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When the U.S. government runs a deficit, it usually does the following:
a. It buys government bonds from the public
b. It asks the Treasury Department to print money to pay for the deficit
c. It sells new government bonds to the public
d. It borrows money directly from the Federal Reserve
e. It asks the Federal Reserve to print money to pay for the deficit.
Refer to Figure 14-6. Suppose the Fed increases the money supply (to . As a result,
the interest rate falls initially to 6 percent. After spending and GDP change, what will
happen to the interest rate?
a. It will remain at 6 percent.
b. It will rise as the money supply curve shifts back toward
c. It will rise as the money demand curve shifts to the right.
d. It will fall as the money supply curve shifts farther to the right.
e. It will fall as the money demand curve shifts to the left.
If the required reserve ratio is 0.25, what is the demand deposit multiplier?
a. 4.00
b. 0.50
c. 0.75
d. 1.33
e. 1.25
Which concept springs to mind when thinking of the classical model?.
a. Inflation.
b. Population growth.
c. Markets clear.
d. The microeconomy.
e. Money supply.
One reason why financial intermediaries are beneficial is that
a. they can predict the pattern of the outflow of funds
b. they earn a profit
c. there are a variety of financial intermediaries
d. they reduce the risk to depositors by spreading loans among different borrowers
e. they charge high interest rates on funds they lend to depositors
Which of the following could lead to a decrease in worker productivity?
a. An increase in the physical capital stock
b. A decrease in the number of workers
c. A war that destroys an enormous amount of plant and equipment
d. An increase in the physical capital stock
e. A decrease in the human capital stock
If the Fed conducts an open market purchase of bonds, the
a. money supply decreases as reserves are injected into the banking system
b. demand for money increases as reserves are drained from the banking system
c. demand for money decreases as reserves are injected into the banking system
d. money supply increases as reserves are injected into the banking system
e. money supply increases as reserves are drained from the banking system
In a market system, prices are determined by
a. corporate executives
b. government bureaucrats
c. supply and demand
d. total market demand
e. production costs
Which of the following would lead to an (eventual) increase in the labor force by
shifting the labor demand curve?
a. A trend toward earlier retirement ages
b. An increase in the working-age population
c. A reduction in the number of guaranteed student loans
d. An increase in college work-study programs
e. A decrease in personal income tax rates
If the marginal propensity to consume is 0.5 and disposable income increases by
$10,000, by how much will consumption spending increase?
a. $10,000
b. $500
c. $50
d. $5,000
e. $9,524
After a negative demand shock, what are the expected long-run adjustments?
a. Wages rise, price level rises, and output falls back to potential
b. Wages fall, price level rises, and output falls back to potential
c. Wages fall, price level falls, and output increases back to potential
d. Wages fall, price level rises, and output increases back to potential
e. Wages rise, price level falls, and output increases back to potential.
If the quantity of money demanded is less than the quantity supplied at a given interest
rate, what will happen to restore the market to equilibrium?
a. The public will try to buy bonds, the price of bonds will increase, and the interest rate
will fall until the equilibrium is attained where the money demand and supply curves
intersect.
b. The public will try to sell bonds, the price of bonds will decrease, and the interest rate
will rise until equilibrium is attained where the money demand and supply curves
intersect.
c. The public will try to sell bonds, the price of bonds will increase, and the interest rate
will fall until equilibrium is attained where the money demand and supply curves
intersect.
d. The public will try to buy bonds, the price of bonds will increase, and the interest rate
will rise until equilibrium is attained where the money demand and supply curves
intersect.
e. The public will try to buy bonds, the price of bonds will decrease, and the interest
rate will fall until equilibrium is attained where the money demand and supply curves
intersect.
Which of the following correctly represents the budget deficit?
a. Tax revenue - government purchases
b. Tax revenue - government outlays
c. Government purchases - tax revenue
d. Government outlays - tax revenue
e. Government outlays - tax revenue - transfer payments.
Although economists use different methods to calculate GDP, each method should lead
to the same number for GDP.
Refer to Figure 14-9. If the aggregate expenditure line shifts from AE1(r = 8%) to
AE2(r = 10%), which of the following is the most likely cause of that shift?
a. An increase in the
money supply
b. A decrease in the money supply
c. An increase in government purchases
d. A decrease in government purchases
e. An increase in taxes.
When money is used to compare the costs of different goods and services, it is
functioning as
a. a unit of account
b. a means of payment
c. fiat money
d. a store of wealth
e. legal tender
Using the table below, calculate GDP:
a. $2,600
b. $1,800
c. $4,800
d. $2,200
e. $2,500
Aggregation is the process of combining different things into a single category.
Which of the following is a major macroeconomic goal?
a. Low prices
b. Fair prices
c. Pure competition
d. Low unemployment
e. High prices
