Macroceconomics

1. The price index was 105 in Year 1 and 108 in Year 2. What was the
inflation rate?

a. 2.9 percent

b. 0.029 percent

c. - 2.9 percent

d. 102.9 percent

2. Money demand refers to

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

b. how much income people want to earn per year.

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

d. how much currency the Federal Reserve decides to print.

3. Suppose that in a closed economy GDP is equal to $35,000, consumption

equal to $16,000, government purchases equal $4,500, and taxes equal
$8,000 What are private saving, public saving, and national saving?

a. $3,500 $11,000, and $14,500, respectively

b. $19,000, $27,000, and $12,500, respectively

c. $11,000, $3,500, and $14,500, respectively

d. $27,000, $19,000, and $12,500, respectively

4. The nominal interest rate is 4%, the inflation rate is 1% and the tax rate is
20%. Given US tax laws, how is after-tax real return computed?

a. .03(1-20)

b. .04(1-20)

c. .04(1-20) - .0.1

d. None of the above is correct

 Macroceconomics

5. Suppose a closed economy had public saving of -$1 trillion and private
saving of $17 trillion. What are national saving and investment for this
country?

a. $16 trillion, $16 trillion

b. $16 trillion, $18 trillion

c. $18 trillion, $16 trillion

d. $18 trillion, $18 trillion

6. Which of the following is a certificate of indebtedness?

a. Both stocks and bonds

b. Stocks but not bonds

c. Bonds but not stocks

d. Neither stocks nor bonds

7. If the central bank in some country raised the reserve requirement, then
the money multiplier for that country

a. would increase.

b. would not change.

c. would decrease.

d. Could do any the above

8. You put money into an account and earn a real interest rate of 5 percent.
Inflation is 2 percent, and your marginal tax rate is 35 percent. What is
your after-tax real rate of interest?"

a. 5.25 percent

b. 3.05 percent

c. 2.55 percent

d. 1.25 percent
 Macroceconomics

9. You put money into an account and earn an after-tax real interest rate of
2.5 percent. If the nominal interest rate on the account is 8 percent and the
inflation rate is 2 percent, then what is the tax rate?

a. 28.00 percent

b. 36.25 percent

c. 43.75 percent

d. 67.50 percent

10. If the price of Italian shoes imported into the United States increases, then

a. both the GDP deflator and the consumer price index will increase

b. neither the GDP deflator nor the consumer price index will increase

c. the GDP deflator will increase, but the consumer price index will not
increase.

d. the consumer price index will increase, but the GDP deflator will not
increase.

11. In 1931, President Herbert Hoover was paid a salary of $75,000.

Government statistics show a consumer price index of 15.2 for 1931 and
237 for 2015. President Hoover's 1931 salary was equivalent to a 2015
salary of about

a. $4,965.

b. $1,169.408.

c. $1,057,894.

d. $16,080,001.

12. A bank has $8,000 in deposits and $6,000 in loans = excess reserves. It
has loaned out all it can given the reserve requirement. It follows that the
reserve requirement is
a. 2.5 percent.

b. 33.3 percent.

c. 25 percent.

d. 75 percent.
 Macroceconomics

13. The cost of the basket

The following table pertains to Wiskancia, an economy in which the
typical consumer's basket consists of 15 pounds of apples and 7 teddy
bears.
Price of Apples Price of Teddy bears
Year
(Dollars per pound) (Dollars per toy)

1 14 7

2 12 5

3 15 9

a. decreased from Year 1 to Year 2 and increased from Year 2 to Year 3.

b. increased from Year 1 to Year 2 and decreased from Year 2 to Year 3.

c. increased from Year 1 to Year 2 and increased from Year 2 to Year 3.

d. decreased from Year 1 to Year 2 and decreased from Year 2 to Year 3

14. Noah is an unpaid stay-at-home father who is not currently searching for
paid work. Pete is a full-time student who is not looking for a job. Who is
included in the labor force by the Bureau of Labor Statistics?

a. only Noah

b. only Pete

c. both Noah and Pete

d. neither Noah nor Pete

15. The money supply increases when the Fed

a. buys bonds. The increase will be larger, the smaller is the reserve ratio.

b. buys bonds. The increase will be larger, the larger is the reserve ratio.
sells bonds.

c. The increase will be larger, the smaller is the reserve ratio. 21 sells
bonds.

d. The increase will be larger, the larger is the reserve ratio.

 Macroceconomics

16. On a bank's Taccount, which are part of the bank's assets?

a. both deposits made by its customers and reserves

b. deposits made by its customers but not reserves

c. reserves but not deposits made by its customers

d. neither deposits made by its customers nor reserves

17. When the Fed conducts open-market purchases,

a. banks buy Treasury securities from Fed, which increases the money
supply.

b. banks buy Treasury securities from the Fed, which decreases the money
supply.

c. it buys Treasury securities, which increases the money supply.

d. it buys Treasury securities, which decreases the money supply.

18. Marta lends money at a fixed interest rate and then inflation turns out to
be higher than she had expected it to be. The real interest rate she earns is

a. higher than she had expected, and the real value of the loan is higher
than she had expected

b. higher than she had expected, and the real value of the loan is lower than
she had expected

c. lower than she had expected, and the real value of the loan is higher than
she had expected

d. lower than she had expected, and the real value of the loan is lower than
she had expected

19. Financial intermediaries are

a. the same as financial markets

b. individuals who make profits by buying a stock low and selling it high.

c. a more general name for financial assets such as stocks, bonds, and
checking accounts.

d. financial institutions through which savers can indirectly provide funds

to borrowers.
 Macroceconomics

20. People hold $400 million of bank deposits but no currency. Banks have
made $380 million dollars of loans and only hold enough reserves to
satisfy reserve requirements. Because of uncertainty, banks choose to
hold $10 million more in reserves. The Fed takes no action. What
happens to bank loans?

a. they fall $220 million

b. they fall $200 million

c. they rise $200 million

d. they rise $220 million

21. A bond buyer is a

a. saver. Bond buyers must hold their bonds until maturity.

b. saver. Bond buyers may sell their bonds prior to maturity.

c. borrower. Bond buyers must hold their bonds until maturity.

d. borrower. Bond buyers may sell their bonds prior to maturity.

22. Changes in real GDP reflect

a. only changes in prices

b. only changes in the amounts being produced.

c. both changes in prices and changes in the amounts being produced.

d. neither changes in prices nor changes in the amounts being produced.

23. In the actual economy, households

a. spend all of their income.

b. divide their income among spending, taxes, and saving.

c. buy all goods and services produced in the economy.

d. save all of their income.

 Macroceconomics

24. By far the largest category of goods and services in the CPI basket is

a. housing.

b. transportation.

c. education & communication.

d. food & beverages.

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

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

c. Both the $80 and the quantity of shoes are nominal variables.

d. Both the $80 and the quantity of shoes are real variables.

26. A budget deficit

a. changes the supply of loanable funds

b. changes the demand for loanable funds.

c. changes both the supply of and demand for loanable funds.

d. does not influence the supply of or the demand for loanable funds.

27. Which of the following is an asset of a bank and a liability for its
customers?
a. deposits of its customers and loans to its customers

b. deposits of its customers but not loans to its customers

c. loans to its customers but not the deposits of its customers

d. neither the deposits of its customers nor the loans to its customers

28. The discount rate is the interest rate that Team

a. banks charge one another for loans.
b. banks charge the Fed for loans
c. the Fed charges banks for loans
d. the Fed charges Congress for loans.
 Macroceconomics

29. As an alternative to selling shares of stock as a means of raising funds, a

large company could, instead,
a. invest in physical capital.

b. use equity finance.

c. sell bonds.

d. purchase bonds.

30. In 2010 the U.S. government was running a large deficit. Some were
concerned that pressures might be put on the Federal Reserve to purchase
government bonds to help the government finance this deficit. If the Fed
were to buy government bonds to help the government finance its
expenditures, then
a. the price level would fall, so the value of money would fall.

b. the price level would fall so the value of money would rise.

c. the price level would rise, so the value of money would fall.

d. the price level would rise, so the value of money would rise.

31. The country of Caspir produces only cereal and milk. The base year is
2015. This country's inflation rate from 2016 to 2017 was
Cereal Milk

Year Quantity
Price (Dollars Price (Dollars Quantity
(Boxes of
per box) per gallon) (Gallons)
cereal)

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

a. 25.0%

b. 23.1%

c. 26.1%.

d. 18.8%.
 Macroceconomics

32. Suppose banks desire to hold no excess reserves and that the Fed has set a
reserve requirement of 6 percent. If you deposit $8,000 into First Raven
Bank,
a. First Raven's required reserves increase by $480.

b. First Raven will be able to lend out $7,520

c. First Raven's assets and liabilities both will increase by $8,000.

d. All of the above are correct.

33. The money supply in Muckland is $100 billion. Nominal GDP is $800
billion and real GDP is $200 billion. What are the price level and velocity
in Muckland?
a. The price level and velocity are both 8.

b. The price level is 2 and the velocity is 8.

c. The price level and velocity are both 4.

d. The price level is 4 and velocity is 8.

34. 31. Suppose that some country had an adult population of about 46
million, a labor-force participation rate of 75 percent, and an
unemployment rate of 8 percent. How many people were employed?
a. 2.76 million

b. 31.74 million

c. 34.5 million

d. 42.32 million

35. If the reserve ratio is 5 percent, banks do not hold excess reserves, and
people do not hold currency, then when the Fed purchases $20 million
worth of government bonds, bank reserves
a. increase by $20M & the money supply eventually increases by $400M.

b. decrease by $20M & the money supply eventually decreases by $400M.

c. increase by $20M & the money supply eventually increases by $100M.

d. decrease by $20M & the money supply eventually decreases by $100M.

 Macroceconomics

36. A farmer produces carrots and sells them to Fresh Juice, which makes
carrot juice. The carrots produced by the farmer are called

a. inventory goods.

b. transitory goods.

c. final goods.

d. intermediate goods.

37. Daniel, a US citizen, travels to Mexico and buys a newly manufactured

motorcycle made there. His purchase is included in

a. both Mexico's GDP and US. GDP.

b. Mexico's GDP, but it is not included in U.S. GDP.

c. US. GDP, but it is not included in Mexico's GDP.

d. neither Mexico's GDP nor U.S. GDP.

38. The economy's two most important financial markets are

a. the investment market and the saving market.

b. the bond market and the stock market.

c. banks and the stock market.

d. financial markets and financial institutions.

39. Long-term bonds are

a. riskier than short-term bonds, and so interest rates on long-term bonds

are usually lower than interest rates on short-term bonds.

b. riskier than short-term bonds, and so interest rates on long-term bonds

are usually higher than interest rates on short-term bonds.

c. less risky than short-term bonds, and so interest rates on long-term

bonds are usually lower than interest rates on short-term bands.

d. less risky than short-term bonds, and so interest rates on long-term

bonds are usually higher than interest rates on short-term bonds.
 Macroceconomics

40. Cyclical unemployment refers to

a. how often a worker is likely to be employed during her lifetime.

b. short run fluctuations around the natural rate of unemployment.

c. the portion of unemployment created by wages set above the

equilibrium level.

d. changes in unemployment due to changes in the structural rate of

unemployment.

41. Lucy quit her job because she was unhappy at work. Genevieve was fired
because she frequently surfed the Internet rather than working on her
assigned tasks. Who is eligible for unemployment insurance benefits?

a. both Lucy and Genevieve

b. Lucy but not Genevieve

c. Genevieve but not Lucy

d. neither Lucy nor Genevieve

42. For any given year, the CPI is the price of the basket of goods and
services in the

a. given year divided by the price of the basket in the base year, then
multiplied by 100.

b. given year divided by the price of the basket in the previous year, then
multiplied by 100.

c. base year divided by the price of the basket in the given year, then
multiplied by 100

d. previous year divided by the price of the basket in the given year, then
multiplied by 100.
 Macroceconomics

43. Which of the following items is included in M27

a. credit cards

b. money market mutual funds

c. corporate bonds

d. large time deposits

44. A bank loans Kellie's Print Shop $350,000 to remodel a building near
campus to use as a new store. On their respective balance sheets, this loan
is

a. an asset for the bank and a liability for Kellie's Print Shop. The loan
increases the money supply

b. an asset for the bank and a liability for Kellie's Print Shop. The loan
does not increase the money supply.

c. a liability for the bank and an asset for Kellie's Print Shop. The loan
increases the money supply.

d. a liability for the bark and an asset for Kellie's Print Shop. The loan does
not increase the money supply.

45. In the GDP accounts production equals

a. income

b. income + saving.

c. income - government expenditures

d. income - imports.

46. The classical dichotomy refers to the idea that the supply of money is

a. irrelevant for understanding the determinants of nominal and real

variables.

b. determines nominal variables, but not real variables.

c. determines real variables. but not nominal variables.

d. is a determinant of both real and nominal variables.

 Macroceconomics

47. A recession has traditionally been defined as a period during which

a. nominal GDP declines for two consecutive quarters.

b. nominal GDP declines for four consecutive quarters.

c. real GDP declines for two consecutive quarters.

d. real GDP declines for four consecutive quarters

48. In the long run, money demand and money supply determine

a. the value of money and the real interest rate.

b. the value of money but not the real interest rate.

c. the real interest rate but not the value of money.

d. neither the value of money nor the real interest

49. If inflation is lower than what was expected,

a. creditors receive a lower real interest rate than they had anticipated.

b. creditors pay a lower real interest rate than they had anticipated.

c. debtors receive a higher real interest rate than they had anticipated.

d. debtors pay a higher real interest rate than they had anticipated.

50. The CPI differs from the GDP deflator in that

a. the CPI is a price index, while the GDP deflator is an inflation index.

b. substitution bias is not a problem with the CPI, but it is a problem with
the GDP deflator.

c. increases in the prices of foreign produced goods that are sold to US,
consumers show up in the CPI but not in the GDP deflator

d. increases in the prices of domestically produced goods that are sold to

the US government show up in the CPI but not in the GDP deflator.
 Macroceconomics

51. The steps involved in calculating the consumer price index and the
inflation rate, in order, are as follows:

a. Choose a base year, update the basket, find the prices, estimate the
basket's cost, compute the index, and compute the inflation rate.

b. Choose a base year, fix the basket, find the prices, compute the inflation
rate, compute the basket's cost, and compute the index.

c. Fix the basket, find the prices, compute the basket's cost, choose a base
year and compute the index, and compute the inflation rate.

d. Fix the basket, find the prices, compute the inflation rate, compute the
basket's cost and choose a base year and compute the index.

52. When the Fed purchases $1000 worth of government bonds from the
public, the U.S. money supply eventually increases by

a. more than $1000.

b. exactly $1000.

c. less than $1000.

d. None of the above are correct.

53. In a closed economy, what does the difference between the tax revenue
and government purchases, (TG), represent?

a. National saving

b. Investment

c. Private saving

d. Public saving

54. When the consumer price index rises, the typical family

a. has to spend more dollars to maintain the same standard of living.

b. can spend fewer dollars to maintain the same standard of living.

c. finds that its standard of living is not affected.

d. can offset the effects of rising prices by saving more.

 Macroceconomics

55. Gross domestic product includes all

a. legal final goods and services, but it excludes illegal final goods and
services.

b. legal and illegal final goods, but it excludes all legal and illegal final
services.

c. legal and illegal final goods and all legal and illegal final services.

d. legal and illegal final goods and legal final services, but it excludes
illegal final services.

56. Suppose the banking system currently has $400 billion in reserves, the
reserve requirement is 8 percent, and excess reserves amount to $5
billion. What is the level of deposits?

a. $5,000 billion

b. $4.937.5 billion

c. $5.062.5 billion

d. $4,995 billion

57. The introduction of the video cassette recorder in the 1970s exemplified a
problem in measuring the cost of living; that problem is the problem of

a. substitution bias.

b. product improvement bias.

c. introduction of new goods.

d. unmeasured quality change.

 Macroceconomics

58. Which of the following is included in the calculation of GDP?

a. The purchase of tutoring services from a tutor who holds citizenship

outside the country but resides within the country.

b. The purchase of a new edition of a foreign textbook that was produced

in a different nation.

c. The purchase of ink and paper supplies by a textbook company for the
production of new textbooks

d. The purchase of a used textbook from a friend who took the same class
last year.

59. Suppose that the adult population in the country of Atlantis is 115
million. If 80 million people are employed and 5 million are unemployed,
then

a. 30 million are not in the labor force.

b. 35 million are in the labor force.

c. 75 million are in the labor force.

d. 35 million are not in the labor force.

60. A Texas household receives a Social Security check for $1500, which it
uses to purchase a $40 pair of shoes made in Thailand by a Thai firm, a
$1240 television made by a Korean firm in Korea, and $220 on groceries
from a local store. As a result, U.S. GDP

a. increases by $40.

b. increases by $220.

c. increases by $280.

d. increases by $1500.
 Macroceconomics

61. The CPI and the GDP deflator

a. generally move together.

b. generally show different patterns of movement.

c. always show identical changes.

d. always show different patterns of movement.

62. Bob is looking for work after school, but everywhere he fills out an
application, the managers say they always have a lot more applications
than open positions. Tom has a law degree Several firms have made him
offers, but he thinks he might be able to find a firm where his talents
could be put to better use.

a. Bob and Tom are both frictionally unemployed

b. Bob and Tom are both structurally unemployed.

c. Bob is frictionally unemployed, and Tom is structurally unemployed

d. Bob is structurally unemployed, and Tom is frictionally unemployed.

63. Suppose the Fed requires banks to hold 9 percent of their deposits as
reserves. A bank has $18,000 of excess reserves and then sells the Fed a
Treasury bill for $9,000. How much does this bank now have to lend out
if it decides to hold only required reserves?

a. $27,000

b. $27,190

c. $26,190

d. $9,000

64. Then the Fed conducts open-market sales,

a. it sells Treasury securities, which increases the money supply.

b. it sells Treasury securities, which decreases the money supply.

c. it auctions term loans, which increases the money supply.

d. it auctions term loans, which decreases the money supply.

 Macroceconomics

65. Which of the following is included in both M1 and M2?

a. savings deposits

b. demand deposits

c. small time deposits

d. money market mutual funds

66. Northwest Wholesale Foods sells common stock. The company is using

a. equity financing and the return shareholders earn is fixed.

b. equity financing and the return shareholders earn depends on how

profitable

c. the company is debt financing and the return shareholders earn is fixed.

d. debt financing and the return shareholders earn depends on how

profitable the company is.

67. Who would be included in the labor force?

a. Maggie, who plans to work at the newspaper next year when she turns
16 years old.

b. Lisa, who is unhappy with her current job.

c. Bart, who is a full-time student and uninterested in finding employment.

d. None of the above is correct.

68. In 6/2009 the Bureau of Labor Statistics reported an adult population of

234.9 million, unemployment of 12.4 million, and employment of 141.6
million. Based on these numbers the labor-force participation rate was

a. 154/234.9.

b. 141.6/234.9.

c. 141.6/154

d. None of the above is correct.

 Macroceconomics

69. As the price level decreases, the value of money

a. increases, so ppl must hold less money to purchase G&S.

b. increases, so people must hold more money to purchase G&S.

c. decreases, so people must hold more money to purchase G&S.

d. decreases, so people must hold less money to purchase G&S.

70. When inflation rises, people

a. make less frequent trips to the bank and firms make less frequent price
changes.

b. make less frequent trips to the bank while firms make more frequent
price changes.

c. make more frequent trips to the bank while firms make less frequent
price changes.

d. make more frequent trips to the bank and firms make more frequent
price changes

71. The inflation rate was

The following table pertains to Wiskancia, an economy in which the
typical consumer's basket consists of 15 pounds of apples and 7 teddy
bears.
Price of Apples Price of Teddy bears
Year
(Dollars per pound) (Dollars per toy)

1 14 7

2 12 5

3 15 9

a. positive in Year 2 and positive in Year 3

b. negative in Year 2 and negative in Year 3.

c. positive in Year 2 and negative in Year 3.

d. negative in Year 2 and positive in Year 3.

 Macroceconomics

72. If the natural rate of unemployment is 5.2 percent and the actual rate of
unemployment is 5:7 percent, then by definition there is
a. cyclical unemployment amounting to 0.5 percent of the labor force.

b. frictional unemployment amounting to 0.5 percent of the labor force.

c. structural unemployment amounting to 0.5 percent of the labor force.

d. search unemployment amounting to 0.5 percent of the labor force.

73. The price of a Honda Accord

a. and the price of a Honda Accord divided by the price of a Honda Civic
are both real variables.
b. and the price of a Honda Accord divided by the price of Honda Civic are
both nominal variables.
c. is a real variable, and the price of a Honda Accord divided by a Honda
Civic is a nominal variable.
d. is a nominal variable and the price of a Honda Accord divided by the
price of a Honda Civic is a real variable.

74. If in some year nominal GDP was $40 billion and the GDP deflator was
70, what was real GDP?
a. $110.0 billion

b. $175.0 billion

c. $57.1 billion

d. $300 billion

75. When economists talk about growth in the economy, they measure that
growth as the
a. absolute change in nominal GDP from one period to another.

b. percentage change in nominal GDP from one period to another.

c. absolute change in real GDP from one period to another.

d. percentage change in real GDP from one period to another.

 Macroceconomics

76. A company sells titanium to a bicycle company for $300. The bicycle
company uses the titanium to produce a bicycle, which it sells for $400.
Taken together, these two transactions contribute
a. $300 to GDP $400 to GDP

b. between $400 and $700 to GDP

c. depending on the profit earned by the bicycle company when it sold the
bicycle.

d. $100 to GDP.

77. A bank has a 5 percent reserve requirement, $5,000 in deposits, and has
loaned out all it can given the reserve requirement.
a. It has $25 in reserves and $4,975 in loans.

b. It has $250 in reserves and $4,750 in loans.

c. It has $1,000 in reserves and $4,000 in loans.

d. None of the above is correct

78. Christopher is an unpaid, stay-at-home father who works as a volunteer at

the local Habitat for Humanity chapter. Currently, Christopher is not
looking for a paid joThe Bureau of Labor Statistics counts Christopher as
a. unemployed and in the labor force.

b. unemployed but not in the labor force.

c. in the labor force but not unemployed.

d. neither in the labor force nor unemployed.

79. The nominal interest rate tells you

a. [Link] fast the number of dollars in your bank account rises over time.

b. how fast the purchasing power of your bank account rises over time.

c. the number of dollars in your bank account today

d. the purchasing power of your bank account today.

 Macroceconomics

80. If the nominal interest rate is 5 percent and the real interest rate is 7
percent, then the inflation rate is
a. -2 percent.

b. 0.4 percent.

c. 2 percent.

d. 12 percent.

81. Given that Monica's income exceeds her expenditures, Monica is best
described as a
a. saver or as a supplier of funds.

b. borrower or as a demander of funds.

c. saver or as a demander of funds.

d. borrower or as a supplier of funds.

82. Other things the same, when the interest rate falls, people would want to
lend
a. less, making the supply of loanable funds increase.

b. more, making the supply of loanable funds decrease.

c. less, making the quantity of loanable funds supplied decrease.

d. more making the quantity of loanable funds supplied increase.

83. Suppose the banking system 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. $270 billion

b. $5,400 billion

c. $6,000 billion

d. $5,100 billion
 Macroceconomics

84. If the base year is Year 1, then the CPI in Year 3 was
The following table pertains to Wiskancia, an economy in which the
typical consumer's basket consists of 15 pounds of apples and 7 teddy
bears.
Price of Apples Price of Teddy bears
Year
(Dollars per pound) (Dollars per toy)

1 14 7

2 12 5

3 15 9

a. 120.5.

b. 111.2.

c. 74.7.

d. 111.2

85. On a bank's T-account, which are part of the bank’s liabilities? both
deposits
a. made by its customers and reserves.

b. deposits made by its customers but not reserves.

c. reserves but not deposits made by its customers

d. neither deposits made by its customers nor reserves.

86. The slope of the supply of loanable funds curve represents

a. the positive relation between the interest rate and investment.

b. positive relation between the interest rate and saving.

c. negative relation between the interest rate and investment.

d. negative relation between the interest rate and saving.

87. The manager of the bank where you work tells you that your bank has
$10 million in excess reserves. She also tells you that the bank has $400
million in deposits and $375 million dollars in loans. Given this
information, you find that the reserve requirement must be
a. 10/400.
 Macroceconomics

b. 25/400.

c. 35/400.

d. 15/400.

88. The Fed purchases $200 worth of government bonds from the publiThe
reserve requirement is 12.5 percent, people hold no currency, and the
banking system keeps no excess reserves. The U.S. money supply
eventually increases by
a. $25.

b. between $200 and $300.

c. $1,600.

d. $2,500.

89. GDP is defined as the

a. value of all goods and services produced within a country in a given

period of time.

b. value of all goods and services produced by the citizens of a country,

regardless of where they are living, in a given period of time.

c. value of all final goods and services produced within a country in a

given period of time.

d. value of all final goods and services produced by the citizens of a

country, regardless of where they are living, in a given period of time.

90. Katherine, a French citizen, works only in the United States. The value of
the output she produces is
a. included in both U.S. GDP and U.S. GNP.

b. included in U.S. GDP, but it is not included in U.S. GNP.

c. Included in US, GNP, but it is not included in U.S. GDP.

d. included in neither U.S. GDP nor U.S. GNP.

 Macroceconomics

91. Harvey, a U.S. taxpayer, purchased 10 shares of MVC stock for $100 per
share; one year later he sold the 10 shares for $130 a share. Over the year,
the price level increased from 140.0 to 147.0. What is Harvey’s
before-tax real capital?
a. $1,300 - $1,000(1.05) and this is the gain he is to report on his income
tax

b. $1,300 - $1,000(1.05) but he is to report a $300 on his income tax

c. $1,300 - $1,000(1.07) and this is the gain he is to report on his income

tax

d. $1,300 - $1,000(1.07) but he is to report a $300 on his income tax

92. Suppose a basket of goods and services has been selected to calculate the
CPI and Year 1 has been selected as the base year. In Year 1, the basket’s
cost was $50; in Year 2, the basket’s cost was $52; and in Year 3, the
basket’s cost was $55. The value of the CPI in Year 3 was
a. 90.9

b. 104.0

c. 105.0

d. 110.0

93. Consider the following traders who meet, which, if any, pairs of traders
has a double coincidence of wants?
a. Bill with Mike

b. Tim with Amy

c. Bill with Mike, and Tim with Amy

d. Bill with Tim, and Mike with Amy

94. The Carters' oldest son attends Big State University. He and his parents
pay all his fees and tuition. These payments count in GDP as
a. investment.

b. government spending.

c. consumption of services.

d. consumption of durable goods.