question

The population of Ectenia is 100 people: 40 work full-time, 20 work half-time but would prefer to work full-time, 10 are looking for a job, 10 would like to work but are so discouraged they have given up looking, 10 are not interested in working because they are full-time students, and 10 are retired. What is the number of unemployed?

answer

10

question

The population of Ectenia is 100 people: 40 work full-time, 20 work half-time but would prefer to work full-time, 10 are looking for a job, 10 would like to work but are so discouraged they have given up looking, 10 are not interested in working because they are full-time students, and 10 are retired. What is the size of Ectenia's labor force?

answer

70

question

The main policy goal of the unemployment insurance system is to reduce the

answer

income uncertainty that workers face.

question

According to the most recent data, among workers who are paid at an hourly rate, about _____ percent have jobs that pay at or below the minimum wage.

answer

5

question

Unionized workers are paid about _____ percent more than similar nonunion workers.

answer

15

question

According to the theory of efficiency wages,

answer

firms may find it profitable to pay above-equilibrium wages.

question

The Bureau of Labor Statistics (BLS) announced that in January 2013, of all adult Americans, 143,322,000 were employed, 12,332,000 were unemployed, and 89,008,000 were not in the labor force. What is the adult population?

answer

244,662,000

question

The money supply includes all of the following EXCEPT metal coins. paper currency. lines of credit accessible with credit cards. bank balances accessible with debit cards.

answer

lines of credit accessible with credit cards.

question

Chloe takes $100 of currency from her wallet and deposits it into her checking account. If the bank adds the entire $100 to reserves, the money supply ________, but if the bank lends out some of the $100, the money supply ________.

answer

is unchanged, increases

question

If the reserve ratio is ¼ and the central bank increases the quantity of reserves in the banking system by $120, the money supply increases by

answer

$480.

question

Which of the following actions by the Federal Reserve would reduce the money supply?

answer

an increase in the interest rate paid on reserves

question

In a system of fractional-reserve banking, even without any action by the central bank, the money supply declines if households choose to hold ________ currency or if banks choose to hold ________ excess reserves.

answer

more, more

question

The classical principle of monetary neutrality states that changes in the money supply do not influence ________ variables and is thought most applicable in the ________ run.

answer

real, long

question

If nominal GDP is $400, real GDP is $200, and the money supply is $100, then

answer

the price level is 2, and velocity is 4.

question

According to the quantity theory of money, which variable in the quantity equation is most stable over long periods of time?

answer

velocity

question

Hyperinflations occur when the government runs a large budget ________, which the central bank finances with a substantial monetary ________.

answer

deficit, expansion

question

According to the quantity theory of money and the Fisher effect, if the central bank increases the rate of money growth,

answer

inflation and the nominal interest rate both increase.

question

If an economy always has inflation of 10 percent per year, which of the following costs of inflation will it NOT suffer?

answer

Arbitrary redistributions between debtors and creditors.

question

When the economy goes into a recession, real GDP ________, and unemployment ________.

answer

falls, rises

question

A sudden crash in the stock market shifts

answer

the aggregate demand curve.

question

A change in the expected price level shifts

answer

the short-run aggregate-supply curve.

question

An increase in the aggregate demand for goods and services has a larger impact on output ________ and a larger impact on the price level ________.

answer

in the short run, in the long run

question

Stagflation is caused by

answer

a leftward shift in the aggregate-supply curve.

question

The idea that economic downturns result from an inadequate aggregate demand for goods and services is derived from the work of which economist?

answer

John Maynard Keynes

question

If the central bank wants to expand aggregate demand, it can ________ the money supply, which would ________ the interest rate.

answer

increase, decrease

question

If the government wants to contract aggregate demand, it can ________ government purchases or ________ taxes.

answer

decrease, increase

question

The Federal Reserve's target rate for the federal funds rate

answer

commits the Fed to set a particular money supply so that it hits the announced target.

question

With the economy in a recession because of inadequate aggregate demand, the government increases its purchases by $1,200. Suppose the central bank adjusts the money supply to hold the interest rate constant, investment spending is fixed, and the marginal propensity to consume is 2/3. How large is the increase in aggregate demand?

answer

$3,600

question

Suppose the government increases its purchases by $1,200 while holding the money supply constant. The change in aggregate demand resulting from an increase in government purchases if the government allows interest rates to adjust (as compared to the change if it were to hold them constant) will be

answer

smaller but still positive.

question

Which of the following is an example of an automatic stabilizer? When the economy goes into a recession,

answer

more people become eligible for unemployment insurance benefits.

question

Who of the following would be included in the Bureau of Labor Statistics' "unemployed" category?

answer

Tuuli, who is waiting for her new job to start

question

Zeeman is a college student who is not working or looking for a job. The Bureau of Labor Statistics counts Zeeman as

answer

neither in the labor force nor unemployed.

question

Unemployment Rate = number of unemployed mc003-1.jpg (number of employed + number of unemployed) mc003-2.jpg 100.

answer

number of unemployed ÷ (number of employed + number of unemployed) ×100.

question

The labor-force participation rate measures the percentage of the

answer

total adult population that is in the labor force.

question

Suppose some country had an adult population of about 50 million, a labor-force participation rate of 60 percent, and an unemployment rate of 5 percent. How many people were unemployed?

answer

1.5 million

question

Discouraged workers

answer

are counted as out of the labor force but should be counted as unemployed.

question

People who are unemployed because of job search are best classified as

answer

frictionally unemployed.

question

The natural unemployment rate includes

answer

both frictional and structural unemployment.

question

Which of the following does not help reduce frictional unemployment?

answer

unemployment insurance

question

When a union raises the wage above the equilibrium level, it

answer

raises the quantity of labor supplied and reduces the quantity of labor demanded, resulting in unemployment.

question

In which of the following sets of assets are the assets correctly ranked from most liquid to least liquid?

answer

money, bonds, cars, houses

question

Which of the following is not included in M1?

answer

$500 in your savings account

question

Liquidity refers to

answer

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

question

Credit cards are

answer

not included in any measure of the money supply.

question

The Federal Reserve does all except which of the following?

answer

It makes loans to large business firms.

question

When the Fed purchases $200 worth of government bonds from the public, the U.S. money supply eventually increases by

answer

more than $200.

question

The discount rate is the interest rate that

answer

the Fed charges banks for loans.

question

The federal funds rate is the interest rate that

answer

banks charge one another for loans.

question

To increase the money supply, the Fed can

answer

buy government bonds or decrease the discount rate.

question

If the reserve ratio is 8 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed purchases $20 million of government bonds, bank reserves

answer

increase by $20 million and the money supply eventually increases by $250 million.

question

Inflation can be measured by the

answer

percentage change in the consumer price index.

question

If P denotes the price of goods and services measured in terms of money, then

answer

1/P represents the value of money measured in terms of goods and services. P can be regarded as the "overall price level." an increase in the value of money is associated with a decrease in P.

question

If M = 10,000, P = 2, and Y = 20,000, then velocity =

answer

4. Velocity will rise if money changes hands more frequently.

question

According to the quantity theory of money, a 2 percent increase in the money supply

answer

causes the price level to rise by 2 percent.

question

The inflation tax refers to

answer

the revenue a government creates by printing money.

question

Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate rises, then

answer

the nominal interest rate rises, but the real interest rate does not.

question

When inflation rises, people tend to go to the bank

answer

more often, giving rise to shoeleather costs.

question

Wealth is redistributed from creditors to debtors when inflation was expected to be

answer

low and it turns out to be high.

question

When the money supply curve shifts from MS1 to MS2,

answer

the equilibrium price level increases.

question

If the money supply is MS2 and the value of money is 2, then there is an excess

answer

supply of money that is represented by the distance between points A and B.

question

Which part of real GDP fluctuates most over the course of the business cycle?

answer

investment expenditures

question

The classical dichotomy refers to the separation of

answer

real and nominal variables.

question

The model of aggregate demand and aggregate supply explains the relationship between

answer

real GDP and the price level.

question

In the context of aggregate demand and aggregate supply, the wealth effect refers to the idea that, when the price level decreases, the real wealth of households

answer

increases and as a result consumption spending increases. This effect contributes to the downward slope of the aggregate-demand curve.

question

Other things the same, when the price level falls, interest rates

answer

fall, so firms increase investment.

question

An increase in the money supply

answer

and an investment tax credit both cause aggregate demand to shift right.

question

According to the sticky-wage theory of the short-run aggregate supply curve, if workers and firms expected prices to rise by 4 percent, but instead they rise by 2 percent, then

answer

employment and production fall.

question

The long-run, but not the short-run, aggregate supply curve is consistent with

answer

the idea that nominal variables do not affect real variables.

question

Which of the following would cause stagflation?

answer

rising oil prices

question

Suppose the economy is in long-run equilibrium. In a short span of time, there is a decline in the money supply, a tax increase, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, we would expect

answer

the price level and real GDP both to fall.

question

For the U.S. economy, which of the following is the most important reason for the downward slope of the aggregate-demand curve?

answer

the interest-rate effect

question

According to John Maynard Keynes,

answer

the interest rate adjusts to balance the supply of, and demand for, money.

question

Using the liquidity-preference model, when the Federal Reserve increases the money supply,

answer

the equilibrium interest rate decreases.

question

When the interest rate increases, the opportunity cost of holding money

answer

increases, so the quantity of money demanded decreases.

question

In the short run, an increase in the money supply causes interest rates to

answer

decrease, and aggregate demand to shift right.

question

Fiscal policy refers to the idea that aggregate demand is affected by changes in

answer

government spending and taxes.

question

The multiplier for changes in government spending is calculated as

answer

1/(1 - MPC).

question

Which of the following correctly explains the crowding-out effect?

answer

An increase in government expenditures increases the interest rate and so reduces investment spending.

question

If the multiplier is 7 and if there is no crowding-out effect, then a $50 billion increase in government expenditures causes aggregate demand to

answer

increase by $350 billion.

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