Question

An increase in savings by consumers is seen as a(n) decrease in investment spending in the economy increase in government spending in the economy. decrease in exports in the economy. increase in imports in the economy. leakage in spending in the economy.

Question 2(Multiple Choice Worth 1 points) If changes in the stock market cause an increase in consumer wealth, we would expect to see a/an increase in consumer indebtedness. increase in consumer card balances. increase in consumer spending. decrease in investment spending. decrease in imports.

Question 3(Multiple Choice Worth 1 points) A college graduate who is searching for his first job illustrates the concept of cyclical unemployment. frictional unemployment. structural unemployment. an employed individual. a discouraged worker.

Question 4(Multiple Choice Worth 1 points) Transfer payments are not counted in GDP because transfer payments are sent as aid to foreign nations. movements of money between checking and savings accounts. payments for which no good or service is exchanged. made in the foreign exchange market. payments for imports and exports.

Question 5(Multiple Choice Worth 1 points) All of the following would be included in the calculation of unemployment except people who are working part-time while they are looking for a full-time job. people who are laid off because they lack the skills for their current job. people voluntarily moving from one job to another. people graduating from college or a technical school. people whose job moved to another location while they stayed in their old location.

Question 6(Multiple Choice Worth 1 points) Good/Service Quantity 2009 Unit Price 2010 Unit Price Lettuce 2 $3.00 $1.00 Bread 3 $2.00 $3.00 T-shirts 4 $10.00 $15.00 Between 2009 and 2010, the CPI increased by 26.7 percent. increased by 36.5 percent. increased by 73.2 percent. decreased by 36.5 percent. decreased by 26.7 percent.

Question 7(Multiple Choice Worth 1 points) Which of the following will be counted in GDP? Cameron purchased his best friend’s I-Pod Nano®. Maggie bought some beads she will use to make necklaces to sell at the local flea market. Matt agreed to clean Ryan’s pool for $10 cash each week. Laura purchased a backpack for her trip to Europe. Pratheek received a $10,000 scholarship from the Department of Education.

Question 8(Multiple Choice Worth 1 points) If nominal GDP equals $125 billion and the CPI is 125, then real GDP equals $1,000 billion. $156.25 billion. $100 billion. $15.62 billion. $10 billion.

Question 9(Multiple Choice Worth 1 points) Assets Liabilities Reserves $82,500 Deposits $125,000 Bonds $30,000 Loans $12,500 Using the table above, if the reserve requirement is 10 percent, then the additional amount the bank could create is $700,000. $125,500. $1,255,000. $7,000,000. $8,250,000.

Question 10(Multiple Choice Worth 1 points) When a new Congress is elected, businesses become more confident that the economy will improve. As a result, we can expect the following changes in the loanable funds market (LF): Demand for LF / Real Interest Rates Increase / Increase Increase / Decrease Decrease / Increase Decrease / Decrease No change because supply of loanable funds will change

Question 11(Multiple Choice Worth 1 points) After saving money in his piggy bank for three years, Omar decided to deposit $2,500 of the money in the local bank. If the bank were fully loaned out and the reserve requirement was 20 percent, then the change in the dollar value of the total money supply would be $500. $2,000. $10,000. $12,500. $25,000.

Question 12(Multiple Choice Worth 1 points) The term of office for a member of the Board of Governors of the Fed is 7 years. 9 years. 10 years. 12 years. 14 years.

Question 13(Multiple Choice Worth 1 points) The interest rate banks charge each other is called the prime interest rate. real interest rate. discount rate. nominal interest rate. federal funds rate.

Question 14(Multiple Choice Worth 1 points) If the money supply increases while velocity remains stable, we would expect to see an increase in nominal GDP. an increase in real GDP. a decrease in nominal GDP. a decrease in real GDP. a decrease in interest rates.

Question 15(Multiple Choice Worth 1 points) The U.S. funds deficit spending primarily through personal income tax increases. business tax increases. borrowing from the International Monetary Fund. borrowing from the World Bank. selling bonds, bills, and notes.

Question 16(Multiple Choice Worth 1 points) If the CPI is 4.5 percent and the interest rates banks charge customers on loans is 10.5 percent, the real interest rate is 15 percent. 10.5 percent. 6 percent 4.5 percent. 2.33 percent.

Question 17(Multiple Choice Worth 1 points) Suppose Aaron deposits $4,000 in a U.S. bank that he brought from another country. If the required reserve ratio is 10 percent, the amount the banking system can create is $400. $3,600. $4,000. $40,000. $36,000.

Question 18(Multiple Choice Worth 1 points) If the Federal Reserve buys bonds on the open market then the money supply will increase causing a decrease in investment spending shifting aggregate demand to the right. increase causing an increase in investment spending shifting aggregate demand to the right. decrease causing a decrease in investment spending shifting aggregate demand to the right. decrease causing a decrease in investment spending shifting aggregate demand to the left. increase causing a decrease in investment spending shifting aggregate demand to the left.

Question 19(Multiple Choice Worth 1 points) If the government imposes an effective interest rate ceiling in the loanable funds market, how would quantity demanded and quantity supplied of loanable funds be impacted? Quantity Demanded / Quantity Supplied No change because demand will increase to meet supply Increase / Increase Increase / Decrease Decrease / Increase Decrease / Decrease No change because supply will decrease to meet demand

Question 20(Multiple Choice Worth 1 points) Completed Per Day Flower Beds Weeded Bags of Leaves Raked Samantha 4 8 Adam 5 25 Samantha and Adam own a gardening business together. They each pull weeds from flower beds and rake up leaves for their neighbors. If each decides to specialize in what they are best at, Samantha will weed and Adam will rake because these are the goods each has a comparative advantage in. rake and Adam will weed because these are the goods each has a comparative advantage in. weed and Adam will rake because these are the goods each has an absolute advantage in. rake and Adam will weed because these are the goods each has an absolute advantage in.

Question 21(Multiple Choice Worth 1 points) An economy with government involvement in the provision of social welfare benefits combined with relatively free markets where buyers and sellers are allowed to interact with one another would be a market economy. command economy. traditional economy. normal economy. mixed economy.

Question 22(Multiple Choice Worth 1 points) This graph shows a production possibilities curve set to the x-axis of Pajamas and the y-axis of Slippers. It has 1, 2, 3, 4 on the horizontal axis and 40, 70, 90, and 100 on the vertical axis. If two pajamas are currently being produced, the opportunity cost of increasing production to three pajamas would be 90 slippers. 70 slippers. 40 slippers. 30 slippers. 20 slippers.

Question 23(Multiple Choice Worth 1 points) Graphs A-E are all set to the horizontal axis of Q and the vertical axis of P, and all have a basic supply and demand curve. Graph A includes a second supply curve located further to the right of the original supply curve. Graph B includes a second supply curve located further to the left of the original supply curve. Graph C includes a second demand curve located further to the right of the original demand curve. Graph D includes a second demand curve located to the left of the original demand curve. Graph E includes a second supply curve to the right of the original and a second demand curve to the right of the original demand curve. Assume that fresh fish and chicken are substitutes for consumers. If fresh fish is found to have high levels of mercury in it, which of the graphs above would reflect the impact of the finding on the market for chicken in the short-run? A B C D E

Question 24(Multiple Choice Worth 1 points) Graphs A-E are all set to the horizontal axis of Q and the vertical axis of P, and all have a basic supply and demand curve. Graph A includes a second supply curve located further to the right of the original supply curve. Graph B includes a second supply curve located further to the left of the original supply curve. Graph C includes a second demand curve located further to the right of the original demand curve. Graph D includes a second demand curve located to the left of the original demand curve. Graph E includes a second supply curve to the right of the original and a second demand curve to the right of the original demand curve. To be efficient, the production of each good this economy should produce is 100 slippers and no pajamas. 90 slippers and 2 pajamas. 70 slippers and 3 pajamas. 40 slippers and 4 pajamas. indeterminate with the information given.

Question 25(Multiple Choice Worth 1 points) Which of the following will cause an increase in SRAS? a decrease in labor productivity an increase in employee wages a decrease in government regulations on businesses an increase in consumer spending a decrease in investment spending

Question 26(Multiple Choice Worth 1 points) The elimination of cyclical and structural unemployment as a result of flexible prices and wages correcting themselves would be Keynesian. classical. monetarism. supply-side. rational expectations.

Question 27(Multiple Choice Worth 1 points) With an MPC of .75, the government spending multiplier will be 1. 2. 4. 5. 8.

Question 28(Multiple Choice Worth 1 points) If the Federal Reserve buys securities, we would expect to see an increase in all consumer spending. investment spending. government spending. tax rates. interest rates.

Question 29(Multiple Choice Worth 1 points) All of the following are reasons the AD curve is down sloping except when prices rise in an economy, the real value of household income declines causing decreased consumer spending. when prices rise in an economy, more households seek loans, decreasing investment and consumer spending as interest rates rise. when prices rise in an economy, consumers tend to buy cheaper foreign products and fewer domestic products resulting in a decrease in net exports. when prices rise in an economy, consumers tend to spend more on domestic goods. when prices rise in an economy, consumers tend to spend less on domestic goods.

Question 30(Multiple Choice Worth 1 points) When exports increase, we can expect what changes in price level and real GDP? Price Level / Real GDP Decrease / Indeterminate Increase / Increase Increase / Decrease Increase / Indeterminate Decrease / Increase Decrease / Decrease

Question 31(Multiple Choice Worth 1 points) Crowding out occurs when deficit spending increases interest rates. decreases interest rates. increases consumer spending. decreases consumer spending. increases investment spending.

Question 32(Multiple Choice Worth 1 points) The spending multiplier will increase when the marginal propensity to consume increases. marginal propensity to save increases. interest rates increases. savings rate increases. investment rate increases.

Question 33(Multiple Choice Worth 1 points) Stagflation in the economy would be caused by a rightward shift of AD. leftward shift of AD. rightward shift of AS. leftward shift of AS. leftward shift of LRAS.

Question 34(Multiple Choice Worth 1 points) Which of the following combinations of fiscal and monetary policy would be most effective in fixing hyper-inflation in an economy? Taxes / Government Spending / Discount Rate / Open Market Operations Decrease / Increase / Increase / Sell Decrease / Increase / Increase / Buy Increase / Decrease / Increase / Sell Decrease / Decrease / Decrease / Buy Increase / Decrease / Decrease / Sell

Question 35(Multiple Choice Worth 1 points) A change in the long-run Phillips Curve will occur when aggregate demand shifts right. aggregate demand shifts left. aggregate supply shifts right. aggregate supply shifts left. the natural rate of unemployment changes.

Question 36(Multiple Choice Worth 1 points) Stagflation can be caused by a decrease in investment spending. consumer spending. government regulations. productivity. interest rates. Question 37(Multiple Choice Worth 1 points) If Congress decreases taxes and spending by $500, then AS will decrease by $500. AD will decrease by $500. AD will decrease by more than $500. AS will increase by $500. AD will increase by $500.

Question 38(Multiple Choice Worth 1 points) If investment spending increases while in the up sloping range of the aggregate supply curve, then output will decrease. employment will decrease. unemployment will decrease. price level will decrease. interest rates will decrease.

Question 39(Multiple Choice Worth 1 points) In an economy with a vertical aggregate supply curve, a decrease in taxes will affect price level and employment in which of the following ways? Price Level / Output Decrease / Increase Increase / Increase Increase / Decrease Increase / No Change Decrease / No Change No Change / Decrease

Question 40(Multiple Choice Worth 1 points) If expected inflation was greater than current inflation then buyers are hurt. borrowers are helped. lenders are helped. savers are helped. employees are always helped.

Question 41(Multiple Choice Worth 1 points) If in response to a spreading recession, the President calls for an increase in investment spending by businesses, which of the following would be the best policy mix to accomplish this goal without increasing the output level? Buy bonds and increase government spending Buy bonds and decrease government spending Sell bonds and increase business taxes Sell bonds and decrease government spending Sell bonds and increase government spending

Question 42(Multiple Choice Worth 1 points) The short-run Phillips Curve shows a(n) inverse relationship between inflation and unemployment. inverse relationship between inflation and interest rates. inverse relationship between interest rates and unemployment. direct relationship between inflation and unemployment. direct relationship between inflation and interest rates.

Question 43(Multiple Choice Worth 1 points) To correct unemployment in the economy, the Federal Reserve might increase government spending. taxes. the discount rate. the required reserve ratio. the purchase of bonds.

Question 44(Multiple Choice Worth 1 points) If the government provides subsidies to all manufacturing and agricultural sectors, what would happen to price level and output? Price Level / Output Decrease / Indeterminate Increase / Increase Increase / Decrease Increase / Indeterminate Decrease / Increase Decrease / Decrease

Question 45(Multiple Choice Worth 1 points) The idea that if consumers anticipate monetary policy changes there will be no change in GDP is a theory advanced by monetarists. Keynesians. Classical economists. rational expectationists. supply side economists.

Question 46(Multiple Choice Worth 1 points) Aggregate demand will decrease for all of the following reasons except government spending decreases. personal taxes increase. business taxes increase. real interest rates increase. the discount rate increases.

Question 47(Multiple Choice Worth 1 points) The federal government will increase the budget deficit when investment spending increases. the government spends more than it earns in revenue from taxes. consumer spending decreases. the government spends more on debt interest than it earns in revenue from taxes. Congress increases spending and taxes by the same amount.

Question 48(Multiple Choice Worth 1 points) If Congress decides to increase defense spending but does not increase taxes to cover the deficit spending, we can expect that GDP will decrease. consumer spending will decrease. the money supply will increase. interest rates will increase. consumer spending will increase.

Question 49(Multiple Choice Worth 1 points) An open market sale will result in a(n) decrease in nominal interest rates. decrease in aggregate supply. decrease in real interest rates. increase in aggregate demand. increase in real and nominal interest rates.

Question 50(Multiple Choice Worth 1 points) Which of the following would cause the U.S. dollar (USD) to appreciate as compared to the Mexican peso? interest rates in Mexico increase. American consumers prefer to buy Mexican goods. Mexican income decreases. GDP in Mexico increases. GDP in the United States increases.

Question 51(Multiple Choice Worth 1 points) Suppose the demand for loanable funds increases in the United States, but they don’t increase in Russia. What is the short-run impact of this change in interest rates on the value of the U.S. dollar (USD), and the value of the Russian ruble? USD / ruble Depreciate / Depreciate Depreciate / Appreciate Appreciate / Depreciate Appreciate / Appreciate Appreciate / No Change

Question 52(Multiple Choice Worth 1 points) If real interest rates rise in the United States and they don’t rise in other nations, what is the impact on capital stock and capital flow? Capital Stock / Capital Flow Decrease / No Change Increase / Inflow Decrease / Inflow Increase / No Change Decrease / Outflow Increase / Outflow

Question 53(Multiple Choice Worth 1 points) Suppose demand for U.S. products across the world increases. What is the impact on the flow of financial capital as a result of the increase in demand for products, the value of the U.S. dollar, and the foreign money price of the U.S. dollar? Financial capital flow / Value of the U.S. dollar / Price of the U.S. dollar No Change / Appreciate / Increase Inflow / Depreciate / Decrease Inflow / Appreciate / Increase Outflow / Depreciate / Increase Outflow / Appreciate /

Decrease Question 54(Multiple Choice Worth 1 points) All of the following are counted in a nation’s current account except the purchase of a pair of jeans by a British tourist. horse farm in Kentucky by a Spanish breeder. ticket to a concert by a Lithuanian visitor. buggy ride around Central Park by a Canadian family. Statue of Liberty ticket by a French historian.

Question 55(Multiple Choice Worth 1 points) An economist would state that tariffs and quotas are bad for the U.S. economy for all of the following reasons except the price level will increase. more American jobs would be lost. there will be fewer goods and services to buy. there will be less variety of goods and services. U.S. resources will not be used in the most efficient manner.

Question 56(Multiple Choice Worth 1 points) As a result of rising unemployment, savings in the United States increases as families begin to save for a rainy day. Which of the following describes the impact on real interest rates, the international value of the U.S. dollar (USD), and U.S. exports? Interest Rates / USD / Exports Increase / Increase / Increase Increase / Increase / Decrease Increase / Decrease / Increase Decrease / Increase / Decrease Decrease / Decrease / Increase Decrease / Decrease / Decrease

Question 57(Multiple Choice Worth 1 points) This is a series of 5 economic graphs. Graphs A and E show production possibilities curves with consumer goods on the y-axis and capital goods on the x-axis. In A, there is a line parallel and inside the original line with arrows pointing inward. In E, there is a line parallel and outside the original line with arrows pointing outward. Graphs B, C, and D are set to the x-axis of RGDP=Y and the y-axis of PL. They show a downward sloping aggregate demand curve marked as AD1. The upward sloping aggregate supply curve is marked as AS1. In graph B, there is a second downward sloping aggregate demand curve marked AD2 to the right of AD1 and a vertical LRAS intersecting AD2 and AS1. In graph C, there is a second upward sloping aggregate supply curve marked AS2 to the right of AS1 and a vertical LRAS intersecting AD1 and AS2. In graph D, there is a second upward sloping aggregate supply curve marked AS2 to the left of AS1 and a vertical LRAS intersecting AD1 and AS2. An increase in economic growth in all sectors of the economy would best be represented by which of the graphs above? A B C D E

Question 58(Multiple Choice Worth 1 points) Economic growth would increase as a result of all of the following except increase in labor productivity. introduction of new technology in the manufacturing sector. decrease in investment spending. new factory construction in the northern states. discovery of new sources oil and natural gas in Utah and Idaho.

Question 59(Multiple Choice Worth 1 points) Economic growth is best represented by an increase in AD and LRAS. AD and SRAS. AD and the PPC. LRAS and the PPC. SRAS and the PPC.

Question 60(Multiple Choice Worth 1 points) The production possibilities curve would shift outward as a result of a(n) decrease in labor productivity. increase in absenteeism. new integrated circuit that revolutionizes the defense industry. increase in short run aggregate supply. increase in aggregate demand.

Answer 1

1. An increase in savings by consumers is seen as:  leakage in spending in the economy. It is because savings reduces the flow of income and spending i.e when households save, they reduce their expenditure on goods and services and as aresult, money flow reduces and we call it a leakage in circular flow.
2. If changes in the stock market cause an increase in consumer wealth, we would expect to see: increase in consumer spending. Consumers' expenditure is a positive function of overall wealth of the consumer. So as the wealth of consumer increases, he/she definitely spends more.
3. A college graduate who is searching for his first job illustrates the concept of:  frictional unemployment. People looking for new jobs or switching a job are said to be frictionally enemployed. Frictional unemployment exists because people are in process of shifting jobs. All other options are ruled out because structural unemployment is related to structure of the economy (type of industries, skills of the worker). A person looking for a job can not be called either employed or discouraged. So, the answer should be Frictional unemployment.
4. Transfer payments are not counted in GDP because:  payments for which no good or service is exchanged. Transfer payments are unilateral payments like scholarships, aids etc for which there is no corresponding good or service produced. Hence these are not included in calculating GDP.