Question

1.Capital investment, labor force and its productivity, and technology are three key elements that determine the total output of an economy. True or False

2.In the long run, when capital is abundant, the marginal benefit of capital investment is decreasing, so technological changes are more important in supporting economic growth. True or False

3.GDP calculates the total market values of newly produced final goods and services to represent the size of the economy. True or False The labor force participation rate shows what percentage of the working-age population is in the labor market. True or False

4.The unemployment rate indicates what percentage of the labor force in the labor market is currently unemployed. True or False

5.When a country opens its economy to the rest of the world, if the original domestic price is lower than the global price, an export will incur, which drives up the domestic price to the global level. True or False

6.When a country opens its economy, if the original domestic price is higher than the global price, imports will incur which drives the domestic price to move lower to the global price.True or False

7.When the domestic price of a good is higher than the global price of the same good, what happens in the context of an open economy? A. It will increase domestic sales and also the domestic price. B. It will attract domestic sellers to sell to the international market. The additional sales drive the domestic price even higher. C. The domestic sales and price will both go down. D. It will attract international sellers, which will lead to import.

8.The additional supply will lower the domestic price to the same level as the global price. A foreign exchange system that allows the exchange market to determine exchange rates but with restrictions on daily trade volume and exchange rate movement is called: A. free floating system. B. pegging system. C. managed floating system. D. fixed system.

9.A local gas station shows that the price of regular unleaded is $4.19 a gallon. What is the function of money here? A. medium of exchange B. store of value C. unit of account D. standard of deferred payment

10.According to the quantity theory of money, which of the following statements is NOT true? A. Else the same, the higher the velocity of circulation, the less money needed for the same amount of transactions. B. Else the same, inflation will lead to larger quantity of money needed for an economy. C. Else the same, the higher the price level, the lower the demand for money. D. Else the same, a larger real GDP generally requires more money in circulation.

11.If a country has tax revenues of $7 trillion and government expenditures of $7 trillion, its government has a(n): A. unknown situation. B. budget surplus. C. budget deficit. D. balanced budget.

12.In recent months, the exchange rate between the Chinese Yuan and the U.S. dollar moved from 6.1 Yuan/USD to 6.3 Yuan/USD. Which currency depreciated? A. Neither B. Both C. Dollar D. Yuan Katy sets up a savings account to manage money for her child's education.

13.What is the function of money here? A. standard of deferred payment. B. medium of exchange. C. store of value. D. unit of account. Micheal, a recent Shepherd graduate, financed his studies with a student loan.

14.Now he works as a trainer and makes monthly payments to the loan. What is the function of money here? A. medium of exchange B. unit of account C. standard of deferred payment D. store of value Most economic policies are a two-edge sword.

15.The overuse of a policy may cause significant side effects. The side effects of an expansionary fiscal policy include: A. government budget deficit. B. potential inflation. C. that the government may have too much influence on the market economy, and its efficiency is always of question. D. all of the above.

16.One year ago, the federal discount rate (a key interest rate) was 2.5%, and the current federal discount rate is 0.5%. Such adjustment aims to: A. decrease the monetary base. B. increase the cost for firms to borrow from the Fed. C. balance federal budget. D. encourage lending.

17.The Short-Run Phillips Curve shows: A. that monetary policy has an inverse effect on the unemployment rate and the inflation rate. B. monetary policy is effective in moving the real economy in the short run since it can affect the unemployment rate. C. There is a negative relationship between the inflation rate and the unemployment rate in the short run. D. all of the above.

18.The government expenditure multiplier refers to: A. that government spending has little impact on national economy. B. that each additional dollar spent by the government will lead to a less than one dollar increase in GDP. C. that government spending leads to less consumer spending. D. that government spending has a magnified effect on national economy.

19.To serve as a commodity money, an object must satisfy which of the following requirements? A. It has to be a commodity or token, which can be divided into small parts. B. It has to be generally accepted by the market participants to trade for goods and services. C. It has to be used as a method of settling a debt or payment. D. all of the above.

20.To serve as a commodity money, an object must satisfy which of the following requirements? A. It has to be a commodity or token, which can be divided up into small parts. B. It has to be generally accepted by the market participants to trade for anything and everything. C. It has to be used as a method of settling a debt or payment. D. All of the above.

21.Tom bought 6 oranges for 3 dollars. Money serves the function of: A. standard of deferred payment. B. store of value. C. medium of exchange. D. unit of account. What is (are) the main objective(s) of fiscal policy: A. higher economic growth. B. full employment. C. low inflation. D. all of the above.

22.Which branch of the Fed oversees most financial institutions in West Virginia? A. Richmond B. Cleveland C. Washington DC D. Philadelphia

23.Which of the following items is NOT a form of money? A. Traveler's checks B. Coins C. Treasury bonds D. Cash Which of the following statements about the balance of payments in an open economy is correct? A. It includes current accounts, financial accounts and capital accounts. B. It is always in balance. C. A deficit of current accounts (i.e., trade deficit) is always balanced by a surplus in financial accounts (i.e., net investments in domestic assets). D. all of the above.

24.Which of the following statements is INCORRECT about M1 and M2? A. M2 includes M1, savings deposits, time deposits and money market funds. B. M1 and M2 are mutually exclusive. C. M2 is more broadly defined than M1. D. M1 is more liquid than M2.

25.Which of the following statements is NOT true? A. An increase in government spending directly increases the aggregate demand for goods and services. B. Lower taxes reduces business costs and increases aggregate supply. C. Although government spending may have a crowding-out effect on private investment and spending in the same field, the positive impact on the overall economy is greater. D. all of the above are true.

Answer 1

1. True. The main components which determine the output in an economy are labor, capital, and technology.

2. Since with the increase in the capital level, the marginal benefit of capital investment declines. Thus, in the long run, we must enhance the productivity of the capital which is the same as technological advancement. So, true.

3. GDP is the total market value of the goods and services newly produced in an economy in a given year. So, True.

The labor force participation rate shows the share of the people in the labor market (both employed and unemployed) out of the working-age population. So, True.

4. True. The unemployment rate is the share of unemployed people who are a part of the labor force.

5. With exports, the demand for goods will increase. This increased demand will increase the price of the goods. On the other hand, the larger competition in the market will decrease the price of international products and thus making them one. False.

6. When there is an increase in imports, then the number of products in the market will increase and due to the more competition, there will be a decline in the price in the market. But with the higher competition, the global price will increase and both will become equal. So, false.