Economic Concepts Quiz

The CPI measures approximately the same economic phenomenon as

• nominal GDP.

• real GDP.

• the GDP deflator

• the unemployment rate.

If a Pennsylvania gun manufacturer raises the price of rifles it sells to the U.S. Army, its price hikes will increase

• both the CPI and the GDP deflator.

• neither the CPI nor the GDP deflator.

• the CPI but not the GDP deflator.

• the GDP deflator but not the CPI.

You deposit $2,000 in a savings account, and a year later you have $2,100. Meanwhile, the CPI rises from 200 to 204. In this case, the nominal interest rate is ...... percent, and the real interest rate is ........ percent.

• 1, 5

• 3, 5

• 5, 1

• 5, 3

Elaine wants to buy and operate an ice-cream truck but doesn't have the financial resources to start the business. She borrows $10,000 from her friend George, to whom she promises an interest rate of 7 percent, and gets another $20,000 from her friend Jerry, to whom she promises a third of her profits. What best describes this situation?

• George is a stockholder, and Elaine is a bondholder.

• George is a stockholder, and Jerry is a bondholder.

• Jerry is a stockholder, and Elaine is a bondholder.

• Jerry is a stockholder, and George is a bondholder.

Which of the following actions by the Fed would tend to increase the money supply?

• an open-market sale of government bonds

• decrease in reserve requirements

• an increase in the interest rate paid on reserves

• an increase in the discount rate on Fed lending

If the Fed raises the interest ra it will.........the money supply by increasing?

• decrease; the money multiplier

• decrease; excess reserves

• increase; the money multiplier

• increase; excess reseểves

In a system of fractional-reserve banking, even without any action by the central bank, the money supply declines if households choose to hold ......... currency or if banks choose to hold .......... excess reserves.

• more; more

• more; less

• less; more

• less; less

The money supply includes all of the following EXCEPT

• metal coins.

• paper currency.

• lines of credit accessible with credit cards.

• bank balances accessible with debit cards.

Chloe takes $100 of currency from her wallet and deposits it into her checking account. If the bank adds the entire $100 to reserves, the money supply , but if the bank lends out some of the $100, the money supply

• increases, increases even more

• increases, increases by less

• is unchanged, increases

• decreases, decreases by less

The term inflation refers to:

• The short-run tradeoff between unemployment and inflation

• The fluctuation in the amount of goods and services produced

• A decrease in the quantity of money supplied in the economy

• An increase in the economy-wide price level