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Sample questions to study for macro-econ final.

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Macro-Econ Final

Macro-Econ Final

Question 1 of 77

1

GDP is defined as the

Select one of the following:

  • value of all goods and services produced within a country in a given period of time

  • value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time

  • value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time

  • value of all final goods and services produced within a country in a given period of time

Explanation

Question 2 of 77

1

Gross domestic product measures

Select one of the following:

  • income but not expenditures

  • expenditures but not income

  • both income and expenditures

  • neither income nor expenditures

Explanation

Question 3 of 77

1

Grapes are considered intermediate goods

Select one of the following:

  • if the purchaser eats them, but not if the purchaser uses them to make wine to see

  • if the purchaser uses them to make wine to sell others but not if the purchaser eats them

  • whether the purchaser uses them to make wine to sell or eats them

  • None of the above is correct

Explanation

Question 4 of 77

1

Which of the following transactions adds to U.S. GDP for 2010?

Select one of the following:

  • In December 2010, Isabella eats onions that she harvested from her backyard garden in October 2010

  • In 2010, Ashley sells a car that she bought in 2006 to William for $5,000

  • An American professor teaches Economics in China during the summer of 2010 and earns the equivalent of $8000 during that time

  • In February 2010, Amanda buys a ticket for $10 to visit a zoo in Florida

Explanation

Question 5 of 77

1

In the economy of Ukzten in 2010, consumption was $5000, exports was $100, government purchases were $900, imports were $200, and investment was $1000. What was Ukzten's GDP in 2010?

Select one of the following:

  • $6800

  • $6700

  • $7200

  • $7000

Explanation

Question 6 of 77

1

Which of the following is NOT included in the consumption component of GDP?

Select one of the following:

  • Aunt Jane buys a new house

  • Bill buys a pizza for dinner

  • Bob pays his tuition and fees for college

  • You get a nice haircut

Explanation

Question 7 of 77

1

Darnell's employer upgrades all of its computer systems using U.S. made parts. Which component of GDP is this transaction included?

Select one of the following:

  • Consumption

  • Investment

  • Government Expenditure

  • Net Exports

Explanation

Question 8 of 77

1

If in some year real GDP was $25 billion and nominal GDP was $30 billion, what was GDP deflator?

Select one of the following:

  • 120

  • 83.33

  • 1.2

  • 0.833

Explanation

Question 9 of 77

1

Changes in nominal GDP reflect

Select one of the following:

  • only changes in prices

  • neither changes in prices nor changes in the amounts being produced

  • only changes in the amounts being produced

  • both changes in prices and changes in the amounts being produced

Explanation

Question 10 of 77

1

When studying changes in the economy over time, economists want a measure of the total quantity of goods and services the economy is producing that is not affected by changes in the prices of those goods and services. In other words, economists want to study

Select one of the following:

  • GNP

  • the GDP deflator

  • real GDP

  • nominal GDP

Explanation

Question 11 of 77

1

Which of the following statement about GDP is correct?

Select one of the following:

  • Nominal GDP values production at constant prices, whereas real GDP values production at current prices

  • Nominal GDP values production at the cost of the resources used in the production process, whereas real GDP values production at market prices

  • Nominal GDP values production at current prices, whereas real GDP values production at constant prices

  • Nominal GDP values production at market prices, whereas real GDP values production at the cost of the resources used in the production process

Explanation

Question 12 of 77

1

The CPI is a measure of the overall cost of

Select one of the following:

  • the inputs purchased by a typical producer

  • the goods and services produced in the economy

  • the goods and services purchased by a typical consumer

  • the stocks on the New York Stock Exchange

Explanation

Question 13 of 77

1

The term inflation is used to describe a situation in which

Select one of the following:

  • stock-market prices are rising

  • the overall level of prices in the economy is increasing

  • incomes in the economy are increasing

  • the economy is growing rapidly

Explanation

Question 14 of 77

1

If the price of Spanish olives imported into the United States decreases, then there would be an effect on the value of

Select one of the following:

  • neither the GDP deflator nor the consumer price index

  • the GDP deflator but not on the value of the consumer price index

  • the consumer price index but not on the value of the GDP delator

  • both the GDP deflator and the consumer price index

Explanation

Question 15 of 77

1

Suppose that U.S. mining companies purchase German made ore trucks at a reduced price. By itself, what effect will this purchase have on the GDP deflator and on the consumer price index?

Select one of the following:

  • The consumer price index and the GDP deflator will both fall

  • The consumer price index and the GDP deflator will both be unaffected

  • The consumer price index will fall, and the GDP deflator will be unaffected

  • The consumer price index will be unaffected, and the GDP deflator will fall

Explanation

Question 16 of 77

1

In 1983, one could buy a model radio-controlled airplane for $11.50 each. Those same planes are available today and the price increased at exactly the rate of inflation. If the CPI today is 220.5 and in 1983 was 105, what is the price of the airplane today?

Select one of the following:

  • $11.50

  • $5.48

  • $2.10

  • $24.15

Explanation

Question 17 of 77

1

The nominal interest rate tells you

Select one of the following:

  • how fast the purchasing power of your bank account rises over time

  • the number of dollars in your bank account today

  • the purchasing power of your bank account today

  • how fast the number of dollars in your bank account rises over time

Explanation

Question 18 of 77

1

In 2011, Sally opened an account and deposited $1000 with a nominal interest rate of 10%. A hamburger was $5 in 2011. CPI was 120 in 2011 and 129.6 in 2012. What is the purchasing power of her $1000 in 2011?

Select one of the following:

  • 180 hamburgers

  • 250 hamburgers

  • 200 hamburgers

  • 220 hamburgers

Explanation

Question 19 of 77

1

In 2011, Sally opened an account and deposited $1000 with a nominal interest rate of 10%. A hamburger was $5 in 2011. CPI was 120 in 2011 and 129.6 in 2012. What is the inflation rate?

Select one of the following:

  • 9.6%

  • 8%

  • 6%

  • 7.4%

Explanation

Question 20 of 77

1

In 2011, Sally opened an account and deposited $1000 with a nominal interest rate of 10%. A hamburger was $5 in 2011. CPI was 120 in 2011 and 129.6 in 2012. What is the real interest rate?

Select one of the following:

  • 4%

  • 2%

  • 8%

  • 6%

Explanation

Question 21 of 77

1

Who is included in the labor force by the Bureau of Labor Statistics?

Select one of the following:

  • Gabe, who does not have a job, but is looking for work

  • Marcus, a full-time student not looking for work

  • Chris, a retired engineer not looking for other work

  • None of the above is correct

Explanation

Question 22 of 77

1

In 2009, based on concepts similar to those used to estimate U.S. employment figures, the Italian adult non-institutionalized population was 51.070 million, the labor force was 24.710 million, and the number of people employed was 22.765 million. According to these numbers, the Italian labor-force participation rate and unemployment rate were about

Select one of the following:

  • 48.4% and 7.9%

  • 44.6% and 3.8%

  • 48.4% and 3.8%

  • 44.6% and 7.9%

Explanation

Question 23 of 77

1

Unemployment that is due to a recession is

Select one of the following:

  • Frictional unemployment

  • Structural unemployment

  • Cyclical unemployment

  • Seasonal unemployment

Explanation

Question 24 of 77

1

John worked in a ski resort last winter but he got laid off in May. Curtis has looked for work as an entry-level accountant for some time. While the general demand for accountants doesn't appear to be falling, there seems to be more job openings for senior-level accountants.

Select one of the following:

  • John and Curtis are both seasonally unemployed

  • John is structurally unemployed, and Curtis is seasonally unemployed

  • John and Curtis are both structurally unemployed

  • John is seasonally unemployed, and Curtis is structurally unemployed

Explanation

Question 25 of 77

1

Suppose that in a closed economy GDP is 11,000, consumption is 7,500, and taxes are 2,000. What value of government purchases would make national savings equal to 1,000 and at that value would the government have a deficit or surplus?

Select one of the following:

  • 2,500 deficit

  • 2,500 surplus

  • 1,000 deficit

  • 1,000 surplus

Explanation

Question 26 of 77

1

In a small closed economy investment is $50 billion and private saving is $55 billion. What are public saving and national saving?

Select one of the following:

  • $60 billion and $5 billion

  • $50 billion and -$5 billion

  • $5 billion and $60 billion

  • -$5 billion and $50 billion

Explanation

Question 27 of 77

1

In a closed economy, in Y is 10,000, T is 1,000, G is 3,000, and C is 5,000, then

Select one of the following:

  • the government as a budget deficit and investment is 1,000

  • the government has a budget surplus and investment is 1,000

  • the government has a budget surplus and investment is 2,000

  • the government has a budget deficit and investment is 2,000

Explanation

Question 28 of 77

1

In a closed economy, national saving is

Select one of the following:

  • equal to investment

  • usually greater than investment

  • usually less than investment

  • always less than investment

Explanation

Question 29 of 77

1

Which of the following would a macroeconomist consider as investment?

Select one of the following:

  • Marisa purchases a bond issued by Proctor and Gamble Corp.

  • Karlee purchases stock issued by Texas Instruments, Inc.

  • Charlie builds a new coffee shop

  • All of the above are correct

Explanation

Question 30 of 77

1

Which list ranks assets form most to least liquid?

Select one of the following:

  • $10 bills, cars, houses, bonds

  • $10 bills, bonds, cars, houses

  • bonds, $10 bills, cars, houses

  • bonds, cars, $10 bills, houses

Explanation

Question 31 of 77

1

Which of the following is included in M2 but not in M1?

Select one of the following:

  • savings deposits

  • currency

  • demand deposits

  • All of the above are included in both M1 and M2

Explanation

Question 32 of 77

1

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Select one of the following:

  • Unit of account

  • Liquidity

  • Store of Value

  • Medium of Exchange

Explanation

Question 33 of 77

1

If the reserve ratio is 5 percent and banks keep no excess reserves, then $1,000 of additional deposits can create up to (hint: get the money multiplier first)

Select one of the following:

  • $200 of new money

  • $2,000 of new money

  • $20,000 of new money

  • None of the above is correct

Explanation

Question 34 of 77

1

If the money multiplier is 2 and the Fed buys $50,000 worth of bonds, what happens to the money supply?

Select one of the following:

  • It increases by $100,000

  • It increases by $150,000

  • It decreases by $100,000

  • It decreases by $150,000

Explanation

Question 35 of 77

1

To explain the long-run determinants of the price level and the inflation rate, most economists rely on the

Select one of the following:

  • Quantity theory of money

  • Price-index theory of money

  • Fisher effects

  • Theory of hyperinflation

Explanation

Question 36 of 77

1

When the money market is drawn with the value of money on the vertical axis, if the Federal Reserve sells bonds, then the money supply curve (hint: how selling bonds changes the money supply)

Select one of the following:

  • Shifts right, causing the price level to rise

  • Shifts right, causing the price level to fall

  • Shifts left, causing the price level to rise

  • Shifts left, causing the price level to fall

Explanation

Question 37 of 77

1

When the money market is drawn with the value of money on the vertical axis,

Select one of the following:

  • money demand slopes upward and money supply is horizontal

  • money demand slopes downward and money supply is horizontal

  • money demand slopes upward and money supply is vertical

  • money demand slopes downward and money supply is vertical

Explanation

Question 38 of 77

1

As the price level decreases, the value of money

Select one of the following:

  • increases, so people want to hold more of it

  • increases, so people want to hold less of it

  • decreases, so people want to hold more of it

  • decreases, so people want to hold less of it

Explanation

Question 39 of 77

1

On a given morning, Franco sold 40 pairs of shoes for a total of $80 at his shoe store.

Select one of the following:

  • The $80 is a real variable and the quantity of shoes is a nominal variable

  • The $80 is a nominal variable and the quantity of shoes is a real variable

  • Both the $80 and the quantity of shoes are nominal variables

  • Both the $80 and the quantity of shoes are real variables

Explanation

Question 40 of 77

1

Your boss gives you an increase in the number of dollars you earn per hour. This increase in pay makes

Select one of the following:

  • your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your real wage also increased

  • your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your real wage decreased.

  • your real wage increase. If your real wage rose by a greater percentage than the price level, then your nominal wage also increased.

  • your real wage decrease. If your real wage rose by a greater percentage than the price level, then your nominal wage decreased.

Explanation

Question 41 of 77

1

According to the principle of monetary neutrality, a decrease in the money supply will not change

Select one of the following:

  • nominal GDP

  • the price level

  • unemployment

  • all of the above are correct

Explanation

Question 42 of 77

1

Suppose the money supply tripled, but at the same time velocity fell by half and real GDP was unchanged. According to the quantity equation the price level

Select one of the following:

  • is 1.5 times its old value

  • is 3 times its old value

  • is 6 times its old value

  • is the same as its old value

Explanation

Question 43 of 77

1

Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate rises, then

Select one of the following:

  • both the nominal and the real interest rate rise

  • neither the nominal nor the real interest rate rise

  • the nominal interest rate rises, but the real interest rate does not

  • the real interest rate rises, but the nominal interest rate does not

Explanation

Question 44 of 77

1

In which case below is the real interest rate the highest? (hints: use fisher effect equation)

Select one of the following:

  • the nominal interest rate= 4% and inflation= 3%

  • the nominal interest rate= 3% and inflation= 1%

  • the nominal interest rate= 2% and inflation= -2%

  • the nominal interest rate= 1% and inflation= -4%

Explanation

Question 45 of 77

1

Which of the following is one of the long-run economic goals?

Select one of the following:

  • a zero unemployment rate

  • a stable interest rate

  • high economic growth

  • a stable exchange rate

Explanation

Question 46 of 77

1

Which of the following is correct?

Select one of the following:

  • Economic fluctuations are easily predicted by competent economists

  • Recessions have never occurred very close together

  • Spending, income, and production do not fluctuate closely with real GDP

  • None of the above is correct

Explanation

Question 47 of 77

1

During recessions

Select one of the following:

  • sales and profits fall

  • sales and profits rise

  • sales rise, profits fall

  • profits rise, sales fall

Explanation

Question 48 of 77

1

The long-run aggregate supply curve shifts right if

Select one of the following:

  • either immigration from abroad increases or more people get college degrees

  • immigration from abroad increases, but not if more people get college degrees

  • more people get college degrees, but not if immigration from abroad increases

  • none of the above are correct

Explanation

Question 49 of 77

1

According to Sticky-wage theory, the wage contract was determined in advance based on the expected price level. The wage was fixed in the short run. If the actual price level was higher than the expected price level, the firm would have

Select one of the following:

  • lower labor costs and lower profits. So the firm would decrease the production

  • lower labor costs and higher profits. So the firm would increase the production

  • higher labor costs and lower profits. So the firm would decrease the production

  • higher labor costs and higher profits. So the firm would decrease the production

Explanation

Question 50 of 77

1

A decrease in the expected price level shifts

Select one of the following:

  • only the short-run aggregate supply curve left

  • only the short-run aggregate supply curve right

  • both the short-run and the long-run aggregate supply curve left

  • both the short-run and the long-run aggregate supply cure right

Explanation

Question 51 of 77

1

Which of the following is NOT included in aggregate demand? (hint: AD = C + I + G + NX)

Select one of the following:

  • purchases of stock and bonds

  • purchases of services such as visits to the doctor

  • purchases of capital goods such as equipment in a factory

  • purchases by foreigners of consumer goods produced in the United States

Explanation

Question 52 of 77

1

If marginal propensity to consume (MPC) is 0.60, how much money will the household spend to buy goods and services with $50 extra income?

Select one of the following:

  • $20, the multiplier is 2.5

  • $20, the multiplier is 1.67

  • $30, the multiplier is 2.5

  • $30, the multiplier is 1.67

Explanation

Question 53 of 77

1

If marginal propensity to consume (MPC) is 0.60 and there is no crowding out, how much should Congress increase government spending to end the recession?

Select one of the following:

  • $50 billion

  • $160 billion

  • $240 billion

  • $300 billion

Explanation

Question 54 of 77

1

Suppose a computer virus disables all ATM machines, making withdrawals from bank accounts less convenient. As a result, people want to keep more cash on hand. (Draw MS & MD graph and AS & AD graph) Assume policymakers do nothing, according to the theory of liquidity preference, what happens to money market?

Select one of the following:

  • Money demand shifts right and interest rate rises

  • Money demand shifts left and interest rate drops

  • Money supply shifts right and interest rate drops

  • Money supply shifts left and interest rate rises

Explanation

Question 55 of 77

1

Suppose a computer virus disables all ATM machines, making withdrawals from bank accounts less convenient. As a result, people want to keep more cash on hand. (Draw MS & MD graph and AS & AD graph) IN AD-AS diagram, which curve shifts and in which direction?

Select one of the following:

  • Aggregate supply shifts right

  • Aggregate supply shifts left

  • Aggregate demand shifts right

  • Aggregate demand shifts left

Explanation

Question 56 of 77

1

Suppose a computer virus disables all ATM machines, making withdrawals from bank accounts less convenient. As a result, people want to keep more cash on hand. (Draw MS & MD graph and AS & AD graph) In the short run what happens to the price level and real GDP?

Select one of the following:

  • both the price level and real GDP rise

  • both the price level and real GDP fall

  • the price level rises and real GDP falls

  • the price level falls and real GDP rises

Explanation

Question 57 of 77

1

Suppose a computer virus disables all ATM machines, making withdrawals from bank accounts less convenient. As a result, people want to keep more cash on hand. (Draw MS & MD graph and AS & AD graph) If the Fed wants to stabilize this economic fluctuation, it should

Select one of the following:

  • buy bonds. So interest rate rises to make the curve in AD-AS diagram shift back

  • buy bonds. So interest rate drops to make the curve in AD-AS diagram shift back

  • sell bonds. So interest rate rises to make the curve in AD-AS diagram shift back

  • sell bonds. So interest rate drops to make the curve in AD-AS diagram shift back

Explanation

Question 58 of 77

1

Suppose a computer virus disables all ATM machines, making withdrawals from bank accounts less convenient. As a result, people want to keep more cash on hand. (Draw MS & MD graph and AS & AD graph) If the Fed does nothing, what might Congress do to stabilize the economic fluctuation?

Select one of the following:

  • decrease government spending or raise taxes

  • increase government spending or raise taxes

  • decrease government spending or cut taxes

  • increase government spending or cut taxes

Explanation

Question 59 of 77

1

Suppose a computer virus disables all ATM machines, making withdrawals from bank accounts less convenient. As a result, people want to keep more cash on hand. (Draw MS & MD graph and AS & AD graph) If policymakers do nothing, the economy is able to correct the short-run fluctuation by itself. To reach the new long-run equilibrium, the change in price expectations created by this event shifts

Select one of the following:

  • long-run aggregate supply right

  • long-run aggregate supply left

  • short-run aggregate supply right

  • short-run aggregate supply left

Explanation

Question 60 of 77

1

Hurricane Sandy destroyed many factories in Eastern areas and caused a rise of the oil prices. How does this event affect the U.S. economy? Assume the government did not respond to this event at the beginning. (Draw AS & AD diagram) Which curve shifts and in which direction?

Select one of the following:

  • aggregate demand shifts right

  • aggregate demand shifts left

  • aggregate supply shifts right

  • aggregate supply shifts left

Explanation

Question 61 of 77

1

Hurricane Sandy destroyed many factories in Eastern areas and caused a rise of the oil prices. How does this event affect the U.S. economy? Assume the government did not respond to this event at the beginning. (Draw AS & AD diagram) If the policymakers do nothing at first, in the short-run what happens to the price level and real GDP?

Select one of the following:

  • both the price level and real GDP rise

  • both the price level and real GDP fall

  • the price level rises and real GDP falls

  • the price level falls and real GDP rises

Explanation

Question 62 of 77

1

Hurricane Sandy destroyed many factories in Eastern areas and caused a rise of the oil prices. How does this event affect the U.S. economy? Assume the government did not respond to this event at the beginning. (Draw AS & AD diagram) If policymakers want to stabilize the economic fluctuation caused by hurricane Sandy, which curve shifts and in which direction?

Select one of the following:

  • aggregate demand shifts right

  • aggregate demand shifts left

  • aggregate supply shifts right

  • aggregate supply shifts left

Explanation

Question 63 of 77

1

Hurricane Sandy destroyed many factories in Eastern areas and caused a rise of the oil prices. How does this event affect the U.S. economy? Assume the government did not respond to this event at the beginning. (Draw AS & AD diagram) How is the new long-run equilibrium different from the original one?

Select one of the following:

  • both price and real GDP are higher

  • both price and real GDP are lower

  • the price level is the same and GDP is higher

  • the price level is higher and real GDP is the same

Explanation

Question 64 of 77

1

Suppose the economy is in long-run equilibrium. A survey measure of consumer confidence indicate a wave of optimism about the economic conditions. As a result, consumers are purchasing more goods and services. Firms are expanding their business. (Draw AS & AD diagram) In the short-run what happens to the price level and unemployment rate?

Select one of the following:

  • both the price level and unemployment rate rise

  • both the price level and unemployment rate fall

  • the price level rises and unemployment rate falls

  • the price level falls and unemployment rate rises

Explanation

Question 65 of 77

1

Suppose the economy is in long-run equilibrium. A survey measure of consumer confidence indicate a wave of optimism about the economic conditions. As a result, consumers are purchasing more goods and services. Firms are expanding their business. (Draw AS & AD diagram) In the short-run, this event causes

Select one of the following:

  • inflation

  • recession

  • stagflation

  • none of the above

Explanation

Question 66 of 77

1

Suppose the economy is in long-run equilibrium. A survey measure of consumer confidence indicate a wave of optimism about the economic conditions. As a result, consumers are purchasing more goods and services. Firms are expanding their business. (Draw AS & AD diagram) What happens to the expected price level and what impact does this have on wage bargaining?

Select one of the following:

  • The expected price level falls. Bargains are struck for higher wages

  • The expected price level falls. Bargains are struck for lower wages

  • The expected price level rises. Bargains are struck for higher wages

  • The expected price level rises. Bargains are stuck for lower wages

Explanation

Question 67 of 77

1

Suppose the economy is in long-run equilibrium. A survey measure of consumer confidence indicate a wave of optimism about the economic conditions. As a result, consumers are purchasing more goods and services. Firms are expanding their business. (Draw AS & AD diagram) In the long run, the change in price expectations created by this event shifts

Select one of the following:

  • long-run aggregate supply right

  • long-run aggregate supply left

  • short-run aggregate supply right

  • short-run aggregate supply left

Explanation

Question 68 of 77

1

Suppose the economy is in long-run equilibrium. A survey measure of consumer confidence indicate a wave of optimism about the economic conditions. As a result, consumers are purchasing more goods and services. Firms are expanding their business. (Draw AS & AD diagram) How is the new long-run equilibrium different from the original one?

Select one of the following:

  • the price level and real GDP are higher

  • the price level and real GDP are lower

  • the price level is higher and real GDP is the same

  • the price level is higher and real GDP is lower

Explanation

Question 69 of 77

1

An economy if which the typical consumer's basket consists of 5 books and 10 calculators.
2006: price of a book $24 / price of a calculator $8
2007: price of a book $30/ price of a calculator $12
2008: price of a book $32/ price of a calculator $15

The cost of a basket in 2006 was

Select one of the following:

  • $32

  • $480

  • $200

  • $280

Explanation

Question 70 of 77

1

An economy if which the typical consumer's basket consists of 5 books and 10 calculators.
2006: price of a book $24 / price of a calculator $8
2007: price of a book $30/ price of a calculator $12
2008: price of a book $32/ price of a calculator $15

If 2006 is the base year, then the consumer price index was

Select one of the following:

  • 100 in 2006, 270 in 2007, and 310 in 2008

  • 200 in 2006, 135 in 2007, and 155 in 2008

  • 200 in 2006, 270 in 2007, and 310 in 2008

  • 100 in 2006, 135 in 2007, 155 in 2008

Explanation

Question 71 of 77

1

An economy if which the typical consumer's basket consists of 5 books and 10 calculators.
2006: price of a book $24 / price of a calculator $8
2007: price of a book $30/ price of a calculator $12
2008: price of a book $32/ price of a calculator $15

The inflation rate was

Select one of the following:

  • 25.9% in 2007 and 14.8% in 2008

  • 35% in 2007 and 20% in 2008

  • 35% in 2007 and 14.8% in 2008

  • 22.6% in 2007 and 12.9% in 2008

Explanation

Question 72 of 77

1

Assets Liabilities
Reserves $2,000 Deposits $10,000
Loans $8,000

The reserve ratio for this bank is

Select one of the following:

  • 0%

  • 20%

  • 80%

  • 100%

Explanation

Question 73 of 77

1

Assets Liabilities
Reserves $2,000 Deposits $10,000
Loans $8,000

If $1,000 is deposited into the First Bank of Fairfield, and the bank takes no other actions its (hint: "takes no other actions" means the bank hasn't loaned out the new deposits yet, and keeps all new deposits as reserves)

Select one of the following:

  • reserves will increase by $200

  • liabilities will decrease by $1,000

  • assets will increase by $1,000

  • reserves will increase by $800

Explanation

Question 74 of 77

1

Assets Liabilities
Reserves $2,000 Deposits $10,000
Loans $8,000

Starting from the situation as depicted by the T-account, if someone deposits $500 into the First Bank of Fairfield, and if the bank makes new loans so as to keep its reserve ratio unchanged, then the amount of new loans that it makes will be

Select one of the following:

  • $320

  • $400

  • $680

  • $750

Explanation

Question 75 of 77

1

Draw a MS-MD diagram and shift MD to the right. What is the quantity measured along the horizontal axis?

Select one of the following:

  • the price level

  • the real interest rate

  • the value of money

  • the quantity of money

Explanation

Question 76 of 77

1

Draw a MS-MD diagram and shift MD to the right. Which of the following events could explain a shift of the money-demand curve from MD1 to MD2?

Select one of the following:

  • an increase in the value of money

  • a decrease in the price level

  • an open-market purchase of bonds by the Federal Reserve

  • it is the holiday season and people want to purchase more goods and services

Explanation

Question 77 of 77

1

Draw a MS-MD diagram and shift MD to the right. Suppose the relevant money-demand curve is the one on the left; also suppose the velocity of money is 3. If the money market is in equilibrium, then the economy's real GDP amounts to

Select one of the following:

  • 5,000

  • 7,500

  • 10,000

  • 15,000

Explanation

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