Term
The primary economic function of the financial system is to
a. keep interest rates low.
b. provide expert advice to savers and investors.
c. match one person’s consumption expenditures with another person’s capital
expenditures.
d. match one person’s saving with another person’s investment. |
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Definition
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Term
As an alternative to selling shares of stock as a means of raising funds, a large company could, instead,
a. invest in physical capital.
b. use equity finance.
c. sell bonds.
d. purchase bonds |
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Definition
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Term
Which of the following would likely make the interest rate on a bond higher than otherwise?
a. both high credit risk and a long term
b. high credit risk but not a long term
c. a long term but not a high credit risk
d. neither high credit risk nor a long term |
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Definition
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Term
A bond buyer is a
a. saver. Long term bonds have less risk than short term bonds.
b. saver. Long term bonds have more risk than short term bonds.
c. borrower. Long term bonds have less risk than short term bonds..
d. borrower. Long term bonds have more risk than short term bonds. |
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Definition
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Term
In a closed economy, what does (T - G) represent?
a. national saving
b. investment
c. private saving
d. public saving |
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Definition
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Term
In a closed economy, what does (Y - T - C) represent?
a. national saving
b. government tax revenue
c. public saving
d. private saving |
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Definition
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Term
. In a small closed economy investment is $50 billion and private saving is $55 billion. What are public saving
and national saving?
a. $60 billion and $5 billion
b. $50 billion and -$5 billion
c. $5 billion and $60 billion
d. -$5 billion and $50 billion |
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Definition
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Term
Suppose the economy is closed and consumption is 6,500, taxes are 1,500, and government purchases are
2,000. If national saving amounts to 1,000, then what is GDP?
a. 9,500
b. 10,000
c. 10,500
d. 11,000 |
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Definition
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Term
GDP = $200,000; consumption = $120,000;
government purchases = $35,000; and taxes = $25,000.
____ 9. Refer to Scenario 26-2. Suppose, for this economy, the relationship between the real interest rate, r, and
investment, I, is given by the equation I = 69,000 – 3,000r. (If, for example, r = 10, this means that the real
interest rate is 10 percent.) The equilibrium real interest rate for this economy is
a. 6 percent.
b. 7 percent.
c. 8 percent.
d. 9 percent. |
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Definition
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Term
The source of the supply of loanable funds
a. is saving and the source of demand for loanable funds is investment.
b. is investment and the source of demand for loanable funds is saving.
c. and the demand for loanable funds is saving.
d. and the demand for loanable funds is investment |
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Definition
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Term
The slope of the demand for loanable funds curve represents the
a. positive relation between the real interest rate and investment.
b. negative relation between the real interest rate and investment.
c. positive relation between the real interest rate and saving.
d. negative relation between the real interest rate and saving. |
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Definition
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Term
If the supply of loanable funds shifts to the right, then the equilibrium interest rate
a. and quantity of loanable funds rise.
b. and quantity of loanable funds fall.
c. rises and the quantity of loanable funds falls.
d. falls and the quantity of loanable funds rises. |
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Definition
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Term
Suppose that Congress were to institute an investment tax credit. What would happen in the market for
loanable funds?
a. The demand for loanable funds would shift left.
b. The supply of loanable funds would shift left.
c. The demand for loanable funds would shift right.
d. The supply of loanable funds would shift right |
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Definition
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Term
The Bureau of Labor Statistics counts a member of a surveyed household as an adult if that person is at least
a. 14 years old.
b. 16 years old.
c. 18 years old.
d. 21 years old. |
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Definition
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Term
Edgar is working part-time. Diane is on temporary layoff. Who is included in the Bureau of Labor Statistics’
“employed” category?
a. only Edgar
b. only Diane
c. both Edgar and Diane
d. neither Edgar nor Diane |
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Definition
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Term
Angelica is an unpaid homemaker who works as a volunteer at the local Red Cross and is currently not
looking for a paid job. The Bureau of Labor Statistics counts Angelica as
a. unemployed and in the labor force.
b. unemployed, but not in the labor force.
c. in the labor force, but not unemployed.
d. neither in the labor force nor unemployed |
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Definition
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Term
In June 2009 the BLS reported an adult population of 234.9 million, a labor force of 154 million and
employment of 141.6 million. Based on these numbers the unemployment rate was
a. 93.3/234.9.
b. 12.4/234.9.
c. 93.3/154.
d. 12.4/154. |
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Definition
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Term
If the natural rate of unemployment is 5.2 percent and the actual rate of unemployment is 5.7 percent, then by
definition there is
a. cyclical unemployment amounting to 0.5 percent of the labor force.
b. frictional unemployment amounting to 0.5 percent of the labor force.
c. structural unemployment amounting to 0.5 percent of the labor force.
d. search unemployment amounting to 0.5 percent of the labor force. |
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Definition
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Term
Suppose that consumers choose to smoke less and chew gum more. Tobacco companies cut back on the
number of people they employ while chewing gum manufacturers employ more. This is an example of
a. structural unemployment created by efficiency wages.
b. structural unemployment created by sectoral shifts.
c. frictional unemployment created by efficiency wages.
d. frictional unemployment created by sectoral shifts. |
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Definition
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Term
Which of the following does not help reduce frictional unemployment?
a. government-run employment agencies
b. public training programs
c. unemployment insurance
d. All of the above help reduce frictional unemployment. |
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Definition
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Term
Which of the following is not a cause of frictional unemployment?
a. the destruction of manufacturing jobs
b. a worker leaving a job to find one with better benefits
c. minimum-wage laws
d. unemployment insurance |
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Definition
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Term
wage quantity demanded quantity supplied
$7 9,000 14,000
$6 12,000 12,000
$5 15,000 10,000
____ 22. Refer to Labor Market Data. If the government imposed a minimum wage of $5, what would
unemployment be?
a. 0
b. 2,000
c. 3,000
d. 5,000 |
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Definition
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Term
Refer to Figure 28-1. At the equilibrium wage, how many workers are unemployed?
a. 0
b. 4000
c. 5000
d. 8000 |
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Definition
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Term
Refer to Figure 28-1. At the equilibrium wage, how many workers are employed?
a. 0
b. 1000
c. 5000
d. 9000 |
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Definition
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Term
Economists have found that union workers earn what percent more than similar nonunion workers?
a. 0 to 5
b. 5 to 10
c. 10 to 20
d. 20 to 30 |
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Definition
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Term
Unions contribute to
a. frictional but not structural unemployment.
b. structural but not frictional unemployment.
c. both frictional and structural unemployment.
d. neither frictional nor structural unemployment. |
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Definition
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Term
Right-to-work laws
a. guarantee workers the right to form unions.
b. give workers in a unionized firm the right to choose whether to join the union.
c. prevent employers from hiring permanent replacements for workers who are on strike.
d. prevent workers from being fired because of increases in wages brought about by
collective bargaining. |
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Definition
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Term
Efficiency wages
a. increase frictional unemployment by keeping wages above equilibrium.
b. decrease frictional unemployment by keeping wages at equilibrium.
c. increase structural unemployment by keeping wages above equilibrium.
d. decrease structural unemployment by keeping wages at equilibrium. |
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Definition
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Term
As opposed to a payments system based on barter, a payments system based on money
a. requires a double coincidence of wants.
b. leads to less specialization.
c. makes trades less costly.
d. None of the above is correct. |
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Definition
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Term
Which of the following is a function of money?
a. a unit of account
b. a store of value
c. medium of exchange
d. All of the above are correct. |
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Definition
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Term
Fiat money
a. has no intrinsic value.
b. is backed by gold.
c. is a medium of exchange but not a unit of account.
d. is any close substitute for currency such as checkable deposits. |
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Definition
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Term
Which of the following is included in both M1 and M2?
a. savings deposits
b. demand deposits
c. small time deposits
d. money market mutual funds |
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Definition
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Term
The members of the Federal Reserve’s Board of Governors
a. are appointed by the president of the U.S. and confirmed by the U.S. Senate.
b. serve six-year terms.
c. are also the presidents of the regional Federal Reserve banks.
d. share power equally, with no governor having any more influence or power than any
other governor. |
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Definition
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Term
A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of
$100. If customers deposit $50 into the bank, what is the value of the money supply?
a. $50
b. $100
c. $150
d. $200 |
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Definition
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Term
A bank has a 10 percent reserve requirement, $4,000 in deposits, and has loaned out all it can given the
reserve requirement.
a. It has $40 in reserves and $3,960 in loans.
b. It has $400 in reserves and $3,600 in loans.
c. It has $444 in reserves and $3,556 in loans.
d. None of the above is correct. |
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Definition
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Term
When a bank loans out $1,000, the money supply
a. does not change.
b. decreases.
c. increases.
d. may do any of the above. |
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Definition
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Term
If R represents the reserve ratio for all banks in the economy, then the money multiplier is
a. 1/(1-R).
b. 1/R.
c. 1/(1+R).
d. (1+R)/R. |
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Definition
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Term
Refer to Table 29-5. From the table it follows that the Bank of Pleasantville operates in a
a. fractional-reserve banking system, since its reserves are less than its deposits.
b. fractional-reserve banking system, since its reserves are less than its loans.
c. 100-percent-reserve banking system, since its assets are equal to its liabilities.
d. 100-percent-reserve banking system if the Fed’s reserve requirement is 10 percent;
otherwise, it operates in a fractional-reserve banking system |
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Definition
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Term
Refer to Table 29-5. Assume there is a reserve requirement and the Bank of Pleasantville is exactly in
compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold
only deposits and no currency. What is the money multiplier?
a. 5
b. 10
c. 15
d. 20 |
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Definition
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Term
The Fed can decrease the money supply by conducting open-market
a. sales or by raising the discount rate.
b. sales or by lowering the discount rate.
c. purchases or by raising the discount rate.
d. purchases or by lowering the discount rate. |
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Definition
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