1. The price index was 105 in Year 1 and 108 in Year 2. What was the inflation rate?

(1 Point)
A. 2.9 percent
B. 0.029 percent
C. -2.9 percent
D. D.102.9 percent
2. Money demand refers to (1 Point)
A. the total quantity of financial assets that people want to hold.
B. how much income people want to earn per year.
C. how much wealthy people want to hold in liquid form.
D. how much currency the Federal Reserve decides to print.
3. Suppose that in a closed economy GDP is equal to $35,000, consumption equal to $16,000,
government purchases equal $4,500, and taxes equal $8,000 What are private saving, public
saving, and national saving? (1 point)
A. $3,500 $11,000, and $14,500, respectively
B. $19,000, $27,000, and $12,500, respectively
C. $11,000, $3,500, and $14,500, respectively
D. $27,000, $19,000, and $12,500, respectively
4. The nominal interest rate is 4%, the inflation rate is 1% and the tax rate is 20%. Given
US tax laws, how is after-tax real return computed? (1 Point)
A. .03(1-20)
B. .04(1-20)
C. .04(1-20) - .0.1
D. None of the above is correct.
5. Suppose a closed economy had public saving of -$1 trillion and private saving of $17
trillion. What are national saving and investments for this country? (1 point)
A. $16 trillion, $16 trillion
B. $16 trillion, $18 trillion
C.$18 trillion, $16 trillion
D. $18 trillion, $18 trillion

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6. Which of the following is a certificate of indebtedness?
A. Both stocks and bonds
B. Stocks but not bonds
C. Bonds but not stocks
D. Neither stocks nor bonds
7. If the central bank in some countries raised the reserve requirement, then the money
multiplier for that country
A. would increase.
B. would not change.
C. would decrease.
D. Could do any of the above
8. You put money into an account and earn a real interest rate of 5 percent. Inflation is 2
percent, and your marginal tax rate is 35 percent. What is your after-tax real rate of
interest?" (1 point)
A. 5.25 percent
B. 3.05 percent
C. 2.55 percent
D. 1.25 percent
9. You put money into an account and earn an after-tax real interest rate of 2.5 percent. If
the nominal interest rate on the account is 8 percent and the inflation rate is 2 percent, then
what is the tax rate?
A. 28.00 percent
B. 36.25 percent
C. 43.75 percent
D. 67.50 percent
10. If the price of Italian shoes imported into the United States increases, then
A. both the GDP deflator and the consumer price index will increase
B. Neither the GDP deflator nor the consumer price index will increase
C. The GDP deflator will increase, but the consumer price index will not increase.
D. The consumer price index will increase, but the GDP deflator will not increase.

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11. In 1931, President Herbert Hoover was paid a salary of $75,000. Government statistics
show a consumer price index of 15.2 for 1931 and 237 for 2015. President Hoover's 1931
salary was equivalent to a 2015 salary of about.
A. $4,965.
B. $1,169.408
C. $1,057,894.
D. $16,080,001.
12. A bank has $8,000 in deposits and $6,000 in loans = excess recerves. It has loaned out
all it can given the reserve requirement. It follows that the reserve requirement is
A. 2.5 percent.
B. 33.3 percent.
C. 25 percent.
D. 75 percent.
12. The cost of the basket
The following table pertains to Wiskancia, an economy in which the typical consumer's basket
consists of 15 pounds of apples and 7 teddy bears.
Year Price of Apples Price of Teddy bears
(Dollars per pound) (Dollars per toy)
1 14 7
2 12 5
3 15 9

A. decreased from Year 1 to Year 2 and increased from Year 2 to Year 3

B. increased from Year 1 to Year 2 and decreased from Year 2 to Year 3.
C. increased from Year 1 to Year 2 and increased from Year 2 to Year 3.
D. decreased from Year 1 to Year 2 and decreased from Year 2 to Year 3
13. Noah is an unpaid stay-at-home father who is not currently searching for paid work. Pete is a
full-time student who is not looking for a job. Who is included in the labor force by the Bureau
of Labor Statistics?
A. Only Noah
B. Only Pete
C. both Noah and Pete
D. neither Noah nor Pete

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14. The money supply increases when the Fed
A. buys bonds. The increase will be larger, the smaller the reserve ratio.
B. buys bonds. The increase will be larger, the larger the reserve ratio is. sells bonds.
C. The increase will be larger, the smaller the reserve ratio. 21 sells bonds.
D. The increase will be larger, the larger the reserve ratio is.
15. On a bank's Taccount, which are part of the bank's assets?
A. Oboth deposits are made by its customers and reserves.
B. deposits made by its customers but not reserves.
C. reserves but not deposits made by its customers.
D. neither deposits made by its customers nor reserves
16. When the Fed conducts open-market purchases,
A. banks buy Treasury securities from Fed, which increases the money supply.
B. banks buy Treasury securities from the Fed, which decreases the money supply.
C. it buys Treasury securities, which increases the money supply.
D. it buys Treasury securities, which decreases the money supply.
16. Marta lends money at a fixed interest rate and then inflation turns out to be higher than
she had expected it to be. The real interest rate she earns is
A. higher than she had expected, and the real value of the loan is higher than she had expected.
B. higher than she had expected, and the real value of the loan is lower than she had expected.
C. lower than she had expected, and the real value of the loan is higher than she had expected
D. lower then she had expected, and the real value of the loan is lower than she had expected.
17. Financial intermediaries are
A. the same as financial markets
B. individuals who make profits by buying a stock low and selling it high.
B. a more general name for financial assets such as stocks, bonds, and checking accounts.
D. financial institutions through which savers can indirectly provide funds to borrowers.

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18. People hold $400 million of bank deposits but no currency. Banks have made $380 million
dollars of loans and only hold enough reserves to satisfy reserve requirements. Because of
uncertainty, banks choose to hold $10 million more in reserves. The Fed takes no action.
What happens to bank loans?
A. they fall $220 million.
B. they fall $200 million.
C. They raised $200 million.
D. They raised $220 million.
19. A bond buyer is a
A. saver. Bond buyers must hold their bonds until maturity.
B. saver. Bond buyers may sell their bonds prior to maturity.
C. borrower. Bond buyers must hold their bonds until maturity.
D. borrower. Bond buyers may sell their bonds prior to maturity.
20. Changes in real GDP reflect
A. only changes in prices.
B. only changes in the amounts being produced.
C. both changes in prices and changes in the amounts being produced.
D. neither changes in prices nor changes in the amounts being produced.
21. In the actual economy, households (1 Point)
A. spend all their income.
B. divide their income among spending, taxes, and saving.
C. buy all goods and services produced in the economy.
D. save all their income.
22. By far the largest category of goods and services in the CPI basket is
A. housing.
B. transportation.
C. education & communication.
D. food & beverages.

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23. On a given morning, Franco sold 40 pairs of shoes for a total of $80 at his shoe store.
A. The $80 is a real variable. The quantity of shoes is a nominal variable.
B. The $80 is a nominal variable. The quantity of shoes is a real variable.
C. Both the $80 and the quantity of shoes are nominal variables.
D. Both the $80 and the quantity of shoes are real variables.
24. A budget deficit
A. changes the supply of loanable funds
B. changes the demand for loanable funds.
C. changes both the supply of and demand for loanable funds.
D. does not influence the supply of or the demand for loanable funds.
25. Which of the following is an asset of a bank and a liability for its customers?
A. deposits of its customers and loans to its customers
B. deposits of its customers but not loans to its customers.
C. loans to its customers but not the deposits of its customers.
D. neither the deposits of its customers nor the loans to its customers.
26. The discount rate is the interest rate that Team
A. banks charge one another for loans.
B. banks charge the Fed for loans.
C. The Fed charges banks for loans.
D. The Fed charges Congress for loans.
26. As an alternative to selling shares of stock as a means of raising funds, a large company
could, instead,
A. invest in physical capital.
B. use equity finarice.
C. sell bonds.
D. purchase bonds.

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27. In 2010 the U.S. government was running a large deficit. Some were concerned that
pressures might be put on the Federal Reserve to purchase government bonds to help the
government finance this deficit. If the Fed were to buy government bonds to help the
government finance its expenditures, then.
A.the price level would fall, so the value of money would fall.
B. the price level would fall so the value of money would rise.
C. the price level would rise, so the value of money would fall.
D. the price level would rise, so the value of money would rise.
28. This country's inflation rate from 2016 to 2017 was
The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the
last several years are shown in the following table. The base year is 2015.

Year Cereal Milk

Price (Dollars Quantity Price (Dollars Quantity
per box) (Boxes of per gallon) (Gallons)
cereal)
2015 4.00 100 1.50 180
2016 4.00 120 2.00 200
2017 5.00 150 2.50 200
2018 6.00 180 3.50 240

A. 25.0%
B. 23.1%
C. 26.1%.
D. 18.8%.
29. Suppose banks desire to hold no excess reserves and that the Fed has set a reserve
requirement of 6 percent. If you deposit $8,000 into First Raven Bank,
A. First Raven's required reserves increase by $480.
B. First Raven will be able to lend out $7,520.
C. First Raven's assets and liabilities will both increase by $8,000.
D. All the above are correct.

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30. The money supply in Muckland is $100 billion. Nominal GDP is $800 billion and real
GDP is $200 billion. What are the price level and velocity in Muckland?
A. The price level and speed are both 8.
B. The price level is 2 and the speed is 8.
C. The price level and velocity are both 4.
D. The price is 4 and the velocity is 8.
31. Suppose that some countries had an adult population of about 46 million, a labor-force
participation rate of 75 percent, and an unemployment rate of 8 percent. How many people
were employed?
A. 2.76 million
B. 31.74 million
C. 34.5 million
D. 42.32 million
32. If the reserve ratio is 5 percent, banks do not hold excess reserves, and people do not hold
currency, then when the Fed purchases $20 million worth of government bonds, bank
reserves
A. increase by $20 million and the money supply eventually increases by $400 million.
B. decrease by $20 million and the money supply eventually decreases by $400 million.
C. increase by $20 million and the money supply eventually increases by $100 million.
D. decrease by $20 million and the money supply eventually decreases by $100 million.
33. A farmer produces carrots and sells them to Fresh Juice, which makes carrot juice. The
carrots produced by the farmer are called:
A. inventory goods.
B. transitory goods.
C. final goods.
D. intermediate goods.

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34. Daniel, a US citizen, travels to Mexico and buys a newly manufactured motorcycle made
there. His purchase is included in:
A. both Mexico's GDP and US. GDP.
B. Mexico's GDP, but it is not included in U.S. GDP.
C. US. GDP, but it is not included in Mexico's GDP.
D. neither Mexico's GDP nor U.S. GDP.
35. The economy's two most important financial markets are
A. the investment market and the saving market.
B. the bond market and the stock market.
C. banks and the stock market.
D. financial markets and financial institutions.
36. Long-term bonds are
A. riskier than short-term bonds, and so interest rates on long-term bonds are usually lower than
interest rates on short-term bonds.
B. riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than
interest rates on short-term bonds.
C. less risky than short-term bonds, and so interest rates on long-term bonds are usually lower than
interest rates on short-term bonds.
D. less risky than short-term bonds, and so interest rates on long-term bonds are usually higher
than interest rates on short-term bonds.
37. Cyclical unemployment refers to
A. How often a worker is likely to be employed during her lifetime.
B. short run fluctuations around the natural rate of unemployment.
C. the portion of unemployment created by wages set above the equilibrium level.
D. changes in unemployment due to changes in the structural rate of unemployment.
38. Lucy quit her job because she was unhappy at work. Genevieve was fired because she
frequently surfed the Internet rather than working on her assigned tasks. Who is eligible for
unemployment insurance benefits?
A. both Lucy and Genevieve
B. Lucy but not Genevieve
C. Genevieve but not Lucy
D. neither Lucy nor Genevieve

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39. For any given year, the CPI is the price of the basket of goods and services in the
A. The given year divided by the price of the basket in the base year, then multiplied by 100.
B. given year divided by the price of the basket in the previous year, then multiplied by 100.
C. base year divided by the price of the basket in the given year, then multiplied by 100
D. previous year divided by the price of the basket in the given year, then multiplied by 100.
40. Which of the following items is included in M27
A. credit cards
B. money market mutual funds
C. corporate bonds
D. large time deposits
41. A bank loans Kellie's Print Shop $350,000 to remodel a building near campus to use as a
new store. On their respective balance sheets, this loan is
A. an asset for the bank and a liability for Kellie's Print Shop. The loan increases the money supply.
B. an asset for the bank and a liability for Kellie's Print Shop. The loan does not increase the
money supply.
C. a liability for the bank and an asset for Kellie's Print Shop. The loan increases the money supply.
D. a liability for the bark and an asset for Kellie's Print Shop. The loan does not increase the money
supply.
42. In the GDP accounts production equals
A. income
B. income + saving.
C. income-government expenditures
D. income - imports.
43. The classical dichotomy refers to the idea that the supply of money
A. is irrelevant for understanding the determinants of nominal and real variables.
B. determines nominal variables, but not real variables.
C. determines real variables. but not nominal variables.
D. is a determinant of both real and nominal variables.

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44. A recession has traditionally been defined as a period during which
A. nominal GDP declines for two consecutive quarters.
B. nominal GDP declines for four consecutive quarters.
C. real GDP declines for two consecutive quarters.
D. real GDP declines for four consecutive quarters
45. In the long run, money demand and money supply determine
A. the value for money and the real interest rate.
B. the value of money but not the real interest rate.
C. the real interest rate but not the value of money.
D. neither the value of money nor the real interest
46. If inflation is lower than what was expected,
A. creditors receive a lower real interest rate than they had anticipated.
B. creditors pay a lower real interest rate than they had anticipated.
C. debtors receive a higher real interest rate than they had anticipated.
D. debtors pay a higher real interest rate than they had anticipated.
47.The CPI differs from the GDP deflator in that
A.the CPI is a price index, while the GDP deflator is an inflation index.
B. substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator.
C. increases in the prices of foreign produced goods that are sold to the US, consumers show up
in the CPI but not in the GDP deflator.
D. increases in the prices of domestically produced goods that are sold to the US government
show up in the CPI but not in the GDP deflator.

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48. The steps involved in calculating the consumer price index and the inflation rate, in order,
are as follows:
A. Choose a base year, update the basket, find the prices, estimate the basket's cost, compute the
index, and compute the inflation rate.
B. Choose a base year, fix the basket, find the prices, compute the inflation rate, compute the
basket's cost, and compute the index.
C. Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the
index, and compute the inflation rate.
D. Fix the basket, find the prices, compute the inflation rate, compute the basket's cost and
choose a base year and compute the index.
49. When the Fed purchases $1000 worth of government bonds from the public, the U.S.
money supply eventually increases by
A. more than $1000.
B. exactly $1000.
C. less than $1000.
D. None of the above are correct.
50. In a closed economy, what does the difference between the tax revenue and government
purchases, (TG), represent?
A. National saving
B. Investment
C. Private saving
D. Public saving
51. When the consumer price index rises, the typical family
A. has to spend more dollars to maintain the same standard of living.
B. can spend fewer dollars to maintain the same standard of living.
C. finds that its standard of living is not affected.
D. can offset the effects of rising prices by saving more.

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52. Gross domestic product includes all
A. legal final goods and services, but it excludes illegal final goods and services.
B. legal and illegal final goods, but it excludes all legal and illegal final services.
C. legal and illegal final goods and all legal and illegal final services.
D. legal and illegal final goods and legal final services, but it excludes illegal final services.
53. Suppose the banking system currently has $400 billion in reserves, the reserve
requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of
deposits?
A. $5,000 billion
B. $4.937.5 billion
C. $5.062.5 billion
D. $4,995 billion
54. The introduction of the video cassette recorder in the 1970s exemplified a problem
in measuring the cost of living; that problem is the problem of
A. substitution bias.
B. product improvement bias.
C. introduction of new goods.
D. unmeasured quality change.
55. Which of the following is included in the calculation of GDP?
A. The purchase of tutoring services from a tutor who holds citizenship outside the country but
resides within the country.
B. The purchase of a new edition of a foreign textbook that was produced in a different nation.
C. The purchase of ink and paper supplies by a textbook company for the production of new
textbooks
D. The purchase of a used textbook from a friend who took the same class last year.

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56. Suppose that the adult population in the country of Atlantis is 115 million. If 80
million people are employed and 5 million are unemployed, then:
A. 30 million are not in the labor force.
B. 35 million are in the labor force.
C. 75 million are in the labor force.
D. 35 million are not in the labor force.
57. A Texas household receives a Social Security check for $1500, which it uses to purchase a
$40 pair of shoes made in Thailand by a Thai firm, a $1240 television made by a Korean
firm in Korea, and $220 on groceries from a local store. As a result, U.S. GDP:
A. increases by $40.
B. increases by $220.
C. increases by $280.
D. increases by $1500.
58. The CPI and the GDP deflator
A. generally move together.
B. generally show different patterns of movement.
C. always show identical changes.
D. always show different patterns of movement.
59. Bob is looking for work after school, but everywhere he fills out an application, the
managers say they always have a lot more applications than open positions. Tom has a law
degree. Several firms have made him offers, but he thinks he might be able to find a firm
where his talents could be put to better use.
A. Bob and Tom are both frictionally unemployed.
B. Bob and Tom are both structurally unemployed.
C. Bob is frictionally unemployed, and Tom is structurally unemployed.
D. Bob is structurally unemployed, and Tom is frictionally unemployed.

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60. Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank
has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much
does this bank now have to lend out if it decides to hold only required reserves?
A.$27,000
B. $27,190
C. $26,190
D. $9,000
61. Then the Fed conducts open-market sales,
A. it sells Treasury securities, which increases the money supply.
B. it sells Treasury securities, which decreases the money supply.
C. it auctions term loans, which increases the money supply.
D. it auctions term loans, which decreases the money supply.
62. Which of the following is included in both M1 and M2?
A. savings deposits
B. Demand deposits
C. small time deposits
D. money market mutual funds
63. Northwest Wholesale Foods sells common stock. The company is using:
A. equity financing and the return shareholders’ earnings are fixed.
B. equity financing and the return shareholders earn depends on how profitable the company is
C. debt financing and the return shareholders earn is fixed.
D. debt financing and the return shareholders earn depends on how profitable the company is.
64. Who would be included in the labor force?
A. Maggie, who plans to work at the newspaper next year when she turns 16 years old.
B. Lisa, who is unhappy with her current job.
C. Bart, who is a full-time student and uninterested in finding employment.
D. None of the above is correct.

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65. In June 2009 the Bureau of Labor Statistics reported an adult population of 234.9
million, unemployment of 12.4 million, and employment of 141.6 million. Based on these
numbers the labor-force participation rate was
A. 154/234.9.
B. 141.6/234.9.
C. 141.6/154
D. None of the above is correct.
66. As the price level decreases, the value of money
A. increases, so people must hold less money to purchase goods and services.
B. increases, so people must hold more money to purchase goods and services.
C. decreases, so people must hold more money to purchase goods and services.
D. decreases, so people must hold less money to purchase goods and services.
67. When inflation rises, people
A. make less frequent trips to the bank and firms make less frequent price changes.
B. make less frequent trips to the bank while firms make more frequent price changes.
C. make more frequent trips to the bank while firms make less frequent price changes.
D. make more frequent trips to the bank and firms make more frequent price changes
68. The inflation rate was
The following table pertains to Wiskancia, an economy in which the typical consumer's basket
consists of 15 pounds of apples and 7 teddy bears.
Year Price of Apples Price of Teddy bears
(Dollars per pound) (Dollars per toy)
1 14 7
2 12 5
3 15 9

A. positive in Year 2 and positive in Year 3

B. negative in Year 2 and negative in Year 3.

C. positive in Year 2 and negative in Year 3.
D. negative in Year 2 and positive in Year 3.

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69. If the natural rate of unemployment is 5.2 percent and the actual rate of unemployment
is 5:7 percent, then by definition there is
A. cyclical unemployment amounting to 0.5 percent of the labor force.
B. frictional unemployment amounting to 0.5 percent of the labor force.
C. structural unemployment amounting to 0.5 percent of the labor force.
D. search unemployment amounting to 0.5 percent of the labor force.
70. The price of a Honda Accord
A. and the price of a Honda Accord divided by the price of a Honda Civic are both real variables.
B. and the price of a Honda Accord divided by the price of Honda Civic are both nominal variables.
C. is a real variable, and the price of a Honda Accord divided by a Honda Civic is a nominal
variable.
D. is a nominal variable and the price of a Honda Accord divided by the price of a Honda Civic is
a real variable.
71. If in some year nominal GDP was $40 billion and the GDP deflator was 70, what was
real GDP?
A. $110.0 billion
B. $175.0 billion
C. $57.1 billion
D. $300 billion
72. When economists talk about growth in the economy, they measure that growth as the
A. absolute change in nominal GDP from one period to another.
B. percentage change in nominal GDP from one period to another.
C. absolute change in real GDP from one period to another.
D. percentage change in real GDP from one period to another.

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73. A company sells titanium to a bicycle company for $300. The bicycle company uses the
titanium to produce a bicycle, which it sells for $400. Taken together, these two transactions
contribute:
A. $300 to GDP
B. $400 to GDP
C. between $400 and $700 to GDP depending on the profit earned by the bicycle company when
it sold the bicycle.
D. $100 to GDP.
74. A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it
can given the reserve requirement.
A. It has $25 in reserves and $4,975 in loans.
B. It has $250 in reserves and $4,750 in loans.
C. It has $1,000 in reserves and $4,000 in loans.
D. None of the above is correct
75. Christopher is an unpaid, stay-at-home father who works as a volunteer at the local
Habitat for Humanity chapter. Currently, Christopher is not looking for a paid job. The
Bureau of Labor Statistics counts Christopher as
A. unemployed and in the labor force.
B. unemployed but not in the labor force.
C. in the labor force but not unemployed.
D. neither in the labor force nor unemployed.
76. The nominal interest rate tells you
A.how fast the number of dollars in your bank account rises over time.
B. how fast the purchasing power of your bank account rises over time.
C. the number of dollars in your bank account today
D. the purchasing power of your bank account today.

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77. If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the
inflation rate is
A. -2 percent.
B. 0.4 percent.
C. 2 percent.
D. 12 percent.
78. Given that Monica's income exceeds her expenditures, Monica is best described as a
A.saver or as a supplier of funds.
B. borrower or as a demander of funds.
C. saver or as a demander of funds.
D. borrower or as a supplier of funds.
79. Other things are the same, when the interest rate falls, people would want to lend
A. less, making the supply of loanable funds increase.
B. more, making the supply of loanable funds decrease.
C. less, making the quantity of loanable funds supplied decrease.
D. more making the quantity of loanable funds supplied increase.
80. If the base year is Year 1, then the CPI in Year 3 was
The following table pertains to Wiskancia, an economy in which the typical consumer's basket
consists of 15 pounds of apples and 7 teddy bears.
Year Price of Apples Price of Teddy bears
(Dollars per pound) (Dollars per toy)
1 14 7
2 12 5
3 15 9

A. 120.5.

B. 111.2.
C. 74.7.
D. 111.2

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81. Suppose the banking system currently has $300 billion in reserves, the reserve
requirement is 5 percent, and excess reserves are $30 billion. What is the level of loans?
A.$270 billion
B. $5,400 billion
C. $6,000 billion
D. $5,100 billion
82. The manager of the bank where you work tells you that your bank has $10 million in
excess reserves. She also tells you that the bank has $400 million in deposits and $375 million
dollars in loans. Given this information you find that the reserve requirement must be
A. 10/400.
B. 25/400.
C. 35/400.
D. 15/400.
83. The Fed purchases $200 worth of government bonds from the public. The reserve
requirement is 12.5 percent, people hold no currency, and the banking system keeps no
excess reserves. The U.S. money supply eventually increases by
A.$25.
B. between $200 and $300.
C. $1,600.
D. $2,500.
84. GDP is defined as the
A. value of all goods and services produced within a country in each period.
B. value of all goods and services produced by the citizens of a country, regardless of where they
are living, in each period.
C. value of all final goods and services produced within a country in each period.
D. value of all final goods and services produced by the citizens of a country, regardless of where
they are living, in each period.

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85. Katherine, a French citizen, works only in the United States. The value of the output she
produces is:
A. included in both U.S. GDP and U.S. GNP.
B. included in U.S. GDP, but it is not included in U.S. GNP.
C. Included in US, GNP, but it is not included in U.S. GDP.
D. included in neither U.S. GDP nor U.S. GNP.
86. On a bank's T-account, which are part of the bank’s liabilities?
A. both deposits made by its customers and reserves.
B. deposits made by its customers but not reserves.
C. reserves but not deposits made by its customers.
D. neither deposits made by its customers nor reserves.
87. The slope of the supply of loanable funds curve represents the
A. positive relation between the interest rate and investment.
B. positive relation between the interest rate and saving
C. negative relation between the interest rate and investment.
D. negative relation between the interest rate and saving.
88. Harvey, a U.S taxpayer, purchased 10 shares of MVC stock for $100 per share; one year
later he sold the 10 shares for $130 a share. Over the year, the price level increased from
140.0 to 147.0. What is Harvey’s beforetax real capital?
A. $1,300 - $1,000(1.05) and this is the gain he is to report on his income tax
B. $1,300 - $1,000(1.05) but he is to report a $300 on his income tax
C. $1,300 - $1,000(1.07) and this is the gain he is to report on his income tax
D. $1,300 - $1,000(1.07) but he is to report a $300 on his income tax
89. Suppose a basket of goods and services has been selected to calculate the CPI and Year
1 has been selected as the base year. In Year 1, the basket’s cost was $50; in Year 2, the
basket’s cost was $52; and in Year 3, the basket’s cost was $55. The value of the CPI in Year
3 was:
A. 90.9
B. 104.0
C. 105.0
D. 110.0

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90. Consider the following traders wwho meet, which, it any, pairs of traders has a double
coincidence of wants?
Bill Has an eggplant Wants a head of cabbage
Tim Has a head of Wants a cucumber
lettuce
Mike Has a tomato Wants an eggplant
Amy Has a cucumber Wants a head of lettuce

A. Bill with Mike

B. Time with Amy
C. Bill with Mike, and Tim with Amy
D. Bill with Tim, and Mike with Amy
91. The Carters' oldest son attends Big State University. He and his parents pay all his
fees and tuition. These payments count in GDP as:
A. Investment.
B. government spending.
C. consumption of services.
D. consumption of durable goods.

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