QUESTION 1

A $100 bill in your wallet is part of

a.both M1 and M2.

b.only M2.

c.only M1.

QUESTION 2

A weak dollar will __________ net exports and shift the AD curve to the __________.

a.decrease; left

b.increase; right

c.increase; left

d.decrease; right

QUESTION 3

An aggregate demand-aggregate supply model is used to study

a.growth theory.

b.the theory of business cycles.

c.the theory of why businesses fail.

d.why gas prices go up in summer.

QUESTION 4

Business cycles can be readily identified from

a.salary or wage data.

b.real GDP data.

c.unemployment-rate data and real GDP data.

d.unemployment-rate data.

QUESTION 5

How will a hurricane in Louisiana that disrupts the oil supply affect U.S. output, price level, and unemployment in the long run?

a.Output will increase, price level will decrease, and unemployment will increase.

b.Output will increase, price level and unemployment will decrease.

c.Output, price level, and unemployment will decrease.

d.Output will decrease, price level will increase, and unemployment will decrease.

e.Output, price level, and unemployment will remain unchanged.

QUESTION 6

If the required reserve ratio is 25%, then the simple money multiplier is

a.1/4.

b.4.

c.25.

d.0.04.

QUESTION 7

In a fractional reserve banking system,

a.the central bank accepts individuals' cash deposits.

b.commercial banks do not loan out deposits.

c.money is created when the Treasury Department prints currency.

d.money is created when commercial banks make new loans.

QUESTION 8

Long-run aggregate supply is __________ while short-run aggregate supply is __________.

a.vertical; horizontal

b.vertical; upward sloping

c.horizontal; vertical

d.upward sloping; vertical

e.horizontal; upward sloping

QUESTION 9

The Federal Reserve in the United States

a.cannot provide loans to commercial banks.

b.conducts fiscal policy.

c.conducts monetary policy.

d.provides loans to households.

QUESTION 10

The University Bank currently has $800 million in deposits. If the required reserve ratio is 15%, then what is the maximum amount of loans that the bank can legally lend?

a.$120 million

b.$680 million

c.$800 million

d.$720 million

QUESTION 11

The most important role of the Federal Reserve is to

a.make loans to businesses.

b.control the U.S. money supply.

c.finance the government's budget deficit.

d.clear checks.

QUESTION 12

What phrase describes the situation that's occurring when the economy is growing more slowly than usual, or perhaps even shrinking?

a.the business cycle

b.an economic contraction

c.an economic expansion

QUESTION 13

Which of the following does NOT determine a country's ability to produce goods and services in the long run?

a.price level

b.institutions

c.resources

d.technology

QUESTION 14

Which of the following statements regarding the Great Recession is correct?

a.It began in December 2007 and real GDP was back at its pre-recession levels after 18 months.

b.It was more severe than the Great Depression of the 1930s.

c.It was more severe than a typical recession.

QUESTION 15

You go to Starbucks and see the price of a tall latte is quoted as $3.00. You buy the latte and pay with $3.00 cash. In the first instance money serves as ___________ while in the second instance money serves as ___________.

a.a medium of exchange; a unit of account

b.a medium of exchange; a store of value

c.a unit of account; a medium of exchange

d.a unit of account; a store of value

e.a store of value; a medium of exchange

QUESTION 16

You transfer $100 from your savings account to your checking account. As a result, M1 will __________ and M2 will __________.

a.increase by $100; increase by $100 as well

b.increase by $100; remain unchanged

c.increase by $100; decrease by $100

d.remain unchanged; remain unchanged

e.remain unchanged; decrease by $100