Review Questions Last Few Chapters

Question 1

One countries imports are another countries:

Answer 1

Exports

Question 2

Taxi medallions were issued in New York City to:

Answer 2

Increase the wages of taxi drivers

Question 3

Keynesian economists believe:

Answer 3

Government can implement policy proposals that can positively impact the economy

Question 4

Before the Great Depression the popular view of the government was:

Answer 4

Laissez-Faire and after the Great Depression the popular view of the government was activist

Question 5

The highest amount of output an economy can sustainably produce and sell using existing production processes and resources is called:

Answer 5

Potential output

Question 6

Another term for what the test calls “target rate of unemployment” is:

Answer 6

The natural rate of unemployment

Question 7

Potential U.S. output in the long run:

Answer 7

Rises at a fern rate of 3.5 to 3.5 percent per year

Question 8

A concern about long term economic growth was important in economics:

Answer 8

From the time of Adam smith and his the wealth of nations

Question 9

Small differences in growth rates can create large differences in income levels:

Answer 9

Because of compounding

Question 10

Which of the following is not a cost of material growth?

Answer 10

An increase in crime

Question 11

Costs of material growth:

Answer 11

1. Pollution
2. Resource exhaustion
3. Destruction of natural habitat

Question 12

If output increases by 2 percent and population growth 3 percent, per capita output:

Answer 12

Falls by 1%

Question 13

The U.S. dollars bills you sometimes have in your wallet are:

Answer 13

Liabilities of the federal reserve

Question 14

One of the three functions of money is to serve as:

Answer 14

A financial asset

Question 15

When a clerk gives you a pair of jeans for your $20 bill money is serving which function?

Answer 15

Medium of exchange

Question 16

Which of the following components is not included in the M2 definition of money?

Answer 16

Bonds

Question 17

If the reserves in the U.S. banks totaled $8,000 and total deposits were $100,000, the banking systems reserve ratio would be:

Answer 17

.08

Question 18

If the required reserve ratio is .10 what is the maximum amount of money that can be created from a $2 million deposit in the banking system (including the $2 million deposit)?

Answer 18

$20 million

Question 19

If I am worried about the price of assets such as bonds falling, u may be more inclined to hold money instead. You hold cash for the:

Answer 19

Speculative motive

Question 20

Who determines U.S. monetary policy?

Answer 20

The federal reserve

Question 21

In the short run if the fed undertakes expansionary monetary policy, the effect will be to shift the:

Answer 21

AD curve out to the right

Question 22

An effect of an expansionary monetary policy is to:

Answer 22

Lower interest rates