ECON test 3

An increase in the velocity of money can have an effect similar to that of an increase in the money supply.

True

False

Question 21
2 points
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As income or spending patterns change substantially, it is wise to change the base year of the CPI.

True

False

Question 22
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The velocity of money is equal to PQ/M.

True

False

Question 23
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If banks had $10 million in legal reserves, $110 million in checkable deposits, and a 10 percent reserve requirement, they would have to reduce checkable deposits by $10 million or increase reserves by $1 million.

True

False

Question 24
2 points
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Funds that earn a fixed rate of interest and must be held for a stipulated period of time are known as

checkable deposits

time deposits

savings deposits

money market funds

Question 25
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If a worker receives a weekly nominal wage of $300 and the CPI is 125, the real wage is approximately

$210

$240

$200

$300

Question 26
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The unregulated portion of the economy involving goods and services that are produced and exchanged without monetary transactions is known as

the underground economy

the secret economy

the capital consumption

transfer payments

Question 27
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National income accountants eliminate double counting of intermediate goods by using only the value of final goods.

True

False

Question 28
2 points
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The receipt of a Social Security benefit check would be considered part of

GDP

NI

NNP

PI

Question 29
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In dollar value, the nominal GDP in the United States is in the vicinity of

between 3 and 4 billion

between 4 and 5 billion

between 4 and 5 trillion

between 10 and 12 trillion

Question 30
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If nominal GDP is reported at $10,000 billion and the GDP implicit price deflator is 150, the GDP in constant dollars is

$6,667 billion

$8,250 billion

$5,650 billion

$5,350 billion

Question 31
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U.S. gross domestic product is converted to U.S. gross national product by

adding the value of output produced by U.S.-owned resources in foreign countries

subtracting the value of output produced by U.S.-owned resources in foreign countries

subtracting the value of output produced in the United States by foreign-owned resources

both (a) and (c)

Question 32
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The measure of income received by persons from all sources is known as

personal income

national income

gross domestic product

net national product

Question 33
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In terms of purchasing power parity, Japan has highest per capita GDP in the world.

True

False

Question 34
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A transfer payment is a payment of money in return for which no current goods or services are produced.

True

False

Question 35
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The difference between the cost of raw materials and the price of the final good is known as

value added

capital consumption allowance

a transfer payment

net national product

Question 36
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Final sales are always larger than the GDP.

True

False

Question 37
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Current disposable income can be adjusted for price changes and population changes to yield real per capita disposable income.

True

False

Question 38
2 points
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Each Federal Reserve Bank

is directly responsible to the U.S. President

is controlled by its own Board of Governors

lacks autonomy

handles a district of equal geographic size

Question 39
2 points
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Any bank reserves over and above the level of required reserves are known as

federal funds

discounted reserves

excess reserves

surplus reserves

Question 40
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The Board of Governors of the Federal Reserve System is

under the jurisdiction of the U.S. President

responsible to the Secretary of the U.S. Treasury

independent within the U.S. government

responsible to the Council of Economic Advisors

Question 41
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The discount rate is

set in the money market

set by each member bank

set by the Federal Reserve Bank

the same as the federal funds rate

Question 42
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Cash transactions account for about 20 percent of the value of transactions.

True

False

Question 43
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By buying government securities, the Federal Open Market Committee adds to member banks’ reserves.

True

False

Question 44
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If a bank has excess reserves,

its reserves are greater than its liabilities

it can make a loan if it wishes

it cannot make a loan if it wishes

it must borrow from the Fed

Question 45
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A major weakness of the National Banking System was the perverse elasticity of the money supply.

True

False

Question 46
2 points
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The Financial Services Modernization Act

reinforced the Glass Steagall Act

prevented mergers of banks

eliminated barriers between banks, brokerage houses, and insurance companies

eliminated all banking regulations

Question 47
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If the Fed sells securities on the open market, this will

decrease banks’ excess reserves

increase banks’ excess reserves

leave banks’ excess reserves unchanged

lower the reserve requirement

Question 48
2 points
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Within certain limits, the reserve requirement for checkable deposits are established by

Congress

the U.S. President

each Federal Reserve Bank

the Board of Governors

Question 49
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The Federal Reserve today no longer has control over stock market margins requirements.

True

False

Question 50
2 points
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If the Fed desires to increase checkable deposits, it may lower the reserve requirement.

True

False