Question 1 1. Macroeconomics examinesA.employment, out.docx

Question 1
1.
Macroeconomics examines:
A.
employment, output, and inflation.
B.
pricing, profit maximization, and utility maximization.
C.
the behavior of individual households, businesses, and
government units.
D.
all of the above.
1 points
Question 2
1.
When economists refer to unemployed resources they mean
unutilized:
A.
land.
B.
labor.
C.
capital.
D.
all of the above.
1 points

Question 3
1.
Being unemployed can:
A.
cause a person to alter spending patterns and lifestyle.
B.
affect a person's self-esteem and relationships with others.
C.
cause a person to experience depression and other psychological
or physiological problems.
D.
all of the above.
1 points
Question 4
1.
Unemployment that occurs when people voluntarily quit their
jobs to look for other work, or enter the workforce and are
looking for a job, is called:
A.
structural unemployment.
B.
frictional unemployment.
C.
cyclical unemployment.
D.
systematic unemployment.
1 points
Question 5

1.
Unemployment that is due to a decrease in the demand for
workers with a certain skill because of technological change is:
A.
frictional.
B.
cyclical.
C.
structural.
D.
seasonal.
1 points
Question 6
1.
The labor force includes all persons:
A.
capable of working, regardless of their age.
B.
who are working, regardless of their age.
C.
16 years of age and older who are working.
D.
16 years of age and older who are working or actively seeking
work.
1 points
Question 7
1.
A person who has dropped out of the labor force after a long

and unsuccessful search for a job is:
A.
a discouraged worker.
B.
frictionally unemployed.
C.
structurally unemployed.
D.
still included in the unemployment statistics.
1 points
Question 8
1.
The unemployment rate that results when cyclical
unemployment is eliminated is the:
A.
full employment rate.
B.
frictional rate.
C.
natural rate.
D.
voluntary rate.
1 points
Question 9
1.
Inflation refers to:
A.

an increase in the general level of prices.
B.
a high price for every good and service.
C.
a high average price for all goods and services.
D.
an increase in the price of every good and service.
1 points
Question 10
1.
Income stated in terms of current dollars is:
A.
money, or nominal, income.
B.
a good measure of purchasing power in a period of severe
inflation.
C.
effective income.
D.
real income.
1 points
Question 11
1.
Potential winners from inflation are always:
A.
savers.
B.

lenders.
C.
individuals on fixed incomes.
D.
none of the above.
1 points
Question 12
1.
Demand-pull inflation occurs when:
A.
the supply of money is falling.
B.
taxes are increasing.
C.
the cost of factor inputs is increasing.
D.
the economy is operating at or close to full employment.
1 points
Question 13
1.
Cost-push inflation can result from:
A.
poor productivity.
B.
limited availability of resources.
C.
strong bargaining power of resource owners.

D.
all of the above.
1 points
Question 14
1.
Price indexes:
A.
were developed to provide jobs for out-of-work statisticians
during the Great Depression.
B.
are used solely by academics to explain abstract theories.
C.
are used by government policymakers, businesses, workers, and
households in their economic decision-making process.
D.
have little real world applicability.
1 points
Question 15
1.
Inflation coming from the buyers' side of the market is:
A.
demand-pull inflation.
B.
caused by too few buyers in the market.
C.
caused by output increasing faster than spending.
D.

none of the above.
1 points
Question 16
1.
A business cycle is:
A.
the period of time from the organization of a business until it
ceases operations.
B.
the order and timing of steps that must be completed to produce
a product.
C.
the amount of time required to exhaust an economy's inventory
of goods.
D.
a recurring period of growth and decline in an economy's real
output.
1 points
Question 17
1.
The phase of the business cycle where real GDP, or output,
reaches its maximum is the:
A.
trough.
B.
peak.
C.
expansion.

D.
limit.
1 points
Question 18
1.
The phase of the business cycle where real GDP, or output, is
contracting is the:
A.
recovery.
B.
recession.
C.
peak.
D.
trough.
1 points
Question 19
1.
Aggregate, or total, spending is the combined spending for new
goods and services of all:
A.
households, businesses, government units, and foreign buyers.
B.
households and businesses.
C.
households.
D.
households, businesses, and government units.

1 points
Question 20
1.
Over time, the most stable spending in the economy is:
A.
purchases by foreign buyers.
B.
business investment spending.
C.
household personal consumption expenditures.
D.
government purchases of goods and services.
1 points
Question 21
1.
Considering only the household sector, an economy will:
A.
contract as spending from transfers and borrowing, and savings
and taxes increase.
B.
expand as spending from transfers and borrowing, and savings
and taxes increase.
C.
contract as spending from transfers and borrowing increases,
and expand as savings and taxes increase.
D.
expand as spending from transfers and borrowing increases, and
contract as savings and taxes increase.

1 points
Question 22
1.
Spending by businesses on newly produced goods such as
machinery, buildings, and the like, is termed:
A.
a leakage.
B.
business consumption expenditures.
C.
investment spending.
D.
production spending.
1 points
Question 23
1.
A decrease in interest rates would:
A.
have no effect on investment decisions.
B.
make investment projects less attractive.
C.
make more investment projects attractive.
D.
make investment spending as stable as personal consumption
expenditures.
1 points
Question 24

1.
A country's net exports are equal to:
A.
this year's exports minus last year's exports.
B.
exports minus imports.
C.
total production minus imports.
D.
imports minus exports.
1 points
Question 25
1.
If the levels of output, income, and employment have increased,
there has been:
A.
less leaked from the spending stream than has been injected.
B.
nothing leaked from, or injected into, the spending stream.
C.
as much leaked from the spending stream as has been injected.
D.
more leaked from the spending stream than has been injected.
1 points
Question 26
1.
The larger change in total output that results from a change in
nonincome-determined spending is caused by the:

A.
multiplier effect.
B.
re-spending effect.
C.
circular-flow effect.
D.
expansion effect.
1 points
Question 27
1.
Fiscal policy involves:
A.
taxes.
B.
transfer payments.
C.
government purchases.
D.
all of the above.
1 points
Question 28
1.
The difference between fiscal and monetary policy is fiscal
policy:
A.
is used to restrain an economy, while monetary policy is used to

stimulate an economy.
B.
focuses on government spending and taxing, while monetary
policy focuses on saving and borrowing.
C.
is used to stimulate an economy, while monetary policy is used
to restrain an economy.
D.
focuses on saving and borrowing, while monetary policy
focuses on government spending and taxing.
1 points
Question 29
1.
The primary cause of changes in the level of economic activity
is changes in:
A.
total spending.
B.
imports and exports.
C.
government tax and expenditure policies.
D.
none of the above.
1 points
Question 30
1.
When injections into the spending stream are greater than
leakages, the level of economic activity will:

A.
remain unchanged.
B.
increase.
C.
increase and then decrease.
D.
decrease.
1 points
Question 31
1.
A good or service that is provided for all of society, and no one
is excluded from its use, is called:
A.
a public good.
B.
a private good.
C.
an entitlement.
D.
a necessity.
1 points
Question 32
1.
Since 1985, the largest percentage of federal expenditures has
been for:
A.
transfer payments.

B.
interest payments.
C.
financial assistance.
D.
purchases of goods and services.
1 points
Question 33
1.
On which of the following has the federal government primarily
relied as a source of revenue since 1985?
A.
Corporations.
B.
State governments.
C.
Households.
D.
Foreign governments.
1 points
Question 34
1.
A personal income tax that takes 5% of incomes under $50,000,
15% of incomes between $50,000 and $100,000, and 25% of
incomes over $100,000 is an example of:
A.
an excise tax.

B.
a proportional tax.
C.
a regressive tax.
D.
a progressive tax.
1 points
Question 35
1.
Which of the following is a regressive tax?
A.
The federal individual income tax.
B.
A state tax of 5 percent of earned income.
C.
A local tax of $75.00 per person per year for fire protection.
D.
None of the above.
1 points
Question 36
1.
Which of the following is a proportional tax?
A.
A 5 percent sales tax on food.
B.
The federal personal income tax.
C.

A 2 percent earnings tax on income.
D.
None of the above.
1 points
Question 37
1.
The federal personal income tax is a:
A.
proportional tax.
B.
progressive tax.
C.
regressive tax.
D.
consumption tax.
1 points
Question 38
1.
A tax base is the:
A.
minimum tax an individual must pay.
B.
object on which a tax is levied.
C.
multiplier used to determine the amount of tax due.
D.
minimum tax rate an individual can qualify for.

1 points
Question 39
1.
The change in government payments for unemployment
compensation that occurs as the economy moves into a
recession is an example of:
A.
automatic stabilization.
B.
a tax incentive program.
C.
monetary policy.
D.
discretionary fiscal policy.
1 points
Question 40
1.
When a government's total expenditures equal its total revenues
it is operating with a:
A.
deficit budget.
B.
surplus budget.
C.
balanced budget.
D.
full employment budget.
1 points

Question 41
1.
A surplus in the federal budget should cause:
A.
inflation and employment to increase.
B.
no change in economic activity.
C.
an increase in economic activity.
D.
a decrease in economic activity.
1 points
Question 42
1.
Public choice is the study of:
A.
how resources are transformed into outputs.
B.
the economic motives and attitudes of voters and public
officials, and their effects on government decision-making.
C.
public enterprises.
D.
how government activities affect the economy.
1 points
Question 43
1.
When the federal government borrows money:

A.
it publicly announces the amount it intends to raise.
B.
it borrows from those lenders that offer funds at the lowest
interest rates.
C.
potential lenders submit applications stating how much they are
willing to lend, and at what rates.
D.
all of the above.
1 points
Question 44
1.
Crowding out occurs when government borrowing reduces:
A.
savings by households and businesses.
B.
borrowing by households and businesses.
C.
income-determined spending by households and businesses.
D.
all of the above.
1 points
Question 45
1.
One of the most significant changes brought about by the Tax
Reform Act of 1986 was to:

A.
increase bracket creep.
B.
abolish the corporate income tax.
C.
reduce the number of federal individual income tax brackets and
the maximum tax rate.
D.
require that the federal budget be balanced by 1997.
1 points
Question 46
1.
For something to be considered money it must:
A.
have a high intrinsic value.
B.
have the backing of government.
C.
be generally accepted as a medium of exchange.
D.
all of the above.
1 points
Question 47
1.
If the general level of prices in the U.S. decreased:
A.
money would become more of a medium of exchange.

B.
money would become a less effective measure of the value of
goods and services.
C.
the economy would move to a barter system.
D.
the value of money would increase.
1 points
Question 48
1.
The value of money:
A.
decreases with inflation.
B.
increases over time.
C.
increases with inflation.
D.
is constant over time.
1 points
Question 49
1.
The narrowest definition of the U.S. money supply is:
A.
M1.
B.
M3.

C.
currency in circulation.
D.
M2.
1 points
Question 50
1.
In the U.S., a penny is token money because the value of the
metal in the penny is:
A.
less than 1 cent.
B.
greater than 1 cent.
C.
equal to 1 cent.
D.
determined by the supply and demand for pennies.
1 points
Question 51
1.
Demand deposits are:
A.
certificates of deposit payable in less than 30 days.
B.
checking account balances.
C.
savings accounts plus credit union share drafts.

D.
any type of account or deposit that can be kept at a commercial
bank.
1 points
Question 52
1.
The velocity of money is:
A.
the number of times the money supply is turned over in a year
relative to GDP.
B.
the number of times the money supply is turned over in a year
relative to taxes.
C.
how fast money comes off the printing presses.
D.
the number of times the money supply is used in a year for
household purchases.
1 points
Question 53
1.
The ease of converting an asset to its value in cash or spendable
funds is its:
A.
liquidity.
B.
cash-equivalence.
C.
velocity.

D.
conversion factor.
1 points
Question 54
1.
Money is created:
A.
only when the U.S. Treasury prints more money.
B.
when commercial banks and other financial depository
institutions make loans.
C.
when the U.S. gold supply is increased.
D.
only when the U.S. Secretary of the Treasury decides to do so.
1 points
Question 55
1.
Commercial banks:
A.
make loans to businesses and individuals.
B.
provide various services, such as selling traveler's checks.
C.
offer demand deposit and other accounts to businesses and
individuals.
D.

all of the above.
1 points
Question 56
1.
Membership in the Federal Reserve is required of:
A.
national banks.
B.
state chartered banks.
C.
all financial depository institutions.
D.
none of the above.
1 points
Question 57
1.
Geographically the Federal Reserve System is made up of:
A.
50 districts - one for each state.
B.
one central bank in Washington, D.C. and 12 branches.
C.
12 districts.
D.
four districts - North, South, East, and West.
1 points
Question 58
1.

Which of the following is NOT a function of the Federal
Reserve Banks?
A.
Examine the operations of commercial banks that are members
of the Federal Reserve System.
B.
Provide the means for putting coins and paper money into or out
of circulation.
C.
Act as fiscal agent for the U.S. government.
D.
Hold demand deposits for, and make loans to, businesses and
households.
1 points
Question 59
1.
The growth of mutual funds has:
A.
caused an outflow of deposits from financial depository
institutions.
B.
prompted some financial depository institutions to offer mutual
fund services of their own.
C.
both of the above.
D.
none of the above.
1 points

Question 60
1.
Which of the following statements is FALSE?
A.
Mutual funds compete with commercial banks and other
financial depository institutions for households' deposits.
B.
A holding company is a corporation that owns controlling
shares of stock in other corporations.
C.
The Economic Stabilization Act was passed to extend the time
limits of the Federal Reserve.
D.
Interstate banking is not allowed in the United States.
1 points
Question 61
1.
The primary determinant of the overall level of economic
activity is:
A.
government regulation.
B.
total spending by households, businesses, government, and
foreign buyers.
C.
consumer confidence.
D.
the size of the money supply.

1 points
Question 62
1.
Given the equation of exchange, MV = PQ, increasing the
money supply when the economy is operating at less than full
employment should primarily increase:
A.
total output.
B.
the price level.
C.
unemployment.
D.
all of the above.
1 points
Question 63
1.
A financial depository institution's reserve account balance plus
vault cash equal its:
A.
in-house reserves.
B.
required reserves.
C.
excess reserves.
D.
actual reserves.
1 points

Question 64
1.
Excess reserves are equal to:
A.
required reserves minus vault cash.
B.
required reserves divided by the reserve requirement.
C.
actual reserves minus vault cash.
D.
actual reserves minus required reserves.
1 points
Question 65
1.
A financial depository institution can make new loans up to the
value of its:
A.
deposits.
B.
required reserves.
C.
excess reserves.
D.
actual reserves.
1 points
Question 66
1.
With a reserve requirement of 20 percent, the money multiplier

would be:
A.
0.8.
B.
5.
C.
0.2.
D.
20.
1 points
Question 67
1.
If excess reserves in the depository institutions system are
increased by $10 million and the reserve requirement is 10
percent, then the total money supply could increase by up to:
A.
$100 million.
B.
$10 million.
C.
$1 million.
D.
cannot determine with available information.
1 points
Question 68
1.
The interest rate is:

A.
the price paid to lenders for making loans.
B.
the price paid by borrowers to borrow money.
C.
calculated as a percentage of the amount borrowed.
D.
all of the above.
1 points
Question 69
1.
Monetary policy involves changing:
A.
tax and expenditures laws to influence economic activity.
B.
banking laws to influence economic activity.
C.
the money supply to influence economic activity.
D.
employment laws to influence economic activity.
1 points
Question 70
1.
Which of the following would coincide with an easy money
policy?
A.
Decreasing the money supply.

B.
Decreasing spending.
C.
Increasing excess reserves.
D.
Increasing interest rates.
1 points
Question 71
1.
Which of the following is NOT a tool of monetary policy?
A.
Automatic stabilization.
B.
Open market operations.
C.
Changes in the reserve requirement.
D.
Discount rate changes.
1 points
Question 72
1.
The discount rate is the interest rate charged by:
A.
banks to other banks.
B.
banks to their best customers.
C.

the Federal Reserve to financial depository institutions.
D.
none of the above.
1 points
Question 73
1.
Open Market Operations are the buying and selling of:
A.
U.S. government securities by the Treasury.
B.
high-grade corporate securities by the Federal Reserve.
C.
Federal Reserve securities by the Federal Reserve.
D.
U.S. government securities by the Federal Reserve.
1 points
Question 74
1.
Crowding out occurs when borrowing by:
A.
households reduces borrowing by businesses and government.
B.
businesses reduces borrowing by households and government.
C.
government reduces borrowing by households and businesses.
D.
all of the above constitute crowding out.

1 points
Question 75
1.
A financial depository institution's reserve requirement is a
specified percentage of:
A.
required reserves that must be kept as actual reserves.
B.
actual reserves that must be kept at a Federal Reserve bank.
C.
excess reserves that must be backed by required reserves.
D.
deposits that must be kept as actual reserves.
1 points
Question 76
1.
The conclusions and policy implications of an economic model
are influenced by the:
A.
data that are analyzed in the model.
B.
assumptions on which the model is built.
C.
choice of variables described in the model.
D.
all of the above.
1 points
Question 77

1.
The popularly accepted theory prior to the Great Depression
that says the economy will automatically adjust to full
employment is:
A.
classical economics.
B.
mercantilism.
C.
Keynesian economics.
D.
supply-side economics.
1 points
Question 78
1.
Which of the following is an assumption of the classical school?
A.
savings equal investment.
B.
wage and prices are flexible.
C.
supply creates its own demand.
D.
all of the above are assumptions of the classical school.
1 points
Question 79
1.
In Keynesian economics, the key to understanding how total

spending can be more or less than current production is the role
played by:
A.
business investment spending.
B.
government transfer payments.
C.
net exports.
D.
business inventories.
1 points
Question 80
1.
The concept of controlling the level of economic activity by
purposefully influencing the size of the spending stream is most
closely associated with:
A.
John Maynard Keynes.
B.
Milton Friedman.
C.
James Mill.
D.
Adam Smith.
1 points
Question 81
1.
Which of the following is NOT an assumption of new classical

economics?
A.
an economy operating in the long run at an unemployment rate
that is higher than the natural rate.
B.
a downward sloping aggregate demand curve.
C.
free markets.
D.
flexible wages and prices.
1 points
Question 82
1.
According to new classical economics, the aggregate demand
curve for an economy is downward sloping because of the:
A.
wealth effect.
B.
interest rate effect.
C.
foreign trade effect.
D.
all of the above.
1 points
Question 83
1.
The reasoning behind the new classical argument that the
effects of macroeconomic policies might be distorted by the

adjustment of business and household behaviors in anticipation
of policymakers' strategies is based on:
A.
the private sector effect.
B.
rational expectations.
C.
classical economic theory.
D.
the supply-side effect.
1 points
Question 84
1.
The school of thought that holds that, in the macroeconomy,
prices and wages are inflexible, or "sticky," downward is:
A.
classical economics.
B.
new classical economics.
C.
new Keynesian economics.
D.
all of the above.
1 points
Question 85
1.
A typical monetarist would favor:

A.
free markets and proper control over the money supply.
B.
regulated markets and detailed control over the money supply.
C.
free markets and no control over the money supply.
D.
regulated markets and no control over the money supply.
1 points
Question 86
1.
Which of the following statements most accurately describes the
current state of thinking about the macroeconomy?
A.
No theory of the macroeconomy is necessary because there are
good theories that explain the behavior of businesses and
households, whose actions drive the macroeconomy.
B.
Over time, economists have been unable to develop any theory
that helps us understand the behavior of the macroeconomy.
C.
There is almost complete agreement among economists that the
classical model fully and accurately portrays the
macroeconomy.
D.
There are several theories focusing on different variables that
help us understand the behavior of the macroeconomy.
1 points
Question 87

1.
Classical economics holds that a market economy will tend to
operate at full employment when:
A.
the government runs deficit budgets.
B.
exports are greater than imports.
C.
it is free of government intervention.
D.
the money supply grows at an increasing rate.
1 points
Question 88
1.
Which of the following schools of thought would argue that an
economy could persistently operate well below full
employment?
A.
The classical school.
B.
The new classical school.
C.
The new Keynesian school.
D.
All of the above.
1 points
Question 89
1.

The Phillips curve that shows a tradeoff between the rate of
unemployment and the rate of inflation is:
A.
downward sloping.
B.
upward sloping.
C.
upward sloping at low rates of unemployment and downward
sloping at high rates of unemployment.
D.
downward sloping at low rates of unemployment and upward
sloping at high rates of unemployment.
1 points
Question 90
1.
Assumptions:
A.
are a key component of a model.
B.
are conditions held to be true in a model.
C.
influence the conclusions derived from the model.
D.
all of the above.

Question 1 1. Macroeconomics examinesA.employment, out.docx

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Question 1 1. Macroeconomics examinesA.employment, out.docx