The Mother of Economy Practice Test

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• Which statement describes complementary goods?
• The law of supply states that, all else equal, higher prices lead to
• Positive economics is best described as:
• A negative output gap is located where relative to the LRAS?
• Which statement best defines a unit of account?
• What does a price index measure?
• Why does the short-run aggregate supply curve have a positive slope?
• Which statement describes comparative advantage?
• Which theory emphasizes a positive relationship between the price level and the money supply and uses MxV=PxY?
• Which statement best describes the Loanable Funds graph?
• Which statement defines the inflation rate?
• Real terms are inflation-adjusted measures. Real terms describe measurements adjusted for inflation. Which factor is inflation adjusted for in these measurements?
• Which statement describes currency appreciation?
• GDP Per Capita is defined as GDP divided by:
• Which statement best describes the wealth effect on consumption when the price level falls?
• Which statement best describes the Federal Reserve?
• Which statement about M1 and M2 is correct?
• Near money is defined as assets that cannot be used as a medium of exchange but can be easily converted into cash or checkable deposits.
• Which asset is included in M2 but not in M1?
• Which statement defines depreciation as used in currency terms?
• Nominal interest rate is defined as which of the following?
• In the circular flow model, households supply what to firms?
• Which statement best defines opportunity cost?
• Devaluation occurs under fixed exchange rate regimes as which description?
• SRAS Curve describes:
• In a fixed exchange rate regime, devaluation refers to which description?
• What does a government deficit indicate?
• Monetary policy is the:
• Excess reserves are defined as what?
• Which model illustrates the trade-offs facing an economy that produces only two goods?
• Which statement correctly describes monetary policy?
• Which statement about the foreign exchange market is true?
• Fiscal policy refers to:
• Which market is defined as the market in which currencies are traded?
• Which statement best describes the Consumer Price Index (CPI)?
• Which list correctly identifies the four factors of production?
• How do open market operations affect the monetary base?
• Trade barriers are best described as what?
• Which statement best describes a free market economy?
• In a fixed exchange rate regime, revaluation refers to which description?
• In the circular flow model, which statement is true?
• Allocative efficiency occurs when:
• What best defines an aggregate supply shock?
• What best describes a product market?
• A central bank is defined as?
• Normative economics is best described as:
• Which statement best defines the real interest rate in relation to inflation?
• Money supply refers to which concept?
• If the nominal interest rate is 6% and inflation is 2%, the real interest rate is:
• What does base-year normalization mean in a price index?
• Which of the following best describes a commercial bank?
• Which is an example of a scarce resource?
• If the actual unemployment rate equals the natural rate, the economy is typically considered to be performing how?
• In the loanable funds framework, who supplies funds?
• Which of the following best describes capital goods?
• Real GDP measures output using constant prices, removing the effects of price changes.
• What does the marginal propensity to save describe?
• What is government debt?
• Sticky wage refers to:
• Which best defines human capital?
• Which economic concept describes an inverse relationship between inflation and unemployment, as suggested by the Phillips curve?
• Balance of payments on the Current account includes:
• Comparative advantage is defined as what?
• What is the present value of money?
• What are Government securities?
• Labor productivity is defined as which measure?
• Which term refers to the difference between a country's imports and exports?
• Which term describes output measured after removing the effects of inflation?
• Which term represents the maximum sustainable level of real GDP?
• Absolute advantage is defined as which of the following?
• What is the exchange rate?
• Real GDP is defined as:
• Nominal GDP measures the value of output using:
• Revaluation occurs under fixed exchange rate regimes as which description?
• How is the GDP deflator defined?
• Stagflation refers to:
• Infrastructure refers to what?
• Which statement describes the interest rate effect?
• Which statement describes increasing opportunity cost?
• Capital flows are defined as what?
• Gains from trade arise because of what?
• Which statement describes an automatic stabilizer?
• Which factor commonly contributes to structural unemployment?
• Unit of account costs arise because inflation makes money a less reliable what?
• Which term is a synonym for potential GDP?
• Why is the MPC between 0 and 1?
• Which statement best describes the concept of growth factors in macroeconomics?
• Which components are included in the Current account?
• LRAS curve is vertical because:
• In the money demand framework, if the price level increases, holding other factors constant, money demand tends to:
• Which statement best defines the unemployment rate?
• Which statement best distinguishes product markets from resource markets?
• A demand shock is defined as:
• What happens when the price of a good changes, holding all else constant?
• Which arrangement of the quantity theory of money expresses the equation M×V=P×Y?
• Which statement best defines the natural rate of output?
• Structural unemployment is best described as which of the following?
• Which statement describes a convex surface?
• Which of the following statements describes the concept of growth capacity in an economy?
• Capital flows include what?
• What does the PPC show when analyzing two goods?
• Near money includes assets that cannot be used as a medium of exchange but can be converted into cash or checkable deposits.
• Which term is synonymous with 'potential output'?
• Which statement correctly defines depreciation and appreciation?
• What characterizes an investment bank?
• What are bank reserves?
• What is meant by the inflationary spiral?
• What does the Laffer Curve suggest about tax revenue and tax rates?
• Which statement best describes a feature of the federal funds market?
• What is the most common form of trade barrier?
• The Capital Account records:
• What best describes the federal funds market?
• According to the law of demand, when the price rises, the quantity demanded tends to
• What is the crowding-out effect?
• Which statement accurately describes reserve ratio policy?
• Which type of unemployment is most closely associated with recessions?
• What is the difference between nominal and real interest rates?
• Which of the following is true about demand shocks?
• Frictional unemployment is unemployment that results from which of the following?
• What is the reserve ratio?
• Gains from trade arise primarily because of what?
• What does the Production Possibility Curve illustrate?
• Which policy action is expansionary fiscal policy?
• Money multiplier is defined as?
• Natural rate of output is also referred to as what?
• Which statement accurately defines the Federal Reserve's founding?
• What best describes a resource market?
• In a freely operating market with consumer-driven decisions, which actor primarily allocates resources?
• Which term describes the central bank's use of changes in the money supply or the interest rate to stabilize the economy?
• If a central bank pursues an easy money policy, which of the following is true?
• The Current account includes which of the following?
• Which system has economic decisions made by the government rather than by market participants?
• Terms of trade are defined as what?
• Which best defines physical capital?
• Which statement describes substitute goods?
• Productive efficiency is achieved when:
• Crowding out describes the negative effect of budget deficits on private investment because government borrowing drives up interest rates.
• Which statement best describes the Money Demand/Market Graph?
• Balance of payments on goods and services is defined as what?
• Which statement describes a concave surface?
• What does the Laffer Curve imply about tax revenue?
• What defines scarcity?
• The labor force is defined as the sum of which groups?
• Which term corresponds to the overall money in the economy?
• Discretionary monetary policy refers to what?
• What does the marginal propensity to consume describe?
• Which best describes an Easy Money policy?
• Which statement is true about Real GDP?
• GDP, or Gross Domestic Product, is:
• Which term is another common name for potential output?
• GDP includes only final goods and services, while excluding intermediate goods. Which statement best reflects this principle?
• What causes the crowding-out effect?
• Nominal GDP is GDP measured at current market prices, without adjusting for inflation.
• Cyclical unemployment is primarily associated with which factor?
• Which of the following is a shifter of supply?
• Discretionary fiscal policy is the direct result of which of the following?
• Which statement correctly describes the relationship between M1 and M2?
• The long-run aggregate supply curve is vertical because:
• What does the aggregate supply (AS) curve illustrate?
• Real interest rate equals which of the following?
• The Balance of Payments on goods and services is:
• Final goods are defined as goods and services that are
• A supply shock is best described as:
• The multiplier is defined as the ratio of the total change in real GDP to the size of the autonomous change in aggregate spending.
• What best defines a Negative Output Gap?
• What does the aggregate demand (AD) curve illustrate?
• The natural rate of unemployment is the rate that arises from which factors?
• An improvement in a country's terms of trade occurs when which happens?
• What is the federal funds rate?
• Which market is primarily concerned with exchanging currencies for international trade and investment?
• Which statement about Real GDP is true?
• What describes a Positive Output Gap?
• In the money demand framework, when the interest rate falls, what happens to the quantity of money demanded?
• What is a commercial bank?
• Which term describes deliberate, policy-action-driven changes in the money supply or interest rate to stabilize the economy?
• Money supply is defined as?
• Open market operations refer to what?
• Which item is not an automatic stabilizer?
• Is the GDP deflator calculated as 100 times the ratio of nominal GDP to real GDP?
• An Intermediate Good is best described as:
• Which description best defines a market basket?
• Which best describes an investment bank's core function?
• GDP per capita is computed as GDP divided by population.
• Which statement best defines the wealth effect in macroeconomics?
• The Capital Account records:
• Which of the following is NOT a shifter of demand?
• Which of the following describes consumer goods?
• What does the multiplier effect quantify?
• Stabilization policy tools include which of the following?
• If country X can produce 100 units of a good with given resources, while country Y can produce 60 units, X has the ...
• Which statement about automatic stabilizers is true?
• Which statement describes the money demand curve?
• Which statement about the natural rate of unemployment is true?
• Which describes Tight Money policy?