Archives: Quiz

The net present value (NPV) of an activity or project is equal to the _____ value of all of the revenues minus the _____ value of all of the costs associated with it. A) future; present B) present; present C) […]

Which of the following is a point of the Great Moderation consensus? I. Monetary policy should be the main stabilization policy. II. The central bank should be independent of political influence. III. Discretionary fiscal policy should be used sparingly. A) […]

Figure: Actual and Natural Rates of Unemployment Look at the figure Actual and Natural Rates of Unemployment. In 2014, the natural unemployment rate was approximately: A) zero. B) 3%. C) 5.5%. D) 9%. Scenario: Aggregate Consumption Function Suppose the aggregate […]

In the long run, if the money supply rises by 10%, then the price level may rise by more than 10%. A) True B) False The first country to adopt the euro was Great Britain. A) True B) False Answer: […]

Growth accounting estimates the: A) increase in the population rate over time. B) increase in the inflation rate over time. C) contribution of each major factor in the aggregate production function to economic growth. D) contribution of the technology factor […]

Figure: Consumption and Real GDP Look at the figure Consumption and Real GDP. The slope of the consumption function is called the: A) marginal propensity to save. B) average propensity to consume. C) marginal propensity to consume. D) marginal consumption […]

International trade based on comparative advantage allows a country to produce outside its production possibility frontier. A) True B) False Figure: Shifts in Demand and Supply II Look at the figure Shifts in Demand and Supply II. The figure shows […]

High interest rates in the 1970s: A) helped S&Ls because it increased their return on investment. B) helped S&Ls because higher interest rates on their mortgages increased their profitability. C) hurt S&Ls because they lost savings deposits to investments that […]

As a result of a sharp decrease in aggregate demand between 1929 and 1933, the unemployment rate changed from _____ in 1929 to _____ in 1933. A) 0%; 3% B) 3%: 25% C) 40%; 5% D) 25%; 0% Figure: Shift […]

The largest monetary aggregate is: A) M1, because it contains all of the currency in circulation. B) M2, because it contains currency in circulation, all bank deposits, other deposits, and deposit-like assets. C) the reserves in the vaults of Federal […]

Figure: Policy Alternatives Look at the figure Policy Alternatives. Suppose that the initial equilibrium is at real GDP level Y1 and price level P2 in panel (a). At real GDP level Y1 there is: A) an inflationary gap. B) a […]

Scenario: Money Supply Changes II Charlotte withdraws $8,000 from her checkable bank deposit to pay tuition this semester. Assume that the reserve requirement is 20% and that banks do not hold excess reserves. Look at the scenario Money Supply Changes […]

It is certain that the equilibrium price will rise when the supply curve shifts to the _____ and the demand curve shifts to the _____. A) right; right B) right; left C) left; left D) left; right A shift away […]

Figure: Policy Alternatives Look at the figure Policy Alternatives. If the economy is in equilibrium at Y1 in panel (a) and the government decreases taxes, the result will likely be: A) an increase in unemployment. B) a decrease in interest […]

Suppose that commodity prices across the economy begin to fall and consumers and firms begin to expect a lower rate of inflation. The SRAS curve will shift to the _____, and the short-run Phillips curve will shift _____. A) left; […]

According to the Great Moderation consensus: I. monetary policy should be the main stabilization tool. II. the natural rate of unemployment doesn’t actually exist. A) I only B) II only C) I and II D) neither I nor II A […]

Which of the following is consumption? A) a new computer purchased by Federal Express for one of its corporate executives B) a storage facility for a moving company C) a new car purchased for personal use D) a dump truck […]

According to Okun’s law, unemployment must decrease by 1% for output to increase by 1%. A) True B) False Scenario: Open Economy S= I In an open economy GDP is $12 trillion this year. Consumption is $8 trillion, and government […]

Figure: AD”AS Look at the figure AD”AS. Suppose that initially the economy is at long-run equilibrium. If the government cuts taxes, _____ will shift to the _____. A) SRAS; right B) SRAS; left C) AD1; right to AD2 D) AD1; […]

In the circular-flow diagram, firms: A) supply goods and services. B) demand goods. C) supply resources. D) demand services. If the marginal propensity to consume increases, the multiplier will: A) increase. B) decrease. C) remain constant. D) fluctuate randomly. Answer: […]

A decrease in the level of business opportunity will generally _____ the loanable funds demand curve. A) not change B) left-shift C) cause a movement along D) right-shift Whenever planned aggregate spending exceeds real GDP, unplanned inventory investment is: A) […]

The marginal propensity to consume is consumption divided by disposable income. A) True B) False Economists use the term equilibrium to describe when: A) individuals are equal. B) no individual would be better off taking a different action. C) no […]

To fight inflation, the Federal Reserve should conduct _____ monetary policy to _____ interest rates, which will shift the aggregate demand curve to the _____. A) contractionary; raise; left B) contractionary; raise; right C) expansionary; lower; right D) expansionary; raise; […]

When a waiter deposits his cash tips in his savings account: A) M2 increases. B) M1 decreases. C) M2 decreases. D) M3 increases. A floating exchange rate: A) retains the ability of monetary policy to help stabilize the economy. B) […]

Figure: AD”ASModel II Look at the figure AD”AS Model II. If the value of household wealth increases, the _____ curve will shift to the _____. A) SRAS; left B) SRAS; right C) AD; right D) AD; left The TED spread […]

Scenario: Real GDP Suppose that in year 1 an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year the economy produces 110 golf balls that sell for $3.25 […]

Keynes’s ideas were: A) quickly adopted in the 1930s to end the Great Depression. B) slowly but consistently used in 2008 to end the Great Recession. C) used somewhat to help reduce the Great Depression. D) ignored in the Great […]

Which of the following is TRUE? A) Currency in circulation is not part of the monetary base. B) Bank reserves are part of the monetary base. C) Most of the monetary base consists of checkable deposits. D) The money multiplier […]

Figure: A Money Market Look at the figure A Money Market. If the current interest rate is r1, the interest rate will _____ because there is a _____ of money in the market. A) fall; surplus B) fall; shortage C) […]

We are forced to make choices because of: A) exploitation. B) efficiency. C) scarcity. D) the margin. Under fixed exchange rates, a revaluation decreases aggregate demand by: A) increasing exports. B) reducing imports. C) causing a financial account deficit. D) […]

To _____ the money supply, the Federal Reserve could _____. A) increase; decrease the money multiplier B) decrease; lower the reserve requirements C) increase; conduct open-market purchases D) decrease; lower the discount rate It is certain that the equilibrium price […]

Scenario: Countries A and B Two countries, A and B, produce two goods, wheat (W) and steel (S). Each has a linear production possibility frontier in both goods. If country A spends all of its available resources to produce wheat, […]

An illiquid asset can be quickly converted to cash with little or no loss of value. A) True B) False The _____ curve shows the positive relationship between the aggregate price level and the quantity of aggregate output supplied when […]

The Bretton Woods agreement called for: A) each currency’s value to be flexible relative to other currencies. B) maintaining fixed exchange rates by government intervention. C) most nations to adopt the euro as their official currency. D) what amounted to […]

An example of the frictionally unemployed is a(n): A) autoworker who is temporarily laid off because of a decline in sales. B) geologist who is permanently laid off from an oil company because of a technological advance. C) worker at […]

The Fed prints money not only when it is conducting monetary policy but also when it is paying bills as the fiscal agent for the federal government. A) True B) False Capital inflow into a country is associated with: A) […]

Since 1960 the price level in the United States has increased in most years. A) True B) False If Debbie gets a loan to remodel her kitchen, the loan is a liability for Debbie and an asset for the bank […]

Adam believes that in the long run all prices are flexible and that any increase in the money supply will lead only to inflation, not to an increase in aggregate output. Because the economy would self-correct to long-run equilibrium output, […]

Severe banking crises are usually followed by deep recessions and slow recoveries. A) True B) False Figure: Demand and Supply of Gasoline Look at the figure Demand and Supply of Gasoline. A factor that may have changed supply from S1 […]

Workers are more productive than in the past because they: A) have more natural resources to use. B) work a four-day week. C) are better educated and so have more human capital. D) are physically larger than their parents. According […]

Owen had a typewriter shop, but he went out of business because no one buys typewriters anymore. This statement best represents this economic concept: A) Resources are scarce. B) People usually exploit opportunities to make themselves better off. C) Markets […]

An example of investment spending is the purchase of a: A) bond by a banker. B) loaf of bread by a restaurant. C) new tractor by a farmer. D) ticket to a football game by a student. If the labor […]

In movement along a production possibility frontier, the opportunity cost to society of getting more of one good: A) is always constant. B) is measured in dollar terms. C) is measured by the amount of the other good that must […]

An economy that has the lowest opportunity cost of producing a particular good is said to have: A) an absolute advantage in production of that good. B) a comparative advantage in production of that good. C) a production possibility frontier. […]

A decrease in the supply of money will lead to a(n) _____ in equilibrium real GDP and a(n) _____ in equilibrium interest rates. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease Figure: The Production Possibilities for […]

If goods A and Z are complements, an increase in the price of good Z will: A) increase the demand for good A. B) decrease the demand for good A. C) decrease the demand for good Z. D) decrease the […]

If the opportunity costs of production are constant, then the production possibility frontier is: A) bowed out from the origin. B) bowed in toward the origin. C) a straight line. D) circular. Policies that expand output and decrease unemployment are […]

One factor that reduces the natural rate of unemployment is: A) a binding minimum wage. B) the recent proliferation of temporary employment agencies. C) a slowdown in productivity growth. D) government policies such as those that produced Eurosclerosis. When a […]

Bonds are less risky than stocks because a company legally must pay what it owes to lenders before it can distribute profits to stockholders. A) True B) False The United States dollar”Mexican peso exchange market is initially in equilibrium. Suppose […]

If government purchases decrease so the budget may be balanced, some government transfers will automatically increase, reducing the multiplier effect. A) True B) False If a country runs a trade deficit, its investment spending is probably: A) above its level […]