Macroeconomics Mutiple Choice Questions: See below

1 Barter transactions involve the use of money.

True

False

2
The use of money as a medium of exchange represents
the most important service that money renders.

True

False

3 Currency includes demand
deposits.

True

False

4
The money supply known as M1 includes all assets that
are good stores of value.

True

False

5
A primary tool of the Federal Reserve System is open market operations.

True

False

6 Commercial banks and credit
unions create money in concert with the Fed.

True

False

7
Providing a secure place for savings is not a major
function of financial institutions.

True

False

8
The Fed’s reserve requirement ratio can reduce
the monetary base.

True

False

9
If bankers want to retain reserves of 25% against all deposits, if the Fed issues $100 billion in currency,
and if private individuals keep all money in banks, then once the banks are fully loaned up,
the money supply will consist
of $400 billion in demand deposits.

True

False

10
The Long-run Aggregate Supply Curve that is
compatible with the classical macroeconomic model is
a vertical line at full employment.

True

False

11
When the federal government spends more than it
collects, it must issue more debt or more
monetary base.

True

False

12
Keynesians tend to believe that massive tax cuts and new
government spending are cures for recession.

True

False

13
There are currently 13 Federal Reserve Districts.

True

False

14
One of the 3 tools of the Federal Reserve is fiscal
policy.

True

False

15
Monetary policy of the Federal Reserve affects
the monetary base to achieve its goals of rates of inflation and interest.

True

False

16
The buying of securities in the open market by the Federal Reserve will augment the monetary base of the economy.

True

False

17
The selling of securities in the open market by
the Federal Reserve will actually decrease the monetary base by reducing the
amount the banking system will ultimately be
able to lend.

True

False

18 The Federal Funds Market is actually monitored and manipulated by
the Federal Reserve, but individuals can actually enter
the market and borrow funds if desired.

True

False

19
The short-run Phillips curve is a curve that
shows the relationship between the inflation rate and
the pure interest rate when the natural rate of unemployment rate and the expected inflation rate remain constant.

True

False

20
When interest rates are rising,
the tendency is for holders of M1 to get out of M1 and move into M2 and
M3 due to the opportunity costs of holding M1.

True

False

21
The science of macroeconomics:

  * solved the Great Depression.

  *did not solve the Great Depression but kept
the U.S. economy from suffering.

  *emerged during the decade of the Great
Depression.

  *did not evolve until after World War II so
had no connection to the Great Depression.

22 The tax cuts passed
by Congress in 2002 to help move the economy more rapidly toward potential GDP are an example of:

  *automatic fiscal policy.

  *discretionary fiscal policy.

  *lump-sum taxes.

  *contractionary fiscal policy.

23
In the post-World War II period, considerable
growth in total production took place in the
U.S. But at the same time, businesses were dumping their waste into the Great
Lakes with minimal cost to themselves,
significantly polluting the bodies of water as a result. This occurrence is an
example where:

  *real GDP gives an overly positive view of
economic welfare.

  * real GDP gives an overly negative view of
economic welfare.

  * investment would have been a better measure
of total production.

  *the pollution counts as a final good.

24 A Phillips curve measures the relationship between:

  * the unemployment rate and inflation.

  *the level of money wage rates and GDP.

  *unemployment and GDP.

  *inflation and GDP.

25
In order for the United States to repay its
international debt, the United States would need to:

  * have a current account
deficit.

  *cut taxes.

  *have a surplus of imports over exports.

  *have a surplus of exports over imports.

26
If the CPI was 122.3 at the end of 2007 and 124.5 at the end of 2008, the inflation
rate over these two years was:

  * 1.8 percent.

  *2.5 percent.

  *22.5 percent.

  *18.0 percent.

27
A demand-pull inflation initially is
characterized by:

  * increasing real output and a labor
shortage.

  *increasing real output and a labor surplus.

  *decreasing real output and a labor
shortage.

  *decreasing real output and a labor surplus.

28
The labor force is the sum of the:

  *working-age population and the number of
unemployed people.

  *number of employed people and the working-age
population.

  *number of employed people and the number of
unemployed people.

  *total population and the number of
unemployed people.

29
In 2005, Armenia had a real GDP of approximately $4.21
billion and a population of 2.98 million.
In 2006, real GDP was $4.59
billion and population was 2.97 million.
From 2005 to 2006, Armenia’s standard of living ________.

  *increased

  *decreased

  *did not change

*might have increased, decreased, or remained unchanged but
more information is needed to determine which.

30
According to real business cycle theory, a fall
in the real interest rate ________ current labor supply and ________ current employment.

  *increases; increases

  *increases; decreases

  *decreases; increases

  *decreases; decreases