Set 1 Question 1 of 20 5.0 Points Economists define the labor force to include __________. A. only people who are working full time B. people who are working C. people who are not working but are actively looking for a job, and people who are working D. all individuals of working age, regardless of whether they are working or looking for a job Question 2 of 20 5.0 Points If Sam does not have a job and is not looking for work, he is considered __________. A. unemployed and in the labor force B. unemployed and not in the labor force C. not in the labor force D. unemployed Question 3 of 20 5.0 Points Economists believe that the CPI overstates actual price changes by as much as __________ to __________ percent each year. A. 1; 2 B. 2; 3 C. 0.5; 1 D. 0.5; 1.5 Question 4 of 20 5.0 Points Macroeconomics __________. A. studies the behavior of individual consumers, firms, and markets B. studies the behavior of the economy as a whole C. involves the interaction between different countries in specific markets D. studies how computer automation has changed economics Question 5 of 20 5.0 Points The labor supply and demand most directly affect the level of __________ in an economy. A. people attending colleges B. people requiring retraining C. employment D. welfare benefits Question 6 of 20 5.0 Points The value of all final goods and services produced during a given time period measures a nation’s __________. A. gross domestic product B. net national product C. consumer price index D. net exports Question 7 of 20 5.0 Points Which one of the following statements is true of the Consumer Price Index? A. It does not take account of the price of imported goods and services. B. It measures changes in prices of a fixed basket of goods. C. It does not take into account the price of used goods. D. It understates the true rate of inflation. Question 8 of 20 5.0 Points The Consumer Price Index (CPI. differs from a chain-weighted price index in that the CPI __________. A. requires calculation of GDP, while the chain-weighted index does not B. measures the costs of a typical fixed basket of goods over time, while the chain-weighted index does not C. allows for the goods consumed in an economy to change over time, while the chain-weighted index does not D. compares the prices of all goods in one year to the prices of all goods in other years Question 9 of 20 5.0 Points Suppose that nominal GDP in year 1 is 200 and nominal GDP in year 2 is 242. Assume that inflation is 10 percent per year. How fast did the economy grow between these two years? A. 10 percent B. 12 percent?? C. 21 percent D. 42 percent Question 10 of 20 5.0 Points Economists define the unemployed as individuals who are __________. A. not currently working B. not currently working but are actively looking for work C. working but looking for a different job D. working less than their desired amount of time Question 11 of 20 5.0 Points Economists say that the economy is at “full employment” when the __________. A. structural unemployment rate is zero B. total unemployment rate is zero C. frictional unemployment rate is zero D. cyclical unemployment rate is zero Question 12 of 20 5.0 Points The unemployment rate is the number of unemployed people __________. A. divided by the number of people who are working B. divided by the total working-age population C. divided by the sum of the number of people who are working and the number of people who are looking for work D. and the number of people working fewer than their desired number of hours, divided by the number of people who are working or looking for work Question 13 of 20 5.0 Points When there are sustained increases in real GDP over time, we say that the economy is undergoing __________. Answer: C A. economic stagnation B. a recession C. economic growth D. massive changes in productive capacity Question 14 of 20 5.0 Points For the purpose of GDP accounting, consumption expenditures include __________. A. only nondurable goods B. only durable goods C. both nondurable goods and services D. durable goods, nondurable goods, and services Question 15 of 20 5.0 Points The index most widely used by the government and the private sector to measure changes in the cost of living is the __________. A. Producer Price Index B. Consumer Price Index C. the GDP deflator D. the chain-weighted price index Question 16 of 20 5.0 Points Suppose the stock of capital remains constant. By adding more labor, perhaps a second work shift, output __________. A. decreases B. increases C. remains the same D. becomes more costly Question 17 of 20 5.0 Points The circular flow is used to make the point that __________. A. rising prices never occur during times of unemployment B. unemployment only occurs during a recession C. production generates income D. households purchase factors of production from firms Question 18 of 20 5.0 Points If you take out a bank loan prior to unanticipated inflation, __________. A. it will be harder for you to repay the loan because of the inflated dollar B. you will gain at the expense of your bank C. your bank will gain at your expense D. neither you nor your bank will be affected, because the loan was made prior to the inflation Question 19 of 20 5.0 Points Which of the following would be a macroeconomic question? A. How have the retirement benefits in the auto industry changed over time? B. How has inflation increased over time? C. How has the price of gold increased over time? D. How has the number of commercial airline flights decreased over time? Question 20 of 20 5.0 Points If you negotiated a salary based on an anticipated inflation rate of 4 percent, and the actual inflation rate turned out to be 6 percent, __________. A. the purchasing power of your real wages would be more than you anticipated B. your employer would have gained at your expense C. your real wage will increase, but your nominal wage will decrease D. the purchasing power of your wages will not change, since purchasing power is based on your nominal wage Set 2 Question 1 of 40 2.5 Points An event that allows the economy to operate more efficiently by producing more outputs without using any more inputs is referred to as __________. A. absolute progress B. efficiency progress C. capital investment D. technological progress Question 2 of 40 2.5 Points In a simple economy without government or foreign trade, any income not consumed is called __________. A. investment B. net investment C. saving D. depreciation Question 3 of 40 2.5 Points When the government has a budget deficit or surplus, it enters the __________. A. market for loanable funds B. subprime housing market C. bond market D. government-sponsored mortgage lenders market Question 4 of 40 2.5 Points If a firm increases its capital stock per person while holding constant the number of workers employed, the firm is said to experience __________. A. capital augmentation B. investment deepening C. labor intensity D. capital deepening Question 5 of 40 2.5 Points Which of the following uses of tax revenues collected by the government leads to increased capital deepening? A. building roads B. increased foreign aid C. Medicare payments D. Social Security payments Question 6 of 40 2.5 Points An increase in the capital stock will __________. A. shift the production function downward B. shift the production function upward C. flatten the production function D. steepen the production function Question 7 of 40 2.5 Points In making accurate comparisons of GDP across countries, it is important to take differences in __________ into account. A. population size ?? B. the average age of the population C. family size D. all of the above Question 8 of 40 2.5 Points Nations with low levels of GDP per capita may converge to richer nations if __________. A. nations with high levels of income experience a continuously increasing growth rate B. nations with lower levels of income grow more quickly than those with higher levels of income C. nations with lower levels of income spend less on investment D. nations with lower levels of income grow more slowly than those with higher levels of income Question 9 of 40 2.5 Points Convergence refers to closing the gap in __________ between poorer countries and richer countries. A. real GDP B. real GDP per capita C. the growth rate in real GDP D. the growth rate in real GDP per capita Question 10 of 40 2.5 Points The fraction of additional income spent on imports is called the __________. A. import function B. marginal propensity to import C. marginal propensity to export D. trade balance Question 11 of 40 2.5 Points According to the text, __________ is perhaps the most critical aspect of a country’s economic performance. A. growth in GDP B. the inflation rate C. the unemployment rate D. the living standard Question 12 of 40 2.5 Points It is possible for an economy to become more productive and per-capita output to increase if __________. A. new ideas are generated B. inventions are developed C. technology is improved D. all of the above Question 13 of 40 2.5 Points An increase in the level of U.S. exports __________ the demand for goods and service produced in the United States. A. decreases B. increases ??? C. increases or decreases D. does not affect Question 14 of 40 2.5 Points If government increases spending and wants to maintain a balanced budget, it should __________. A. decrease taxes by an equal amount B. increase taxes by an equal amount C. decrease taxes by an amount equal to the increase in spending multiplied by the tax multiplier D. increase taxes by an amount equal to the increase in spending multiplied by the tax multiplier Question 15 of 40 2.5 Points Fluctuations in the demand and supply of loanable funds will in turn bring changes to the __________ of lent and borrowed funds. A. product recipient B. mortgage-backed securities C. equilibrium quantity D. equilibrium quality Question 16 of 40 2.5 Points Suppose that for a given firm, the increase in output resulting from the last worker hired is less than the increase in output of the previous worker hired. This is an example of __________. A. diminishing returns B. constant returns C. increasing return D. capital deepening Question 17 of 40 2.5 Points The idea that investment in comprehensive education in developing countries leads to permanent increases in the rate of technological progress is an example of __________. A. increasing economic inequality B. capital deepening C. new growth theory D. a trade-off between human capital and technology Question 18 of 40 2.5 Points The multiplier that arises from equal increases in government spending and taxes is called the __________. A. simple multiplier B. tax multiplier C. balanced budget multiplier D. government spending multiplier Question 19 of 40 2.5 Points Trade deficits always lead to future decreases in consumption if the trade deficits __________. A. support current investment B. support current consumption C. support either current investment or current consumption D. require borrowing from abroad Question 20 of 40 2.5 Points happens to U.S. GDP when foreign countries experience prosperity? A. It increases because the United States will export more product to those countries. B. It decreases because the foreign countries will now buy more of their own products. C. It decreases because the foreign countries will be able to export more at a lower cost. D. It does not change because U.S. GDP is not affected by other countries’ prosperity. Question 21 of 40 2.5 Points If money is used as a mechanism to hold purchasing power for a period of time, it is functioning as a __________. A. standard of value B. store of value C. medium of exchange D. unit of account Question 22 of 40 2.5 Points Money guarantees that there is a(n. __________, because it will always be accepted in exchange for a desired service or good. A. double coincidence of wants B. open market C. fiat D. human interaction Question 23 of 40 2.5 Points An open market __________ by the Fed decreases the money supply, which leads to __________ interest rates and a fall in investment spending. A. sale; increased B. sale; decreased C. purchase; increased D. purchase; decreased Question 24 of 40 2.5 Points The group responsible for deciding on monetary policy is the __________. A. Federal Open Market Committee B. Board of Governors only C. Federal Advisory Council D. group of 12 Federal Reserve Bank presidents only Question 25 of 40 2.5 Points One of the essential functions that a bank performs is __________. A. purchasing government bonds B. creating deposits by lending required reserves C. transferring money from savers to lenders D. owning assets like real estate Question 26 of 40 2.5 Points When money is used to express the value of goods and services, it is functioning as a __________. A. medium of exchange B. store of value C. unit of account D. store of purchasing power Question 27 of 40 2.5 Points The Fed can change the money supply by buying or selling long-term Treasury bonds. Purchasing long-term securities is commonly called __________. A. open market operations B. discount operations C. federal funds speculation D. quantitative easing Question 28 of 40 2.5 Points To increase the money supply using the reserve requirements, what would the Fed typically do? A. increase the reserve requirement for banks B. reduce the reserve requirement for banks C. make each bank set its own reserve levels D. let each bank get more currency from the Treasury Question 29 of 40 2.5 Points The Federal Reserve influences the level of interest rates in the short run by changing the __________. A. demand for money through open market operations B. demand for money through changes in reserve requirements C. supply of money through open market operations D. supply of money through changes in stock market operations Question 30 of 40 2.5 Points Consider how the value of the U.S. dollar affects the worldwide increase in commodity prices to answer the following two question(s.. Starting in the summer of 2010, there was a rise in prices of commodities such as oil and food worldwide. Some economists suggested that monetary policy in the United States was the cause of the worldwide commodity boom. Some economists noticed that the change in the value of the U.S. dollar was largely due to the change in interest rates, and the change in interest rates occurred because of the Fed’s use of __________ to further stimulate the economy. A. open market sales B. quantitative easing C. discount operations D. open market purchases Question 31 of 40 2.5 Points All of the following statements are true of the Federal Reserve EXCEPT __________. A. it acts as the central bank for all countries in the world B. along with the Board of Governors, the chairperson of the Federal Reserve determines monetary policies and strategies based on the state of economy C. it supplies currency to the economy D. it holds reserves from banks and regulates banks Question 32 of 40 2.5 Points The supply of money in the U.S. economy is determined primarily by __________. A. decisions made by the Federal Reserve and the U.S. Treasury B. the actions of the Federal Reserve and the banking system C. consumers and the banking system D. the demand for money in the economy Question 33 of 40 2.5 Points A bank’s reserves __________. A. are the sum of its excess and required reserves B. can be held as cash in its vault C. can be held as deposits with the Federal Reserve D. all of the above Question 34 of 40 2.5 Points Good news for the economy is bad news for bond prices, because __________. A. the increased demand for money will increase interest rates B. when real GDP increases, demand for money will decrease C. bond prices move in the same direction as interest rates D. when interest rates increase during growing GDP, bond prices will increase Question 35 of 40 2.5 Points An increase in the reserve requirement __________. A. increases the money supply, which leads to increased interest rates and a decrease in GDP B. increases the money supply, which leads to decreased interest rates and a decrease in GDP C. decreases the money supply, which leads to increased interest rates and a decrease in GDP D. decreases the money supply, which leads to decreased interest rates and a decrease in GDP Question 36 of 40 2.5 Points Loans are examples of a bank’s __________. A. assets B. liabilities C. net worth D. balance sheet Question 37 of 40 2.5 Points When checks are exchanged between banks, the Fed oversees the banks to ensure the appropriate funds have been transferred. This is known as __________. A. check kiting B. check clearing C. check floating D. check balancing Question 38 of 40 2.5 Points The Federal Reserve System was created by the __________. A. U.S. Treasury B. President C. Congress D. Supreme Court Question 39 of 40 2.5 Points M1 __________. A. is the sum of currency plus traveler’s checks B. is the narrowest definition of the money supply C. includes small time deposits D. includes credit cards Question 40 of 40 2.5 Points Equilibrium in the money market occurs when __________. A. the quantity of money demanded equals the quantity of money supplied B. the quantity of money demanded is less than the quantity of money supplied C. the quantity of money demanded is more than the quantity of money supplied D. the interest rate equals the money supply
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