1.If there is no one who is interested in borrowing from a bank,

a,the entire bank system will collapse

b,there will be no process of money creation

c,the Fed would have to raise the discount rate to encourage more borrowing

d,the bank's excess reserves will be zero

2,The Federal Reserve Board of Governors consists of:

a.12 members nominated by the President and confirmed by the Senate

b.seven members elected by Congress

c.seven members nominated by the President and confirmed by the Senate

d.12 members, one from each Federal Reserve District

3.The combination of frictional and structural unemployment is the:

a.civilian rate of unemployment

b.natural rate of unemployment

c.cyclical rate of unemployment

d.none of the answers given is correct

4.GDP does count:

a.spending on employee salaries

b.state and local government purchases

c.changes in business inventories

d.spending for new homes

e.any one of the answers is correct.

5.Inflation is an increase in:

a.prices of all products in the economy

b.any one of the answers is correct.

c.homes, autos, and all basic resources

d.the general price level of products

6.Which of the following options could be used to eliminate a recessionary GDP gap, using fiscal policy?

a.an increase in government spending

b.a reduction of the federal funds rate

c.a reduction of the required reserve ratio

d.an increase in personal income tax rate

e.a reduction of the discount rate

7.If the interest rate rises, then firms' investment spending:

a.remains the same

b.reacts unpredictably

c.none of the answers given is correct

d.rises

e.falls

8.A bank's "required reserves" are:

a.equal to its checkable deposits

b.held as deposits with the Federal Reserve System

c.none of the answers given is correct

d.equal to its transactions deposits

9.The ease with which an asset can be converted into a medium of exchange is:

a.asset convertibility

b.none of the answers given is correct

c.liquidity

d.currency convertibility

e.money convertibility

10. Which of the following policies of the Federal Reserve is considered expansionary?

a.cutting personal and business income tax rates

b.raising government spending

c.selling government securities

d.reducing the required reserve ratio

e.raising the discount rate

11.According to the expenditure approach, the largest component of GDP is:

a.proprietor's income

b.compensation of employees

c.personal consumption expenditures

d.government spending

e.net interest and rent combined

12.A person who has given up searching for work is called:

a.an underemployed worker

b.frictionally unemployed

c.a discouraged worker

d.a depressed worker

e.cyclically unemployed

13.As a general rule, a recession is a decline in real GDP lasting at least:

a.3 quarters

b.none of the answers given is correct

c.6 months

d.1 month

e.1 year

14.Economic growth is measured by the annual percentage increase in a nation's level of:

a.inflation rate

b.unemployment rate

c.real GDP deflator

d.real GDP

e.nominal GDP

15.Banks normally hold few excess reserves because this practice is:

a.not recommended by the Fed

b.illegal

c.subject to an excess reserves tax

d.not profitable

e.against the Fed policy

16. Eric lost his job because a recession caused his employer's sales to fall.This is an example of:

a.frictional unemployment

b.seasonal unemployment

c.cyclical unemployment

d.structural unemployment

17.Which of the following statements is true?

a.if real interest rates are negative, lenders incur loses

b.if nominal interest rates remain the same and inflation rate falls, real interest rates increase

c.cost-push inflation is caused by an increase in resource costs

d.demand-pull inflation is caused by excess total spending

e.any one of the answers is correct.

18. The phase of the business cycle that follows (after) a recession is known as the:

a.trough

b.none of the answers given is correct

c.recession

d.recovery

e.peak

19.Retired persons are officially classified as:

a.underemployed

b.self-employed

c.not in the labor force

d.unemployed

e.Flag this Question

20.The economy is fully employed when there is no:

Group of answer choices

a.cyclical unemployment

b.seasonal unemployment

c.frictional unemployment

d.structural unemployment