Incomes policies of the federal government include:
a. presidential jawboning.
b. wage-price guidelines.
c. wage-price controls.
d. All of these.
Assume we have a simplified banking system in balance-sheet equilibrium. Also
assume that all banks are subject to a uniform 10 percent reserve requirement and
demand deposits are the only form of money. A commercial bank receiving a new
demand deposit of $100 would be able to extend new loans in the amount of:
a. $10.
b. $90.
c. $100.
d. $1,000.
Stagflation occurs when the economy experiences:
a. low unemployment and low inflation.
b. high unemployment and rapid inflation.
c. low unemployment and rapid inflation.
d. high unemployment and low inflation.
The characteristics that money should have include:
a. portability, durability, and flexibility.
b. durability, flexibility and stability.
c. durability, portability, and non-homogeneity.
d. scarcity, portability, and divisibility.
e. portability, homogeneity, and flexibility.
If people buy less chewing gum at every price when their incomes fall, then:
a. chewing gum is a normal good.
b. the demand for chewing gum is positively sloped.
c. demand for chewing gum has increased.
d. the price of chewing gum has increased.
e. there has been a decrease in population that changed demand.
Exhibit 16-3 Money market demand and supply curves
In Exhibit 16-3, assume an equilibrium with an interest rate of 15 percent and the
money supply at $100 billion. The Fed uses its policy tools to move the economy to a
new equilibrium at E2 with money supply of $150 billion and an interest rate of 10
percent. This change could be the result of a(n):
a. open market sale of securities by the Fed.
b. higher discount rate set by the Fed.
c. higher required-reserve ratio set by the Fed.
d. open market purchase of securities by the Fed.
National income:
a. represents total wages and salaries in an economy.
b. equals GDP minus indirect business taxes.
c. equals GDP minus depreciation.
d. equals C + I + G + (X – M).
e. is the value of existing capital stock used up in making goods.
Which one of the following financial statements reports an entity’s financial position at
a specific date?
a. Balance sheet
b. Statement of retained earnings
c. Income statement
d. Both the income statement and the balance sheet
As the marginal propensity to consume (MPC) increases, the spending multiplier:
a. increases.
b. decreases.
c. remains constant.
d. becomes undefinable.
Monetarists reject using discretionary monetary policy as an effective stabilization tool
because they believe:
a. if the money supply grows at a rate equal to the economy’s long-run rate of economic
growth, then the economy will be unstable.
b. that changes in the money stock do not affect output or prices.
c. the Fed will miss its money supply targets and make the economy worse.
d. monetary policy can stimulate aggregate demand, but it cannot affect inflation.
Which of the following is true, other things equal?
a. A reduction in prices will increase the real wealth of those holding a fixed quantity of
money.
b. A reduction in prices will lead to a decline in net exports.
c. A reduction in prices will increase the scarcity of money, raise the real interest rate,
and, thereby, encourage investment and consumption.
d. A reduction in prices will increase profit margins and, thereby, stimulate additional
investment.
Which of the following is the most likely effect of lower apple juice prices on the price
and quantity purchased of orange juice, a substitute product?
a. The price of orange juice will increase, and the quantity purchased will fall.
b. The price of orange juice will fall, and the quantity purchased will increase.
c. The price of orange juice will increase, and the quantity purchased will increase.
d. The price of orange juice will fall, and the quantity purchased will fall.
Decisions regarding purchases and sales of government securities by the Fed are made
by the:
a. Federal Funds Committee. .
b. Discount Committee.
c. Federal Open Market Committee
d. FDIC.
Economic growth is measured by the annual percentage increase in a nation’s level of:
a. nominal GDP.
b. real GDP.
c. real GDP deflator.
d. economic indicators.
A decrease in the interest rate, other things being equal, causes a(n):
a. upward movement along the demand curve for money.
b. downward movement along the demand curve for money.
c. rightward shift of the demand curve for money.
d. leftward shift of the demand curve for money.