Given the balance sheet below and assuming a required reserve ratio of 20 percent, how
much (in dollar terms) is this bank actually holding in reserves?
a. $3.5 million
b. $8 million
c. $15 million
d. $20 million
e. $35 million
One way to increase economic efficiency in saving lives is to
a. shift resources toward methods with low cost per life saved
b. shift resources toward methods with high cost per life saved
c. allocate more resources to saving lives
d. allocate fewer resources to saving lives
e. move along the production possibilities frontier and increase the number of lives
saved
In the classical model, the loanable funds market will clear when saving
a. equals investment plus government purchases minus net taxes
b. equals net taxes
c. equals investment
d. equals investment plus government purchases
e. minus taxes equals investment plus government purchases
Which of the following is the relationship between the required reserve ratio (RRR) and
the demand deposit multiplier?
a. The demand deposit multiplier = 1/RRR
b. The demand deposit multiplier = RRR ´ change in reserves
c. The demand deposit multiplier = 1/(1 + RRR)
d. RRR = demand deposit multiplier
e. The demand deposit multiplier = 1/(1 – RRR).
Nancy buys a $150,000 home using $30,000 of her own money and gets a mortgage for
the remaining $120,000. If the price of the house increases 5%, what will Nancy’s
capital gain be?
a. $30,000
b. $31,500
c. $35,000
d. $37,500
e. $45,550
At what U.S. unemployment rate do most economists believe full employment occurs?
a. 0 percent
b. between 1.5 and 2.0 percent
c. between 4.5 and 5.0 percent
d. between 5.5 and 6.0 percent
e. between 7.5 and 8.0 percent
On a graph, the private sector’s demand for loanable funds curve is
a. upward sloping
b. vertical
c. horizontal
d. downward sloping
e. horizontal then upward sloping
Prices of finished imported goods are
a. not included in the CPI because the goods were produced outside the country
b. not included in the CPI because different countries choose different base periods
c. not included in the CPI because import prices are not denominated in U.S. dollars
d. not included in the CPI because most imports are raw materials
e. included in the CPI
If the Fed increased the discount rate,
a. banks would make more loans
b. the money supply would increase
c. firms would be more likely to seek out loans
d. the required reserve ratio would increase
e. banks would make fewer loans
Under a managed float, if U.S. GDP suddenly increased, which of the following actions
would the Bank of England need to take in order to stop any movement in the
dollar-pound exchange rate?
a. Buy British pounds for dollars in order to shift the demand curve for pounds leftward
b. Sell British pounds for dollars in order to shift the supply curve for pounds leftward
c. Sell British pounds for dollars in order to shift the supply curve for pounds rightward
d. Buy British pounds for dollars in order to shift the demand curve for pounds
rightward
e. Do nothing, since purchasing power parity will correct the situation in the short run.
Which of the following is a role of a financial intermediary?
a. Increasing risk to lenders
b. Combining a large number of loans of small borrowers into a small number of
deposits of large savers
c. Decreasing liquidity for savers
d. Reducing risk to depositors
e. Increasing interest rates for both borrowers and lenders.
Suppose that an economy produces civilian goods and military goods. If technological
breakthroughs increase its ability to produce military goods, then
a. fewer military goods will be produced
b. more civilian goods will be produced
c. the opportunity cost of producing military goods will rise
d. there will be productive inefficiency in the economy
e. the production possibilities frontier will pivot outward around the axis for military
goods
A group of buyers and sellers with the potential to trade with each other is known as
a(n)
a. trading bloc
b. cartel
c. market
d. industry
e. sector