ECON 2 PRACTICE EXAM QUESTIONS
WITH CORRECT DETAILED ANSWERS
Which of the following is not one of the categories into which the Bureau of Labor
Statistics places each adult of each surveyed household?
a. employed
b. unemployed
c. underemployed
d. not in the labor force - Answer- c
The unemployment rate is computed as the number of unemployed
a. times the labor-force participation rate, all times 100.
b. divided by the number of employed, all times 100.
c. divided by the adult population, all times 100.
d. divided by the labor force, all times 100. - Answer- d
Unemployment that results because it takes time for workers to search for the jobs that
best suit their tastes and skills is called
a. frictional unemployment.
b. cyclical unemployment.
c. structural unemployment.
d. the natural rate of unemployment. - Answer- a
The Bureau of Labor Statistics is part of the U.S. Department of
a. Labor.
b. Commerce.
c. the Interior.
,d. the Treasury. - Answer- a
The labor-force participation rate measures the percentage of the
a. labor force that is employed.
b. labor force that is either employed or unemployed.
c. total adult population that is in the labor force.
d. total adult population that is employed. - Answer- c
Efficiency wages
a. decrease productivity and increase unemployment.
b. decrease productivity but reduce unemployment.
c. increase productivity but increase unemployment.
d. increase productivity and reduce unemployment. - Answer- c
Which of the following defer payments?
a. debit cards but not credit cards
b. credit cards but not debit cards
c. neither credit cards nor debit cards
d. credit cards and debit cards - Answer- b
The federal funds rate is the
a. percentage of deposits that banks must hold as reserves.
b. percentage of face value that the Federal Reserve is willing to pay for Treasury
Securities.
c. interest rate at which the Federal Reserve makes short-term loans to banks.
d. interest rate at which banks lend reserves to each other overnight. - Answer- d
An open-market purchase
, a. decreases the number of dollars in the hands of the public and increases the number
of bonds in the hands of the public.
b. increases the number of dollars and the number of bonds in the hands of the public.
c. decreases the number of dollars and the number of bonds in the hands of the public.
d. increases the number of dollars in the hands of the public and decreases the number
of bonds in the hands of the public. - Answer- d
Which of the following statements is correct?
a. All items that are included in M2 are included also in M1.
b. Savings deposits are included in both M1 and M2.
c. All items that are included in M1 are included also in M2.
d. Credit cards are included in both M1 and M2. - Answer- c
If R represents the reserve ratio for all banks in the economy, then the money multiplier
is
a. (1+R)/R.
b. 1/(1-R).
c. 1/R.
d. 1/(1+R). - Answer- c
The Federal Reserve
a. is responsible for conducting the nation's monetary policy, and it plays a role in
regulating banks.
b. is not responsible for conducting the nation's monetary policy, and it plays a role in
regulating banks.
c. is not responsible for conducing the nation's monetary policy, and it plays no role in
regulating banks.
d. is responsible for conducing the nation's monetary policy, but it plays no role in
regulating banks - Answer- a
The interest rate that the Fed charges banks that borrow reserves from it is the
WITH CORRECT DETAILED ANSWERS
Which of the following is not one of the categories into which the Bureau of Labor
Statistics places each adult of each surveyed household?
a. employed
b. unemployed
c. underemployed
d. not in the labor force - Answer- c
The unemployment rate is computed as the number of unemployed
a. times the labor-force participation rate, all times 100.
b. divided by the number of employed, all times 100.
c. divided by the adult population, all times 100.
d. divided by the labor force, all times 100. - Answer- d
Unemployment that results because it takes time for workers to search for the jobs that
best suit their tastes and skills is called
a. frictional unemployment.
b. cyclical unemployment.
c. structural unemployment.
d. the natural rate of unemployment. - Answer- a
The Bureau of Labor Statistics is part of the U.S. Department of
a. Labor.
b. Commerce.
c. the Interior.
,d. the Treasury. - Answer- a
The labor-force participation rate measures the percentage of the
a. labor force that is employed.
b. labor force that is either employed or unemployed.
c. total adult population that is in the labor force.
d. total adult population that is employed. - Answer- c
Efficiency wages
a. decrease productivity and increase unemployment.
b. decrease productivity but reduce unemployment.
c. increase productivity but increase unemployment.
d. increase productivity and reduce unemployment. - Answer- c
Which of the following defer payments?
a. debit cards but not credit cards
b. credit cards but not debit cards
c. neither credit cards nor debit cards
d. credit cards and debit cards - Answer- b
The federal funds rate is the
a. percentage of deposits that banks must hold as reserves.
b. percentage of face value that the Federal Reserve is willing to pay for Treasury
Securities.
c. interest rate at which the Federal Reserve makes short-term loans to banks.
d. interest rate at which banks lend reserves to each other overnight. - Answer- d
An open-market purchase
, a. decreases the number of dollars in the hands of the public and increases the number
of bonds in the hands of the public.
b. increases the number of dollars and the number of bonds in the hands of the public.
c. decreases the number of dollars and the number of bonds in the hands of the public.
d. increases the number of dollars in the hands of the public and decreases the number
of bonds in the hands of the public. - Answer- d
Which of the following statements is correct?
a. All items that are included in M2 are included also in M1.
b. Savings deposits are included in both M1 and M2.
c. All items that are included in M1 are included also in M2.
d. Credit cards are included in both M1 and M2. - Answer- c
If R represents the reserve ratio for all banks in the economy, then the money multiplier
is
a. (1+R)/R.
b. 1/(1-R).
c. 1/R.
d. 1/(1+R). - Answer- c
The Federal Reserve
a. is responsible for conducting the nation's monetary policy, and it plays a role in
regulating banks.
b. is not responsible for conducting the nation's monetary policy, and it plays a role in
regulating banks.
c. is not responsible for conducing the nation's monetary policy, and it plays no role in
regulating banks.
d. is responsible for conducing the nation's monetary policy, but it plays no role in
regulating banks - Answer- a
The interest rate that the Fed charges banks that borrow reserves from it is the
