macroeconomics exam 3 multiple choice

1. Cora is an unpaid worker in her family’s bakery. How does the BLS classify her?

Employed and in the labor force

2. Josh is a full-time college student who is not working or looking for a job. How does the BLS classify him?

Neither in the labor force nor unemployed

3. Sharon is a homemaker not searching for paid work; Noah is a student not looking for work. Who is in the labor force?

Neither Sharon nor Noah

4. More people are working, but the unemployment rate is higher. How could both claims be true?

The labor force grew faster than employment

5. What is the deviation of unemployment from its natural rate called?

Cyclical unemployment

6. What do efficiency wages do?

Increase productivity but increase unemployment

7. Being paid for babysitting best illustrates which function of money?

Medium of exchange

8. Dollar bills, rare paintings, and emerald necklaces are all what?

Stores of value

9. What is fiat money?

Money that has no intrinsic value

10. As the reserve ratio increases, what happens to the money multiplier?

It decreases

11. If the reserve ratio is 4%, what is the money multiplier?

25

12. If the money multiplier is 10, what is the reserve ratio?

10%

13. What is the interest rate the Fed charges banks on loans called?

The discount rate

14. What is the federal funds rate?

The interest rate banks charge each other for short-term loans of reserves

15. How can the Fed increase the money supply?

Buy government bonds or decrease the discount rate

16. How can the Fed decrease the money supply?

Sell government bonds or increase the discount rate

17. Which monetary policy tool does the Fed use most often?

Open-market operations

18. Why is the Fed’s control of the money supply not precise?

The amount of money depends partly on the behavior of depositors and bankers

19. Why are bank runs uncommon today?

Because of FDIC deposit insurance

20. What are economic variables measured in monetary units called?

Nominal variables

21. What are economic variables measured in goods called?

Real variables

22. What is the velocity of money?

The average number of times per year a dollar is spent

23. Nominal interest rate is 3% and inflation is 8.3%. What is the real interest rate?

-5.3%

24. A professor gets a raise and can buy more goods and services. What happened to her real and nominal salary?

Both her real and nominal salary rose

25. A manager gets a raise but can buy fewer goods and services. What happened to his real and nominal salary?

Real salary fell; nominal salary rose

26. You pay workers more dollars and more goods than before. What increased?

Both the real and nominal value of wages