Archives: Quiz

An excess supply of rice in a competitive market would indicate that a. the problem of scarcity has been solved in that market b. buyers want to purchase more rice at the current price than the sellers want to sell […]

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 […]

Refer to Figure 9-4. Which of the following policies would most likely shift the supply of loanable funds curve from S1 to S2? a. Introduction of an investment tax credit b. Cutting the corporate profits tax rate c. Increasing personal […]

If the Federal Reserve purchases $1,000 in bonds and the reserve requirement ratio is 0.2, what will be the total change in reserves at all banks assuming there are no excess reserves? a. +$500 b. +$5,000 c. -$500 d. -$5,000 […]

If Greg uses a special glue to make model planes that he sells and the price of his model planes increases, then one would expect that the equilibrium price of the special glue would _______ and the equilibrium quantity would […]

The Fed’s objectives present it with a true dilemma when a. there are demand shocks caused by shifts in money demand b. there are demand shocks caused by changes in spending c. there are negative supply shocks d. cyclical unemployment […]

In what way is the result of an excise tax imposed on either demanders or suppliers similar to the result of a price ceiling? a. The amount that consumers pay for the good will be less than they previously paid […]

In the U.S. over the past century, increases in labor a. supply have outpaced increases in labor demand, causing the average wage rate to fall b. supply have outpaced increases in labor demand, causing the average wage rate to rise […]

The equilibrium short-run interest rate is determined at the intersection of the demand and supply curves in the market for a. labor b. money c. capital goods d. mortgage funds e. corporate bonds If steel manufacturers expected that the price […]

An increase in the price level will lead to which of the following sequences? a. The money demand curve shifts leftward, the interest rate drops, the aggregate expenditure line shifts upward, and there is movement downward along the aggregate demand […]

In macroeconomics, a. we study one market at a time b. we try to understand how the entire economy behaves c. we focus on large, important products and ignore the rest d. we study one nation’s economy only e. we […]

Suppose that a labor union leader is trying to bargain for an increase in union workers’ real wages of 5 percent. If he expected the price level to rise at a rate of 3 percent this year, how much would […]

Which of the following is the best example of an intermediate good? a. a new fighter jet purchased by the federal government b. tires purchased by an automobile manufacturer for installation on new cars c. a new saw purchased by […]

The Fed typically decreases the money supply by a. selling government bonds b. buying government loans c. selling government loans d. printing more currency e. buying government bonds Supply curves are usually assumed to slope upward because a. profits fall […]

Full employment occurs when a. everyone has a job b. everyone who wants a job has one c. there is no frictional unemployment d. there is no cyclical unemployment e. there is no structural, frictional, and seasonal unemployment Assuming the […]

Real consumption spending is inversely related to a. real disposable income b. the amount of common stock owned c. the amount of real estate owned d. expectations of future income e. the interest rate Microeconomics deals with which of the […]

Rapid economic growth, stable prices and __________ are the three important macroeconomic goals about which most economists agree. a. an unemployment rate of zero b. zero inflation c. full employment d. a high exchange rate e. low interest rates The […]

If 130 million individuals are employed and 6 million are unemployed, what is the unemployment rate? a. 4.8 percent b. 3.0 percent c. 4.4 percent d. 4.6 percent e. 9.6 percent Increases in the general price level are primarily a […]

Countries like _________ have no reserve requirements at all. a. England b. Canada c. Australia d. all of the above e. none of the above. In a typical economy, the dollar value of the total output for a period will […]

According to the law of comparative advantage, individuals and economies should specialize in producing those goods and services in which they have a comparative advantage. Which of the following describes the relationship between GDP and government spending? a. Government spending […]

Microeconomics analyzes individual parts of the economy rather than broad economic aggregates. Which of the following are the best examples of substitute goods? a. personal computers and computer software programs b. milk and cookies c. Packard Bell and IBM personal […]

If the Fed has a goal of stable real GDP and government spending increased, which of the following would occur? a. The money demand would not change, real GDP would not change, the interest rate would decrease, and there would […]

Due to society’s overall scarcity of resources, a. only households are constrained by income b. only government agencies are constrained by limited budgets c. only business firms are constrained by the cost of buying their inputs d. households, business firms […]

If the required reserve ratio is 0.25 and the First National Bank holds $10 million in demand deposits and $5 million in reserves, how much more in demand deposits is this bank capable of creating? a. $0 b. $0.625 million […]

Even though households may have unlimited wants, they have to allocate their spending carefully because they a. do not want their credit card bills to be too high b. worry about their taxes c. have limited intelligence d. have limited […]

If net taxes were lowered from $5,000 to $1,000, the marginal propensity to consume is 0.75, and autonomous consumption spending is $10,000, by how much would consumption increase? a. $3,000 b. $1,250 c. $7,500 d. $3,750 e. $750 Which of […]

If the federal government announces a tax cut, which of the following is most likely in the short run? a. A decrease in output, an increase in money demand, and an increase in the interest rate b. An increase in […]

In a traditional economy, decisions about what to produce, how to produce, and who should get society’s output are made by a. the market b. the government c. repeating what was done in the past d. business firms e. nonprofit […]

According to Say’s Law, in the aggregate a. demand creates its own supply b. the production of output will generate exactly enough income to purchase what has been produced c. the economy is incapable of producing output fast enough to […]

Which of the following would be the best example of a spot market? a. the market for fine art b. the market for bananas c. the market for stocks and bonds d. the market for baseball cards Which of the […]

If people start to use cash because of an increase in credit card fraud, which of the following would we expect to happen under a neutralization policy? a. The money supply would decrease, real GDP would not change, and the […]

The Federal Reserve banks make loans to member banks at a special interest rate called the discount rate. When opportunity costs rise as more of a good is consumed, the production possibilities frontier will be concave (bowed out) with respect […]

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 […]

An increase in government spending leads to a(n) a. downward shift of the aggregate expenditure line and a leftward shift of the money demand curve b. upward shift of the aggregate expenditure line and a rightward shift of the money […]

The classical model a. relies on the equivalency of the labor, capital, and land resource markets b. includes a land market and a labor market c. focuses primarily on capital markets d. focuses primarily on labor markets e. focuses on […]

Those who prefer that the Fed react to negative supply shocks by tolerating higher rates of inflation as a means of moderating a recession are called a. inflation doves b. inflation hawks c. monetarists d. Keynesians e. hard headed and […]

When GDP is rising, the economy is experiencing a. a contraction b. a recession c. a financial crisis d. an expansion e. equilibrium The index used to translate nominal GDP into real GDP is the a. Consumer Price Index b. […]

The inflation rate for a given year is found by taking the percentage change in the Consumer Price Index (CPI) from the base year to the year in question. The idea of opportunity cost suggests that the cost of a […]

If the Federal Reserve unexpectedly raised its interest rate target, which of the following would most likely occur? a. The interest rate would increase and bond prices would rise. b. The interest rate would decrease and bond prices would rise. […]

Which of the following statements about modern macroeconomic theory is most accurate? a. Keynes’ ideas help us understand movements in output around its long-run trend, while the Classical model is more useful in explaining the long-run trend itself. b. The […]

If there is an excess supply of money in the economy, a. there is also an excess demand for money b. there is also an excess demand for bonds c. there is also an excess supply of bonds d. the […]

The real interest rate on a loan a. is the amount that the consumer agrees to pay b. is always the same as the nominal rate c. is always greater than the nominal rate d. is only of concern when […]

All cash within the geographical boundaries of the United States is counted as part of the U.S. money supply. Managed floats are only effective in the long run. Answer: B A monetary system is what allows us to a. earn […]

Ceteris paribus, when households spend less but do not supply of all their additional saving to the loanable funds market, a. total spending will exceed below total income, satisfying Say’s law. b. total spending will drop below total income, violating […]

When we talk about injections in the classical model, we refer to a. taxes b. total government purchases. c. federal government purchases only. d. state government purchases only. e. local government purchases only. Transfer payments are a. payments for goods […]

The real wage can increase only if the nominal wage increases. Over the past several decades, federal transfer payments as a fraction of GDP have trended upward. Answer: A If the price level is increasing and output is falling, which […]

Which of the following statements is true when total spending equals total output? a. Saving plus taxes equals investment plus government purchases. b. Output equals investment plus government purchases plus saving plus taxes. c. Output equals consumption spending plus investment […]

Suppose you start your own company making T-shirts that commemorate campus sporting events. An example of the resource capital would be a. the factory you created in a building you are leasing b. your time and effort used to produce […]

Which of the following could lead to an increase in the equilibrium quantity of a good? a. a decrease in supply and a decrease in demand b. an increase in the price of an input c. an increase in demand […]

Given the balance sheet below and assuming a required reserve ratio of 20 percent, how much (in dollar terms) must the bank hold in required reserves? a. It is failing to meet its reserve requirement. b. It is just meeting […]