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  5. Question 1
  6. An event that allows the economy to operate more efficiently by producing more outputs without using any more inputs is referred to as __________.
  7. A. absolute progress
  8. B. efficiency progress
  9. C. capital investment
  10. D. technological progress
  12. Question 2
  13. In a simple economy without government or foreign trade, any income not consumed is called __________.
  14. A. investment
  15. B. net investment
  16. C. saving-
  17. D. depreciation
  19. Question 3
  20. When the government has a budget deficit or surplus, it enters the __________.
  21. A. market for loanable funds
  22. B. subprime housing market
  23. C. bond market
  24. D. government-sponsored mortgage lenders market
  26. Question 4
  27. If a firm increases its capital stock per person while holding constant the number of workers employed, the firm is said to experience __________.
  28. A. capital augmentation
  29. B. investment deepening
  30. C. labor intensity
  31. D. capital deepening
  33. Question 5
  34. Which of the following uses of tax revenues collected by the government leads to increased capital deepening?
  35. A. building roads
  36. B. increased foreign aid
  37. C. Medicare payments
  38. D. Social Security payments
  40. Question 6
  41. An increase in the capital stock will __________.
  42. A. shift the production function downward
  43. B. shift the production function upward
  44. C. flatten the production function
  45. D. steepen the production function
  47. Question 7
  48. In making accurate comparisons of GDP across countries, it is important to take differences in __________ into account.
  49. A. population size ??
  50. B. the average age of the population
  51. C. family size
  52. D. all of the above
  54. Question 8
  55. Nations with low levels of GDP per capita may converge to richer nations if __________.
  56. A. nations with high levels of income experience a continuously increasing growth rate
  57. B. nations with lower levels of income grow more quickly than those with higher levels of income
  58. C. nations with lower levels of income spend less on investment
  59. D. nations with lower levels of income grow more slowly than those with higher levels of income
  61. Question 9
  62. Convergence refers to closing the gap in __________ between poorer countries and richer countries.
  63. A. real GDP
  64. B. real GDP per capita
  65. C. the growth rate in real GDP
  66. D. the growth rate in real GDP per capita
  68. Question 10
  69. The fraction of additional income spent on imports is called the __________.
  70. A. import function
  71. B. marginal propensity to import
  72. C. marginal propensity to export
  73. D. trade balance
  75. Question 11
  76. According to the text, __________ is perhaps the most critical aspect of a country’s economic performance.
  77. A. growth in GDP
  78. B. the inflation rate
  79. C. the unemployment rate
  80. D. the living standard
  82. Question 12
  83. It is possible for an economy to become more productive and per-capita output to increase if __________.
  84. A. new ideas are generated
  85. B. inventions are developed
  86. C. technology is improved
  87. D. all of the above
  89. Question 13
  90. An increase in the level of U.S. exports __________ the demand for goods and service produced in the United States.
  91. A. decreases
  92. B. increases ???
  93. C. increases or decreases
  94. D. does not affect
  96. Question 14
  97. If government increases spending and wants to maintain a balanced budget, it should __________.
  98. A. decrease taxes by an equal amount
  99. B. increase taxes by an equal amount
  100. C. decrease taxes by an amount equal to the increase in spending multiplied by the tax multiplier
  101. D. increase taxes by an amount equal to the increase in spending multiplied by the tax multiplier
  103. Question 15
  104. Fluctuations in the demand and supply of loanable funds will in turn bring changes to the __________ of lent and borrowed funds.
  105. A. product recipient
  106. B. mortgage-backed securities
  107. C. equilibrium quantity
  108. D. equilibrium quality
  110. Question 16
  111. Suppose that for a given firm, the increase in output resulting from the last worker hired is less than the increase in output of the previous worker hired. This is an example of __________.
  112. A. diminishing returns
  113. B. constant returns
  114. C. increasing return
  115. D. capital deepening
  117. Question 17
  118. The idea that investment in comprehensive education in developing countries leads to permanent increases in the rate of technological progress is an example of __________.
  119. A. increasing economic inequality
  120. B. capital deepening
  121. C. new growth theory
  122. D. a trade-off between human capital and technology
  124. Question 18
  125. The multiplier that arises from equal increases in government spending and taxes is called the __________.
  126. A. simple multiplier
  127. B. tax multiplier
  128. C. balanced budget multiplier
  129. D. government spending multiplier
  131. Question 19
  132. Trade deficits always lead to future decreases in consumption if the trade deficits __________.
  133. A. support current investment
  134. B. support current consumption
  135. C. support either current investment or current consumption
  136. D. require borrowing from abroad
  138. Question 20
  139. What happens to U.S. GDP when foreign countries experience prosperity?
  140. A. It increases because the United States will export more product to those countries.
  141. B. It decreases because the foreign countries will now buy more of their own products.
  142. C. It decreases because the foreign countries will be able to export more at a lower cost.
  143. D. It does not change because U.S. GDP is not affected by other countries’ prosperity.
  145. Question 21
  146. If money is used as a mechanism to hold purchasing power for a period of time, it is functioning as a __________.
  147. A. standard of value
  148. B. store of value
  149. C. medium of exchange
  150. D. unit of account
  152. Question 22
  153. Money guarantees that there is a(n. __________, because it will always be accepted in exchange for a desired service or good.
  154. A. double coincidence of wants
  155. B. open market
  156. C. fiat-
  157. D. human interaction
  159. Question 23
  160. An open market __________ by the Fed decreases the money supply, which leads to __________ interest rates and a fall in investment spending.
  161. A. sale; increased
  162. B. sale; decreased
  163. C. purchase; increased
  164. D. purchase; decreased
  166. Question 24
  167. The group responsible for deciding on monetary policy is the __________.
  168. A. Federal Open Market Committee
  169. B. Board of Governors only
  170. C. Federal Advisory Council
  171. D. group of 12 Federal Reserve Bank presidents only
  173. Question 25
  174. One of the essential functions that a bank performs is __________.
  175. A. purchasing government bonds
  176. B. creating deposits by lending required reserves
  177. C. transferring money from savers to lenders
  178. D. owning assets like real estate
  180. Question 26
  181. When money is used to express the value of goods and services, it is functioning as a __________.
  182. A. medium of exchange
  183. B. store of value
  184. C. unit of account
  185. D. store of purchasing power
  187. Question 27
  188. The Fed can change the money supply by buying or selling long-term Treasury bonds. Purchasing long-term securities is commonly called __________.
  189. A. open market operations
  190. B. discount operations
  191. C. federal funds speculation
  192. D. quantitative easing
  194. Question 28
  195. To increase the money supply using the reserve requirements, what would the Fed typically do?
  196. A. increase the reserve requirement for banks
  197. B. reduce the reserve requirement for banks
  198. C. make each bank set its own reserve levels
  199. D. let each bank get more currency from the Treasury
  201. Question 29
  202. The Federal Reserve influences the level of interest rates in the short run by changing the __________.
  203. A. demand for money through open market operations
  204. B. demand for money through changes in reserve requirements
  205. C. supply of money through open market operations
  206. D. supply of money through changes in stock market operations
  208. Question 30
  209. Consider how the value of the U.S. dollar affects the worldwide increase in commodity prices to answer the following two question(s.. Starting in the summer 10, there was a rise in prices of commodities such as oil and food worldwide. Some economists suggested that monetary policy in the United States was the cause of the worldwide commodity boom. Some economists noticed that the change in the value of the U.S. dollar was largely due to the change in interest rates, and the change in interest rates occurred because of the Fed’s use of __________ to further stimulate the economy.
  210. A. open market sales
  211. B. quantitative easing
  212. C. discount operations
  213. D. open market purchases
  215. Question 31
  216. All of the following statements are true of the Federal Reserve EXCEPT __________.
  217. A. it acts as the central bank for all countries in the world
  218. B. along with the Board of Governors, the chairperson of the Federal Reserve determines monetary policies and strategies based on the state of economy
  219. C. it supplies currency to the economy
  220. D. it holds reserves from banks and regulates banks
  222. Question 32
  223. The supply of money in the U.S. economy is determined primarily by __________.
  224. A. decisions made by the Federal Reserve and the U.S. Treasury
  225. B. the actions of the Federal Reserve and the banking system
  226. C. consumers and the banking system
  227. D. the demand for money in the economy
  229. Question 33
  230. A bank’s reserves __________.
  231. A. are the sum of its excess and required reserves
  232. B. can be held as cash in its vault
  233. C. can be held as deposits with the Federal Reserve
  234. D. all of the above
  236. Question 34
  237. Good news for the economy is bad news for bond prices, because __________.
  238. A. the increased demand for money will increase interest rates
  239. B. when real GDP increases, demand for money will decrease
  240. C. bond prices move in the same direction as interest rates
  241. D. when interest rates increase during growing GDP, bond prices will increase
  243. Question 35
  244. An increase in the reserve requirement __________.
  245. A. increases the money supply, which leads to increased interest rates and a decrease in GDP
  246. B. increases the money supply, which leads to decreased interest rates and a decrease in GDP
  247. C. decreases the money supply, which leads to increased interest rates and a decrease in GDP
  248. D. decreases the money supply, which leads to decreased interest rates and a decrease in GDP
  250. Question 36
  251. Loans are examples of a bank’s __________.
  252. A. assets-
  253. B. liabilities
  254. C. net worth
  255. D. balance sheet
  257. Question 37
  258. When checks are exchanged between banks, the Fed oversees the banks to ensure the appropriate funds have been transferred. This is known as __________.
  259. A. check kiting
  260. B. check clearing
  261. C. check floating
  262. D. check balancing
  264. Question 38
  265. The Federal Reserve System was created by the __________.
  266. A. U.S. Treasury
  267. B. President
  268. C. Congress
  269. D. Supreme Court
  271. Question 39
  272. M1 __________.
  273. A. is the sum of currency plus traveler’s checks
  274. B. is the narrowest definition of the money supply
  275. C. includes small time deposits
  276. D. includes credit cards
  278. Question 40
  279. Equilibrium in the money market occurs when __________.
  280. A. the quantity of money demanded equals the quantity of money supplied
  281. B. the quantity of money demanded is less than the quantity of money supplied
  282. C. the quantity of money demanded is more than the quantity of money supplied
  283. D. the interest rate equals the money supply
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