Question 1
1.
Consolidated Balance Sheet:
Commercial Banking System
Assets
Liabilities & Net Worth
Reserves
$72 Checkable Deposits
Securities
110 Loans From Federal Reserve Banks
Loans
60
Consolidated Balance Sheet:
Federal Reserve Banks
Securities
$240 Reserves of Commercial Banks
Loans to Commercial Banks
2 Treasury Deposits
Federal Reserve Notes
$240
2
$72
30
140
2. Refer to the given balance sheets. If the reserve ratio is 25 percent, commercial banks
have excess reserves of
3.
$12.
$24.
$22.
$16.
1 points
Question 2
1. (Consider This) Credit card balances are
2.
a component of M1.
a component of M1 but not of M2.
a component of M2 but not of M1.
not a component of M1 or M2.
1 points
Question 3
1. A $20 bill is a
2.
Treasury bill.
Federal Reserve note.
gold certificate.
Treasury note.
1 points
Question 4
1. A major advantage of the built-in or automatic stabilizers is that they
2.
simultaneously stabilize the economy and reduce the absolute size of the public debt.
automatically produce surpluses during recessions and deficits during inflations.
require no legislative action by Congress to be made effective.
guarantee that the federal budget will be balanced over the course of the business cycle.
1 points
Question 5
1. A tariff is
2.
a tax imposed on imports.
any non-subsidy used to increase trade.
any non-tax action used to restrict trade.
a subsidy granted to imports.
a tax imposed on exports.
1 points
Question 6
1. An appropriate fiscal policy for a severe recession is
2.
a decrease in government spending.
appreciation of the dollar.
an increase in interest rates.
a decrease in tax rates.
1 points
Question 7
1. An economist who favors smaller government would recommend
2.
tax cuts during recession and reductions in government spending during inflation.
increases in government spending during recession and tax increases during inflation.
tax cuts during recession and tax increases during inflation.
tax increases during recession and tax cuts during inflation.
1 points
Question 8
1. Answer the question on the basis of the given consolidated balance sheet of the
commercial banking system. Assume that the reserve requirement is 20 percent. All
figures are in billions.
Assets
Reserves
Securities
Loans
Property
Liabilities & Net Worth
$200 Checkable Deposits
300 Stock Shares
500
400
2. The commercial banking system has excess reserves of
3.
$2 billion.
$5 billion.
$10 billion.
zero.
1 points
Question 9
$1,000
400
1. Answer the question on the basis of the given consolidated balance sheet of the
commercial banking system. Assume that the reserve requirement is 20 percent. All
figures are in billions.
Assets
Liabilities & Net Worth
$200 Checkable Deposits
300 Stock Shares
500
400
Reserves
Securities
Loans
Property
$1,000
400
2. The monetary multiplier for the commercial banking system is
3.
10.
20.
15.
5.
1 points
Question 10
1. Answer the question on the basis of the table, in which columns (1) and (2) indicate the
transactions demand (Dt) for money and columns (1) and (3) show the asset demand (Da)
for money.
(1)
(2)
(3)
Interest Rate
Dt
Da
12%
10
8
6
4
2
$100
100
100
100
100
100
$0
20
40
60
80
100
2. The given data suggest that the amount of money demanded for transactions
3.
varies directly with the interest rate.
is independent of the interest rate.
varies inversely with nominal GDP.
varies inversely with the interest rate.
1 points
Question 11
1. Discretionary fiscal policy refers to
2.
the changes in taxes and transfers that occur as GDP changes.
intentional changes in taxes and government expenditures made by Congress to
stabilize the economy.
any change in government spending or taxes that destabilizes the economy.
the authority that the president has to change personal income tax rates.
1 points
Question 12
1. If nominal GDP is $600 billion and, on the average, each dollar is spent three times per
year, then the amount of money demanded for transactions purposes will be
2.
$1,200 billion.
$200 billion.
$1,800 billion.
$600 billion.
1 points
Question 13
1. If supporters of restrictions on imports argue that protection is needed to preserve a strategic
industry, which of the following is being used?
2.
infant-industry argument
save domestic jobs argument
protecting national culture argument
national security argument
dumping argument
1 points
Question 14
1. If the MPC in an economy is 0.8, government could shift the aggregate demand curve
rightward by $100 billion by
2.
increasing government spending by $25 billion.
decreasing taxes by $100 billion.
decreasing taxes by $25 billion.
increasing government spending by $80 billion.
1 points
Question 15
1. If the MPS in an economy is 0.1, government could shift the aggregate demand curve
rightward by $40 billion by
2.
increasing taxes by $4 billion.
increasing government spending by $40 billion.
increasing government spending by $4 billion.
decreasing taxes by $4 billion.
1 points
Question 16
1. If you are estimating your total expenses for school next semester, you are using money
primarily as
2.
a store of value.
an economic investment.
a unit of account.
a medium of exchange.
1 points
Question 17
1. If you place a part of your summer earnings in a savings account, you are using money
primarily as a
2.
unit of account.
store of value.
standard of value.
medium of exchange.
1 points
Question 18
1. In terms of aggregate supply, a period in which nominal wages and other resource prices
are unresponsive to price-level changes is called the
2.
long run.
immediate market period.
short run.
very long run.
1 points
Question 19
1. In terms of aggregate supply, a period in which nominal wages and other resource prices
are fully responsive to price-level changes is called the
2.
very long run.
immediate market period.
long run.
short run.
1 points
Question 20
1. In the United States, the money supply (M1) includes
2.
coins, paper currency, checkable deposits, and credit balances with brokers.
coins, paper currency, and checkable deposits.
paper currency, coins, gold certificates, and time deposits.
currency, checkable deposits, and Series E bonds.
1 points
Question 21
1. In the extended analysis of aggregate supply, the short-run aggregate supply curve is
2.
horizontal and the long-run aggregate supply curve is upsloping.
horizontal and the long-run aggregate supply curve is vertical.
upsloping and the long-run aggregate supply curve is vertical.
vertical and the long-run aggregate supply curve is horizontal.
1 points
Question 22
1. In the long run,
2. is an inflation-unemployment trade-off, and the terms of that trade-off have
there
worsened in recent years.
there is an inflation-unemployment trade-off, but the terms of that trade-off have
improved in recent years.
there is no inflation-unemployment trade-off.
attempts to "fine-tune" the economy cause the rate of unemployment to accelerate.
1 points
Question 23
1. Inflation accompanied by falling real output and employment is known as
2.
Laffer's law.
Okun's law.
stagflation.
the Phillips Curve.
1 points
Question 24
1.
Interest Rate
2%
4
6
8
10
Transactions Demand
for Money
$220
220
220
220
220
Asset Demand for
Money Supply
Money
$300
$460
280
460
260
460
240
460
220
460
2. Based on the given table, an increase in the money supply of $20 billion will cause the
equilibrium interest rate to
3.
rise by 4 percentage points.
fall by 2 percentage points.
rise by 2 percentage points.
fall by 4 percentage points.
1 points
Question 25
1.
Item
Checkable Deposits
Small TIme Deposits
Currency Held By The Public
Savings Deposits, Including Money-Market Deposit Accounts
Money-Market Mutual Funds Held By Individuals
Money-Market Mutual Funds Held By Businesses
Billions of Dollars
$2,000
350
80
1,300
600
700
2. The accompanying table contains hypothetical data for an economy. The size of the M2
money supply is
3.
$3,980.
$4,330.
$4,470.
$3,730.
1 points
Question 26
1.
Item
Checkable Deposits
Small TIme Deposits
Currency Held By The Public
Savings Deposits, Including Money-Market Deposit Accounts
Money-Market Mutual Funds Held By Individuals
Money-Market Mutual Funds Held By Businesses
Billions of Dollars
$2,000
350
80
1,300
600
700
2. The accompanying table contains hypothetical data for an economy. The size of the M1
money supply is
3.
$2,730.
$2,220.
$1,940.
$2,080.
1 points
Question 27
1. Money functions as
2.
a unit of account.
a store of value.
a store of value, a unit of account, and a medium of exchange.
a medium of exchange.
1 points
Question 28
1. Open-market operations refer to
2.
purchases of stocks in the New York Stock Exchange.
the purchase or sale of government securities, as well as collateralized money loans, by
the Fed.
central bank lending to commercial banks.
the specifying of loan maximums on stock purchases.
1 points
Question 29
1. Paper money (currency) in the United States is issued by the
2.
national banks.
U.S. Mint.
Federal Reserve Banks.
U.S. Treasury.
1 points
Question 30
1. Purchasing groceries using a debit card best exemplifies money serving as a
2.
index of satisfaction.
medium of exchange.
store of value.
unit of account.
1 points
Question 31
1.
Refer to the diagram for a specific economy. The curve on this graph is known as a
2.
production possibilities curve.
Phillips Curve.
Laffer Curve.
labor demand curve.
1 points
Question 32
1.
Refer to the diagram of the market for money. The downward slope of the money
demand curve Dm is best explained in terms of the
2.
wealth or real-balances effect.
transactions demand for money.
direct or positive relationship between bond prices and interest rates.
asset demand for money.
1 points
Question 33
1.
Refer to the diagram of the market for money. The equilibrium interest rate is
.
2.
I1
I2.
I3.
not determinable without additional information.
1 points
Question 34
1.
Refer to the diagram relating to short-run and long-run aggregate supply. The
2.
long-run aggregate supply curve is B.
short-run aggregate supply curve is A.
short-run aggregate supply curve is B.
long-run aggregate supply curve is D.
1 points
Question 35
1.
Refer to the diagram, in which T is tax revenues and G is government expenditures. All
figures are in billions. In this economy,
2.
tax revenues vary directly with GDP, but government spending is independent of GDP.
tax revenues and government spending both vary directly with GDP.
government spending varies directly with GDP, but tax revenues are independent of
GDP.
tax revenues and government spending both vary inversely with GDP.
1 points
Question 36
1.
Refer to the diagram. The long-run aggregate supply curve is
A.
2.
B.
C.
D.
1 points
Question 37
1.
Refer to the diagrams. The numbers in parentheses after the AD1, AD2, and AD3 labels
indicate the levels of investment spending associated with each curve. All figures are in
billions. If aggregate demand is AD3 and the monetary authorities desire to reduce it to
AD2, they should
2.
decrease the interest rate from 3 percent to 9 percent.
increase the money supply from $100 to $120.
increase the interest rate from 3 percent to 9 percent.
decrease the money supply from $120 to $100.
1 points
Question 38
1.
Refer to the given market-for-money diagrams. The total demand for money is shown by
2.
D1.
D2.
D3.
S.
1 points
Question 39
1.
Refer to the graph. Assume that the economy is in a recession with a price level of P1 and
output level Q1. The government then adopts an appropriate discretionary fiscal policy.
What will be the most likely new equilibrium price level and output?
2.
P2 and Q2
P1 and Q1
P2 and Q4
P1 and Q3
1 points
Question 40
1.
Refer to the graphs. Growth of production capacity is shown by
2.
both the shift from AB to CD and the shift from Y to X.
both the shift from AB to CD and the shift from X to Y.
the shift from X to Y only.
the shift from AB to CD only.
1 points
Question 41
1. Suppose the world price of widgets is $5 each. If a widget-importing country imposed a $2 per
widget tariff, what price would that country's consumers pay for widgets?
$7
2.
$3
$10
$5
A price that is greater than $5 and less than $7
1 points
Question 42
1. The M1 money supply is composed of
2.
all coins and paper money held by the general public and the banks.
checkable deposits and currency in circulation.
bank deposits of households and business firms.
bank deposits and mutual funds.
1 points
Question 43
1. The amount by which government expenditures exceed revenues during a particular year
is the
2.
budget deficit.
public debt.
GDP gap.
full employment.
1 points
Question 44
1. The asset demand for money
2.
is unrelated to both the interest rate and the level of GDP.
varies inversely with the level of real GDP.
varies directly with the level of nominal GDP.
varies inversely with the rate of interest.
1 points
Question 45
1. The asset demand for money is most closely related to money functioning as a
2.
unit of account.
medium of exchange.
store of value.
measure of value.
1 points
Question 46
1. The crowding-out effect of expansionary fiscal policy suggests that
2.
increases
in government spending financed through borrowing will increase the interest
rate and thereby reduce investment.
it is very difficult to have excessive aggregate spending in the U.S. economy.
consumer and investment spending always vary inversely.
tax increases are paid primarily out of saving and therefore are not an effective fiscal
device.
1 points
Question 47
1. The currency, or money, of the United States, like those of other countries, is
2.
intrinsic money.
token money.
commodity money.
deposit money.
1 points
Question 48
1. The cyclically adjusted budget refers to
the2.number of workers who are underemployed when the level of unemployment is 4
to 5 percent.
the inflationary impact that the automatic stabilizers have in a full-employment
economy.
the size of the federal government's budgetary surplus or deficit when the economy is
operating at full employment.
that portion of a full-employment GDP that is not consumed in the year it is produced.
1 points
Question 49
1. The discount rate is the rate of interest at which
2.
savings and loan associations lend to some builders.
Federal Reserve Banks lend to large corporations.
commercial banks lend to large corporations.
Federal Reserve Banks lend to commercial banks.
1 points
Question 50
1.
The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve
and DUS is the domestic demand curve. The world price of a T-shirt is $5. The U.S. government
imposes a $2 per unit tariff on imported T-shirts.
The figure above shows that the government revenue from the tariff is
$20 million per year.
$15 million per year.
zero.
$55 million per year.
$30 million per year.
1 points
Question 51
1.
The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve
and DUS is the domestic demand curve. The world price of a T-shirt is $5. The U.S. government
imposes a $2 per unit tariff on imported T-shirts.
The figure above shows that as a result of the tariff, the quantity of T-shirts produced in the
United States ________, and the quantity of T-shirts imported ________.
decreases by 30 million per year; increases by 30 million per year
increases by 15 million per year; increases by 15 million per year
decreases by 15 million per year; decreases by 30 million per year
does not change; decreases by 15 million per year
increases by 15 million per year; decreases by 30 million per year
1 points
Question 52
1.
The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve
and DUS is the domestic demand curve. The world price of a T-shirt is $5. The U.S. government
imposes a $2 per unit tariff on imported T-shirts.
The figure above shows that as a result of the tariff, the price of a T-shirt in the United States
________, and the quantity of T-shirts bought ________.
rises by $2; decreases by 15 million per year
does not change; does not change
rises by $2; increases by 15 million per year
falls by $2; increases by 5 million per year
does not change; decreases by 5 million per year
1 points
Question 53
1.
The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve
and DUS is the domestic demand curve. The United States trades freely with the rest of the world.
The world price of a T-shirt is $5.
In the figure above, with international trade the United States ________ million T-shirts per year.
imports 20
exports 20
imports 40
exports 40
imports 60
1 points
Question 54
1.
The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve
and DUS is the domestic demand curve. The United States trades freely with the rest of the world.
The world price of a T-shirt is $5.
Based on the figure above, as a result of international trade, U.S. domestic production ________
million T-shirts per year.
decreases by 10
increases by 20
increases by 40
decreases by 20
increases by 10
1 points
Question 55
1.
The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve
and DUS is the domestic demand curve. The United States trades freely with the rest of the world.
The world price of a T-shirt is $5.
In the figure above, with international trade U.S. consumers buy ________ million T-shirts per
year at ________ per T-shirt.
40; $5
20; $5
40; $8
60; $11
60; $5
1 points
Question 56
1.
The figure above shows the U.S. market for airplanes, where SUS is the domestic supply curve and
DUS is the domestic demand curve. The United States trades freely with the rest of the world. The
world price of an airplane is $150 million.
In the figure above, the United States ________ airplanes per year.
imports 400
exports 200
exports 400
imports 500
exports 500
1 points
Question 57
1.
The figure above shows the U.S. market for airplanes, where SUS is the domestic supply curve and
DUS is the domestic demand curve. The United States trades freely with the rest of the world. The
world price of an airplane is $150 million.
In the figure above, U.S. consumers buy ________ airplanes per year at ________ million per
airplane.
200; $150
400; $100
200; $100
400; $150
700; $150
1 points
Question 58
1.
The figure above shows the U.S. market for airplanes, where SUS is the domestic supply curve and
DUS is the domestic demand curve. The United States trades freely with the rest of the world. The
world price of an airplane is $150 million.
Based on the figure above, as a result of international trade, U.S. domestic production ________
airplanes per year.
decreases by 100
increases by 200
increases by 500
decreases by 200
increases by 300
1 points
Question 59
1.
The given curve is known as the
2.
Taylor rule.
Phillips Curve.
Laffer Curve.
Okun Curve.
1 points
Question 60
1. The interest rate that banks charge one another on overnight loans is called the
2.
overnight lending rate.
prime lending rate.
discount rate.
federal funds rate.
1 points
Question 61
1. The paper money used in the United States is
2.
United States notes.
Federal Reserve notes.
Treasury notes.
National Bank notes.
1 points
Question 62
1. The purchasing power of money and the price level vary
2.
inversely.
directly and proportionately.
directly but not proportionately.
directly during recessions but inversely during inflations.
1 points
Question 63
1. The transactions demand for money is most closely related to money functioning as a
2.
store of value.
unit of account.
measure of value.
medium of exchange.
1 points
Question 64
1. When governments specify the maximum amount of a good that may be imported in a given
period of time, they are establishing a
2.
dynamic tariff.
dumping limit.
quota.
tax.
tariff.
1 points
Question 65
1. When protection is encouraged to protect a growing domestic industry; which of the following is
being used?
2.
diversity and stability argument
save domestic jobs argument
anti-dumping argument
infant-industry argument
national security argument
1 points
Question 66
1. When the Fed acts as a "lender of last resort," as it did in the financial crisis of 20072008, it is performing its role of
2.
being the bankers' bank.
controlling the money supply.
providing for check clearing and collection.
setting the reserve requirements.
1 points
Question 67
1. Which group is responsible for the policy decision of changing the money supply?
2.
Thrift Advisory Council
Federal Advisory Council
Federal Open Market Committee
Office of Management and Budget
1 points
Question 68
1. Which of the following allegedly contributed to the stagflation in the mid-1970s?
2.
a sharp drop in the prices of farm products
rising productivity in manufacturing
a dramatic increase in oil prices
appreciation of the dollar
1 points
Question 69
1. Which of the following will happen when the Federal Reserve buys bonds from the
public in the open market and the amount of cash held by the public does not change?
2.
Commercial bank reserves will increase.
The money supply will decrease.
The deposits of commercial banks will decline.
The required reserve ratio will increase.
1 points
Question 70
1. ________ occurs when a foreign firm sells its exports at a lower price than its cost of production.
2.
The trickle-down effect
Tariff avoidance
Rent seeking
Dumping
Nontariff barrier protection