ECON204 2

1.

1 point

The "real burden" of the debt is directly related to

The relationship between the Treasury and the Federal Reserve System

The difference between internally held debt and externally held debt

The idea of opportunity cost

How transfers redistribute income

2.

1 point

The Federal Open Market Committee includes

All 7 governors and 5 of the regional Reserve bank presidents

5 of the governors and all of the regional Reserve bank presidents

12 of the regional Reserve bank presidents plus the Chair of the Fed

All 7 of the governors and all 12 of the regional Reserve bank presidents

3.

1 point

When cash or coins are initially deposited in to a bank

The composition of the money supply changes, but the size of the money supply does not change

Both the composition and the size of money supply change

Neither the composition nor the size of the money supply changes

The composition of the money supply does not change, but the size of the money supply does change.

4.

1 point

From an economic standpoint, government interventions is justified

When the market mechanism fails to achieve the optimal mix of output

Because of the government can increase the level of market power of private businesses

Because the government will encourage the production of private goods

When the private sector is larger than the public sector

5.

1 point

Which of the following would cause both an increase in the average price level and in increase in real output?

A decrease in the production costs

A tax hike

A decrease in government spending

An increase in transfer payments

6.

1 point

Which of the following is not included in the narrowest definition of the money supply?

Currency in circulation

Transactions account balances

Credit card balances

Traveler's checks

7.

1 point

In economics, scarcity means that

A shortage of a particular good will cause the price to fall

A production-possibilities curve cannot accurately represent the tradeoff between two good

Society's desires exceed the want-satisfying capability of the resources available to satisfy those desires.

The market mechanism has failed

8.

1 point

When money serves as a mechanism for transforming current income into future purchases it is functioning as a

Standard of account

Store of value

Medium of exchange

Standard of value

9.

1 point

If the multiplier is 5 and a change in government spending leads to an $800 million decrease in aggregate demand, we can conclude that

Taxes increased by $500 million

Taxes decreased by $140 million

Government spending decreased by $160 million

Government spending decreased by $100 million

10.

1 point

Given a required reserve ration of 0.25, what is the maximum amount that the money supply can increase in response to a $200 million increase in excess reserves for the whole banking system.

$200 million

$250 million

$800 million

$500 million

11.

1 point

Much of each year's federal budget is considered "uncontrollable" because

Most of the current revenues and expenditures are the result of decisions made in prior years

It must be spent for purchases, as opposed to transfer payments

Government spending is so large that its out of control

It is determined by decision-makers who do not have the power to change spending and taxes

12.

1 point

The minimum amount of reserves a bank is required to hold is known as

The money multiplier

Total reserves

Excess reserves

Required reserves

13.

1 point

IF the population of a country is 250,000 people, its labor force consist of 145,000 people, 35,000 people are unemployed, 10,000 are unable to work, and 5,000 are unwilling to work, the unemployment rate is

19.4 percent

22.1 percent

14.0 percent

24.1 percent

14.

1 point

The government uses ______ to regulate the amount of money banks lend

Monetary policy

Fiscal policy

Banking policy

Tax cuts

15.

1 point

Real GDP is more accurate than nominal GDP in making comparisons of output over time because

Nominal GDP can increase simply because of price increases over time

Real GDP is not affected by output changes

Nominal GDP is the hypothetical output that would be produced at full employment

Real GDP is not affected by changes in productivity or the size of the labor force

16.

1 point

The AD shortfall is the amount of additional aggregate demand needed to achieve full employment after allowing for

Price-level changes

Multiplier effects

Fiscal stimulus

Feedback effects

17.

1 point

One of the essential functions a bank performs is that of

Creating money by lending required reserves

Participating in the stock market

Transferring money from savers to spenders

Purchasing government bonds

18.

1 point

According to the cost benefit analysis, a government project should be undertaken as long as the

Benefits exceed the opportunity costs

Opportunity costs exceed the welfare benefits

Voters approve the project

Benefits equal the costs

19.

1 point

The Federal Reserve System was created by

The FDIC in 1929

The Federal Reserve Act in 1913

The US Treasury in 1914

The Federal Banking Authority in 1904

20.

1 point

If total reserves for a bank are $12000 excess reserves are $2000 and demand deposits are $100000, then the money multiplier must be

5

15

20

10

21.

1 point

Assume the economy is operating below full employment. Which of the following policy actions will allow aggregate spending to increase but will not increase the size of the government in the process?

Decrease in government spending by more than in increase in taxes

Increase in government spending and taxes by the same amount

Decrease tax rates and leave government spending unchanged

Increase government spending and leave tax rates unchanged

22.

1 point

Initially a bank has a required reserve ratio of 20 percent and no excess reserves. IF $5000 is deposited into the bank, then ceteris paribus

This bank can increase its loans by $5000

This bank can increase its loans by $4000

Total reserves will increase by $4000

Required reserves will increase by $5000

23.

1 point

A single bank with $10000 of reserves and a reserve ratio of 25 percent could support total transactions account balances of at most

$10000

$5000

$40000

$25000

24.

1 point

Supposed a bank has $1 million in deposits, a required reserve ratio of 25 percent, and total reserves of $600000/ Then it has excess reserves of

$250000

$600000

$350000

$1000000

25.

1 point

Which of the following is a sound economic reason why the government should subsidize your college education?

The profit motive would cause the private sector to overproduce education

There are external benefits associated with education

It is too expensive

It is a public good

26.

1 point

If real GDP falls from one period to another and the price level stays the same we can conclude that

Nominal GDP increased

Nominal GDP decreased

Inflation increased

NDP decreased

27.

1 point

Governments usually build highways because it is difficult to exclude individuals who don't pay for the highways from using them. What type of market failure is involved?

Public goods

Market power

Externalities

Inequity

28.

1 point

Which of the following services is performed by the regional Federal Reserve banks?

Holding deposits for individuals

Providing loans to individuals

Providing currency to private banks

Check cashing for large corporations

29.

1 point

If the MPC for an economy is 0.80, a $4 billion increase in taxes will ultimately cause consumption to decrease by

$3.2 billion

$16 billion

$36 billion

$40 billion

30.

1 point

IF the price level is 100 for 2005 and the price level is 106.5 in 2007 (the price level has increased by 6.5% from 2005 to 2007), a nominal GDP in 2007 of $15,600 billion would mean that real GDP in 2007 (in 2005 prices) would be closest to

$15,600.0 billion

$14,751.3 billion

$14,647.9 billion

$13,971.2 billion

31.

1 point

When there is a mismatch between the skills required for a job and the skills of job seekers, the unemployment that results is an example of

Structural unemployment

Seasonal unemployment

Cyclical unemployment

Frictional unemployment

32.

1 point

Excess reserves are

Total reserves less required reserves

Total reserves less transactions account balances

Required reserves less demand deposits

Bank reserves in excess of vault cash

33.

1 point

Crowding out is most likely to occur when the federal government

Runs a surplus and pays off part of the debt

Runs a deficit and sell bonds to make up the difference

Runs a deficit and raises taxes to generate more revenue

Has a balanced budget and refinances a portion of the debt that matures

34.

1 point

The components of GDP are

C+I+G+(X-M)

C+I-G+(X-M)

C+I+G-(X+M)

C+I+X-(G+M)

35.

1 point

Which of the following sets the legal minimum reserve ratio?

The commercial banks

The US Treasury

The Federal Reserve

Congress

36.

1 point

The primary function of taxes is to

Correct inequities in the distribution of goods and services

Increase private saving

Transfer command over resources from the private sector to the public sector

Increase the purchasing power of the private sector

37.

1 point

Open market operations involve the Fed

Buying or selling bonds

Buying or selling shares of stock

Borrowing money from a bank

Lending money to individuals

38.

1 point

A tax cut

Directly decreases the disposable income of consumers

Indirectly increases the disposable income of consumers

Shifts the AD curve to the left

Contains less fiscal stimulus than an increase in government spending of the same size

39.

1 point

Deposit creation occurs when

A bank lends money

A person takes money out of one bank and puts it in another bank

A bank borrows dollars from the Federal Reserve

A person takes money out of the banking system and holds is as cash

40.

1 point

The different components of the money supply reflect

Variation in liquidity and accessibility of assets

Whether deposits are domestic or international

How often depositors use their accounts

Whether the deposits are earned or inherited

41.

1 point

Which of the following is excluded from calculations of GDP?

Income received by managers of corporations

The value of lawn mowing provided by a teenager for his own family

Goods that bring little value to society

Goods that are produced but not sold during the time period

42.

1 point

The Board of Governors consists of

7 members, appointed for 14 year term

26 members, appointed for 2 year term

14 members, appointed for 7 year term

50 members, appointed for 7 year term

43.

1 point

Suppose University Bank has zero excess reserves. If the required reserve ratio decreases, the

Money multiplier will decrease

Bank will not have enough required reserves

Bank will be able to make more loans

Bank's assets will increase

44.

1 point

IF bagels and donuts are substitutes, then a decrease in the price of donuts will result in

An increase in the demand for donuts

A decrease in the demand for bagels

An increase in the demand for bagels

A decrease in the demand for donuts

45.

1 point

Which of the following are included in the labor force?

A student who is still in school, but not working or looking for work

A person who voluntarily runs a charity

A part-time store clerk who is looking for another job

A person who spending the entire day taking care of his or her own young children at home

46.

1 point

The ratio of a bank's reserves to its total transactions deposits is known as the

Required reserves

Reserve ration

Excess reserves

Deposit ratio

47.

1 point

The type of unemployment that economists generally associate with normal growth of the labor force and expanding job opportunities in a dynamic economy is

Structural unemployment

Seasonal unemployment

Frictional unemployment

Cyclical unemployment

48.

1 point

Initially a bank has required reserve ratio of 10 percent and no excess reserves. If $1000 is deposited in to the bank, then ceteris paribus

Total reserves will increase by $900

This bank can increase its loans by $1000

This bank can increase it loans by $900

Required reserves will increase by $1000

49.

1 point

Ceteris paribus, which of the following is most likely to cause a decrease in the supply of skateboards?

An increase in the price of skateboards

An increase in the cost of materials used to produce skateboards

An improvement in skateboard-making technology

All of the choices

50.

1 point

Suppose a bank has $2 million in deposits, a required reserve ratio of 10 percent, and total reserves of $500000. Then it has excess reserves of

$50000

$200000

$500000

$300000