Question 1 (1 point)

Potential GDP focuses on the:

Question 1 options:

	long-run supply side of the economy.
	long-run demand side of the economy.
	short-run supply side of the economy.
	short-run demand side of the economy.

Question 2 (1 point)

Measuring expenditures and income with the price level allowed to vary, so that changes in these values represent changes in either the actual amount of goods, services, and income or changes in the price level or a combination of both factors is denoted in ________ terms.

Question 2 options:

	nominal
	real
	constant dollar
	all of the above

Question 3 (1 point)

The sum of personal consumption expenditure, investment expenditure, government expenditure, and net export expenditure on the total amount of real output in the economy in a given period of time is called:

Question 3 options:

	potential GDP.
	aggregate expenditure.
	real money balances.
	none of the above.

Question 4 (1 point)

For the U.S. economy, the largest expenditure category is:

Question 4 options:

	government expenditures.
	net export expenditures.
	personal consumption expenditures.
	investment expenditures.

Question 5 (1 point)

Household consumption primarily depends on:

Question 5 options:

	disposable income.
	the interest rate.
	marginal propensity to import.
	credit card debt.

Question 6 (1 point)

If marginal propensity to save equals 0.50, then the marginal propensity to consume is:

Question 6 options:

	1.25.
	0.50.
	0.70.
	1.00.

Question 7 (1 point)

Comparing the situation of a nominal interest rate of 10 percent and an inflation rate of 9 percent with a nominal interest rate of 6 percent and inflation rate of 2 percent, consumers would borrow more in which situation?

Question 7 options:

	Nominal interest rate of 10 percent since real interest rate is 1 percent.
	Nominal interest rate of 6 percent since the real interest rate is 4 percent.
	Nominal interest rate of 10 percent since the real interest rate is 9 percent.
	Nominal interest rate of 6 percent since the real interest rate is 2 percent.

Question 8 (1 point)

The opportunity costs of the firm using its own funds are measured by the:

Question 8 options:

	market interest rate.
	inflation rate.
	price level.
	menu costs.

Question 9 (1 point)

The extent to which investment spending changes with changes to income is called the:

Question 9 options:

	marginal propensity to consume.
	marginal propensity to save.
	marginal propensity to import.
	marginal propensity to invest.

Question 10 (1 point)

Appreciation of the U.S. dollar will ________ exports and ________ imports, other things equal.

Question 10 options:

	increase; increase
	increase; decrease
	decrease; decrease
	decrease; increase

Question 11 (1 point)

A system where goods and services are exchanged directly without a common unit of account is called the:

Question 11 options:

	commodity system.
	fiat system.
	barter system.
	none of the above.

Question 12 (1 point)

The function of money that enables individuals to exchange goods and services in a common unit of account is called:

Question 12 options:

	medium of exchange.
	store of value.
	unit of account.
	measure of power.

Question 13 (1 point)

Deposits held by commercial banks are insured by the:

Question 13 options:

	Federal Trade Commission.
	Federal Deposit Insurance Corporation.
	Federal Communications Commission.
	Resolution Trust Corporation.

Question 14 (1 point)

The banking system in the U.S. is based on:

Question 14 options:

	100 percent reserve banking.
	fractional reserve banking.
	0 percent reserve banking.
	none of the above.

Question 15 (1 point)

The reserve requirement is 0.10. What is the simple deposit multiplier?

Question 15 options:

	2
	20
	0.2
	10

Question 16 (1 point)

The money multiplier is computed as follows:

Question 16 options:

	(c + 1)/(c + rr + e).
	(c + 1)/(c + rr).
	1/rr.
	(c + 1)/(c + e).

Question 17 (1 point)

The currency deposit ratio, c, is 0.10. The reserve requirement, rr, is 0.08. The excess reserve ratio, e, is 0.05. What is the size of the money multiplier?

Question 17 options:

	4.70
	4.78
	4.75
	4.00

Question 18 (1 point)

Open market purchases and sales are conducted at the:

Question 18 options:

	Federal Reserve Bank of Kansas City.
	Federal Reserve Bank of New York.
	Federal Reserve Bank of Chicago.
	Federal Reserve Bank of St. Louis.

Question 19 (1 point)

Expansionary monetary policy is achieved by:

Question 19 options:

	decreasing the amount of bank reserves and lowering the federal funds rate.
	decreasing the amount of bank reserves and raising the federal funds rate.
	increasing the amount of bank reserves and lowering the federal funds rate.
	increasing the amount of bank reserves and raising the federal funds rate.

Question 20 (1 point)

The equilibrium price in the money market is the:

Question 20 options:

	inflation rate.
	exchange rate.
	interest rate.
	none of the above.

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