Question 1(3 points)

Which of the following is NOT an example of "investment," as the term is used in macroeconomics?

a

Warren Buffet purchases 100,000 shares of Apple corporate stock.

b

The corner store purchases a new computer to track its inventory.

c

Ford Motor Company experiences an increase in its inventory of unsold vehicles.

d

General Motors builds a new factory in Ohio to produce small cars.

e

All of these ARE examples of "investment."

Question 2(3 points)

Which of the following is NOT counted in a country's GDP?

a

Spending on the construction of new houses.

b

Government spending on the construction of interstate highways.

c

Consumer spending on goods imported into the country such as smartphones and clothing.

d

The change in the value of businesses' inventories of unsold goods.

Question 3(3 points)

The consumer price index and GDP deflator are two measures of the overall level of prices.If the price of domestically-produced cars rises, then

a

the GDP deflator rises but the CPI does not rise.

b

the CPI rises but the GDP deflator does not rise.

c

the CPI and GDP deflator do not change.

d

the CPI and GDP deflator both rise.

Question 4(3 points)

If 500,000 unemployed workers drop out of the labor force, the unemployment rate will

a

rise

b

fall

c

not change

Question 5(3 points)

If 500,000 employed workers drop out of the labor force, the unemployment rate would

a

rise.

b

fall.

c

not change.

Question 6(3 points)

In a closed economy in the long run, an increase in the government's budget deficit causes

a

investment and the real interest rate to rise.

b

investment and the real interest rate to fall.

c

investment to rise and the real interest rate to fall.

d

investment to fall and the real interest rate to rise.

e

none of the above

Question 7(3 points)

In a closed economy in the long run, an increase in real GDP causes

a

investment and the real interest rate to rise.

b

investment to rise and the real interest rate to fall.

c

investment and the real interest rate to fall.

d

investment to fall and the real interest rate to rise.

Question 8(3 points)

The consumption function is:C = 150 + 0.85(Y - T)

Other things being equal, a $100 tax cut will cause private saving to

a

rise by $85

b

fall by $85

c

rise by $15

d

fall by $15

e

rise by $150

Question 9(3 points)

To reduce the money supply, the Federal Reserve would

a

lower the interest rate it pays on bank reserves.

b

sell government bonds.

c

reduce the federal funds rate.

d

lower reserve requirements.

Question 10(3 points)

The Federal Reserve's "reserve requirement" is a regulation requiring banks to hold a certain percentage of deposits as reserves.

Suppose that banks were required to hold 10% of deposits as reserves up until December 31, 2020, but starting on January 1, 2021, banks will be required to hold 15% of deposits as reserves.Other things being equal, we should expect the federal funds rate to ______ in January 2021.

a

increase

b

decrease

c

remain the same