If the present value of money IS LESS

If the present value of money is less than the expected revenue generated, the loan

is more attractive for investors. will provide less return on investment. is more attractive for lenders. will eventually pay for itself. is less attractive for investors.Question 4 (Multiple Choice Worth 2 points)

If you need $200 to buy a new iPhone™ next year and interest rates are 2%, the amount of money you need to deposit into the bank this year is

$40.00. $40.08. $100.00. $166.67. $196.08.Question 5 (Multiple Choice Worth 2 points)

Two key factors in determining to increase investment spending are

1. interest rates
2. length of time before the investment begins generating revenue
3. the future value of the money invested

I only. I and II only. I and III only. II and III only. I, II and III.Question 6 (Multiple Choice Worth 2 points)

If you transfer $100 from your piggy bank to your checking account,

M1 increases by $100. M2 increases by $100. M1 decreases by $100 and M2 increases by $100. M2 decreases by $100 and M2 increases by $100. there is no immediate change in the money supply.Question 7 (Multiple Choice Worth 2 points)

You pay $68 for a pair of designer jeans. This statement best illustrates money used as a

store of value. medium of exchange. unit of account. liquid asset. liability.Question 8 (Multiple Choice Worth 2 points)

If you use money as a store of value, you would be

buying a new radio. searching the Internet for a deal on a new computer. charging a new book on your credit card. withdrawing $500 from your savings account. putting money in a savings bond.Question 9 (Multiple Choice Worth 2 points)

You have an opportunity to purchase season tickets for the local professional football team. The sales representative shows you a color-coded picture of the arena. Each color represents a different ticket price. This best illustrates money used as a

store of value. medium of exchange. unit of account. liquid asset. liability.Question 10 (Multiple Choice Worth 2 points)

The consumer price index is a measure of

all the final goods and services produced in the economy in a specific time period. the price of all final goods and services produced in the economy in a specific time period. all final goods and services sold by producers. the price of all goods and services sold by producers. the price of all goods and services in a specific market basket bought by consumers.Question 11 (Multiple Choice Worth 2 points)

Which graph illustrates the effect of regulations that require pollution reducing devices be installed on all factories in the United States?

A B C D EQuestion 12 (Multiple Choice Worth 2 points)

If the President proposed increasing funding for schools and colleges across the United States as well as providing funding for health care for all Americans, we would most likely see an increase in

unemployment. short-run aggregate supply. long-run aggregate supply. aggregate demand. net exports.Question 13 (Multiple Choice Worth 2 points)

When the production possibilities curve is concave from the origin, then

resources can be used equally well for both goods. as more of one good is produced, more of the other good is sacrificed. the nation can produce more of both goods. the good on the horizontal axis is a free good. the good on the vertical axis is a free good.Question 14 (Multiple Choice Worth 2 points)

Studying the concept of opportunity cost is most important because of all the following, except

it helps individuals better allocate scarce resources.  it helps governments better allocate scarce resources.  it helps businesses better allocate scarce resources.  it helps reach maximum output of a combination of goods and services.  it helps eliminate scarcity of goods and services.Question 15 (Multiple Choice Worth 2 points)

During the expansionary phase of the business cycle,

unemployment is rising and GDP is falling. unemployment and GDP are rising. unemployment and GDP are falling. unemployment is falling and GDP is rising. unemployment is rising and GDP is stable.Question 16 (Multiple Choice Worth 2 points)

0	5
8	4
19	3
28	2
35	1
40	0

Using the table above, a combination of eight MP3 players and two semi trucks,

is unattainable given the resources in the economy. is attainable and efficient. is attainable but inefficient. is unattainable and inefficient. is unattainable even through trade with another nation.Question 17 (Multiple Choice Worth 2 points)

If Congress decreases personal income taxes, consumer spending and unemployment will most likely change in which of the following ways?

Consumer Spending / Unemployment

Increase / Increase Increase / Decrease Decrease / No change Decrease / Increase Decrease / DecreaseQuestion 18 (Multiple Choice Worth 2 points)

Apple™ sells 40,000 iPods™ that were produced last year, to new customers. As a result,

GDP will increase for this year. GDP will decrease for this year. the iPods™ will increase GDP for this year and count as inventory for last year. the iPods™ will decrease GDP for this year and count as inventory for last year. last year’s GDP was increased by the inventory value of the iPods™, and this year’s GDP increases by the retail value of the iPods™ less their inventory value from last year.Question 19 (Multiple Choice Worth 2 points)

Some economists argue that trade restrictions

are instituted because of powerful lobbyists who demand them. are beneficial for at least one of the countries involved in trading. increase trade between countries. improve productive efficiency. improve allocative efficiency.Question 20 (Multiple Choice Worth 2 points)

If nominal interest rate equals 8% and expected inflation is 3%, then nominal and real interest rates are respectively

5% and 2%. 8% and 3%. 8% and 5%. 11% and 8%. 11% and 5%.Question 21 (Multiple Choice Worth 2 points)

Crowding out occurs when

the government is using contractionary fiscal policy. the government is using expansionary fiscal policy. Congress increases personal income taxes. Congress increases business taxes. Congress increases spending and personal income taxes by the same amount.Question 22 (Multiple Choice Worth 2 points)

If the federal government decided to implement a special tax incentive to encourage household savings, we can expect that

demand for loanable funds will increase. supply of loanable funds will increase. supply of loanable funds will decrease. supply of loanable funds will decrease and demand for loanable funds will increase. loanable funds will not be impacted by this action.Question 23 (Multiple Choice Worth 2 points)

Which of the following is true concerning the loanable funds market?

1. The quantity of loanable funds demanded is inversely related to the interest rate.
2. The quantity of loanable funds supplied is inversely related to the interest rate.
3. An increase in the demand for loanable funds would most likely increase the interest rate.
4. An increase in the rate of return on investment spending would increase the supply of loanable funds.

I and III only. I and IV only. II and III only. II and IV only. I, III, and IV only.Question 24 (Multiple Choice Worth 2 points)

In the past year, six new factories have been built in the Macro Islands that are operating at less than full capacity. Since the factories are still not operating at full capacity, there will be

an increase in the supply of loanable funds. an increase in the quantity supplied of loanable funds. a decrease in the supply of loanable funds. a decrease in the demand for loanable funds. an increase in the demand for loanable funds.Question 25 (Multiple Choice Worth 2 points)

The demand curve for loanable funds is downward sloping because

there are more potential investment projects that yield 10% than there are investment projects that yield 7%. when the interest rate is low, the quantity demanded of loanable funds will be less. when the interest rate is low, the quantity demanded of loanable funds will be greater. when the interest rate is high, the quantity supplied of loanable funds will be less. when the interest rate is high, the quantity demanded of loanable funds will be greater.Question 26 (Multiple Choice Worth 2 points)

If demand for loanable funds decreases, what will happen to real interest rates and the economic growth?

Real Interest Rates / Economic Growth

Increase / Increase Increase / Decrease Decrease / No Change Decrease / Decrease Decrease / IncreaseQuestion 27 (Multiple Choice Worth 2 points)

The supply of loanable funds will increase if

investors put more money in the stock market. investors sell stocks and increase their money holdings. low interest rates attract foreign investors. a personal income tax cut increases household saving. government spending increases.Question 28 (Multiple Choice Worth 2 points)

Given the loanable funds market illustrated above, which of the following is most likely to be true of quantity demanded and quantity supplied of loanable funds, if the government imposes an effective interest floor of 8%?

Quantity Demanded / Quantity Supplied

Decrease / Decrease Decrease / Increase Increase / No change Increase / Decrease Increase / IncreaseQuestion 29 (Multiple Choice Worth 2 points)

As a result of a recession, citizens all over the nation are withdrawing their savings. As a result of this action, there will be

an increase in the supply of loanable funds. an increase in the quantity supplied of loanable funds.  a decrease in the supply of loanable funds. a decrease in the demand for loanable funds.  an increase in the demand for loanable funds.Question 30 (Multiple Choice Worth 2 points)

When Bethany deposits $500 in a bank that has a 25% required reserve ratio, the maximum amount of money the bank can loan out is

$12,500. $2,000. $1,500. $375. $125.Question 31 (Multiple Choice Worth 2 points)

A U.S. five dollar bill is an example of

certificate money. commodity money. standard money. fiat money. M2.Question 32 (Multiple Choice Worth 2 points)

Assets		Liabilities
Total Reserves	$80,000	Demand Deposits	$150,000
Loans	$70,000

Using the table above, if the reserve requirement is 10%, then the bank could loan out an additional

$650,000. $135,000.  $80,000.  $65,000. $15,000.Question 33 (Multiple Choice Worth 2 points)

Banks may not be able to create the maximum amount of money from a new deposit as a result of

people’s desire to hold cash rather than re-deposit it in the bank. the bank’s desire to make new loans. a decrease in the required reserve ratio. an increase in investment demand. an increase in savings by consumers.Question 34 (Multiple Choice Worth 2 points)

A bank balance sheet shows the bank’s

excess and required reserves only. total reserves and investment purchases only. assets and liabilities only. demand deposits only. assets and what the bank owns only.Question 35 (Multiple Choice Worth 2 points)

Which of the following is/are considered liabilities for a bank?

1. Checkable deposits
2. Excess reserves
3. Required reserves

I only. II only. III only. I and II only. I and III only.Question 36 (Multiple Choice Worth 2 points)

Assets		Liabilities
Reserves	$100,000	Deposits	$400,000
Bonds	$250,000
Loans	$50,000

Using the table above, if the reserve requirement is 20%, then the additional amount the banking system might create is

$40,000. $60,000. $100,000. $340,000. $1,800,000.Question 37 (Multiple Choice Worth 2 points)

Assets		Liabilities
Total Reserves	$80,000	Demand Deposits	$150,000
Loans	$70,000

Using the table above, if the reserve requirement is 10%, then the total additional amount the bank could create is

$1,350,000. $650,000. $135,000.  $65,000. $15,000.Question 38 (Multiple Choice Worth 2 points)

Total reserves are equal to

vault cash plus money the bank has on deposit with the Federal Reserve. the demand deposits times the reserve requirement. the demand deposits minus (checkable deposits times the reserve requirement). the total liabilities times the reserve requirement. the total liabilities minus checkable deposits.Question 39 (Multiple Choice Worth 2 points)

After saving money in her piggy bank for three years, Linda decided to deposit $5,000 of the money in the Millertown Bank. If the bank was fully loaned out prior to the deposit and the required reserve ratio was 20%, then the additional dollar value that Millertown Bank could loan out as a result of Linda’s deposit would be

$25,000. $20,000. $5,000. $4,000. $1,000.Question 40 (Multiple Choice Worth 2 points)

Velocity is

another term for the money multiplier. equivalent to real GDP. equivalent to the price level. equivalent to nominal GDP. the number of times the average dollar is spent in a year.Question 41 (Multiple Choice Worth 2 points)

In Drewland, the money supply equals $1,000 and velocity of money is 3. The government budget is $300, consumers spend $1500, and investors spend $500. When national output is 30, then price equals

33.33. 100. 766.66. 2,300. cannot be determined with the information provided.Question 42 (Multiple Choice Worth 2 points)

In Drewland, the money supply equals $1,000 and velocity of money is 3. The government budget is $300, consumers spend $1500, and investors spend $500. Nominal GDP equals

$3,000. $2,300. $800. $500. cannot be determined with the information provided.