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Suppose your bank pays you 6% interest per year on your savings account. If prices
increase by 3% per year over that time, approximately how much nominal value do you
gain by keeping $100 in the bank for a year?
A) $6
B) $0
C) $3
D) $106
If Andrew is paid an interest rate of 10% on his savings account, but the inflation rate is
20%, the real (effective) value of his savings account is:
A) constant.
B) rising, but by less than 20 percent.
C) dropping.
D) rising.
The natural rate of unemployment is the estimated rate of unemployment that would
prevail when ________ unemployment is zero.
A) frictional
B) cyclical
C) structural
D) seasonal
If the real wage rises,
A) the marginal cost of labor falls.
B) firms will hire additional labor.
C) the marginal benefit of the worker increases.
D) firms will hire less labor.
Suppose that the required reserve ratio is 0.25. If a customer withdraws $10 million
from a bank, then the money supply could potentially:
A) decrease by $40 million.
B) decrease by $25 million.
C) increase by $40 million.
D) increase by $2.5 million.
Recall the Application about the size of Wal-Mart to answer the following
question(s). During 2008, Wal-Mart's sales were approximately $374 billion, or
roughly 2.6 percent of U.S. GDP, and its cost of sales was $286 billion.
According to this Application, by using a value-added approach to measure Wal-Mart's
sales impact on the economy, we are
A) using a chain-weighted index.
B) avoiding double-counting.
C) including GDP as a measure of welfare.
D) excluding the net foreign sector.
If the consumption function is C = 90 + 0.75y, then the level of autonomous
consumption is
A) 0.25.
B) 0.75.
C) 67.5.
D) 90.
Figure 15.5
Refer to Figure 15.5. If the unemployment rate is above the natural rate, the effect on
the money market is represented by movement from point ________ to point ________.
A) c; a
B) ; d
C) d; a
D) ; a
Which of the following would be likely to lead to a decrease in the natural rate of
unemployment?
A) an increase in the number of teenagers in the workforce
B) a decrease in the length of time during which people can receive unemployment
benefits
C) a prolonged recession
D) all of the above
Gross investment minus depreciation is equal to
A) gross domestic product.
B) net investment.
C) personal investment.
D) nominal investment.
Assuming all excess reserves are loaned out, currency holdings by the public are zero,
and a reserve ratio of 20 percent, an initial deposit of $850 will lead to total deposits of
A) $425.
B) $850.
C) $4,250.
D) $42,500.
If an economy's marginal propensity to consume is 0.6 and the marginal propensity to
import is 0.1, then the multiplier in an open economy is:
A) 2.5.
B) 0.5.
C) 2.
D) 1.5.
Recall Application 2, "Using Long-Term Macro Data to Measure Multipliers," to
answer the following questions:
According to the application, the multiplier for government spending ________ during
periods of high unemployment.
A) was larger
B) was smaller
C) was zero
D) was less than the multiplier for investment spending
Figure 2.2
Figure 2.2 presents a production possibilities curve for a country that can either produce
highways or provide people with medical care in a given year. The figure shows that the
production possibilities curve is:
A) bowed inward.
B) bowed outward.
C) a straight line.
D) bowed inward and then outward.
Which of the following is not an investment in human capital?
A) Local governments begin providing free hepatitis vaccinations to any resident who
wants one.
B) The Precision Tool Company teaches all its workers how to repair the machines in
the factory.
C) Older workers return to school to update their skills.
D) The Ferris Advertising Agency replaces its secretary's typewriters with personal
computers.
