PPI.B) the CPI and the PPI usually move simultaneously. C) the PPI usually increases before the CPI.D) the CPI and the PPI usually move in opposite directions.
Q:
Economists who believe in activist policy making argue thatA) decreases in aggregate demand impact the economy only in the short run.B) decreases in aggregate demand definitely impact the economy in the short run.C) only planned changes in the money supply impact the economy.D) only increases in the minimum wage levels improve economic well -being.
Q:
The rate of unemployment below which the rate of inflation tends to rise and above which the rate of inflation tends to fall is known as theA) Phillips rate of unemployment. B) contrary rate of unemployment.C) non-accelerating-inflation rate of unemployment (NAIRU). D) menu cost rate of unemployment.
Q:
If the economy is operating below its full employment level, the Fed canA) increase aggregate demand by increasing the rate of growth of the money supply. B) increase aggregate demand by stimulating the demand for money.C) increase aggregate demand by selling bonds and raising interest rates. D) increase aggregate supply by raising the price level.
Q:
Open market operations involveA) the buying and selling of existing corporate bonds. B) the buying and selling of existing corporate stocks.C) the buying and selling of existing federal government bonds. D) the buying and selling of Federal Reserve bonds.
Q:
All transaction deposits are included inA) M1 only. B) M2 only.C) both M1 and M2. D) savings balances only.
Q:
Gross public debt minus all government interagency borrowing isA) government budget deficit. B) net public debt. C) U.S. Treasury bonds. D) an entitlement.
Q:
What does research tell us about the impact of Ricardian equivalence effects on the economy?
A) There is no evidence of any impact of Ricardian equivalence effects.
B) Ricardian equivalence effects have a huge impact on aggregate demand.
C) There is a very small impact on both aggregate demand and aggregate supply. D) Ricardian equivalence effects may exist, but their magnitudes are unclear.
Q:
For an investment to be considered autonomous, it mustA) be negatively related to the interest rate.B) increase as the level of income increases. C) include fixed components.D) be independent of the level of real disposable income.
Q:
At a level of real disposable income of $0, suppose consumption is $2,000. Given this information, we know with certainty that saving equalsA) $0. B) $2,000. C) -$2,000. D) -$1,000. Answer: C
Q:
In the classical model, what is the result of an increase in aggregate demand?A) Real GDP increases, and the price level remains constant. B) Real GDP decreases, and the price level remains constant. C) The price level increases, and real GDP remains constant. D) The price level decreases, and real GDP remains constant.
Q:
Which of the following is true about how the aggregate demand curve differs from the individualʹs demand curve?A) The individualʹs demand curve shows the relationship between price and quantity demanded while the aggregate demand curve is not influenced by price.B) For the individualʹs demand curve equilibrium is determined by the intersection of supply and demand while for the aggregate demand curve equilibrium is determined by the real balance effect.C) The individualʹs demand curve is just for an individual while the aggregate demand curve looks at the entire circular flow of income.D) The individualʹs demand curve will shift when there is a change in taxes while the aggregate demand curve will not.
Q:
Firms are more likely to devote resources to research and development whenA) the country is in recession.B) they expect to earn rewards from successful research and development.C) it is easy to copy new techniques of other firms.D) the country has been experiencing slow economic growth in order to spur economic growth.
Q:
Disposable personal income isA) the total of factor payments to owners of resources.B) the dollar value of all final goods and services produced in a country in a year.C) the amount of monetary payments households actually receive before paying personal income taxes.D) the amount of monetary payments households actually receive after paying personal income taxes.
Q:
Intermediate goods are goods that are used up entirely in the production of final goods. As such, intermediate goodsA) are excluded in calculating Gross Domestic Product (GDP) because they are not valuable. B) are excluded in calculating Gross Domestic Product (GDP) because to do so would be to double count them.C) make up only a small portion of Gross Domestic Product (GDP).D) are included in Gross Domestic Product (GDP) only if produced within the borders of the United States.
Q:
Market BasketQuantity2009 Price2010 PriceCDs10$32$24Gasoline200 gal$2.00$2.50Which of the following is a measure of general inflation that is NOT based on a fixed market basket of goods and services?A) consumer price indexB) producer price indexC) personal consumption expenditure indexD) medical price index
Q:
The conclusion that the economy has price flexibility, wage flexibility, and perfectly competitive markets justifiesA) active policy making. B) rational policy making. C) passive policy making. D) none of the above.
Q:
In the above figure, if initial equilibrium is at point A and there is a fully anticipated increase in aggregate demand from AD 1 to AD2 due to an anticipated increase in the money supply, then A) the economy will move directly from point A to point C without passing through point B.B) the economy will move directly from point A to point B, and will remain at point B in the long run.C) the price level will shift to P2 in the short run.D) the price level will shift to P2 in the long run.
Q:
Suppose the economy is in long -run equilibrium. The Fed changes its policy and lowers the differential 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 GDP. D) a higher real GDP.
Q:
Which one of the following would increase reserves for the banking system?A) The Fed sells government securities on the open market.B) The Fed buys government securities on the open market.C) You purchase a newly-issued U.S. Treasury bond.D) You purchase a U.S. Treasury bond from a bond dealer.
Q:
What differentiates a savings deposit from a small -denomination certificate of deposit (CD)?A) A CD has a fixed maturity date; a savings deposit can be withdrawn at any time.B) A savings deposit cannot be withdrawn before its maturity date without incurring a penalty; funds in a CD are available at any time with no interest penalty.C) Only a savings deposit is a time deposit.D) All depository institutions accept savings deposits, whereas only a thrift institution canm issue a CD.
Q:
If no foreign residents owned any of the U.S. public debt, then it would be true that A) there would be no distributional consequences associates with he public debt. B) U.S. residents would essentially owe the public debt to themselves.C) there would be no interest payments on the public debt. D) the public debt would naturally disappear over time.
Q:
Suppose the government believes the economy is operating beyond the full -employment real GDP. What kind of fiscal policy could it pursue?
Q:
Which of the following would cause a leftward shift in the investment function?A) Technological progressB) A reduction in the rate of interestC) Optimistic expectations about business conditionsD) An increase in business taxes