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1)A person who is counted as unemployed by the Bureau of Labor Statistics a

Economics

1)A person who is counted as unemployed by the Bureau of Labor Statistics

a.

is also in the labor force.

b.

must have recently looked for work or be on temporary layoff.

c.

must be at least 16 years old.

d.

All of the above are correct.

 

2. Suppose that the adult population is 4 million, the number of unemployed is 0.25 million, and the labor-force participation rate is 75%.  What is the unemployment rate?

a.

6.25%

b.

8.3%

c.

9.1%

d.

18.75%

3. Minimum-wage laws

a.

create frictional unemployment, while firms paying wages above equilibrium to reduce worker turnover creates structural unemployment.

b.

create structural unemployment, while firms paying wages above equilibrium to reduce worker turnover creates frictional unemployment.

c.

and firms paying wages above equilibrium to reduce worker turnover both create structural unemployment.

d.

and firms paying wages above equilibrium to reduce worker turnover both create frictional unemployment.

Figure 15-1

    4. Refer to Figure 15-1.  At the equilibrium wage, how many workers are unemployed?

a.

0

b.

4000

c.

5000

d.

8000

 

 

  5. Other things the same, an increase in wages above their equilibrium level

a.

increases frictional unemployment but leaves the natural rate of unemployment unchanged.

b.

increases frictional unemployment and increases the natural rate of unemployment.

c.

increases structural unemployment but leaves the natural rate of unemployment unchanged.

d.

increases structural unemployment and increases the natural rate of unemployment.

 

 

 6. Workers waiting for jobs to open up is most closely associated with

a.

cyclical unemployment.

b.

frictional unemployment.

c.

seasonal unemployment.

d.

structural unemployment.

 

. 7. The deviation of unemployment from its natural rate is called

a.

the normal rate of unemployment.

b.

deviant unemployment.

c.

cyclical unemployment.

d.

fluctuating unemployment.

 

8.         Two bonds have the same term to maturity.  The first was issued by a state government and the probability of default is believed to be low.  The other was issued by a corporation and the probability of default is believed to be high.  Which of the following is correct?

a.

Because they have the same term to maturity the interest rates should be the same.

b.

Because of the differences in tax treatment and credit risk, the state bond should have the higher interest rate.

c.

Because of the differences in tax treatment and credit risk, the corporate bond should have the higher interest rate.

d.

It is not possible to say if one bond has a higher interest rate than the other.

 

9. Stock represents

a.

a claim to a share of the profits of a firm.

b.

ownership in a firm.

c.

equity finance.

d.

All of the above are correct

 

 

 

 

 

 

 

10. What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

a.

The supply of and demand for loanable funds would shift right.

b.

The supply of and demand for loanable funds would shift left.

c.

The supply of loanable funds would shift right and the demand for loanable funds would shift left.

d.

None of the above is correct.

 

11. If in the past Congress had taken additional actions to make saving more rewarding, then today it is likely that the equilibrium interest rate

a.

and the equilibrium quantity of loanable funds both would be lower.

b.

and the equilibrium quantity of loanable funds both would be higher.

c.

would be higher and the equilibrium quantity of loanable funds would be lower.

d.

would be lower and the equilibrium quantity of loanable funds would be higher.

 

12.  An increase in the budget deficit

a.

makes investment spending fall.

b.

makes investment spending rise.

c.

does not affect investment spending.

d.

may increase, decrease, or not affect investment spending.

 

13.  Crowding out occurs when investment declines because

a.

a budget deficit makes interest rates rise.

b.

a budget deficit makes interest rates fall.

c.

a budget surplus makes interest rates rise.

d.

a budget surplus makes interest rates fall.

 

14. According to the loanable funds model, which of the following events would result in higher interest rates and greater saving?

a.

Firms become pessimistic about the future and, as a result, they cut back on their plans to buy new equipment and build new factories.

b.

The government goes from running a budget deficit to running a budget surplus.

c.

Congress passes a reform of the tax laws that encourages greater saving.

d.

Congress passes a reform of the tax laws that encourages greater investment.

 

15. Which of the following are effects of an increased budget deficit?

a.

the supply of loanable funds does not change; a higher interest rate reduces private saving

b.

the supply of loanable funds does not change; a higher interest rate raises private saving

c.

at any interest rate the supply of loanable funds is less; a higher interest rate reduces private saving

d.

at any interest rate the supply of loanable funds is less; a higher interest rate raises private saving

 

16. Economists use the term money” to refer to

a.

all wealth.

b.

all assets, including real assets and financial assets.

c.

all financial assets, but not real assets.

d.

those types of wealth that are regularly accepted by sellers in exchange for goods and services.

 

 17. Which of the following is a store of value?

a.

currency

b.

U.S. government bonds

c.

fine art

d.

All of the above are correct.

18. Which of the following functions of money is also a common function of most other financial assets?

a.

a unit of account

b.

a store of value

c.

medium of exchange

d.

None of the above is correct.

 

19. The ease with which an asset can be

a.

traded for another asset determines whether or not that asset is a unit of account.

b.

transported from one place to another determines whether or not that asset could serve as fiat money.

c.

converted into a store of value determines the liquidity of that asset.

d.

converted into the economy’s medium of exchange determines the liquidity of that asset.

 

20. When in France you notice that prices are posted in euros, this best illustrates money’s function as

a.

a store of value.

b.

a medium of exchange.

c.

a unit of account.

d.

a method of barter.

 

21. Which of the following is not included in M1?

a.

a $5 bill in your wallet

b.

$100 in your checking account

c.

$500 in your savings account

d.

All of the above are included in M1.

 

 22. John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account. As a result of this transfer by itself

a.

M1 increases by $2,500 and M2 decreases by $2,500.

b.

M1 increases by $2,500 and M2 stays the same.

c.

M1 decreases by $2,500 and M2 stays the same.

d.

M1 decreases by $2,500 and M2 decreases by $2,500.

 

23. The agency responsible for regulating the money supply in the United States is

a.

the Comptroller of the Currency.

b.

the U.S. Treasury.

c.

the Federal Reserve.

d.

the U.S. Bank.

 

24. When conducting an open-market purchase, the Fed

a.

buys government bonds, and in so doing increases the money supply.

b.

buys government bonds, and in so doing decreases the money supply.

c.

sells government bonds, and in so doing increases the money supply.

d.

sells government bonds, and in so doing decreases the money supply.

 

 

 

25. If a bank has a reserve ratio of 8 percent, then

a.

government regulation requires the bank to use at least 8 percent of its deposits to make loans.

b.

the bank’s ratio of loans to deposits is 8 percent.

c.

the bank keeps 8 percent of its deposits as reserves and loans out the rest.

d.

the bank keeps 8 percent of its assets as reserves and loans out the rest.

 

26.   As the reserve ratio increases, the money multiplier

a.

increases.

b.

does not change.

c.

decreases.

d.

could do any of the above.

 

Table 16-2.  An economy starts with $10,000 in currency.  All of this currency is deposited into a single bank, and the bank then makes loans totaling $9,250.  The T-account of the bank is shown below.

Assets

Liabilities

Reserves              $750

Deposits          $10,000

Loans                  9,250

 

 

27 .  The bank’s reserve ratio is

a.

7.50 percent.

b.

8.12 percent.

c.

92.50 percent.

d.

100 percent.

 

28. Refer to Table 16-2.  If all banks in the economy have the same reserve ratio as this bank, then an increase in reserves of $150 for this bank has the potential to increase deposits for all banks by

a.

$866.67.

b.

$1,666.67.

c.

$2,000.00.

d.

an infinite amount.

 

29. When the Fed purchases $200 worth of government bonds from the public, the U.S. money supply eventually increases by

a.

more than $200.

b.

exactly $200.

c.

less than $200.

d.

None of the above are correct.

 

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