1. The Bureau of Labor Statistics must periodically update the base year because

Question

1. The Bureau of Labor Statistics must periodically update the base year because

a.     new goods and services appear on the market

b.     of quality improvements

c.     of changes in the importance of goods in the consumer basket

d.     a, b, and c

e.     a and b

2) All of the following are included in the M2 money supply except

a.      currency

b.      savings accounts

c.      repurchase agreements

d.      small denomination time deposits

e.      corporate bonds

3. When the Fed buys government securities, it

a.     increases the amount of excess reserves that banks hold, discouraging them from making loans to the general public

b.     raises the cost of borrowing from the Fed, discouraging banks from making loans to the general public

c.     lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public

d.     increases the amount of excess reserves that banks hold, encouraging them to make loans to the general public

e.     decreases the amount of excess reserves that banks hold, discouraging them from making loans to the general public

EC Real GDP refers to nominal GDP adjusted for

a.      depreciation.

b.      taxes and saving.

c.      exports.

d.      taxes.

e.      price changes.

Explanation / Answer

1) d is correct

Bureau of labor statistics must update their base year because of importance of goods changes, quality improvement, new goods produced in the country.

2) e is correct

Corporate bonds are not included in M2.

3) d is correct

When fed buys securities, it pays for the securities in money to banks. Increase in money leads to increase in excess reserves which banks use to make loans to public.

4) e is correct

Real gdp is nominal gdp adjusted for price changes.

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