Economics Final Test

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sharonj
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218087
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Economics Final Test
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2013-05-07 08:26:54
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Econ Sharon final exam
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Chapters 1 through 16
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  1. At full employment there is only frictional and ____________ unemployment.

    A. natural
    B. cyclical
    C. potential
    D. structural
    D. structural
    (this multiple choice question has been scrambled)
  2. With the stock of capital fixed, output increases with more labor input, but at a rate that is _____________

    A. decreasing
    B. increasing
    C. remaining the same
    d. all of the above
    A. decreasing
    (this multiple choice question has been scrambled)
  3. Another term for full employment output is ______________.

    A. economic output
    B. cyclical output
    C. potential output
    D. maximum output
    C. potential output
    (this multiple choice question has been scrambled)
  4. Economic models which assume that wages and prices adjust freely and quickly to changes in demand and supply are known as ____________. 

    A. Classical models
    B. Neoclassical models
    C. Keynesian models
    D. Flexible models 
    A. Classical models
    (this multiple choice question has been scrambled)
  5. In an open economy, increases in government spending can crowd out consumption, investments, or ______________.

    A. transfer payments
    B. savings
    C. net exports
    d. all of the above
    C. net exports
    (this multiple choice question has been scrambled)
  6. A 7% annual growth rate in GDP per capita will take __________ years for GDP per capita to double. 

    A. 14 years
    B. 10 years
    C. 35 years
    D. 49 years
    B. 10 years
    (this multiple choice question has been scrambled)
  7. Which government department produces the national income and product accounts? 

    A. The Congressional Budget Office
    B. Department of Commerce
    C. Department of Education
    D. Council of Economic Affairs
    B. Department of Commerce
    (this multiple choice question has been scrambled)
  8. Which is the largest component of National Income? 

    A. rental income
    B. compensation for employees (wages and benefits)
    C. net investments
    D. corporate profits
    B. compensation for employees (wages and benefits)
    (this multiple choice question has been scrambled)
  9. The four factors included in the expanded circular flow but not in the simple circular flow are: 

    A. government, investments, imports, and transfer payments
    B. government, exports, depreciation, and taxes
    C. consumption, exports, investments, and taxes
    D. government, exports, imports, and taxes
    D. government, exports, imports, and taxes
    (this multiple choice question has been scrambled)
  10. Which of the following is not a component of GDP? 

    A. net exports
    B. government purchases
    C. consumption
    D. investment
    E. consumer price index
    E. consumer price index
    (this multiple choice question has been scrambled)
  11. What part of government spending is excluded from GDP? 

    A. education
    B. purchase of police cars
    C. transfer payments
    D. national defense
    C. transfer payments
    (this multiple choice question has been scrambled)
  12. Illegal activities are not computed as part of measured GDP because they are not: 

    A. production
    B. reported
    C. legal
    D. big enough to worry about
    B. reported
    (this multiple choice question has been scrambled)
  13. The three types of unemployment are: 

    A. structural, natural, and total
    B. cyclical, natural, and full
    C. cyclical, frictional, and structural
    D. frictional, natural, and total
    C. cyclical, frictional, and structural
    (this multiple choice question has been scrambled)
  14. The natural rate of unemployment consists solely of: 

    A. Frictional and structural 
    B. Cyclical and structural 
    C. Cyclical, frictional, and structural
    D. Frictional and cyclical
    A. Frictional and structural
    (this multiple choice question has been scrambled)
  15. The effect of unemployment today may carry over and linger into the future because: 

    A. unemployment makes people really unhappy
    B. a person must be actively seeking work to be counted as unemployed
    C. discouraged workers are not measured in the unemployment rate
    D. those that experience prolonged unemployment lose job skills that are difficult to recover
    D. those that experience prolonged unemployment lose job skills that are difficult to recover
    (this multiple choice question has been scrambled)
  16. If the price index is 55 in 1998 and 60 in 1990, the rate of inflation between the two years is: 

    A. 7%
    B. 5%
    C. 10%
    D. 9.1%
    D. 9.1%
    (this multiple choice question has been scrambled)
  17. The single largest component of the 'basket of goods' that comprises the CPI is the category for: 

    A. food and beverages
    B. rent
    C. medical services
    D. transportation
    B. rent
    (this multiple choice question has been scrambled)
  18. An example of a major technological innovation that could have caused major economic fluctuations is: 

    a. computers
    b. electricity
    c. steam power
    d. all of the above
    d. all of the above
  19. The production functions illustrates the relationship between 

    A. technology and ouput
    B. output and cost of production
    C. capital and labor
    D. factors of production and output
    D. factors of production and output
    (this multiple choice question has been scrambled)
  20. Labor market equilibrium occurs at a rage wage rate at which the quantity demanded for labor equals: 

    A. the quantity supplied for labor
    B. the quantity demanded for labor
    C. full employment
    D. the natural rate of unemployment
    A. the quantity supplied for labor
    (this multiple choice question has been scrambled)
  21. Which of the following may increase technological progress?

    a. Research and development spending
    b. Monopolies
    c. The scale of the market
    d. All of the above
    d. All of the above
  22. Some economists say that economic growth involves a tradeoff between the current generation and future generation. If the current generation raises its saving rate, what does it sacrifice?

    A. physical capital
    B. human capital
    C. capital deepening
    D. current consumption
    D. current consumption
    (this multiple choice question has been scrambled)
  23. Hyperinflation is understood as:

    A. an inflation rate exceeding 50% per month
    B. an inflation rate exceeding 5% per month
    C. an inflation rate exceeding 10% per month
    D. an inflation rate exceeding 20% per month
    A. an inflation rate exceeding 50% per month
    (this multiple choice question has been scrambled)
  24. Some government programs like social security will automatically increase payments because of: 

    A. cost of living adjustments (COLAs) will allow automatic increases in wages and other payments that are tied to the CPI
    B. cost of living adjustments  (COLAs)
    C. inflation
    D. consumer price index (CPI)
    A. cost of living adjustments (COLAs) will allow automatic increases in wages and other payments that are tied to the CPI
    (this multiple choice question has been scrambled)
  25. The recession starting in December 2007 is frequently referred to as 'The Great Depression' that is the most severe economic recession since the Great Depression. This is because:

    A. It lasted 18 months with unemployment rising from 4.6 to 10%
    B. It lasted 16 months with unemployment rising from 4.9 to 8.5%
    C. There was a 4.1% decline in GDP
    D. With a decline in GDP of approximately 4.1%, it lasted for 18 months with unemployment rising from 4.6 to 10%
    D. With a decline in GDP of approximately 4.1%, it lasted for 18 months with unemployment rising from 4.6 to 10%
    (this multiple choice question has been scrambled)
  26. Why do the French and other Europeans work one-third fewer hours than U.S. workers?

    A. Compared to the U.S., there is an increase in tax burden in Europe that ultimately falls on workers
    B. America is a hard working nation, compared to most of the European nations
    C. Europeans prefers leisure to work
    D. Decrease in the tax burden in Europe so that people enjoy more vacations
    A. Compared to the U.S., there is an increase in tax burden in Europe that ultimately falls on workers
    (this multiple choice question has been scrambled)
  27. In the 26 year period from 1978 to 2004, GDP in China grew at a rate of 9.3% per year while India's GDP grew at a lower but still robust rate pf 5.4% per year. Why did China grow faster than India?

    A. Labor productivity in China is much more higher compared to India
    B. China has more population compared to India
    C. China invested much more than India in physical capital and was able to increase its technological progress at a much rapid rate
    D. China is a socialist country
    C. China invested much more than India in physical capital and was able to increase its technological progress at a much rapid rate
    (this multiple choice question has been scrambled)
  28. New growth theory (credited to the names of Robert E. Lucas and Paul Romer) focuses on the role of: 

    A. technological progress
    B. international trade
    C. capital accumulation
    D. population growth
    A. technological progress
    (this multiple choice question has been scrambled)
  29. Which country spends more funds on research and development (R&D) as a percentage of its GDP? 

    A. Germany
    B. France
    C. United States
    D. Japan
    D. Japan
    (this multiple choice question has been scrambled)
  30. Creative destruction is credited to the ideas of: 

    A. Joseph Schumpeter
    B. Robert E. Lucas
    C. Milton Friedman
    D. John Maynard Keynes
    A. Joseph Schumpeter
    (this multiple choice question has been scrambled)
  31. A change in demand causes a ___________ the demand curve. 

    A. a movement along
    B. a shift of
    C. change in income
    D. change in price
    B. a shift of
    (this multiple choice question has been scrambled)
  32. By promoting competition the government generates ____________ product prices. 

    A. lower
    B. unchanged
    C. changed
    D. higher
    A. lower
    (this multiple choice question has been scrambled)
  33. A change in quantity demanded causes a ___________ the demand curve. 

    A. change in price
    B. change in income
    C. shift of
    D. movement along
    D. movement along
    (this multiple choice question has been scrambled)
  34. Economics studies the choices we make when there is ______________. 

    A. scarcity
    B. inequality
    C. poverty
    D. unemployment
    A. scarcity
    (this multiple choice question has been scrambled)
  35. Rational people respond to ______________. 

    A. kindness
    B. incentives
    C. self interest
    D. ethical consequences
    B. incentives
    (this multiple choice question has been scrambled)
  36. The market supply curve is the _________ sum of the individual supply. 

    A. positive
    B. vertical 
    C. horizontal
    D. negative
    C. horizontal
    (this multiple choice question has been scrambled)
  37. What is the economic solution to the congestion problem?

    A. require people to carpool
    B. charge a toll during rush hour
    C. require people to move closer to their jobs
    d. no economist would suggest any of the above
    B. charge a toll during rush hour
    (this multiple choice question has been scrambled)
  38. Which of the following is one of the three basic questions a society must answer

    a. How do we produce products?
    b. What products do we produce?
    c. Who consumes all the products?
    d. All of the above
    d. All of the above
  39. What does the Latin expression ceteris paribus mean?

    A. a measure of something that can take on different values
    B. seize the day
    C. other things are held fixed
    D. Resources are limited
    C. other things are held fixed
    (this multiple choice question has been scrambled)
  40. Which of the following is not a factor of production

    A. human capital
    B. entrepreneurship
    C. money
    D. land 
    C. money
    (this multiple choice question has been scrambled)
  41. The intersection of the supply curve and the demand curve is known as: 

    A. minimum supply price
    B. market equilibrium
    C. law of supply
    D. law of demand
    B. market equilibrium
    (this multiple choice question has been scrambled)
  42. Excess demand occurs when the price is: 

    A. greater than the equilibrium price
    B. less than the equilibrium price
    C. equal to the equilibrium price
    d. none of the above
    B. less than the equilibrium price
    (this multiple choice question has been scrambled)
  43. Excess supply occurs when the price is: 

    A. greater than the equilibrium price
    B. equal to the equilibrium price
    C. less than the equilibrium price
    d. none of the above
    A. greater than the equilibrium price
    (this multiple choice question has been scrambled)
  44. The four important social inventions that have made markets work better are: 

    A. ethics, specialization, antitrust laws and price control
    B. contracts, insurance, patents, and accounting rules
    C. innovation, profit sharing, quality control and low price guarantee
    D. specialization, globalization, trade negotiations and price control
    B. contracts, insurance, patents, and accounting rules
    (this multiple choice question has been scrambled)
  45. Which of the following must be true for markets to operate efficiently?

    A. people must bear the cost and reap the full reward from their decisions
    B. property rights must be divided equally between consumers and producers
    C. consumers and producers must face no uncertainty
    d. all of the above
    A. people must bear the cost and reap the full reward from their decisions
    (this multiple choice question has been scrambled)
  46. An increase in supply decreases the equilibrium price because: 

    a. the quantity supplied exceed the quantity demanded
    b. increase in supply shift the supply curve to the right
    c. the excess supply causes the prices to drop 
    d. all of the above
    d. all of the above
  47. The effects of Hurricane Katrina on the housing market in Baton Rouge is understood as:

    A. The excess demand for homes, with the limited supply of homes, caused the average home prices to rise
    B. population of Baton Rouge increased because of large scale relocation to Baton Rouge from New Orleans
    C. both (b) and (c)
    D. price of homes dropped as a result of the storm
    C. both (b) and (c)
    (this multiple choice question has been scrambled)
  48. An increase in pollination by bees decreases the output of fruit and nuts, increasing the prices of some ingredients of ice cream, resulting in: 

    a. increase in the cost of producing ice cream
    b. shift the supply curve to the right
    c. increased the equilibrium price and decreased the equilibrium quantity
    d. all of the above
    d. all of the above
  49. A heart surgeon is skillfull in unplugging arteries and rerouting the flow of blood. And these skills also make her a ver skillful plumber. She can clear a clogged drain in 6 minutes, about 10 times faster than the most skillful plumber. Should the surgeon clear her own drains?

    A. Yes, her opportunity cost is too high.
    B. No, her opportunity cost is too low. 
    C. No, her opportunity cost is too high.
    D. Yes, her opportunity cost is too low
    C. No, her opportunity cost is too high.
    (this multiple choice question has been scrambled)
  50. A taxi company currently has 9 cabs in its fleet, and its total daily cost is $4,000. If the company added its 10th cab, its daily total cost would be $4,200 or $420 per cab. Adding the 10th car will increase the daily total revenue by $300. Should the company add the 10th cab?

    A. No because total cost is more than revenue
    B. No because the average cost of $420 is more than the revenue of $300 
    C. Yes because the marginal revenue of $300 is greater than the marginal cost of $200
    D. Yes because the total revenue is more than the total cost
    C. Yes because the marginal revenue of $300 is greater than the marginal cost of $200
    (this multiple choice question has been scrambled)
  51. Suppose you borrow money to buy a car and must repay $20,000 in interest and principal in five years. Your current monthly salary is $4,000. Which situation is better for you to repay the car loan?

    A. inflation, where prices and wages rise by 25%
    B. deflation where wages and prices fall by 50%
    C. stable prices and wages
    d. none of the above
    A. inflation, where prices and wages rise by 25%
    (this multiple choice question has been scrambled)
  52. Adam Smith noted that specialization actually increased productivity through division of labor. He listed three reasons for profuctivity to increase with specialization, with each worker preforming a single task. These reasons are:

    A. repetition, continuity, and innovation
    B. division of labor, specialization  and expansion of markets
    C. specialization, exchange and expansion of markets
    D. productivity, division of labor and exchange
    A. repetition, continuity, and innovation
    (this multiple choice question has been scrambled)
  53. True/False

    Most modern economics is based on normative analysis
    False
  54. True/False

    Microeconomics is the study of the nation's economy as a whole; it focuses on the issues of inflation, unemployment, and economic growth
    False
  55. True/False

    Adam Smith suggested that people are motivated solely by self interest
    False
  56. True/False

    A change in quantity supplied is brought about by a change in price, while a change in supply is due to a non-price factor.
    True
  57. True/False

    A change in quantity demanded is indicated by a movement along the demand curve, while a change in demand is shown by a shift of the demand curve.
    True
  58. True/False

    The market supply curve is the horizontal sum of the individual supply curves.
    True
  59. The long run aggregate supply curve is 

    A. vertical
    B. horizontal
    C. downwards sloping
    D. upwards sloping
    A. vertical
    (this multiple choice question has been scrambled)
  60. For most films the biggest cost of doing business is _________

    A. wages
    B. cost of technology
    C. cost of energy
    D. cost of materials
    A. wages
    (this multiple choice question has been scrambled)
  61. Fiscal year for 2011 began and ended on _______. 

    A. June 1, 2010 to May 31, 2011
    B. Jan 1, 2011 to Dec 31, 2011
    C. Oct 1, 2010 to Sept 30, 2011
    D. Oct 1, 2009 to Sept 30, 2010
    C. Oct 1, 2010 to Sept 30, 2011
    (this multiple choice question has been scrambled)
  62. The time taken by policy makers to recognize an economic problem and take appropriate action is known as _________.

    A. fiscal lags
    B. administrative lags
    C. inside lags
    D. outside lags
    C. inside lags
    (this multiple choice question has been scrambled)
  63. If the MPC decreases, the value of the multiplier ____________. 

    A. increase
    B. remain the same
    C. decrease
    d. none of the above
    C. decrease
    (this multiple choice question has been scrambled)
  64. If MPC is .7 the marginal propensity to save (MPS) must be equal to

    A. 1.7
    B. 0.3
    C. 3.3
    D. 1.3
    B. 0.3
    (this multiple choice question has been scrambled)
  65. To increase aggregate demand, the government can:

    A. either increase spending or decrease taxes
    B. increase spending and increase taxes
    C. increase taxes and decrease spending
    D. decrease spending and decrease taxes
    A. either increase spending or decrease taxes
    (this multiple choice question has been scrambled)
  66. An adverse supply shock such as an increase in the price of oil will cause the short run AS  to shift

    A. both upward and downward according to the size of the shock
    B. remain the same
    C. downwards to the right
    D. upwards to the left
    D. upwards to the left
    (this multiple choice question has been scrambled)
  67. John M. Keynes challenged the conventional wisdom that economies would automatically recover from economic downturns. He argued that the fundamental problem causing the world depression was

    A. bad policy and government intervention
    B. excess supply of goods and services
    C. insufficient demand for goods and services
    D. financial institutions like the bank
    C. insufficient demand for goods and services
    (this multiple choice question has been scrambled)
  68. As a country's income increases, its marginal propensity to import will

    A. increase
    B. decrease
    C. remain the same
    d. none of the above
    A. increase
    (this multiple choice question has been scrambled)
  69. A budget deficit is understood as:

    A. the amount by which government spending exceed government revenues in a given year
    B. federal deficit caused by bad policies
    C. the amount by which government revenues exceed government spending
    D. long term effects of excess government spending
    A. the amount by which government spending exceed government revenues in a given year
    (this multiple choice question has been scrambled)
  70. The 'locomotive effect' explains how foreign demand affects a country's output and how countries benefit from growth in their trading partners. This is better understood as a situation where:

    a. As a share of the world economy, the US economy grew approximately 26% in 1992 to 32% in 2001
    b. US imports increased along with output during this period
    c. because the US economy is such an important part of the world, economy, its demand for foreign goods - US imports - fueled exports in foreign countries and promoted their growth
    d. all of the above
    d. all of the above
  71. Which of the following is not a component of aggregate demand

    A. investments
    B. federal government expenditure
    C. depreciation
    D. net exports
    C. depreciation
    (this multiple choice question has been scrambled)
  72. The aggregate demand curve shifts to the right if: 

    A. firms suddenly become optimistic about the future
    B. taxes increase
    C. the money supply decrease
    D. the price level decreases
    A. firms suddenly become optimistic about the future
    (this multiple choice question has been scrambled)
  73. A fall in the price causes the aggregate demand curve to slope downwards to the right because of: 

    A. the tax effect and public spending effect
    B. the wealth effect, interest rate effect and international effect
    C. increase in money supply and fall in interest rate
    D. the consumption function and multiplier
    B. the wealth effect, interest rate effect and international effect
    (this multiple choice question has been scrambled)
  74. Stagflation refers to a situation where: 

    A. the economy is in recession and prices are sticky
    B. stock prices are falling
    C. prices are increasing and output is falling
    D. unemployment is rising but prices are falling
    C. prices are increasing and output is falling
    (this multiple choice question has been scrambled)
  75. The largest component of federal spending is:

    A. entitlement and mandatory spending
    B. deficit spending
    C. discretionary spending
    D. consumption spending
    A. entitlement and mandatory spending
    (this multiple choice question has been scrambled)
  76. Which of the following is an entitlement program?

    A. private investment spending
    B. spending on defense
    C. spending on Medicaid
    D. personal income taxes
    C. spending on Medicaid
    (this multiple choice question has been scrambled)
  77. Which of the following is one of the primary sources of government revenue?

    A. individual income tax
    B. sales tax
    C. excise tax
    D. estate tax
    A. individual income tax
    (this multiple choice question has been scrambled)
  78. Suppose the government runs a large deficit for successive years. In the future, the interest component in total outlays will: 

    A. Decrease because expenditures on net interest rate are inversely related to the total government debt
    B. Decrease because the deficit will increase the debt at an decreasing rate
    C. Remain unchanged because higher government debt will be offset by lower interest rate
    D. Increase because the deficit will increase the debt and lead to higher interest payments
    D. Increase because the deficit will increase the debt and lead to higher interest payments
    (this multiple choice question has been scrambled)
  79. The US economy witnessed federal budget surplus in the 20th century under:

    A. Regan
    B. Carter
    C. George W. Bush
    D. Clinton
    D. Clinton
    (this multiple choice question has been scrambled)
  80. Which of the following factors led the US from federal surpluses at the end of 1990s to deficits in the first decade of 2000?

    A. tax cuts combined with increased spending 
    B. tax cuts combined with spending cuts
    C. tax hike combined with increased spending 
    D. tax hike combined with spending cuts
    A. tax cuts combined with increased spending
    (this multiple choice question has been scrambled)
  81. At any point on the 45 degree line, planned expenditures are: 

    A. less than output or income
    B. unrelated to output
    C. greater than output or income
    D. equal to output or income
    D. equal to output or income
    (this multiple choice question has been scrambled)
  82. Suppose economists see that inventories are suddenly increasing. Which of the following may be causing this increase in inventories?

    A. Increase in the demand for goods and services
    B. Decrease in the price for goods and services
    C. Decrease in the demand for goods and services
    D. Increase in the price for goods and services
    C. Decrease in the demand for goods and services
    (this multiple choice question has been scrambled)
  83. Which of the following describes the slope of the consumption function?

    A. Average Propensity to Consume
    B. Autonomous consumption
    C. Marginal Propensity to Consume
    D. Marginal Propensity to Save
    C. Marginal Propensity to Consume
    (this multiple choice question has been scrambled)
  84. If autonomous consumption decreases, then the consumption function will: 

    A. shift upwards
    B. not shift
    C. shift downwards
    D. get flatter
    C. shift downwards
    (this multiple choice question has been scrambled)
  85. Economists believe that the increase in housing prices after 2002 was related to the fall in household savings that was also observed during that period, because increases in:

    A. consumer wealth will cause an increase in autonomous consumption
    B. marginal propensity to consume will decrease household savings
    C. consumption income will cause an increase in autonomous consumption
    D. consumer wealth will cause an increase in household savings
    A. consumer wealth will cause an increase in autonomous consumption
    (this multiple choice question has been scrambled)
  86. Which of the following do you think is the most significant reason for economic stability today?

    A. government stabilization policies
    B. higher consumer reliance on permanent income
    C. higher taxes and transfer payments
    D. better inventory management practices
    C. higher taxes and transfer payments
    (this multiple choice question has been scrambled)
  87. When the stock market fell sharply in 2008 and 2009, many people near their retirement found that their savings for retirement were dramatically reduced. This would result in:

    A. Higher levels of spending since people would rather spend than save
    B. Lower levels of spending which is consistent with the wealth effect
    C. Lower levels of spending, which is not consistent with the wealth effect
    D. Higher levels of spending since people would continue working instead of retiring
    B. Lower levels of spending which is consistent with the wealth effect
    (this multiple choice question has been scrambled)
  88. Consumption function refers to:

    A. the relationship between consumption spending and the level of income
    B. the relationship between consumption and GDP
    C. the relationship between input and output
    D. the relationship between the price level and GDP 
    A. the relationship between consumption spending and the level of income
    (this multiple choice question has been scrambled)
  89. If consumer confidence decreases, then the consumption function will: 

    A. get flatter
    B. shift upwards
    C. not shift
    D. shift downwards
    D. shift downwards
    (this multiple choice question has been scrambled)
  90. Permanent income refers to:

    A. an estimate of a household's life-cycle income
    B. an estimate of a household's long run average level of income
    C. an estimate of a family's income relative to the income of neighboring families
    D. the absolute income that households receive in a given year
    B. an estimate of a household's long run average level of income
    (this multiple choice question has been scrambled)
  91. The largest component of M1 in the US is __________. 

    A. demand deposits
    B. currency
    C. savings deposits
    D. money market mutual funds
    B. currency
    (this multiple choice question has been scrambled)
  92. To increase the supply of money, the Fed should ________ bonds. 

    A. sell
    B. hold on
    C. purchase
    d. all of the above
    C. purchase
    (this multiple choice question has been scrambled)
  93. If you strongly believe that the Fed is going to lower interest rates, you would want to _________ bonds.

    A. hold on
    B. purchase
    C. sell
    d. all of the above
    B. purchase
    (this multiple choice question has been scrambled)
  94. Studies show that committees tend to perform ________ individuals in monetary policy

    A. almost the same as
    B. the same as
    C. better than
    D. worse than
    C. better than
    (this multiple choice question has been scrambled)
  95. David Ricardo and John Stuart Mill are known as ____________ economists. 

    A. Classical
    B. Monetarist
    C. Liberal
    D. Keynesian
    A. Classical
    (this multiple choice question has been scrambled)
  96. If the growth rate of money supply suddenly increases from 3 to 5%, interest rates will initially __________. 

    A. fall
    B. stay the same
    C. rise
    d. none of the above
    A. fall
    (this multiple choice question has been scrambled)
  97. Credit cards are not considered part of the money supply because:

    a. they are a unit of account
    b. they are a loan which you have to use money to pay for later
    c. they make it easier to conduct business
    d. they represent a store of value
    b. they are a loan which you have to use money to pay for later
  98. Which of the following will decrease the money supply? 

    A. increasing reserve requirements
    B. decreasing the federal funds rate
    C. decreasing the discount rate
    D. purchasing bonds
    A. increasing reserve requirements
    (this multiple choice question has been scrambled)
  99. Banks trade reserves with one another in the: 

    A. money market
    B. federal funds market
    C. discount market
    D. capital market
    B. federal funds market
    (this multiple choice question has been scrambled)
  100. Banks borrow funds from the Fed at the:

    A. federal funds rate
    B. open market rate
    C. discount rate
    D. real interest rate
    C. discount rate
    (this multiple choice question has been scrambled)
  101. If investors began to think that the stock market is becoming more risky, how will this belief affect the demand for money? It will

    A. Be unchanged since stocks and currency are different assets.
    B. Decrease since people want less money to buy stocks
    C. Increase since people will want more money to buy stocks
    D. Increase since people will prefer assets that have a more certain value 
    D. Increase since people will prefer assets that have a more certain value
    (this multiple choice question has been scrambled)
  102. To increase the level of output in the short run, the Fed should:

    A. conduct an open market purchase
    B. conduct an open market sale
    C. raise the federal funds rate
    D. raise the discount rate
    A. conduct an open market purchase
    (this multiple choice question has been scrambled)
  103. Which of the following variables should be examined when making monetary policy decisions?

    a. prices in the bond and stock markets
    b. inflation
    c. exchange rates
    d. all of the above
    d. all of the above
  104. Short run in macroeconomics is the time period over which:

    A. employment do not adjust
    B. prices adjust
    C. the money supply does not adjust
    D. prices do not adjust
    D. prices do not adjust
    (this multiple choice question has been scrambled)
  105. Suppose golf become popular, but tennis declines in popularity. Which of the following would be expected to occur?

    A. wages and prices will fall in golf industries and rise in the tennis
    B. wages and prices will rise in both industries
    C. wages and prices will rise in golf industry and fall in the tennis industry
    D. wages and prices will fall in both industries
    C. wages and prices will rise in golf industry and fall in the tennis industry
    (this multiple choice question has been scrambled)
  106. It is likely that firms have more accurate information about the future course of inflation than workers because:

    A. firms have rational expectations and workers do not
    B. firms usually have broader access to data than individual workers
    C. firms have complete information about all prices in the economy
    D. workers have rational expectations and firms do not
    B. firms usually have broader access to data than individual workers
    (this multiple choice question has been scrambled)
  107. Some economists noticed that during Zimbabwe's hyperinflation, the economy was turning into a bartering economy. This could be expected to occur because: 

    A. the government banned the use of currency
    B. the value of money was decreasing rapidly
    C. the value of money was increasing rapidly
    D. the high population has made this practical
    B. the value of money was decreasing rapidly
    (this multiple choice question has been scrambled)
  108. The balance sheet of a bank shows:

    A. a statement that shows its owner's equity
    B. the statement that shows its deposits and reserves
    C. an account statement that shows its assets and liabilities
    D. the statement that shows its loans and reserves
    C. an account statement that shows its assets and liabilities
    (this multiple choice question has been scrambled)
  109. Refrigerators and clothing are to some extent durable goods. The decision to purchase a refrigerator is likely to be more sensitive to interest rates than the decision to buy clothing because:

    A. Refrigerators are expensive and sometimes payment is financed
    B. It takes longer to pick out a refrigerator
    C. Neither should be sensitive to interest rates
    D. Clothing is more important than refrigerators
    A. Refrigerators are expensive and sometimes payment is financed
    (this multiple choice question has been scrambled)
  110. Long run in macroeconomics is the time period over which:

    A. prices do not adjust
    B. prices adjust
    C. employment do not adjust
    D. the money supply does not adjust
    B. prices adjust
    (this multiple choice question has been scrambled)
  111. In the short run GDP is determined by the demand for goods and services so fiscal and monetary policy can affect demand and GDP. However, in the long run, GDP is determined by:

    A. Supply and demand
    B. The supply of labor, the stock of capital, and technological progress
    C. Aggregate demand and aggregate supply
    D. Wages and prices and their adjustments over time
    B. The supply of labor, the stock of capital, and technological progress
    (this multiple choice question has been scrambled)
  112. Most of the currency in the official statistics not used in ordinary commerce in the US. Who is using and holding this money?

    A. Both (a) and (b)
    B. Some is used in illegal transactions such as the drug trade.
    C. A substantial fraction of US currency is held abroad
    D. The dollar is only used in Latin America
    A. Both (a) and (b)
    (this multiple choice question has been scrambled)
  113. Money solves the problem to double coincidence of wants that would regularly occur under a system of:

    A. credit cards
    B. barter
    C. debit cards
    D. money
    B. barter
    (this multiple choice question has been scrambled)
  114. Banks are required by law to keep a fraction of their deposits as:

    A. reserves
    B. owner's equity
    C. savings deposits
    D. loans
    A. reserves
    (this multiple choice question has been scrambled)
  115. The Federal Reserve is NOT theLL
    A. Agency that decides the tax rates
    B. US central bank
    C. Lender of last resorts
    D. Agency that conduct monetary policy
    A. Agency that decides the tax rates
    (this multiple choice question has been scrambled)
  116. To help ensure political independence each member of the Board of Governors is appointed for a term of:

    A. 7 years
    B. 10 years
    C. 14 years
    D. 4 years
    C. 14 years
    (this multiple choice question has been scrambled)
  117. Which of the following is a reason that the president of the New York Federal Reserve Bank is always a voting member of the Federal Open Market Committee?

    a. The FRB of NY conducts monetary policy
    b. New York is a major economic power of the US
    c. New York is the world's financial center
    d. All of the above
    d. All of the above
  118. In the banking system, the difference between the Federal Reserve's credits and debits is the:

    A. liability
    B. reserve
    C. money
    D. float
    D. float
    (this multiple choice question has been scrambled)
  119. We measure the opportunity cost of hoolding money with

    A. currency 
    B. liquidity
    C. money demand
    D. interest rates
    D. interest rates
    (this multiple choice question has been scrambled)
  120. Which principle suggests that the demand for money should increase as prices increase?

    A. The principle of liquidity
    B. The ceteris paribus principle
    C. The principle of opportunity costs
    D. The  real nominal principle
    D. The  real nominal principle
    (this multiple choice question has been scrambled)
  121. The demand for money arising from individual and business use in ordinary business is the:

    A. liquidity demand
    B. speculative demand
    C. asset demand
    D. transactions demand
    D. transactions demand
    (this multiple choice question has been scrambled)
  122. Suppose the US's currency came under attack by speculators and to prevent the value of its currency falling, the central bank raise the interest rates. What would be the side effect of such a policy?

    A. Exports will rise
    B. GDP will increase
    C. Net exports will fall
    D. US currency will depreciate in value
    C. Net exports will fall
    (this multiple choice question has been scrambled)

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