Macroeconomics Exam

Set 2

Question 1 of 40

2.5 Points

An event that allows the economy to operate more efficiently by producing more outputs without using any more inputs is referred to as __________.

[removed] A. absolute progress
[removed] B. efficiency progress
[removed] C. capital investment
[removed] D. technological progress

Question 2 of 40

2.5 Points

In a simple economy without government or foreign trade, any income not consumed is called __________.

[removed] A. investment
[removed] B. net investment
[removed] C. saving
[removed] D. depreciation

Question 3 of 40

2.5 Points

When the government has a budget deficit or surplus, it enters the __________.

[removed] A. market for loanable funds
[removed] B. subprime housing market
[removed] C. bond market
[removed] D. government-sponsored mortgage lenders market

Question 4 of 40

2.5 Points

If a firm increases its capital stock per person while holding constant the number of workers employed, the firm is said to experience __________.

[removed] A. capital augmentation
[removed] B. investment deepening
[removed] C. labor intensity
[removed] D. capital deepening

Question 5 of 40

2.5 Points

Which of the following uses of tax revenues collected by the government leads to increased capital deepening?

[removed] A. building roads
[removed] B. increased foreign aid
[removed] C. Medicare payments
[removed] D. Social Security payments

Question 6 of 40

2.5 Points

An increase in the capital stock will __________.

[removed] A. shift the production function downward
[removed] B. shift the production function upward
[removed] C. flatten the production function
[removed] D. steepen the production function

Question 7 of 40

2.5 Points

In making accurate comparisons of GDP across countries, it is important to take differences in __________ into account.

[removed] A. population size ??
[removed] B. the average age of the population
[removed] C. family size
[removed] D. all of the above

Question 8 of 40

2.5 Points

Nations with low levels of GDP per capita may converge to richer nations if __________.

[removed] A. nations with high levels of income experience a continuously increasing growth rate
[removed] B. nations with lower levels of income grow more quickly than those with higher levels of income
[removed] C. nations with lower levels of income spend less on investment
[removed] D. nations with lower levels of income grow more slowly than those with higher levels of income

Question 9 of 40

2.5 Points

Convergence refers to closing the gap in __________ between poorer countries and richer countries.

[removed] A. real GDP
[removed] B. real GDP per capita
[removed] C. the growth rate in real GDP
[removed] D. the growth rate in real GDP per capita

Question 10 of 40

2.5 Points

The fraction of additional income spent on imports is called the __________.

[removed] A. import function
[removed] B. marginal propensity to import
[removed] C. marginal propensity to export
[removed] D. trade balance

Question 11 of 40

2.5 Points

According to the text, __________ is perhaps the most critical aspect of a country's economic performance.

[removed] A. growth in GDP
[removed] B. the inflation rate
[removed] C. the unemployment rate
[removed] D. the living standard

Question 12 of 40

2.5 Points

It is possible for an economy to become more productive and per-capita output to increase if __________.

[removed] A. new ideas are generated
[removed] B. inventions are developed
[removed] C. technology is improved
[removed] D. all of the above

Question 13 of 40

2.5 Points

An increase in the level of U.S. exports __________ the demand for goods and service produced in the United States.

[removed] A. decreases
[removed] B. increases ???
[removed] C. increases or decreases
[removed] D. does not affect

Question 14 of 40

2.5 Points

If government increases spending and wants to maintain a balanced budget, it should __________.

[removed] A. decrease taxes by an equal amount
[removed] B. increase taxes by an equal amount
[removed] C. decrease taxes by an amount equal to the increase in spending multiplied by the tax multiplier
[removed] D. increase taxes by an amount equal to the increase in spending multiplied by the tax multiplier

Question 15 of 40

2.5 Points

Fluctuations in the demand and supply of loanable funds will in turn bring changes to the __________ of lent and borrowed funds.

[removed] A. product recipient
[removed] B. mortgage-backed securities
[removed] C. equilibrium quantity
[removed] D. equilibrium quality

Question 16 of 40

2.5 Points

Suppose that for a given firm, the increase in output resulting from the last worker hired is less than the increase in output of the previous worker hired. This is an example of __________.

[removed] A. diminishing returns
[removed] B. constant returns
[removed] C. increasing return
[removed] D. capital deepening

Question 17 of 40

2.5 Points

The idea that investment in comprehensive education in developing countries leads to permanent increases in the rate of technological progress is an example of __________.

[removed] A. increasing economic inequality
[removed] B. capital deepening
[removed] C. new growth theory
[removed] D. a trade-off between human capital and technology

Question 18 of 40

2.5 Points

The multiplier that arises from equal increases in government spending and taxes is called the __________.

[removed] A. simple multiplier
[removed] B. tax multiplier
[removed] C. balanced budget multiplier
[removed] D. government spending multiplier

Question 19 of 40

2.5 Points

Trade deficits always lead to future decreases in consumption if the trade deficits __________.

[removed] A. support current investment
[removed] B. support current consumption
[removed] C. support either current investment or current consumption
[removed] D. require borrowing from abroad

Question 20 of 40

2.5 Points

What happens to U.S. GDP when foreign countries experience prosperity?

[removed] A. It increases because the United States will export more product to those countries.
[removed] B. It decreases because the foreign countries will now buy more of their own products.
[removed] C. It decreases because the foreign countries will be able to export more at a lower cost.
[removed] D. It does not change because U.S. GDP is not affected by other countries' prosperity.

Question 21 of 40

2.5 Points

If money is used as a mechanism to hold purchasing power for a period of time, it is functioning as a __________.

[removed] A. standard of value
[removed] B. store of value
[removed] C. medium of exchange
[removed] D. unit of account

Question 22 of 40

2.5 Points

Money guarantees that there is a(n. __________, because it will always be accepted in exchange for a desired service or good.

[removed] A. double coincidence of wants
[removed] B. open market
[removed] C. fiat
[removed] D. human interaction

Question 23 of 40

2.5 Points

An open market __________ by the Fed decreases the money supply, which leads to __________ interest rates and a fall in investment spending.

[removed] A. sale; increased
[removed] B. sale; decreased
[removed] C. purchase; increased
[removed] D. purchase; decreased

Question 24 of 40

2.5 Points

The group responsible for deciding on monetary policy is the __________.

[removed] A. Federal Open Market Committee
[removed] B. Board of Governors only
[removed] C. Federal Advisory Council
[removed] D. group of 12 Federal Reserve Bank presidents only

Question 25 of 40

2.5 Points

One of the essential functions that a bank performs is __________.

[removed] A. purchasing government bonds
[removed] B. creating deposits by lending required reserves
[removed] C. transferring money from savers to lenders
[removed] D. owning assets like real estate

Question 26 of 40

2.5 Points

When money is used to express the value of goods and services, it is functioning as a __________.

[removed] A. medium of exchange
[removed] B. store of value
[removed] C. unit of account
[removed] D. store of purchasing power

Question 27 of 40

2.5 Points

The Fed can change the money supply by buying or selling long-term Treasury bonds. Purchasing long-term securities is commonly called __________.

[removed] A. open market operations
[removed] B. discount operations
[removed] C. federal funds speculation
[removed] D. quantitative easing

Question 28 of 40

2.5 Points

To increase the money supply using the reserve requirements, what would the Fed typically do?

[removed] A. increase the reserve requirement for banks
[removed] B. reduce the reserve requirement for banks
[removed] C. make each bank set its own reserve levels
[removed] D. let each bank get more currency from the Treasury

Question 29 of 40

2.5 Points

The Federal Reserve influences the level of interest rates in the short run by changing the __________.

[removed] A. demand for money through open market operations
[removed] B. demand for money through changes in reserve requirements
[removed] C. supply of money through open market operations
[removed] D. supply of money through changes in stock market operations

Question 30 of 40

2.5 Points

Consider how the value of the U.S. dollar affects the worldwide increase in commodity prices to answer the following two question(s.. Starting in the summer of 2010, there was a rise in prices of commodities such as oil and food worldwide. Some economists suggested that monetary policy in the United States was the cause of the worldwide commodity boom. Some economists noticed that the change in the value of the U.S. dollar was largely due to the change in interest rates, and the change in interest rates occurred because of the Fed's use of __________ to further stimulate the economy.

[removed] A. open market sales
[removed] B. quantitative easing
[removed] C. discount operations
[removed] D. open market purchases

Question 31 of 40

2.5 Points

All of the following statements are true of the Federal Reserve EXCEPT __________.

[removed] A. it acts as the central bank for all countries in the world
[removed] B. along with the Board of Governors, the chairperson of the Federal Reserve determines monetary policies and strategies based on the state of economy
[removed] C. it supplies currency to the economy
[removed] D. it holds reserves from banks and regulates banks

Question 32 of 40

2.5 Points

The supply of money in the U.S. economy is determined primarily by __________.

[removed] A. decisions made by the Federal Reserve and the U.S. Treasury
[removed] B. the actions of the Federal Reserve and the banking system
[removed] C. consumers and the banking system
[removed] D. the demand for money in the economy

Question 33 of 40

2.5 Points

A bank's reserves __________.

[removed] A. are the sum of its excess and required reserves
[removed] B. can be held as cash in its vault
[removed] C. can be held as deposits with the Federal Reserve
[removed] D. all of the above

Question 34 of 40

2.5 Points

Good news for the economy is bad news for bond prices, because __________.

[removed] A. the increased demand for money will increase interest rates
[removed] B. when real GDP increases, demand for money will decrease
[removed] C. bond prices move in the same direction as interest rates
[removed] D. when interest rates increase during growing GDP, bond prices will increase

Question 35 of 40

2.5 Points

An increase in the reserve requirement __________.

[removed] A. increases the money supply, which leads to increased interest rates and a decrease in GDP
[removed] B. increases the money supply, which leads to decreased interest rates and a decrease in GDP
[removed] C. decreases the money supply, which leads to increased interest rates and a decrease in GDP
[removed] D. decreases the money supply, which leads to decreased interest rates and a decrease in GDP

Question 36 of 40

2.5 Points

Loans are examples of a bank's __________.

[removed] A. assets
[removed] B. liabilities
[removed] C. net worth
[removed] D. balance sheet

Question 37 of 40

2.5 Points

When checks are exchanged between banks, the Fed oversees the banks to ensure the appropriate funds have been transferred. This is known as __________.

[removed] A. check kiting
[removed] B. check clearing
[removed] C. check floating
[removed] D. check balancing

Question 38 of 40

2.5 Points

The Federal Reserve System was created by the __________.

[removed] A. U.S. Treasury
[removed] B. President
[removed] C. Congress
[removed] D. Supreme Court

Question 39 of 40

2.5 Points

M1 __________.

[removed] A. is the sum of currency plus traveler's checks
[removed] B. is the narrowest definition of the money supply
[removed] C. includes small time deposits
[removed] D. includes credit cards

Question 40 of 40

2.5 Points

Equilibrium in the money market occurs when __________.

[removed] A. the quantity of money demanded equals the quantity of money supplied
[removed] B. the quantity of money demanded is less than the quantity of money supplied
[removed] C. the quantity of money demanded is more than the quantity of money supplied
[removed] D. the interest rate equals the money supply

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