Chapter 1 - Understanding Economic Data and Indicators
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1.
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______________ is a good indicator of the housing market's momentum.
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  Median home prices.
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Housing starts.
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Existing-home sales.
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Inventory of unsold homes.
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2.
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Which of the following is NOT a leading economic indicator?
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Average weekly hours for U.S. manufacturing workers.
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Average weekly initial claims for unemployment insurance.
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GDP
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Manufacturers' new orders, consumer goods and materials.
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3.
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Consumer confidence is measured by
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The Consumer Confidence Index.
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Index of Consumer Sentiment.
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J.D. Power Survey.
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Answers (A) and (B)
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4.
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Institute for Supply Management's Index measures new orders, inventories, exports, and employment in the __________ sector.
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Export.
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Service.
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Manufacturing.
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Outsourcing.
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5.
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Steep yield curve is a sign of
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Healthy economic outlook.
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Recession.
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Inflation.
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Full employment
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6.
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__________________________ is NOT included in the International Profit Associates’ Small Business Confidence Index?
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Inflation.
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Revenue growth.
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Hiring.
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State of economy.
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Chapter 2 - The Scope of Economics
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7.
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The economy consists of two primary sectors:
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Foreign and domestic.
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Private and public.
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Households and business.
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Profit and nonprofit.
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8.
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Economics attempts to solve a wide variety of problems, NOT including
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Allocation of scarce resources.
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Unemployment.
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Real estate bubble.
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Inflation.
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9.
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Economic systems do NOT include
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Capitalist system.
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Command system.
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Bureaucratic system.
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Market system.
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10.
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Major goals of economic policy in the USA include all EXCEPT:
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Price stability.
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Full employment.
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Economic growth.
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Social justice.
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Chapter 3 - Basic Concepts in Economics
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11.
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Economic decisions are based on _______________ analysis of output, revenue, and profit.
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Environmental.
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Marginal.
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Ecofriendly.
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Rational.
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12.
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Which of the following is NOT one of the basic economic concepts in the United States?
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Inflation control.
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Economic growth.
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Equal income share.
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Full employment.
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13.
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At the market determined equilibrium price
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The consumers get what they want.
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The quantity consumers need equals stocks on hand.
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The quantity supplied equals quantity demanded.
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The quantity purchased equals quantity sold.
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14.
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Economic decisions are based on marginal analyses of output, revenue, profit, and so on. Marginal concepts do NOT include
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Marginal revenue.
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Marginal externality
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Marginal costs.
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Marginal profit.
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15.
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Tennis rackets and tennis balls may be described as
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Complementary goods.
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Inferior goods.
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Derived demand goods.
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Substitute goods.
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Chapter 4 - Fundamental Macroeconomic Concepts
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16.
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There are two types of inflation.
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Demand-pull and cost-push.
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Consumer and Producer.
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Production and service.
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Core and durable.
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17.
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Which one of the following is NOT true about recession?
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Three or more straight monthly drops of the Index of Leading Economic Indicators are generally considered a sign of recession.
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An unusual drop in the money supply is recessionary.
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Two consecutive quarterly drops of Gross Domestic Product (GDP) signals recession.
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Consecutive monthly drops of durable goods orders which most likely results in less production and increasing layoffs in the factory sector.
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18.
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Unemployment indicators do NOT include
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Cost of supply management.
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Unemployment rate.
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Initial jobless claims.
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Help-wanted index.
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19.
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Unemployment will eventually rise if
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Aggregate demand remains constant
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The money supply increases
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Aggregate supply remains vertical
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Money demand declines
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20.
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The trough of a business cycle is generally characterized by
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Shortages of essential raw materials and rising costs.
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Increasing purchasing power and increasing capital investments.
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Rising costs and an unwillingness to risk new investments.
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Unused productive capacity and an unwillingness to risk new investments.
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Chapter 5 - Measuring Economic Activity
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21.
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Measures of money supply do NOT include
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Eurodollars.
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Money market mutual fund shares.
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Repurchase agreements (overnight).
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Trade deficits.
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22.
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A broadly used measure of money supply is
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23.
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Which one of the following would NOT be included in the calculation of the gross domestic product (GDP)?
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Corporate profits.
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An automotive worker's wages.
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A tenant's rent.
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Homemakers' activities.
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24.
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The _______________________ is a nation-wide measure of the average increase in prices for all domestic personal consumption
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CPI.
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PPI.
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PCE index
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Employment cost index
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Chapter 6 - Equilibrium Output and Income
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25.
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Equilibrium outputs and income is the income level at which
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Planned savings and planned investments are equal.
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The total output of goods and services are greater than the total quantity of goods and services demanded.
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Aggregate supply is less than aggregate demand.
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Full employment and actual employment are equal.
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26.
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The interest rate that equates saving and investment at full employment is known as the
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Equilibrium rate.
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Discount rate.
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Real rate.
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Natural rate.
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27.
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Economists and economic policy makers are interested in the multiplier effect because the multiplier explains why
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A small change in investment can have a much larger impact on gross domestic product (GDP).
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Consumption is always a multiple of savings.
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The money supply increases when deposits in the banking system increase.
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The velocity of money is less than one.
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28.
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When the addition to capital goods (gross investment) in an economy is less than depreciation (capital consumption allowance), the economy has experienced
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Negative net investment.
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Equilibrium investment.
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Positive gross investment.
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Positive net investment.
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29.
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If personal consumption expenditures increase from $720 billion to $760 billion when disposable income increases from $900 billion to $980 billion, the marginal propensity to save equals
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Chapter 7 - Fiscal Policy
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30.
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Which one of the following statements is NOT true as to fiscal policy?
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Fiscal policy is the overall program for directing government spending and taxation for the purpose of keeping the actual GDP close to the potential full employment GDP.
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Both lower taxes and higher government spending will generate a multiplier effect.
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Fiscal policy ensures not to overheat the economy and to cause inflation.
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Fiscal policy endeavors to avoid excessive unemployment and idle production capability and to create conditions whereby the economy can achieve a growth rate that is neither too rapid nor too slow.
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31.
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Major components of aggregate demand stems from all EXCEPT:
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Government.
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Environments.
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Households.
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Businesses.
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Chapter 8 - Money, Financial Markets, and the Banking System
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32.
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The most prominent role for money is to serve as a
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Standard of value.
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Form of credit.
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Source of income.
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Unit of account.
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33.
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An example of a financial instrument in the capital market is
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Negotiable bank CDs.
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Debt-instruments.
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Commercial paper.
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U.S. Treasury bills.
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34.
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An important role of financial institutions is to
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Buy primary securities.
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Provide borrowers with low interest rates.
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Serve as intermediaries between lenders and borrowers.
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Control the money supply.
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35.
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The Federal Reserve Bank includes 12 banks and ___ branches:
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36.
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Each regional Federal Reserve Bank is owned by
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The Federal Deposit Insurance Corporation.
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The taxpayers in its district.
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Those who purchase its stock on the open market.
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The member banks in its district.
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37.
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Funding for the operations of the Board of Governors of the Federal Reserve is derived from
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Federal Reserve district banks.
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Appropriations from the United States Congress.
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The governments of the states in which the district banks operate.
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Taxes collected from commercial banks.
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38.
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In the Keynesian model, which of the following will cause a reduction in interest rates?
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A decline in saving.
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An increase in money supply.
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An increase in money demand.
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An increase in saving.
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39.
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The prime rate is
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The interest rate the Fed charges its member banks to ôcover their requirement.ö
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What banks charge their best customers for short-term loans.
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The rate on short-term loans among commercial banks for overnight use.
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A closely watched indicator of long-term interest rates since the entire bond market (and sometimes the stock market as well) often moves in line with this rate.
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40.
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Interest rates are determined by the supply and demand for
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Currency.
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Loanable funds.
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Financial service.
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Corporate stock.
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41.
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Empirical evidence indicates that money demand is determined by
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Interest rates and the level of GDP.
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Interest rates and the money supply.
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The money supply and the level of GDP.
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The inflation rate and the unemployment rate.
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42.
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The Federal Open Market Committee directive is a
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Statement specifying the maximum level of inflation the Federal Reserve will accept.
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General statement of Federal Reserve policy goals.
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Detailed description of government security purchases to be carried out by the New York Federal Reserve bank.
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Statement specifying the maximum level of unemployment the Federal Reserve will accept.
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Chapter 9 - Monetary Policy
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43.
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The equation of exchange is equal to
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M3 minus M1
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MV=PQ
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The velocity of M1
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GDP multiplied by M2
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44.
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Excess reserves immediately increase if
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The discount rate decreases.
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The discount rate increases.
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Reserve requirements decrease.
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Reserve requirements increase.
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45.
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If investment is interest-insensitive,
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Fiscal policy has no impact on equilibrium income.
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Monetary policy has no impact on equilibrium income.
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Fiscal policy has no impact on the equilibrium interest rate.
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Monetary policy has no impact on the equilibrium interest rate.
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Chapter 10 - The Full Macroeconomic Model
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46.
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Ideally, policy makers wish to find a policy mix that would shift the Phillips curve___________________, thus making price stability and full employment more compatible and bearable.
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Downward and to the left
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Upward and to the right.
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Downward and to the right.
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Upward and to the left.
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47.
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Stagflation is a combination of ___________________.
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Deflation and recession.
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Inflation and depression.
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Inflation and recession.
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Deflation and full employment.
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48.
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Which of the following arguments is against budget deficits?
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Possible inability to make the required payments
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Budget deficits can be inflationary.
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Debt represents government use of resources better used by the private sector
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Financing the debt disrupts private capital markets and investment.
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49.
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Market measures for curing stagflation do NOT include
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Public service job programs.
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Various employment programs.
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Import foreign labor.
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Productivity improvement programs.
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Chapter 11 - International Trade and Finance
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50.
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The foreign exchange market is
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Located in NYSE.
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Not located in any one place, most transactions being conducted by telephone, wire service, or cable.
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Located in Hong Kong.
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Located in London.
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51.
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Long-term capital movements show up on the
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Current account balance.
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Capital account.
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Merchandise trade balance.
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Goods and services balance.
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52.
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There are basically three forces that will lead to alleviation of a country's payments imbalance. Which of the following is NOT one of those forces?
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A rise in the home country's price of imports.
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A change in gold reserve.
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A fall in the foreign country's price of exports.
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A possible rise in interest rates.
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53.
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Trade restrictions do NOT include
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Tariffs
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Sanctions.
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Embargos.
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Import quotas.
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54.
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The spot rate is
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The rate quoted for immediate delivery.
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Usually higher than the forward rate.
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A contract rate between the corporation and the foreign exchange trader at the bank for future delivery.
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Usually at a premium for sales and a discount for purchases.
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55.
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_______________ is NOT one of the functions of the foreign exchange market
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Transfer purchasing power.
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Transfer inflation.
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Provide credit.
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Minimize exchange risk.
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56.
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If a U.S. firm can buy 1,100,000 yens for $10,000, the rate of exchange for the yen is
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Chapter 12 - Issues in Macroeconomics
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57.
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Monetarists argue that rising money supply leads to
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Declining interest rate
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Declining real output.
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Rising velocity.
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Rising spending on capital goods.
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58.
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The key features of Keynesian economics do NOT include
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The dependency of consumption on income, called the consumption function.
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The multiplier effect of an autonomous spending on GDP.
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Inflation as a function of interest rate.
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The marginal efficiency of investment as a measure of business demand for investment.
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59.
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The Laffer curve is a view of
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Classical economists.
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Supply side theorists.
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Monetarists.
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Keynesians.
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60.
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Monetarists emphasize that stimulative fiscal measures lead to
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Inflation.
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Unstable money demand.
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Unemployment.
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Crowding out private investments.
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