Question

According to the practice of the Federal Reserve, which of the following interest rates is normally the highest one?

a.	A and B are always equal, and C is always lower.	b.	The Federal funds rate target
c.	The rate paid on commercial banks’ deposits of reserves	d.	The discount rate

Consider the figure above. The economy is in short-run equilibrium. Long-run equilibrium will occur at Point ____.

a.	D	b.	B
c.	C	d.	A

China experiences high rates of economic growth. Other things remaining equal, this should _______ the aggregate ________ of the United States.

a.	decrease; supply	b.	increase; supply;
c.	decrease; demand	d.	increase; demand

Other things remaining equal, an open market sale of government securities to Dolan Bank will ________ Dolan Bank’s assets and _________ Dolan Bank’s liabilities

a.	not change; not change	b.	increase; not change
c.	not change; increase	d.	increase; increase

A securities dealer sells $1,000,000 of securities to a bank. What happens to the dealer’s bank deposit?

a.	The liabilities will decrease by $1,000,000.	b.	The assets will decrease by $1,000,000.
c.	The liabilities will increase by $1,000,000.	d.	The assets will increase by $1,000,000.

The value of environmental quality is not counted in GDP.

a.	True	b.	False

The Human Development Index (HDI) for 2011 reports __________ as the country with the highest standard of living.

a.	Norway	b.	Canada
c.	Japan	d.	the United States

The consumer price index omits the prices of all except which of the following?

a.	Fire engines	b.	Fighter planes
c.	Foodstuffs	d.	Industrial equipment

Real GDP is _________ GDP adjusted for changes in _________.

a.	nominal; prices	b.	actual; prices
c.	nominal; production	d.	actual; production

Answer 1

1.

D

It is the discount rate that is highest in recent years.

2.

A

At point D, Long run equilibrium will be achieved when SRAS will shift to the left.

3.

B

When China experiences fast economic growth, then it increases aggregate demand. It will lead to the increase in the aggregate supply of the USA so that can cater the demand of the China.

4.

A

Only selling the government securities, will change the type of assets where the cash will be taken up and replaced by the government securities in the bank. So, liability will also not change.

5.

6.

True

GDP does not consider the environmental quality or cost of natural resource depletion.

7.

A

It is Norway, as per the HDI of 2011.

8.

C

CPI includes the price of food materials, as these are consumed by the people.

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