Economics Review Chapters 7-12

20 Questions | Total Attempts: 93

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Economics Quizzes & Trivia

A review of Chapters 7-12 of "Principles of Macroeconomics. "


Questions and Answers
  • 1. 
    Spending by consumers on consumption goods, spending by businesses on investment goods, spending by government and spending by foreigners on net exports make up
    • A. 

      Disposable national income

    • B. 

      The equilibrium economy

    • C. 

      Aggregate supply

    • D. 

      Aggregate expenditure

    • E. 

      Discretionary spending

  • 2. 
    If $30 billion in new investment is added to the economy and MPC is 0.9, national income would increase by
    • A. 

      $30 billion

    • B. 

      $90 billion

    • C. 

      $100 billion

    • D. 

      $210 billion

    • E. 

      $300 billion

  • 3. 
    Last month 5,000 people decided to quit their jobs in order to seek better employment opportunities. These people are
    • A. 

      Structurally unemployed

    • B. 

      Frictionally unemployed

    • C. 

      Discouraged workers

    • D. 

      Cyclically unemployed

    • E. 

      Underemployed workers

  • 4. 
    Among the losers from inflation are
    • A. 

      Savers and borrowers

    • B. 

      Landlords and the government

    • C. 

      Borrowers and the government

    • D. 

      Those on a fixed income and borrowers

    • E. 

      Those on a fixed income and savers

  • 5. 
    Government spending on interstate highways, public housing facilities, and defense projects are all ways that the president can
    • A. 

      Close a recessionary gap

    • B. 

      Close an inflationary gap

    • C. 

      Combat inflation

    • D. 

      Shift the aggregate demand curve to the left

    • E. 

      Reverse the paradox of thrift

  • 6. 
    A government spending and taxation policy to create full employment without inflation is known as
    • A. 

      Closing an inflationary gap

    • B. 

      Fiscal policy

    • C. 

      Closing a recessionary gap

    • D. 

      A balanced budget

    • E. 

      A balanced budget multiplier

  • 7. 
    The capital-output ratio is measured by dividing
    • A. 

      The capital stock by labor

    • B. 

      Output by the capital stock

    • C. 

      The capital stock by GDP

    • D. 

      The change in labor by GDP

    • E. 

      GDP by labor

  • 8. 
    An increase in which of the following will shift the economy's productivity (GDP/L) curve?
    • A. 

      The quantity of laborers

    • B. 

      Technology

    • C. 

      Capital

    • D. 

      Output

    • E. 

      Consumption

  • 9. 
    The primary functions of money are
    • A. 

      Velocity, liquidity, and transactions

    • B. 

      Speculative demand, measure of value, and precautionary demand

    • C. 

      A medium of exchange, a measure of value, and a store of value

    • D. 

      A store of value, heterogeneity, and a medium of exchange

    • E. 

      Currency value, fiat value, and accepted value

  • 10. 
    The number of times per year a dollar is used to transact an exchange is known as
    • A. 

      Liquidity of money

    • B. 

      Velocity of money

    • C. 

      Quantity theory of money

    • D. 

      Equation of exchange

    • E. 

      Rapidity index

  • 11. 
    According to the quantity theory of money, if M's growth is less than Q'a, then
    • A. 

      V falls

    • B. 

      V rises

    • C. 

      P stays the same

    • D. 

      P falls

    • E. 

      P rises

  • 12. 
    Keynesians identify three principal motives for demanding money. They are the
    • A. 

      Transactions motive, precautionary motive, and liquidity motive

    • B. 

      Transactions motive, precautionary motive, and convertibility motive

    • C. 

      Transactions motive, speculative motive, and volatility motive

    • D. 

      Transactions motive, speculative motive, and liquidity motive

    • E. 

      Transactions motive, speculative motive, and precautionary motive

  • 13. 
    The potential money multiplier, m, is
    • A. 

      1/excess reserves

    • B. 

      Excess reserves x loans

    • C. 

      Legal reserve requirement/excess reserves

    • D. 

      1/actual reserves

    • E. 

      1/legal reserve requirement

  • 14. 
    If a bank keeps some of its excess reserves, the actual money multiplier
    • A. 

      Increases

    • B. 

      Stays the same

    • C. 

      Goes to zero

    • D. 

      Decreases

    • E. 

      Increases, then decreases

  • 15. 
    Which of the following is a bank liability?
    • A. 

      Required reserves

    • B. 

      Excess reserves

    • C. 

      Actual reserves

    • D. 

      Demand deposits

    • E. 

      Loans

  • 16. 
    The most effective and frequently used tool the ed has at its disposal to change the economy's money supply is
    • A. 

      Open market operations

    • B. 

      The discount rate

    • C. 

      The legal reserve requirement

    • D. 

      The federal funds rate

    • E. 

      The margin requirement

  • 17. 
    When the Fed purchases government securities, it
    • A. 

      Increases banks' reserves and makes possible an increase in the money supply

    • B. 

      Decreases banks reserves and makes possible a decrease in the money supply

    • C. 

      Automatically raises the discount rate

    • D. 

      Uses discounting operations to influence margin requirements

    • E. 

      Sends a signal to the banking community that there is too much inflation

  • 18. 
    Which of the following directs open market operations?
    • A. 

      Board of Governors

    • B. 

      Federal Reserve Banks

    • C. 

      Federal Open Market Committee

    • D. 

      Federal Advisory Council

    • E. 

      Treasury Department

  • 19. 
    The federal funds market is the market in which
    • A. 

      Banks borrow from the Fed

    • B. 

      Bank customers borrow from their banks

    • C. 

      Banks borrow from each other

    • D. 

      The federal government borrows from the Fed

    • E. 

      The federal government borrows from the general public

  • 20. 
    The federal funds market is the market in which
    • A. 

      Banks borrow from the Fed

    • B. 

      Bank customers borrow from their banks

    • C. 

      Banks borrow from each other

    • D. 

      The federal government borrows fromt he Fed

    • E. 

      The federal government borrows from the general public

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