Question

1) “Demand” is best defined as the relationship between:

1. the price of a good and the quantity consumers are willing and able to buy at each price level.
2. the current price of a good and the quantity demanded at that price.
3. the quantity supplied and the price people are willing to pay for a good.
4. the amount of income someone has and the price he is willing to pay for a good.

2) A home theater system and an HD television would be considered an example of:

A) substitute goods.

2. giffen goods.
3. inferior goods.
4. complementary goods.

3) Many people consider hot dogs to be an inferior good. For such people, all else held constant, a decrease in income would cause their demand for hot dogs to:

1. increase.
2. stay the same.
3. decrease.
4. cannot be determined with the information given.

4) If movies on DVD for home rental and movies seen at a theater are substitutes, and the price of movies seen at a theater increases, the demand for movies on DVD will:

A) increase.

2. stay the same.
3. decrease.
4. cannot be determined.

5) Which of the following is not considered a factor that influences supply?

A) Technology.

2. Production taxes and subsidies.
3. The number of buyers.
4. Resource prices.

6) For the U.S. economy, the largest expenditure category is:

A) government expenditures.

2. net export expenditures.
3. personal consumption expenditures.
4. investment expenditures.

7) Greater consumer confidence, wealth, available consumer credit, and disposable income ________ personal consumption expenditures.

1. increase
2. decrease
3. have no effect on
4. none of the above

8) Higher expected profits and business confidence ________ investment spending.

A) decrease

2. increase
3. do not affect
4. none of the above.

9) Appreciation of the U.S. dollar will ________ exports and ________ imports, other things equal.

1. increase; increase
2. increase; decrease
3. decrease; decrease
4. decrease; increase

10) The reserve requirement is 0.20. What is the simple deposit multiplier?

A) 1

2. 5
3. 0.10
4. 100

11) The interest rate that commercial banks charge each other for loans of reserves to meet their minimum reserve requirements is called:

A) treasury bill rate.

2. federal funds rate.
3. prime interest rate.
4. none of the above.

12) An increase in the reserve requirement would:

1. decrease excess reserves and reflect an expansionary monetary policy.
2. decrease excess reserves and reflect a contractionary monetary policy.
3. increase excess reserves and reflect an expansionary monetary policy.
4. increase excess reserves and reflect a contractionary monetary policy.

Answer 1

Since, there are more than 1 questions, so I am providing only the correct option for each answer along with its explanation. I am not providing the explanation for other options why they are wrong. If you have doubt, you can ask it in the comment section.

Ans 1: (A) because this is the best definition for a demand. There is a negative relation between price and quantity demanded by consumers.

Ans 2: (D) because they are jointly used together.

Ans 3: (A) because there is an inverse relation between demand for inferior good and income of the consumer. As income decreases, consumer demand more of inferior goods.

Ans 4: (A) because as the price of movies at theater increases it becomes expensive to watch movies at theater so people would demand more of DVDs because both are substitutes.

Ans 5: (C) The no. of buyers affect the demand side, and not the supply side.

Ans 6: (C) Personal household consumption expenditure is the largest component of GDP.

Ans 7: (A) because there are the factor which positively influences consumption expenditure.

Ans 8: (B) because these factor positively influences business investment.

Ans 9: (D) because appreciation of US dollar makes imports cheaper and exports less profitable now.

Ans 10: (B) because simple deposit multiplier is: 1/reserve requirement ratio = 1/0.20 = 5

Ans 11: (B) Because it is the rate set by the central bank of a country to lend and borrow to other financial institutions.

Ans 12: (B) It would decrease excess reserve now because the banks has to keep more reserve with themselves now, so they would be making less loans to public now. As a result the money supply in the economy falls. Hence, it is contractionary monetary policy.