The Fed’s objectives present it with a true dilemma when
a. there are demand shocks caused by shifts in money demand
b. there are demand shocks caused by changes in spending
c. there are negative supply shocks
d. cyclical unemployment exists
e. there is member bank opposition
In general, a higher-than-anticipated inflation rate
a. helps everyone
b. hurts everyone
c. helps creditors and harms debtors
d. helps debtors and harms creditors
e. helps sellers
Which of the following people would be considered employed in the Census Bureau’s
Household Survey?
a. A homemaker working 20 hours cleaning her house
b. A person paid to work 2 hours per week cleaning houses
c. A child shoveling neighbors’ driveways for money
d. A person volunteering full-time at a local hospital
e. A laid-off carpenter looking for a job
Which of the following is a reason why a country barely at subsistence levels cannot
achieve growth very easily?
a. It cannot decrease capital goods in order to increase consumption goods.
b. The lower income means that Say’s law does not apply here.
c. Too much savings exist and therefore it remains underutilized.
d. It cannot decrease consumption goods in order to increase capital goods.
e. It cannot decrease capital goods in order to also decrease consumption goods.
The secondary market for bonds is
a. where new issues of bonds are purchased
b. of less importance to our economy than is the primary market
c. of less importance to our economy than the stock market
d. where bonds that were issued in previous periods are purchased
e. a key determinant of the money supply
If the Federal Reserve sells a $2,000 bond to a bond dealer who pays with a check
written on an account at Second National Bank, what changes will occur on the bank’s
balance sheet after the check clears?
a. Reserves and total assets will increase by $2,000; demand deposits and total
liabilities will decrease by $2,000.
b. Reserves, demand deposits, total assets, and total liabilities will all increase by
$2,000.
c. Reserves and total assets will decrease by $2,000; demand deposits and total
liabilities will increase by $2,000.
d. Reserves, demand deposits, total assets, and total liabilities will all decrease by
$2,000.
e. Reserves will decrease by $2,000; demand deposits, total assets, and total liabilities
will all increase by $2,000.
Which of the following could shift the labor supply curve and increase employment?
a. An increase in the number of firms
b. An increase in income tax rates
c. Increased spending on welfare programs
d. Increased federal funding for education
e. A decrease in income tax rates
In the classical model, investment spending is
a. positively related to the level of income
b. positively related to the interest rate
c. negatively related to the interest rate
d. unrelated to the interest rate
e. negatively related to the price level
The investment demand curve
a. is upward sloping
b. is downward sloping
c. is horizontal
d. begins sloping upward then flattens out
e. begins sloping downward, then flattens out
Which group of people would be characterized as unemployed?
a. Those who are unwilling to work
b. Those who are unable to find work
c. Those who are unable to work
d. Those who did not search for work
e. Those who are too young to work
When we add the up value of all capital goods, we determine
a. private investment
b. the capital stock
c. a flow phenomenon
d. GDP
e. inventory
A bank’s balance sheet can show a negative net worth and yet its income statement can
show a profit for the year.
If the Consumer Price Index (CPI) increases from 100 to 200 and the nominal wage
increases from $100 to $400, what is the change in the real wage in terms of the
beginning year’s dollars?
a. +$200
b. +$400
c. +$100
d. +$300
e. -$200
Which of the following defines a recession?
a. Real GDP is increasing.
b. Real GDP is decreasing.
c. Real GDP is below its full employment level.
d. Unemployment is unusually low.
e. Employment growth is positive.
At each level of income, net taxes reduce disposable income, thereby reducing
consumption spending.
Economics is the study of choice under conditions of
a. demand
b. supply
c. scarcity
d. opportunity
e. abundance
The statement that “at 10 percent, the interest rate is too high for families to buy the
home they deserve,” is a(n)
a. positive statement
b. normative statement
c. morally ambiguous philosophical position
d. affront to the American dream
e. value judgment
An economic model is
a. a concrete representation of reality
b. as close to reality as possible
c. too abstract to be useful when assumptions are involved
d. unrelated to reality
e. an abstract representation of reality
The occurrence of the Great Depression offered evidence that supported
a. the classical theory of economics
b. the need for the government to practice the policy of laissez faire
c. the need for the government to control prices
d. Congress to take action to stop rising prices
e. the Keynesian idea that the government needed to guide the economy