A perfectly elastic supply curve is:
a. upward sloping to the right.
b. downward sloping to the left.
c. horizontal.
d. vertical.
Question 2Which of the following is true?
a. Actual reserves equal required reserves minus excess reserves.
b. The predominant liability of virtually all banks is loans.
c. The lower the required reserve ratio, the larger the money multiplier.
d. If some banks choose not to lend all of their excess reserves, the total amount of money created by an initial cash deposit will be larger.
Question 3The monetarist assumption that monetary policy cannot change long-run equilibrium income is based on the idea that:
a. the long-run aggregate supply curve is horizontal.
b. the long-run Phillips curve is vertical.
c. the price level in the long run is fixed.
d. the aggregate demand curve cannot shift.
e. the long-run Phillips curve is upward-sloping.
Question 4For a given change in demand:
a. The quantity exchanged will change relatively more in the long run than the short run.
b. The quantity exchanged will change relatively more in the short run than the long run.
c. The market price will change relatively more in the short run than the long run.
d. Both a. and c. are true.
Question 5Which of the following is true?
a. A majority of U.S. money, whether M1 or M2, is in the form of legal tender.
b. If a bank lends out its excess reserves of 90,000, at the time the loan is made, the money supply will increase by 90,000.
c. Reserve requirements exist primarily to eliminate bank runs.
d. When there are two forms of money available, people prefer to spend the form of money that is more valuable.
Question 6The new classical school holds that:
a. macroeconomic equilibrium is achieved only through active government intervention.
b. unemployment is only temporary, because the economy tends naturally toward equilibrium.
c. rigid prices and wages prevent the economy from achieving equilibrium.
d. macroeconomic equilibrium cannot occur as long as the aggregate supply curve isvertical.
e. rational expectations result in involuntary unemployment and prolonged periods of macroeconomic disequilibrium.
Question 7For a given change in demand:
a. Quantity will change relatively more in the long run than the short run.
b. Quantity will change relatively more in the short run than the long run.
c. Price will change relatively more in the long run than the short run.
d. Both b. and c. are true.
Question 8Which of the following is true?
a. Checking account deposits and time deposits constitute assets of banks.
b. M2 includes M1, plus saving accounts, time deposits (except for some large-denomination certificates of deposits), and money market mutual funds.
c. reserves times the required reserve ratio equals deposits.
d. Money is destroyed when banks make loans.
Question 9New classical economists believe that:
a. market failure on a large scale is possible.
b. disequilibrium in commodity markets demand government intervention.
c. people are completely aware and informed about everything that is happening.
d. wages are fixed in the short run.
e. people purposefully substitute non-labor activities for work during recession.
Question 10A decrease in demand will increase total revenue:
a. Always.
b. Only if supply is relatively inelastic.
c. Only if supply is relatively elastic.
d. Never.
Question 11When is a particular bank in a position to make new loans?
a. When required reserves equal actual reserves.
b. When required reserves exceed actual reserves.
c. When required reserves are less than actual reserves.
d. all of the above
Question 12Suppose the central bank increases the money supply in an economy unexpectedly during a year. If the current inflation rate in this country is 3.4 percent, then according to new classical economists, the expected inflation rate for the following year would be:
a. 3.4 percent.
b. less than 3.4 percent.
c. 2.4 percent, because people form their expectations adaptively.
d. around 6.8 percent.
e. greater than 3.4 percent.
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