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If the required reserve ratio is 0.25 and the First National Bank holds $10 million in
demand deposits and $5 million in reserves, how much more in demand deposits is this
bank capable of creating?
a. $0
b. $0.625 million
c. $1.875 million
d. $2.5 million
e. $10 million
Consider the market for ground beef represented by Figure 3-12, which is initially in
equilibrium at point J. Which of the following is correct if equilibrium shifts to point K?
a. There is an excess supply of 50,000 pounds at the price of $1.00.
b. The demand decreased due to a lower price substitute.
c. There is an excess demand of 25,000 pounds at the price of $1.00.
d. The shift in supply will cause a temporary shortage, which will disappear when the
price rises to $1.50.
e. Both demand and the quantity demanded have dropped.
If output is below the full-employment level of output, we should expect wages to
increase over time.
In a command system, the decision about what should be produced is made by
a. a central authority
b. the market
c. repeating what was done in the past
d. business firms
e. consumers
Use the table below to find the real wage in 2008 (in 2007 dollars).
a. $13.00
b. $11.82
c. $14.30
d. $11.78
e. $11.48
A real variable is
a. measured in terms of after-tax dollars
b. measured in terms of dollars and not foreign currency
c. measured in nominal terms
d. measured in terms of current dollars
e. measured in terms of purchasing power
After an excise tax is imposed on a good or service,
a. the equilibrium price and quantity are unchanged
b. firms must charge a higher price for any particular quantity
c. firms must charge a lower price for any particular quantity
d. the equilibrium price and quantity will both increase
e. the equilibrium price and quantity will both decrease
Which of the following is the best example of a stock variable?
a. U.S. GDP in 2008
b. The daily sales of economics textbooks
c. Bill Gates' annual salary from Microsoft Corporation
d. The total wealth of the 50 richest U.S. citizens
e. U.S. government purchases during 2008
Suppose that a large dairy farmer is able to raise the market price of milk by
withholding milk supply from the market. In this instance,
a. the milk market is perfectly competitive
b. buyers will decrease their demand for milk
c. buyers will increase their demand for milk
d. the milk market is imperfectly competitive
e. the milk market will collapse in the long run
Economic models are used primarily to
a. predict behavior under specific circumstances
b. make an exact reproduction of one facet of the economy
c. increase the mathematical complexity and rigor of economics
d. provide simple answers to simple questions
e. give accurate forecasts of the future
The role of prices in a market economy is to
a. make producers rich at the expense of consumers
b. replicate what society produced in the past
c. determine the allocation of resources
d. enforce what the government chooses
e. force consumers to pay for business profits
Open market purchases of bonds by the Federal Reserve eventually
a. reduce the pressures on bond markets
b. increase real GDP
c. lead to open market sales of bonds
d. increase the interest rate
e. encourage tax increases
Growth in employment occurs only because of increases in labor demand due to
government hiring.
The national debt must be paid back in the future.
