In national income accounting, which pair of terms is used interchangeably? — D. Public saving and government tax revenue minus government spending
2. Which group meets to discuss changes in the economy and determine monetary policy? — B. The Federal Open Market Committee
3. As the maturity of a bond becomes longer, the bond will pay what? — C. A higher interest rate because it has more risk
4. For a closed economy, GDP is $31 trillion, consumption is $7 trillion, taxes are $3 trillion, and the government runs a surplus of $4 trillion. What are private saving and national saving? — A. $21.0 trillion and $25.0 trillion
5. If you put $125 in a bank account at 4.75% annual interest for 19 years, what is the future value? — D. $301.88
6. Which increases when the Fed makes open-market sales? — A. Neither currency nor reserves
7. Which is not an example of monetary policy? — D. The Federal Reserve facilitates bank transactions by clearing checks
8. Proprietary technology is knowledge known by whom? — D. Only by the company that discovered it
9. If interest rates rise, Katleen is less likely to expand her dress shop. What does this illustrate? — C. The demand for loanable funds slopes downward
10. A budget deficit does what? — A. Changes the supply of loanable funds
11. If the nominal interest rate is 8% and inflation is 3%, what is the real interest rate? — C. 5%
12. Printers, computers, and furniture needed to open a print shop are called what? — A. Capital investment
13. Which is an example of physical capital? — A. The tables and chairs in the restaurant
14. Bank of Cheerton has reserves of $4,200 and deposits of $60,000. What is the reserve ratio? — C. 7.0%
15. If Des Moines has a high credit rating, how does that affect bond interest rates? — A. The high credit rating and tax status of municipal bonds both contribute to a lower interest rate
16. An increase in the government’s budget surplus means public saving is what? — A. Positive and increasing
17. In a closed economy, what does T - G represent? — D. Public saving
18. If there is a shortage of loanable funds, what happens? — A. Neither curve shifts, but quantity supplied rises and quantity demanded falls as interest rate rises to equilibrium
19. In a 100-percent-reserve banking system, what is true? — B. Banks do not influence the supply of money
20. Given GDP $7.3 trillion, consumer spending $5.2 trillion, taxes minus transfers $1.1 trillion, and government purchases $0.7 trillion, what is private saving? — B. $1 trillion
21. When conducting an open-market sale, the Fed does what? — D. Sells government bonds and decreases the money supply
22. In 2002, mortgage rates fell and mortgage lending increased. What explains both changes? — C. The supply of loanable funds shifted rightward
23. What explains a decrease in interest rate and increase in quantity of loanable funds? — D. The supply of loanable funds shifted to the right
24. If the reserve requirement is 5%, how much excess reserves does the Bank of Cheerton hold? — A. $1,200
25. If the government finds a major product defect and demands the product be removed from the market, what happens to the stock? — D. Demand for existing shares of the stock and the price will both fall
26. Which is not included in M1? — C. Savings deposits
27. Which is not a function of money? — D. Protection against inflation
28. If Bank of Cheerton is exactly meeting the reserve requirement, what is the money multiplier? — B. 14.3
29. What happens if the government decreases the tax rate on interest income? — A. There would be an increase in the equilibrium quantity of loanable funds
30. Which statement about stock market irrationality is correct? — A. Speculative bubbles could arise because stock prices depend partly on what people think others will pay in the future
31. A policy that increases saving will do what? — D. Improve economic growth and health outcomes
32. Which best represents fiat money? — A. The euro
33. If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, what could it do? — A. Buy $300,000 worth of bonds
34. What is included in Keira’s human capital? — C. What she’s learned from experience but not her seed drill
35. What would tend to make the stock price rise? — B. The announcement but not the rise in interest rates