When a bank's excess reserves increase by $375 after $500 was deposited in the bank, the reserve requirement must be

10 percent.

15 percent.

20 percent.

25 percent.

30 percent.

Danielle recently moved to the United States with $10,000 of acceptable currency that had never been in the system before. Assume Danielle deposits the money into First National Bank. If the central bank has set a required reserve ratio of 20 percent, what is the maximum amount of money First National Bank can create?

$50,000

$40,000

$5,000

$4,000

$800

If the prime interest rate is 14 percent and the consumer price index is rising at a rate of 6 percent each year, then the real rate of interest is

20 percent.

14 percent.

8 percent.

6 percent.

1.3 percent.

Which of the following policies would bemosteffective in combating a recession in the economy?

Congress could increase taxes while the Federal Reserve increases the discount rate and sells bonds.

Congress could increase taxes while the Federal Reserve decreases the discount rate and buys bonds.

Congress could decrease taxes while the Federal Reserve increases the reserve requirement ratio.

Congress could decrease taxes while the Federal Reserve buys securities and decreases the reserve requirement.

Congress could decrease taxes while the Federal Reserve sells securities and decreases the discount rate.

Assume that there is a recessionary gap in Shadowland. The government of Shadowland might eliminate the gap by doing all of the followingexcept

an increase in government spending.

a decrease in personal taxes.

an increase in reserve requirement.

an decrease in discount rate.

an open market purchase.

If a major hurricane devastated industry in the eastern United States, the result would most likely cause

a decrease in aggregate supply.

an increase in aggregate demand.

a decrease in aggregate demand.

an increase in aggregate supply.

an increase in employment.

The long-long run Phillips curve shows

cyclical unemployment in the economy.

structural unemployment in the economy.

frictional and structural unemployment in the economy.

cyclical and frictional unemployment in the economy.

cyclical and structural unemployment in the economy.

the Macro Islands can produce sugar cane at a lower opportunity cost than the Micro Islands, then the

Macro Islands have a comparative advantage in the production of sugar cane.

Micro Islands have a comparative advantage in the production of sugar cane.

Macro Islands have an absolute advantage in the production of sugar cane.

Micro Islands have an absolute advantage in the production of sugar cane.

Micro Islands are more efficient at producing sugar cane.

Which of the following will cause a decrease in SRAS?

An increase in labor productivity

An decrease in employee wages

An increase in government regulations on businesses

An increase in consumer spending

A decrease in investment spending

Question 24(Multiple Choice Worth 1 points)

Assume a nation's economy is operating in equilibrium. If exports increase and imports decrease, how will output, employment, and price level likely change?

Output / Employment / Price Level

Increase / Increase / Increase

Increase / Increase / Decrease

Increase / Decrease / Increase

Decrease / Decrease / Increase

Decrease / Decrease / Decrease

Question 25(Multiple Choice Worth 1 points)

With an MPC of .8, the government spending multiplier will be

1.

2.

4.

5.

8.

Question 26(Multiple Choice Worth 1 points)

The spending multiplier will decrease when the

marginal propensity to consume increases.

marginal propensity to save increases.

interest rates decrease.

savings rate decreases.

investment rate decreases.

When inflation has reached a peak, economists would say that the economy has reached the

trough of the business cycle.

expansion of the business cycle.

peak of the business cycle.

contraction of the business cycle.

bottom of the business cycle.