Given the balance sheet below and assuming a required reserve ratio of 20 percent, how
much (in dollar terms) must the bank hold in required reserves?
a. It is failing to meet its reserve requirement.
b. It is just meeting its reserve requirement, but has no excess reserves.
c. It is meeting its reserve requirement, and has $5 million in excess reserves.
d. It is meeting its reserve requirement, and has $10 million in excess reserves.
e. It is meeting its reserve requirement, and has $15 million in excess reserves.
If net taxes decrease by $500 billion, both household disposable income and
consumption spending will increase by $500 billion.
If we included the purchases of used goods in GDP,
a. we would be overestimating GDP
b. we would be underestimating GDP
c. we would be accurately measuring GDP
d. the effect on GDP would vary depending on what year the goods were sold new
e. we could offset any measurement problems by also including purchases of stocks and
bonds
In a perfectly competitive market,
a. there can be few or many buyers and sellers
b. the price is driven upward when suppliers hold back on goods and services
c. each participant is too small to affect the market price
d. government intervention is needed to ensure that prices are fair for consumers
e. resources are allocated by a central authority
Refer to Figure 9-6. Starting from a balanced budget, the government runs a budget
deficit of $200 billion. Investment spending will
a. decrease by $100 billion
b. decrease by $200 billion
c. increase by $100 billion
d. increase by $200 billion
e. not be affected by government budget deficit
Which of the following would lead to a leftward shift in the supply curve for Czech
kroner?
a. A decrease in the dollar-krona exchange rate
b. An increase in the Czech Republic’s GDP relative to U.S. GDP
c. Expectation that the dollar price of the krona will rise
d. Stronger Czech interest in U.S. audio CDs
e. An increase in the U.S. interest rate relative to the Czech interest rate.
The CPI is used
a. to estimate from estimated to actual values
b. to translate from real to nominal values
c. to translate from nominal to real values
d. as a policy target
e. c and d.
When a recession begins and ends is determined by a committee within the
a. Office of Management and Budget
b. Bureau of Economic Analysis
c. Council of Economic Advisors
d. National Bureau of Economic Research
e. Bureau of Labor Statistics
Which of the following is the study of economic policy recommendations?
a. positive economics
b. law and economics
c. microeconomics
d. development economics
e. normative economics
Changes in business inventories are part of private investment spending.
Which of the following could lead to a bank’s failure, even if the bank has positive net
worth?
a. The bank may encounter difficulty selling its government bonds.
b. Most of the bank’s liabilities are illiquid.
c. A bank with positive net worth cannot fail.
d. The bank may encounter difficulty borrowing reserves from the Federal Reserve.
e. Most of the bank’s assets are illiquid.
Investment spending is a stock variable.
Over the past twenty years the Fed’s policy experience
a. has been good and improving
b. is an indicator that economic policy is confused
c. shows a focus on full employment
d. reveals a lack of concern about unemployment
e. has been generally poor and deteriorating
Federal Deposit Insurance Corporation protection of deposits
a. increases the likelihood of bank runs
b. increases bankers’ incentives to be cautious with depositors’ money
c. reduces bankers’ incentives to be cautious with depositors’ money
d. lessens the need for the Fed to regulate banking activity
e. began in 1913 with the creation of the Fed
An assumption that affects a model in important ways is
a. a key step
b. a simplifying assumption
c. a bad assumption, one that should be avoided in economic theory
d. a critical assumption
e. one that should be replaced with empirical evidence