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ENT213 Final
| Question | Answer |
|---|---|
| What is not true about barter? | It allows people to obtain more goods than they can using money. |
| Professor Williams tutors her next-door neighbor's son in economics. Instead of paying her for this service,the neighbor washes the professor's car. This is an example of: | Barter. |
| Money is functioning as a medium of exchange when you: | Buy lunch at a fast food restaurant for yourself and your friend. |
| Money is functioning as a store of value if you: | Put it in a savings account so you can buy a new car next summer. |
| Money is functioning as a standard of value if you: | Compare the prices of running shoes online to those in a sporting goods store. |
| The basic money supply (M1) includes: | Currency, transactions accounts, and traveler's checks. |
| Savings accounts and certificates of deposit are called | Near money |
| Martin takes $150 out of his checking account and hides it in his house as cash. The immediate result of this transaction is that M1: | Does not change in value. |
| If Edgar takes $100 out of his savings account and deposits it into his checking account, the immediate result of this transaction is that M1: | Increases by $100. |
| Money creation occurs when: | Banks make loans to borrowers. |
| What does not occur when a bank makes a loan? | It transfers money from spenders to savers. |
| Suppose a bank has $50,000 in transactions accounts and a minimum reserve requirement of 10 percent. Then required reserves are: | $5,000 |
| A bank may lend an amount equal to its: | Excess reserves. |
| If excess reserves are $50,000, demand deposits are $1,000,000, and the minimum reserve requirement is 5 percent, then total reserves are: | $100,000 |
| Suppose a bank has $1,500,000 in deposits, a minimum reserve requirement of 20 percent, and total reserves of $350,000. Then the bank has excess reserves of: | $50,000 |
| Suppose a bank has $1,000,000 in deposits, a minimum reserve requirement of 15 percent, and bank reserves of $170,000. Then the bank can make new loans in the amount of: | $20,000 |
| Initially a bank has a minimum reserve requirement of 15 percent and no excess reserves. If $200,000 is deposited in the bank, then ceteris paribus: | Excess reserves will increase by $170,000. |
| The money multiplier represents: | The number of deposit dollars the banking system can create from $1 of excess reserves. |
| If total reserves for a bank are $10,000, excess reserves are zero, and demand deposits are $100,000, then the money multiplier must be: | 10. |
| If total reserves for a bank are $150,000, excess reserves are zero, and demand deposits are $1,000,000, then the money multiplier must be: | 6.67. |
| Suppose the entire banking system has $10 million in excess reserves and a required reserve ratio of 5 percent. The deposit-creation potential of the banking system is: | $200 million |
| Suppose the entire banking system has $10,000 in excess reserves and a required reserve ratio of 20 percent. The deposit-creation potential of the banking system is: | $50,000 |
| A reduction in the money supply should shift the aggregate: | Demand curve to the left. |
| Monetary policy involves the use of money and credit controls to: | Shift the aggregate demand curve. |
| What not a basic monetary policy tool used by the Fed? | deposit insurance |
| A change in the reserve requirement affects: | The money multiplier and excess reserves. |
| Ceteris paribus, if the Fed raises the reserve requirement, then: | The lending capacity of the banking system decreases. |
| Suppose the banks in the Federal Reserve System have $400 million in transactions accounts and the reserve requirement is 0.10. Ceteris paribus, if the reserve requirement is decreased to 0.05, then excess reserves will increase by: | $20 million. |
| By raising or lowering the _______, the Fed changes the cost of money for banks, which impacts the incentive to borrow reserves. | Discount rate |
| If the Fed wishes to increase the money supply it can: | Decrease the discount rate. |
| The purchase and sale of government bonds by the Fed for the purpose of altering bank reserves is referred to as: | Open-market operations. |
| If the Fed wants to increase bank reserves, it can: | Buy bonds. |
| If the Fed wants to reduce bank reserves, it can: | Raise the discount rate or sell bonds on the open market. |
| What cannot be used to shift aggregate demand? | A change in the price level. |
| Ceteris paribus, what will occur if the Fed buys bonds through open-market operations? | The aggregate demand curve should shift rightward |
| To decrease the money supply the Fed can: | Raise the reserve requirement, raise the discount rate, or sell bonds. |
| If the banking system has a required reserve ratio of 20 percent, then the money multiplier is: | 5.0 |
| What is true about barter? | It is more likely to occur if people lose faith in a nation's currency. |
| What is true about barter? | It is considered to be less efficient for an economy than the use of money. |
| What is true about barter? | It involves the direct exchange of one good or service for another. |
| What occurs when a bank makes a loan? | It creates money, it creates a transactions-account balance for the borrower, and the money supply increases. |
| What are some basic monetary policy tools used by the Fed? | The reserve requirement, the discount rate, and the sale and purchase of Treasury bonds |
| What can be used to shift aggregate demand? | A change in government spending, a change in taxes, and monetary policy. |
| Market structure is determined by: | The number and relative size of firms in an industry. |
| An industry in which many firms produce similar products but each firm has significant brand loyalty is known as: | Monopolistic competition. |
| Which of the following is characteristic of a perfectly competitive market? | There are low barriers to entry |
| A perfectly competitive firm is a price taker because: | It has no control over the market price of its product. |
| A perfectly competitive firm currently sells 30,000 cartons of eggs at $1.25 each. If the firm wants to sell one more carton of eggs, the firm: | Should price the carton at $1.25. |
| A flat or horizontal demand curve for a firm indicates that: | The firm has no market power. |
| If a perfectly competitive firm wanted to maximize its total revenues, it would produce: | As much output as it is capable of producing. |
| If the market price was below the ATC and at the current firm's rate of production the MC was less than the market price an increase in output would: | increase profit but economic profits would still be negative. |
| If price is greater than marginal cost, a competitive firm should increase output because additional units of output will: | Add to the firm's profits (or reduce losses). |
| Economic profits disappear when: | Price falls to the level of minimum average total cost. |
| Assume that for an individual firm MC = AVC at $6 and MC = ATC at $10 and MC = price at $12 then the firm will be operating: | where economic profits are positive. |
| What is not true for a monopoly? | It is a price taker. |
| What is true of a monopoly? | The demand curve for the monopoly and the market are the same, it has no direct competitors, and it can use its market power to charge higher prices than a competitive firm. |
| Monopolists are price: | Makers, but perfectly competitive firms are price takers. |
| Since a monopoly has market power: | Its marginal revenue curve is below its demand curve. |
| The change in total revenue that results from a one-unit increase in quantity sold is: | Marginal revenue. |
| For a monopolist, after the first unit of output, marginal revenue is always: | Less than price. |
| Suppose a monopoly firm produces software and can sell 10 items per month at a price of $50 each. In order to increase sales by one item per month, the monopolist must lower the price of its software by $1 to $49. The marginal revenue of the 11th item is: | $39. |
| A monopolist sets price at a point on the _______ curve, corresponding to the rate of output determined by the intersection of ______. | Demand; marginal revenue and marginal cost. |
| In terms of pricing, which of the following is not true for a monopolist? | Price charged is always less than marginal revenue. |
| Total profit can be calculated as: | The difference between price and average total cost multiplied by the quantity sold. |
| Suppose a market is dominated by three firms. This type of market is called: | An oligopoly. |
| As the economy falls from the peak to the trough of the business cycle: | Cyclical unemployment should increase and real GDP should decline. |
| Real GDP measures changes in: | Output but not prices. |
| All persons over age 16 who are either working for pay or actively seeking paid employment refers to: | The labor force. |
| Who is an example of a part of the labor force? | The CEO of General Motors |
| Who would be counted as unemployed? | Bob, a college student looking for summer work. |
| If the population of a country is 1,000,000 people, its labor force consists of 600,000, and 60,000 people are unemployed, the unemployment rate is: | 10.0 percent. |
| If the population of a country is 220 million people, its labor force consists of 115 million, and 99 million people are employed, the unemployment rate is: | 13.9 percent. |
| When construction workers seek work because the ground is covered in snow and ice, the unemployment rate goes up. This situation is an example of: | Seasonal unemployment. |
| After quitting one job, some people with marketable skills find that it takes several months to find a new job. This is an example of which type of unemployment? | Frictional unemployment |
| An office worker who loses her job because she does not have the necessary computer skills is, ceteris paribus: | Structurally unemployed. |
| Which of the following is likely to reduce the level of structural unemployment? | Federally funded job-training programs |
| A stock person who is laid off by a department store because retail sales across the country have decreased is _______ unemployed. | Cyclically |
| According to macroeconomists, a goal for the economy is a: | Low unemployment rate. |
| When the unemployment rate falls to the full-employment level: | There is increased concern about inflation. |
| If the price of computers falls during a period when the average price level remains constant, which of the following has occurred? | A change in relative prices |
| If the number of dollars you receive every year is the same, but prices are rising, then your nominal income: | Stays the same but your real income falls. |
| Patricia's nominal annual income in 2009 was $60,000. If the rate of inflation is constant at 10 percent, in order to keep Patricia's real income constant, her nominal income in the year 2010 should be: | $66,000. |
| The value of a painting, held as an asset, increased in value by 100 percent from 1970 -2010. Suppose during the same period average prices in the economy rose by 150 percent.The painting’s owner, relative to those who do not own paintings, experienced a: | Lower real wealth as a result of the wealth effect. |
| If a market basket of goods cost $100 in the base year and $110 in a later year, then average prices have increased by: | 10 percent. |
| Keynes and classical economists disagree about whether: | Government intervention should be used to correct business cycles. |
| The various quantities of output that all market participants are willing and able to buy at alternative price levels in a given time period is: | Aggregate demand. |
| Ceteris paribus, based on the aggregate demand curve, if the price level _______ the quantity of real output _______ increases. | Decreases; demanded |
| The aggregate demand curve is downward sloping because, ceteris paribus: | People are willing and able to buy more goods and services at lower average prices. |
| Ceteris paribus, based on the real balances effect, if the price level falls: | Purchasing power increases. |
| According to the foreign trade effect, when the U.S. price level decreases, U.S. consumers are likely to buy: | More American-made products. |
| Which of the following is an example of the foreign trade effect, assuming the U.S. price level decreases? | U.S. goods are less expensive for Americans so they buy fewer imports and more domestic goods. |
| Ceteris paribus, based on the aggregate supply curve, if the price level _______ the quantity of real output _______ increases. | Increases; produced |
| The aggregate supply curve is positively sloped because as the price level increases: | Profit margins increase in the short run. |
| Macro equilibrium always occurs: | When aggregate demand equals aggregate supply at the average price level. |
| If the price level is: | Above equilibrium, this results in excess supply. |
| Which of the following is likely to cause a leftward shift in the aggregate supply curve, ceteris paribus? | An increase in the cost of natural gas |
| Which of the following is likely to occur if OPEC increases the amount of oil it supplies and domestic energy prices fall, ceteris paribus? | Aggregate supply will increase or shift to the right. |
| Which of the following is likely to occur if people reduce their spending because they are worried about an economic downturn, ceteris paribus? | Aggregate demand will decrease or shift to the left |
| Keynes viewed the economy as inherently unstable and suggested that during a recession policy makers should: | Cut taxes and/or increase government spending. |
| What fiscal policy tools are used to shift the aggregate demand curve? | Government spending and taxes |
| Which of the following could cause a recession? | A decline in aggregate demand |
| The four components of aggregate demand are: | Consumption, investment, government spending, and net exports. |
| Ceteris paribus, an increase in _______ will cause an increase in ______. | Consumer confidence; aggregate demand |
| In a graph of the aggregate demand curve, an increase in investment by businesses is represented by a: | Rightward shift of the curve. |
| Ceteris paribus, which of the following changes in the aggregate demand curve best characterizes a cutback in exports? | A leftward shift |
| Which of the following is consistent with what Keynes believed? | Fiscal policy should be used to shift the aggregate demand curve |
| On October 24, 1929, the stock market crashed. By the end of the year, over $40 billion of wealth had vanished. Which of the following indicates the appropriate change in the U.S. economy? | Aggregate demand shifted to the left. |
| When the economy overheats, the government sometimes cools it down with higher taxes, spending reductions, and less money. Which of the following indicates the appropriate change in the U.S. economy after government intervention? | Aggregate demand shifts to the left |
| The GDP gap is: | The difference between equilibrium output and full-employment output. |
| When aggregate demand exceeds the full-employment level of output, the result is: | A higher average price level. |
Created by:
Kelsee