Question 1
Question
Which of the following is not included in M1?
Answer
-
a $5 bill in your wallet
-
$100 in your checking account
-
$500 in your savings account
-
The $5 bill in your wallet and $500 in your savings account
-
All of the choices
Question 2
Question
Which of the following does the Federal Reserve not do?
Answer
-
it controls the supply of money
-
it acts as a lender of last resort to banks
-
it makes loans to any qualified business that requests one
-
it tries to ensure the health of the banking system
-
none of the choices
Question 3
Question
A bank's reserve ratio is 6.5% and the bank has 1,950 in reserve. Its deposits amount to . . .
Question 4
Question
Wealth is redistributed from debtors to creditors when inflation was expected to be . . .
Answer
-
high and it turns out to be high
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low and it turns out to be low
-
low and it turns out to be high
-
high and it turns out to be low
-
none of the choices
Question 5
Question
If US residents want to buy more foreign bonds, then in the market for foreign-currency exchange the exchange rate . . .
Answer
-
and the quantity of dollars traded rises
-
rises and the quantity of dollars traded falls
-
falls and the quantity of dollars traded rises
-
and the quantity of dollars traded falls
-
none of the choices
Question 6
Question
When a country experiences capital flight, its . . .
Answer
-
net capital outflow increases and its real exchange rate rises
-
net capital outflow increases and its real exchange rate falls
-
net capital outflow decreases and its real exchange rate rises
-
net capital outflow decreases and its real exchange rate falls
-
none of the choices
Question 7
Question
In an open-economy, GDP equals $1,850 billion, consumption expenditure equals $975 billion, government expenditure equals $225 billion, investment equals $500 billion, and net exports equals $150 billion. What is the national savings?
Answer
-
$0
-
$500 billion
-
$650 billion
-
$975 billion
-
none of the choices
Question 8
Question
If the Canadian nominal exchange rate does not change, but prices rise faster in Canada than in all other countries, then the Canadian real exchange rate . . .
Answer
-
does not change
-
rises
-
declines
-
rises and declines
-
none of the choices
Question 9
Question
Which of the following is an example of US foreign portfolio investment?
Answer
-
Paulo, a German citizen, buys stocks in a US computer company
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Nohora, a citizen of Columbia, opens a fish and chips restaurant in the US
-
Dawit, a US citizen, buys bonds issued by a Japanese bank
-
Yoseph, a US citizen, opens a country-western tavern in New Zealand
-
all of the choices
Question 10
Question
Which of the following would make both the equilibrium real interest rate and the equilibrium quantity of loanable funds increase?
Answer
-
the demand for loanable funds shift right
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the demand for loanable funds shift left
-
the supply for loanable funds shift right
-
the supply for loanable funds shift left
-
the demand for loanable funds shift left and the supply for loanable funds shift right
Question 11
Question
Which of the following is not included in GDP?
Answer
-
carrots grown in your garden and eaten by your family
-
carrots purchased at a farmer's market and eaten by your family
-
carrots purchased at a grocery store and eaten by your family
-
carrots grown in your garden and eaten by your family and carrots purchased at a farmer's market and eaten by your family
-
none of the choices
Question 12
Question
Which of the following is correct?
Answer
-
nominal GDP never equals real GDP
-
nominal GDP always equals real GDP
-
nominal GDP equals real GDP in the base year
-
nominal GDP equals real GDP in all years but the base year
-
all of the choices
Question 13
Question
When computing the cost of the basket of goods and services purchased by a typical consumer, which of the following changes from year to year?
Answer
-
the quantity of the goods and services purchased
-
the price of the goods and services
-
the goods and services making up the basket
-
the quantity of the goods and services purchased and the goods and services making up the basket
-
all of the choices
Question 14
Question
Frederick earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Frederick's 2001 salary in 2006 dollars is . . .
Answer
-
$25,000
-
$33,333.33
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$44,250
-
$75,000
-
none of the choices
Question 15
Question
Which of the following items plays a role in determining productivity?
Question 16
Question
The slope of the production function with capital per worker on the horizontal axis and output per worker on the vertical axis . . .
Answer
-
is positive and gets steeper as capital per worker rises
-
is positive and gets flatter as capital per worker rises
-
is negative and gets steeper as capital per worker rises
-
is negative and gets flatter as capital per worker rises
-
none of the choices
Question 17
Question
The economy's two most important financial markets are . . .
Answer
-
the investment market and the savings market
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the bond market and the stock market
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banks and the stock market
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financial markets and financial institutions
-
all of the choices
Question 18
Question
Suppose a close economy had public savings of $3 trillion and private savings of $2 trillion. What are the national saving and investment for this country?
Question 19
Question
If the interest rate is 7.5%, then what is the present value of $4,000 to be received in 6 years?
Answer
-
$2,420.68
-
$2,591.85
-
$2,996.33
-
$3,040.63
-
none of the above
Question 20
Question
JoEllen puts a greater proportion of her portfolio into government bonds. JoEllen's action . . .
Answer
-
increases both risk and the average rate of return
-
decreases both risk and the average rate of return
-
increases risk but decreases the average rate of return
-
decreases risk but increases the average rate of return
-
all of the choices
Question 21
Question
Unemployment data are collected . . .
Answer
-
from unemployment insurance claims
-
through a regular survey of about 60,000 households
-
through a regular survey of about 20,000 firms
-
from unemployment claims and through a regular survey of about 60,000 households
-
all of the choices
Question 22
Question
The labor-force participation rate is computed as . . .
Answer
-
(employed/adult population) x 100
-
(employed/labor force) x 100
-
(labor force/adult population) x 100
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(adult population/labor force) x 100
-
none of the choices
Question 23
Question
Suppose some country had an adult population of about 50 million, a labor force participation rate of 60%, and an unemployment rate of 5%. How many people were employed?
Answer
-
1.5 million
-
28.5 million
-
30 million
-
47.5 million
-
none of the choices
Question 24
Question
If you deposit $900 into an account for two years and the interest rate is 4%, how much do you have at the end of the two years?
Answer
-
$972
-
$973.44
-
$974.19
-
$966.50
-
none of the choices
Question 25
Question
Two of the economy's most important financial intermediaries are . . .
Answer
-
suppliers of funds and demanders of funds
-
banks and the bond markets
-
the stock market and the bond market
-
banks and mutual funds
-
none of the choices
Question 26
Question
Suppose that in a close economy GDP is equal to $11,000, taxes are equal to $2,500, consumption equals $7,000, and government purchases equals $3,000. What are private savings and public savings?
Answer
-
$1,500; $-500
-
$1,500; $500
-
$1,000; $-500
-
$1,000; $500
-
none of the choices
Question 27
Question
The key determinate of the standard of living in a country is . . .
Answer
-
the amounts of goods and services produced from each hour of a worker's time
-
the total amount of goods and services produced within the country
-
the total amount of its physical capital
-
its growth rate of GDP
-
all of the choices
Question 28
Question
The consumer price index is used to . . .
Answer
-
convert nominal GDP into real GDP
-
turn dollar figures into meaningful measures of purchasing power
-
characterize the types of goods and services that consumers purchase
-
measure the quantity of goods and services that the economy produces
-
none of the choices
Question 29
Question
The price index was 120 in 2006 and 127.2 in 2007. What was the inflation rate?
Answer
-
5.7%
-
6.0%
-
7.2%
-
27.2%
-
none of the choices
Question 30
Question
Tyree, a US citizen, works only in Germany. The value of Tyree's production is included in . . .
Answer
-
US GDP and German GDP
-
US GDP and German GNP
-
US GNP and German GDP
-
US GNP and German GNP
-
all of the choices
Question 31
Question
Which of the following is an example of US foreign direct investment?
Answer
-
A Swedish car manufacturer opens a plant in Tennessee
-
A Dutch citizen buys shares of stock in a US company
-
A US based restaurant chain opens new restaurants in China
-
A US citizen buys stock in companies located in Japan
-
All of the above
Question 32
Question
A US firm opens a factory that produces camping equipment in Estonia
Answer
-
This increases US net capital outflow and decreases Estonian net capital outflow
-
This decreases US net capital outflow and increases Estonian net capital outflow
-
This increases US net capital outflow
-
This increases Estonian net capital outflow
-
None of the choices
Question 33
Question
The inflation tax . . .
Answer
-
transfers wealth from the government to households
-
is the increase in income taxes due to lack of indexation
-
is a tax on everyone who holds money
-
transfers wealth from the government to households and is the increase in income taxes due to lack of indexation
-
all of the choices
Question 34
Question
The real interest rate is 8% and the nominal interest rate is 10.5%. Is there inflation or deflation? What is the inflation or deflation rate?
Answer
-
deflation; 2.5%
-
deflation; 20.5%
-
inflation; 2.5%
-
inflation; 20.5%
-
none of the choices
Question 35
Question
The federal funds rate is the . . .
Answer
-
percentage of face value that the Federal Reserve is willing to pay for Treasury Securities
-
percentage of deposits that banks must hold as reserves
-
interest rate at which the Federal Reserve makes short term loans to banks
-
interest rate at which banks lend reserves to each other overnight
-
all of the choices
Question 36
Question
Which of the following lists two things that both decrease the money supply?
Answer
-
Make open market purchases, raise the reserve requirements
-
make open market purchases, lower the reserve requirements
-
make open market sales, raise the reserve requirements
-
make open market sales, lower the reserve requirements
-
none of the choices
Question 37
Question
A debit card is more similar to a credit card than to a check.
Question 38
Question
If the Fed buys bonds in the open market, the money supply decreases.
Question 39
Question
Suppose the nominal interest rate is 5%, the tax rate on interest income is 30%, and the after-tax real interest rate is 0.8%. Then the rate of inflation is 2.7%.
Question 40
Question
If the Fed increases the money supply, the equilibrium value of money decreases and the equilibrium price level increases.
Question 41
Question
When net capital outflow is negative, it means that on net the value of domestic assets purchased by foreigners exceeds the value of foreign assets purchased by domestic residents.
Question 42
Question
Purchasing power parity says that nominal exchange rate must equal the real exchange rate.
Question 43
Question
US GDP includes estimates of the value of items that are produced and consumed at home such as house work and car maintenance.
Question 44
Question
If exports are $500, GDP is $8,000, government purchases are $1,200, imports are $700, and investment is $800, then consumption is $6,200.
Question 45
Question
The contents of the basket of goods and services used to compute the CPI changes every month.
Question 46
Question
If nominal interest rate is 5% and the inflation rate is 2%, then the real interest rate is 7%.
Question 47
Question
Like physical capital, human capital is a produced factor of production.
Question 48
Question
A country that made its courts less corrupt and its government more stable would likely see its standard of living rise.
Question 49
Question
When economists refer to investment, they mean the purchasing of stocks and bonds and other types of savings.
Question 50
Question
To state that national saving is equal to investment, for a close economy, is to state an accounting identity.
Question 51
Question
The sale of either stocks or bonds to raise money is known as equity financing.
Question 52
Question
If GDP deflator in 2006 was 160 and the GDP deflator in 2007 was 180, then the inflation rate in 2007 was 12.5%.
Question 53
Question
For an economy as a whole, income must exceed expenditure.
Question 54
Question
Expenditures by households on education are included in the consumption component of GDP.
Question 55
Question
If the GDP deflator in 2004 was 150 and the GDP deflator in 2005 was 120, then the inflation rate in 2005 was 25%.
Question 56
Question
Economists use the term inflation to describe a situation in which the economy's overall production level is rising.
Question 57
Question
The goal of the CPI is to gauge how much incomes must rise to maintain a constant standard of living.
Question 58
Question
Substitution bias causes the CPI to understate the increase in the cost of living from one year to the next.
Question 59
Question
If the real interest rate is 5% and the inflation rate is 2%, then the nominal interest rate is 7%.
Question 60
Question
A dollar figure from 1908 is converted into 2009 dollars by dividing the 2009 price level by the 1908 price level, then multiplying by the 2009 dollar figure.
Question 61
Question
Human capital is the term economists use to refer to the knowledge and skills that workers acquire through education, training, and experience.
Question 62
Question
An increase in capital increases productivity only if it is purchased and operated by domestic residents.
Question 63
Question
An increase in the saving rate does not permanently increase growth rate of real GDP per person.
Question 64
Question
Productivity can be computed as number of hours worked divided by output.
Question 65
Question
If, for an imaginary closed economy, investment amounts to $10,000 and the government is running a $2,500 deficit, then private savings must amount to $12,500.
Question 66
Question
An increase in the demand for loanable funds increases the equilibrium interest rate and increases the equilibrium level of saving.
Question 67
Question
Public saving is T-G, while private saving is Y-T-C.
Question 68
Question
When a firm wants to borrow directly from the public to finance the purchase of new equipment, it does so by selling shares of stocks.
Question 69
Question
The sooner the payment is received and the higher the interest rate, the greater the present value of a future payment.
Question 70
Question
A person with diminishing marginal utility of wealth is risk averse.
Question 71
Question
According to the efficient markets hypothesis, at any moment in time, the market price is the best estimate of the company's value based on publicly available information.
Question 72
Question
The future value of $1.00 saved today is $1.00/(1+r).
Question 73
Question
Cyclical unemployment refers to the year-to-year fluctuation in unemployment that the economy normally experiences.
Question 74
Question
The unemployment rate sometimes falls to zero.
Question 75
Question
Changes in the composition of demand among industries or regions are called sectoral shifts.
Question 76
Question
Full time students and homemakers are included in the Bureau of Labor Statistics "unemployed" category.
Question 77
Question
A drop in a country's real interest rate reduces that country's net capital outflow.
Question 78
Question
In the open economy model, the supply of loanable funds comes from national savings and net capital outflow.
Question 79
Question
In the open economy macroeconomic model, the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.
Question 80
Question
A higher US interest rate discourages Americans from buying foreign assets and encourages foreigners to buy US assets.
Question 81
Question
Capital flight increases a country's interest rate. This increase in the interest rate makes net capital outflow lower than it would be had the interest rate stayed the same.
Question 82
Question
An increase in the government budget deficit shifts the demand for loanable funds to the right.
Question 83
Question
An import quota imposed by the US would reduce US imports but have no impact on US exports.
Question 84
Question
A country with negative net exports has a trade surplus.
Question 85
Question
If Wal-Mart buys $50 million worth of consumer goods from China and sells them in the US, and China uses the $50 million to purchase US bonds, then US net exports and US net capital outflow both fall.
Question 86
Question
A drop in the French real interest rate reduces French net capital outflow.
Question 87
Question
If prices in the US rise faster than prices in the UK, then according to the doctrine of purchasing power parity, the US nominal exchange rate should fall.
Question 88
Question
Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.
Question 89
Question
To increase domestic investment, a country must increase its savings.
Question 90
Question
If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services.
Question 91
Question
If the quantity of money demanded is greater than the quantity supplied, then the value of money rises.
Question 92
Question
Shoeleather costs and menu costs are both costs of anticipated inflation.
Question 93
Question
If inflation is higher than expected, then borrowers make nominal interest payments that are less than they expected.
Question 94
Question
If the money supply increased by 10% and at the same time velocity decreased by 10%, then according to the quantity equation there would be no change in the price level.
Question 95
Question
Monetary neutrality means that while real variables change in response to changes in the money supply, nominal variables do not.
Question 96
Question
Demand deposits are balances in bank accounts that depositors can access by writing checks or using debit cards.
Question 97
Question
The money supply of Princess Anne is $10,000 in 100% reserve banking system. If the Central Bank of Princess Anne decreases the reserve requirement ratio to 10%, the money supply could increase by no more than $9,000.
Question 98
Question
Because of the multiple tools at its disposal, the Fed can control the money supply very precisely.
Question 99
Question
US dollars are an example of commodity money and hides used to make trades are an example of fiat money.
Question 100
Question
Fractional reserve banking is a system where banks must hold an amount of cash based on a percentage of its loan.
Question 101
Question
Money allows people to specialize in what they do best, thereby raising everyone's standard of living.