TEST CODE 202

Q1: Which asset below is the most liquidity?

A. ATM card

B. Bond

C. Car

D. Stock

Q2: The three main tools of monetary policy are

A. fiat, commodity, and deposit money.

B. open-market operations, reserve requirements, and the discount rate.

C. the money supply, government purchases, and taxation.

D. government expenditures, taxation, and reserve requirements.

Q3: Suppose that, because of inflation, people in Brazil economize on currency and go to
the bank each day to withdraw their daily currency needs. This is an example of

A. costs due to inflation induced relative price variability which misallocates resources.

B. menu costs.

C. Shoe leather costs.

D. costs due to inflation induced tax distortions.

Q4: In the economy of Talikastan in 2015, consumption was $4000, exports were $800, GDP
was $ 7500,imports were $200, and investment was $1000. What were Tajikistan's
government purchases in 2015? GDP = C+I+G+NX(Ex-Im)

A 1200

B.1900

C.1800

D.800

Q5: Assuming that GDP = 3000; C =2300; G= 350; NX =50. How much Investment in the
Economy?

A. 400
B. 500

C. 600

D. 700

Q6: In 1989, the CPI was 124.0. In 1990, it was 130.7. What was the rate of inflation over
this period?

A. 5.4 percent

B. 30.7 percent

C. 5.1 percent

D. You can't tell without knowing the base year.

Q.7: An example of fiat money is

A. paper euros.

B. gold.

C. silver coins.

D. Cigarettes

Q.8: The quantity theory of money concludes that an increase in the money supply causes

A. a proportional increase in real output.

B. a proportional increase in prices

D. a proportional increase in velocity.

C. a proportional decrease in velocity.

Q.9: When the commercial banks buy government bonds from the Fed.

B. the money supply increases

A. the money supply decreases

C. the money supply increases

D. the money supply decreases

Q. 10: Who of the following would necessarily be included in the Bureau of Labor
Statistics "unemployed" category?
A. Huey, who did not work during the previous four weeks

B. Dewey, who tried to find new employment during the previous four weeks

C. Louie, who was an unpaid worker during the previous four weeks

D. None of the above is correct.

Q.11: When computing the cost of the basket of goods and services purchased by a typical
consumer, which of the following changes from year to year?

A. the goods and services making up the basket

B. the quantities of the goods and services purchased

C. the prices of the goods and services

D. All of the above are correct.

Q.12: Maury did not work last week because fire forced an evacuation of his workplace.
The Bureau of Labor Statistics counts Maury as

A. unemployed and in the labor force.

B. unemployed and not in the labor force.

C. employed and in the labor force.

D. employed and not in the labor force

Q. 13: The crowding out effect refers to

A. the presence of the Ricardo-Barro effect.

B. how a cyclical budget deficit changes over the business cycle

C. the wealth effect's impact on the aggregate demand curve

D. government investment crowding out private investment

Q.14:

Year Price of Cereal Quality of Price of Milk Quality of Milk

Cereal
2015 4.00 100 1.50 180
2016 4.00 120 2.00 200
2017 5.00 150 2.50 200
The country of Caspir produces only cereal and milk. Quantities and prices of these goods
for the last several years are shown below. The base year is 2015. In 2017, this country's

A. real GDP was $1250, and the GDP deflator was 128.0.

B. real GDP was $1250, and the GDP deflator was 138.9.

C. real GDP was $900, and the GDP deflator was 128.0.

D. real GDP was $900, and the GDP deflator was 138.9.

Q.15: If M=6,000, P= 3, and Y=3,000, what is velocity?

A. 1.5 P x Y/M

B. 6

C. 0.67

D. 0.167

Q. 16: When income increases, the money demand curve shifts to the ___, which __ the
interest rate with a fixed money supply.

A. right; decreases

C. right; increases

B. left; decreases

D. left; increases

Q.17: Government increases expenditure of goods and services and decreases tax in
recession period of economy. This means government is applying

A. Tight Monetary Policy ( chính sách tiền tệ thắt chặt )

C. Easy Monetary Policy

B. Contractionary Fiscal Policy

D. Expansionary Fiscal Policy (Chính sách tài khóa mở rộng, tăng chi tiêu, giảm thuế )

Q.18: In 2009, based on concepts similar to those used to estimate U.S. employment figures,
the Swedish adult non-institutionalized population was 7.568 million, the labor force was
4.888 million, and the number of people employed was 4.486 million. According to these
numbers, the Swedish labor-force participation rate and unemployment rate were about
A. 64.6% and 5.3%.

B. 64.6% and 8.2%.

C. 59.3% and 5.3%.

D. 59.3% and 8.2%.

Q. 19: Money demand refers to

A .how much currency the Federal Reserve decides to print

B. how much wealth people want to hold in liquid form

C. the total quantity of financial assets that people want to hold

D. how much income people want to earn per year

Q. 20: Blanks are able to create money only when

A. only a fraction of deposits is held in reserve

B. the reserve ratio is 100%

C. the Fed sells US government bonds

D. interest rates are above 2%.

Q. 21: If M=12,000, P=3, and Y=32,000, then velocity

A. Equal 1.125 Velocity will rise if money changes hands more frequently.

B. Equal 8 Velocity will rise if money changes hands less frequently.

C. Equal 1.125 Velocity will rise if money changes hands less frequently.

D. Equal 8 Velocity will rise if money changes hands more frequently.

Q. 22: Which of the following is included in the investment component of GDP?

A. spending on new business equipment such as power tools and spending on stocks and bonds

B. spending on stocks and bonds but not spending on new business equipment such as power
tools

C. spending on new business equipment such as power tools but not spending on stocks and
bonds
D. neither spending on new business equipment such as power tools nor spending on stocks and
bonds

Q.23: Which of the following is a function of money?

A. a unit of account

C. medium of exchange

B. a store of value

D. All of the above are correct.

Q.24: In the long run, money demand and money supply determine ( the value of money )

A. the real interest rate but not the price level

B. the price level and the real interest rate

C. the price level but not the real interest rate

D. neither the price level nor the real interest rate

Q.25: In the basket of goods that is used to compute the consumer price index, the three
largest categories of consumer spending are

A. housing, transportation, and recreation

B. housing, food & beverages, and education & communication

C. housing, transportation, and food & beverages.

D. housing, medical care, and education & communication.

Q.26: Which list ranks assets from most to least liquid?

A money, cars, houses, bonds

B. bonds, money, cars, houses

C. money, bonds, cars, houses

D. bonds, cars, money, houses

Q.27: Suppose that some country had an adult population of about 25 million, a labor-force
participation rate of 60 percent, and an unemployment rate of 6 percent. How many people
were employed? .

A.14.1 million
B. 15 million

C. 0.9 million

D. 23.5 million

Q. 28: Suppose OPEC succeeds in missing world oil prices by 300 percent. This price
increase causes inventors to look at alternative sources of fuel for internal-combustion
engines. A hydrogen-powered engine is developed which is cheaper to operate than gasoline
engines. Which problems in the construction of the CPI does this situation represent?

A. substitution bias and introduction of new goods

B. income bias and substitution bias

C. substitution bias and unmeasured quality change

D. introduction of new goods and unmeasured quality change

Q. 29: Measuring unemployment is the job of the

A. Department of Commerce.

B. Bureau of Labor Statistics.

C. Council of Economic Advisers,

D. Congressional Budget Office.

Q.30: Economists call an institution designed to oversee the banking system and regulate
the quantity of money in the economy

A. A Charter Bank

C. A Central Bank

B. A National Bank

D. A State Bank

Q.31: Fiscal policy affects the goods market through

A. changes in taxes and government spending.

B. changes in taxes and money supply.

C. changes in government spending and money supply.

D. changes in money supply.

Q.32: For an open economy, the equation Y-C+I+G+NX is an identity. If we define national
saving, S. as the total income in the economy that is left after paying for consumption and
government purchases, then for an open economy, it is true that

A. S=I

B. S=I+NX

C. I=S+NX

D. S=0

Q.33: The manager of the bank where you work tells you that the bank has $300 million in
deposits and $255 million dollars in loans. If the reserve requirement is 8.5 percent, how much is
the bank holding in excess reserves?

A. $15 million

B. $25.5 mm

C. $19.5 million

D. 0 million

Q.34: Suppose the banking systems currently has $300 billion in reserves the reserve
requirement is 5 percent, and excess reserves are $30 billion. What is the level of loans?

A. $5,400 billion

B. $5,100 billion

C. $6,000 billion

D. $270 billion

Q.35: Which of the following statements is true?

A. If we know the base year is 2000, and if we know the value of the consumer price index for
the year 1995, then we have all the information we need to calculate the inflation rate for 1995.

B. Even if we know the values of the comer price index for the years 2009 and 2010, we cannot
calculate the inflation rate for 2010 if we do not know which year is the base year.

C. If we know the base year is 2000, and if we know the value of the consumer price index for
the year 1995, then we have all the information we need to calculate the percentage change in the
cost of living between 1995 and 2000
D. If we know the base year is 1990, and if we know the value of the consumer price index for
the year 2010, then we have all the information we need to calculate the inflation rate for 2010.

Q.36: On a given morning, Franco sold 40 pairs of shoes for a total of $80 at his shoe store. A.
The $80 is a nominal variable. The quantity of shoes is a real variable.

B. Both the 580 and the quantity of shoes are nominal variables.

C. Both the S80 and the quantity of shoes are real variables.

D. The $80 is a real variable. The quantity of shoes is a nominal variable.

Q.37. In the economy of Taki in 2015, consumption was $5000, exports were $400,
government purchases were $1000, imports were $600, and investment was $1200. What
was Taki's GDP in 2015!

A. S7000

C. $6200

D. $8200

B. 56400

Q. 38: Suppose private saving in a closed economy is $12B and investment is $10B.

A. National savings must equal $12B.

B. Public saving must equal $2B

C. The government budget surplus must equal $2B.

D. The government budget deficit must equal $2B.

0.39: Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as
depicted by the T-account, a customer deposits an additional $60,000 into his account at the
bank. If the bank takes no other action it will

The First Bank of Roswell

Asset Liabilities
Reserves 30,000 Deposits 200,000
Loans 170,000

A. be in a position to make new loans equal to $6,000

B. have $64,000 in excess reserves.

C. have $4,000 in excess reserves,

D. None of the above is correct.

Q.40: The figure in the economy as follow: C=1,500+ 0.8Yd, I= 1800+ 0.75Y: G=700; X=800;
M=300+0.6Y, Tt=0.25Y, Tr=625

At the Equilibrium National income point, What happen for Government Budget?

A. Surplus

B. Shortage

C. Budget=0

D. All answers are wrong

Q. 41: Assume that in the closed economy. The investment(1) is 15,000, the government
spending (G) is 10,000. The tax (T) is 40,000. The function of Consumption is C=75,000+0.5Yd.
Identify the equilibrium national income (Y).

We know that: Yd (disposal income)=Y- T: National income in closed economy (Y)=C+I+G

B. 160,000

C. 150,000

D. 140,000

A. 130,000

Q.42: If the quantity of loanable funds demanded exceeds the quantity of loanable funds
supplied,

A. there is a surplus and the interest rate is above the equilibrium level.

B. there is a surplus and the interest rate is below the equilibrium level.

C. there is a shortage and the interest rate is above the equilibrium level.

D. There is a shortage and the interest rate is below the equilibrium level.

Q.43: The deviation of unemployment from its natural rate is called

A. structural unemployment.

B. cyclical unemployment.
C. frictional unemployment.

D. the economic rate of unemployment.

Q.45: If a bank that desires to hold no excess reserves and has just enough reserves to meet the
required reserve ratio of 15 percent receives a deposit of $600, it has a

A. $510 increase in excess reserves and a $90 increase in required reserves.

B. $600 increase in excess reserves and no increase in required reserves.

C. $600 increase in required reserves and no increase in excess reserves

D. $90 increase in excess reserves and a $510 increase in required reserves.

Q.46: For an economy that engages in international trade, GDP is divided into four components.
Which of the following items is not one of those components?

A. national saving.

C. consumption.

B. government purchases.

D. net exports.

Q.47: Suppose that in a closed economy GDP is equal to 15,000, government purchases are
equal to 3,000, consumption equals 10,500, and taxes equal 3,500. What is private saving and
public saving?

A. 1,500 and -500, respectively

C. 1,000 and -500, respectively

B. 1,500 and 500, respectively

D. 1,000 and 500, respectively

Q.48:Assume the following information for an imaginary, closed economy.

GDP $5 trillion; consumption = $3.1 trillion; government purchases = $0.7 trillion; and
taxes=0.9 trillion. For this economy, national savings is equal to

B. $2.9 trillion.

A. $1.2 trillion.

C. S1.1 trillion.
D. $1.7 trillion

Q.49: If the economy is in an inflationary period, what action would Fiscal Policy most likely
take

A. Increase spending

B. Increase taxes

C Decrease the discount rate

D. Decrease taxes

Q.50: Which of the following could explain an increase in the equilibrium interest rate and a
decrease in the equilibrium quantity of loanable funds?

A The demand for loanable funds shifted right.

B. The demand for loanable funds shifted left.

C. The supply of loanable funds shifted right.

D. The supply of loanable funds shifted left

Q.51: If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will
want to hold

A. fewer reserves, so the reserve ratio will rise.

B. more reserves, so the reserve ratio will rise.

C. fewer reserves, so the reserve ratio will fall.

D. more reserves, so the reserve ratio will fall.

Q. 52: When the money market is drawn with the value of money on the vertical axis, if the Fed
sells bonds then

A. the money supply and the price level increase.

B. the money supply and the price level decrease

C. The money supply increases and the price level decreases.

D. the money supply increases and the price level increases.

Q.53: If the tax revenue of the federal government is less than its spending, then the federal
government necessarily
A. runs a budget deficit.

C. runs a national debt.

B. runs a budget surplus.

D. will increase taxes.

Q.54: The manager of the bank where you work tells you that the bank has $400 million in
deposits and $340 million dollars in loans. The Fed then raises the reserve requirement from 5
percent to 10 percent. Assuming everything else stays the same, how much is the bank holding in
excess reserves after the increase in the reserve requirement?

A. $40 million

B. $20 million

C. $0

D. $60 million
 TEST CODE 201

Q.1: Eric, an American citizen, prepares meals for his family at home. Ellen, a Canadian citizen,
commutes to the US. to help prepare meals at a restaurant in Idaho. Whose value of services
preparing meals is included in US. GDP?

A. Eric's but not Ellen's

B. Eric's and Ellen's

C. Ellen's but not Eric's.

D. Neither Eric’s nor Ellen's.

Q.2: If the consumer price index was 96 in 2015, 100 in 2016, and 102 in 2017, then the base
year must be

A.2015

B.2016

C.2017.

D. The base year cannot be determined from the given information

Q.6:In the economy of Turkey in 2015, consumption was $5000, exports were $400, government
purchases were $1000, imports were $600, and investment was $1200. What was Turkey's GDP
in 2015?

A. $8200

B. $6200

C. $6400

D. $7000

Q.7:If M=12,000, P=3, and Y=32,000, then velocity =

A.1.125. Velocity will rise if money changes hands more frequently.

B. 8. Velocity will rise if money changes hands less frequently,

C. 1.125. Velocity will rise if money changes hands less frequently.

D.8. Velocity will rise if money changes hands more frequently.

Q.8: Labor Data for Ariana

Year 2010 2011 2012

Adult population 2,000 3,000 3,200

Number of employed 1,400 1,300 1,600

Number of unemployed 200 600 200

The labor force of Aridia in 2010 was

A.1,400.

B.1,600.

C. 1,800.

D.2,000.

Q.9: Suppose that velocity rises while the money supply stays the same. It follows that

A.P x Y must be unchanged.

B. P x Y must fall.

C. the effects on P x Y are uncertain

D. P x Y must rise.

Q. 10: Which of the following is not correct?

A. Purchases of capital goods are excluded from GDP.

B. Gross domestic product is both total income in an economy and total expenditures on the
economy's output of goods and services.

C. National saving is the sum of private saving and public saving.

D. In a closed economy net exports are zero.

Q. 12: Who of the following would necessarily be included in the Bureau of Labor Statistics"
"unemployed” category?

A. Huey, who did not work during the previous four weeks

B. Dewey, who tried to find new employment during the previous four weeks

C. Louie, who was an unpaid worker during the previous four weeks

D. None of the above is correct.

Q. 13: Which of the following is not included in the investment component of GDP?

A. The purchase of 100 shares of stock.

B. The purchase of a $1000 bond.

C. A firm's purchase of a used van to use for deliveries

D. None of the above are included in the investment component of GDP.

Q. 14: Which of the following is included in the investment component of GDP?

A. spending on new business equipment such as power tools and spending on stocks and bonds

B. neither spending on new business equipment such as power tools nor spending on stocks and
bonds

C. spending on stocks and bonds but not spending on new business equipment such as power
tools

D. spending on new business equipment such as power tools but not spending on stocks and
bonds

Q. 15: Gwen is an unpaid worker in her family's restaurant. The Bureau of Labor Statistics
counts Gwen as

A. unemployed and in the labor force.

B. employed and in the labor force.

C. employed and not in the labor force.

D. unemployed and not in the labor force.

Q. 16: Maury did not work last week because fire forced an evacuation of his workplace. The
Bureau of Labor Statistics counts Maury as

A. unemployed and in the labor force.

B. unemployed and not in the labor force.

C. employed and in the labor force.

D. employed and not in the labor force

Q. 17: For an economy that engages in international trade, GDP is divided into four components.
Which of the following items is not one of those components?
A. net exports.

B. consumption.

C. government purchases.

D. national saving.

Q.18: Suppose private savings in a closed economy is $12B and investment is $10B

A. National saving equal $12b

B. Public swing must equal 52b

C. The government budget surplus must equal $2B.

D. The government budget deficit must equal $2B.

Q.19

Year Price of Cereal Quality of Cereal Price of Milk Quality of Milk

2015 $4.00 100 $1.50 180
2016 $4.00 120 $2.00 200
2017 $5.00 150 $2.50 200
2018 $6.00 180 $3.50 240
The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the
last several years are shown below. The base year is 2015. In 2017, this country's

A. Real GDP was $900, and the GDP deflator was 128.0.

B. Real GDP was $1250, and the GDP deflator was 128.0.

C. real GDP was $1250, and the GDP deflator was 138.9.

D. real GDP was $900, and the GDP deflator was 138.9

Q. 20: If a U.S. citizen buys a television made in Korea by a Korean firm, then

A. U.S. net exports decrease and U.S. GDP is unaffected.

B. U.S. net exports are unaffected and U.S. GDP decreases.

C. U.S. net exports are unaffected and U.S. GDP is unaffected.

D. U.S. net exports decrease and U.S. GDP decreases.

Q.21: If the CPI was 125 this year and 120 last year, then
A. the cost of the CPI basket of goods and services increased by 4.2 percent this year.

B. the price level increased by 4.2 percent this year.

C. the inflation rate for this year was 4.2 percent.

D. All of the above are correct

Q.22: Fiat money

A. has no intrinsic value.

B. is a medium of exchange but not a unit of account.

C. is any close substitute for currency such as checkable deposits.

D. is backed by gold.

Q. 23: If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000,
it could

A. sell $300,000 worth of bonds.

B. buy $225,000 worth of bonds

C. buy $300,000 worth of bonds

D. sell $225,000 worth of bonds

Q.24. If the prices of all goods and services produced in the economy rose while the quality
of all goods at services stay at same, which would rise ?

A. neither nominal GDP nor real GDP

B. nominal GDP hot word GOP

C. real GDP but not nominal GDP.

D. both real GDP and nominal GDP

Q.25: If R represents the reserve ratio for all banks in the economy, then the money multiplier is

A. 1/(1-R).

B. 1/R

C. 1/(1+R)

D. (1+R)/R
Q.26: If you buy a burger and fries at your favorite fast food restaurant,

A. then neither GDP nor consumption will be affected because you would have eaten at home
had you not bought the meal at the restaurant

B. then GDP will be higher, but consumption spending will be unchanged.

C. then GDP will be unchanged, but consumption spending will be higher

D. then both GDP and consumption spending will be higher.

Q.27: Who of the following would be included in the Bureau of Labor Statistics “unemployed”
category?

A. Reta, who worked only 15 hours last week A.

B. Marisa, who neither has a job nor is looking for one

C. Miguel, who is on temporary layoff

D. None of the above is correct.

Q. 28: Which of the following could explain an increase in the equilibrium interest rate and a
decrease in the equilibrium quantity of loanable funds?

A. The demand for loanable funds shifted right..

B. The demand for loanable funds shifted left.

C. The supply of loanable funds shifted right.

D. The supply of loanable funds shifted left.

Q.29: Consternation Corporation has an agreement with its workers to index completely the
wage of its employees using the CPI. Consternation Corporation currently pays its production
line workers $7.50 an hour and is scheduled to index their wages today. If the CPI is currently
130 and was 125 a year ago, the firm should increase the hourly wages of its workers by

A. $0.30.

B. $0.50.

C. $0.29.

D. $0.04.

Q.30: The consumer price index is used to

A. convert nominal GDP into real GDP.

B. turn dollar figures into meaningful measures of purchasing power.

C. characterize the types of goods and services that consumers purchase.

D. measure the quantity of goods and services that the economy produces

Q.31: To decrease the money supply, the Fed could

A. sell government bonds.

B. increase the discount rate

C. increase the reserve requirement.

D. All of the above are correct

Q.32: Assume the following ìnormation for an imaginary, closed economy. GDP = $5 trillion;
consumption = $3.1 trillion; government purchases = $0.7 trillion; and taxes = $0.9 trillion. For
this economy, investment amounts to

A. $1.7 trillion

B. $0.4 trillion

C. $1.2 trillion.

D. $2.1 trillion.

Q.33: The inflation rate is defined as the

A. percentage change in the price level from the previous period.

B. change in the price level from one period to the next.

C. price level minus the price level from the previous period.

D. price level in an economy.

Q.34: A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount
to

A. 8

B. 80

C. 92
D. 920

Q.35: Which of the following does not describe a function of money

A. unit of account

B. A medium of exchange

C. Barter

D. A store of value

Q.36: For an economy as a whole,

A. wages must equal profit.

B. income must equal expenditure.

C. consumption must equal income

D. consumption must equal saving.

Q.37: If the money multiplier is 3 and the Fed buys $50,000 worth of bonds, what happens to the
money supply?

A. it increases by $150,000

B. it increases by $100,000

C. it decreases by $100,000

D. it decreases by $200,000

Q.38: Assume that in the closed economy. The investment(1) is 15,000, the government
spending (G) is 10,000. The tax (T) is 40,000. The function of Consumption is C = 75,000
+0.5Yd. Indentity the equilibirum national income (Y). We know that: Yd (disposal income) = Y-
T; National income in closed econmy(Y)=C+H+G

A. 170,000

B. 180,000

C. 160,000

D. 150,000
39: For an open economy, the equation Y=C+I+G+NX is an identity. If we define national saving
S, as the total income in the economy that is left after paying for consumption and government
purchases, then for an open economy, it is true that

A. S=I

B. S=0.

C. I=S+NX.

D. S=1+ NX.

Q.40: The country of Growpaw does not trade with any other country. Its GDP is $20 billion. Its
government purchases $3 billion worth of goods and services each year, collects $4 billion in
taxes, and provides $2 billion in transfer payments to households. Private saving in Growpaw is
$4 billion. What is investment in Growpaw?

A. $5 billion

B. $4 billion

C. $3 billion

D. $11 billion

Q.41: A worker received $5 for a daily wage in 1930, which has the equivalent value of $63.24
today. If the CPI was in 1930 what is the value of the CPI today, rounded to the nearest whole
number?

A.

B. 215

C.13

D.17

Q.42

The First Bank of Roswell

Assets Liabilities

Reserves $30,000 Deposits $200,000

Loans 170,000
If the bank is holding $4,000 in excess reserves, then the reserve requirement with which it must
comply is

A. 17 percent.

B. 13 percent.

C. 12 percent.

D. 14 percent.

Q.43: When the money market is drawn with the value of money on the vertical axis, an increase
in the money supply shifts the money supply curve to the

A. right, lowering the price level.

B. left, lowering the price level.

C. right, raising the price level.

D. left, raising the price level.

Q. 44: Measuring unemployment is the job of the

A. Congressional Budget Office.

B. Council of Economic Advisers.

C. Department of Commerce.

D. Bureau of Labor Statistics.

Q.45: Liquidity refers to

A.the case with which an asset is converted to the medium of exchange.

B. the measurement of the intrinsic value of commodity money.

C. the measurement of the durability of a good.

D. how many time a dollar circulates in a given year.

Q. 46: When conducting an open-market purchase, the Fed

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

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

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

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

Q.47: If M-6,000, P=3, and Y=3,000, what is velocity?

A.1.5

B. 6

C. 0.67

D. 0.167

Q. 48: If in some year real GDP was $5 trillion and the GDP deflator was 200, what was nominal
GDP?

A. $2.5 trillion.

B. $100 trillion

C. $10 trillion.

D. $40 trillion.

Q.49: Which of the following does the Federal Reserve not do?

A. It controls the supply of money.

B. It acts as a lender of last resort to banks.

C. It tries to ensure the health of the banking system.

D. It makes loans to any qualified business that requests one.

Q.50: The Techcombank of Roswell

Assets Liabilities

Reserves $30,000 Deposits $200,000

Loans 170,000
If the bank faces a reserve requirement of 6%, then the bank

A. is in a position to make a new loan of $12,000

B. is in a position to make a new loan of $18,000

C. Has excess reserves of $12,000

D. none of the above is correct

Q.51 .During periods of inflation, which function of money is most severely affected?

A. medium of exchange

B. unit of account

C. means of payment

D. store of value

Q.52 Which of the following is NOT included in the M1 definition of money?

A. currency held outside banks

B. time deposits

C. traveler's checks

D. checking deposits

Q53

Component Amount (billions of dollars)

Money market mutual fund deposits 4,400

time deposits 1,237

saving deposits 1,589

checking deposits 752

currency 609

Based on the data above What is the value of M1

A. $ 2,9250

B. $1,361
 C. $752

D. $609

Q.54: The sale of government securities by the Fed leads to

A decrease in bank reserves

B. A contraction in bank lending

C. An increase in the Federal funds rate

D. All of the above answers are correct

Q.55: James owns two houses. He rents one house to the Johnson family for $10,000 per year.

He lives in the other house. If he were to rent the house in which he lives, he could earn $12,000

per year in rent. How much do the housing services provided by the two houses contribute to

GDP?

A. $10,000

B. $12,000

C. $22,000

D. $0

Q.56: One bag of flour is sold for $1.00 to a bakery, which uses the flour to bake bread that is

sold for $3.00 to consumers. A second bag of flour is sold for $1 to a grocery store who sells it to

a consumer for $2.00. Taking these four transactions into account, what is the effect on GDP?

A. GDP increases by $3.00.

B. GDP increases by $6.00.

C. GDP increases by $7.00.

D. GDP increases by $5.00.

Q.57: When the Consumer Price Index falls from 110 to 100:
A. There is inflation of 9.1% and the value of money decreases.

B. There is deflation of 9.1% and the value of money increases.

C. There is deflation of 10% and the value of money increases.

D. There is inflation of 10% and the value of money decreases.

Q.58: If the reserve ratio is 4 percent, then the money multiplier is

A.24

B. 26.

C. 25.

D. 4

Q. 59: A. The supply of money increases when

A. the Fed makes open-market purchases

B. the price level falls.

C. the interest rate increases.

D. money demand increases.

Q. 60: A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The

oranges produced by the farmer are called

A. intermediate goods

B. inventory goods.

C. final goods.

D. transitory goods.