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1 Question Multiple Choice Economists make assumptions in order to Your Answer: Correct Answer: Question 2 Multiple Choice 0 of 2 point(s) minimize the likelihood that some aspect of the problem at hand is being overlooked. focus their thinking on the essence of the problem at hand. 0 of 2 point(s) A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between Your Answer: Correct Answer: Question 3 Multiple Choice Which of these statements about economic models is correct? Your Answer: Correct Answer: Question 4 Multiple Choice Which of the following statements is true? Your Answer: Correct Answer: Economics is a social science rather than a true science because it cannot employ the scientific method. Economists are usually not allowed to conduct experiments, and so they must rely on natural experiments offered by history. 0 of 2 point(s) All of the above are correct. All of the above are correct. 0 of 2 point(s) inflation and unemployment. efficiency and equity. 2 of 2 point(s) Question 5 Multiple Choice Figure 2-1 Refer to Figure 2-1. Which arrow shows the flow of land, labor, and capital? Your Answer: Correct Answer: Question 6 Multiple Choice In most societies, resources are allocated by Your Answer: Correct Answer: Question 7 Multiple Choice those firms that use resources to provide goods and services. the combined actions of millions of households and firms. 2 of 2 point(s) B C 0 of 2 point(s) Russell spends an hour studying instead of playing tennis. The opportunity cost to him of studying is Your Answer: Correct Answer: Question 8 Multiple Choice The principle that "people face tradeoffs" applies to Your Answer: Correct Answer: All of the above are correct. All of the above are correct. the enjoyment and exercise he would have received had he played tennis. the enjoyment and exercise he would have received had he played tennis. 2 of 2 point(s) Question 9 Multiple Choice For economists, statements about the world are of two types: Your Answer: Correct Answer: Question 10 Multiple Choice Which is the best statement about the roles of economists? Your Answer: Correct Answer: positive statements and normative statements. positive statements and normative statements. 2 of 2 point(s) 2 of 2 point(s) In trying to explain the world, economists are scientists; in trying to improve the world, they are policymakers. In trying to explain the world, economists are scientists; in trying to improve the world, they are policymakers. 2 of 2 point(s) Question 11 Multiple Choice Figure 2-1 Refer to Figure 2-1. Which arrow represents the flow of spending by households? Your Answer: Correct Answer: Question 12 Multiple Choice A A 0 of 2 point(s) When studying the effects of changes in public policy, economists believe that Your Answer: Correct Answer: the long-run effects of those changes are always more beneficial to society than are the short-run effects. it is important to distinguish between the short run and the long run. 0 of 2 point(s) Question 13 Multiple Choice The goal of an economist who formulates new theories is to Your Answer: Correct Answer: Question 14 Multiple Choice demonstrate that economists, like other scientists, can formulate testable theories. contribute to an understanding of how the world works. 0 of 2 point(s) Which two groups of decisionmakers are included in the simple circular-flow diagram? Your Answer: Correct Answer: Question 15 Multiple Choice A rational decisionmaker Your Answer: Correct Answer: takes an action only if the marginal benefit of that action exceeds the marginal cost of that action. takes an action only if the marginal benefit of that action exceeds the marginal cost of that action. 0 of 2 point(s) markets and government households and firms 2 of 2 point(s) Question 16 Multiple Choice Stan buys a 1966 Mustang for $2,000, planning to restore and sell the car. He goes on to spend $8,000 restoring the car. At this point he can sell the car for $9,000. As an alternative, he can spend an additional $3,000 replacing the engine. With a new engine the car would sell for $12,000. Stan should Your Answer: Correct Answer: complete the repairs and sell the car for $12,000. be indifferent between (i) selling the car now and (ii) replacing the engine and then selling it. Question 17 Multiple Choice Figure 2-1 2 of 2 point(s) Refer to Figure 2-1. Which arrow represents the flow of goods and services? Your Answer: Correct Answer: Question 18 Multiple Choice B B 2 of 2 point(s) Which of the following questions is not answered by the decisions that every society must make? Your Answer: Correct Answer: Question 19 Multiple Choice The opportunity cost of going to college is Your Answer: Correct Answer: the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses. the value of the best opportunity a student gives up to attend college. 0 of 2 point(s) What determines consumer preferences? What determines consumer preferences? 0 of 2 point(s) Question 20 Multiple Choice Economists are particularly adept at understanding that people respond to Your Answer: Correct Answer: Question 21 Multiple Choice punishments more than rewards. incentives. 0 of 2 point(s) In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers? Your Answer: Correct Answer: to produce those products that society desires most to produce enough to meet the output target, without regard for quality or cost 0 of 2 point(s) Question 22 Multiple Choice When the government redistributes income from the wealthy to the poor, Your Answer: Correct Answer: Question 23 Multiple Choice efficiency is improved, but equity is not. people work less and produce fewer goods and services. 0 of 2 point(s) The overriding reason as to why households and societies face many decisions is that Your Answer: Correct Answer: Question 24 Multiple Choice people, by nature, tend to disagree. resources are scarce. 0 of 2 point(s) For a college student who wishes to calculate the true costs of going to college, the costs of room and board Your Answer: Correct Answer: plus the cost of tuition, equals the opportunity cost of going to college. should be counted only to the extent that they are more expensive at college than elsewhere. 2 of 2 point(s) Question 25 Multiple Choice Who among the following individuals majored in economics as a college student? Your Answer: Correct Answer: Question 26 Multiple Choice All of the above are correct. All of the above are correct. 0 of 2 point(s) Which of the following is an example of a positive statement? Your Answer: Correct Answer: When public policies are evaluated, the benefits to the economy of improved equity should be considered more important than the costs of reduced efficiency. Prices rise when the government prints too much money. 0 of 2 point(s) Question 27 Multiple Choice A rational decision maker takes an action only if the Your Answer: Correct Answer: Question 28 Multiple Choice Which of the following is true? Your Answer: Correct Answer: marginal benefit is less than the marginal cost. marginal benefit is greater than the marginal cost. 0 of 2 point(s) Efficiency and equity can both be achieved if the economic pie is cut into equal pieces. Efficiency refers to the size of the economic pie; equity refers to how the pie is divided. 0 of 2 point(s) Question 29 Multiple Choice Figure 2-5 Refer to Figure 2-5. The shift of the production possibilities frontier from A to B illustrates Your Answer: Correct Answer: Question 30 Multiple Choice Figure 2-6 All of the above are correct. economic growth. 0 of 2 point(s) Refer to Figure 2-6. A movement from point C to point D could be caused by Your Answer: All of the above are correct. Correct Answer: Question 31 Multiple Choice unemployment. 0 of 2 point(s) Economics deals primarily with the concept of Your Answer: Correct Answer: Question 32 Multiple Choice Microeconomics is the study of Your Answer: Correct Answer: Question 33 Multiple Choice In economics, capital refers to Your Answer: Correct Answer: Question 34 Multiple Choice An economic outcome is said to be efficient if the economy is Your Answer: Correct Answer: Question 35 Multiple Choice Economics is the study of Your Answer: Correct Answer: Question 36 Multiple Choice Macroeconomics is the study of the interaction of business and government. how society manages its scarce resources. 0 of 2 point(s) conserving on resources, rather than using all available resources. getting all it can get from the scarce resources it has available. 0 of 2 point(s) the finances necessary for firms to produce their products. buildings and machines used in the production process. 0 of 2 point(s) how the economy as a whole works. how individual households and firms make decisions. 0 of 2 point(s) poverty. scarcity. 0 of 2 point(s) Your Answer: Correct Answer: Question 37 Multiple Choice markets for large products. economy-wide phenomena. 0 of 2 point(s) Senator Smith wants to increase taxes on people with high incomes and use the money to help the poor. Senator Jones argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that Your Answer: Correct Answer: Question 38 Multiple Choice Which of the following is the best example of a marginal change? Your Answer: Correct Answer: Housing prices in an area increase by 40 percent when a new interstate is built that passes nearby. Morgan gets a raise at her part-time job and is now paid $7.25 per hour instead of $7.00. 0 of 2 point(s) we should agree with Senator Jones. a good decision requires that we recognize both viewpoints. 0 of 2 point(s) Question 39 Multiple Choice The circular-flow diagram is a Your Answer: Correct Answer: Question 40 Multiple Choice visual model of the relationships among money, prices, and businesses. visual model of how the economy is organized. 0 of 2 point(s) People are willing to pay more for a diamond than for a bottle of water because Your Answer: Correct Answer: water prices are held artificially low by governments, since water is necessary for life. the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water. 2 of 2 point(s) Question 41 Multiple Choice Economic models Your Answer: Correct Answer: Question 42 Multiple Choice Which of the following items is not a factor of production? Your Answer: Correct Answer: Question 43 Multiple Choice Figure 2-1 capital money 0 of 2 point(s) can be useful, even if they are not particularly realistic. can be useful, even if they are not particularly realistic. 0 of 2 point(s) Refer to Figure 2-1. Which arrow shows the flow of income payments? Your Answer: Correct Answer: Question 44 Multiple Choice B D 2 of 2 point(s) Which of these statements is a normative statement (as opposed to a positive statement)? Your Answer: Correct Answer: Question 45 Multiple Choice All of the above are normative statements. All of the above are normative statements. 0 of 2 point(s) Factors of production are Your Answer: Correct Answer: Question 46 Multiple Choice Figure 2-6 social and political conditions that affect production. inputs into the production process. 2 of 2 point(s) Refer to Figure 2-6. What is the opportunity cost to society of the movement from point A to point C? Your Answer: Correct Answer: Question 47 Multiple Choice 100 baseballs 100 baseballs 2 of 2 point(s) Guns and butter are used to represent the classic societal tradeoff between spending on Your Answer: Correct Answer: Question 48 Multiple Choice In economics, the cost of something is national defense and consumer goods. national defense and consumer goods. 0 of 2 point(s) Your Answer: Correct Answer: Question 49 Multiple Choice the dollar amount of obtaining it. what you give up to get it. 0 of 2 point(s) The word "margin" means Your Answer: Correct Answer: Question 50 Multiple Choice The adage, "There is no such thing as a free lunch," means Your Answer: Correct Answer: HW 2: space. edge. 0 of 2 point(s) all costs are included in the price of a product. to get something we like, we usually have to give up another thing we like. hw2 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. In a market economy, supply and demand are important because they a. play a critical role in the allocation of the economy's scarce resources. b. determine how much of each good gets produced. c. can be used to predict the impact on the economy of various events and policies. d. All of the above are correct. 2. For each good produced in a market economy, the interaction of demand and supply determines a. the price of the good, but not the quantity. b. the quantity of the good, but not the price. c. both the price of the good and the quantity of the good. d. neither price nor quantity, because prices and quantities are determined by the sellers of the goods alone. 3. For a competitive market, which of the following statements is correct? a. A seller can always increase her profit by raising the price of her product. b. If a seller charges more than the going price, buyers will go elsewhere to make their purchases. c. A seller often charges less than the going price to increase sales and profit. d. A single buyer can influence the price of the product, but only when purchasing from several sellers in a short period of time. 4. To say that the quantity demanded of a good is negatively related to the price of the good is to say that a. an increase in the quantity demanded of the good leads to a decrease in the price of the good. b. an increase in the price of the good leads to a decrease in the quantity demanded of the good. c. there is a weak relationship between the quantity demanded of a good and the price of the good. d. there is no relationship between the quantity demanded of a good and the price of the good. 5. Which of the following would not be a determinant of the demand for a particular good? a. prices of related goods b. income c. tastes d. the prices of the inputs used to produce the good 6. The amount of the good buyers are willing and able to purchase is called the a. demand. b. quantity demanded. c. supply. d. quantity supplied. 7. Economists in general a. do not try to explain people's tastes, but they do try to explain what happens when tastes change. b. believe that they must be able to explain people's tastes in order to explain what happens when tastes change. c. do not believe that people's tastes determine demand and therefore they ignore the subject of tastes. d. incorporate tastes into economic models only to the extent that tastes determine whether pairs of goods are substitutes or complements. 8. According to the law of demand, a. quantity supplied and quantity demanded are positively related. b. quantity supplied and quantity demanded are negatively related. c. price and quantity demanded are positively related. d. price and quantity demanded are negatively related. 9. A higher price for batteries would result in a(n) a. increase in the demand for flashlights. b. decrease in the demand for flashlights. c. increase in the demand for batteries. d. decrease in the demand for batteries. 10. When constructing a demand curve, a. demand is on the vertical axis and quantity is on the horizontal axis. b. price is on the horizontal axis and quantity is on the vertical axis. c. price is on the vertical axis and demand is on the horizontal axis. d. price is on the vertical axis and quantity demanded is on the horizontal axis. 11. When we move along a given demand curve, a. only price is held constant. b. income and the price of the good are held constant. c. all nonprice determinants of demand are held constant. d. all determinants of quantity demanded are held constant. 12. An increase in demand is represented by a. a movement downward and to the right along a demand curve. b. a movement upward and to the left along a demand curve. c. a rightward shift of a demand curve. d. a leftward shift of a demand curve. 13. Today's demand curve for gasoline could shift in response to a. a change in today's price of gasoline. b. a change in the expected future price of gasoline. c. a change in the number of sellers of gas oline. d. All of the above are correct. 14. When the price of a good or service changes, a. the supply curve shifts in the opposite direction. b. the demand curve shifts in the opposite direction. c. the demand curve shifts in the same direction. d. there is a movement along a given demand curve. 15. The relationship between price and quantity supplied is a. negative. b. positive. c. the same as the relationship between price and quantity demanded. d. not well understood by economists because laboratory-type experiments have not been conducted. 16. According to the law of supply, a. the quantity supplied of a good is negatively related to the price of the good. b. when the price of a good falls, the quantity supplied of the good rises. c. the supply curve for a good is upward-sloping. d. All of the above are correct. 17. A decrease in the supply of televisions is represented by a. a leftward shift of the supply curve for televisions. b. a rightward shift of the supply curve for televisions. c. a flattening of the supply curve for televisions. d. a movement down and to the left along the supply curve for televisions. 18. Which of the following events could cause an increase in the supply of ceiling fans? a. The number of sellers of ceiling fans increases. b. There is an increase in the price of air conditioners, and consumers regard air conditioners and ceiling fans as substitutes. c. There is an increase in the price of the motor that powers ceiling fans. d. All of the above are correct. 19. The positive relationship between price and quantity supplied is called a. profit. b. a change in supply. c. a shift of the supply curve. d. the law of supply. 20. A movement along the supply curve might be caused by a change in a. technology. b. input prices. c. expectations about future prices. d. the price of the good or service that is being supplied. 21. A technological advance will shift the a. supply curve to the right. b. supply curve to the left. c. demand curve to the right. d. demand curve to the left. 22. The unique point at which the supply and demand curves intersect is called a. market harmony. b. coincidence. c. cohesion. d. equilibrium. 23. If, at the current price, there is a shortage of a good, a. sellers are producing more than buyers wish to buy. b. the market must be in equilibrium. c. the price is below the equilibrium price. d. quantity demanded equals quantity supplied. Figure 4-7 24. Refer to Figure 4-7. Equilibrium price and quantity are, respectively, a. $35 and 200. b. $35 and 600. c. $25 and 400. d. $15 and 200. 25. Refer to Figure 4-7. At a price of $35, a. there would be a shortage of 400 units. b. there would be a surplus of 200 units. c. there would be a surplus of 400 units. d. there would be an excess supply of 200 units. 26. Refer to Figure 4-7. At the equilibrium price, a. 200 units would be supplied and demanded. b. 400 units would be supplied and demanded. c. 600 units would be supplied and demanded. d. 600 units would be supplied, but only 200 would be demanded. Figure 4-8 27. Refer to Figure 4-8. In this market, equilibrium price and quantity, respectively, are a. $14 and 70. b. $12 and 40. c. $10 and 50. d. $8 and 50. 28. Refer to Figure 4-8. If price in this market is currently $14, there would be a a. shortage of 20 units and the law of demand predicts that the price will rise from $14 to a higher price. b. excess supply of 20 units and the law of supply and demand predicts that the price will fall from $14 to a lower price. c. shortage of 40 units and the law of supply predicts that the price will fall from $14 to a lower price. d. surplus of 40 units and the law of supply and demand predicts that the price will fall from $14 to a lower price. Table 4-2 PRICE QUANTITY DEMANDED QUANTITY SUPPLIED $10 10 60 $ 8 20 45 $ 6 30 30 $ 4 40 15 $ 2 50 0 29. Refer to Table 4-2. If the price were $2, a a. shortage of 25 units would exist and price would tend to fall. b. surplus of 50 units would exist and price would tend to rise. c. surplus of 25 units would exist and price would tend to fall. d. shortage of 50 units would exist and price would tend to rise. Figure 4-9 30. Refer to Figure 4-9. In this market, equilibrium price and quantity, respectively, are a. $15 and 400. b. $20 and 600. c. $25 and 500. d. $25 and 800. 31. Refer to Figure 4-9. If price is $25, quantity demanded and quantity supplied, respectively, are a. 400 and 600. b. 500 and 800. c. 600 and 600 d. 800 and 500. 32. Suppose roses are currently selling for $40.00 per dozen, while the equilibrium price of roses is $30.00 per dozen. We would expect a a. shortage to exist and the market price of roses to increase. b. shortage to exist and the market price of roses to decrease. c. surplus to exist and the market price of roses to increase. d. surplus to exist and the market price of roses to decrease. 33. If a surplus exists in a market we know that the actual price is a. above equilibrium price and quantity supplied is greater than quantity demanded. b. above equilibrium price and quantity demanded is greater than quantity supplied. c. below equilibrium price and quantity demanded is greater than quantity supplied. d. below equilibrium price and quantity supplied is greater than quantity demanded. Figure 4-10 34. Refer to Figure 4-10. Which of the four graphs represents the market for peanut butter after a major hurricane hits the peanut-growing south? a. A b. B c. C d. D 35. Refer to Figure 4-10. Which of the four graphs represents the market for winter coats as we progress from winter to spring? a. A b. B c. C d. D 36. Refer to Figure 4-10. Which of the four graphs represents the market for cars as a result of the adoption of new technology on assembly lines? a. A b. B c. C d. D 37. Which of the following events will definitely cause equilibrium quantity to fall? a. demand increases and supply decreases b. demand and supply both decrease c. demand decreases and supply increases d. demand and supply both increase 38. If the demand for a product decreases, we would expect a. equilibrium price to increase and equilibrium quantity to decrease. b. equilibrium price to decrease and equilibrium quantity to increase. c. equilibrium price and equilibrium quantity to both increase. d. equilibrium price and equilibrium quantity to both decrease. 39. If the supply of a product increases, we would expect a. equilibrium price to increase and equilibrium quantity to decrease. b. equilibrium price to decrease and equilibrium quantity to increase. c. equilibrium price and equilibrium quantity both to increase. d. equilibrium price and equilibrium quantity both to decrease. 40. A weaker demand together with a stronger supply would necessarily result in a. a lower price. b. a higher price. c. an increase in equilibrium quantity. d. a decrease in equilibrium quantity. 41. When supply and demand both increase, equilibrium a. price will increase. b. price will decrease. c. quantity may increase, decrease, or remain unchanged. d. price may increase, decrease, or remain unchanged. 42. In a free market system, what coordinates the actions of millions of people with their varying abilities and desires? a. producers b. prices c. consumers d. the government 43. If the United States decides to trade with Mexico, we know that a. Mexico will benefit, but trade with a less developed country could not benefit the United States. b. it will not benefit Mexico because workers in the United States are more productive. c. Mexico and the United States can both benefit. d. it will not benefit either country because their cultural differences are too vast. 44. In an economy in which decisions are guided by prices and individual self-interest, there is a. the potential to achieve efficiency in production. b. a strong need for government intervention in the market. c. less efficiency than would be observed in a centrally-planned economy. d. more need for a strong legal system to control individual greed than would be needed in a centrally-planned economy. 45. Prior to the collapse of communism, communist countries worked on the premise that economic well-being could be best attained by a. a market economy. b. a strong reliance on prices and individuals' self-interests. c. a system of la rge, government-operated, privately-owned firms. d. the actions of government central planners. 46. Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations? a. There is no such thing as a free lunch. b. People buy more when prices are low than when prices are high. c. No matter how much people earn, they tend to spend more than they earn. d. Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes. 47. Adam Smith argued that in a market system, when people act in their own self-interest, they typically a. help only themselves. b. harm others. c. help others, but not as much as they would have if they were not self-interested. d. help others even more than when they deliberately try to help others. 48. A primary function of prices in a market economy is to provide participants with a. relevant economic information. b. relevant spending limits. c. an equitable distribution of goods and services. d. All of the above are correct. 49. One reason we need government, even in a market economy, is that a. there are insufficient quantities of externalities in the absence of government. b. property rights become too entrenched in the absence of government. c. the invisible hand seldom leads to an efficient allocation of resources in any market. d. the invisible hand, while powerful, is not perfect. 50. What did the interactive graph in the ThinkEconomics exercise from assignment 2 demonstrate? a. increase (shift) in demand, excess demand, falling price in new equilibrium b. increase (shift) in demand, excess supply, rising price in new equilibrium c. increase (shift) in supply, excess supply, falling price in new equilibrium d. decrease (shift) in demand, excess demand, falling price in new equilibrium #3 hw3 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. 1. Which is the most correct statement about the invisible hand? a. The invisible hand always ensures both equity and efficiency. b. The invisible hand is more effective at ensuring equity than it is at ensuring efficiency. c. The invisible hand is more effective at ensuring efficiency than it is at ensuring equity. d. Market power is the instrument with which the invisible hand directs economic activity. 2. According to Adam Smith, the success of decentralized market economies is primarily due to a. the basic benevolence of society. b. society's legal system. c. individuals' pursuit of self-interest. d. partnerships that are forged between business and government. 3. The primary determinant of a country's standard of living is a. the country's ability to prevail over foreign competition. b. the country's ability to produce goods and services. c. the total supply of money in the economy. d. the average age of the country's labor force. 4. The income of a typical worker in a country is most closely linked to which of the following? a. population b. productivity c. market power d. government policies 5. Large or persistent inflation is almost always caused by a. excessive government spending. b. excessive growth in the quantity of money. c. foreign competition. d. higher-than-normal levels of productivity. 6. Which of the following is the most correct statement about the relationship between inflation and unemployment? a. In the short run, falling inflation is associated with falling unemployment. b. In the short run, falling inflation is associated with rising unemployment. c. In the long run, falling inflation is associated with falling unemployment. d. In the long run, falling inflation is associated with rising unemployment. 7. The mainstream view among economists is that a. society faces a tradeoff between unemployment and inflation, but only in the short run. b. society faces a tradeoff between unemployment and inflation, but only in the long run. c. society faces a tradeoff between unemployment and inflation, both in the short run and in the long run. d. no tradeoff exists between unemployment and inflation, either in the short run or in the long run. 8. The business cycle is the a. relationship between unemployment and inflation. b. irregular fluctuations in economic activity. c. positive relationship between the quantity of money in an economy and inflation. d. predictable changes in economic activity due to changes in government spending and taxes. 9. In the short run Recessions in South Korea and Indonesia will cause a. the U.S. price level and real GDP to rise. b. the U.S. price level and real GDP to fall. c. the U.S. price level to rise and real GDP to fall. d. the U.S. price level to fall and real GDP to rise. 10. Which of the following would cause prices and real GDP to rise in the short run? a. Short-run aggregate supply shifts right. b. Short-run aggregate supply shifts left. c. Aggregate demand shifts right. d. Aggregate demand shifts left. 11. Which of the following would cause prices to fall and output to rise in the short run? a. Short-run aggregate supply shifts right. b. Short-run aggregate supply shifts left. c. Aggregate demand shifts right. d. Aggregate demand shifts left. 12. Which of the following would cause prices to rise and real GDP to fall in the short run? a. an increase in the expected price level b. an increase in the capital stock c. an increase in the quantity of labor available d. All of the above are correct. 13. Suppose a shift in aggregate demand creates an economic contraction. If policymakers can respond with sufficient speed and precision, they can offset the initial shift by shifting a. aggregate supply right. b. aggregate supply left. c. aggregate demand right. d. aggregate demand left. 14. In the early 1930s in the United States, there was a a. large increase in output. In the early 1940s there was also a large increase in output. b. large increase in output. In the early 1940s there was a large decrease in output. c. large decrease in output. In the early 1940s there was a large increase in output. d. large decrease in output. In the early 1940s there was also a large decrease in output. 15. Which of the following has been suggested as a cause of the Great Depression? a. a decline in the money supply b. a decrease in stock prices c. the collapse of the banking system d. All of the above are correct. 16. Which of the following did not happen during the onset of the Great Depression? a. The money supply fell as households took money out of bank deposits. b. The Fed conducted expansionary monetary policy. c. Stock prices fell about 90 percent. d. Disruption of the banking system made it difficult for some firms to obtain funds for investment. 17. In the first few years of the Great Depression, unemployment rose to about a. 10 percent, and prices rose about 14 percent. b. 15 percent, and prices rose about 22 percent. c. 20 percent, and prices fell about 14 percent. d. 25 percent, and prices fell about 22 percent. 18. An increase in the price level and a reduction in real GDP could be created by a. a fall in stock prices. b. natural disasters such as hurricanes and famines. c. declining government expenditures. d. tax rebates. 19. An increase in the price level and a decrease in real GDP in the short run could be created by a. an increase in the money supply. b. an increase in government expenditures. c. a fall in stock prices. d. bad weather in farm states. 20. Policymakers who control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift a. aggregate supply to the right. b. aggregate supply to the left. c. aggregate demand to the right. d. aggregate demand to the left. 21. Stagflation exists when prices a. and output rise. b. rise and output falls. c. fall and output rises. d. and output fall. 22. In the short-run an increase in the costs of production makes a. output and prices rise. b. output rise and prices fall. c. output fall and prices rise. d. output and prices fall. 23. In a short span of time, there is a sharp decline in the stock market, a tax cut, an increase in the money supply and a decline in the value of the dollar. In the short run, we would expect a. the price level and real GDP both to rise. b. the price level and real GDP both to fall. c. the price level and real GDP both to stay the same. d. All of the above are possible. 24. In the mid-1970s the price of oil rose dramatically. This a. shifted aggregate supply left. b. caused U.S. prices to fall. c. was the consequence of OPEC increasing oil production. d. All of the above are correct. 25. In 1936, John Maynard Keynes published a book, The General Theory, which attempted to explain a. stagflation. b. the classical dichotomy. c. short-run economic fluctuations. d. how changes in the money supply had created the Great Depression. 26. Keynes explained that recessions and depressions occur because of a. excess aggregate demand. b. inadequate aggregate demand. c. excess aggregate supply. d. inadequate aggregate supply. 27. Keynes believed that economies experiencing high unemployment should adopt policies to a. reduce the money supply. b. reduce government expenditures. c. increase aggregate demand. d. increase aggregate supply. 28. An aggregate demand (AD) curve shows the a. amount of a particular good people are willing and able to buy at a particular price, ceteris paribus. b. real output (Real GDP) people are willing and able to sell at different price levels, ceteris paribus. c. real output (Real (GDP) people are willing and able to buy and to sell at different price levels, ceteris paribus. d. real output (Real GDP) people are willing and able to buy at different price levels, ceteris paribus. 29. Aggregate demand curves are a. downward sloping. b. upward sloping. c. horizontal. d. vertical. 30. Suppose consumption decreases at each price level. As a result, aggregate demand __________, and the AD curve shifts __________. a. increases; leftward b. decreases; leftward c. increases; rightward d. decreases; rightward 31. Which of the following will cause a movement from one point on an AD curve to another point on the same AD curve? a. a change in consumption b. a change in government expenditures c. a change in net exports d. a change in the price level e. all of the above 32. The real balance effect is one of the a. reasons why an AD curve is downward-sloping. b. shifters of an AD curve. c. reasons why a shortrun aggregate supply curve can be derived. d. shifters of a short-run aggregate supply curve. 33. Which of the following factors can shift the AD curve? a. net exports b. government purchases c. the money supply d. b and c e. a, b, and c 34. Suppose a drop in stock prices makes people feel less wealthy. This would cause __________ the economy's AD curve. a. movement down along b. movement up along c. a rightward shift of d. a leftward shift of 35. An economic policy initiative results in the AD curve shifting to the right. As a result, a. the price level will rise. b. the price level will stay constant. c. the price level will fall. d. Real GDP will rise in the short run. e. a and d 36. As the interest rate rises, the cost of a given investment project __________ and businesses invest __________. a. rises; more b. rises; less c. falls; more d. falls; less 37. As the interest rate rises, businesses invest __________ and the AD curve shifts to the __________. a. more; right b. more; left c. less; right d. less; left 38. As income taxes rise, disposable income __________, causing __________ the AD curve. a. increases; movement down along b. increases; a rightward shift of c. decreases; movement up along d. decreases; a leftward shift of 39. Business optimism about future sales tends to __________ investment expenditures, shifting the AD curve to the __________. a. increase; left b. increase; right c. decrease; left d. decrease; right 40. An appreciation of the U.S. dollar tends to __________ U.S. net exports and shift the U.S. AD curve to the __________. a. raise; right b. raise; left c. lower; right d. lower; left 41. A short-run aggregate supply curve shows the a. amount of a particular good producers are willing and able to buy at a particular price, ceteris paribus. b. real output (Real GDP) producers are willing and able to sell at different price levels, ceteris paribus. c. real output (Real GDP) people are willing and able to buy and to sell at different price levels, ceteris paribus. d. real output (Real GDP) people are willing and able to buy at different price levels, ceteris paribus. 42. The Great Depression can be analyzed using the simple aggregate supply and aggregate demand model. A series of events caused __________ to decline which resulted in __________ and __________. a. aggregate demand; deflation; high unemployment. b. aggregate supply; inflation; high unemployment. c. aggregate demand; inflation; reduced unemployment. d. aggregate supply; deflation; reduced unemployment. e. none of the above 43. The purchases made by the foreign sector are called __________; the purchases made by the household sector are called __________; the purchases made by the government sector are called __________; and the purchases made by the business sector are called investment. a. net exports; consumption; net interest b. net exports; domestic spending; government purchases c. net exports; consumption; government purchases d. exports; domestic spending; government product e. imports; consumption; government expenditures 44. Which of the following statements represents a correct and sequentially accurate economic explanation? a. The (U.S.) dollar appreciates, net exports rise, total expenditures on goods and services (TE) rises, AD rises, and the AD curve shifts rightward. b. The interest rate falls, investment rises, total expenditures on goods and services (TE) rises, AD falls, and the AD curve shifts leftward. c. Wealth increases, consumption rises, total expenditures on goods and services (TE) rises, AD falls, and the AD curve shifts rightward. d. (Business) expectations about future sales become more positive, investment rises, total expenditures on goods and services (TE) rises, AD rises, and the AD curve shifts rightward. e. Foreign real national income rises, net exports rise, total expenditures on goods and services (TE) falls, AD rises, and the AD curve shifts rightward. Exhibit 5-1 AD AD Price Level SRAS D C SRAS A B 1 2 2 1 Quantity 45. Refer to Exhibit 5-1. Which of the points on this graph is most likely representative of the lowest unemployment rate. a. A b. B c. C d. D 46. Refer to Exhibit 5-1. Assume that the economy is originally in equilibrium at point A. If businesses become optimistic about future sales, at which point is the economy most likely to end up? a. A b. B c. C d. D 47. Refer to Exhibit 5-1. Assume that the economy is originally in equilibrium at point A. If foreign real national income rises, at which point is the economy most likely to end up? a. A b. B c. C d. D e. A change in foreign real national income would have no impact on our economy. 48. Refer to Exhibit 5-1. Assume the economy is originally in equilibrium at point A. If the price of oil rises, at which point is the economy most likely to end up? a. A b. B c. C d. D 49. Which is true of John Maynard Keynes? a. He believed that serious economic contractions were natural phases in an otherwise healthy system. b. He provided a model that closely resembled that of Adam Smith. c. He advocated a decrease in the money supply to stabilize the economy. d. He argued that increased government demand should offset reduced private sector demand to prevent depression. e. He advocated tax increases to balance the federal government's budget during the Great Depression. 50. An increase in government spending, other things constant, would cause a a. leftward shift of the aggregate supply curve b. rightward shift of the aggregate supply curve c. leftward shift of the aggregate demand curve d. rightward shift of the aggregate demand curve e. movement toward equilibrium, along curves that do not shift 51. Which of the following best describes the Keynesian approach to economic policy? a. supply-side b. classical c. demand-side d. mercantilist e. laissez-faire #4 COURSES > INTRO MACRO SECTION 4 SPRING 2008 SHEFLIN > ASSIGNMENTS > ASSIGNMENT 4 > REVIEW ASSESSMENT: HW 4 Review Assessment: HW 4 Name: Status: Score: HW 4 Completed 56 out of 98 point(s) Time Elapsed: 30 minutes and 38 seconds out of 55 minutes allowed. Instructions: Question 1 Multiple Choice International data on GDP and socioeconomic variables Your Answer: leave no doubt that a nation's GDP is closely associated with its citizens' standard of living. 2 of 2 point(s) Correct Answer: leave no doubt that a nation's GDP is closely associated with its citizens' standard of living. 2 of 2 point(s) Question 2 Multiple Choice The income that households and noncorporate businesses receive is called Your Answer: Correct Answer: Question 3 Multiple Choice personal income. personal income. 0 of 2 point(s) Suppose the government reports that U.S. GDP was about $13 trillion dollars in the most recent quarter. What is the correct interpretation of this number? Your Answer: Correct Answer: This number was obtained by taking the actual value of final goods and services produced in that quarter, then seasonally adjusting that value. This number was obtained by taking the actual value of final goods and services produced in that quarter, then seasonally adjusting that value and multiplying it by 4. 2 of 2 point(s) Question 4 Multiple Choice Which of the following examples of household spending are categorized as investment rather than consumption? Your Answer: Correct Answer: Question 5 Multiple Choice expenditures on new housing expenditures on new housing 0 of 2 point(s) Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. This change in behavior, by itself, has Your Answer: Correct Answer: increased measured GDP only to the extent that the value of the restaurant meals exceeded the value of meals previously cooked at home. increased measured GDP by the full value of the restaurant meals. 0 of 2 point(s) Question 6 Multiple Choice Which of the following items is counted as part of government purchases? Your Answer: Correct Answer: All of the above are correct. The city of Des Moines, Iowa pays $10,000 to a tree-trimming firm to trim trees along city boulevards. 0 of 2 point(s) Question 7 Multiple Choice If chained (2000$) GDP increases it must mean that Your Answer: Correct Answer: Question 8 Multiple Choice both prices and output increased output increased 0 of 2 point(s) The value of goods added to a firm's inventory in a certain year is treated as Your Answer: Correct Answer: consumption, since the goods will be sold to consumers in another period. investment, since GDP aims to measure the value of the economy's production. 2 of 2 point(s) Question 9 Multiple Choice Which of the following items is included in GDP? Your Answer: Correct Answer: Question 10 Multiple Choice the sale of services such as those performed by a doctor the sale of services such as those performed by a doctor 2 of 2 point(s) In computing GDP, market prices are used to value final goods and services because Your Answer: Correct Answer: Question 11 Multiple Choice market prices reflect the values of goods and services. market prices reflect the values of goods and services. 2 of 2 point(s) If the GDP deflator is 200 and nominal GDP is $10,000 billion, then real GDP is Your Answer: Correct Answer: Question 12 Multiple Choice $5,000 billion. $5,000 billion. 0 of 2 point(s) Suppose an apartment complex converts to a condominium, so that the former renters are now owners of their housing units. Suppose further that a current estimate of the value of the condominium owners' housing services is the same as the rent they previously paid. What happens to GDP as a result of this conversion? Your Answer: Correct Answer: GDP necessarily decreases. GDP is unaffected because previously the rent payments were included in GDP, and now the rent payments are replaced in GDP the by estimate of the value of housing services. 2 of 2 point(s) Question 13 Multiple Choice If a state made a previously-illegal activity such as gambling or prostitution legal, then, other things equal, GDP Your Answer: Correct Answer: Question 14 Multiple Choice What's a Value-Add Tax (VAT) Your Answer: Correct Answer: Question 15 Multiple Choice Transfer payments are Your Answer: Correct Answer: not included in GDP because they are not payments for currently produced goods or services. not included in GDP because they are not payments for currently produced goods or services. 2 of 2 point(s) national sales tax national sales tax 2 of 2 point(s) necessarily increases. necessarily increases. 2 of 2 point(s) Question 16 Multiple Choice Which of the following is not included in GDP? Your Answer: Correct Answer: Question 17 Multiple Choice unpaid cleaning and maintenance of houses unpaid cleaning and maintenance of houses 0 of 2 point(s) Greg, a U.S. citizen, works only in Canada. The value that his labor contributes to U.S. output is Your Answer: Correct Answer: Question 18 Multiple Choice How is Net National Product (NNP) calculated? Your Answer: Correct Answer: Saving is subtracted from the total income of a nation's citizens. Depreciation losses are subtracted from the total income of a nation's permanent residents. 0 of 2 point(s) included in neither U.S. GDP nor U.S. GNP. included in U.S. GNP, but it is not included in U.S. GDP. 0 of 2 point(s) Question 19 Multiple Choice If real GDP increases it must mean that Your Answer: Correct Answer: Question 20 Multiple Choice either prices or output increased or both output increased 0 of 2 point(s) In the United States in 2007, consumption represented approximately Your Answer: Correct Answer: Question 21 Multiple Choice 30 percent of GDP. 90 percent of GDP. 2 of 2 point(s) One bag of flour is sold for $1.50 to a bakery, which uses the flour to bake bread that is sold for $4.00 to consumers. A second bag of flour is sold to a consumer in a grocery store for $2.00. Taking these three transactions into account, what is the effect on GDP? Your Answer: Correct Answer: Question 22 Multiple Choice GDP increases by $6.00. GDP increases by $6.00. 2 of 2 point(s) Disposable personal income is the income that Your Answer: Correct Answer: households and noncorporate businesses have left after paying taxes and non-tax payments to the government. households and noncorporate businesses have left after paying taxes and non-tax payments to the government. 2 of 2 point(s) Question 23 Multiple Choice Retained earnings is the part of income that Your Answer: Correct Answer: Question 24 Multiple Choice If nominal GDP increases it must mean that Your Answer: Correct Answer: Question 25 Multiple Choice For the purpose of calculating GDP, investment is spending on Your Answer: Correct Answer: Question 26 Multiple Choice GDP is not a perfect measure of well-being; for example, Your Answer: All of the above are correct. both prices and output increased either prices or output increased or both corporations have earned but have not paid out to their owners. corporations have earned but have not paid out to their owners. 0 of 2 point(s) 2 of 2 point(s) new capital equipment, inventories, and structures, including new housing. new capital equipment, inventories, and structures, including new housing. 2 of 2 point(s) Correct Answer: Question 27 Multiple Choice All of the above are correct. 0 of 2 point(s) Goods that go into inventory and are not sold during the current period are Your Answer: Correct Answer: Question 28 Multiple Choice The component of GDP called consumption consists of Your Answer: Correct Answer: household spending on durable and nondurable goods as well as household spending on services. household spending on durable and nondurable goods as well as household spending on services. 0 of 2 point(s) counted as intermediate goods and so are not included in current period GDP. included in current period GDP as inventory investment. 2 of 2 point(s) Question 29 Multiple Choice If real GDP doubles and the GDP deflator doubles, then nominal GDP Your Answer: Correct Answer: Question 30 Multiple Choice remains constant. quadruples. 2 of 2 point(s) The value of the housing services provided by the economy's owner-occupied houses is Your Answer: Correct Answer: included in GDP and the estimated rental values of the houses is used to place a value on these housing services. included in GDP and the estimated rental values of the houses is used to place a value on these housing services. 2 of 2 point(s) Question 31 Multiple Choice GDP is defined as Your Answer: the market value of all final goods and services produced within a country in a given period of time. Correct Answer: the market value of all final goods and services produced within a country in a given period of time. 2 of 2 point(s) Question 32 Multiple Choice What was Simon Kuznets major contribution? Your Answer: Correct Answer: Question 33 Multiple Choice National Income Accounting National Income Accounting 0 of 2 point(s) In the nation of Paolaland, quarterly GDP is always higher in the second quarter than in other quarters. In order to account systematically for this predictable second-quarter jump in GDP, Paolaland's government statisticians will Your Answer: Correct Answer: Question 34 Multiple Choice report a four-quarter moving average of GDP rather than the one-quarter figure. employ a statistical procedure called seasonal adjustment. 2 of 2 point(s) In a simple circular-flow diagram total income and total expenditure are Your Answer: Correct Answer: Question 35 Multiple Choice always equal because every transaction has a buyer and a seller. always equal because every transaction has a buyer and a seller. 2 of 2 point(s) Which of the following statistics is usually regarded as the best single measure of a society's economic well-being? Your Answer: Correct Answer: Question 36 Multiple Choice The total sales of all firms in the economy for a year Your Answer: is smaller than GDP for the year. gross domestic product gross domestic product 0 of 2 point(s) Correct Answer: Question 37 Multiple Choice is larger than GDP for the year. 2 of 2 point(s) In 2007, U.S. GDP (nominal) was almost Your Answer: Correct Answer: Question 38 Multiple Choice $14 trillion. $14 trillion. 2 of 2 point(s) Table 23-2. The information in the table pertains to the country of Ophir. Year 2004 2005 2006 Nominal GDP $4000 $4100 $4200 GDP Deflator 100 105 110 Refer to Table 23-2. From this information we can conclude that Your Answer: Correct Answer: real GDP was higher in 2004 than in 2005, and real GDP was higher in 2005 than in 2006. real GDP was higher in 2004 than in 2005, and real GDP was higher in 2005 than in 2006. 0 of 2 point(s) Question 39 Multiple Choice If a U.S. citizen buys a television made in Korea by a Korean firm, Your Answer: Correct Answer: Question 40 Multiple Choice U.S. net exports are unaffected and U.S. GDP decreases. U.S. net exports decrease and U.S. GDP is unaffected. 0 of 2 point(s) Being able to measure the behavior of the economy with statistics such as GDP Your Answer: Correct Answer: can be helpful in developing macroeconomic science, but is not useful for policymaking. is a crucial step toward developing the science of macroeconomics. 2 of 2 point(s) Question 41 Multiple Choice Government purchases include spending on goods and services by Your Answer: Correct Answer: Question 42 Multiple Choice Unemployment compensation is Your Answer: Correct Answer: Question 43 Multiple Choice Which of the following transactions adds to U.S. GDP for 2006? Your Answer: When John and Jennifer were both single, they lived in separate apartments and each paid $750 in rent. John and Jennifer got married in 2006 and they bought a house that, according to reliable estimates, could be rented for $1,600 per month. When John and Jennifer were both single, they lived in separate apartments and each paid $750 in rent. John and Jennifer got married in 2006 and they bought a house that, according to reliable estimates, could be rented for $1,600 per month. 0 of 2 point(s) part of GDP because it represents income. not part of GDP because it is a transfer payment. 2 of 2 point(s) local, state and federal governments. local, state and federal governments. 0 of 2 point(s) Correct Answer: Question 44 Multiple Choice Which government entity prepares the U.S. national income accounts? Your Answer: Correct Answer: Question 45 Multiple Choice the Federal Reserve System the Department of Commerce 0 of 2 point(s) In 2007, GDP per person in the United States was somewhat more than Your Answer: Correct Answer: Question 46 Multiple Choice Household spending on education is included in $31,000. $42,000. 2 of 2 point(s) Your Answer: Correct Answer: consumption, although it might be argued that it would fit better in investment. consumption, although it might be argued that it would fit better in investment. 0 of 2 point(s) Question 47 Multiple Choice For an economy as a whole, Your Answer: Correct Answer: Question 48 Multiple Choice expenditure is greater than income. income is equal to expenditure. 2 of 2 point(s) A steel company sells some steel to a bicycle company for $100. The bicycle company uses the steel to produce a bicycle, which it sells for $200. Taken together, these two transactions contribute Your Answer: Correct Answer: Question 49 Multiple Choice $200 to GDP. $200 to GDP. 2 of 2 point(s) Which of the following serves as an example of the underground or "shadow" economy? Your Answer: Correct Answer: All of the above are correct. All of the above are correct. #5 COURSES > INTRO MACRO SECTION 4 SPRING 2008 SHEFLIN > ASSIGNMENTS > ASSIGNMENT 5 > REVIEW ASSESSMENT: HW 5 Review Assessment: hw 5 Name: Status: Score: hw 5 Completed 62 out of 118 point(s) Time Elapsed: 44 minutes and 27 seconds out of 1 hours allowed. Instructions: Question 1 Multiple Choice Today, bank runs are Your Answer: Correct Answer: Question 2 Multiple Choice uncommon because of FDIC deposit insurance. uncommon because of FDIC deposit insurance. 2 of 2 point(s) 2 of 2 point(s) Use the (hypothetical) information in the following table to answer the following Questions. Table 29-1 Type of Money Large time deposits Small time deposits Demand deposits Other checkable deposits Savings deposits Travelers' checks Money market mutual funds Currency SDRs Miscellaneous categories of M2 Amount $80 billion $75 billion $75 billion $40 billion $10 billion $1 billion $15 billion $100 billion $10 billion $25 billion Refer to Table 29-1. What is the M1 money supply? Your Answer: Correct Answer: Question 3 Multiple Choice As the reserve ratio increases, the money multiplier $216 billion $216 billion 0 of 2 point(s) Your Answer: Correct Answer: Question 4 Multiple Choice increases. decreases. 0 of 2 point(s) In recent years the Federal Open Market Committee has focused on a target for Your Answer: Correct Answer: Question 5 Multiple Choice The existence of money leads to Your Answer: Correct Answer: Question 6 Multiple Choice Changes in the quantity of money affect Your Answer: Correct Answer: Question 7 Multiple Choice Who is credited with making the first coins? Your Answer: Correct Answer: Question 8 Multiple Choice Greeks Lydians 2 of 2 point(s) prices All of the above are correct 0 of 2 point(s) greater specialization in production, but not a higher standard of living. greater specialization and a higher standard of living. 0 of 2 point(s) M1 growth. the federal funds rate. 0 of 2 point(s) Suppose a bank has a 10 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement. Your Answer: Correct Answer: It has $500 in reserves and $4,500 in loans. It has $500 in reserves and $4,500 in loans. Question 9 Multiple Choice The Fed can directly protect a bank during a bank run by Your Answer: Correct Answer: Question 10 Multiple Choice Liquidity refers to Your Answer: Correct Answer: Question 11 Multiple Choice Which of the following executes open-market operations? Your Answer: Correct Answer: Question 12 Multiple Choice Paper money Your Answer: Correct Answer: Question 13 Multiple Choice has a high intrinsic value. New York Federal Reserve Bank New York Federal Reserve Bank Doing any of the above. lending reserves to the bank. 0 of 2 point(s) 2 of 2 point(s) the ease with which an asset is converted to the medium of exchange. the ease with which an asset is converted to the medium of exchange. 2 of 2 point(s) 0 of 2 point(s) is valuable because it is generally accepted in trade. 2 of 2 point(s) What part of the Fed meets to discuss changes in the economy and determine monetary policy? Your Answer: Correct Answer: Question 14 Multiple Choice The Federal Funds rate is the the FOMC the FOMC 0 of 2 point(s) Your Answer: Correct Answer: Question 15 Multiple Choice percentage of deposits that banks must hold as reserves. interest rate at which banks lend reserves to each other overnight. 2 of 2 point(s) If the public decides to hold less currency and more deposits in banks, bank reserves Your Answer: Correct Answer: Question 16 Multiple Choice increase and the money supply eventually increases. increase and the money supply eventually increases. 2 of 2 point(s) The agency responsible for regulating the money supply in the United States is Your Answer: Correct Answer: Question 17 Multiple Choice Who is credited with making the first coins? Your Answer: Correct Answer: Question 18 Multiple Choice Use the balance sheet for the following questions. Table 29-2 Assets Required Reserves Loans First Bank of Mason City Liabilities $20.00 Deposits $80.00 Romans Lydians 2 of 2 point(s) the Federal Reserve. the Federal Reserve. 0 of 2 point(s) $100.00 Refer to Table 29-2. If someone deposits $400 into the First Bank of Mason City, Your Answer: Correct Answer: All of the above are correct. All of the above are correct. Question 19 Multiple Choice One puzzle about the U.S. money stock is that Your Answer: Correct Answer: Question 20 Multiple Choice The money supply increases when the Fed Your Answer: Correct Answer: Question 21 Multiple Choice Which of the following is correct? Your Answer: Correct Answer: 0 of 2 point(s) the public holds so much currency relative to banks. there is so much currency per person. 2 of 2 point(s) buys bonds. The increase will be larger the smaller the reserve ratio is. buys bonds. The increase will be larger the smaller the reserve ratio is. 2 of 2 point(s) The Federal Reserve has 12 regional banks. The Board of Governors has 7 members who serve 14-year terms. The Federal Reserve has 12 regional banks. The Board of Governors has 7 members who serve 14-year terms. 0 of 2 point(s) Question 22 Multiple Choice A bank's liabilities include Your Answer: Correct Answer: Question 23 Multiple Choice both its reserves and the deposits of its customers. the deposits of its customers, but not its reserves. 2 of 2 point(s) Which of the following best illustrates the unit of account function of money? Your Answer: Correct Answer: You list prices for candy sold on your Web site, www.sweettooth.com, in dollars. You list prices for candy sold on your Web site, www.sweettooth.com, in dollars. 2 of 2 point(s) Question 24 Multiple Choice Economists use the word "money" to refer to Your Answer: Correct Answer: Question 25 Multiple Choice An increase in the money supply might indicate that the Fed had Your Answer: Correct Answer: Question 26 Multiple Choice When was the Federal Reserve created?? Your Answer: Correct Answer: Question 27 Multiple Choice Where did Ben Bernanke teach prior to going to Washington? Your Answer: Correct Answer: Question 28 Multiple Choice On a bank's T-account, Your Answer: Correct Answer: Question 29 Multiple Choice When the Fed conducts open-market purchases, Your Answer: it borrows money from member banks, which increases the money supply. deposits are assets, reserves are liabilities. reserves are assets, deposits are liabilities. 0 of 2 point(s) Harvard Princeton 0 of 2 point(s) 1913 1913 0 of 2 point(s) purchased bonds in an attempt to reduce the federal funds rate. purchased bonds in an attempt to reduce the federal funds rate. 2 of 2 point(s) those assets regularly used to buy goods and services. those assets regularly used to buy goods and services. 2 of 2 point(s) Correct Answer: Question 30 Multiple Choice it buys Treasury securities, which increases the money supply. 0 of 2 point(s) What was the first bill issued by a U.S. governemnt? Your Answer: Correct Answer: Question 31 Multiple Choice Mass Bay note Continental 0 of 2 point(s) If you deposit $100 of currency into a demand deposit at a bank, this action by itself Your Answer: Correct Answer: Question 32 Multiple Choice Credit cards Your Answer: Correct Answer: Question 33 Multiple Choice The Fed's primary tool to change the money supply is Your Answer: Correct Answer: Question 34 Multiple Choice If the reserve ratio is 10 percent, the money multiplier is Your Answer: Correct Answer: Question 35 Multiple Choice Money 1/10. 10. 2 of 2 point(s) changing the reserve requirement. conducting open market operations. 0 of 2 point(s) defer payments. defer payments. 0 of 2 point(s) increases the money supply. does not change the money supply. 2 of 2 point(s) Your Answer: Correct Answer: Question 36 Multiple Choice All of the above are correct. All of the above are correct. 2 of 2 point(s) The Federal Open Market Committee is made up of Your Answer: Correct Answer: 5 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. 5 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. 2 of 2 point(s) Question 37 Multiple Choice What does annuit coeptis mean? Your Answer: Correct Answer: Question 38 Multiple Choice Use the balance sheet for the following questions. Table 29-2 Assets Required Reserves Loans First Bank of Mason City Liabilities $20.00 Deposits $80.00 he as favored our undertaking he as favored our undertaking 0 of 2 point(s) $100.00 Refer to Table 29-2. If $1,000 is deposited into the First Bank of Mason City, and the bank takes no other actions, it's Your Answer: Correct Answer: Question 39 Multiple Choice Members of the Board of Governors Your and the presidents of the Federal Reserve regional banks are total reserves will increase by $200. assets will increase by $1,000. 0 of 2 point(s) Answer: Correct Answer: appointed by the U.S. president. are appointed by the U.S. president, while presidents of the Federal Reserve regional banks are appointed by the banks' boards of directors. 2 of 2 point(s) Question 40 Multiple Choice The money multiplier is defined as Your Answer: Correct Answer: Question 41 Multiple Choice Which of the following is included in M2 but not in M1? Your Answer: Correct Answer: Question 42 Multiple Choice savings deposits savings deposits 1/R 1/R 2 of 2 point(s) 0 of 2 point(s) In the nineteenth century when there were often bank runs caused by crop failures, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, these actions by the banks should have Your Answer: Correct Answer: Question 43 Multiple Choice Demand deposits are a type of Your Answer: Correct Answer: Question 44 Multiple Choice checking account. checking account. 2 of 2 point(s) decreased the money multiplier and increased the money supply. decreased both the money multiplier and the money supply. 2 of 2 point(s) The interest rate the Fed charges on loans it makes to banks is called Your Answer: the discount rate. Correct Answer: Question 45 Multiple Choice the discount rate. 0 of 2 point(s) The legal tender requirement means that Your Answer: Correct Answer: Question 46 Multiple Choice Debit cards Your Answer: Correct Answer: Question 47 Multiple Choice Current U.S. currency is Your Answer: Correct Answer: Question 48 Multiple Choice The "yardstick" people use to post prices and record debts is called Your Answer: Correct Answer: Question 49 Multiple Choice Which list ranks assets from most to least liquid? Your Answer: Correct Answer: Question 50 Multiple Choice Which of the following is a store of value? currency, stocks, fine art currency, stocks, fine art 2 of 2 point(s) a unit of account. a unit of account. 2 of 2 point(s) fiat money with intrinsic value. fiat money with no intrinsic value. 2 of 2 point(s) are used as a method of payment. are used as a method of payment. 0 of 2 point(s) the government must hold enough gold to redeem all currency. people are more likely to accept the dollar as a medium of exchange. 2 of 2 point(s) Your Answer: Correct Answer: Question 51 Multiple Choice M1 includes Your Answer: Correct Answer: Question 52 Multiple Choice All of the above are correct. All of the above are correct. 2 of 2 point(s) All of the above are correct. All of the above are correct. 2 of 2 point(s) Use the balance sheet for the following questions. Table 29-2 Assets Required Reserves Loans First Bank of Mason City Liabilities $20.00 Deposits $80.00 $100.00 Refer to Table 29-2. The reserve ratio is Your Answer: Correct Answer: Question 53 Multiple Choice Under a fractional reserve banking system, banks Your Answer: Correct Answer: Question 54 Multiple Choice In a 100-percent-reserve banking system, Your Answer: Correct Answer: Question 55 Multiple Choice banks hold as many reserves as they hold deposits. banks hold as many reserves as they hold deposits. 2 of 2 point(s) All of the above are correct. generally lend out a majority of the funds deposited. 2 of 2 point(s) 20 percent. 20 percent. 0 of 2 point(s) Which of the following does the Federal Reserve not do? Your Answer: Correct Answer: Question 56 Multiple Choice When a bank loans out $1,000, the money supply Your Answer: Correct Answer: Question 57 Multiple Choice A bank's assets include Your Answer: Correct Answer: Question 58 Multiple Choice both its reserves and the deposits of its customers. its reserves, but not the deposits of its customers. 0 of 2 point(s) decreases. increases. 0 of 2 point(s) convert Federal Reserve Notes into gold convert Federal Reserve Notes into gold 0 of 2 point(s) Imagine that the Federal Funds rate was below the level the Federal Reserve had targeted. To move the rate back towards it's target the Federal Reserve could Your Answer: Correct Answer: Question 59 Multiple Choice Bank runs Your Answer: Correct Answer: can be neither prevented nor stopped by the Federal Reserve. are a problem because banks only hold a fraction of deposits as reserves. sell bonds. This selling would increase reserves. sell bonds. This selling would reduce reserves. 0 of 2 point(s) COURSES > INTRO MACRO SECTION 4 SPRING 2008 SHEFLIN > ASSIGNMENTS > ASSIGNMENT 6 > REVIEW ASSESSMENT: HW 6 Review Assessment: HW 6 Name: Status: Score: HW 6 Completed 60 out of 112 point(s) Time Elapsed: 33 minutes and 40 seconds out of 1 hours allowed. Instructions: Question 1 Multiple Choice Compare the lags in fiscal policy to those of monetary policy. Your Answer: fiscal: short implementation, long impact; monetary long implementation, short impact 0 of 2 point(s) 0 of 2 point(s) Question 2 Multiple Choice Which of the following tends to make the size of a shift in aggregate demand resulting from a tax change smaller than otherwise? Your Answer: Question 3 Multiple Choice People own or hold money primarily because it Your Answer: Question 4 Multiple Choice The Employment Act of 1946 states that Your Answer: Question 5 Multiple Choice In the Chairman's game, what is the Fed's target and tool Your Answer: Question 6 Multiple Choice reserve requirements, open market operations 0 of 2 point(s) All of the above are correct. 0 of 2 point(s) can directly be used to buy goods and services. 0 of 2 point(s) the crowding-out effect 0 of 2 point(s) According to liquidity preference theory, equilibrium in the money market is achieved by adjustments in Your Answer: Question 7 Multiple Choice the interest rate. 0 of 2 point(s) If the MPC = 3/5, then the government purchases multiplier is Your Answer: Question 8 Multiple Choice Critics of stabilization policy argue that Your Answer: policy can be a source of, instead of a cure for, economic fluctuations. 0 of 2 point(s) 5/2. 0 of 2 point(s) Question 9 Multiple Choice For the following questions, use the diagram below: Figure 34-2 Refer to Figure 34-2. Which of the following would cause the aggregate demand curve to shift from AD1 to AD2? Your Register to View Answerdecrease in stock prices 0 of 2 point(s) Question 10 Multiple Choice If the Federal Reserve decided to lower interest rates, it could Your Answer: Question 11 Multiple Choice buy bonds to raise the money supply. 0 of 2 point(s) Which of the following correctly explains the crowding-out effect? Your Answer: An increase in government expenditures increases the interest rate and so reduces investment spending. 0 of 2 point(s) Question 12 Multiple Choice The Federal Funds rate is the interest rate Your Answer: Question 13 Multiple Choice Which of the following is the most liquid asset? Your Answer: Question 14 Multiple Choice funds in a checking account banks charge each other for short-term loans. 0 of 2 point(s) 0 of 2 point(s) Which of the following policies would Keynes' followers support when an increase in business optimism shifts the aggregate demand curve away from long-run equilibrium? Your Answer: Question 15 Multiple Choice increase the money supply 0 of 2 point(s) When the Fed buys government bonds, the reserves of the banking system Your Answer: Question 16 Multiple Choice increase, so the money supply increases. 0 of 2 point(s) The marginal propensity to consume (MPC) is defined as the fraction of Your Answer: Question 17 Multiple Choice For the following questions, use the diagram below: extra income that a household consumes rather than saves. 0 of 2 point(s) Figure 34-2 Refer to Figure 34-2. Which of the following is correct? Your Answer: Question 18 Multiple Choice An increase in government purchases is likely to Your Answer: Question 19 Multiple Choice decrease interest rates. 0 of 2 point(s) All of the above are correct. 0 of 2 point(s) Fiscal policy refers to the idea that aggregate demand is changed by changes in Your Answer: Question 20 Multiple Choice government spending and taxes. 0 of 2 point(s) For the U.S. economy, which of the following is the most important reason for the downward slope of the aggregate-demand curve? Your Answer: Question 21 Multiple Choice The multiplier effect is the multiplied impact on Your Answer: the money supply of a given increase in government purchases. the interest-rate effect 0 of 2 point(s) Question 22 Multiple Choice Which of the following shifts money demand to the right? Your Answer: Question 23 Multiple Choice If the stock market booms Your Register to View Answerdecrease in the interest rate 0 of 2 point(s) 0 of 2 point(s) household spending increases. To offset the effects of this on the price level and real GDP, the Fed would increase the money supply. 0 of 2 point(s) Question 24 Multiple Choice If the MPC is 0, the multiplier is Your Answer: Question 25 Multiple Choice Supply-side economists focus more than other economists on Your Answer: Question 26 Multiple Choice the multiplier affect of fiscal policy. 1. 0 of 2 point(s) 0 of 2 point(s) The government buys a bridge. The owner of the company that builds the bridge pays her workers. The workers increase their spending. Firms that the workers buy goods from increase their output. This type of effect on spending illustrates Your Answer: Question 27 Multiple Choice In the Chairman's game, what are the Fed's goals or objectives Your Answer: Question 28 Multiple Choice The government-purchases multiplier is defined as Your Answer: 1/(1 - MPC). b and c 0 of 2 point(s) the multiplier effect. 0 of 2 point(s) Question 29 Multiple Choice What did the latest FOMC statement say about the economy? Your Answer: Question 30 Multiple Choice Monetary policy Your Answer: firmer economic growth, moderating inflation 0 of 2 point(s) 0 of 2 point(s) can be implemented quickly and most of its impact on aggregate demand occurs very soon after policy is implemented. 0 of 2 point(s) Question 31 Multiple Choice Automatic stabilizers Your Answer: are changes in taxes or government spending that increase aggregate demand without requiring policy makers to act when the economy goes into recession. 0 of 2 point(s) Question 32 Multiple Choice People are likely to want to hold more money if the interest rate Your Answer: Question 33 Multiple Choice According to liquidity preference theory, the money supply curve is Your Answer: Question 34 Multiple Choice vertical. increases making the opportunity cost of holding money fall. 0 of 2 point(s) 0 of 2 point(s) In the short run, a decrease in the money supply causes interest rates to Your Answer: Question 35 Multiple Choice Opponents of active stabilization policy Your argue that fiscal policy is unable to change aggregate demand or increase, and aggregate demand to shift left. 0 of 2 point(s) Answer: aggregate supply. 0 of 2 point(s) Question 36 Multiple Choice In the short run an increase in government expenditures Your Answer: Question 37 Multiple Choice Keynes argued that aggregate demand is Your Answer: Question 38 Multiple Choice An increase in government spending initially and primarily shifts Your Answer: Question 39 Multiple Choice aggregate demand right. raises real GDP, but not the price level. 0 of 2 point(s) stable, because the economy returns to long-run equilibrium. 0 of 2 point(s) 0 of 2 point(s) In the early 1960s, the Kennedy administration made considerable use of Your Answer: Question 40 Multiple Choice monetary policy to stimulate the economy. 0 of 2 point(s) In recent years, the Federal Reserve has conducted policy by setting a target for Your Answer: Question 41 Multiple Choice the monetary growth rate. 0 of 2 point(s) The positive feedback from aggregate demand to investment is called Your Answer: Question 42 Multiple Choice Keynes used the term "animal spirits" to refer to Your Answer: Question 43 Multiple Choice firms' relentless efforts to maximize profits. 0 of 2 point(s) the investment accelerator. 0 of 2 point(s) Supply-side economists believe that a reduction in the tax rate Your Answer: Question 44 Multiple Choice Other things the same, automatic stabilizers tend to Your Answer: raise expenditures during expansions and lower expenditures during recessions. 0 of 2 point(s) shifts the aggregate supply curve to the right. 0 of 2 point(s) Question 45 Multiple Choice The price of imported oil rises. If the government wanted to stabilize output, which of the following could it do? Your Answer: Question 46 Multiple Choice If the interest rate is above the Fed's target, the Fed should Your Answer: Question 47 Multiple Choice If taxes Your Answer: Question 48 Multiple Choice For the following questions, consult the diagram below: Figure 34-1 increase, consumption decreases, aggregate demand shifts left. 0 of 2 point(s) buy bonds to increase the money supply. 0 of 2 point(s) increase government expenditures or increase the money supply 0 of 2 point(s) Refer to Figure 34-1. At an interest rate of 4 percent there is excess Your Answer: Question 49 Multiple Choice money supply equal to the distance between b and a. 0 of 2 point(s) According to liquidity preference theory, an increase in money demand for some reason other than a change in the price level causes Your Answer: Question 50 Multiple Choice If households view a tax cut as temporary, the tax cut Your Answer: Question 51 Multiple Choice has no affect on aggregate demand. 0 of 2 point(s) the interest rate to fall so aggregate demand shifts right. 0 of 2 point(s) What kinds of lags in fiscal policy does Walsh refer to as problematic? Your Answer: Question 52 Multiple Choice The lag problem associated with monetary policy is due mostly to Your Answer: Question 53 Multiple Choice All of the above are correct. 0 of 2 point(s) all of these 0 of 2 point(s) During expansions, automatic stabilizers make government expenditures Your Answer: Question 54 Multiple Choice For the following questions, consult the diagram below: Figure 34-1 fall and taxes rise. 0 of 2 point(s) Refer to Figure 34-1. If the current interest rate is 2 percent, Your Answer: Question 55 Multiple Choice For the following questions, consult the diagram below: Figure 34-1 All of the above are correct. 0 of 2 point(s) Refer to Figure 34-1. Which of the following is correct? Your Answer: If the interest rate is 3 percent, there is excess money supply, and the interest rate will rise. 0 of 2 point(s) Question 56 Multiple Choice Liquidity refers to Your Answer: the ease with which an asset is converted into a medium of exchange. COURSES > INTRO MACRO SECTION 4 SPRING 2008 SHEFLIN > ASSIGNMENTS > ASSIGNMENT 7 > REVIEW ASSESSMENT: HW7 Review Assessment: hw7 Name: Status: Score: hw7 Completed 80 out of 108 point(s) Time Elapsed: 47 minutes and 15 seconds out of 1 hours allowed. Instructions: Question 1 Multiple Choice The consumer price index is used to 0 of 2 point(s) Your Answer: Question 2 Multiple Choice monitor changes in the cost of living. 0 of 2 point(s) Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 195 for 2005. Ruth's 1931 salary was equivalent to a 2005 salary of about Your Answer: Question 3 Multiple Choice The supply of money increases when Your Answer: Question 4 Multiple Choice the Fed makes open-market purchases. 0 of 2 point(s) $1,026,000. 0 of 2 point(s) In the basket of goods that is used to compute the consumer price index, the three most important categories of consumer spending are Your Answer: Question 5 Multiple Choice The inflation tax Your Answer: is the increase in income taxes due to lack of indexation. CORRECT: Is a tax on everyone who holds money. housing, transportation, and food & beverages. 0 of 2 point(s) Question 6 Multiple Choice 0 of 2 point(s) An important difference between the GDP deflator and the consumer price index is that Your Answer: the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of some goods and services bought by consumers. 0 of 2 point(s) Question 7 Multiple Choice Unemployment would decrease and prices increase if Your Answer: Question 8 Multiple Choice aggregate demand shifted right. 0 of 2 point(s) You buy stock and its price rises just as much as the price level. Before taxes you made Your Register to View Answernominal gain, but no real gain, yet you pay taxes on the nominal gain. 0 of 2 point(s) Question 9 Multiple Choice The CPI is a measure of the overall cost of Your Answer: goods and services bought by a typical consumer. Question 10 Multiple Choice 0 of 2 point(s) Ingrid took a university teaching job as an assistant professor in 1974 at a salary of $10,000. By 2003, she had been promoted to full professor, with a salary of $50,000. If the price index in 1974 was 50 and the price index in 2003 was 180, what is Ingrid's'2003 salary in 1974 dollars? Your Answer: CORRECT Register to View Answer$13,889 Question 11 Multiple Choice 0 of 2 point(s) $36,000 Table 24-4 The table below pertains to an economy with only two goods -- books and calculators. The fixed basket consists of 5 books and 10 calculators. Year 2006 2007 2008 Price of books $24 30 32 Price of calculators $8 12 15 Refer to Table 24-4. Using 2006 as the base year, the inflation rate is Your Answer: CORRECT ANSWER: Question Multiple Choice 135 percent for 2007 and 155 percent for 2008. 35 percent for 2007 and 14.8 percent for 2008. 0 of 2 point(s) 12 Use the pair of diagrams below to answer the following questions. Figure 35-1 Refer to Figure 35-1. If the economy starts at c and 1, then in the short run, an increase in the money supply growth rate moves the economy to Your Answer: Question 13 Multiple Choice The shoeleather cost of inflation refers to Your Answer: Question 14 Multiple Choice the waste of resources used to maintain lower money holdings. 0 of 2 point(s) b and 2. 0 of 2 point(s) Over the last 70 years the average annual U.S. inflation rate was about Your Answer: Question 15 Multiple Choice If this year the CPI is 125 and last year it was 120, then Your Answer: Question 16 Multiple Choice All of the above are correct. 0 of 2 point(s) 4 percent. 0 of 2 point(s) Use the pair of diagrams below to answer the following questions. Figure 35-1 Cost-push or supply shock inflation leads to Your Answer: Question 17 Multiple Choice The consumer price index is used to Your Answer: Question 18 Multiple Choice measure the quantity of goods and services that the economy produces. MONITOR CHANGES IN THE COST OF LIVING 0 of 2 point(s) increase in prices/inflation and a decrease in output 0 of 2 point(s) If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is Your Answer: Question 19 Multiple Choice Inflation can be measured by the Your Answer: Question 20 Multiple Choice When prices are falling, economists say that there is percentage change in the consumer price index. 0 of 2 point(s) 5 percent. 0 of 2 point(s) Your Answer: Question 21 Multiple Choice deflation. 0 of 2 point(s) The nominal interest rate tells you Your Answer: how fast the number of dollars in your bank account rises over time. 0 of 2 point(s) Question 22 Multiple Choice By not taking into account the possibility of consumer substitution, the CPI Your Answer: Question 23 Multiple Choice may overstate or understate the cost of living, regardless of the extent to which prices rise. OVERSTATES THE COST OF LIVING 0 of 2 point(s) Suppose the CPI was 95 in 1955, and suppose currently the CPI is 475. According to the CPI, $100 today purchases the same amount of goods and services as Your Answer: CORRECT: a. $20.00 purchased in 1955. Question 24 Multiple Choice If policymakers decrease aggregate demand, the price level Your Answer: CORRECT: falls, but unemployment rises Question 25 Multiple Choice The real interest rate tells you Your Answer: how fast the purchasing power of your bank account rises over time. 0 of 2 point(s) 0 of 2 point(s) rises, but unemployment falls. 0 of 2 point(s) None of the above is correct. Question 26 Multiple Choice If the economy unexpectedly went from inflation to deflation, Your Answer: Question 27 Multiple Choice Menu costs refers to Your Answer: . the cost of more frequent price changes induced by higher inflation creditors would gain at the expense of debtors. 0 of 2 point(s) the distortion in incentives created by inflation when taxes do not adjust for inflation. Question 28 Multiple Choice 0 of 2 point(s) From 2004 to 2005, the CPI for medical care increased from 260.8 to 272.8. What was the inflation rate for medical care? Your Answer: Question 29 Multiple Choice When the consumer price index rises, the typical family Your Answer: has to spend more dollars to maintain the same standard of living. 0 of 2 point(s) 4.6 percent 0 of 2 point(s) Question 30 Multiple Choice The goal of the consumer price index is to measure changes in the Your Answer: Question 31 Multiple Choice High and unexpected inflation has a greater cost Your Answer: cost of living. 0 of 2 point(s) for savers in high income tax brackets than for savers in low income tax brackets. 0 of 2 point(s) Question 32 Multiple Choice The government's use of a statistical technique called hedonics Your Answer: is intended to account for the changing quality of products when calculating price movements. All of the above are correct. 0 of 2 point(s) Question 33 Multiple Choice The steps involved in calculating the consumer price index, in order, are as follows: Your Answer: Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index. 0 of 2 point(s) Question 34 Multiple Choice The CPI and the GDP deflator Your Answer: Question 35 Multiple Choice The GDP deflator reflects the Your Answer: generally move together. 0 of 2 point(s) current level of prices relative to the level of prices in the base year. 0 of 2 point(s) Question 36 Multiple Choice A German automobile company produces cars in the United States, with some of those cars being exported to other nations and some of them being sold within the United States. If the prices of these cars increase, then Your Answer: the GDP deflator will be unchanged and the CPI will increase. a. the GDP deflator and the CPI will both increase. Question 37 Multiple Choice The misery index is calculated as the Your Answer: Question 38 Multiple Choice inflation rate plus the unemployment rate. 0 of 2 point(s) 0 of 2 point(s) Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate? Your Answer: The real interest rate is the nominal interest rate minus the rate of inflation. 0 of 2 point(s) Question 39 Multiple Choice Table 24-4 The table below pertains to an economy with only two goods -- books and calculators. The fixed basket consists of 5 books and 10 calculators. Year 2006 2007 2008 Price of books $24 30 32 Price of calculators $8 12 15 Refer to Table 24-4. Using 2006 as the base year, the consumer price index is Your Answer: Question 40 Multiple Choice 100 in 2006, 135 in 2007, and 155 in 2008. 0 of 2 point(s) Andrew is offered a job in Little Rock, where the CPI is 80, and a job in New York, where the CPI is 125. Andrew's job offer in Little Rock is for $42,000. How much does the New York job have to pay in order for the two salaries to represent about the same purchasing power? Your Answer: Question 41 Multiple Choice Let 2002 be the base year; then Your Answer: Inflation rate in 2005 = $65,625 0 of 2 point(s) Question 42 Multiple Choice Deflation 0 of 2 point(s) Your Answer: Question 43 Multiple Choice reduces the ability to pay debts and raises the value of money. 0 of 2 point(s) Which of the following agencies calculates the CPI? Your Answer: Question 44 Multiple Choice Phillips found a negative relation between Your Answer: Question 45 Multiple Choice Wealth is distributed from creditors to debtors when inflation is Your Answer: Question 46 Multiple Choice low, whether it is expected or not. Unexpectedly High, 0 of 2 point(s) wage inflation and unemployment. 0 of 2 point(s) the Bureau of Labor Statistics 0 of 2 point(s) Suppose the price of gasoline increases rapidly, and that consumers respond by buying a smaller quantity of gasoline. The consumer price index Your Answer: understates the price increase due to the so-called income bias. d. overstates the price increase due to the so-called substitution bias. 0 of 2 point(s) Question 47 Multiple Choice Social Security payments are indexed for inflation using the CPI. A recent newspaper editorial claimed that Social Security recipients are harmed by years of low inflation because they do not receive as large an increase in their payments as they do in years of high inflation. Which of the following statements is correct? Your Answer: Question 48 The newspaper editorial is correct if the prices of the goods consumed by Social Security recipients increase faster than the prices of the goods in the market basket used to compute the CPI. 0 of 2 point(s) Multiple Choice Use the pair of diagrams below to answer the following questions. Figure 35-1 Demand-pull inflation leads to Your Answer: Question 49 Multiple Choice increase in output and an increase in prices/inflation 0 of 2 point(s) Which of the following is not a widely acknowledged problem with the CPI as a measure of the cost of living? Your Answer: Question 50 Multiple Choice The term inflation is used to describe a situation in which Your Answer: Question 51 Multiple Choice the overall level of prices in the economy is increasing. 0 of 2 point(s) unmeasured price change 0 of 2 point(s) When box office receipts are corrected for inflation, the No. 1 movie of all time is Your Answer: Question 52 Multiple Choice What basket of goods is used to construct the CPI? Gone With the Wind. 0 of 2 point(s) Your Answer: the goods and services that are typically bought by consumers as determined by government surveys 0 of 2 point(s) Question 53 Multiple Choice Suppose the price of a gallon of ice cream rises from $4 to $5 and the price of coffee rises from $2 to $2.50 . If the CPI rises from 150 to 200, then people likely will buy Your Answer: less ice cream and more coffee. Correct: More ice cream and more coffee. 0 of 2 point(s) Question 54 Multiple Choice The primary purpose of measuring the overall level of prices in the economy is to Your Answer: allow for the comparison of dollar figures from different points in time. ... View Full Document

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