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Mega awesome Units 5-6 AP Macroeconomics review

Total questions: 499

Worksheet time: 8hrs 19mins

Name
Class
Date
1.
When the government spends more money than they take in each year is called a _________?
a)
Debt
b)
Deficit
c)
Surplus
d)
Expansionary
2.
"The Fed" refers to the....
a)
Federal Bureau of Investigation
b)
Federal Government
c)
Federal Reserve System
d)
Federal Income Tax
3.

what is the purpose of Monetary Policy?

a)

contribute to economic growth and stability

b)

keep rich people from getting too rich

c)

Functions like Fiscal Policy

d)

give Congress and the political parties more control of the economy

4.

These are IOUs from the U.S. government to people that finance a little piece of the government's debt in exchange for a very small amount of interest

a)

Government Bonds, or Securities

b)

Government Credit

c)

Government Cash

d)

Government Holdings

5.
The primary role of the Federal Reserve Bank is to steer the economy by
a)
controlling the budget
b)
setting spending levels.
c)
controlling the money supply.
d)
loaning out money.
6.
Cash that banks must keep in the vault.
a)
excess reserves
b)
fiscal policy
c)
required reserves
d)
crowding out effect
7.
The exchange of goods and services without using money is known as...
a)
near money.
b)
bartering.
c)
double coincidence of wants. 
d)
fiat money.
8.
Which of the following would the FED us to increase the money supply?
a)
raise the discount rate
b)
raise the required reserves
c)
buy bonds/securities
d)
print more money
9.

Fiat money is

a)

money is checking accounts.

b)

money that has intrinsic value on its own.

c)

specially created from the Federal Reserve.

d)

money that is only valuable because the government says it is.

10.
If the Federal Reserve wanted to stimulate the economy (make it grow), they might
a)
Sell Treasury bonds
b)
Buy Treasury bonds
c)
Spend more money
d)
Spend less money
11.
Which of the following scenarios would cause the nation’s money supply to increase?
a)
Decreasing government spending
b)
Lowering interest rates
c)
Raising interest rates
d)
Selling bonds to investors
12.
This is a paper component of the money supply, today consisting of Federal Reserve notes.
a)
coins
b)
currency
c)
both coins and currency
d)
debit cards
13.

Money loses its value when it

a)

becomes too plentiful

b)

becomes too portabale

c)

is divisible

d)

is durable

14.

____________ is the price paid for the use of money.

a)

Gold

b)

Monetary policy

c)

Fiscal policy

d)

The interest rate

15.
Which of these is NOT a monetary policy tool?
a)
Discount rate
b)
Balance Accounts
c)
Open Market Operation
d)
Reserved Requirements
16.
High reserve requirements 
a)
lower the money supply
b)
increase the money supply
17.
What is an action of monetary policy?
a)
reduce taxes
b)
changing reserve requirements
c)
increase spending
d)
borrow money for deficit
18.
During an expansion what would you do to prevent inflation?
a)
Lower the RRR, Lower the DR, Buy Bonds
b)
Raise the RRR, Raise the DR, Sell Bonds
19.

Based on the Required Reserves that Reserve Ratio must be

a)

5%

b)

10%

c)

20%

d)

19%

e)

none of the above

20.

If the reserve requirement is 10%, this bank could create _______ in loans.

a)

$1900

b)

$8100

c)

$900

d)

$9000

e)

not enough information.

21.

If this bank were to purchase securities from the Fed, it could currently purchase _______ in securities.

a)

$810

b)

$1710

c)

$1900

d)

$190

e)

$90

22.

If the reserve requirement is 10%, this bank has _______ in excess reserves

a)

$52

b)

$100

c)

$47

d)

$48

e)

$32

23.

If the reserve requirement is 20%, this bank has _______ in excess reserves

a)

$12

b)

$100

c)

$10

d)

$40

e)

$32

24.

If the reserve requirement is 10%, this bank can increase the money supply by increasing

a)

securities by $20.

b)

loans by $100

c)

loans by $320

d)

securities by $100

e)

loans by $32

25.

This bank has a reserve requirement of

a)

9%

b)

4.5%

c)

10%

d)

20%

e)

7%

26.

The reserve ratio here is....

a)

10%

b)

20%

c)

5%

d)

27%

e)

25%

27.

The reserve requirement at this bank is

a)

10%

b)

80%

c)

20%

d)

5%

e)

15%

28.

This bank can lend

a)

$100

b)

$20

c)

$80

d)

$300

e)

$400

29.

This bank can create up to _______ in the money supply

a)

$100

b)

$20

c)

$80

d)

$300

e)

$400

30.

If $100 is is deposited into this bank the excess reserves will grow to

a)

$100

b)

$20

c)

$80

d)

$120

e)

$40

31.

If $200 is is deposited into this bank the excess reserves will grow to

a)

$100

b)

$260

c)

$180

d)

$120

e)

$160

32.

If the reserve ratio at this bank was lowered to 10%, the required reserves would be

a)

$80

b)

$20

c)

$100

d)

$40

e)

$160

33.

If the reserve ratio at this bank was lowered to 10%, this bank could create up to _____ in the money supply.

a)

$800

b)

$200

c)

$600

d)

$400

e)

$1600

34.

If this bank sold $100 in Securities it's ________ would rise to _____ and its Demand Deposits would ______.

a)

Securities; $200; remain the same

b)

Reserves; 140; remain the same

c)

Loans; $180; increase by $100

d)

Securities; $200; increase by $100

e)

Reserves; $140; increase by $100

35.

This shift could occur with

a)

an increase in bank lending.

b)

the purchase of securities in the open market by the Fed.

c)

a decrease in the discount rate.

d)

an increase in the Federal Funds rate.

e)

a decrease in the reserve ratio.

36.

This shift could be caused by

a)

an increase in government spending.

b)

a decrease in deficit spending.

c)

an increase in the discount rate.

d)

the net export effect.

e)

a decrease in the discount rate.

37.

A shift from MD1 to MD2 could be caused by

a)

customers wishing to hold more cash and use credit cards less.

b)

a decrease in the discount rate.

c)

an open market operation sale of bonds to the Fed.

d)

the GDP falling.

e)

an open market operation purchase of bonds by the Fed.

38.

To decrease the equilibrium interest rate to 8% the Fed could

a)

sell bonds.

b)

raise the discount rate.

c)

raise the Federal Funds rate.

d)

lower the reserve requirement.

e)

decrease the GDP.

39.

To raise the interest rate to 12% the Fed could

a)

buy bonds.

b)

increase the discount rate.

c)

decrease the reserve ratio.

d)

decrease the nominal interest rate.

e)

decrease the Federal Funds rate.

40.

The shift in the graph could be caused by

a)

a recession.

b)

government deficit spending.

c)

an increase in savings.

d)

positive feelings about the future of the economy.

e)

the Fed selling securities in an open market operation.

41.

A movement from D3 to D2 could be caused by

a)

an increase in personal wealth.

b)

an increase in the money supply.

c)

a negative view of the future of the economy.

d)

a decrease in household savings.

e)

a government budget surplus.

42.

The shift on the graph could be caused by

a)

a lowering of default risk on loans.

b)

an increase in the desire of companies to invest.

c)

positive expectations about the future of the economy.

d)

a government budget deficit.

e)

a decrease in household savings.

43.

The shift in the graph could be caused by

a)

the crowding out effect.

b)

positive expectations about the future of the economy.

c)

an increase in government budget deficit spending.

d)

a decrease in consumer wealth.

e)

a decrease in household savings.

44.

The shift in the graph could be caused by

a)

an decrease in the federal funds rate.

b)

a lowering of the discount rate.

c)

a government budget surplus.

d)

a decrease in household savings.

e)

an increase in positive opinions on the economic future.

45.

The shift in the graph could be caused by

a)

the Federal Reserve increases the discount rate.

b)

the Federal Reserve makes an open market sale of securities (bonds).

c)

the government increases spending without a corresponding increase in taxes.

d)

the Federal Reserve makes an open market purchase of securities (bonds).

46.
An increase in government spending only leads to an increase in the Demand for Loanable Funds when
a)
the spending is on infrastructure.
b)
the spending is on education.
c)
the spending is deficit spending.
d)
the spending leads to a surplus.
47.
The shift in the graph could be caused by
a)
an increase in consumer wealth.
b)
expectations of a recession.
c)
a government surplus.
d)
the balanced budget multiplier.
48.
If investors expect the economy is headed for expansion the ______ of loanable funds will _______.
a)
demand; decrease
b)
demand; increase
c)
supply; decrease
d)
supply; increase
49.
The crowding out effect can only occur if the
a)
government deficit spends.
b)
government runs a surplus.
c)
personal savings rate increases.
d)
economy begins to boom.
50.
The crowding out effect manifests itself in the GDP formula by causing
a)
an increase in G and a decrease in Xn.
b)
a decrease in G and an increase in C.
c)
an increase in I and a decrease in G.
d)
an increase in G but a decrease in I.
51.
If Congress increases government spending by the same amount it increases taxes aggregate demand will
a)
remain the same
b)
decrease, these are both contractionary
c)
increase
d)
shift down
52.
Money loses its value when it
a)
It becomes too plentiful
b)
becomes too portabale
c)
is divisible
d)
is durable
53.
If the Federal Reserve raises interest rates to combat rapid inflation, what might be a negative outcome?
a)
Unemployment rates would rise
b)
taxes will rise 
c)
The government would put a freeze on prices
d)
international trade would stop 
54.
Which of the following is a monetary policy action used to combat a recession?
a)
cutting taxes
b)
increasing the money supply
c)
decreasing the money supply
d)
raising taxes
55.
The Federal Reserve wants to reduce the nation's money supply. This could be accomplished by doing all of the following EXCEPT
a)
decreasing the discount rate.
b)
increasing the reserve requirement.
c)
selling securities on the open market.
d)
making banks hold a reserve for all types of deposits.
56.
If the Federal Reserve System wanted to stimulate the U.S. economy and reduce unemployment, it would
a)
A. cause interest rates to decrease because low interest rates encourage businessgrowth and expansion
b)
B. cause interest rates to rise because high interest rates encourage business growthand expansion
c)
C. increase the discount rate it charges banks, which would increase the money supply
d)
D. increase consumer spending by reducing the money supply
57.
If the Federal reserve and Government are attempting to encourage growth and stimulate the economy, which actions would each take? 
(monetary / fiscal)
a)
increase the Required reserve / increase government spending
b)
sell government securities / decrease taxes
c)
decrease the interest rate / increase government spending
d)
buy government securities / decrease government spending
58.
If the federal government is attempting to encourage spending by consumers and businesses, a fiscal policy BEST serving this purpose would be
a)
decreasing taxes.
b)
decreasing government spending.
c)
reducing the investment tax credit.
d)
balancing the budget.
59.
The rate the Fed charges banks for a loan
a)
Discount rate
b)
Federal fund rate
c)
reserve ratio
d)
prime rate
60.

Which of the following statements is true?

a)

Contractionary monetary policy would increase government revenue & slow down the economy.

b)

Contractionary fiscal policy would decrease the reserve requirement & slow down the economy.

c)

Contractionary fiscal policy would lead to a decrease in national debt.

d)

Contractionary monetary policy leads to a budget deficit.

61.

Which fiscal policy tool would be used if the economy were in a trough?

a)

decrease reserve requirement

b)

increase individual tax rate

c)

sell bonds through open market operations

d)

increase government spending

62.

Which of the following fiscal policy tools would decrease the national debt?

a)

increase income taxes

b)

decrease income taxes

c)

increase money supply

d)

decrease money supply

63.

Which of the following are fiscal policy tools (select more than one)?

a)

adjusting the reserve requirement

b)

adjusting the discount rate

c)

changing government spending

d)

changing income taxes

e)

buying/selling bonds via open market operations

64.

Which monetary policy tool would speed up the economy?

a)

increasing reserve requirement

b)

decreasing income taxes

c)

increasing government spending

d)

decreasing interest paid on reserves

65.

Which combination of fiscal and monetary policy would speed up the economy?

a)

increase taxes; decrease reserve requirement

b)

decrease taxes; decrease discount rate

c)

increase spending; increase interest on reserves

d)

decrease spending; sell bonds via open market operations

66.

Which monetary policy tool would be expansionary?

a)

decrease reserve requirement

b)

increase discount rate

c)

increase interest paid on reserves

d)

selling bonds via open market operations

67.

If the government is concerned about unemployment, which tool would they use?

a)

increase spending

b)

increase taxes

c)

increase reserve requirement

d)

increase discount rate

68.

How are monetary policy and fiscal policy similar?

a)

They are both done by the President.

b)

They are both done by the Fed.

c)

They are both used to keep the economy stable.

d)

They both use four tools.

69.

The Federal Open Market Committee sells bonds. What type of policy is this?

a)

Contractionary Fiscal

b)

Expansionary Fiscal

c)

Contractionary Monetary

d)

Expansionary Monetary

70.
What typically happens to consumer & business spending when interest rates go up?
a)
both types of spending increase.
b)
Consumer spending increases & business spending decreases.
c)
Both types of spending decrease.
d)
Business spending increases & consumer spending decreases
71.
Which of the following IS NOT a monetary policy tool of the Federal Reserve?
a)
required reserve ratio
b)
buying & selling US Securities
c)
decreasing government spending
d)
discount rate
72.
Banks create money by 
a)
printing & issuing paper currency
b)
Making interest rates on leans higher than those on savings accounts
c)
exchanging gold for paper currency
d)
lending money or making loans
73.
Monetary policy primarily deals with...
a)
the unemployment rate.
b)
the budget.
c)
the amount of money in circulation.
d)
the tax rate.
74.
When the economy is "overheating", the Fed will often...
a)
decrease discount rates.
b)
decrease the reserve requirement.
c)
increase discount rates.
d)
stay the course.
75.
The federal government raising money by selling bonds (Treasury Bills, T Bills).
a)
True
b)
False
76.
What is a Keynesian economist likely to do to stimulate recovery for an economy in recession?
a)
increase taxes to finance increased government expenditure
b)
increase govt spending financed by increased govt borrowing
c)
increase the money supply to maintain low interest rates
d)
cutting government expenditure to balance the budget
77.
Which of the following is an example of expansionary policy?
a)
The Fed sells bonds
b)
the Fed raises reserve requirements
c)
the Fed buys bonds
d)
the Fed raises the Fed funds rate
78.
Which of the following best describes Keynesian Economics?
a)
"trickle down" economics
b)
demand-side economics
c)
supply-side economics
d)
reserve-side economics
79.
If policy makers are concerned about inflation, which fiscal and monetary policies would be MOST effective? 
a)
lowering taxes and buying bonds
b)
lowering taxes and raising the reserve requirement
c)
increasing taxes and lowering the discount rate
d)
increasing taxes and selling bonds
80.

These are IOUs from the U.S. government to people that finance a little piece of the government's debt in exchange for a very small amount of interest

a)

Government Bonds, or Securities

b)

Government Credit

c)

Government Cash

d)

Government Holdings

81.

Assume that the velocity of money in Theopolis is 3 and the aggregate supply curve is vertical at $100 million.

What impact will an increase in the money supply have on real output?

a)

Real output will increase by 30%

b)

Real output will increase by 10%

c)

Real output will increase by 3%

d)

Real output will increase by 3/10%

e)

There will be no impact on real output

82.

Which of the following would cause the long-run Phillips curve to shift to the right?

a)

A decrease in frictional unemployment

b)

An increase in cyclical unemployment

c)

An increase in structural unemployment

d)

An increase in aggregate demand (AD)

e)

A decrease in aggregate demand (AD)

83.

The natural rate of unemployment in Mithrim is 5%, and the current rate of unemployment is 2%. Also, the consumer price index (CPI) has been increasing rapidly.

Which of the following combinations of monetary and fiscal policy would be appropriate to return this economy to full employment?

a)

Increasing taxes; lower the discount rate

b)

Decreasing taxes; buy bonds

c)

Increase government spending; sell bonds

d)

Increasing taxes; increasing government spending

e)

Increasing taxes; open market sales

84.

The current state of the economy of Te Rehunga is represented in the graph shown above.

Let point B in the options below represent the current combination of inflation and the unemployment rate.

Which of the following graphs best depicts the Phillips curve model of Te Rehunga based on this AD-AS model?

a)
b)
c)
d)
e)
85.

In the graph of the Phillips curve above, an economy moved from point 1 to point 2 to point 3.

Which of the following would be the most likely reason for the movement from point 2 to point 3 shown in this graph?

a)

A change in the natural rate of unemployment

b)

An increase in aggregate demand

c)

A decrease in aggregate demand (AD)

d)

A decrease in short-run aggregate supply (SRAS)

e)

An increase in short-run aggregate supply (SRAS)

86.

The economy of Burginville has experienced high rates of inflation over the past 10 years.

According to the quantity theory of money, which of the following is the most likely explanation for the sustained inflation during this period?

a)

Better banking technology that has decreased the velocity of money

b)

Contractionary monetary policy

c)

Expansionary monetary policy

d)

Strong economic growth

e)

A money supply that has increased at the same pace as real output

87.

What is the primary cause of deflation according to monetarist theory?

a)

A stable quantity velocity of money

b)

Any decrease in the money supply.

c)

A rapidly changing velocity of money

d)

The money supply decreases faster than real output decreases.

e)

The money supply increases too rapidly for a long time.

88.

The economy of Rivendell experienced the AD shock shown in this graph.

Which of the following combinations of monetary and fiscal policy would be appropriate to combat the effect on the price level shown in this graph?

a)

Increase taxes; open market sales

b)

Sell bonds; increase the reserve requirement

c)

Decrease taxes; increase government spending

d)

Decrease taxes; decrease the reserve requirement

e)

Increase taxes; decrease the reserve requirement

89.

The economy of Mithrim is experiencing a severe recession. As a result, the government is conducting expansionary fiscal policy. The central bank of Mithrim is considering expansionary monetary policy to aid in the recovery efforts.

Which of the following is an example of a monetary policy action that would work with the expansionary fiscal policy to close the output gap?

a)

Increasing government spending

b)

Increasing the discount rate

c)

Increase taxes

d)

Selling bonds

e)

Open market purchases

90.

King Thranduil of the Woodland Realm is trying to rescue the kingdom from a severe recession by engaging in expansionary fiscal policy. As a result of the expansionary fiscal policy, the Woodland Realm now has a budget deficit. Meanwhile, the president of the central bank is Smaug, who wants to maintain a steady interest rate.

What is the appropriate action for the central bank to take in order to reduce the impact of the expansionary fiscal policy on interest rates?

a)

Increase taxes

b)

Decrease taxes

c)

Increase the reserve requirement

d)

Buy bonds

e)

Sell bonds

91.

The economy of Isengard is experiencing high inflation and a rate of unemployment below the natural rate.

Which of the following combination of fiscal and monetary policy actions would be the most appropriate response to this output gap?

a)

Decrease government spending; decrease the money supply

b)

Buy bonds; decrease the reserve ratio

c)

Increase government spending; decrease taxes

d)

Decrease taxes; increase the money supply

e)

Increase taxes; buy bonds

92.

Which of the following actions would most likely lead to a shift to the left of the short-run Phillips curve, or SRPC?

a)

A strong central bank commitment to reducing inflation

b)

A strong central bank commitment to decreasing cyclical unemployment

c)

A strong government commitment to engage in expansionary fiscal policy

d)

A strong central bank commitment to increasing the money supply

e)

A strong government commitment to reducing structural unemployment

93.

Which of the following represents how a positive aggregate demand shock would impact the Phillips curve model?

a)
b)
c)
d)
e)
94.

What causes the long-run Phillips curve to shift?

a)

Changes in cyclical unemployment

b)

Changes in expectations about inflation

c)

Changes in structural or frictional unemployment

d)

Shifts in the short-run aggregate supply (SRAS) curve

e)

Shifts in the aggregate demand curve

95.

The natural rate of unemployment in Elizaland is 5%. The citizens of Elizaland expected inflation to be 2% and unemployment to be 5% during 2018. However, inflation turned out to be 6% and unemployment 1.5%.

What happens in the long run as people begin to expect a permanantly higher rate of inflation?

a)

The short-run Phillips curve (SPRC) shifts to the left.

b)

The long-run Phillips curve (LRPC) shifts to the left

c)

The long-run Phillips curve (LRPC) shifts to the right

d)

A movement to the right along the short-run Phillips curve (SRPC)

e)

The short-run Phillips curve (SRPC) shifts to the right

96.

According to the quantity theory of money, changes in which variable(s) from the equation of exchange determine(s) the rate of inflation in the long run?

a)

Y only

b)

V only

c)

Y and V

d)

M only

e)

P only

97.

According to monetarist theory, what happens if the money supply increases more rapidly than real output?

a)

The velocity of money increases.

b)

Deflation occurs.

c)

The velocity of money decreases.

d)

Inflation occurs.

e)

Nominal output decreases.

98.

Assume that wages and prices are fully flexible and all inflation is correctly anticipated.

According to the quantity theory of money, what would be the impact of expansionary monetary policy on real output and the price level?

a)

Real output increases, no impact on price level

b)

Real output decreases, price level decreases

c)

Real output increases, price level increases

d)

No impact on real output, price level increases

e)

No impact on real output, no impact on the price level

99.

According to the quantity theory of money, which of the following best describes what determines the rate of inflation in the long run?

a)

The rate of change of the velocity of money

b)

The rate of growth of the money supply

c)

The growth of the price level

d)

The growth of real GDP per capita

e)

The rate of inflation is constant in the long-run

100.

The economy of Burginville has been running budget deficits which it paid for by borrowing.

What is the likely impact of government borrowing on spending on capital goods and economic growth in Burginville?

a)

Increase in spending on capital goods; no effect on economic growth

b)

A decrease in spending on capital goods; a decrease in economic growth

c)

Increase in spending on capital goods; an increase in economic growth

d)

No effect on spending on capital goods or economic growth

e)

A decrease in spending on capital goods; no effect on economic growth

101.

An economy has a budget deficit, and you want to show the impact of the budget deficit on the real interest rate.

What model would you use, and what would be the impact on the interest rate?

a)

The AD-AS model; the real interest rate is not impacted

b)

The money market; the real interest rate decreases

c)

The money market; the real interest rate is not impacted

d)

The loanable funds market; real interest rate decreases

e)

The loanable funds market; real interest rate increases

102.

The government of Tatooine had a balanced budget last year. However, an unanticipated recession triggered by the wanton destruction of Jabba’s Palace leads to a decrease in tax revenues, even though government spending and transfer payments did not change.

What happens to the budget balance and national debt in Tatooine as a result of the decrease in tax revenues?

a)

There is a budget deficit; the debt will increase

b)

There is a budget deficit; no impact on national debt

c)

There is a budget surplus; no impact on national debt

d)

There is a budget surplus; national debt will decrease

e)

There is a balanced budget; national debt will increase

103.

Which of the following changes would cause a balanced budget to move to a budget surplus?

a)

An increase in transfer payments

b)

A decrease in transfer payments

c)

An increase in government spending

d)

A decrease in tax revenue

e)

A decrease in national income

104.

The AD-AS model of Snaximus changed as shown in the graph above.

Which of the following illustrates what would also be occuring in Snaximus’ production possibilities curve?

a)
b)
c)
d)
e)
105.

The average years of education per person in Islandia increased by 3 years over the period 2010 - 2015.

What determinant of productivity changed, and how would that impact Islandia’s long-run aggregate supply curve (LRAS)?

a)

Technology increased; no impact on LRAS

b)

Technology increased; LRAS increased

c)

Human capital increased; LRAS shifts right

d)

Labor increased; no impact on LRAS

e)

Capital increased; LRAS increased

106.

Which of the following measures is typically used to approximate the productivity of an individual unit of labor in a country?

a)

The consumer price index (CPI)

b)

Real GDP

c)

Real GDP per capita

d)

Nominal GDP

e)

The unemployment rate

107.

The aggregate production function is used to describe which of the following relationships?

a)

The tradeoff between the production of capital goods and consumption goods

b)

The relationship between output supplied and the price level

c)

The relationship between unemployment and inflation in the long run

d)

The tradeoff between unemployment and inflation in the short run

e)

The relationship between output and inputs (labor, capital, and technology)

108.

Winterfell and Dorne have no restrictions on the flow of financial capital. An increase in business optimism in Dorne has lead to a higher real interest rate in Dorne.

What effect does this have on real interest rates and long-run economic growth in Winterfell?

a)

Lower interest rates and higher economic growth in Winterfell.

b)

Higher interest rates and lower economic growth

c)

Lower interest rates and lower economic growth.

d)

Neither interest rates nor economic growth in Winterfell are affected.

e)

Higher interest rates and higher economic growth

109.

Which of the following is LEAST likely to be associated with a higher rate of economic growth?

a)

strong protection of property rights

b)

encouraging the replenishment of natural resources

c)

higher consumption

d)

taxes on savings and investment

e)

policies that discourage immigration

110.

Which of the following is the most likely effect of a government policy that leads to more development of technology used by firms throughout an economy?

a)

a negative supply shock and a higher price level

b)

a positive demand shock and a lower growth rate

c)

a positive supply shock and higher growth rate

d)

a positive supply shock and a higher price level

e)

a negative demand shock and a lower price level

111.

Higher taxes have reduced disposable income in Fredland.

What happens to household savings and the real interest rate in the short run, and potential output in the long run?

a)

Household saving increases; the real interest rate decreases, and potential output increases.

b)

Household saving decreases; the real interest rate decreases, and potential output increases.

c)

Household saving decreases; the real interest rate decreases, and potential output increases.

d)

Household saving decreases; the real interest rate increases, and potential output decreases.

e)

Household saving increases; the real interest rate decreases, and potential output is unaffected.

112.

Which of the following policies is most likely to increase potential output in the long run?

a)

Policies that encourage more household spending.

b)

Policies that encourage more saving for retirement.

c)

Taxes on business investment.

d)

Weakening protections on intellectual property

e)

Taxes on the gains from the sale of assets.

113.

The current rate of unemployment in Hamiltonia is 7%. Economists estimate that frictional unemployment is 4% and structural unemployment is 1%.

Which of the following best describes the amount of cyclical unemployment in Hamiltonia and current output in the economy?

a)

Cyclical unemployment is 2%; output is more than full employment output.

b)

Cyclical unemployment is 0%; output is less than full employment output.

c)

Cyclical unemployment is 2%; output is less than full employment output.

d)

Cyclical unemployment is 0%; output is equal to full employment output.

e)

Cyclical unemployment is 7%; output is equal to full employment output.

114.

Before experiencing the supply shock shown in this graph, Maxistan was in long-run equilibrium. The marginal propensity to consume (MPC) Maxistan is 0.75.

Which of the following is a fiscal policy action that would be the best choice to return the economy to full employment output?

a)

increase taxes by $75 million

b)

decrease taxes by $25 million

c)

decrease government spending by $25 million

d)

increase government spending by $25 million

e)

decrease government spending by $75

115.

Justinia is a country that produces three goods: guitars, physics books, and sandals.

Which of the following would definitely cause an increase in nominal GDP but not a change real GDP in Justinia?

a)

The quantity of goods produced increases; prices stay the same

b)

The quantity of goods produced increases; prices decrease

c)

The quantity of goods produced increases; prices increase

d)

The quantity of goods produced decreases; prices stay the same

e)

The quantity of goods produced stays the same; prices increase

116.

Which of the following would be the FIRST change to occur when a central bank conducts open market purchases of bonds?

a)

Aggregate demand increases

b)

Bank reserves increase

c)

The money supply increases

d)

The monetary supply decreases

e)

The interest rate decreases

117.

Ygritte loaned Mans $100. Mans paid her back $110

one year later. The annual rate of inflation was

3%.

What was the real interest rate that Ygritte earned on this loan?

a)

$10

b)

10%

c)

$100

d)

7%

e)

3%

118.

You borrow $200 from the First Bank of Westeros to purchase Kraken repellant. The bank charges a fixed nominal interest rate of 18% per year and you will repay them in one year. You and the bank both anticipate that there will be 7% inflation. However, after the loan agreement is signed, the rate of inflation turns out to be 9%.

Who is hurt by this unanticipated inflation, and why are they hurt by it?

a)

The bank is hurt because the value of what is repaid has decreased

b)

You are hurt because the value of what is repaid has decreased

c)

The bank is hurt because the value of what is repaid has increased

d)

You are hurt because the value of what is repaid has increased

e)

We cannot tell without more information

119.

Which of the following would cause the value of a nation's GDP to increase in a given year?

a)

An increase in sale of illegal goods in the economy

b)

Households spend more on domestic air travel

c)

An increase in the sale of used cars

d)

More people choose to stay at home to raise their children rather than using paid childcare

e)

An increase in volunteer work

120.

Which of the following best describes why the money supply curve is vertical?

a)

Individuals hold less money when interest rates increase

b)

The central bank responds to increases in the interest rate by increasing the quantity of money supplied

c)

Central banks determine the monetary base independent of the interest rate

d)

Savers want to supply more money when interest rates are high

e)

The central bank sets interest rates and changes the quantity of money accordingly

121.

How does a decrease in the price level affect real wealth and aggregate demand?

a)

Real wealth increases; the quantity of aggregate demand decreases

b)

Real wealth decreases; aggregate demand increases

c)

Real wealth increases; aggregate demand increases

d)

Real wealth increases; the quantity of aggregate demand increases

e)

Real wealth decreases; the quantity of aggregate demand increases

122.

The figure above shows the result of a change in the market for loanable funds.

Which of the following is the most likely to have caused the shift shown here?

a)

Firms invest less in plant and equipment

b)

Foreign savers view this country as a desirable place to send assets.

c)

Optimism by firms increases investment in physical capital.

d)

Domestic saving decreases.

e)

The government runs a budget surplus.

123.

A banking innovation has made it easier for people in Hamsterville to convert their assets into money. As a result, the demand for money has decreased, and this has changed the nominal interest rate.

If the central bank wants to counteract this change, which of the following is an appropriate open market operation to achieve that?

a)

Buy bonds.

b)

Increase the reserve requirement.

c)

Decrease taxes.

d)

Sell bonds.

e)

Lower the discount rate.

124.

If unemployed workers decide to stop looking for a job and instead enroll in further education, how will the number of employed workers and the unemployment rate change?

a)

The number of employed workers does not change; the unemployment rate decreases

b)

The number of employed workers does not change; the unemployment rate does not change

c)

The number of employed workers increases; the unemployment rate decreases

d)

The number of employed workers decreases; the unemployment rate increases

e)

The number of employed workers does not change; the unemployment rate increases

125.

What is included in the monetary base?

a)

All deposits in banks and money in circulation

b)

Money held in bank vaults and money held by the public

c)

Any asset of any value including cash, stocks, and bonds

d)

Only paper currency and coins

e)

Only money held by the public

126.

Which of the following best describes what will happen to this economy in the long run?

a)

The LRAS curve will shift out and full employment output will increase from Yf to Y1.

​

b)

Wages and prices will decrease and the full employment level of output will increase

c)

Wages and prices will decrease and output will decrease from

Y1 to Yf.

​

d)

Wages and prices will decrease and output will increase from

Y1 to Yf.

e)

Wages and prices will increase and output will remain at

Y1.

127.

Assume that milk is an inferior good.

Assuming all other factors remain constant, if the income of milk buyers increases, what will happen to the equilibrium price and quantity of milk?

a)

We cannot determine what happens to price, but quantity will increase

b)

Price will decrease and quantity will increase

c)

Price will decrease and quantity will decrease

d)

Price will increase, but we cannot determine what happens to quantity

e)

Price will increase and quantity will decrease

128.
a)

P increased


Q unknown

​

b)

P decreased


Q unknown

​

c)

P increased


Q stays the same

​

d)

P increased


Q increased

​

e)

Q increased


P stays the same

​

129.

a)

Neither country would be willing to buy or sell boats given these terms of trade because the prices of these goods are not given in money.

b)

Country A would want to buy boats, and Country B would want to sell boats.

c)

Country A would want to sell boats, and Country B would want to buy boats.

d)

Both countries would want to sell given these terms of trade, so there will be no exchange.

e)

Neither country would be willing to sell given these terms of trade because neither country has the comparative advantage in either good.

130.

In a country that has a low rate of inflation is that a good economy or a bad economy?

a)

Good economy

b)

Bad economy

131.

What is the Federal Reserve's primary goal?

a)

To keep inflation at a low and steady rate.

b)

To have full employment.

c)

Economic growth.

d)

Economic Freedom.

132.

If the rate of inflation rises above their target level what does the Federal Reserve do?

a)

Increasing bond prices

b)

They put more money into circulation

c)

Decreases interest rates

d)

They take excess money out of circulation

133.

What is Cost-push inflation?

a)

The decrease prices of the factors of the production leads to decreased supply of these goods.

b)

The increase prices of the factors of the production leads to a decreased supply of these goods.

134.

What is commonly described as "too much money chasing too few goods."

a)

Demand-pull inflation

b)

Cost-push inflation

135.

It involves publicly announcing an inflation forecast which the BSP promises to achieve.

a)

Monetary policy

b)

Inflation Target

c)

Price Stability

d)

Financial Stability

136.

_________ is a decrease in the rate of inflation.

a)

Hyperinflation

b)

Disinflation

c)

Deflation

d)

Stagflation

137.

__________ refers to a decrease in price level.

a)

Hyperinflation

b)

Disinflaation

c)

Deflation

d)

Stagflation

138.

__________ occurs in the economy when unemployment and inflation are both high.

a)

Hyperinflation

b)

Disinflation

c)

Deflation

d)

Stagflation

139.

The Taylor rule sets the target federal funds rate based on which of the following?

a)

the inflation rate only

b)

the unemployment rate only

c)

the output gap only

d)

both the inflation rate and the unemployment rate

e)

both the output gap and the inflation rate

140.

An inflation tax is the result of

a)

the federal government running a budget surplus.

b)

the Federal Reserve raising the federal funds rate.

c)

an increase in the demand for money.

d)

printing money to cover a budget deficit.

e)

contraction fiscal policy.

141.

Which of following is true when the output gap is negative?

a)

Aggregate output is above potential output.

b)

The unemployment rate is below the natural rate.

c)

The economy is experiencing inflation.

d)

Potential output is above aggregate output.

e)

The natural rate of unemployment is decreasing.

142.

The short-run Phillips curve shows the relationship between the inflation rate and the

a)

GDP growth

b)

unemployment rate

c)

employment rate

d)

real interest rate

e)

nominal interest rate

143.

An increase in expected inflation has what effect on the short-run Phillips curve?

a)

a movement up and to the left along the curve

b)

a movement down and to the right along the curve

c)

an upward shift of the curve

d)

a downward shift of the curve

e)

an increase in the slope of the curve

144.

The long-run Phillips curve is

a)

horizontal.

b)

vertical.

c)

upward sloping.

d)

downward sloping.

e)

U-shaped.

145.

The long-run Phillips curve illustrates which of the following?

a)

a positive relationship between unemployment and inflation

b)

a negative relationship between unemployment and inflation

c)

that unemployment will always return to the NAIRU

d)

that unemployment will adjust so that the economy experiences 2% inflation

e)

that output will adjust so that there is no unemployment or inflation in the long run

146.

The process of bringing down the rate of inflation that has become embedded in expectations is known as

a)

disinflation.

b)

deflation.

c)

negative inflation.

d)

debt deflation.

e)

monetary policy.

147.

A liquidity trap occurs when conventional monetary policy is ineffective because

a)

the short-run Phillips curve is negatively sloped.

b)

the public will not buy or sell Treasury bills.

c)

the unemployment rate can't go below 5%.

d)

the nominal interest rate can't be negative.

e)

the real interest rate can't be negative.

148.

What is seignorage?

a)

The right of the US government to tax its citizens

b)

The right of the US government to tax businesses

c)

The right of the US government to print money

d)

The right of the US government to less treasury bonds

149.

When a government uses seignorage as a way to pay off its debt, it is actually imposing an inflation tax on those with money.

a)

True

b)

False

150.

In the USA, seignorage accounts for about ___ percentage of the US government's budget.

a)

0-1%

b)

3-5%

c)

6-8%

d)

+10%

151.

Misusing seignorage can cause

a)

inflation

b)

hyperinflation

c)

disinflation

d)

deflation

152.
Name a group that was badly effected by hyperinflation.
a)
Pensioners
b)
Farmers
c)
Big business owners
d)
Landowners
153.
Name a group that was not badly effected by hyperinflation.
a)
Pensioners
b)
Landowners
c)
The poor
d)
Factory workers
154.

Long Run Phillips Curve

a)

Wages and Resource Costs will increase as price levels increase.

b)

Measures the effect of the economy on inflation and unemployment with an inverse relationship

c)

No tradeoff between inflation and unemployment, represented by a vertical line at the NRU.

d)

Government spending might cause unintended effects that weaken the impact of the policy.

e)

Wages and Resource Costs will not increase as price levels increase.

155.

Crowding Out Effect

a)

Wages and Resource Costs will increase as price levels increase.

b)

Measures the effect of the economy on inflation and unemployment with an inverse relationship

c)

No tradeoff between inflation and unemployment, represented by a vertical line at the NRU.

d)

Government spending might cause unintended effects that weaken the impact of the policy.

e)

Wages and Resource Costs will not increase as price levels increase.

156.
Shows the relationship between unemployment and inflation after expectations of inflation have had time to adjust to experience.
a)
Short Run Phillips Curve
b)
Long Run Phillips Curve
c)
Elon Musk
157.
This occurs when aggregate output is above potential output.
a)
Inflationary Gap
b)
Recessionary Gap
c)
LRAS shifts down
d)
LRAS shifts on the z-axis
158.
Define inflation tax! 
a)
A reduction in the  value of money held by the public caused by inflation
b)
An increase in the value of money held by the public
c)
Deflation 
d)
The disinflation of deflation
159.
What does NAIRU stand for?
a)
Non-accelerating inflation rate of unemployment,
b)
Nasty Awesome Incredible Real Unemployment
c)
LRPC
d)
SRPC
160.
How does an inflationary gap self correct?
a)
Wages increase, output decreases
b)
Wages decrease, output increases 
c)
Wages decrease, output decreases 
d)
Output increase, wages increase
161.
What is the Y-axis in the Phillips Curve
a)
Unemployment Rate
b)
Inflation Rate
c)
Interest Rate
d)
GDP
162.

The Phillips curve shows what type of relationship between inflation and unemployment?

a)

negative

b)

positive

c)

parabolic

d)

symmetric

163.

Which of the following causes movement along the short run Phillips curve?

a)

Any changes to aggregate supply.

b)

Any changes to aggregate demand.

c)

Any changes in frictional or structural unemployment

d)

All of the above

164.

Which of the following causes a shift in the short run Phillips curve?

a)

Any changes to aggregate supply.

b)

Any changes to aggregate demand.

c)

Any changes in frictional or structural unemployment

d)

All of the above

165.

Which of the following causes a shift in the long run Philips curve?

a)

Any changes to aggregate supply.

b)

Any changes to aggregate demand.

c)

Any changes in frictional or structural unemployment

d)

All of the above

166.

According to the the Philips curve, if the inflation rate increases from 4% to 6%, and if the unemployment rate is 5% when the inflation rate was 4%, we can expect the unemployment rate in the short run to...

a)

stay the same

b)

increase to 8%

c)

decrease to 3%

167.

The long run Philips curve is also known as the

a)

real output rate

b)

natural rate of inflation

c)

natural unemployment rate

d)

real interest rate

168.

According to the Phillips curve, there is

a)

a trade-off in inflation and unemployment in the short run, but not the long run.

b)

a trade-off in inflation and unemployment in both short and long run.

c)

no trade-off in inflation and unemployment in both short and long run.

d)

a trade-off in inflation and unemployment in the long run, but not the short run.

169.

A movement from A to B would represent

a)

an increase in AS in the AS/AD model.

b)

a decrease in AS in the AS/AD model.

c)

stagflation.

d)

an increase in AD in the AS/AD model.

e)

a decrease in AD in the AS/AD model.

170.

A decrease in AD would cause a(n)

a)

downward movement on the Phillips Curve.

b)

upwards movement on the Phillips Curve.

c)

a rightward shift of the Phillips Curve.

d)

a leftward shift of the Phillips Curve.

e)

stagflation.

171.

The movement from B to C would be reflected on the AS/AD model as

a)

a decreasing shift of AD from an inflationary gap to full employment.

b)

an increasing shift of AS from an inflationary gap to full employment.

c)

a decreasing shift of AS from an inflationary gap to full employment.

d)

an increasing shift of AD from a recessionary gap to full employment.

e)

a decreasing shift of AS from a recessionary gap to full employment.

172.

The movements on each graph could be caused by

a)

a major technological innovation.

b)

a decrease in the reserve requirement.

c)

an increase in government spending.

d)

a decrease in taxes.

e)

an increase in the cost of a major resource such as oil.

173.

The shift from AS1 to AS2 would cause a

a)

movement along the SRPC towards inflation.

b)

movement along the SRPC towards unemployment.

c)

a downward movement along the LRPC.

d)

a leftward or downward shift of the SRPC.

e)

a rightward or upward shift of the SRPC.

174.

The shift from AD1 to AD2 would cause a

a)

movement along the SRPC towards inflation.

b)

movement along the SRPC towards unemployment.

c)

a downward movement along the LRPC.

d)

a leftward or downward shift of the SRPC.

e)

a rightward or upward shift of the SRPC.

175.

Which of the following would cause a movement from point S to point R on the short-run Phillips curve above?

a)

An unanticipated increase in government spending

b)

An unanticipated adverse supply shock

c)

A decrease in net investment

d)

An increase in real interest rates

e)

An increase in the labor-force participation rate

176.
When the government spends more money than they take in each year is called a _________?
a)
Debt
b)
Deficit
c)
Surplus
d)
Expansionary
177.

what is the purpose of Monetary Policy?

a)

contribute to economic growth and stability

b)

keep rich people from getting too rich

c)

Functions like Fiscal Policy

d)

give Congress and the political parties more control of the economy

178.

These are IOUs from the U.S. government to people that finance a little piece of the government's debt in exchange for a very small amount of interest

a)

Government Bonds, or Securities

b)

Government Credit

c)

Government Cash

d)

Government Holdings

179.
The primary role of the Federal Reserve Bank is to steer the economy by
a)
controlling the budget
b)
setting spending levels.
c)
controlling the money supply.
d)
loaning out money.
180.
Cash that banks must keep in the vault.
a)
excess reserves
b)
fiscal policy
c)
required reserves
d)
crowding out effect
181.
Which of the following would the FED us to increase the money supply?
a)
raise the discount rate
b)
raise the required reserves
c)
buy bonds/securities
d)
print more money
182.
Which of the following scenarios would cause the nation’s money supply to increase?
a)
Decreasing government spending
b)
Lowering interest rates
c)
Raising interest rates
d)
Selling bonds to investors
183.

____________ is the price paid for the use of money.

a)

Gold

b)

Monetary policy

c)

Fiscal policy

d)

The interest rate

184.
Which of these is NOT a monetary policy tool?
a)
Discount rate
b)
Balance Accounts
c)
Open Market Operation
d)
Reserved Requirements
185.
During an expansion what would you do to prevent inflation?
a)
Lower the RRR, Lower the DR, Buy Bonds
b)
Raise the RRR, Raise the DR, Sell Bonds
186.

This shift could occur with

a)

an increase in bank lending.

b)

the purchase of securities in the open market by the Fed.

c)

a decrease in the discount rate.

d)

an increase in the Federal Funds rate.

e)

a decrease in the reserve ratio.

187.

A shift from MD1 to MD2 could be caused by

a)

customers wishing to hold more cash and use credit cards less.

b)

a decrease in the discount rate.

c)

an open market operation sale of bonds to the Fed.

d)

the GDP falling.

e)

an open market operation purchase of bonds by the Fed.

188.

To decrease the equilibrium interest rate to 8% the Fed could

a)

sell bonds.

b)

raise the discount rate.

c)

raise the Federal Funds rate.

d)

lower the reserve requirement.

e)

decrease the GDP.

189.

To raise the interest rate to 12% the Fed could

a)

buy bonds.

b)

increase the discount rate.

c)

decrease the reserve ratio.

d)

decrease the nominal interest rate.

e)

decrease the Federal Funds rate.

190.

The shift in the graph could be caused by

a)

a recession.

b)

government deficit spending.

c)

an increase in savings.

d)

positive feelings about the future of the economy.

e)

the Fed selling securities in an open market operation.

191.
The crowding out effect can only occur if the
a)
government deficit spends.
b)
government runs a surplus.
c)
personal savings rate increases.
d)
economy begins to boom.
192.
The crowding out effect manifests itself in the GDP formula by causing
a)
an increase in G and a decrease in Xn.
b)
a decrease in G and an increase in C.
c)
an increase in I and a decrease in G.
d)
an increase in G but a decrease in I.
193.
If Congress increases government spending by the same amount it increases taxes aggregate demand will
a)
remain the same
b)
decrease, these are both contractionary
c)
increase
d)
shift down
194.
If the Federal Reserve raises interest rates to combat rapid inflation, what might be a negative outcome?
a)
Unemployment rates would rise
b)
taxes will rise 
c)
The government would put a freeze on prices
d)
international trade would stop 
195.
Which of the following is a monetary policy action used to combat a recession?
a)
cutting taxes
b)
increasing the money supply
c)
decreasing the money supply
d)
raising taxes
196.
If the federal government is attempting to encourage spending by consumers and businesses, a fiscal policy BEST serving this purpose would be
a)
decreasing taxes.
b)
decreasing government spending.
c)
reducing the investment tax credit.
d)
balancing the budget.
197.

Which of the following statements is true?

a)

Contractionary monetary policy would increase government revenue & slow down the economy.

b)

Contractionary fiscal policy would decrease the reserve requirement & slow down the economy.

c)

Contractionary fiscal policy would lead to a decrease in national debt.

d)

Contractionary monetary policy leads to a budget deficit.

198.

Which of the following fiscal policy tools would decrease the national debt?

a)

increase income taxes

b)

decrease income taxes

c)

increase money supply

d)

decrease money supply

199.
The _____________ is an estimate of what the budget balance would be if real GDP were exactly equal to potential output.
a)
Cyclically Adjusted Budget Balance
b)
Fiscal Year
c)
Government Debt
d)
Debt-GDP Ratio
200.
The _____________ runs from October 1 to September 30 and is labeled according to the calendar year in which is ends.
a)
Fiscal Year
b)
Money Year
c)
Calendar Year
d)
Government Year
201.
_____________ are spending promises made by governments that are effectively a debt despite the fact that they are not included in the usual debt statistics.
a)
Implicit Liabilities
b)
Liabilities
c)
Risk
d)
Government Debt
202.

Any good Macroeconomist will tell you that when a country's economy is growing, the government should utilize _____ policy and when a country's economy is shrinking the government should utilize ______ policy.

a)

expansionary, expansionary

b)

contractionary, contractionary

c)

expansionary, contractionary

d)

contractary, expansionary

203.

Which of the following is NOT an implicit liability of the US Government

a)

Social Security

b)

Medicare

c)

Medicaid

d)

Military Budget

204.

Which of the following is NOT a direct tool of the Fed Reserve?

a)

Open Market Operations

b)

Setting the Discount Rate

c)

Setting the Federal Funds Rate

d)

Setting the Reserve Requirement

205.

If the Fed wanted to lower the interest rate, the way it would do that is by

a)

increasing taxes

b)

decreasing taxes

c)

increasing the money supply

d)

decreasing the money supply

206.

The main tool for economic stabilization policy is

a)

monetary policy because it has more lag time

b)

monetary policy because it has less lag time

c)

fiscal policy because it has more lag time

d)

fiscal policy because it has less lag time

207.

Monetary policy, like fiscal policy is subject to

a)

lag times, but those times are greater

b)

lag times, but those times are smaller

c)

the will of the President of the United States

d)

the will of the US Congress

208.

Most countries try to maintain an inflation rate of ______ per year.

a)

One percent or less

b)

Two to three percent

c)

Four to five percent

d)

Six to seven percent

209.

The Federal Reserve does have an explicit inflation target of 2% per year

a)

True

b)

False

210.

What is the difference between inflation targeting and the Taylor rule?

a)

Inflation targeting is backward-looking while the Taylor rule is forward-looking

b)

Inflation targeting is forward-looking while the Taylor rule is backward-looking

c)

Inflation targeting is less restrictive, while the Taylor rule is more restrictive

d)

The Central Bank's success is easier to judge using the Taylor rule

211.

In the short run, an increase in the money supply will _______ prices and __________ real GDP

a)

increase, increase

b)

decrease, decrease

c)

increase, decrease

d)

decrease, increase

212.

In the short run, a decrease in the money supply will _______ prices and __________ real GDP

a)

increase, increase

b)

decrease, decrease

c)

increase, decrease

d)

decrease, increase

213.

In the long run, a decrease in the money supply _______ prices and __________ real GDP

a)

won't change, increase

b)

won't change, decrease

c)

increases, won't change

d)

decreases, won't change

214.

In the long run, an increase in the money supply _______ prices and __________ real GDP

a)

won't change, increase

b)

won't change, decrease

c)

increases, won't change

d)

decreases, won't change

215.

According to money neutrality, the only long run effect of an increase in the money supply is to _____

a)

raise aggregate price level by an equal percentage

b)

lower aggregate price level by an equal percentage

216.

In the short run, an increase in the Money Supply pushes interest rates _______________, while in the long run interest rates __________

a)

down, increase

b)

down, don't change

c)

up, increase

d)

up, don't change

217.

In the short run, a decrease in the Money Supply pushes interest rates _______________, while in the long run interest rates __________

a)

down, increase

b)

down, don't change

c)

up, increase

d)

up, don't change

218.

Country X's economy is in an inflationary gap. Which of the following combinations of fiscal and monetary policy actions would restore full employment in the short run?

a)

A decrease in income taxes and a decrease in the required reserve ratio

b)

A decrease in government spending and open-market purchases

c)

An increase in income taxes and open-market sales

219.

An economy is in a recessionary output gap. Which of the following combinations of policy actions would definitely move the economy toward long-run equilibrium?

a)

A decrease in government spending and an increase in income taxes

b)

A decrease in the money supply and an increase in income taxes

c)

A decrease in income taxes and an increase in the money supply

220.

An open-market purchase of government bonds accompanied by a decrease in income taxes will result in which of the following in the short run?

a)

A decrease in real output

b)

A decrease in the price level

c)

A decrease in unemployment

221.

Use the graph of a Phillips Curve to answer the question. Which of the following points illustrates an inflationary gap?

a)

X

b)

Y

c)

Z

222.

An increase in the the aggregate costs of production will cause which of the following?

a)

A rightward shift in the short-run Phillips curve

b)

A rightward movement along the short-run Phillips curve

c)

A leftward shift in the short-run Phillips curve

223.

Suppose that an economy with flexible wages and prices is in long-run equilibrium when the central bank contracts the money supply. What is the long-run effect on real output in the economy?

a)

Real output falls.

b)

Real output is unchanged.

c)

Real output rises.

224.

Assume an economy is in long-run equilibrium and the central bank engages in an expansionary monetary policy for a prolonged time period. If the velocity of money is constant, which of the following is true according to the quantity theory of money?

a)

Price level will increase at the same rate as the money supply.

b)

Real output will exceed full employment in the long run.

c)

The actual unemployment rate will exceed the natural rate of unemployment.

225.

If tax revenues are less than the total of government spending plus government transfer payments, which of the following will happen?

a)

The spending multiplier will increase.

b)

The national debt will increase.

c)

The government budget will be in surplus.

226.

Which of the following terms describes the adverse effect that results when private sector investment spending competes with government deficit financing?

a)

Crowding out effect

b)

Multiplier effect

c)

Interest rate effect

227.

Assume policy makers increased spending and cut taxes to stimulate the economy. If the government’s budget was initially in balance, which of the following will occur?

a)

There will be a budget deficit, real interest rates will increase, and investment spending will be crowded out.

b)

There will be a budget deficit, real interest rates will decrease, and investment spending will increase.

c)

There will be a budget surplus, real interest rates will increase, and investment spending will be crowded out.

228.

Which of the following changes is most likely to cause economic growth?

a)

A decrease in labor productivity

b)

A decrease in physical capital

c)

An increase in human capital

229.

How will a nation’s production possibilities curve (PPC) and long-run aggregate supply (LRAS) curve change as a result of an increase in both the labor force and productivity?

a)

The LRAS curve will shift to the right, and the PPC will shift inward.

b)

The LRAS curve will shift to the right, and the PPC will shift outward.

c)

The LRAS curve will shift to the left, and the PPC will shift inward.

230.

If economic growth through investment in the economy's infrastructure is desirable, which of the following policies will most likely achieve this objective?

a)

Decreasing spending on education and training of workers for higher-income jobs

b)

Reducing subsidies for business investment in research and development

c)

Granting tax credits for businesses in the construction sector

231.

Which of the following policies will most likely promote long-run economic growth?

a)

Decreasing government spending on infrastructure

b)

Increasing funding for research and development

c)

Decreasing funding for primary education

232.

Which of the following is true regarding the short-run Phillips curve (SRPC)?

a)

A rightward shift in aggregate demand will cause the SRPC to shift leftward

b)

The SRPC is upward sloping showing the positive relationship between price and output

c)

The SRPC shows the inverse relationship between interest rates and unemployment

d)

The SRPC is vertical when the economy has no cyclical unemployment

e)

The SRPC shows the inverse relationship between inflation and unemployment

233.

According to the long-run Phillips curve, which of the following is true?

a)

Unemployment increases with an increase in inflation.

b)

Unemployment decreases with an increase in inflation.

c)

Increased automation leads to lower levels of frictional unemployment in the long run.

d)

Changes in the composition of the overall labor force tend to be deflationary in the long run.

e)

The natural rate of unemployment is independent of inflation

234.

The quantity theory of money suggests that

a)

An increase in spending will always lead to inflation

b)

An increase in the amount of money will lead to a proportional increase in prices

c)

Hyperinflation is due to an increase in the cost of key resources

d)

Demand-pull inflation will occur as countries produce more output

e)

The quantity of money times the velocity of money equals the real GDP

235.

The velocity of money is best described as:

a)

The number of times the average dollar is spent in a year

b)

Equivalent to nominal GDP

c)

Equivalent to the Price level

d)

Equivalent to real GDP

e)

Another term for the spending multiplier

236.

When government spending causes an increase in real interest rates, gross private domestic investment

a)

Will increase at the same rate as the increase in government expenditures

b)

Will increase the amount of capital stock and cause economic growth in the economy

c)

Will experience crowding-out

d)

Will not change

e)

Will decrease at the same rate as the increase in government expenditures

237.

A decrease in government spending by a given amount accompanied by a decrease in taxes by the same amount will cause which of the following?

a)

Aggregate demand to increase

b)

Aggregate demand to decrease

c)

Aggregate demand to stay the same

d)

Aggregate supply to increase

e)

Aggregate supply to decrease

238.

Which of the following is true regarding budget deficits?

a)

The national debt is the accumulation of budget deficits and surpluses over time

b)

Budget deficits occur when tax revenues are greater than government expenditures

c)

Budget deficits are often greater than the national debt

d)

Large budget surpluses can cause the crowding-out effect

e)

Budget deficits occur when imports are more than exports

239.

A decrease in interest rates resulting in the increase in capital stock will likely cause which of the following in the long-run?

a)

Decrease in only aggregate demand

b)

Decrease in only aggregate supply

c)

Increase in only aggregate demand

d)

Increase in only aggregate supply

e)

Increase in aggregate demand, aggregate supply, and long-run aggregate supply

240.

Which of the following will most likely result in economic growth?

a)

Increased wages

b)

Decreased savings

c)

Increased business taxes

d)

Increased labor productivity

e)

Decreased unemployment

241.

Which of the following to occur in the short-run if the economy is at full employment and the central bank conducts an open market purchase of bonds?

a)

The short-run Phillips Curve will shift to the right

b)

The short-run Phillips Curve will shift to the left

c)

The long-run Phillips Curve will shift to the right

d)

There will be a movement to the right along a short-run Phillips Curve

e)

There will be a movement to the left along a short-run Phillips Curve

242.

Which of the following to occur in the long-run if the economy is at full employment and the central bank conducts an open market purchase of bonds?

a)

The short-run Phillips Curve will shift to the right

b)

The short-run Phillips Curve will shift to the left

c)

The long-run Phillips Curve will shift to the right

d)

There will be a movement to the right along a short-run Phillips Curve

e)

There will be a movement to the left along a short-run Phillips Curve

243.

When government spending cause an increase in real interest rates, gross private domestic investment

a)

Will increase at the same rate as the increase in government expenditures

b)

Will increase the amount of capital stock and cause economic growth in the economy

c)

Will experience crowding-out

d)

Will not change

e)

Will decrease at the same rate as the increase in government expenditures

244.
Money loses its value when it
a)
It becomes too plentiful
b)
becomes too portabale
c)
is divisible
d)
is durable
245.
Inflation is measured by...
a)
Consumer Price Index (CPI).
b)
Gross National Product (GNP).
c)
Gross Domestic Product (GDP).
d)
Securities & Exchange Commission (SEC).
246.

A pair of shoes that costs $80 last month costs $100 this month. Which of the following BEST describes this economic condition?

a)

inflation

b)

recession

c)

deflation

d)

expansion

247.

Which of the following is a subject matter of Macroeconomics?

a)

Studies Employment & Unemployment

b)

Promotes Economic Growth & Development

c)

Determination of National Income

d)

All of the above options

248.

It is the study of the nations economy as a whole.

a)

Microeconomics

b)

National economy

c)

National output

d)

Macroeconomics

249.

It is the measure of a country's total production of final goods and services in a given period of time.

a)

Gross National Product

b)

Gross Domestic Product

c)

Exports

d)

Imports

250.

What do you call an economic policy that is designed to influence the aggregate demand in order to control the economy?

a)

Spending policy

b)

National policy

c)

Fiscal policy

d)

Monetary policy

251.

It is the continuing increase of the general price level in the market.

a)

Inflation

b)

Deflation

c)

Stagflation

d)

Recession

252.

It is the decrease in the general level of prices of basic commodities.

a)

Inflation

b)

Deflation

c)

Stagflation

d)

Stagnation

253.

This happens when there is an increase in the production of goods and services.

a)

Economic Development

b)

Economic Progress

c)

Economic Growth

d)

Economic efficiency

254.

It captures the prices of goods and services that consumers typically buy.

a)

Total Weighted Price

b)

Weighted Price

c)

Consumer Price Index

d)

Consumer Product Index

255.

If a company lays off half of its employees during a recession, what can you reasonably conclude?

a)

The employees were bad at their job

b)

Another company wanted to higher the employees

c)

The company couldn't afford to pay the employees

d)

The employees were overqualified for their jobs

256.

Based on the graph, in which of these years would you have had the toughest time finding work?

a)

2001

b)

2004

c)

2007

d)

2010

257.

How does a government-funded construction project stimulate spending?

a)

By requiring construction workers to buy equipment

b)

By providing construction workers with regular income

c)

By selling leftover materials to construction workers

d)

By creating homes for construction workers to rent

258.

Which of the following typically rises during a recession?

a)

Unemployment

b)

Average income

c)

Production

d)

Stock prices

259.
When inflation is high the _______________of the dollar decreases
a)
cost value
b)
purchasing power
c)
importance
d)
validity
260.
Who is most likely to be hurt by inflation?
a)
someone who borrowed money
b)
a retiree on a fixed income
c)
a business owner
d)
the U.S. government
261.

Most countries try to maintain an inflation rate of ______ per year.

a)

One % or less

b)

Two to three %

c)

Four to five %

d)

Six to seven %

262.

The national debt is equal to which of the following?

a)

The value of all government bonds held by the nation’s central bank

b)

The value of all loans in the nation’s banking system

c)

The current government budget deficit

d)

The sum of all past government budget deficits and surpluses

263.

When a government it spending more money than it is making, it is operating in a...

a)

deficit

b)

surplus

c)

IOU

d)

interest

264.

When the US is is making more money than it is spending, it is operating in a

a)

deficit

b)

suprlus

c)

interest

d)

IOU

265.

Revenue means this:

a)

Credit

b)

Income

c)

Taxes

d)

Bankruptcy

266.

The total amount of money that a country's government has borrowed, by various means

a)

National Debt

b)

Social Security

c)

Grants

d)

Stock options

267.

The U.S. National debt is an immediate cataclysmic event that could topple the government any day now

a)

True

b)

False

268.
Which of the following are responsible for making fiscal policy decision? 
a)
The President and Congress
b)
The Federal Reserve System
c)
The National Council of Economic Advisors
d)
The commerce Department
269.
Taxing & spending to help the economy grow is referred to as
a)
expansionary policy
b)
monetary policy
c)
contractionary policy
d)
budget deficit
270.
Taxing & spending to slow the economy is referred to as 
a)
budget surplus 
b)
monetary policy
c)
contractionary policy
d)
budget deficit
271.

Who is in charge of Monetary Policy

a)

The Government

b)

The Federal Reserve System

c)

The states

d)

The Department of the Treasury

272.

Monetary Policy is the Federal Reserve Systems attempt to...

a)

control the amount of money in circulation

b)

control the Federal Government's debt

c)

control state governments' spending

d)

none of these answers are correct.

273.

An expansionary policy means that the Fed is attempting to

a)

increase the size of the nation's money supply

b)

decrease the size of the nation's money supply

274.

A contractionary policy means that the Fed is attempting to

a)

increase the size of the nation's money supply

b)

decrease the size of the nation's money supply

275.

Who "owns" most of the U.S. debt?

a)

American citizens

b)

India

c)

England

d)

The International Monetary Fund

276.

When Obama became president, he inherited a __________________

a)

Recession

b)

Expansion

c)

Surplus

d)

Deflation

277.

When Trump became president, he inherited a __________________

a)

Recession

b)

Expansion

c)

Surplus

d)

Deflation

278.

Who was President the last time America had a "surpulus"

a)

Reagan

b)

Bush

c)

Trump

d)

Clinton

279.

What is the rule to profit maximize when hiring workers?

a)

MR = MC

b)

MRC = MRS

c)

MRP = MRC

d)

S = D

280.

What is the shape of the Supply curve for workers in a p.C. Firm?

a)

horizontal

b)

perfectly horizontal

c)

Vertical

d)

Downward sloping

281.

What is MRC?

a)

Marginal Revenue Cost

b)

Marginal Resource Counting

c)

Marginal Resource Cost

d)

Mad, Risky, Customers

282.

Factor Markets designate

a)

productivity

b)

input

c)

price

d)

output

283.

Factor Markets determine how (please pick 2)

a)

Many items to produce

b)

many workers to hire

c)

Wage to be paid

d)

Price to charge for products

284.

The two types of factor markets are

a)

Monopoly

b)

Oligopoly

c)

Monopolistic Competition

d)

Perfect Competition & Monopsony

285.

A monopsony pays _____ & hires ____ than a P.C. Firm

a)

much more & tons of workers

b)

more & more

c)

less & less

d)

the same & fewer

286.
In a perfectly competitive labor market, an increase in an effective minimum wage will result in:
a)
an increase in the supply of workers 
b)
a decrease in the supply of workers 
c)
a decrease in the demand for workers 
d)
fewer workers being hired 
287.
The table shows the production function of an auto parts manufacturer. Assume that the firm can hire as many workers as it wants at the market wage rate of $600 per week per worker and sell as many auto parts as it wants at the price of $10 per part. To maximize profits, the firm should hire: 
a)
1 worker
b)
3 workers
c)
5 workers
d)
7 workers
288.
Assume that firms sell their output in a perfectly competitive product market and hire labor in a perfectly competitive labor market. If all other factors remain constant, an increase in the demand for the firms’ product will result in which of the following changes in the labor market? 
a)
The demand curve for labor will shift to the right. 
b)
The supply curve for labor will shift to the right. 
c)
The supply curve for labor will shift to the left. 
d)
The demand curve for labor will shift to the left. 
289.
If a large number of unskilled workers enter the labor market, which of the following is most likely to occur in the labor market for unskilled workers? 
a)
The supply curve will shift to the right and the wage rate will decrease. 
b)
The supply curve will shift to the left and the wage rate will increase. 
c)
The demand curve will shift to the right and the wage rate will increase. 
d)
The demand curve will shift to the left and the wage rate will decrease. 
290.
Assume that a profit-maximizing, perfectly competitive firm hires labor in a perfectly competitive labor market. If the market wage is $12 per hour and the price of the product is $3 per unit, the firm will:
a)
hire more workers if each worker can produce 3 units per hour 
b)
hire another worker if the output per hour of the additional worker exceeds 4 units 
c)
hire fewer workers, since the hourly wage exceeds the cost of producing one unit of output 
d)
not hire any workers, since the cost of labor is greater than the price of the output 
291.
The last worker currently employed by a firm has a marginal product of 3 units per hour and is paid $20 per hour. Assuming that both the
labor market and product market are perfectly competitive and that the product’s price is $5 per unit, the firm should do which of the following? 
a)
Increase the product’s price 
b)
Increase wages
c)
Employ more workers
d)
Employ fewer workers
292.
A profit-maximizing firm will continue to hire workers until the marginal revenue product of labor is equal to the:
a)
marginal product of labor
b)
demand for labor
c)
marginal factor cost
d)
price of the good that labor is producing
293.
A perfectly competitive firm hires three workers in a perfectly competitive labor market. The marginal products of the three workers are shown in the table. Which of the following will be true? 
a)
Each worker will receive a wage based on the marginal product of the last worker hired. 
b)
Each worker will receive a wage based on the marginal product of the first worker hired. 
c)
Each worker will receive a wage based on the average of the marginal products of the workers. 
d)
Worker 1 will receive the highest wage. 
294.

Which of the following would cause the wage for computer programmers to increase?

a)

A decrease in the amount of physical capital per computer programmer

b)

An improvement in the education of computer programmers

c)

An increase in the social prestige associated with being a computer programmer

d)

A decrease in the value that computer programmers place on leisure

e)

A minimum wage set below the equilibrium wage in the market for computer programmers

295.

Which of the following is a firm’s demand for labor?

a)

the firm’s marginal factor cost (MFC) curve

b)

the firm’s long-run average total cost (LRATC) curve

c)

the firm’s marginal revenue product of labor (MRPL) curve

d)

the firm’s marginal revenue (MR) curve

e)

the firm’s marginal revenue product of capital (MRPK) curve

296.

The table below shows the marginal revenue product of labor (MRPL) of a firm producing pillows. The firm uses various amounts of labor, and it can sell as many pillows as it wants for $10.


What is the marginal product of the fourth worker?

a)

10 pillows

b)

20 pillows

c)

50 pillows

d)

1 pillow

e)

15 pillows

297.

If the wage rate decreases, which of the following is the most likely outcome?

a)

people decide to equalize their leisure and labor usage

b)

people decrease their leisure and increase their supply of labor

c)

people don’t change the quantity of labor supplied; firms increase the quantity of labor demanded

d)

people increase the quantity of labor supplied; firms decrease the quantity of labor demanded

e)

people decrease the quantity of labor supplied; firms increase the quantity of labor demanded

298.

Blammo Inc. produces greeting cards in a perfectly competitive market. The table below shows the total number of greeting cards produced using different amounts of labor. The market price for a greeting card is $4.


What is the marginal revenue product of labor (MRPL) of the fifth worker?

a)

$4

b)

$60

c)

$160

d)

$400

e)

$0

299.

Which of the following best describes a firm’s marginal revenue product of capital (MRPK)?

a)

the marginal product of capital multiplied by the marginal revenue gained

b)

the horizontal sum of every firm’s demand for capital

c)

the additional revenue gained from the sale of one more unit

d)

the additional cost associated with using an additional unit of capital

e)

the additional output gained from using one more unit of capital

300.

The table gives output, marginal product, and average product of a firm producing novelty T-shirts using different numbers of workers. The firm produces t-shirts in a perfectly competitive market where the price of a t-shirt is $10.


What is the marginal revenue product of labor (MRPL) of the fourth worker?

a)

$700

b)

$1,300

c)

$400

d)

$100

e)

$500

301.
The U.S. can produce 10 ipads or 20 phones.  China can produce 20 ipads or 30 phones. Who should produce what?
a)
U.S.-ipads
China- phones
b)
U.S. phones
China- ipads
c)
both should produce ipads
d)
they should not specialize
302.
The US can produce 1 ton of sugar using 4 acres of land, or they can produce 1 ton of avocados using 6 acres. 
Ecuador can produce 1 ton of sugar using 5 acres of land or 1 ton of avocados using 4 acres. 
Which country should produce avocados? 
a)
Ecuador
b)
US
c)
not enough information
303.
The US can produce 200 airplanes or 400 trucks. Japan can produce 300 trucks or 100 airplanes. 
Which country has the absolute advantage in producing airplanes? 
a)
Japan
b)
US
304.
Country X can manufacture a particular product better and at a lower cost than country Y can.
What conclusion can be drawn from this situation?
a)
Country X has solved the problem of scarcity.
b)
Country X should discontinue making that product.
c)
Country Y should try to produce the same product. 
d)
Country X should sell that product to Country Y.
305.
Suppose that in one week Sam can knit 5 sweaters or make 4 blankets and Rob can knit 10 sweaters or make 6 blankets. Which of the following is true?
a)
Sam has an absolute advantage in making blankets
b)
Sam has neither a comparative nor an absolute advantage in knitting sweaters or making blankets
c)
Sam has a comparative advantage in making blankets
d)
Sam has a comparative advantage in knitting sweaters
306.
The diagram shows the production possibilities curve for Country Y. Which of the following statements is true?
a)
If Country Y is producing at point C, it is using all its resources efficiently
b)
The opportunity cost of producing more machines is constant
c)
Country Y cannot produce at point E
d)
The most efficient point of production is point D
307.
The simplified production possibilities curves for country A and B are shown. Which one of the following statements is correct?
a)
Country A has the comparative advantage in both goods
b)
Country A has the comparative advantage in chairs & Country B has the comparative advantage in shirts
c)
Country B has the absolute advantage in shirts only
d)
Country A has the comparative advantage in shirts & Country B has the comparative advantage in chairs
308.
Improvements in technology for producing all goods must result in:
a)
An inward shift in the production possibilities curve 
b)
A flatter production possibilities curve 
c)
An outward shift in the production possibilities curve 
d)
A steeper production possibilities curve 
309.
If nations specialize according to their comparative advantage and engage in trade with each other, each nation can:
a)
Consume outside its production possibilities curve 
b)
Produce outside its production possibilities curve 
c)
Shift its production possibilities curve to the right 
d)
Produce more of all goods 
310.
Based on the table provided, which one of the following statements is correct?
a)
Japan has the absolute advantage in producing cars
b)
Japan has the comparative advantage in producing cars
c)
The United States has the absolute advantage in producing both cars and computers
d)
The opportunity cost of producing a car in Japan is 1/2 a computer
311.
The more valuable currency has
a)
depreciated
b)
appreciated
c)
depleted
d)
amortizes
312.
When a country's currency appreciates, its exports ____
a)
double
b)
become cheaper
c)
become more expensive
d)
Drop by at least 1/2
313.
Difference between sale of assets to foreigners and purchases of assets from foreigners is called_____
a)
financial account
b)
exchange account
c)
international trade
d)
current account
314.
A country's ____ accounts are a summary of their transactions with other countries
a)
Exchange
b)
Balance of payment
c)
Income statement
d)
line of credit
315.
The price of one nation's currency expressed in terms of another's currency is called
a)
world price
b)
exchange rate
c)
purchasing power parity
d)
terms of trade
316.

What is a 'Fixed Exchange Rate'

a)

the government/central bank entirely or predominantly determines the exchange rate.

b)

the forex market entirely or predominantly determines the exchange rate.

c)

the trading partners entirely or predominantly determines the exchange rate.

d)

the importing countries entirely or predominantly determines the rate.

317.

A floating exchange rate is a regime where the currency price is set by the

a)

forex market based on demand for the currency compared with other currencies.

b)

forex market based on supply and demand compared with other currencies.

c)

central banking authority

d)

the country who is trading with our country

318.

What is the difference between a fixed and a floating exchange rate?

a)

A fixed exchange rate is set by the monetary authority with respect to a foreign currency or a basket of foreign currencies, a floating exchange rate is determined in foreign exchange markets depending on demand and supply, and it generally fluctuates constantly.

b)

There is no difference between them, both determined by the central bank.

c)

A fixed exchange rate is better than the floating exchange rate in determining the exchange rate of a particular country's currency.

d)

All of the answers above.

319.
if 1 $ = Rs. 50, and if rises to 1 $ = Rs. 60 it will be called
a)
appreciation
b)
depreciation
c)
revaluation
d)
all the above
320.
If 1 $ = Rs. 50 and now it becomes 1 $ = Rs 40 it will be called 
a)
Depreciation
b)
appreciation
c)
devaluation
d)
none of the above
321.

The graph shows a(n)

a)

depreciation of the dollar and appreciation of the Euro.

b)

appreciation of the dollar and depreciation of the Euro.

c)

appreciation of the dollar and appreciation of the Euro.

d)

depreciation of the dollar and depreciation of the Euro.

322.

The shift in the graph could be caused by

a)

an increase in the Supply of Euros.

b)

an increase in the Demand for Euros.

c)

a decrease in the Supply of Euros.

d)

the crowding out effect.

323.

The shift in the graph could be caused by

a)

an increase in the Supply of dollars.

b)

deflation in Europe.

c)

people in Europe become wealthier.

d)

inflation in the US.

e)

European companies launch new popular products.

324.

The shift in the graph could be caused by

a)

interest rates rising in Mexico.

b)

an increase in American tariffs.

c)

speculators demanding more pesos.

d)

the launch of a popular product by an American company.

e)

inflation in the US.

325.

All of the following could cause the shift in the graphs for the Japanese Yen and US Dollar except:

a)

an increase in interest rates in the US.

b)

the release of hot new video game console by Japanese producer Nintendo.

c)

speculators desiring Japanese currency.

d)

inflation in the US.

e)

an increase in GDP in the US.

326.

What could cause the shift in the graphs for the Japanese Yen and US Dollar?

a)

deflation in the US.

b)

inflation in Japan.

c)

Japanese company Sony creates a holographic TV system.

d)

a decrease in Japenese interest rates.

e)

an increase in the Japanese GDP.

327.

The shift in the graph would cause

a)

a US trade deficit.

b)

an increase in American tariffs.

c)

speculators demanding more pesos.

d)

an appreciation of the dollar.

e)

inflation in the US.

328.

An increase in interest rates in the US would cause

a)

D for the $ to increase and D for the Real to increase

b)

D for the $ to increase and S for the Real to increase.

c)

S for the $ to increase and D for the Real to increase.

d)

S for the $ to increase and S for the Real to increase.

329.

A recession in the US would cause

a)

D for the $ to increase and D for the Real to increase

b)

D for the $ to increase and S for the Real to increase.

c)

S for the $ to increase and D for the Real to increase.

d)

S for the $ to increase and S for the Real to increase.

330.

Speculators for-see a future increase in the Brazilian GDP we would expect

a)

D for the $ to increase and D for the Real to increase

b)

D for the $ to increase and S for the Real to increase.

c)

S for the $ to increase and D for the Real to increase.

d)

S for the $ to increase and S for the Real to increase.

331.

Brazilians decide to travel in massive tours at Orlando area theme parks, we expect the following in the ForEx market

a)

D for the $ to increase and D for the Real to increase

b)

D for the $ to increase and S for the Real to increase.

c)

S for the $ to increase and D for the Real to increase.

d)

S for the $ to increase and S for the Real to increase.

332.

Massive inflation strikes the US, we expect

a)

D for the $ to increase and D for the Real to increase

b)

D for the $ to increase and S for the Real to increase.

c)

S for the $ to increase and D for the Real to increase.

d)

S for the $ to increase and S for the Real to increase.

333.

A large increase in the value of real estate occurs in Brazil making Brazilians feel wealthier. We expect

a)

D for the $ to increase and D for the Real to increase

b)

D for the $ to increase and S for the Real to increase.

c)

S for the $ to increase and D for the Real to increase.

d)

S for the $ to increase and S for the Real to increase.

334.

Real incomes rise in the US, we expect

a)

D for the $ to increase and D for the Real to increase

b)

D for the $ to increase and S for the Real to increase.

c)

S for the $ to increase and D for the Real to increase.

d)

S for the $ to increase and S for the Real to increase.

335.
Will the following scenario affect the current account or capital account, and will the transaction be a debit or credit?
The U.S. increase imports of tractor wheels from Canada. 
a)
current account; debit.
b)
current account; credit.
c)
capital account; debit.
d)
capital account; credit.
336.
Will the following scenario affect the current account or capital account, and will the transaction be a debit or credit?
A Ukrainian businesswoman buys a majority share of ownership in a U.S. clothing company.
a)
current account; debit.
b)
current account; credit.
c)
capital account; debit.
d)
capital account; credit.
337.
Will the following scenario affect the current account or capital account, and will the transaction be a debit or credit?
An American working in Saudi Arabia sends his wife, who lives in Atlanta, money so she can buy a new car.
a)
current account; debit.
b)
current account; credit.
c)
capital account; debit.
d)
capital account; credit.
338.
Will the following scenario affect the current account or capital account, and will the transaction be a debit or credit?
An American receives quarterly dividend payments (profits) from stock she owns in a German company.
a)
current account; debit.
b)
current account; credit.
c)
capital account; debit.
d)
capital account; credit.
339.
An increase in price level in the U.S. relative it its trading partners will cause the U.S. dollar to __________ on the foreign exchange market, and Americans will __________ the purchase of foreign made goods.  
a)
appreciate, increase
b)
appreciate, decrease
c)
depreciate, decrease
d)
depreciate, increase
340.
If Americans want to purchase more South Korean cars, the supply of dollars in the foreign exchange market will __________ and demand for the Won, the South Korean currency, will __________.
a)
increase, decrease
b)
increase, increase
c)
decrease, decrease
d)
decrease, increase
341.
An increase in stock market profits in Europe will cause the dollar to ______________ and the euro, the currency of the European Union, to __________.
a)
depreciate, depreciate
b)
depreciate, appreciate
c)
appreciate, appreciate
d)
appreciate, depreciate
342.
An increase in US deficit spending will cause a(n) __________ in domestic U.S. business investment and a(n) __________ of the U.S. dollar in foreign exchange markets. 
a)
increase, appreciation
b)
decrease, depreciation
c)
decrease, appreciation
d)
increase, depreciation
343.
The sale of U.S. treasury bonds on the open market will cause a(n) __________ in the U.S. price level and a(n) __________ of the U.S. dollar in the foreign exchange market.
a)
decrease, appreciation
b)
decrease, depreciation
c)
increase, appreciation
d)
increase, depreciation
344.
Imports involve
a)
Goods in, money in, positive in Current Account
b)
Goods in, money out, negative in Current Account
c)
Goods in, money in, positive in Financial Account
d)
Goods in, money out, negative in Financial Account
345.
Exports involve
a)
Goods out, money out, positive in Current Account
b)
Goods out, money in, positive in Current Account
c)
Goods out, money in, positive in Financial Account
d)
Goods out, money out, negative in Current Account
346.
Financial Account transactions include items such as
a)
Imports
b)
Exports
c)
Transfers & Remittances
d)
Purchase and sale of stocks and bonds
347.
Currency depreciation could be caused by
a)
Supply Increase or Demand Increase
b)
Supply Increase or Demand Decrease
c)
Supply Decrease or Demand Decrease
d)
Supply Decrease or Demand Increase
348.
Currency appreciation could be caused by
a)
Supply Increase or Demand Increase
b)
Supply Increase or Demand Decrease
c)
Supply Decrease or Demand Decrease
d)
Supply Decrease or Demand Increase
349.
Currency appreciation results in
a)
Increased exports, increased imports
b)
Decreased exports, decreased imports
c)
Increased exports, decreased imports
d)
Decreased exports, increased imports
350.
Currency depreciation results in
a)
Increased exports, increased imports
b)
Decreased exports, decreased imports
c)
Increased exports, decreased imports
d)
Decreased exports, increased imports
351.

Which of the following would be INCLUDED when calculating the GDP for the U.S.?

a)

Toys that Wal-Mart has imported from their factories in China

b)

A used car bought from Frontier Motors

c)

Getting $20 from your mom for mowing the lawn

d)

A Tesla car that has been manufactured in California

352.

Average GDP per Capita is better known as:

a)

A country's standard of living

b)

How much a country makes on average from imports

c)

The average amount businesses spend on the stock market

d)

The average amount of investment done by citizens

353.

Real GDP is

a)

GDP at the current prices

b)

GDP that has been adjusted for inflation

c)

A measure of the total production of goods in other countries

d)

The same thing as nominal GDP

354.

All of the following would be considered employed except:

a)

Someone who has only a part-time job

b)

Someone on maternity/paternity leave

c)

An owner of a new business who isn't making a profit yet

d)

A prisoner at a state prison who makes commissary money from working in the prison laundry

355.

A general rise in the price level of products is known as:

a)

Hyperinflation

b)

Cost-Push phenomenon

c)

Inflation

d)

Deflation

356.

Which of the following would be considered unemployed?

a)

A recent college graduate looking for a job

b)

A stay-at-home parent

c)

A 14-year-old student who babysits for extra cash

d)

A retired grandmother

357.

When the economy is working properly, and at a normal rate of growth, the unemployment rate is usually around:

a)

0-2 percent

b)

2-8 percent

c)

4-6 percent

d)

15-20 percent

358.

Nominal GDP is calculated with:

a)

Just government spending

b)

Business and Consumer Spending

c)

Everything that is sold in a country, regardless of origin

d)

The stuff that is sold in a country, with the amount of imports subtracted

359.

A lifeguard is hired on at Pensacola Beach for the summer, and is told the job will end in August. This is an example of ______ unemployment.

a)

Frictional

b)

Seasonal

c)

Structural

d)

Cyclical

360.

What is the name of the economic visual aid?

a)

The Economic Cycle

b)

The Growth and Contraction Cycle

c)

The Business Cycle

d)

The GDP Cycle

361.

What does point #1 represent?

a)

Trough

b)

Peak

c)

Contraction/Recession

d)

Growth/Expansion

362.

What does point #2 represent?

a)

Trough

b)

Peak

c)

Contraction/Recession

d)

Growth/Expansion

363.

What does point #3 represent?

a)

Trough

b)

Peak

c)

Contraction/Recession

d)

Growth/Expansion

364.

What does point #4 represent?

a)

Trough

b)

Peak

c)

Contraction/Recession

d)

Growth/Expansion

365.

The Consumer Price Index (CPI) is a measure of inflation, with one tool being a "market basket." What is a market basket, in reference to the study of economics?

a)

How much baskets cost currently

b)

A metaphorical object to represent the purchases by the average urban consumer

c)

The cost of goods when an economist goes to the store and calculates the price changes and inflation level

d)

The differences in price for the same good bought in 1963, like McDonald's hamburgers

366.

The process by which the Federal Reserve controls the supply, availability, and cost of money in order to keep the economy stable is _________________________.

a)

Fiscal Policy

b)

Monetary Policy

c)

the Interest Rate

d)

the Discount Rate

367.

Monetary policy is BEST described as ...

a)

benefits received by employees in addition to wages and salaries

b)

actions by the Federal Reserve System to expand or contract the money supply

c)

a system that relies on supply and demand to determine the value of one currency to another

d)

actions by the federal government to use spending and revenue collection to influence the economy

368.

When the Federal Reserve sells government securities on the open market, what effect does this action have on the nation's money supply and interest rates?

a)

Money Supply - Decreases / Interest Rates - Increase

b)

Money Supply - Increase / Interest Rates - Increase

c)

Money Supply - Decrease / Interest Rates - Decrease

d)

Money Supply - Increases / Interest Rates - Decrease

369.

What is the name of the "central bank" of the United States?

a)

Bank of the U.S.

b)

The Federal Reserve

c)

U.S. Congressional Bank

d)

The Federal Bank of America

370.

The Federal Reserve wants to increase the money supply in the United States. What is the Federal Reserve likely to do to accomplish this?

a)

reduce the discount rate

b)

sell securities on the open market

c)

increase the reserve requirement for banks

d)

require banks to hold a reserve for all types of deposit

371.

What would MOST LIKELY happen if the Federal Reserve decided to increase the reserve requirement in banks?

a)

The amount of federal taxes people owe would decrease

b)

The amount of federal taxes people owe would increase

c)

The amount of money circulating in the economy would decrease

d)

The amount of money circulating in the economy would increase

372.

All of these are ways in which the Federal Reserve System can...

a)

control the stock market

b)

regulate the money supply

c)

decrease consumer spending

d)

challenge Presidential power

373.

Which of these actions of the Federal Reserve can slow economic growth?

a)

The Federal Reserve regulates the amount of money that flows into and out of the nation's economy

b)

The Federal Reserve buys securities, which puts money back into the hands of people who can spend it in the marketplace

c)

The Federal Reserve decreases the reserve requirement and banks have more money to loan to people to save rather than to spend

d)

The Federal Reserve increase the discount rate, which causes interest rates to rise and people to save rather than to spend

374.

What consumer behavior is the Federal Reserve Board trying to encourage when it implements a loose monetary policy?

a)

increased saving and spending

b)

decreased saving and spending

c)

increased saving and reduces spending

d)

decreased saving and increased spending

375.

What is the term for the situation where more money is available for borrowing and investment?

a)

loose money

b)

open market

c)

tight money

d)

fiscal policy

376.

If the federal government wants to encourage businesses and consumers to spend more money, it would MOST LIKELY

a)

increase the tax rate

b)

decreases the tax rate

c)

increases the reserve requirement

d)

decrease government spending on goods and services

377.

Which of these is MOST LIKELY to occur after the government increases taxes?

a)

Annual deficits increase

b)

The national debt increases

c)

Consumer spending decreases

d)

Government programs decrease

378.

Unemployment insurance, Welfare, Medicare, Medicaid, and Social Security are key components of

a)

fiscal policy

b)

monetary policy

c)

supply-side policy

379.

A tax that takes a larger percentage of income from high-income groups than from low income groups is known as a...

a)

Progressive Tax

b)

Proportional Tax

c)

Regressive Tax

d)

Excise Tax

380.

A tax that takes the same percentage of income from all income groups, such as sales tax, is an example of a ...

a)

Progressive Tax

b)

Proportional Tax

c)

Regressive Tax

d)

Excise Tax

381.

Which pairs of operations BEST fit with fiscal policy?

a)

government spending and taxation

b)

taxation and open market operations

c)

discount rate and government spending

d)

open market operations and discount rate

382.

One of the primary goals of stabilizing the economy is to

a)

increase income levels

b)

maintain low unemployment

c)

raise the standard of living

d)

increase profits and spending

383.

How will a contractionary fiscal policy affect a budget deficit?

a)

not affect it

b)

grow the deficit

c)

shrink the deficit

d)

change monetary policy

384.

With regards to economic growth, what is the goal of an expansionary fiscal policy?

a)

to increase trade deficits

b)

to increase economic growth

c)

to decrease economic growth

d)

to maintain current economic levels

385.

A tax that takes a larger percentage of income from low-income groups than from high-income groups is a ...

a)

Progressive Tax

b)

Proportional Tax

c)

Regressive Tax

d)

Property Tax

386.

All of the following are counted in a nation's current account (CA) except

a)

$50,000 car imported from Italy

b)

$500 of cheese exported from France

c)

A $50 million Chinese factory purchased by a Canadian

d)

$1 million donated in first aid supplies to Indonesia

e)

$1,000 sent to Russia from a Russian working in the US

387.

Which of the following would decrease the U.S. capital and financial account (CFA)?

a)

A boat purchased by a British investment banker in Florida

b)

A ski chateau purchased in Switzerland by an American entrepreneur

c)

An American earns $1000 in the Japanese stock market

d)

The purchase of $1000 of US Treasury bonds by a Chinese investor

e)

The purchase of a foreign car by an American diplomat living in Costa Rica

388.

Which of the following are included in a nation's balance of payments accounts?


I. International trading

II. International lending

III. Domestic investment

a)

I, II, and III only

b)

I and II only

c)

I and III only

d)

II and III only

e)

I only

389.

Which of the following is true regarding international trade

a)

A country that exports more than it imports has a trade deficit

b)

A country that exports more than 30% of their GDP has a trade surplus

c)

A deficit in the current account is offset by a surplus in the capital and financial account

d)

A country that exports more than it imports will have a financial account surplus

e)

A country with a trade deficit will have a current account surplus

390.

An increase in Korea’s demand for U.S. goods would cause the US dollar to

a)

Depreciate because of inflation

b)

Depreciate because the U.S. would be selling more dollars to Korea

c)

Depreciate because the U.S. money supply would increase as exports rise

d)

Appreciate because Korea would be buying more U.S. dollars

e)

Appreciate because Korea would be selling more U.S. dollars

391.

If the demand for the British Pound increases relative to the U.S. dollar, then the

a)

US dollar would appreciate

b)

Supply of US dollars would decrease

c)

Quantity supplied of Pounds would decrease

d)

British pound would appreciate

e)

British pound will depreciate

392.

Suppose incomes fall in the United States, but not in Japan. Which of the following will occur?

a)

The US dollar will appreciate and the Japanese Yen will depreciate

b)

The US dollar will appreciate and the Japanese Yen will appreciate

c)

US imports from Japan will increase

d)

The US dollar will depreciate and the Japanese Yen will appreciate

e)

Japanese exports to the US will increase

393.

Suppose price level increases more in the United States than it does in Indonesia. What is the short-run impact on U.S. net exports, the value of the U.S. dollar, and the value of the Indonesian rupee?

a)

Net Exports / U.S. dollar / Indonesian rupee

Increase / depreciate / depreciate

b)

Net Exports / U.S. dollar / Indonesian rupee

Decrease / depreciate / appreciate

c)

Net Exports / U.S. dollar / Indonesian rupee

Increase / depreciate / appreciate

d)

Net Exports / U.S. dollar / Indonesian rupee

Decrease / appreciate / depreciate

e)

Net Exports / U.S. dollar / Indonesian rupee

Increase / appreciate / depreciate

394.

Suppose interest rates fall in the United States, but they don't fall in Mexico. What is the short-run impact on the value of the U.S. dollar (USD) and the value of the Mexican Peso (Peso)?

a)

USD / Peso

Appreciate / appreciate

b)

USD / Peso

Appreciate / depreciate

c)

USD / Peso

Depreciate / depreciate

d)

USD / Peso

Depreciate / appreciate

e)

USD / Peso

Depreciate / no change

395.

An increase in a country’s interest rate relative to other country’s interest rate will most likely cause which of the following?

a)

An decrease in the demand for the country’s currency

b)

An increase in the supply of the country’s currency

c)

The depreciation of the country’s currency

d)

An increase in the amount of domestic investment

e)

Capital inflow into the country to exceed capital outflow

396.

Assume that the supply of loanable funds increases in Canada. The international value of Canada’s currency and Canada’s exports will most likely change in which of the following ways

a)

Value of the Canadian Dollar Exports

Decrease Decrease

b)

Value of the Canadian Dollar Exports

Decrease Increase

c)

Value of the Canadian Dollar Exports

Increase Decrease

d)

Value of the Canadian Dollar Exports

Increase Increase

e)

Value of the Canadian Dollar Exports

Not change Not change

397.

Which of the following is an example of direct foreign investment?

a)

An increase in the demand for US dollars by foreigners

b)

A decrease in the supply of US dollars by Americans

c)

The purchase of American planed by a Mexican company

d)

The sale of financial service to a foreign investor by a US bank

e)

A Chinese company buying a microprocessor factory in Korea

398.

An increase in net exports for country X will most likely be caused by which of the following?

a)

An increase in consumer spending

b)

An increase in direct foreign investment

c)

A decrease in the international value of the currency in country X

d)

An increase in the international value of the currency in country X

e)

An increase in the price level in country X

399.

All of the following are true regarding international trade except

a)

Countries experience a trade deficit when imports are greater than exports

b)

Net exports will increase when that country's currency depreciates

c)

Exports are considered a debit in a country's balance of trade

d)

The balance of payment is a summary of a country's transactions with other countries

e)

The primary components of the balance of payments are the current account and the capital (financial)

400.

Which of the following would definitely move a country toward a current account deficit?

a)

An increase in exports

b)

An increase in imports

c)

An larger capital account deficit

d)

An increase in capital outflow

e)

A decrease in foreign aid provided to other countries

401.

Which of the following is the best example of foreign direct investment?

a)

The Chinese government buying United States Treasury bonds

b)

A business in the United States selling machinery to a company in Japan

c)

A United States citizen buying Mexican pesos.

d)

The United States sending earthquake relief aid to Haiti

e)

A Japanese software company buying a factory in the United States

402.

The value of a country's currency relative to another country's currency is called

a)

capital flow

b)

purchasing-power parody

c)

the inflation rate

d)

the exchange rate appreciation

e)

appreciation

403.

If there is a large increase in the number of Europeans traveling to the United States while US citizens’ travel to Europe remains unchanged, which of the following is true

a)

The euro will depreciate because the demand for euros will decrease

b)

The euro will depreciate because the supply of euros will increase

c)

The euro will appreciate because the demand for euros will increase

d)

The dollar will appreciate because the demand of dollars will decrease

e)

The dollar will appreciate because the supply of dollars will increase

404.

Assume the inflation rate in Mexico is significantly higher than its trading partners. Which of the following will occur to the demand, supply, and international value of the Mexican Peso?

a)

Demand Supply Value

Increase Increase Depreciate

b)

Demand Supply Value

Increase Decrease Appreciate

c)

Demand Supply Value

Decrease Increase Appreciate

d)

Demand Supply Value

Decrease Increase Depreciate

e)

Demand Supply Value

Decrease Decrease Depreciate

405.

Assume the real interest rate in country X increases relative to other countries. What will happen to the value of the currency and net exports in country X?

a)

Value of Currency Net exports

Appreciate Decrease

b)

Value of Currency Net exports

Depreciate Increase

c)

Value of Currency Net exports

Stay the Same Stay the Same

d)

Value of Currency Net exports

Appreciate Increase

e)

Value of Currency Net exports

Depreciate Decrease

406.

Trade Surplus

a)

The difference between the purchase of foreign assets and domestic assets purchased by foreigners

b)

Exporting more than is imported

c)

Measures the purchase and sale of financial assets abroad (things that continue to earn money).

d)

Exporting less than is imported (a.k.a Trade gap)

e)

Measures trades of goods and services, investment income, and net transfers

407.

Trade Deficit

a)

The difference between the purchase of foreign assets and domestic assets purchased by foreigners

b)

Exporting more than is imported

c)

Measures the purchase and sale of financial assets abroad (things that continue to earn money).

d)

Exporting less than is imported (a.k.a Trade gap)

e)

Measures trades of goods and services, investment income, and net transfers

408.

Net Capital Outflow

a)

The difference between the purchase of foreign assets and domestic assets purchased by foreigners

b)

Exporting more than is imported

c)

Measures the purchase and sale of financial assets abroad (things that continue to earn money).

d)

Exporting less than is imported (a.k.a Trade gap)

e)

Measures trades of goods and services, investment income, and net transfers

409.

Current Account

a)

The difference between the purchase of foreign assets and domestic assets purchased by foreigners

b)

Exporting more than is imported

c)

Measures the purchase and sale of financial assets abroad (things that continue to earn money).

d)

Exporting less than is imported (a.k.a Trade gap)

e)

Measures trades of goods and services, investment income, and net transfers

410.

Capital Financial Account

a)

The difference between the purchase of foreign assets and domestic assets purchased by foreigners

b)

Exporting more than is imported

c)

Measures the purchase and sale of financial assets abroad (things that continue to earn money).

d)

Exporting less than is imported (a.k.a Trade gap)

e)

Measures trades of goods and services, investment income, and net transfers

411.

Net Exports

a)

Considers ALL international transactions

b)

Exports – Imports

c)

Inflow > Outflow

d)

Includes only goods and service

e)

Inflow < Outflow

412.

Balance of Payments

a)

Considers ALL international transactions

b)

Exports – Imports

c)

Inflow > Outflow

d)

Includes only goods and service

e)

Inflow < Outflow

413.

Balance of Trade

a)

Considers ALL international transactions

b)

Exports – Imports

c)

Inflow > Outflow

d)

Includes only goods and service

e)

Inflow < Outflow

414.

Account Surplus

a)

Considers ALL international transactions

b)

Exports – Imports

c)

Inflow > Outflow

d)

Includes only goods and service

e)

Inflow < Outflow

415.

Account Deficit

a)

Considers ALL international transactions

b)

Exports – Imports

c)

Inflow > Outflow

d)

Includes only goods and service

e)

Inflow < Outflow

416.

Exchange Rate

a)

The market determines the value of the country’s currency

b)

The government activity manages the country’s currency

c)

The increase of value of a country's currency with respect to a foreign currency (becomes stronger)

d)

The loss of value of a country's currency with respect to a foreign currency (becomes weaker)

e)

The price of one currency in terms of the other currency

417.

Depreciation

a)

The market determines the value of the country’s currency

b)

The government activity manages the country’s currency

c)

The increase of value of a country's currency with respect to a foreign currency (becomes stronger)

d)

The loss of value of a country's currency with respect to a foreign currency (becomes weaker)

e)

The price of one currency in terms of the other currency

418.

Appreciation

a)

The market determines the value of the country’s currency

b)

The government activity manages the country’s currency

c)

The increase of value of a country's currency with respect to a foreign currency (becomes stronger)

d)

The loss of value of a country's currency with respect to a foreign currency (becomes weaker)

e)

The price of one currency in terms of the other currency

419.

Fixed Exchange Rate

a)

The market determines the value of the country’s currency

b)

The government activity manages the country’s currency

c)

The increase of value of a country's currency with respect to a foreign currency (becomes stronger)

d)

The loss of value of a country's currency with respect to a foreign currency (becomes weaker)

e)

The price of one currency in terms of the other currency

420.

Floating Exchange Rate

a)

The market determines the value of the country’s currency

b)

The government activity manages the country’s currency

c)

The increase of value of a country's currency with respect to a foreign currency (becomes stronger)

d)

The loss of value of a country's currency with respect to a foreign currency (becomes weaker)

e)

The price of one currency in terms of the other currency

421.
To move the economy to full employment, the central bank decides that the federal funds rate must be increased. The appropriate open market operation is to _____, which _____the money supply, _____ AD and fight______
a)
OMO: Buy bonds, MS: increase, AD: increase, To fight: unemployment
b)
OMO: Buy bonds, MS: increase, AD: increase, To fight: inflation
c)
OMO: Sell bonds, MS: decrease, AD: increase, To fight: inflation
d)
OMO: Sell bonds, MS: decrease, AD: decrease, To fight: inflation
422.
If the money supply increases, what happens in the money market? (Assuming money demand is downward sloping?) 
a)
The nominal interest rates rises 
b)
The nominal interest rates falls 
c)
The nominal interest rate does not change 
d)
Transaction demand for money falls 
423.

When banks make loans between banks the interest rate is called the __________. (federal funds rate or discount rate?)

a)

federal funds rate

b)

discount rate

424.

______ the discount rate is expansionary monetary policy. (Increasing or decreasing?)

a)

Increasing

b)

Decreasing

425.

When banks make loans from the Federal Reserve the interest rate is called the __________. (federal funds rate or discount rate?)

a)

federal funds rate

b)

discount rate

426.

Which policy would help fight unemployment?

a)

Expansionary

b)

Contractionary

427.

When lowering the discount rate, inflation increases and unemployment ____________. (decreases or increases?)

a)

increases

b)

decreases

428.
The real interest rate equals the
a)
nominal interest rate plus the inflation rate
b)
nominal interest rate minus the inflation rate
c)
nominal interest rate divided by the inflation rate
d)
nominal interest rate times the inflation rate 
429.
Which of the following will increase the demand for loanable funds?
a)
a federal government budget surplus 
b)
an increase in perceived business opportunities
c)
a decrease in the interest rate 
d)
decreased private savings rates
430.
Which function of money best defines $1.25 as the price of a 20 oz. bottle of soda? 
a)
Medium of exchange
b)
Unit of account 
c)
Store of value 
d)
Fiat money
431.
If a bank has $500 in checking deposits and the bank is required to reserve $50, what is the reserve ratio? How much does the bank have in excess reserves? 
a)
10%, $450 in ER 
b)
90%, $50 in ER 
c)
90%, $450 in ER 
d)
10% $50 in ER 
432.
If the Federal Reserve wishes to use monetary policy to reinforce Congress’ fiscal policy changes, it should
a)
increase the money supply when government spending is increased
b)
increase the money supply when government spending is decreased
c)
decrease the money supply when government spending is increased
d)
increase interest rates when government spending is increased
433.
Automatic stabilizers in the economy include which of the following?  
I. A progressive personal income tax
II. Unemployment compensation
III. Congressional action that increase tax 
a)
I and II only
b)
II only
c)
III only
d)
I only
434.
Which of the following will shift the supply curve for loanable funds to the right?
a)
an increase in the rate of return on investment spending 
b)
a decrease in the national saving rate
c)
an increase in expected inflation
d)
capital inflows from abroad 
435.
If the money supply increases, what happens in the money market? (Assuming money demand is downward sloping?) 
a)
The nominal interest rates rises 
b)
The nominal interest rates falls 
c)
The nominal interest rate does not change 
d)
Transaction demand for money falls 
436.
Which of the following will increase the supply of loanable funds?
a)
an increase in perceived business opportunities 
b)
decreased government borrowing 
c)
an increased private saving rate 
d)
an increase in the expected inflation rate
437.
Which of the following indicates that the macro-economy is achieving its economic goals?   
a)
Economic growth
b)
Unemployment
c)
cnflation
d)
Deflation
438.
A sustained increase in oil prices would most likely cause SRAS, LRAS & PPC to change...
a)
SRAS decrease LRAS decrease PPC shift inward
b)
SRAS decrease LRAS decrease PPC shift outward
c)
SRAS decrease LRAS no change PPC shift outward
d)
SRAS increase LRAS no change PPC no change
439.

A rightward shift of the short-run Phillips curve is most likely due to

a)

an increase in aggregate demand

b)

a decrease in aggregate demand

c)

a decrease in the expected rate of inflation

d)

an increase in the expected rate of inflation

e)

an increase in aggregate supply

440.

A reduction in inflation can best be achieved by which of the following combinations of fiscal and monetary policy?

a)

Fiscal Policy: Increase Taxes

Monetary Policy: Sell government bonds

b)

Fiscal Policy: Decrease taxes

Monetary Policy: Buy government bonds

c)

Fiscal Policy: Decrease Taxes

Monetary Policy: Lower margin requirements

d)

Fiscal Policy: Decrease government spending

Monetary Policy: Lower discount rate

e)

Fiscal Policy: Increase government spending

Monetary Policy: Raise discount rate

441.

According to the short-run Phillips curve, a contractionary fiscal policy will result in

a)

a decrease in both unemployment and prices

b)

a decrease in inflation and an increase in unemployment

c)

a decrease in both wage rates and unemployment

d)

an increase in both wage rates and unemployment

e)

an increase in unemployment due to crowding out

442.
Difference between sale of assets to foreigners and purchases of assets from foreigners is called_____
a)
financial account
b)
exchange account
c)
international trade
d)
current account
443.

The shift in the graph could be caused by

a)

an increase in the Supply of Euros.

b)

an increase in the Demand for Euros.

c)

a decrease in the Supply of Euros.

d)

the crowding out effect.

444.

The shift in the graph could be caused by

a)

interest rates rising in Mexico.

b)

an increase in American tariffs.

c)

speculators demanding more pesos.

d)

the launch of a popular product by an American company.

e)

inflation in the US.

445.

All of the following could cause the shift in the graphs for the Japanese Yen and US Dollar except:

a)

an increase in interest rates in the US.

b)

the release of hot new video game console by Japanese producer Nintendo.

c)

speculators desiring Japanese currency.

d)

inflation in the US.

e)

an increase in GDP in the US.

446.

What could cause the shift in the graphs for the Japanese Yen and US Dollar?

a)

deflation in the US.

b)

inflation in Japan.

c)

Japanese company Sony creates a holographic TV system.

d)

a decrease in Japenese interest rates.

e)

an increase in the Japanese GDP.

447.

The shift in the graph would cause

a)

a US trade deficit.

b)

an increase in American tariffs.

c)

speculators demanding more pesos.

d)

an appreciation of the dollar.

e)

inflation in the US.

448.
Will the following scenario affect the current account or capital account, and will the transaction be a debit or credit?
A Ukrainian businesswoman buys a majority share of ownership in a U.S. clothing company.
a)
current account; debit.
b)
current account; credit.
c)
capital account; debit.
d)
capital account; credit.
449.
Will the following scenario affect the current account or capital account, and will the transaction be a debit or credit?
An American receives quarterly dividend payments (profits) from stock she owns in a German company.
a)
current account; debit.
b)
current account; credit.
c)
capital account; debit.
d)
capital account; credit.
450.
An increase in stock market profits in Europe will cause the dollar to ______________ and the euro, the currency of the European Union, to __________.
a)
depreciate, depreciate
b)
depreciate, appreciate
c)
appreciate, appreciate
d)
appreciate, depreciate
451.

When one country completely stops trading with another country. Usually used as a punishment/protest against that country

a)

Tariff

b)

Quota

c)

Embargo

d)

Subsidy

452.

Goods or services a country gets from another country

a)

Import

b)

Export

453.

A tax on any good or service coming into a country.

a)

Tariff

b)

Quota

c)

Sanction

d)

Subsidy

454.

When one country places restrictions on trading with another country, usually as punishment, but may not block trading with them completely

a)

Embargo

b)

Tariff

c)

Subsidy

d)

Sanctions

455.

Goods or services a country sells to another country

a)

Import

b)

Export

456.

All of the following are probable effects of tariffs EXCEPT:

a)

they make imported products more expensive

b)

they reduce the amount of trade between nations

c)

they protect domestic producers from foreign competition

d)

they create an incentive for countries to trade more with each other

457.

A type of economic policy that attempt to protect businesses in a country from foreign competition, usually by putting tariffs on goods from other countries to make them more expensive

a)

Free trade

b)

Protectionism

c)

Interdependence

d)

Specialization

458.

Free trade increases worldwide standards of living.

a)

True

b)

False

459.

As a result of growing international economic interdependence, economic conditions and policies in one nation increasingly affect economic conditions and policies in other nations.

a)

True

b)

False

460.

Barriers to international trade usually impose more benefits than costs.

a)

True

b)

False

461.

An increase in which of the following will most likely promote economic growth?

a)

Taxes on investment

b)

The price level

c)

Human capital

462.

An increase in a country’s current account surplus will result in which of the following in the short run?

a)

A decrease in the country’s financial account deficit

b)

An increase in the country’s net financial capital outflows

c)

A decrease in the country’s national savings

463.

Which of the following is true about inflation and interest rates?

a)

The higher the inflation rate, the lower the nominal interest rate.

b)

The higher the inflation rate, the higher the real interest rate.

c)

If there is no actual or expected inflation, the nominal and real interest rates are equal.

464.

Economic growth is shown by a rightward shift in

a)

the long-run Phillips curve

b)

the production possibilities curve

c)

the short-run aggregate supply curve

465.

If businesses become optimistic about the profitability of investments in an economy, which of the following will happen in the loanable funds market in the short run?

a)

The supply and demand for loanable funds will increase.

b)

The real interest rate will increase.

c)

The real interest rate will decrease.

466.

Which of the following measures the opportunity cost of holding currency?

a)

The forgone interest on alternative assets

b)

The nominal wage rate

c)

The average income tax rates

467.

A contractionary monetary policy combined with an expansionary fiscal policy will

a)

increase both income and consumption

b)

increase the interest rate and decrease investment

c)

increase both the interest rate and investment

468.

Ms. Smith withdraws $1,000 from her safe and deposits the money in a bank. If the bank holds no excess reserves and the reserve requirement is 10%, how will this deposit increase the bank’s required reserves and the bank’s loans?

a)

Required Reserves $1,000; Loans $9,000

b)

Required Reserves $1,000; Loans $10,000

c)

Required Reserves $100; Loans $900

469.

A country can have an increased surplus in its balance of trade as a result of

a)

declining imports and rising exports

b)

an increase in domestic inflation

c)

an appreciating currency

470.

Fred Jones withdraws $1,000 in cash from his savings account. What immediate effect does this transaction have on the monetary aggregate measures of M1 and M2?

a)

M1 Increases; M2 Decreases

b)

M1 Increases; M2 No Change

c)

M1 Decreases; M2 No Change

471.

Which of the following transactions is included in the financial account of Country X’s balance of payments accounts?

a)

An individual in Country X sends money monthly to family members in Country D.

b)

A firm in Country X sells robots to a firm in Country A.

c)

An individual in Country X buys new government bonds issued by Country E.

472.

The short-run Phillips curve implies there is a trade-off between

a)

monetary and fiscal policies

b)

inflation and unemployment

c)

interest rates and investment

473.

Country X’s government increases its spending without raising taxes. Which of the following is true about the effect on Country X’s real interest rates and its subsequent effect on Country X’s net exports?

a)

Real interest rates increase and net exports decrease.

b)

Real interest rates increase and net exports increase.

c)

Real interest rates decrease and net exports increase.

474.

Which of the following shifts the money demand curve to the right?

a)

An increase in the price level

b)

A decrease in the price level

c)

A decrease in interest rates

475.

If nominal gross domestic product in a country is $1,600 and the money supply is $400, what is the velocity of money?

a)

400

b)

10

c)

4

d)

2

e)

0.5

476.

An increase in which of the following would most likely cause the gross domestic product of a country to decrease in the short run?

a)

Government spending

b)

Imports

c)

Money Supply

d)

Consumption spending by households

e)

Investment spending by domestic firms

477.

When the central bank sells government bonds on the open market, which of the following will most likely increase?

a)

Bank reserves

b)

Price of bonds

c)

Money supply

d)

Nominal interest rates

e)

The required reserve ratio

478.

Which of the following is a determinant of the amount of money the commercial banking system can create?

a)

The marginal propensity to consume

b)

The marginal propensity to save

c)

The total number of banks

d)

The size of the federal debt

e)

The reserve requirement

479.

A discretionary fiscal policy action to reduce inflation in the short run would be to

a)

increase transfer payments to those on fixed incomes

b)

increase taxes or decrease government spending

c)

decrease taxes or increase government spending

d)

increase taxes and the money supply

e)

decrease taxes and interest rates

480.

Crowding out is most likely to occur with which of the following changes?

a)

Decrease in government spending

b)

Increase in budget surplus

c)

Increase in budget deficit

d)

Decrease in the real interest rate

e)

Decrease in trade deficit

481.

A bank has $800 million in demand deposits and $100 million in reserves. If the reserve requirement is 10 percent, the bank's excess reserves equal

a)

$10 million

b)

$20 million

c)

$80 million

d)

$100 million

e)

$200 million

482.

Which of the following describes a typical business cycle in the correct sequence?

a)

Peak, trough, recession, and expansion

b)

Peak, trough, expansion, and recession

c)

Peak, recession, trough, and expansion

d)

Peak, recession, expansion, and trough

e)

Peak, expansion, trough, and recession

483.

Which of the following will lead to an increase in the money supply?

a)

A decrease in income tax rates

b)

A decrease in government spending

c)

Open-market purchase of securities by the central bank

d)

Increased borrowing by the federal government by issuing new bonds

e)

An increase in the discount rate

484.

Which of the following could cause a movement along a country's short-run Phillips curve toward higher unemployment and lower inflation?

a)

A significant reduction in energy prices

b)

A recession in the economies of the nation's major trading partners

c)

A decrease in savings by the country's consumers

d)

A movement of the economy from the recovery phase to the expansion phase of the business cycle

e)

An improvement in technology

485.

Which of the following is recorded in a country’s current account?

a)

(A) The value of goods produced and consumed in the country

b)

(B) The value of domestic financial assets sold to foreign investors

c)

(C) The value of foreign bonds purchased by the country’s residents

d)

(D) The value of goods produced abroad and purchased by the country’s residents

e)

(E) The value of the country’s government bonds purchased by the country’s central bank

486.

Which of the following transactions in the balance of payments is recorded as a credit entry in a nation’s capital and financial account?

a)

(A) The sale of common stock to foreign households

b)

(B) Imports of computers used by domestic businesses

c)

(C) The interest earned by the nation on foreign financial assets

d)

(D) The nation’s purchases of consumer goods from foreign firms

e)

(E) The nation’s purchases of accounting services from foreign firms

487.

If a country has a current account deficit, which of the following must be true?

a)

(A) It must also show a deficit in its capital and financial account.

b)

(B) It must show a surplus in its capital and financial account.

c)

(C) It must increase the purchases of foreign goods and services.

d)

(D) It must increase the domestic interest rates on its bonds.

e)

(E) It must limit the flow of foreign capital investment.

488.

Which of the following will increase the United States trade deficit?

a)

(A) United States firms buying technologically advanced computers from Germany

b)

(B) European citizens traveling in large numbers to the United States

c)

(C) A United States company being hired to build a production plant in another country

d)

(D) The United States dollar depreciating in the foreign exchange market

e)

(E) The United States selling one million tons of wheat to China

489.

The price of a Japanese-made pen in Japan is ¥500. If at the current exchange rate a German buyer can buy the pen in Japan for €100, then which of the following is the exchange rate between the two currencies?

a)

(A) €5/¥

b)

(B) €500/¥

c)

(C) ¥0.2/€

d)

(D) ¥5/€

e)

(E) ¥20/€

490.

The price of one nation’s currency expressed in terms of another nation’s currency is called

a)

(A) the world price

b)

(B) the exchange rate

c)

(C) the law of one price

d)

(D) terms of trade

e)

(E) purchasing-power parity

491.

If the current exchange rate of the Mexican peso and the Brazilian real is 0.20 real per peso, and the equilibrium exchange rate is 0.18 real per peso, which of the following describes the foreign exchange market for the Mexican peso?

a)

(A) There is a shortage of pesos and the peso will appreciate.

b)

(B) There is a shortage of pesos and the peso will depreciate.

c)

(C) There is a surplus of pesos and the peso will appreciate.

d)

(D) There is a surplus of pesos and the peso will depreciate.

e)

(E) There is a surplus of pesos and the real will depreciate.

492.

Suppose that Country A is experiencing high inflation relative to Country B, which is enjoying steady growth with a stable price level. Which of the following would occur in the foreign exchange market?

a)

(A) An increase in the demand for Country A’s currency

b)

(B) An increase in the supply of Country B’s currency

c)

(C) A decrease in the supply of Country A’s currency

d)

(D) A decrease in the demand for Country B’s currency

e)

(E) A depreciation of Country A’s currency

493.

Which of the following would cause the United States dollar to increase in value compared to the Japanese yen?

a)

(A) An increase in the money supply in the United States

b)

(B) An increase in interest rates in the United States

c)

(C) An increase in the United States trade deficit with Japan

d)

(D) The United States purchase of gold on the open market

e)

(E) The sale of $2 billion dollars worth of Japanese television sets to the United States

494.

Which of the following will lead to an increase in United States net exports?

a)

(A) An increase in United States real gross domestic product

b)

(B) Appreciation of the United States dollar on the foreign exchange market

c)

(C) Depreciation of the United States dollar on the foreign exchange market

d)

(D) An increase in government expenditures in the United States

e)

(E) A decrease in income tax rates in the United States

495.

Which of the following is likely to cause the currency of Country Z to appreciate in the short run?

a)

(A) Country Z decreases its interest rates.

b)

(B) Country Z pursues an expansionary monetary policy.

c)

(C) Country Z’s price level increases.

d)

(D) Country W, a neighboring country, increases its real interest rates.

e)

(E) Country G’s residents increase their demand for Country Z’s goods.

496.

If higher United States interest rates cause foreign demand for the dollar to increase, which of the following will occur to the international value of the dollar and to United States exports?

a)

(A) International Value of the Dollar Increase; Exports Increase

b)

(B) International Value of the Dollar Increase; Exports Decrease

c)

(C) International Value of the Dollar Increase; Exports No change

d)

(D) International Value of the Dollar Decrease; Exports Increase

e)

(E) International Value of the Dollar Decrease; Exports Decrease

497.

If Mexicans increase their investment in the United States, the supply of Mexican pesos to the foreign exchange market and the dollar price of the peso will most likely change in which of the following ways?

a)

(A) Supply of Pesos Increase; Dollar Price of Peso Increase

b)

(B) Supply of Pesos Increase; Dollar Price of Peso Decrease

c)

(C) Supply of Pesos Decrease; Dollar Price of Peso Increase

d)

(D) Supply of Pesos Decrease; Dollar Price of Peso Decrease

e)

(E) Supply of Pesos Decrease; Dollar Price of Peso No Change

498.

An increase in Japan's demand for United States goods would cause the value of the dollar to

a)

(A) depreciate because of inflation

b)

(B) depreciate because the United States would be selling more dollars to Japan

c)

(C) depreciate because the United States money supply would increase as exports rise

d)

(D) appreciate because Japan would be buying more United Stated dollars

e)

(E) appreciate because Japan would be selling more United States dollars

499.

A depreciation of the United States dollar in foreign exchange markets will result in which of the following?

a)

(A) A decrease in aggregate demand because net exports will increase.

b)

(B) A decrease in aggregate demand because imports will decrease.

c)

(C) A decrease in aggregate demand because exports will increase.

d)

(D) An increase in aggregate demand because exports will increase.

e)

(E) An increase in aggregate demand because exports will decrease.

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