1

U &
ni
t 2
1

1)

2
Which of the following is NOT a topic studied in Macroeconomics?
A)
gross domestic product
B)
the unemployment rate
C)
the price of IBM computers
D)
the inflation
rate
2)
Which of the following is a topic studied in Macroeconomics?
A)
gross domestic product
B)
the wage of auto workers
C)
the price of IBM computers
D)
the amount of
pizza produced
3)
Which of the following is a topic studied in Macroeconomics?
A)
the functioning of individual industries
B)
aggregate behavior of households and industries
C)
the behavior of individual households
D)
the decision-
making
behavior of
individual
business firms
4)
An increase in the overall price level is known as
A)
deflation.
B)
recession.
C)
inflation.
D)
stagflation
5)
Aggreg ate behavior is
A)
the behavior of each household and firm.
B)
the behavior of each individual.
C)
the behavior of all households and firms, and government together.
D)
none of the
above.
6)
Inflation is a(n)
A)
decrease in the overall price level.
B)
decrease in the overall level of economic activity.
C)
increase in the overall price level.
D)
increase in

7)
Deflatio n occurs when
A)
the average price level declines.
B)
economic activity declines.
C)
the economic growth rate declines.
D)
the

8)
A period of very rapid increase in the overall price level is known as
A)
stagnation.
B)
hyperinflatio n.
C)
stagflation.
D)
depression.

9)
The trend of the economy is
A)
the long run growth path of the economy.
B)
the long run inflation rate.
C)
the long run unemployment rate.
D)
the short run

10)
The term business cycle refers to the
A)
short-term ups and downs in the price level.
B)
long-term trends in the price level.
C)
short-term ups and downs in the level of economic activity.
D)
long-term

11)
A period during which aggregate output rises is known as a(n)
A)
recession.
B)
inflation.
C)
hyperinflatio n.
D)
expansion
12)
In a s cycle, a peak represents the end of ________ and a trough represents the end of
busines ________.
A)
an expansion; a recession
B)
a depression; an expansion
C)
a trough; a peak
D)
a recession; an
expansion
13)
In a business cycle, a peak represents the end of
A)
an expansion.
B)
a depression.
C)
trough.
D)
a recession
14)
In a business cycle, a trough represents the end of
A)
an expansion.
B)
an inflation.
C)
a peak
D)
a recession.
15)
A prolonged and deep recession is called
A)
a business cycle.
B)
a depression.
C)
a stagflation.
D)
hyperinflatio
n.
16)
Betwee n a trough and a peak, the economy goes through a(n)
A)
recession.
B)
bust.
C)
expansion.
D)
hyperinflatio n.

17)
Betwee n a peak and a trough, the economy goes through a(n)
A)
expansion.
B)
inflation.
C)
recession.
D)
b m
o .
o

18)
Macroeconomic
s is concerned
with inflation or
deflation,
output growth
and
unemployment.
TRUE OR FALSE
19)
Macroecono
mics is
concerned
with the
market price
and
equilibrium
quantity of
each good or
service.
TRUE OR
FALSE
20)
H e
y n
p t
er i
in c
fl a
at l
io
n e
a c
n o
d n
st o
a m
gf i
la c
ti c
o o
n n
ar d
e i
t t
w i
o o
di n
ff s
er .
e
nt T
n R
a U
m E
e
s O
w R
hi
c F
h A
re L
fe S
r E
to
id
21)
If the central bank decreases the money supply, it is conducting
A)
monetary policy.
B)
supply-side policy.
C)
fiscal policy.
D)
incomes policy.
22)
If Congress increases government spending, it is using
A)
monetary policy.
B)
supply-side policy.
C)
fiscal policy.
D)
incomes
policy.
23)
The government implements fiscal policy when it changes
A)
spending and/or interest rate.
B)
money supply and/or taxes.
C)
taxes and/or spending.
D)
taxes and/or
interest rate.
24)
The ment wants to encourage consumer spending through cutting income taxes. This is
govern an example of
A)
an incomes policy.
B)
a fiscal policy.
C)
a supply- side policy.
D)
a monetary
policy.
25)
The ________ can change the quantity of money in the economy.
A)
Treasury Department
B)
Federal Reserve
C)
Congress
D)
Office of the Comptroller of the Currency

26)
The Federal Reserve affecting the supply of money is known as
A)
fiscal policy.
B)
monetary policy.
C)
growth policy.
D)
supply side
policy.

27)
 increases in the price level during periods of recession or high unemployment are
Rapid known as
A)
stagflation.
B)
stagnation.
C)
depression.
D)
inflation.

28)
Stagflation occurs when the economy's inflation rate is high and
A)
employment is high.
B)
the unemployment rate is high.
C)
the unemployment rate is low.
D)
the rate of

29)
The single largest expenditure component in GDP is
A)
government spending.
B)
investment.
C)
consumption .
D)
net Unit
exports. 3-5

Which of the following is considered a liability to a bank?

1)
A
)
time deposits
B)
reserves
C)
the bank's loans
D)
the bank's
buildings and
equipment
2)
The central bank of the United States is known as the
A)
Federal Reserve System.
B)
Federal Deposit Insurance Corporation.
C)
Department of the Treasury.
D)
Federal

3)
A loan made by a bank is considered ________ of that bank.
A)
a liability
B)
capital
C)
net worth
D)
an asset
4)
A checking deposit in a bank is considered ________ of that bank.
A)
an asset
B)
a liability
C)
net worth
D)
capital
5)
Narnia Bank has $750 million in deposits. The required reserve ratio is 30%. Narnia
National National Bank must keep ________ in reserves.
A)
$125 million
B)
$150 million
C)
$225 million

6)
 Bank has $300 million in deposits. The required reserve ratio is 25%. Neon Bank
Neon must keep ________ in reserves.
A)
$275 million
B)
$145 million
C)
$75 million
D)
$120 million

7)
 Intracoastal Bank has $5 million in deposits and $500,000 in reserves. If the
The required reserve ratio is 5%, excess reserves are equal to
A)
$125,000.
B)
$500,000.
C)
zero.
D)
$250,000.

8)
The Arugula has $9 million in deposits and $900,000 in reserves. If the required reserve
Bank of ratio is 10%, excess reserves are equal to
A)
$90,000.
B)
$180,000.
C)
Zero.

9)
The required reserve ratio is 50%. The money multiplier is
A)
2.5.
B)
10.
C)
5.
D)
2.

10)
If the money multiplier is 8, the required reserve ratio is
A)
8%.
B)
16%.
C)
12.5%.
D)
2 .
0
%
11)
The Federal Reserve System consists of ________ Federal Reserve Banks.
A)
8
B)
10
C)
12
D)
14
12)
Which of the following activities is one of the responsibilities of the Federal Reserve?
A)
issuing new bonds to finance the federal budget deficit
B)
loaning money to other countries that are friendly to the United States
C)
assisting banks that are in a difficult financial position
D)
auditing the
13)
Among the members of the Federal Open Market Committee
A)
is the Secretary of the Treasury.
B)
is the Comptroller of the Currency.
C)
are the seven members of the Board of Governors of the Fed.
D)
is the Chair Banking Committee.
of the
Senate
 1
4)
The Board of governors of the Fed
A)
are appointed by the House of Representatives.
B)
has 12 members.
C)
have a 7- year term.
D)
is

15)
The
16)
T n
h k
e i
F n
e g
d
a s
ct y
s s
a t
s e
a m
le .
n
d T
er R
of U
la E
st
re O
s R
or
t F
fo A
r L
th S
e E
b
a
17)
Which following instruments is NOT used by the Federal Reserve to change the money
of the supply?
A)
the discount rate
B)
the required reserve ratio
C)
the federal tax code
D)
open market
operations
18)
The Federal Open Market Committee (FOMC) directs the Open Market Desk to
A)
determine the required reserve ratio.
B)
determine the discount rate.
C)
buy or sell government securities. (Treasury Bond)
D)
determine
19)
Which of the following is NOT a tool available to the Fed to change the supply of money?
A)
open market operations
B)
the required reserve ratio
C)
the money multiplier
D)
the discount
rate
20)
The discount rate is
A)
the interest rate commercial banks charge each other for borrowing funds.
B)
the interest rate commercial banks charge their new customers.
C)
the interest rate the Fed charges commercial banks for borrowing funds.
D)
the interest
rate
commercial
banks charge
their most
creditworthy
customers.
21)
If the Fed sells government securities, then there is
A)
an increase in the supply of money.
B)
a decrease in the supply of money.
C)
a decrease in the discount rate.
D)
an increase in
the required
reserve ratio.
22)
When raises the required reserve ratio, the banks' excess reserves will initially ________
the Fed and the money supply ________.
A)
remains constant; decreases
B)
decrease; decreases
C)
increase; remain constant
23)
An market purchase of securities by the Fed results in ________ in commercial banks’
open- reserves and ________ in the supply of money.
A)
an increase; a decrease
B)
a decrease; a decrease
C)
an increase; an increase
D)
a decrease; an
increase
24)
A decrease in the required reserve ratio
A)
will increase the money supply.
B)
will decrease the money supply.
C)
will not change the money supply.
D)
will decrease
the discount
rate.
25)
Assume commercial banks are loaned up. Total deposits in the banking system are $200
that all million. The required reserve ratio is increased. The money supply will
A)
decrease.
B)
increase.
C)
not change because there was no change in deposits.
D)
not change
because the
required
reserve ratio
has no impact
on money
supply.
26)
The interest rate banks pay to borrow money from the Fed is the
A)
federal funds rate.
B)
discount rate.
C)
prime lending rate.

27)
 of the following represents an action by the Federal Reserve that is designed to
Which increase the money supply?
A)
a decrease in the required reserve ratio
B)
an increase in the discount rate
C)
a decrease in federal tax rates
D)
selling government securities in the open market

28)
 of the following represents an action by the Federal Reserve that is designed to
Which increase the money supply?
A)
buying government securities in the open market
B)
an increase in the required reserve ratio
C)
a decrease in federal spending
D)
an e in the discount rate
increas
29)
The Federal Open Market Committee (FOMC) directs the Open Market Desk to
A)
determine the required reserve ratio.
B)
determine the discount rate.
C)
buy or sell government securities.
D)
determine
30)
Which of the following is NOT a tool available to the Fed to change the supply of money?
A)
open market operations
B)
the required reserve ratio
C)
the money multiplier
D)
the discount
rate