Archives: Quiz

Careetha has just taken a fixed-rate loan and agreed to pay a nominal interest rate of 6 percent. If the inflation rate during the first year of the loan was 2 percent, her real interest rate that first year was […]

Economic growth a. involves both benefits and costs b. is beneficial to the economy only if it arises from population growth c. is beneficial to the economy only if it arises from technological change d. involves costs that usually outweigh […]

Suppose the current interest rate is 5% and you pay $250 for a bond. What is the total payment that should be made to you in one year? a. $12.50 b. $262.50 c. $237.50 d. $255.00 e. $267.50 From 1929 […]

By driving up interest rates, an increase in investment spending causes a. a voluntary decrease in consumption b. a voluntary increase in consumption c. an involuntary decrease in consumption d. an involuntary increase in consumption e. government spending to be […]

The Full Employment and Balanced Growth Act of 1978 set the target unemployment rate for the United States economy at 4 percent. Which of the following most accurately describes the aggregate supply curve? a. It shows the price level associated […]

In mid-2009, the unemployment rate stood at a. 25 percent b. 5 percent c. 6 percent d. 9.5 percent e. 20 percent The secondary market for bonds is a market for a. bonds that is smaller than the primary market […]

Oil and Natural Gas can each be used as a source of energy and are, for many purposes interchangeable. Which of the following best explains the increase in the price of natural gas that accompanied the increase in the price […]

Government purchases a. are only weakly related to aggregate income b. include spending on goods and services plus transfer payments c. are inversely related to aggregate income d. are inversely related to the price level e. are inversely related to […]

The slope of the production function reflects a. capital expenditures. b. government expenditures. c. Constant returns to labor. d. Increasing returns to labor. e. Diminishing returns to labor. Characterizing a market involves a. counting the number of demanders and measuring […]

The discovery and dissemination of a new cost-saving technology a. is an example of a positive demand shock b. would cause the long-run AS curve to shift leftward, thereby increasing both output and the price level c. would increase firms’ […]

Refer to Figure 15-1. Assume the economy is in equilibrium at $7 trillion. If the changes in all three graphs were caused by the same event, what was that event? a. An increase in nominal income b. An increase in […]

Which of the following is not a tool for controlling the money supply? a. Buying government bonds b. Selling government bonds c. Changing tax rates d. Changing the required reserve ratio e. Changing the discount rate. Which of the following […]

If inflation is correctly anticipated, in a transaction between borrowers and lenders, inflation a. will not reduce purchasing power of the money paid back b. will redistribute purchasing power from borrowers to lenders c. will not redistribute purchasing power d. […]

Inflation will generally redistribute purchasing power when a. it is fully expected b. it is completely unexpected c. it is greater than 3 percent d. it is greater than 5 percent e. it is greater than 10 percent Which of […]

If the price level increases, the money demand curve will a. shift leftward b. become steeper c. remain in the same position; however, there will be movement upward along the curve d. shift rightward e. remain in the same position; […]

Which of the following is a reason why a bank may hold excess reserves? a. It earns more interest on reserves than on loans. b. It is required to do so. c. It may want flexibility to increase its loans […]

Congress created the Federal Deposit Insurance Corporation to a. sell insurance to individuals who have bank accounts b. inject reserves into the economy more quickly c. develop a better working relationship between bank managers and government officials d. charge higher […]

If the demand for new automobiles falls when income falls, automobiles are said to be normal goods. If the required reserve ratio is 0.2, and a bank has $100 million in demand deposits and $40 million in property and buildings, […]

Which of the following is a period of decreasing output that is severe and long lasting? a. business cycle b. expansion c. peak d. recession e. depression Why would workers and retirees want to have their wages and benefits indexed […]

Assume that U.S. agricultural land is used either to raise cotton for clothing or to grow wheat. Curve FG in Figure 2-8 represents the current production possibilities frontier for cotton and wheat. What could cause the production possibilities frontier to […]

Which of the following factors may lead to an underestimation of the significance of unemployment when evaluating the overall unemployment rate? a. Involuntary full-time employment b. An increase in the number of military personnel c. Discouraged workers d. An increase […]

If real consumption spending increases by $400 billion each time real disposable income rises by $1,000 billion, the marginal propensity to consume is a. 40 b. 4 c. 0.4 d. 0.04 e. 0.004 Which of the following would lead to […]

Which of the following is the definition of a capital gain? a. An increase in a firm’s capital stock b. Profit earned from selling a financial asset c. The dividend earned from a company’s stock d. Taxes saved by selling […]

In the short run, a. spending depends on income and income depends on spending b. spending depends on income, but income does not depend on spending c. income depends on spending, but spending does not depend on income d. spending […]

If people work longer or harder, a. they are unambiguously worse off b. living standards will rise but nonmarket activities must be sacrificed c. living standards will fall d. more output can be produced, but living standards will fall e. […]

In the long-run AS-AD model, a. the position of the AD curve determines output b. the self-correcting mechanism of the economy is irrelevant c. the AS curve shifts leftward whenever the economy is growing d. the position of the AD […]

Refer to Figure 8-4. Based on these graphs, what are the equilibrium interest rate and quantity of loanable funds exchanged? a. 5 percent and $1.4 trillion b. 5 percent and $2.2 trillion c. 8 percent and $1.8 trillion d. 8 […]

Where is the interest rate determined in the classical model? a. In the goods market b. In the loanable funds market c. By the federal government d. By the Fed e. Where aggregate expenditure equals GDP. If a change in […]

The ultimate purpose of an economic model is to a. explain reality as completely as possible b. establish assumptions that closely resemble reality c. help us understand economic behavior d. determine what each decision maker wants to maximize e. guide […]

Under which of the following circumstances should we be concerned about a rising national debt? a. When it rises at a slower pace than GDP. b. When the government runs deficits over a long period of time, such as a […]

The level of detail in an economic model a. is as close as possible to the level of detail in reality b. depends on the purpose of the model c. is as complex as possible d. is the same regardless […]

If government spending increases, which of the following is most likely to occur? a. GDP, money demand, the interest rate, and investment spending will all increase. b. GDP, money demand, the interest rate, and investment spending will all decrease. c. […]

Macroeconomics studies the behavior of aggregates while microeconomics studies the behavior of individual decision-making units. Which of the following is the most liquid form of asset? a. Small time deposits b. Large time deposits c. Savings accounts d. Money market […]

Figure 2-5 shows five different points along the production possibilities frontier for a country that produces rockets and cruise ships. If the country is currently operating at point C and decided to move to point B, a. the opportunity cost […]

Microeconomics involves the analysis of smaller, less developed economies while macroeconomics is concerned with the analysis of larger developed economies. Which of the following would lead to an increase in the supply of Russian rubles? a. An increase in the […]

An example of a good whose production is counted in this year’s GDP is a. a share of corporate stock b. a used book c. an acre of farm land d. a used car e. a new shirt Assume that […]

Susie grows corn in her backyard garden to feed her family. The corn she grows is not counted in GDP because a. it was not produced for the marketplace b. it is an intermediate good that Susie will process further […]

All production involves an opportunity cost because a. to produce costs money b. costs of production are sky rocketing c. to produce more of one thing, we must produce more of everything d. to produce more of one thing, we […]

An economic model a. uses equations to understand normative economic phenomena b. often omits crucial elements c. simplifies reality in order to focus on crucial elements d. tries to make simple concepts more complex e. cannot be proven wrong The […]

The marginal propensity to consume is greater than zero but less than one. The consumption function shows the relationship between real consumption spending and a. real wealth b. the interest rate c. expectations d. real disposable income e. debt Answer: […]

A decrease in the interest rate reduces the opportunity cost of holding money. Open market sales of bonds by the Federal Reserve reduce the money supply and a. reduce aggregate expenditures b. increase real aggregate expenditures c. are helpful in […]

We say there is productive inefficiency in saving lives if a. there is some way to save more lives b. there is some way to save more lives without sacrificing any other goods or services c. all resources are devoted […]

If the price of bonds rises, a. the Fed will decrease the money supply b. the Fed will increase the money supply c. the interest rate will rise d. the interest rate will fall e. inflation must be accelerating An […]

Thomas Malthus argued that population grows geometrically and the food supply grows arithmetically. The labor supply curve a. slopes upward to illustrate that more people will want to work as the real wage increases b. slopes upward to illustrate that […]

When a mall Santa Claus loses his job at the end of the Christmas season, this is an example of a. frictional unemployment b. structural unemployment c. frictional unemployment d. seasonal unemployment e. economic unemployment Assume that U.S. agricultural land […]

A reliable indicator of a healthy economy is an appreciating currency. In the following index: 2003 = 123.3; 2004 = 143; 2005 = 111.4; 2006 = 100; 2007 = 94.3, what is the rate of change from 2006 to 2007? […]

Refer to Figure 15-3. Which of the following most likely caused the shifts from AE1 to AE2, and from AD1 to AD2? a. A decrease in the money supply b. An increase in government purchases c. An increase in investment […]

The AD curve is derived by adding up demand curves for all goods and services. If inflation is higher than anticipated and benefits are not indexed, which group loses purchasing power? a. Borrowers and lenders b. Lenders and retirees c. […]

An aggregate production function, when shown on a graph, a. is linear and slopes upward b. is linear and slopes downward c. is horizontal d. is vertical e. slopes upward, and flattens out as more labor is used The highest […]

If the base year for an index is 2005 and the value of the index in 2008 is 165.1, by what percent has the measure grown over those 3 years? a. 165.1 percent b. 100.0 percent c. 6.51 percent d. […]