A business cycle has two turning points –Trough and peak

A commercial bank is defined as –A firm that is chartered to accept deposits and make loans

A currency drain is –An increase in currency held outside banks

A discouraged worker is –Someone who does not have a job but has given up looking

A production possibility frontier (PPF) diagram illustrates all of the following concepts except –Unlimited wants

A public authority that provides banking services to commercial banks and regulates financial institutions and markets is called a –Central Bank

A regulation that sets the highest price at which it is legal to trade a good is a –Price ceiling

After the passage of the North American Free Trade Agreement (NAFTA), which made it less expensive to import goods from Mexico workers in some industries found their factories being relocated to Mexico to take advantage of lower labor costs. These workers experience what type of unemployment? –Structural

An example of automatic fiscal policy is –Expenditure for unemployment compensation increasing as economic growth slows

An example of tight monetary policy is –the Fed selling government securities in the open market

Assume that the population of an island is 275 million. If 210 million people are of working age, 135 million are employed, and 6 million are unemployed, what is the size of the labor force? –141 million                                                       

Barter requires the –Exchange of goods and services directly for other goods and services

Because the federal reserve system is a central bank, it provides banking services to –Commercial banks

Bill has graduated from Monroe College with a degree in Accounting. The College’s Career Services submitted his resume to several companies that Bill will visit the next two weeks. Bill is considered –Frictionally unemployed

Commercial banks create money through –making loans

Cyclical unemployment occurs because of –recessions in national economic activity

Discourage workers –are not considered unemployed since they are not currently seeking work

 Discretionary fiscal policy is define as fiscal policy –Initiated by act of Congress

During the Great depression, the unemployment rate rose to a maximum of about -25 percent

Economic growth is measured by the growth rate of –Real GDP

Economics deals primarily with the concept of: –Scarcity

Economists make assumptions –To make the world easier to understand.

Encouraging international trade will –Speed economic growth as workers specialize and trade with others

Every summer Sarah works as a lifeguard at the YMCA. One summer ends, she returns to college as a full time student.  After summer ends, Sarah is -Not in the labor force

Fiscal policy refers to –The spending and taxing policies used by the government to influence the economy.

For a commodity or token to be money, it must –Be  accepted in exchange for all other goods and services

For Jill to have a comparative advantage in the production of pins means that, relative to Jack, with the same resources –Jill is relatively better at producing pin than at producing needles

Frictional unemployment occurs because of –some people have few, if any job skills

GDP is 1240, Consumption is 900, gross private domestic investment is 150, exports are 50, and imports are 125. Depreciation is 40. Government spending (government consumption and gross investment) is –265                                            

How does the government finance its budget deficit? –By issuing government securities (Treasury Bills and Bonds)

If a wealthy woman marries he butler, quits paying him even if he still does the same job, and does not hire a new butler, then -GDP definitely decrease

If both the production of goods and services increase and prices rises, then the change in nominal GDP –Definitely overstates the change in production

If someone has a comparative advantage in producing cars, –They can produce cars at a lower opportunity cost than other producers.

If the demand for coffee decreases as income decreases, coffee is a(n) –Normal good.

If the government increases unemployment benefits, then labor –Supply curve shifts leftward

If the supply of money increases as a result of an open market— of securities by the Fed, the interest rate will -purchase; decrease

If the value of net exports is negative, then –Imports exceeds exports

In 1996, the real GDP in the United States was $6,500 billion. In 1997, the real GDP grew to $7,100 billion. What was the US economic growth rate from 1996 to 1997 –9.2 %                                          

In the Current Population Survey, a person is considered unemployed if the person –Does not have a job and is actively looking for a job

Inflation and unemployment –are the focus of macroeconomics

Inflation is an increase in –the overall price level

Labor force participation –83.%                                                      

M1 equals currency plus demand deposits plus –traveler’s checks plus other checkable deposits.

Money is –all of the above

Open market operations are defined as –The buying and selling of securities by the Fed

Part time workers are defined as people who are working –Less than 35 hours per week

President Reagan often states that he preferred supply sides policies. Which of the following federal government policies would be supply side –Lower taxes

Refer to Figure 2.5. The economy is currently at Point A. The opportunity cost of moving from Point A to Point B is the –30 LCD televisions that must be forgone to produce 20 additional plasma televisions.

Refer to Figure 3.2. Which of the following would be most likely to cause the demand for macaroni and cheese to shift from D1 to D0? –An increase in income, assuming macaroni and cheese is a normal good

Refer to Table 1. The labor force is –13,500

Refer to table 1. The unemployment rate is –18.50%

Refer to Table 3.2. If the price per cheeseburger is $5, there is an excess –Demand of 1,000 cheeseburgers.

Refer to Table 3.2. If the price per cheeseburger is $6, the price will –Increase because there is an excess demand in the market.

Refer to Table 3.2. If the price per cheeseburger is $9, there is a(n) –Excess supply of 1,000 units.

Refer to Table 3.2. In this market there will be an excess demand of 500 cheeseburgers at a price of  –$6.

Refer to Table 3.2. In this market there will be an excess supply of 500 cheeseburgers at a price of –$8.

Refer to Table 3.2. This market will be in equilibrium if the price per cheeseburger is –$7.

Stagflation is defined as a period when real GDP—– and the price level —— –Decreases; increases

The annual budget is decided upon by the –President of the United States and United State Congress

The boards of directors of the Federal Reserve (FOMC) is –A seven- member board, each one serving a 14-year term

The concept of opportunity cost –Can be applied to the analysis of any decision-making process.

The discount rate is –interest rates the Fed charges on loans it makes to banks

The discount rate is the –Interest rate that banks must pay when they borrow reserves from the Fed

The federal government has a budget surplus when –Tax receipts exceeds government spending

The federal reserved is organized into –12 district, dividing up the United States

The functions of money are -Medium of exchange, unit of account, and store of value

The labor force is defined as –the sum of the employed and the unemployed

The labor force participation rate indicates –The willingness of working-age people to take jobs

The main point to draw from the circular-flow diagram is that: –Every dollar of expenditure is also a dollar of income

The money supply increases immediately when the Fed –buys bond from the public

The most important function of the Fed is to –regulate the money supply

The natural unemployment rate is the unemployment rate that exists when there is no –Cyclical unemployment

The price of hard drives used in the manufacturing of laptop computers has risen. This will lead to ________ laptop computers. –A decrease in the supply of

The process by which resources are transformed into useful forms is –Production

—-the quantity of money in the United States –The Federal Reserve System regulates

The real interest rate is 4%. Inflation is expected to run at 10% during 2008. During 2008, the market interest rate is — -If during 2008, the actual inflation rate is 4%—-lose.14%; borrowers                    

The regulation that sets the lowest price at which it is legal to trade a good is  –Price floor

The reserve requirement is the stipulation that –banks must keep a minimum percentage of deposits available for withdrawals

The study of economics –is a way of analyzing decision-making processes caused by scarcity

The three main policy tools the Federal Reserve System uses to influence the interest rate are setting the –Discount rate, open market operations, and setting the required reserve ratio

The total market value of all final goods and services produced within a given period of time by factors of production located within a country is –Gross Domestic Product

The type of unemployment that arises from a decrease in real GDP is called –Cyclical unemployment

The word “fiat” is -Used to describe today’s money because it is money set by law

The working age population includes –Employed and unemployed people over the age of 16

To change the federal funds rate, the Fed –Uses open market operations to change the quantity of money

To help unscramble cause and effect, economists -Must use the ceteris paribus assumption

Using the table above, the number of people in the labor force is— million –195            

Using the table above, the unemployment rate is –5.13 %  

Using the table above, the working-age population is—— million –235                                       

When calculating the unemployment rate, the BLS counts those over 16 and in jail as  –Institutionalized and therefore not  in the working-age population

When the economy faces an inflationary gap, an appropriate fiscal policy is to –Decrease government expenditures

When the economy is at full employment –Real GDP is equal to potential GDP

When the Fed worries about inflation, it —– federal funds rate and, in the short run—- the real interest rate –Raises; raises

When the tax revenue are equal to government spending, the situation is referred to –A balanced budget

When two people trade –They both expect to be better off by the exchange.

Which of the following best illustrates the concept of a store of value? –You keep 6 ounces of gold in your safe-deposit box at the bank for emergencies

Which of the following Federal Reserve banks caries out the decisions of the FOMC? –The New York Federal Reserve bank

Which of the following is a correct sequence of events during a recession? –Unemployment rises, income falls, tax revenues falls, unemployment benefits rise, and the budget deficit rises.

Which of the following is a liability to a bank? –customer deposits

Which of the following is a positive statement? –The $7.25 minimum wage affects a firm’s hiring decisions.

Which of the following is not a desirable feature in the economy? –rapid increase in the general price level

Which of the following is not a factor of production? –Money

Which of the following is part of GDP? –government purchases

Yorktown has a labor force of 80,000. There are 100,000 people over the age of 16 who are able to work. It also has an employment level of 60,000. What is the unemployment rate in Yorktown? –25%