The Current Base Year for the CPI Is 1985

Question 1 2 points Save

According to the equation of exchange, if total output is 2,000 units, the velocity of money is 5, and the money supply is $1,000, the average price per transaction will be

$0.50

$2.50

$5.00

$7.50

Question 2 2 points Save

The current base year for the CPI is 1985.

True

False

Question 3 2 points Save

If the money supply is $350 and PQ is $1,400, according to the quantity theory of money, the velocity of money is

35.0

7.5

4.0

0.25

Question 4 2 points Save

The higher the reserve requirement,

the more the money supply can expand

the more interest the bank will earn on its reserve account

the less the money supply can expand

both (a) and (b)

Question 5 2 points Save

The current base period for the CPI is

1967

1977

1982–1984

1990

Question 6 2 points Save

In calculating a price index, the period to which prices in all other periods are compared is known as the

comparison period

average period

current period

base period

Question 7 2 points Save

Anything that would cause people to want to hold more of their money as cash and less in the form of checkable deposits would

increase the multiple expansion of the money supply

cause the Federal Reserve to raise the reserve requirement

reduce the multiple expansion of the money supply

increase the size of the money supply

Question 8 2 points Save

Your nominal wages rose during the same period from $200 a week to $260. By how much did your real income rise?

30 percent

16.7 percent

8.33 percent

12 percent

Question 9 2 points Save

Included in the official U.S. money supply are

U.S. government bonds

corporate stocks

checkable deposits

all of the above

Question 10 2 points Save

If a $1,000 cash deposit is made in a bank where the reserve requirement is 10 percent, then the maximum total loans in the form of checkable deposits that may be made as a result of that cash deposit is

$1,000

$5,000

$9,000

$10,000

Question 11 2 points Save

The Producer Price Index (PPI) measures

the price level of aggregate output

the prices charged by manufacturers

changes in the prices received by producers

price changes passed along to consumers

Question 12 2 points Save

In the equation of exchange MV = PQ, V stands for

inventory turnover

total transactions in the economy

average rate of turnover of the money supply

variation in interest rates

Question 13 2 points Save

The 45-degree line in the Keynesian income-expenditure graph indicates

the basic size of the spending flow

points where total output is equal to aggregate expenditure

the size of the multiplier

the size of the marginal propensity to save

Question 14 2 points Save

If planned investment increases by $20 billion, other things remaining the same, planned saving eventually will increase by $20 billion, regardless of the size of the multiplier.

True

False

Question 15 2 points Save

The multiplier is equal to

the reciprocal of MPC

the reciprocal of MPS

MPC + MPS

MPC/MPS

Question 16 2 points Save

The consumption function shows the relationship between the income received by the economy’s households and the

amount they plan to spend on currently produced final output

amount of government spending

amount businesses plans to spend on investment

level of taxes on personal income

Question 17 2 points Save

Which of the following is not one of the four major sectors of the economy to which GDP is allocated?

consumer

investment

agriculture

government

Question 18 2 points Save

Aggregate expenditure (AE) equals

C + I + G

C + G

C – I – (X – IM)

C + I + G + (X – IM)

Question 19 2 points Save

In the simple Keynesian model, if output exceeds aggregate expenditures,

there will be no response from businesses

inventories will decrease and businesses will increase output

inventories will increase and businesses will increase output

inventories will increase and businesses will decrease output

Question 20 2 points Save

According to Keynes, the aggregate supply curve is

vertical in both the long run and the short run

vertical only in the long run

vertical only in the short run

never vertical

Question 21 2 points Save

As income increases, the absolute level of planned consumption will increase.

True

False

Question 22 2 points Save

The classical economists held that the rate of interest would equate planned investment and planned saving, so that all saving would eventually be invested.

True

False

Question 23 2 points Save

The higher the marginal propensity to consume, the

smaller the size of the multiplier

larger the size of the multiplier

larger the propensity to save

larger the velocity

Question 24 2 points Save

In the Keynesian model, if planned investment exceeds planned saving at full-employment output,

unemployment is likely to develop

government spending may be needed to balance the economy

inflation is likely to occur

none of the above

Question 25 2 points Save

Total planned consumption

exceeds total income at very low levels of output

is always less than total income

exceeds total income at very high levels of output

always equals total income

Question 26 2 points Save

The value of leisure is not taken into consideration in GDP accounting.

True

False

Question 27 2 points Save

Gross national product measures the current market value of final output produced within a country by both domestic and foreign resources.

True

False

Question 28 2 points Save

Personal consumption expenditures account for approximately two-thirds of the GDP in the United States.

True

False

Question 29 2 points Save

Most national wealth in the United States is held in the private sector.

True

False

Question 30 2 points Save

When final sales are larger than GDP,

inventories did not change

a net increase in inventories took place

a net decrease in inventories took place

the direction of any net change in inventories is uncertain

Question 31 2 points Save

The measurements of business cycles tend to be exaggerated as a result of the GDP treatment of

services

perishable goods

government services

durable goods

Question 32 2 points Save

The unregulated portion of the economy involving goods and services that are produced and exchanged without monetary transactions is known as

the underground economy

the secret economy

the capital consumption

transfer payments

Question 33 2 points Save

The best measure of a change in the standard of living is the change in

nominal GDP

real GDP

real per capita disposable income

net national product

Question 34 2 points Save

In dollar value, the nominal GDP in the United States is in the vicinity of

between 3 and 4 billion

between 4 and 5 billion

between 4 and 5 trillion

between 10 and 12 trillion

Question 35 2 points Save

The difference between GDP and final sales equals

depreciation

exports

imports

net inventory change

Question 36 2 points Save

In national income accounting, machine depreciation is treated as a cost of production, but damage to a region’s air quality is not.

True

False

Question 37 2 points Save

Transfer payments are added to NI in the process of determining personal income.

True

False

Question 38 2 points Save

If member banks need to borrow reserves, they must do so through the discount window.

True

False

Question 39 2 points Save

Which of the following is not part of the Federal Reserve System?

the Federal Advisory Council

the Federal Open Market Committee

the Council of Economic Advisers

the Conference of Presidents of the Reserve Banks

Question 40 2 points Save

The discount rate is

set in the money market

set by each member bank

set by the Federal Reserve Bank

the same as the federal funds rate

Question 41 2 points Save

The First Bank of the United States was chartered by

the federal government

the state of New York

the city of New York

Suffolk County

Question 42 2 points Save

Instead of having one central bank, the Federal Reserve in effect has 12 district banks, each with some amount of autonomy.

True

False

Question 43 2 points Save

Any bank reserves over and above the level of required reserves are known as

federal funds

discounted reserves

excess reserves

surplus reserves

Question 44 2 points Save

Electronic banking does not include

credit cards

debit cards

smart cards

direct deposit of paychecks

Question 45 2 points Save

The Board of Governors of the Federal Reserve System has

6 members

7 members

1 member from each Federal Reserve Bank

20 members

Question 46 2 points Save

The interest rate at which banks borrow excess reserves from each other is known as the

prime rate

federal funds rate

discount rate

T-bill rate

Question 47 2 points Save

The first attempt at centralized banking in the United States was the Federal Reserve System.

True

False

Question 48 2 points Save

The chair of the Board of Governors of the Federal Reserve is

appointed by the U.S. President

elected by the 12 Federal Reserve Banks

elected by member banks

appointed by Congress

Question 49 2 points Save

Changes in the discount rate are initiated by

the Federal Open Market Committee

Federal Reserve Banks

member banks of the Fed

the president of the New York Federal Reserve Bank

Question 50 2 points Save

If a Federal Reserve Bank wanted to tighten the money supply, it would

lower the reserve requirement

buy securities in the open market

raise the discount rate

lower the discount rate