An economic model
a. uses equations to understand normative economic phenomena
b. often omits crucial elements
c. simplifies reality in order to focus on crucial elements
d. tries to make simple concepts more complex
e. cannot be proven wrong
The price of a typical basket of goods and services in one period divided by the price of
the same basket in a different year is a(n)
a. price index
b. TV-violence index
c. employment index
d. output index
e. unemployment index
If the required reserve ratio is 0.25 and the First National Bank holds $10 million in
demand deposits and $2.5 million in reserves, how much more money is the bank
capable of creating?
a. $0
b. $0.625 million
c. $1.875 million
d. $2.5 million
e. $10 million
As of December 2008, housing accounted for about ________ of the typical consumer’s
spending.
a. 32 percent.
b. 30 percent.
c. 43 percent.
d. 65 percent.
e. 70 percent.
The Fed’s efforts to attain full employment are complicated by
a. the persistence of cyclical unemployment
b. the instability of the inflation rate
c. new legislation that attempts to avoid financial panics
d. the difficulty of determining what normal unemployment means
e. conflicting objectives among its member banks
The sale of which of the following would appear without any modification in GDP?
a. Used automobiles
b. Iron ore mined from the ground
c. Maid services
d. Aluminum rods used in construction
e. Wood pulp
Suppose that the level of real GDP is $1,000,000 and the economy has 10,000 workers.
Labor productivity is
a. $100 per worker
b. $0.01 per worker
c. $1,000,000 per worker
d. $1,000 per worker
e. Labor productivity cannot be computed with the information given
When considering the demand for money, which two assets do we assume individuals
can hold?
a. Stocks and bonds
b. Money and stocks
c. Money and bonds
d. Checking accounts and savings accounts
e. Money and real estate
If the government wants to encourage spending on research and development, it should
a. reduce patent protection so many individuals can use new products in their own
research
b. shorten the number of years during which a developer has exclusive patent rights to
market an invention
c. increase the number of years during which an inventor has exclusive patent rights to
market an invention
d. raise tax rates on corporate profits to raise money for the research
e. encourage firms and households to spend money instead of saving it
The standard measure of the money stock, M1, refers to
a. checking account balances, travelers’ checks, and cash in the hands of the public
b. cash in the hands of the public, demand deposits, and small time deposits
c. cash in the hands of the public, savings-type account balances, and travelers’ checks
d. savings-type account balances, small time deposits, and checking account deposits
e. the sum of the cash in the hands of the public
Increases in government purchases, investment spending, and autonomous consumption
all tend to
a. increase real GDP and raise the interest rate
b. increase real GDP and lower the interest rate
c. increase real GDP but leave the interest rate unchanged
d. decrease real GDP and lower the interest rate
e. decrease real GDP and raise the interest rate
At the peak of a business cycle, employment and GDP are
a. at their lowest
b. at their highest
c. rising
d. falling
e. it is impossible to state for certain what is happening to employment and GDP
Which of the following groups typically experience the highest rate of unemployment?
a. Hispanics
b. Female senior citizens
c. Male senior citizens
d. White teenagers
e. Black teenagers
Which of the following markets must clear if injections from the income-spending
stream are to equal leakages from the stream?
a. The resource market
b. The labor market
c. The goods market
d. The aggregate market
e. The loanable funds market
If workers become more productive, which of the following would happen in the labor
market?
a. Labor supply would increase.
b. Labor supply would decrease.
c. Labor demand would increase and labor supply would decrease.
d. Labor demand would decrease and so would labor supply.
e. Labor demand would increase.
In the classical model, beginning from an equilibrium in which the government is
running a budget surplus,
a. this will lower the wage rate
b. the demand for loanable funds will be horizontal
c. an increase in government spending will crowd out more than an equal amount of
private spending
d. an increase in government spending will crowd out an equal amount of private
spending
e. an increase in government spending will crowd out less than an equal amount of
private spending
The demand for funds in the financial market comes from one source: the business
sector’s investment spending.
The statement “The unemployment rate in the U.S. is 5 percent” is
a. a statement of opinion
b. a positive statement that can be falsified
c. lacking proper microeconomic foundations
d. a statistical anomaly
e. a philosophical difference of opinions regarding the nature and significance of
statistical inference
Rapid economic growth has increased the economic well-being of U.S. citizens because
a. people are now earning higher incomes while goods and services are cheaper
b. the dollar is worth now more than in the past
c. the output of goods and services has risen faster than the population
d. the population is now living and working longer
e. the population has increased while production has decreased
The statement that “IBM’s stock closed at $85” is
a. a normative statement
b. a positive statement
c. a macroeconomic observation
d. financial manipulation
e. a sign that the market may be undervalued