1. (Points 5) The GDP is the value of all final goods and.docx

1.
(Points: 5)
The GDP is the value of all final goods and services produced
a. within the nations boundaries.
b. by domestically owned companies.
c. by citizens of the country.
d. by domestically controlled companies.
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2.
(Points: 5)
If our population doubles, our GDP quadruples, and our GDP
deflator doubles, our per capita real GDP will
a. quadruple.
b. double.
c. stay exactly the same.
d. decline by 25 percent.

e. decline by 50 percent.
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3.
(Points: 5)
For purposes of calculating GDP using the expenditure
approach, which of the following payments is NOT included in
the government spending component?
a. Social Security pensions
b. The wages paid by a local government to its road crew
c. The wages paid by a state government to the workers in its
welfare department
d. The federal government's purchase of a submarine from a
shipbuilder
e. None of the choices are correct
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4.
(Points: 5)
Which of the following is an intermediate product?

a. A road
b. Steel
c. Bread
d. A TV set
e. An automobile
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5.
(Points: 5)
National income is the sum of all of the following except
a. wages.
b. savings.
c. interest.
d. rent.
e. profits.

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6.
(Points: 5)
Which of the following would increase GDP?
a. More imports
b. Additional leisure time
c. Government removing more litter from highway right of ways
d. People engaging in more "do-it-yourself" projects
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7.
(Points: 5)
Which of the following would NOT be included in this year's
GDP?
a. The purchase of 100 shares of Microsoft stock
b. The replacement of a muffler on a 1978 Chevy
c. The commission charged by a real estate agent
d. The services of a hair stylist

e. The tuition fee for a course in economics
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8.
(Points: 5)
The largest item amount among those listed here is
a. national income.
b. net interest.
c. net domestic product.
d. corporate profits.
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9.
(Points: 5)
If GDP increases faster than the GDP deflator,
a. real GDP will rise.
b. real GDP will fall.

c. real GDP will stay the same.
d. There is not enough information to determine what happens
to real GDP.
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10.
(Points: 5)
Which one of the following is taken into account by GDP?
a. Household production
b. Illegal production
c. Leisure time
d. Custom lawn care services
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11.
(Points: 5)
The difference between GDP and NDP is

a. Who has control of the company.
b. Who receives the profit from the sale.
c. Where the money is spent.
d. Depreciation.
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12.
(Points: 5)
In the equation C + I + G + Xn, the I is defined as
a. total new investments less a wear out allowance.
b. total investments in new plant and equipment, business
inventory changes and new residential housing.
c. domestic consumer income.
d. total investments in new plant and equipment.
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13.
(Points: 5)
Which is the smallest?

a. Employees' compensation
b. Corporate profits
c. Net interest
d. Rental income
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14.
(Points: 5)
Which statement is true?
a. The sum of wages and salaries is equal to the total of rent,
profits, and interest.
b. Americans earn about as much in profits as in rent and
interest combined.
c. The largest sector of national income is profits.
d. None of the statements are true.
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15.
(Points: 5)
a. GDP is a virtually perfect measure of national output.
b. GDP takes into account pollution, crime, and even personal
satisfaction.
c. GDP is a single number that seeks to measure our national
output.
d. There is no relationship between our GDP and our national
output.
Save Answer
16.
(Points: 5)
H. Ross Pearlmutter is a crackerjack salesperson. He could
probably sell anything to anyone. The company he works for
goes out of business. Until he finds a new position, Mr.
Pearlmutter is _____ unemployed.
a. frictionally
b. structurally

c. cyclically
d. psychologically
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17.
(Points: 5)
If the CPI is currently 296.3 and the base year is 1967, how
much was the CPI in 1967?
a. 96.3
b. 100
c. 196.3
d. 200
e. There isn't enough information to answer this question.
Save Answer
18.
(Points: 5)
The recession phase of the business cycle is _____ followed by
the recovery phase.

a. never
b. sometimes
c. usually
d. always
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19.
(Points: 5)
The labor force includes only
a. people who are employed.
b. the employed and the unemployed.
c. the employed, the unemployed, and discouraged workers.
d. the unemployed and discouraged workers.
e. the employed and discouraged workers.
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20.

(Points: 5)
a. All people who are unemployed collect unemployment
insurance benefits.
b. All people who collect unemployment insurance benefits are
officially unemployed.
c. No one who is officially unemployed collects unemployment
insurance benefits.
d. No one who collects unemployment insurance benefits is
officially unemployed.
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21.
(Points: 5)
Which statement is false?
a. The 1920s was a very prosperous decade.
b. One of the main features of the 1970s was stagflation.
c. There were no recessions in the 1950s.
d. None is false.

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22.
(Points: 5)
If the consumer price index were 233.8 last year, 261.3 today, a
level of _____ next year would represent disinflation.
a. 261.3
b. 661.3
c. 283.1
d. 260.0
e. 301.3
Save Answer
23.
(Points: 5)
If the number of unemployed stays the same and the number of
people in the labor force declines
a. The unemployment rate will rise.

b. the unemployment rate will fall.
c. the unemployment rate will stay the same.
d. There is not enough information to determine what will
happen to the unemployment rate.
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24.
(Points: 5)
A person who has not worked in six months and has given up
looking for work is officially classified as
a. employed.
b. unemployed.
c. discouraged.
d. in the labor force.
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25.
(Points: 5)
An example of deflation since the base year would be a CPI in

the current year of
a. 90
b. 100
c. 110
d. 200
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26.
(Points: 5)
Inflation is
a. a rise in the price of every good and service.
b. a rise of exactly a specified percentage in the price of every
good or service.
c. a rise in the average price level.
d. a rise in average prices of at least 10 percent a year.
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27.
(Points: 5)
Joseph Schumpeter is most closely associated with the
a. theory of innovations.
b. psychological theory.
c. inventory cycle theory.
d. monetary theory.
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28.
(Points: 5)
A person collecting unemployment insurance benefits is
a. officially unemployed.
b. not in the labor force.
c. classified as a discouraged worker.
d. is employed.

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29.
(Points: 5)
Which statement is true about the rate of inflation?
a. It was higher at the beginning of the 1980s than at the end of
the 1980s.
b. It was lower at the beginning of the 1980s than at the end of
the 1980s.
c. It was about the same at the beginning of the 1980s as at the
end of the 1980s.
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30.
(Points: 5)
A high school dropout with poor work habits, little experience,
and no vocational training, who has been out of work for three
years but is actively seeking employment, would be _____
unemployed.
a. frictionally
b. structurally

c. cyclically
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31.
(Points: 5)
Our economy is always tending towards full employment
according to
a. John Maynard Keynes.
b. the classical economists.
c. both Keynes and the classicals.
d. neither Keynes nor the classicals.
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32.
(Points: 5)
Keynesian theory
a. Established the validity of Say's Law.
b. Assumes that supply creates its own demand.

c. Is primarily demand-oriented.
d. Assigns much importance to aggregate supply and the
average price level.
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33.
(Points: 5)
In the "classical" region of the aggregate supply curve,
a. because there are substantial amounts of unemployed
resources, output can be increased without driving up prices.
b. the economy is at the maximum output level, so only the
composition of output can be changed, the quantity of output
cannot be increased.
c. the economy is on the production possibilities frontier.
d. attempts to expand output will result in increases in both
prices and output.
e. the economy is at the maximum output level, so only the
composition of output can be changed, the quantity of output
cannot be increased AND the economy is on the production
possibilities frontier.

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34.
(Points: 5)
Under what condition will a decrease in aggregate demand
result in no decline in the price level?
a. The aggregate demand curve intersects a downward-sloping
segment of the aggregate supply curve.
b. The aggregate demand curve intersects an upward-sloping
c. The aggregate demand curve intersects a vertical segment of
the aggregate supply curve.
d. The aggregate demand curve is upward sloping.
e. The aggregate demand curve intersects a horizontal segment
of the aggregate supply curve.
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35.
(Points: 5)
The principal cause of the Great Depression of the 1930s was
a. a collapse in aggregate demand.

b. a collapse in aggregate supply.
c. a collapse in the average price level.
d. a collapse in government spending.
e. the outbreak of the Second World War.
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36.
(Points: 5)
The aggregate supply curve shows
a. how the cost of living is related to the sum of consumption,
investment, and government spending.
b. how demand for final products is related to the price level.
c. how production in the economy is related to the price level.
d. None of the choices are shown by the aggregate supply curve.
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37.
(Points: 5)

Suppose our economy is in macroeconomic equilibrium with an
upward-sloping aggregate supply curve and a downward-sloping
aggregate demand curve. An increase in aggregate demand will
a. increase aggregate supply.
b. decrease the price level.
c. cause the aggregate supply curve to shift to the right.
d. increase real GDP.
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38.
(Points: 5)
a. Both Keynes and the classicals believed that equilibrium GDP
and full employment GDP are equal.
b. Neither Keynes nor the classicals believed that equilibrium
GDP and full employment GDP are equal.
c. Keynes believed that equilibrium GDP and full employment
GDP are equal, but the classicals did not.
d. The classicals believed that equilibrium GDP and full
employment GDP are equal, but Keynes did not.

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39.
(Points: 5)
Which best describes the classical theory of employment?
a. We will always have a great deal of unemployment.
b. We will usually have a great deal of unemployment.
c. We will occasionally have some unemployment, but our
economy will automatically move back toward full employment.
d. We never have any unemployment.
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40.
(Points: 5)
When Henry Ford doubled his worker's wages in 1914, he was
implicitly recognizing
a. the wage-price flexibility concept.
b. Say's Law.

c. the paradox of thrift.
d. the real balance effect.
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41.
(Points: 5)
To fight a depression, Keynes said that the government should
a. do nothing.
b. raise taxes.
c. spend money on carefully chosen projects.
d. spend a lot of money.
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42.
(Points: 5)
Which of the following statements is FALSE?
a. Until the 1970s the American economy was essentially a

closed system.
b. Until the 1970s Say's Law best described our economic
system.
c. The American economy is more dependent on foreign
manufacturing today than it was in the 1970s, and is therefore
more of a closed economy.
d. The American economy today is an open economy where
supply no longer creates its own demand.
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43.
(Points: 5)
Under what condition will an increase in aggregate demand
result in no increase in the price level?
a. The aggregate demand curve is upward sloping.
b. The aggregate demand curve intersects the upward-sloping
c. The aggregate demand curve intersects the horizontal
d. The aggregate demand curve intersects the downward-sloping
e. The aggregate demand curve intersects a vertical segment of

the aggregate supply curve.
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44.
(Points: 5)
Classical economics was based upon the belief that
a. government intervention was essential for economic stability.
b. aggregate demand (or aggregate expenditures) was the
principal force controlling income and employment.
c. a redistribution of wealth from the rich to the poor was
necessary to prevent the evolution of a welfare state.
d. full employment was the natural state of the economy and
that government should not interfere with the private market
forces of supply and demand.
e. the business cycle was caused by large monopolistic
corporations that restricted output in order to charge artificially
high prices.
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45.
(Points: 5)

The vertical portion of the AS curve
a. is a short-run phenomenon.
b. shows national output rising with the price level.
c. does not shift over time, due to economic growth.
d. represents the maximum output level.
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46.
(Points: 5)
Fiscal policy deals with each of the following, except
a. the money supply.
b. government spending.
c. taxation.
d. the federal budget.
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47.

(Points: 5)
If full employment GDP is $500 billion greater than equilibrium
GDP and the multiplier is 5, there is a recessionary gap
a. of $50 billion.
b. of $100 billion.
c. of $200 billion.
d. of $500 billion.
e. that is impossible to find.
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48.
(Points: 5)
Which statement is true about inflationary gaps and deflationary
gaps?
a. They can both be eliminated by raising G.
b. They can both be eliminated by lowering G.
c. They can both be eliminated by raising taxes.
d. They can both be eliminated by lowering taxes.

e. None of the statements are true of inflationary gaps and
deflationary gaps.
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49.
(Points: 5)
Statement I: Fiscal policy was invented by John Maynard
Keynes in the 1930s. Statement II: Until the 1980s, virtually all
economists thought that the federal government should balance
its budget every year.
a. Statement I is true and statement II is false.
b. Statement II is true and statement I is false.
c. Both statements are true.
d. Both statements are false.
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50.
(Points: 5)
If G = $800 billion, tax receipts = $850 billion, and there is an
inflationary gap of $100 billion, there is

a. a budget surplus.
b. a budget deficit.
c. not enough information to determine whether there is a
budget surplus or a budget deficit.
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51.
(Points: 5)
When there is an inflationary gap
a. we are spending too much and taxes should be raised.
b. we are spending too much and taxes should be lowered.
c. we are spending too little and taxes should be raised.
d. we are spending too little and taxes should be lowered.
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52.
(Points: 5)
Which of the following is an example of an automatic

stabilizer?
a. The reduction in the money supply that occurs as banks
become less willing to make loans during a recession
b. The reduction in real wages that occurs as the economy goes
into a recession
c. The increase in government spending that occurs as the result
of new spending bills passed by Congress
d. The rise in tax revenue that occurs as a result of growth in
real GDP
e. All of the choices are examples of an automatic stabilizer.
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53.
(Points: 5)
There is a recessionary gap when
a. equilibrium GDP is equal to full employment GDP.
b. equilibrium GDP is smaller than full employment GDP.
c. equilibrium GDP is larger than full employment GDP.
d. None of the choices are correct.

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54.
(Points: 5)
To close a recessionary gap we should
a. raise G and raise taxes.
b. lower G and lower taxes.
c. raise G and lower taxes.
d. lower G and raise taxes.
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55.
(Points: 5)
Budget deficits are appropriate during
a. recessions, but not inflations.
b. inflations, but not recessions.
c. recessions and inflations.

d. neither recessions nor inflations.
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56.
(Points: 5)
Over the last four decades we have had
a. only balanced budgets.
b. only surpluses.
c. only deficits.
d. both deficits and surpluses.
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57.
(Points: 5)
Which statement is true about automatic stabilizers?
a. They have eliminated the business cycle.
b. They have helped smooth out the business cycle.

c. They have been completely ineffective.
d. None of the statements are true of automatic stabilizers.
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58.
(Points: 5)
Statement I: The federal budget deficit more than doubled
between 1987 and 1992. Statement II: High federal budget
deficits tend to push up real interest rates.
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59.
(Points: 5)
Statement I: If equilibrium GDP is $6 trillion and full
employment GDP is $6.5 trillion, we have a recessionary gap of
$500 billion. Statement II: In 1991 and 1992 we had

recessionary gaps.
Save Answer
60.
(Points: 5)
If equilibrium GDP is $1 trillion greater than full employment
GDP, and there is an inflationary gap of $250 billion, the
multiplier is
a. zero.
b. 1.
c. 2.5.
d. 4.
e. impossible to find.

Save Answer
61.
(Points: 5)
People tend to hold more money as
a. the price level rises and credit availability rises.
b. the price level rises and credit availability falls.
c. the price level falls and credit availability falls.
d. the price level falls and credit availability rises.
Save Answer
62.
(Points: 5)
Statement I: As interest rates rise, in the long run people tend to
hold less money. Statement II: As the rate of inflation rises in
the long run, people tend to hold more money.

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63.
(Points: 5)
The concept of the liquidity trap was formulated by
a. John Maynard Keynes.
b. Milton Friedman.
c. Stephen Pizzo.
d. Aristotle.
e. Marshall McLuhan.
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64.
(Points: 5)
The demand for money schedule shows that the quantity of
money that people want to hold

a. rises as income rises.
b. falls as income rises.
c. falls as the interest rate rises.
d. falls as the real price of money rises.
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65.
(Points: 5)
Which of the following is not a component of M1?
a. Currency
b. Passbook savings account
c. Checking accounts
d. Traveler's checks issued by non-banks
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66.
(Points: 5)
Statement I: Our money supply is backed by gold. Statement II:
Our money supply consists almost entirely of paper currency;

the rest is coins.
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67.
(Points: 5)
The precautionary demand for money arises
a. because people feel relatively certain what the future will
bring.
b. because individuals are uncertain about the future.
c. when nominal income exceeds potential income.
d. as important exceptions to the Keynesian model.
e. because the transaction demand for money is never adequate
to absorb the money supply.

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68.
(Points: 5)
Which one of the following is not part of our money supply?
a. Dollar bills
b. Demand deposits
c. Travelers checks
d. Gold
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69.
(Points: 5)
a. M1 is larger than M2.
b. M1 + M2 = M3.
c. M2 + large denomination time deposits = M3.
d. M1 times M2 = M3.

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70.
(Points: 5)
Money is created when someone
a. takes out a bank loan.
b. pays back a bank loan.
c. spends money.
d. saves money.
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71.
(Points: 5)
John Maynard Keynes said that people have three motives for
holding money. Each of the following is a Keynesian motive
except
a. inflation.
b. transactions.

c. speculative.
d. precautionary.
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72.
(Points: 5)
In the early 1980s the savings and loan associations started
making _____ loans and paying their shareholders _____
interest rates.
a. riskier; higher
b. riskier; lower
c. less risky; higher
d. less risky; lower
Save Answer
73.
(Points: 5)
Banks can increase the supply of money

a. only by increasing the currency in the hands of the public.
b. only by increasing the checking deposits held by the public.
c. by increasing both the currency and the checking deposits in
the hands of the public.
d. neither by increasing the currency nor the checking deposits
in the hands of the public.
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74.
(Points: 5)
A large denomination time deposit is
a. money in a passbook savings account.
b. an S & L share.
c. any money left on deposit in a bank for over one year.
d. any deposit of at least $100,000 left on deposit at a bank for
a specified period of time.
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75.

(Points: 5)
If a person writes a check on a Tulsa bank to purchase a new
Oldsmobile, he is employing money as:
a. a medium of exchange.
b. a store of value.
c. a measure of value.
d. All of the choices are correct.
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76.
(Points: 5)
The United States did not have a central bank until
a. 1900.
b. 1913.
c. 1929.
d. 1946.
e. 1973.

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77.
(Points: 5)
If the required reserve ratio was lowered
a. banks would be prompted to reduce their lending.
b. the size of the monetary multiplier would increase.
c. the actual reserves of banks would increase.
d. None of the choices are correct.
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78.
(Points: 5)
a. The Fed can induce people to buy United States government
securities, but it can't induce them to sell.
b. The Fed can induce people to sell United States government
securities, but it can't induce them to buy.

c. The Fed can induce people to buy and sell United States
government securities.
d. The Fed cannot induce people to buy or sell United States
government securities.
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79.
(Points: 5)
The rate of growth of our money supply is controlled by
a. the president.
b. Congress.
c. the Federal Reserve.
d. the United States Treasury.
e. tax legislation.
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80.
(Points: 5)
During the course of a bad recession the Fed would probably be
doing each of the following, except

a. selling securities on the open market.
b. lowering interest rates.
c. lowering reserve requirements.
d. lowering the discount rate.
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81.
(Points: 5)
The Board of Governors of the Federal Reserve is independent
of
a. both the President and Congress.
b. neither the President nor Congress.
c. the President, but not Congress.
d. Congress, but not the President.
Save Answer
82.

(Points: 5)
Which of the following Federal Reserve Banks is most
instrumental in carrying out the policy directives of the Board
of Governors?
a. The Federal Reserve Bank of Richmond
b. The Federal Reserve Bank of St. Louis
c. The Federal Reserve Bank of San Francisco
d. The Federal Reserve Bank of New York
Save Answer
83.
(Points: 5)
There are _____ members of the Board of Governors of the
Federal Reserve; each serves one _____ year term.
a. 7; 14
b. 14; 7
c. 7; 7
d. 14; 14

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84.
(Points: 5)
The members of the Board of Governors are appointed by
a. the president.
b. Congress.
c. the Federal Reserve district banks.
d. the member banks.
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85.
(Points: 5)
Our currency is issued by
a. the United States Treasury.
b. the Federal Reserve.
c. individual commercial banks.

d. the Internal Revenue Service.
Save Answer
86.
(Points: 5)
Which is not a job of the Federal Reserve?
a. Check clearing
b. Issuing currency
c. Insuring bank deposits
d. Controlling the rate of growth of the money supply
Save Answer
87.
(Points: 5)
a. Actual reserves - required reserves = excess reserves.
b. Required reserves - actual reserves = excess reserves.

c. Required reserves + actual reserves = excess reserves.
d. None of the statements are true.
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88.
(Points: 5)
The Board of Governors of the Federal Reserve does each of the
following, except
a. sit on the Federal Open Market Committee.
b. serve on the Board at the pleasure of the President, who can
make individual governors resign at any time.
c. carry out monetary policy.
d. raise and lower reserve requirements.
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89.
(Points: 5)
Fiscal and monetary policy are conducted by _____ people to
attain ______ goals.

a. the same; the same
b. different; different
c. the same; different
d. different; the same
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90.
(Points: 5)
Commercial banks are required by law to hold reserves. These
reserves are specified as percentages of a bank's
a. total assets.
b. total liabilities.
c. checkable deposit liabilities.
d. holdings of government securities.
e. net worth.
Save Answer

1. (Points 5) The GDP is the value of all final goods and.docx

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