1. If there are 110 million people working, 5 million discouraged workers, 10 million receiving unemployment insurance benefits, and 15 million officially unemployed, how many people are in the labor force?
A) 110 million
B) 115 million
C)125 million
D) 130 million
E) 140 million
2. In constructing the consumer price index for the current year
A) the average price of a "bundle" of goods purchased in a base year is divided by the prices of the same bundle that existed during the current year.
B) the average price of a "bundle" of goods purchased during a base year is divided into the price that existed in the current year.
C) the total cost of a "bundle" of goods purchased in a base year is divided by the cost of the same bundle that existed during the current year.
D) the total cost of a "bundle" of goods purchased in a base year is divided into the cost of the same bundle that existed during the current year.
3. When individuals are out of work because they do not have the skills necessary to perform available jobs, we call this
A) structural unemployment.
B) the natural rate of unemployment.
c) cyclical unemployment.
D) frictional unemployment.
E) full employment (5 to 6 percent unemployment).
4. Because of discouraged workers, the unemployment rate
A) tends to behave very erratically.
B) overstates the unemployment problem.
C) understates the unemployment problem.
D) None of the choices are correct.
5. For nearly every year since 1992 our rate of inflation was below
A) 5 percent.
B) 4 percent.
C) 3 percent.
D) 2 percent.
E) 1 percent.
6. Which is the most accurate statement?
A) Our biggest economic concern today is double-digit inflation.
B) Our biggest economic concern today is double-digit unemployment.
C) Our biggest economic concern today is stagflation.
D) Our misery index was under 10 in 1999.
7. If the unemployment rate for whites was 5%, then the unemployment rate for blacks would be around
A) 3%.
B) 5%.
C) 7%.
D) 10%.
E) 15%.
8. American unemployment was lower than most European nations in the last decade because
A) the U.S. experienced a booming economy throughout the 1990s while European economies were stagnant.
B) in Europe there is no longer much of a stigma attached with being unemployed.
C) unemployment benefds are much more generous in Europe than in the U.S.
D) All of the choices are correct.
9. Official unemployment statistics
A) understate unemployment because individuals receiving unemployment compensation are counted as employed.
B) understate unemployment because "discouraged workers" are not counted as unemployed.
C) include cyclical and structural unemployment, but not frictional unemployment.
D) overstate unemployment because workers who are involuntarily working part time are counted as being employed.
10. Which of the following statements is true?
A) The price shock theory of the business cycle is endogenous.
B) Across the board over investment, particularly in the telecommunications industry, prior to 2001 caused a recession in that year.
C) The terrorist attacks on 9/11 caused the recession of 2001.
D) The inventory cycle theory of the business cycle is exogenous.The terrorist attacks on 9/11 caused the recession of 2001.
11. If the crowding-out effect is large, then when government spending increases
A) national income will not increase by much.
B) Investment would decline due to increased cost of borrowing.
C) the multiplier will be large.
D) taxes will automatically increase too.
12. During times of inflation conservative economists would be most in favor of
A) spending cuts.
B) spending increases.
C) tax cuts.
D) tax increases.
13. Which of the following is NOT a automatic stabilizer
A) Food stamps
B) Unemployment insurance benefits
C) Public assistance
D) A supply-side tax cut
14. Govemment policy concerning its spending and taxation is called
A) the quantity theory of money.
B) fiscal policy.
C) business cycles.
D) monetary policy.
E) revenue sharing policy.
15. Mr. Krapotkin hopes to use the family savings to invest in the stock market after prices fall next week. This is an example of
A) speculative demand for holding money.
B) the precautionary motive for holding money.
C) the commodity demand for money.
D) the transaction demand for money.
16. Which statement is true?
A) M1 is money, but not M2.
B) M2 is money, but not M1.
C) Both M1 and M2 are money.
D) Neither M1 nor M2 is money.
17. The unintended consequences of the federal deregulation of the interest paid depositors in the savings and loans was
A) increasing the interest rates in the national money market
B) increasing the amount of the loss on existing loans
C) allowing management to make riskier loans
D) affecting the interest rates on existing long term loans
18. The concept of the liquidity trap was formulated by
A) John Maynard Keynes.
B) Milton Friedman.
C) Stephen Pizzo
D) Aristotle.
E) Marshall McLuhan.
19. In a fractional reserve banking system
A) commercial banks are required to hold savings account in other banks as reserves against their deposits.
B) commercial banks are required to hold a certain fraction of their deposits in reserves.
C) all deposits must be held in reserves.
D) commercial banks hold no deposits in reserve.
20. Statement I: As the level of income rises, people tend to hold more money.
Statement II: People tend to hold less money as credit availability increases.
A) Statement I is true and statement II is false.
B) Statement II is true and statement I is false.
C) Both statements are true.
D) Both statements are false.
21. The economy of Mantis produces just ten goods and services; if it were a money economy there would be prices; if it were a barter economy there would be prices.
A) less than 10; less than 10
B) less than 10; 10
C) 10; 10
D) 10; less than 10
E) 10; more than 10
22. Statement I: Virtually all savings is channeled to borrowers through financial intermediaries.
Statement II: Pension funds are a form of financial intermediary.
A) Statement I is true and statement II is false.
B) Statement II is true and statement I is false.
C) Both statements are true.
D) Both statements are false.
23. Which of the following factors contributed to failure of Savings and Loan associations in the 1980s? OA) The high levels of net worth by all savings and loans
B) Dedining real estate values
C) Avoidance of risky loans by the savings and loans industry
D) Low interest rates paid to attract deposits
24. Which statement is false?
A) Most savings and loan associations were locked into low-interest-rate mortgages in the 1950s and 1960s.
B) To get a bank charter, you need to demonstrate that your community needs a bank or an additional bank.
C) Nearly all banks today are regulated by both the Federal Reserve and the FDIC.
D) The FDIC would rather pay off depositors than be forced to find another bank to take over an ailing institution.
E) Money is created when someone takes out a bank loan.