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Multiple Choice
Fill in the Blank
Definition
True/False
Which of the following...?
100
If the Fed sells a significant a lot of bonds in the open market, what will happen? a. The total amount of loans made by banks will decrease. b. The total amount of loans made by banks will increase. c. The money supply will increase. d. Rates of interest will decrease.
a. The total amount of loans made by banks will decrease.
100
Buying ____ is a way to cover risk by paying money to a company that can pay for accidents.
Insurance
100
What is inflation?
An increase in the overall price level.
100
The study of inflation is part of microeconomics.
False.
100
Suppose that the consumer price index rises from 100 to 200. From this information we may conclude that I. Each person’s real income is cut in half. II. Consumer incomes are doubled. III. The prices in an average consumer’s market basket are doubled. a. Just I b. Just II c. Just III d. I and II e. II and III
c. Just III
200
What will most likely happen to an economy if labor productivity increases? a. An increase in output and a decrease in inflation. b. An increase in interest rates and a decrease in investment. c. A decrease in money demand and money supply. d. A decrease in exports and an increase in unemployment.
a. An increase in output and a decrease in inflation.
200
The traditional view of the production process is that capital is subject to ____ returns.
diminishing
200
What is a recession?
A period of time when a whole economy's output falls.
200
Capital is a factor of production.
True.
200
The value of what an American-owned factory produces in Mexico is: I. Excluded from U.S. GDP. II. Included in U.S. GDP. III. Included in Mexican GDP. IV. Included in U.S. GNP. a. Just I b. I and IV c. II and III d. I, III, and IV
d. I, III, and IV
300
The total demand for goods and services in an economy is called what? a. Gross national product. b. Aggregate demand. c. Economy-wide demand. d. National demand.
b. Aggregate demand
300
The interest rate that is corrected for ____ is called the real interest rate.
inflation
300
What is the Consumer Price Index?
A measure of the overall cost of goods and services bought by a typical customer.
300
Building a diversified stock portfolio can help manage your investment risks.
True.
300
The federal funds rate is: I. The interbank lending rate. II. The rate targeted by the FOMC. III. The same as the prime interest rate. IV. The rate that determines all other interest rates. a. Just I b. II and IV c. I, II, and III d. Just IV
c. I, II, and III
400
An increase in which of these things would cause an increase in aggregate supply? a. Labor productivity. b. The wage rate. c. Prices of imports. d. Consumer spending.
a. Labor productivity
400
Net exports equals the foreign purchases of domestically produced goods minus the ____ purchases of foreign goods.
domestic
400
What is a budget deficit?
An excess of government spending over tax revenue.
400
The central problem of economics is allocation of resources.
False.
400
The supply and demand curves for a product intersect where: I. Buying and selling decisions of consumers and producers are consistent. II. The market is in equilibrium. III. There is neither a surplus nor a shortage of the product. IV. Quantity demanded of the product is equal to quantity supplied. a. Just II and IV b. Just I and III c. Just II d. I, II, III, and IV
d. I, II, III, and IV
500
#1: To turn around a recession, what should the Fed do? a. Sell bonds and raise the discount rate. b. Sell bonds and lower the discount rate. c. Buy bonds and raise the discount rate. d. Buy bonds and lower the discount rate. #2: If the government increases expenditures on goods and services and increases taxes just as much, what will happen? a. Aggregate demand will be unchanged. b. Aggregate demand will increase. c. Interest rates will decrease. d. The money supply will decrease.
#1: d. Buy bonds and lower the discount rate. #2: b. Aggregate demand will increase.
500
#1: Stock represents ____ in a firm. #2: Stagflation is a combination of ____ and ____ .
#1: ownership #2: stagnation and inflation
500
#1: What is frictional unemployment? #2: What is commodity money?
#1: Unemployment that results from the process of matching workers and jobs. #2: Money that takes the form of a commodity with intrinsic value.
500
#1: Structural unemployment is when the quantity of labor supplied exceeds the quantity demanded. #2: Most people are not risk averse.
#1: True. #2: False.
500
#1: Components of the U.S. money supply include: I. Coins and currency II. Credit cards III. Checking accounts and other checkable deposits IV. Savings accounts a. I and III b. Just II c. III and IV d. Just I #2: Which of these statements are true regarding expansionary fiscal policy? I. Government spending increases II. Taxes are cut III. Consumption increases IV. Disposable income increases a. Just II b. Just III c. I and III d. I, II, III, and IV
#1: a. I and III #2: d. I, II, III, and IV