A bank has reserves of $40, loans of $110, deposits of $90, and owners’ equity of $60.
Which of the following represents the bank’s total assets?
A) $180
B) $110
C) $130
D) $150
Crowding out refers to
A) an increase of investment caused by an increase in government spending.
B) a decrease in investment caused by an increase in government spending.
C) a decrease in investment caused by a decrease in government spending.
D) an increase of investment caused by a decrease in government spending.
According to the quantity equation, an increase in the velocity of money, all else fixed,
will tend to cause:
A) an increase in the money supply.
B) a reduction in the money supply.
C) an increase in nominal GDP.
D) a reduction in nominal GDP.
Becky demands more raisins as her income increases. From this, we can conclude that,
for Becky:
A) raisins are an inferior good.
B) raisins are a complementary good.
C) raisins are a normal good.
D) raisins are a substitute good.
Suppose that the government collects $500 in taxes and borrows $1000 from the public.
If the government prints $200 in new money to finance its budget deficit, how much is
the government spending?
A) $1700
B) $1500
C) $700
D) $1200
When calculating GDP, exports are ________ and imports are ________.
A) added; added
B) added; subtracted
C) subtracted; added
D) subtracted; subtracted
Suppose an economy consists of 500,000 individuals 16 years and older, 260,000 are
employed, and 21,000 are unemployed but actively seeking work. In this example the
labor force participation rate is approximately
A) 4 percent.
B) 48 percent.
C) 52 percent.
D) 56 percent.
Figure 4.4
Figure 4.4 illustrates the demand for guitars. Assume that guitars and banjos are
substitutes. A decrease in the price of banjos would bring about a movement from:
A) point B to point C.
B) point B to point A.
C) D1 to D0.
D) D1 to D2.
Table 11.2 Refer to Table 11.2. At an aggregate output level of $200, the unplanned
inventory change is:
A) -$150.
B) -$100.
C) -$50.
D) $100.
Recall Application 3, “Debt Forgiveness?” to answer the following questions:
According to the Application, why did many in Congress propose to help homeowners
by lowering their debt principal?
A) to increase the probability of the homeowners to continue to make payments on their
houses
B) to punish Wall Street and big banks
C) to buy votes from the middle class
D) All of the above are correct.
With a higher interest rate, the opportunity cost of keeping your money as cash is:
A) higher.
B) lower.
C) the same, because cash earns no interest.
D) none of the above; it depends on the amount of money and on the amount of years.
The multiplier-accelerator model was first developed by:
A) Paul Samuelson.
B) John Maynard Keynes.
C) Milton Friedman.
D) David Ricardo.
Peaches and cream are complements. When the price of peaches rises, the equilibrium
quantity of cream will ________ and the equilibrium price of cream will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
Individual income taxes are largely collected:
A) by individual states and then transferred to the federal government.
B) through estimated tax payments.
C) by a combination of withheld tax and individual tax due filing payments.
D) by April 15th of the same year.
Compared to consumption, investment is a much ________ component of GDP and is
much more ________.
A) larger; stable
B) smaller; stable
C) larger; volatile
D) smaller; volatile
Paradoxically, the existence of deposit insurance:
A) reduces the financial institutions’ probability of failure but also increases the
probability of bank runs.
B) reduces the risk to depositors but are indirectly linked to the failure of some financial
institutions.
C) reduces the risk to depositors but increases the risks to investors.
D) reduces the risk to investors but increases the risks to depositors.