Download AP Macro Practice Quiz Questions 28, 29, 30

Macro Econ Practice Quiz Questions Chapts 28, 29, 30
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
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1. Which of the following is correct?
a. Some degree of unemployment is inevitable.
b. Other things the same an increase in the number of people who are unemployed decreases
real GDP.
c. Cyclical unemployment is inversely related to short-run economic fluctuations.
d. All of the above are correct.
2. Data on unemployment is reported
a. weekly.
b. monthly.
c. quarterly.
d. yearly.
3. The labor force equals the
a. number of people who are employed.
b. number of people who are unemployed.
c. number of people employed plus the number of people unemployed.
d. adult population.
4. Tara has just finished school, but she is going to roam around the country awhile before she starts looking for
work. As a result, the unemployment rate
a. increases, and the labor-force participation rate increases.
b. is unaffected, and the labor-force participation rate is unaffected.
c. increases, and the labor-force participation rate decreases.
d. increases, and the labor-force participation rate is unaffected.
5. Frictional unemployment can be the consequence of
a. workers leaving existing jobs to find ones they like better.
b. an industry declining while another is growing.
c. changes in the working conditions offered by competing firms.
d. All of the above are correct.
6. Consumers decide to buy more computers and fewer typewriters. As a result, computer companies expand
production while typewriter companies lay-off workers. This is an example of
a. structural unemployment created by efficiency wages.
b. cyclical unemployment created by a recession.
c. frictional unemployment created by a sectoral shift in demand.
d. None of the above are correct.
7. Union members typically earn _________ percent more than similar workers who do not belong to a union.
a. 0 to 5
b. 5 to 10
c. 10 to 20
d. 20 to 30
8. The minimum wage
a. creates frictional unemployment. Firms paying wages above equilibrium to attract a better
pool of candidates create structural unemployment.
b. creates structural unemployment. Firms paying wages above equilibrium to attract a better
pool of candidates create frictional unemployment.
c. and firms paying wages above equilibrium to attract a better pool of candidates both create
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structural unemployment.
d. and firms paying wages above equilibrium to attract a better pool of candidates both create
frictional unemployment.
Which of the following would reduce the natural rate of unemployment?
a. The Internet provides more readily available information about available jobs.
b. Congress increases the minimum wage.
c. Laws are passed that make it more difficult to monitor the efforts of workers.
d. All of the above are correct.
Money
a. is more efficient than barter.
b. makes trades easier.
c. allows greater specialization.
d. All of the above are correct.
Commodity money is
a. backed by gold.
b. the principal type of money in use today.
c. money with intrinsic value.
d. receipts created in international trade that are used as a medium of exchange.
Savings deposits are included in
a. M1 but not M2.
b. M2 but not M1.
c. M1 and M2.
d. neither M1 nor M2.
Use the (hypothetical) information in the following table to answer the following Questions.
Table 29-1
Type of Money
Large time deposits
Small time deposits
Demand deposits
Other checkable deposits
Savings deposits
Travelers' checks
Money market mutual funds
Currency
SDRs
Miscellaneous categories of M2
Amount
$80 billion
$75 billion
$75 billion
$40 billion
$10 billion
$1 billion
$15 billion
$100 billion
$10 billion
$25 billion
____ 13. Refer to Table 29-1. What is the M2 money supply?
a. $125 billion
b. $341 billion
c. $421 billion
d. $431 billion
____ 14. What part of the Fed meets every six weeks to discuss changes in the economy and determine monetary
policy?
a. the Board of Governors
b. the FOMC
c. the regional Federal Reserve Bank presidents
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d. the Central Bank Policy Commission.
If you deposit $3,000 into First Hawkeye Bank, the
a. bank's required reserves increase by the reserve ratio times $3,000.
b. bank will be able to lend out $3,000 times the reserve ratio.
c. bank initially sees reserves increase by $0.
d. All of the above are correct.
Which list contains only actions that decrease the money supply?
a. raise the discount rate, make open market purchases
b. raise the discount rate, make open market sales
c. lower the discount rate, make open market purchases
d. lower the discount rate, make open market sales
If reserve requirements are decreased, the reserve ratio
a. decreases, the money multiplier increases, and the money supply decreases.
b. increases, the money multiplier increases, and the money supply increases.
c. decreases, the money multiplier increases, and the money supply increases.
d. increases, the money multiplier increases, and the money supply decreases.
When prices are falling, economists say that there is
a. disinflation.
b. deflation.
c. a contraction.
d. an inverted inflation.
The quantity theory of money
a. is a fairly recent addition to economic theory.
b. can explain both moderate and hyperinflations.
c. argues that inflation is caused by too little money in the economy.
d. All of the above are correct.
When the money market is drawn with the value of money on the vertical axis, which of the following would
shift money demand right?
a. an increase in the price level
b. a decrease in the price level
c. open-market purchases by the central bank
d. None of the above is correct.
Randy pays $120 for a bag of goods he purchases at the HyValu discount store.
a. The $120 is a real variable; the bag of groceries is a nominal variable.
b. The $120 is a nominal variable; the bag of groceries is a real variable.
c. Both the $120 and the bag of groceries are nominal variables.
d. Both the $120 and the bag of groceries are real variables.
The price level is a
a. relative variable.
b. actual variable.
c. real variable.
d. nominal variable.
If Y and M are constant, and V doubles, the quantity equation implies that the price level
a. less than doubles.
b. doubles.
c. more than doubles.
d. might do any of the above; more information is needed.
If V and M are constant, and Y doubles, the quantity equation implies that the price level
a. falls to half its original level.
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b. does not change.
c. doubles.
d. more than doubles.
The money supply in Freedonia is $100 billion. Nominal GDP is $800 billion and real GDP is $200 billion.
What are the price level and velocity in Freedonia?
a. Velocity is 2 and the price level is 1.
b. Velocity is 4 and the price level is 8.
c. Velocity is 8 and the price level is 4.
d. There is insufficient information to answer the question.
Arnold puts money into an account. One year later he checks and sees that he has 5 percent more dollars and
that his money will buy 6 percent more goods.
a. The nominal interest rate was 11 percent and the inflation rate was 5 percent.
b. The nominal interest rate was 6 percent and the inflation rate was 5 percent.
c. The nominal interest rate was 5 percent and the inflation rate was -1 percent.
d. None of the above is correct.
If the money supply growth rate permanently increased from 5 percent to 25 percent, we would expect that
inflation and nominal interest rates would both
a. increase by more than 20 percentage points.
b. increase by 20 percentage points.
c. increase, but by less than 20 percentage points.
d. None of the above is correct.
Wealth is distributed from creditors to debtors when inflation is
a. high, whether it is expected or not.
b. low, whether it is expected or not.
c. unexpectedly high.
d. unexpectedly low.
In 1898, prospectors on the Klondike River discovered gold. This discovery caused an unexpected price level
a. decrease that helped creditors at the expense of debtors.
b. decrease that helped debtors at the expense of creditors.
c. increase that helped creditors at the expense of debtors.
d. increase that helped debtors at the expense of creditors.
In order to maintain stable prices, the central bank must
a. maintain low interest rates.
b. keep unemployment low.
c. tightly control the money supply.
d. sell indexed bonds.
Macro Econ Practice Quiz Questions Chapts 28, 29, 30
Answer Section
MULTIPLE CHOICE
1. ANS: D
All of the above are correct.
DIF: 1
2. ANS: B
monthly.
REF: SECTION: 28.0
OBJ: TYPE: M
DIF: 1
REF: SECTION: 28.1
OBJ: TYPE: M
3. ANS: C
number of people employed plus the number of people unemployed.
DIF: 1
REF: SECTION: 28.1
4. ANS: B
is unaffected, and the labor-force participation rate is unaffected
OBJ: TYPE: M
DIF: 1
REF: SECTION: 28.1
5. ANS: D
All of the above are correct.
OBJ: TYPE: M
DIF: 1
REF: SECTION: 28.1
6. ANS: C
frictional unemployment created by a sectoral shift in demand.
OBJ: TYPE: M
DIF: 2
7. ANS: C
10 to 20
OBJ: TYPE: M
REF: SECTION: 28.2
DIF: 1
REF: SECTION: 28.4
OBJ: TYPE: M
8. ANS: C
and firms paying wages above equilibrium to attract a better pool of candidates both create structural
unemployment.
DIF: 2
REF: SECTION: 28.5
OBJ: TYPE: M
9. ANS: A
The Internet provides more readily available information about available jobs.
DIF: 2
REF: SECTION: 28.6
10. ANS: D
All of the above are correct.
OBJ: TYPE: M
DIF: 1
REF: SECTION: 29.1
11. ANS: C
money with intrinsic value.
OBJ: TYPE: M
DIF: 1
12. ANS: B
M2 but not M1.
REF: SECTION: 29.1
OBJ: TYPE: M
DIF: 1
13. ANS: B
$341 billion
REF: SECTION: 29.1
OBJ: TYPE: M
DIF: 2
14. ANS: B
the FOMC
REF: SECTION: 29.1
OBJ: TYPE: M
DIF: 1
REF: SECTION: 29.2
OBJ: TYPE: M
15. ANS: A
banks required reserves increase by the reserve ratio times $3,000.
DIF: 2
REF: SECTION: 29.2
16. ANS: B
raise the discount rate, make open market sales
OBJ: TYPE: M
DIF: 2
REF: SECTION: 29.3
OBJ: TYPE: M
17. ANS: C
decreases, the money multiplier increases, and the money supply increases.
DIF: 3
18. ANS: B
deflation.
REF: SECTION: 29.3
OBJ: TYPE: M
DIF: 1
REF: SECTION: 30.0
19. ANS: B
can explain both moderate and hyperinflations.
OBJ: TYPE: M
DIF: 1
REF: SECTION: 30.0
20. ANS: D
None of the above is correct.
OBJ: TYPE: M
DIF: 2
REF: SECTION: 30.1
OBJ: TYPE: M
21. ANS: B
The $120 is a nominal variable; the bag of groceries is a real variable.
DIF: 1
22. ANS: D
nominal variable.
REF: SECTION: 30.1
OBJ: TYPE: M
DIF: 1
23. ANS: B
doubles.
REF: SECTION: 1
OBJ: TYPE: M
REF: SECTION: 30.1
OBJ: TYPE: M
DIF: 1
24. ANS: A
falls to half its original level.
DIF: 1
REF: SECTION: 30.1
25. ANS: C
Velocity is 8 and the price level is 4.
OBJ: TYPE: M
DIF: 2
REF: SECTION: 30.1
OBJ: TYPE: M
26. ANS: C
The nominal interest rate was 5 percent and the inflation rate was -1 percent.
DIF: 2
REF: SECTION: 30.1
27. ANS: B
increase by 20 percentage points.
OBJ: TYPE: M
DIF: 1
28. ANS: C
unexpectedly high.
OBJ: TYPE: M
REF: SECTION: 30.1
DIF: 1
REF: SECTION: 30.2
29. ANS: D
increase that helped debtors at the expense of creditors.
OBJ: TYPE: M
DIF: 1
REF: SECTION: 30.2
30. ANS: C
tightly control the money supply.
OBJ: TYPE: M
DIF: 1
REF: SECTION: 30.3
OBJ: TYPE: M