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### TITLE: BBA 168 – HOMEWORK #5

#### CLASS / COURSE: BBA 168

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BBA 168 – HOMEWORK #5

Multiple Choice
Identify the choice that best completes the statement or answers the question.

_B___ 1. How does scarcity affect the range of possible choices that decision makers face?
a. It narrows the choice to a single option.
b. It narrows the range of choices.
c. It increases the possible methods for solving problems.
d. It clarifies the choices by highlighting the best solutions.
e. It simplifies the choices and therefore widens the range.

_C___ 2. Generally, the opportunity cost and the money cost of a good
a. are identical only if the good sells in a free market.
b. are different.
c. matter only to the purchaser of the good.
d. are not reflected in its price.

Table 3-1

Peanuts Corn
(Bushels) (Bushels)
0 55
10 50
20 42
30 28
40 0

_A___ 3. Suppose a farmer produces 50 bushels of corn and 10 bushels of peanuts. According to Table 3-1, the opportunity cost of 10 more bushels of peanuts is
a. 8 bushels of corn.
b. 42 bushels of corn.
c. 50 bushels of corn.
d. impossible to determine from the information given.

_C___ 4. If good "A" is represented on the horizontal axis and good "B" on the vertical axis, then the steeper the production possibilities frontier at a given level of production of good "A," the
a. larger the opportunity cost of producing an extra unit of good "A."
b. larger the quantity of resources being devoted to the production of good "B."
c. smaller the quantity of resources being devoted to the production of good "A."
d. smaller the opportunity cost of producing an extra unit of good "A."
e. greater the returns to scale in the production of good "A."

Figure 3-2

_B___ 5. In Figure 3-2, a point such as D
a. can be obtained through new technology.
b. can never be obtained.
c. can only be obtained by a capitalist society.
d. represents a misallocation of resources.

Figure 3-4

_B___ 6. In Figure 3-4, for which of the following would this statement be true: "To get more apples we have to give up wheat." A movement from
a. A to E
b. C to D
c. D to C
d. D to E
e. B to C

_A___ 7. Employment discrimination is a source of
a. economic inefficiency.
b. increased economic growth.
c. innovation.
d. shifting production possibilities.
e. All of the above are correct.

_C___ 8. Adam Smith's book, one of the first systematic treatments of economics, was entitled
a. The Plan of the Ages.
b. The General Theory of Money, Taxes, and Income.
c. The Wealth of Nations.
d. Principles of Economics.
e. Concepts in Moral Philosophy.

_A___ 9. Real GDP
a. is nominal GDP adjusted for changes in the price level.
b. is also called nominal GDP.
c. measures GDP minus depreciation of capital.
d. will always change when prices change.

_C___ 10. In periods of generally rising prices,
a. real GDP will grow faster than nominal GDP.
b. nominal GDP will grow slower than real GDP.
c. real GDP will grow slower than nominal GDP.
d. real GDP and nominal GDP will grow at the same rate.

_D___ 11. Does GDP for a particular year include items produced in a previous year?
a. Nominal GDP will not and real GDP will
b. Real GDP will and nominal GDP will not
c. Always
d. No

_A___ 12. Which of the following is counted in GDP?
a. the cost of the reconstruction and cleanup following September 11, 2001.
b. the value of leisure time
c. the value of a househusband's work at home
d. the value of your do-it-yourself work

_B___ 13. The Italian government collects a smaller amount of the taxes it is owed than the U.S. government. Other things being equal,
a. U.S. and Italian GDP should be equal.
b. U.S. GDP should be higher than Italian GDP.
c. U.S. GDP should be lower than Italian GDP.
d. U.S. residents are better off than Italian residents.

_B___ 14. Recessions
a. almost never occur in the American economy.
b. follow a regular and predictable cycle.
c. are a common feature of the American economy.
d. have been abolished by wise macroeconomic policy.

_A___ 15. Labor productivity is defined as
a. the amount of output a typical worker turns out in an hour of work.
b. the amount of output the best worker turns out in a day of work.
c. the amount of output improvement in a year of work.
d. the amount of average output improvement for a team in a year of work.

_C___ 16. An increase in capital stock will shift the production function
a. downward.
b. rightward.
c. upward.
d. outward.

_B___ 17. If the capital stock decreases, then the economy will produce ____ output with the ____ amount of labor.
a. same, same
b. less, same
c. more, same
d. more, decreased

_D___ 18. Real GDP is the product of the
a. total hours of work times the labor force.
b. labor force times the output per hour.
c. nation's capital stock times the output per hour.
d. total hours of work times the output per hour.

_A___ 19. An economy can increase its total output of goods and services if it
a. increases the hours of work or output per hour.
b. increases the hours of work or decreases output per hour.
c. decreases hours of work or decreases output per hour.
d. decreases hours of work and decreases output per hour.

_B___ 20. If the population increase in India is smaller than the increase in Indian real GDP, then GDP per capita will
a. decrease.
b. increase.
c. remain constant.
d. increase more slowly than real GDP.

_B___ 21. GDP equals hours of work times
a. labor force.
b. output per hour.
c. population.
d. capital stock.

_C___ 22. A new technological innovation would increase
a. the labor force.
b. labor hours worked.
c. labor productivity.
d. population growth.

_B___ 23. If the labor force grows faster than the number employed, the
a. unemployment rate will fall.
b. unemployment rate will rise.
c. labor force rate will rise.
d. employment rate will rise.

_D___ 24. The most likely group of the following that would be eligible for unemployment insurance benefits is
a. new college graduates looking for their first job.
b. mothers returning to the labor force after caring for young children.
c. workers who quit their jobs.
d. experienced workers recently laid off.

_A___ 25. If the nominal interest rate was 12 percent and the inflation rate was 10 percent in 1980, while the nominal interest rate was 7 percent and the inflation rate was 2 percent in 2001, then
a. real rates were higher in 2001.
b. real rates were higher in 1980.
c. credit was more expensive in 1980.
d. credit was cheaper in 2001 because the nominal rate was lower.

_C___ 26. The difference between the price at which an asset is sold and the price at which it was bought is called
a. asset turnover ratio.
b. dividend.
c. capital gain.
d. coupon rate.

_A___ 27. The federal government collects taxes on
a. real capital gains.
b. nominal capital gains.
c. real capital losses.
d. nominal capital losses.

_B___ 28. Saving is often discouraged by usury laws during inflationary periods because
a. nominal rates of interest are kept above real rates of interest.
b. nominal rates of interest are kept below inflation rates.
c. nominal rates of interest are kept above inflation rates.
d. real rates of interest are kept above inflation rates.

_B___ 29. The most common form of trading goods for goods is
b. government commodity distribution.
d. barter.
e. payments in kind.

_C___ 30. Fiat money is
a. always backed by gold or silver.
b. useful in buying Italian cars.
c. only backed by government decree.
d. not as liquid as precious metals.

_D___ 31. Which of the following assets is most liquid?
a. short-term government bonds
b. savings accounts
c. checking accounts
d. currency and coins

_D___ 32. Which of the following is included in M1?
a. savings accounts
b. money market deposit accounts
c. money market mutual funds
d. travelers' checks
e. None of the above are included.

_D___ 33. Are funds available on a credit card included in a definition of the money supply?
a. Yes, because these funds can be used to pay for goods and services.
b. Yes, because these funds are included in M2.
c. No, because these funds are hard to measure total credit card spending.
d. No, because these funds are not a store of value.

_D___ 34. Which of the following are included in the M2 definition of the money supply?
a. cash and currency
b. checkable deposits
c. money market deposit accounts
d. money market mutual funds
e. All of the above are included.

_B___ 35. According to the convention followed in the text, “money” consists all of the following except
a. coins.
b. credit cards.
c. checkable deposits.
d. paper money.

_D___ 36. Most checkable deposits are insured up to \$100,000 by
a. state banking commissions.
b. the Federal Reserve Board.
c. U.S. Department of the Treasury.
d. the Federal Deposit Insurance Corporation.

_C___ 37. Which of the following would be a liability to a bank?
a. cash in the vault
b. a loan to a new business
c. a checking account of a professor
d. All of the above are correct.

_A___ 38. As of December 31, 2008, the assets listed on the balance sheet of Bank A were: \$1.5 million in cash reserves, and \$6 million in outstanding loans to its customers. Its liabilities totaled \$6.5 million in checking deposits. What was the bank's net worth on that date?
a. \$1 million
b. \$4.5 million
c. \$5 million.
d. \$14 million.
e. Zero

_C___ 39. The money supply process was not as expansionary as needed in Japan in the 1990s because
a. Japanese loan recipients write checks instead of using cash.
b. banks don't hold any cash.
c. banks have no excess reserves.
d. banks held high levels of excess reserves.

_A___ 40. Part of the reason that people confuse money and income is because
a. money is tangible, but income is intangible.
b. money serves as the unit of account.
c. money is abstract, but income is concrete.
d. income is almost impossible to measure.

_C___ 41. When the Federal Reserve System was first established, its founders intended the Fed to
a. assist the Treasury in collecting taxes.
b. be primarily responsible for government regulations.
c. pursue an active monetary policy to stabilize the economy.
d. provide protection against financial panics by acting as the lender of last resort.

_C___ 42. The Federal Reserve System is controlled by the
a. U.S. Department of the Treasury.
b. House of Representatives and the Senate.
c. Board of Governors.
d. President of the United States.

_D___ 43. The new European Central Bank is headquartered in
a. Maastricht, Netherlands.
b. Paris, France.
c. London, United Kingdom.
d. Frankfurt, Germany.

_A___ 44. If the price level rises, what will happen to the demand for reserves?
a. It will shift outward.
b. It will shift inward.
c. It will remain unchanged.
d. It depends on what happens to interest rates.

_A___ 45. If the Fed raises the discount rate, what happens to reserves and the money supply?
a. Reserves increase and the money supply decreases.
b. Both increase.
c. Reserves decrease and the money supply increases.
d. Both decrease.

_C___ 46. If the Fed decreases the discount rate, what happens to reserves and the money supply?
a. Reserves increase and the money supply decreases.
b. Both increase.
c. Reserves decrease and the money supply increases.
d. Both decrease.

_A___ 47. If the Fed raises the reserve requirement on deposits from 15 percent to 20 percent, what would happen to the money supply?
a. It would decrease.
b. It would increase.
c. It would remain unchanged.
d. It depends on the value of interest rates.

_A___ 48. Which of the following will lower interest rates in the short run?
a. an increase in reserve requirements
b. open market sales by the Fed
c. a decrease in real GDP
d. an increase in the price level

_D___ 49. Which of the following is most sensitive to monetary policy?
a. Government expenditure
b. Consumption spending
c. Utility spending
d. Investment spending

_B___ 50. Which of the following will increase interest rates in the short run?
a. an decrease in reserve requirements
b. open market sales by the Fed
c. a decrease in real GDP
d. an decrease in the price level

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SUBJECTS / CATEGORIES:
2. Economics
3. Microeconomics

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