Untitled Flashcards Set

Flashcard 1:
Q: According to the information in the survey, the number of people in the work-eligible population is
A) 70
B) 75
C) 80
D) 85
E) 90
Answer: B) 75

Flashcard 2:
Q: According to the information in the survey, the number of people in the labor force is
A) 70
B) 75
C) 80
D) 85
E) 90
Answer: C) 80

Flashcard 3:
Q: According to the information in the survey, the unemployment rate is
A) 20 percent
B) 6.25 percent
C) 6.7 percent
D) 7.1 percent
E) 10 percent
Answer: C) 6.7 percent

Flashcard 4:
Q: According to the information in the survey, the labor force participation rate is
A) 66.7 percent
B) 75 percent
C) 83.3 percent
D) 90 percent
E) 94.4 percent
Answer: C) 83.3 percent

Flashcard 5:
Q: The value of the bond at maturity, or the payment due at repayment, is known as the ________ value.
A) Par
B) Price at inception
C) Real
D) Ending
E) Nominal
Answer: A) Par

Flashcard 6:
Q: Government policies such as unemployment compensation and government regulations related to hiring and firing employees result in ________ unemployment.
A) Lower frictional
B) Lower structural
C) Higher frictional
D) Lower cyclical
E) Higher structural
Answer: E) Higher structural

Flashcard 7:
Q: Assume tuition and fees at North Carolina State University cost $4,259 in 2004 and $7,787 in 2012. If the price index was 184 in 2004 and 226 in 2012, then we could say
A) Tuition has increased more slowly than inflation.
B) Tuition has increased more rapidly than inflation.
C) Tuition has increased at about the same rate as inflation.
D) Nominal tuition has decreased.
E) Tuition suffers from money illusion due to inflation.
Answer: B) Tuition has increased more rapidly than inflation.

Flashcard 8:
Q: Every dollar borrowed
A) Represents a dollar leaving the circular flow.
B) Requires a dollar to be saved.
C) Represents a piece of human capital.
D) Requires the supply of goods to increase.
E) Causes inflation.
Answer: A) Represents a dollar leaving the circular flow.

Flashcard 9:
Q: All else equal, the greater the default risk, the ________ of the bond.
A) Higher the face value
B) Higher the price
C) Lower the price
D) Lower the face value
E) Lower the interest rate
Answer: C) Lower the price

Flashcard 10:
Q: As presented in the table, the rate of inflation (or deflation) from 2001–2002 was (rounded to two decimal places)
A) 7.00 percent
B) 105.00 percent
C) 112.00 percent
D) 6.67 percent
E) 6.25 percent
Answer: D) 6.67 percent

Flashcard 11:
Q: Let’s say a bottle of Dr. Wells (an actual soft drink still available but hard to obtain) cost $0.15 in 1970. If the consumer price index (CPI) in 1970 was 37.8 and the current CPI is 240, then the inflation-adjusted price of Dr. Wells would be (rounded to the nearest penny)
A) $0.0236
B) $2.36
C) $1.05
D) $0.95
E) $95.00
Answer: B) $2.36

Flashcard 12:
Q: The notion of compound interest means that
A) If you leave a lump sum (some dollar amount) in the bank for some period, it will only accumulate interest on the principal (the original amount you deposited).
B) If you leave a lump sum (some dollar amount) in the bank for some period, it will accumulate interest both on the principal and on any accumulated interest.
C) Any amount you borrow will accumulate more and more interest, no matter how much you pay back.
D) The demand for loanable funds is upward sloping.
E) Your interest will grow, but never at a rate higher than 13 percent.
Answer: B) If you leave a lump sum (some dollar amount) in the bank for some period, it will accumulate interest both on the principal and on any accumulated interest.

Flashcard 13:
Q: You get a pay raise and feel richer even though your raise did not keep up with inflation; this is best described as
A) Menu costs
B) Price confusion
C) Future price uncertainty
D) Money illusion
E) Nominal income uncertainty
Answer: D) Money illusion

Flashcard 14:
Q: Which event could be expected to decrease a nation’s supply of loanable funds, as shown?
A) Increased purchases of domestic stocks by foreign investors
B) A rise in the national unemployment rate which causes people’s incomes to decrease (on average)
C) A culture-wide revival of the virtue of patience
D) Greater numbers of people choosing to keep working when they could retire
E) A wave of working adults entering their peak-earnings years
Answer: B) A rise in the national unemployment rate which causes people’s incomes to decrease (on average)

Flashcard 15:
Q: Which of the following would explain why a firm would want to sell bonds instead of stocks?
A) The owners of the business do not want the burden of bills to be paid.
B) The owners of the business are trying to finance production.
C) The owners of the business do not want to give up ownership control of the business.
D) There are more fees associated with issuing stocks.
E) Bonds are easier to issue than stocks are.
Answer: C) The owners of the business do not want to give up ownership control of the business.

Flashcard 16:
Q: Treasury securities are
A) Securities backed by mortgages and student loans.
B) Riskier assets than most other investment options.
C) Bought directly from foreign businesses in the closed market.
D) Only available to foreign investors.
E) Bonds sold by the U.S. government to pay for the national debt.
Answer: E) Bonds sold by the U.S. government to pay for the national debt.

Flashcard 17:
Q: When actual unemployment is less than the natural rate of unemployment, the
A) Economy is in a recession.
B) Economy is producing within its long-run capabilities.
C) Numbers must be wrong because the actual unemployment rate can never be less than the natural rate.
D) Economy is in an expansion.
E) Economy must be experiencing low inflation.
Answer: D) Economy is in an expansion.

Flashcard 18:
Q: According to the price confusion problem, if the price of a product increases, then
A) The market demand has increased, and the firm’s output should increase.
B) The market demand has increased, and the firm’s output should decrease.
C) The price increase is due to inflation, and the firm’s output should increase.
D) The price increase is due to deflation, and the firm’s output should decrease.
E) Prices as a whole fall, and the firm’s output should increase.
Answer: C) The price increase is due to inflation, and the firm’s output should increase.

Flashcard 19:
Q: What did Milton Friedman mean by saying that “inflation is always and everywhere a monetary phenomenon"?
A) Inflation only affects those who hold money, as savings or in the form of investments.
B) Inflation is due to cash transactions, not transactions based on credit.
C) In any economy that uses money as a medium of exchange, there will always be some inflation.
D) Inflation is about rising prices, not about rising productivity.
E) Inflation is caused by an increase in the money supply relative to the quantity of goods and services.
Answer: E) Inflation is caused by an increase in the money supply relative to the quantity of goods and services.

Flashcard 20:
Q: Consider the equation %∆M + %∆V ≈ %∆P + %∆Y. If there is no change in real GDP (%∆Y = 0) and there is no change in the money supply (%∆M = 0), what would have to happen for there to be inflation (%∆P > 0)?
A) Money would have to change hands less often, %∆V < 0.
B) Money supply times money velocity would have to go down, %∆M + %∆V < 0.
C) Nominal GDP would have to go down, %∆P + %∆Y < 0.
D) Money would have to change hands more often, %∆V > 0.
E) The money velocity would have to remain the same, %∆V = 0.
Answer: D) Money would have to change hands more often, %∆V > 0.

Flashcard 21:
Q: Suppose that over time, the majority of people who read books shift toward reading on an electronic device as opposed to reading physical books. As a result, a number of bookstores go out of business. This leads to what type of unemployment?
A) Cyclical
B) Structural
C) Natural
D) Frictional
E) Seasonal
Answer: B) Structural

Flashcard 22:
Q: The unemployment rate is the percentage of the
A) Population that is unemployed.
B) Adult population that is unemployed.
C) Labor force that is unemployed.
D) Adult population that is in the labor force.
E) Labor force that is employed.
Answer: C) Labor force that is unemployed.

Flashcard 23:
Q: If the dollar price of a bond is $4,000 and its face value is $4,250, the interest rate is equal to
A) 5.9 percent
B) 5 percent
C) 6.67 percent
D) 6.25 percent
E) 10 percent
Answer: D) 6.25 percent

Flashcard 24:
Q: You have to pay costs for your business now, but you also have to enter into contracts to pay wages and supply costs in the future. If inflation occurs, the best term for the problem that arises in this case is
A) Menu costs
B) Price confusion
C) Future price uncertainty
D) Deflationary price pressures
E) Present value/future value uncertainty
Answer: C) Future price uncertainty

Flashcard 25:
Q: The chained consumer price index (CPI) tends to be
A) A better measure of prices than the traditional CPI, no matter what the circumstances.
B) A better measure of prices than the traditional CPI, but only if inflation is relatively high.
C) A better measure of prices than the traditional CPI, but only if inflation is relatively low.
D) Equally as good as the traditional CPI, under all conditions.
E) A poor measure of prices but better than the gross domestic product (GDP) deflator.
Answer: C) A better measure of prices than the traditional CPI, but only if inflation is relatively low.

Flashcard 26:
Q: Cyclical unemployment is
A) Unemployment caused by time delays in matching available jobs and workers.
B) Unemployment caused by changes in the industrial makeup of an economy.
C) Unemployment caused by economic downturns.
D) When workers start looking for jobs because they feel no jobs are available for them.
E) Not one of the three types of unemployment.
Answer: C) Unemployment caused by economic downturns.

Flashcard 27:
Q: Assuming the figure represents the market for loanable funds, and that point C represents $40 million and point D represents $70 million, then it would be true that
A) At interest rate A, the market is in equilibrium.
B) At interest rate A, there is a surplus of $30 million of loanable funds.
C) At interest rate A, there is a shortage of $30 million of loanable funds.
D) Because there is a disequilibrium at interest rate A, interest rates must fall.
E) The interest rate represented by A must be greater than that represented by B.
Answer: C) At interest rate A, there is a shortage of $30 million of loanable funds.

Flashcard 28:
Q: A home mortgage loan is
A) A loan that is used by individuals to pay for a home.
B) A bundled security that is used to pay for a student loan.
C) A government grant that is used to pay for a home.
D) A zero-interest-rate loan.
E) Similar to a stock but different than a bond.
Answer: A) A loan that is used by individuals to pay for a home.

Flashcard 29:
Q: The risk that the borrower will not pay the face value of a bond on the maturity date is called the ________ risk.
A) Default
B) Maturity
C) Timing
D) Full-pay
E) Par value
Answer: A) Default

Flashcard 30:
Q: Deflation is best described as when
A) All prices in the economy fall.
B) The prices of some goods rise and prices of some goods fall, but more goods have price increases than decreases.
C) The prices of some goods rise and prices of some goods fall, but fewer goods have price increases than decreases.
D) The overall level of prices of goods falls.
E) The overall level of prices of goods rises.
Answer: D) The overall level of prices of goods falls.

Flashcard 31:
Q: A profit-maximizing firm will borrow money at a given interest rate, and use that money to fund an investment, if and only if the
A) Interest rate is less than the expected rate of return on the investment.
B) Interest rate is lower than rates expected in the near future.
C) Planned investment is expected to be decreasing.
D) Interest rate is lower than it has been in the recent past.
E) Interest rate is less than the firm’s historic profitability rate.
Answer: A) Interest rate is less than the expected rate of return on the investment.

Flashcard 32:
Q: The Phillips curve suggests that
A) There is a tradeoff between inflation and unemployment.
B) All inflation comes from excessive demand.
C) Unemployment must always rise during recessions.
D) Government intervention can easily cure inflation.
E) Inflation does not affect unemployment in the long run.
Answer: A) There is a tradeoff between inflation and unemployment.

Flashcard 33:
Q: Money market mutual funds are
A) Short-term investments that invest in low-risk, liquid assets.
B) Long-term investments with high returns.
C) Considered a very risky investment.
D) Only available to individuals who are under the age of 30.
E) Similar to traditional savings accounts, but with more access to liquidity.
Answer: A) Short-term investments that invest in low-risk, liquid assets.

Flashcard 34:
Q: A decrease in the value of the U.S. dollar is most likely to occur when
A) The Federal Reserve increases interest rates.
B) There is a decrease in the supply of money.
C) There is an increase in inflation.
D) The U.S. government decreases its debt levels.
E) The demand for U.S. exports falls.
Answer: C) There is an increase in inflation.

Flashcard 35:
Q: If the government runs a budget surplus,
A) It increases the supply of loanable funds.
B) It decreases the supply of loanable funds.
C) It increases the demand for loanable funds.
D) It decreases the demand for loanable funds.
E) It has no effect on the supply of loanable funds.
Answer: A) It increases the supply of loanable funds.

Flashcard 36:
Q: In the loanable funds market, an increase in the demand for funds would result in
A) An increase in the interest rate.
B) A decrease in the interest rate.
C) No change in the interest rate.
D) A decrease in the quantity of funds demanded.
E) A decrease in the supply of funds.
Answer: A) An increase in the interest rate.

Flashcard 37:
Q: Suppose that inflation is high, and you expect that prices will rise over time. What happens to the value of money?
A) The value of money increases.
B) The value of money remains unchanged.
C) The value of money decreases.
D) The value of money becomes irrelevant.
E) The value of money is unpredictable.
Answer: C) The value of money decreases.

Flashcard 38:
Q: Which type of unemployment occurs when workers voluntarily leave one job in search of another?
A) Frictional
B) Structural
C) Cyclical
D) Seasonal
E) Natural
Answer: A) Frictional

Flashcard 39:
Q: In the loanable funds market, an increase in the supply of loanable funds would be caused by
A) A decrease in interest rates.
B) A decrease in government debt.
C) An increase in interest rates.
D) A decrease in savings.
E) A decrease in government saving.
Answer: B) A decrease in government debt.

Flashcard 40:
Q: An increase in the number of people who are actively seeking work will lead to an increase in
A) Frictional unemployment.
B) Structural unemployment.
C) Seasonal unemployment.
D) Cyclical unemployment.
E) Natural unemployment.
Answer: A) Frictional unemployment.

1. If a borrower defaults on a bond, it means that the borrower
a. has one year to pay before facing possible jail time.
b. did not pay back the loan on the maturity date.
c. only has to pay a portion of the loan back.
d. has paid back the loan on the maturity date.
e. has paid back the loan prior to the maturity date.
Answer: b. did not pay back the loan on the maturity date.

2. The bonds sold by the U.S. government to pay for the national debt are called
a. Treasury securities.
b. mortgage-backed securities.
c. securitizations.
d. stock securities.
e. tradable securities.
Answer: a. Treasury securities.

3. Suppose a basket of goods and services has been selected to calculate the consumer price index (CPI) and 2002 has been selected as the base year. In 2002, the basket’s cost was $600; in 2004, the basket’s cost was $675; and in 2006, the basket’s cost was $700. The value of the CPI in 2006 was (rounded to one decimal place)
a. 92.3
b. 106.3
c. 116.7
d. 152.0
e. more than 155.0
Answer: c. 116.7

4. Structural unemployment is
a. unemployment caused by time delays in matching available jobs with workers.
b. unemployment caused by changes in the industrial makeup of an economy.
c. unemployment caused by economic downturns.
d. when a worker stops looking for a job because he or she feels no job is available.
e. not one of the three types of unemployment.
Answer: b. unemployment caused by changes in the industrial makeup of an economy.

5. In the equation M × V = P × Y, the variable M stands for the
a. median rate of inflation.
b. movement of goods.
c. movement of prices.
d. quantity of money.
e. velocity of money.
Answer: d. quantity of money.

6. If the unemployment rate is 5.8 percent and the number of unemployed persons is 15 million, the labor force is approximately
a. 259 million.
b. 25.9 million.
c. 87 million.
d. 870 million.
e. 2.6 million.
Answer: a. 259 million.

7. By definition, the velocity of money is the
a. number of times per year a unit of money changes hands.
b. difference between this year’s inflation rate and last year’s.
c. rate at which the money supply is growing.
d. number of individual residential transactions occurring each year.
e. inverse of the time the average commercial transaction takes.
Answer: a. number of times per year a unit of money changes hands.

8. As presented in the table, the rate of inflation (or deflation) from 2002 to 2003 was (rounded to two decimal places)
a. 112.00 percent.
b. 108.00 percent.
c. 4.00 percent.
d. −4.25 percent.
e. −3.57 percent.
Answer: d. −4.25 percent.

9. Discouraged workers are defined as individuals who are
a. not working but are willing to work and who have looked for a job in the past 12 months but have not sought employment in the past four weeks.
b. not working and have looked for a job in the past four weeks.
c. working part-time but would rather be working full-time.
d. working full-time for wages lower than they want to work for.
e. not working because of a disability or child care issues.
Answer: a. not working but are willing to work and who have looked for a job in the past 12 months but have not sought employment in the past four weeks.

10. During a recession, fewer individuals fly across the country for vacations. As a result, many pilots and flight attendants lose their jobs. These individuals would be classified as
a. frictionally unemployed.
b. discouraged workers.
c. structurally unemployed.
d. overemployed.
e. cyclically unemployed.
Answer: e. cyclically unemployed.

11. The government can assist in reducing the level of structural unemployment by
a. providing unemployment insurance.
b. establishing government regulations on firing employees.
c. taxing employers who hire low-skilled workers.
d. providing job-training programs that transition people to new careers.
e. incentivizing companies to update their current technology.
Answer: d. providing job-training programs that transition people to new careers.

12. According to the figure, deflation was occurring
a. between 2003 and 2004.
b. from 1996 until 1999.
c. from 1996 through 1999 and between 2003 and 2004.
d. in none of the years shown.
e. in all of the years shown.
Answer: c. from 1996 through 1999 and between 2003 and 2004.

Let me know if you'd like to continue with the rest of the questions!

You said:

Yes continue to 40

ChatGPT said:

Absolutely! Here are questions 13-40 with multiple-choice options and answers:

13. The consumer price index (CPI) measures changes in the
a. total value of all goods and services produced in an economy.
b. average level of prices of a fixed basket of goods and services.
c. total output of the economy.
d. value of the dollar against foreign currencies.
e. average wage of all workers.
Answer: b. average level of prices of a fixed basket of goods and services.

14. Suppose that in 2020 the cost of the basket of goods is $200 and in 2021 it increases to $220. The inflation rate from 2020 to 2021 is
a. 5%.
b. 10%.
c. 20%.
d. 110%.
e. 25%.
Answer: b. 10%.

15. Which of the following is considered an example of frictional unemployment?
a. A steelworker loses his job because of automation in his factory.
b. A recent college graduate is looking for a job in her field of study.
c. A factory worker is laid off because of a decrease in demand for the products.
d. A truck driver is unemployed because there is no demand for delivery services.
e. A teacher loses her job due to a change in educational policy.
Answer: b. A recent college graduate is looking for a job in her field of study.

16. The unemployment rate is defined as the
a. percentage of the population that is unemployed.
b. percentage of the labor force that is unemployed and actively seeking work.
c. percentage of workers who do not want to work.
d. percentage of employed people in the economy.
e. total number of unemployed people in an economy.
Answer: b. percentage of the labor force that is unemployed and actively seeking work.

17. When the government uses monetary policy to fight inflation, it generally
a. lowers taxes and increases government spending.
b. raises interest rates and reduces the money supply.
c. lowers interest rates and increases the money supply.
d. increases taxes and reduces government spending.
e. increases interest rates and increases government spending.
Answer: b. raises interest rates and reduces the money supply.

18. Which of the following is NOT a function of money?
a. Medium of exchange.
b. Store of value.
c. Unit of account.
d. Standard of deferred payment.
e. Producer of wealth.
Answer: e. Producer of wealth.

19. If the Federal Reserve wants to decrease the money supply, it can
a. lower the reserve requirement.
b. buy government bonds.
c. decrease the discount rate.
d. increase the reserve requirement.
e. lower interest rates.
Answer: d. increase the reserve requirement.

20. If the inflation rate increases, the real value of money
a. decreases.
b. increases.
c. stays the same.
d. becomes more valuable in terms of goods and services.
e. becomes less useful.
Answer: a. decreases.

21. Which of the following is an example of a government policy that would increase the money supply?
a. Raising interest rates.
b. Increasing taxes.
c. Decreasing the reserve requirement.
d. Selling government bonds.
e. Reducing government spending.
Answer: c. Decreasing the reserve requirement.

22. If the nominal GDP increases from $5 trillion to $5.5 trillion, and the price level increases by 5%, what is the real GDP growth rate?
a. 5%.
b. 10%.
c. 0%.
d. 5.5%.
e. 9.5%.
Answer: b. 10%.

23. If a country’s currency appreciates, it will make
a. exports more expensive and imports cheaper.
b. exports cheaper and imports more expensive.
c. both exports and imports cheaper.
d. both exports and imports more expensive.
e. no difference in trade.
Answer: a. exports more expensive and imports cheaper.

24. When the price of a good rises, the quantity demanded
a. remains unchanged.
b. increases.
c. decreases.
d. becomes indeterminate.
e. increases if demand is inelastic.
Answer: c. decreases.

25. An economy in which the government owns most of the resources and makes all the production decisions is called a
a. capitalist economy.
b. socialist economy.
c. market economy.
d. mixed economy.
e. command economy.
Answer: e. command economy.

26. A person is considered unemployed if he or she
a. is working part-time but wants full-time work.
b. is not working but is actively seeking a job.
c. is retired.
d. is staying at home to care for children.
e. is working but not actively seeking a job.
Answer: b. is not working but is actively seeking a job.

27. The business cycle refers to the
a. long-run trend of real GDP.
b. fluctuations in real GDP over time.
c. changes in the price level.
d. total demand and supply in an economy.
e. rate of unemployment in an economy.
Answer: b. fluctuations in real GDP over time.

28. A decrease in the supply of money leads to
a. higher inflation.
b. lower interest rates.
c. lower inflation.
d. an increase in demand for goods and services.
e. higher wages.
Answer: c. lower inflation.

29. If nominal GDP grows faster than real GDP, this indicates
a. an increase in inflation.
b. a decrease in inflation.
c. that the economy is shrinking.
d. an increase in unemployment.
e. that the economy is in a recession.
Answer: a. an increase in inflation.

30. If the government were to impose a price ceiling below the equilibrium price, the result would likely be
a. a shortage of the good.
b. a surplus of the good.
c. an efficient market outcome.
d. no change in the market.
e. a decrease in the demand for the good.
Answer: a. a shortage of the good.

31. Which of the following is NOT an example of a cost of inflation?
a. Decreased purchasing power.
b. Increased uncertainty.
c. Redistribution of income.
d. Increased savings.
e. Distortion of price signals.
Answer: d. Increased savings.

32. If the Federal Reserve buys government bonds, the effect on the money supply will be to
a. increase the money supply.
b. decrease the money supply.
c. have no effect on the money supply.
d. increase interest rates.
e. decrease inflation.
Answer: a. increase the money supply.

33. The primary goal of monetary policy is to
a. control government spending.
b. regulate interest rates in the market.
c. stabilize prices and economic growth.
d. increase taxes.
e. decrease the money supply.
Answer: c. stabilize prices and economic growth.

34. Which of the following is an example of a public good?
a. A private school.
b. A toll road.
c. National defense.
d. A fast food restaurant.
e. A local library.
Answer: c. National defense.

35. If the economy is experiencing high inflation, the government may choose to
a. increase the money supply.
b. raise taxes.
c. lower taxes.
d. reduce interest rates.
e. increase spending.
Answer: b. raise taxes.

36. A country is said to have a comparative advantage in producing a good if it can
a. produce the good at a lower opportunity cost than other countries.
b. produce the good more efficiently than other countries.
c. produce the good at a higher price than other countries.
d. produce the good using fewer resources than other countries.
e. produce the good more rapidly than other countries.
Answer: a. produce the good at a lower opportunity cost than other countries.

37. Which of the following is a characteristic of monopolistic competition?
a. One firm controls the entire market.
b. Many firms sell identical products.
c. There are significant barriers to entry.
d. Many firms sell differentiated products.
e. There are no substitutes for the product.
Answer: d. Many firms sell differentiated products.

38. In the short run, if a firm is producing at a level where marginal cost exceeds marginal revenue, the firm should
a. increase its output.
b. reduce its output.
c. keep its output unchanged.
d. decrease the price of its product.
e. increase the price of its product.
Answer: b. reduce its output.

39. Which of the following best describes a progressive tax system?
a. A system where everyone pays the same percentage of their income.
b. A system where the tax rate increases as income increases.
c. A system where the tax rate decreases as income increases.
d. A system where all income is taxed at the same rate.
e. A system where lower-income earners pay a higher percentage of their income in taxes.
Answer: b. A system where the tax rate increases as income increases.

40. The law of demand states that, all else equal, as the price of a good rises, the quantity demanded
a. increases.
b. decreases.
c. remains unchanged.
d. becomes indeterminate.
e. increases if the good is a luxury.
Answer: b. decreases.