3315 Final
According to the classical theory of money, inflation does not make workers poorer because nominal wages increase: A) faster than the overall price level. B) more slowly than the overall price level. C) in proportion to the increase in the overall price level. D) in real terms during periods of inflation.
C) in proportion to the increase in the overall price level.
Assume that the production function is Cob-Douglas with parameter α = 0.7. In the neoclassical model, if the labor force increases by 10 percent, then output: A) increases by about 10 percent. B) increases by about 7 percent. C) increases by about 3 percent. D) does not increase since the new workers are unemployed.
C) increases by about 3 percent.
Suppose that nominal GDP were $1200 billion in 2000 and $2000 billion in 2017. The implicit GDP deflator was 100 in 2000 and 166.7 in 2017. From this we can infer that, between 2000 and 2017: A) nominal GDP rose by 33%. B) prices rose by 36%. C) real GDP remained constant. D) real GDP rose by about 11%.
C) real GDP remained constant.
International businesses like a fixed-exchange-rate system because A) they like large swings in currency values when devaluation or revaluation occur. B) they profit by speculating on devaluation or revaluation. C) they can plan better if they know what the exchange rate will be. D) fixed exchange rates are economically efficient.
C) they can plan better if they know what the exchange rate will be.
The IS curve provides combinations of interest rates and income that satisfy equilibrium in the market for _______, and the LM curve provides combinations of interest rates and income that satisfy equilibrium in the market for ______. A) saving and investment; planned spending B) real money balances; loanable funds C) goods and services; real money balances D) real money balances; goods and services
C) goods and services; real money balances
An example of increasing returns to scale is when capital and labor inputs: A) both increase 10 percent and output increases 5 percent B) both increase 10 percent and output increases 10 percent C) both increase 5 percent and output increases 10 percent D) do not change and output decreases 5 percent
C) both increase 5 percent and output increases 10 percent
If inflation is 6 percent and a worker received a 4 percent nominal wage increase, then the worker's real wage: A) increased by 4 percent B) increased by 2 percent C) decreased by 2 percent D) decreased by 6 percent
C) decreased by 2 percent
Starting from a small open economy with balanced trade, if large foreign countries increase their domestic government purchases, this policy will tend to increase: A) investment in the small open economy B) saving in the small open economy C) exports by the small open economy D) imports by the small open economy
C) exports by the small open economy
In the Keynesian-cross model, if the MPC equals 0.75, then a $1 billion increase in government spending increases planned expenditures by ______ and increases the equilibrium level of income by ________. A) $1 billion; more than $1 billion B) $0.75 billion; more than $0.75 billion C) $0.75 billion; $0.75 billion D) $1 billion; $1 billion
A) $1 billion; more than $1 billion
If the GDP deflator in 2009 equals 1.25 and nominal GDP in 2009 equals $15 trillion, what is the value of real GDP in 2009? A) $12 trillion B) $12.5 trillion C) $15 trillion D) $18.75 trillion
A) $12 trillion
If GDP (measured in billions of current dollars) is $5,465, consumption is $3,657, investment is $741, and government purchases are $1,098, then net exports are: A) $131 B) -$131 C) $31 D) -$31
A) $131 B) -$131 C) $31 D) -$31
Suppose that the IS curve is given by: Y = 1,700 - 100 * r, while the LM curve is given by (M/P)S = (M/P)D, where the money demand function is given by (M/P)D = Y - 100 * r, the nominal money supply M is 1,000, and the price level P is 2. With these equations, you can find Y and r. Then, if the nominal money supply M is raised to 1,400, the equilibrium income Y will rise by: A) 200 and the interest rate will fall by 2% point. B) 100 and the interest rate will fall by 1% point. C) 50 and the interest rate will fall by 0.5% point. D) 200 and the interest rate will remain constant.
A) 200 and the interest rate will fall by 2% point.
Which of the following would most likely be called a hyperinflation? A) Price increases averaged above 300 percent per year. B) The inflation rate was 10 percent per year. C) Real GDP grew at a rate of 12 percent over a year. D) A stock market index rose by 1,000 points over a year.
A) Price increases averaged above 300 percent per year.
In the.case of an unanticipated inflation: A) creditors with an unindexed contract are hurt because they get less than they expected in real terms. B) creditors with an indexed contract gain because they get more than they contracted for in nominal terms. C) debtors with an unindexed contract do not gain because they pay exactly what they contracted for in nominal terms. D) debtors with an indexed contract are hurt because they pay more than they contracted for in nominal terms.
A) creditors with an unindexed contract are hurt because they get less than they expected in real terms.
10. If in 2011 the real GDP was $1000 and the nominal GDP was $1250, and in 2012, they were $1000 and $800, respectively, the GDP deflator in 2011 is ___________ the GDP deflator in 2012. A) greater than B) lesser than C) equal than D) it is impossible to determine with the information given
A) greater than
According to the purchasing power parity (ε = eP/P* =1), with the nominal exchange rate expressed as units of the foreign currency per dollar, one can conclude that: A) increases in the money supply that raise the domestic price level will lead to a depreciation of the domestic currency (dollar). B) increases in the money supply that raise the domestic price level will lead to an appreciation of the domestic currency (dollar) C) increases in the money supply that raise the domestic price level will have no effect on the nominal exchange rate. D) people should take advantage of the arbitrage opportunities that this represent.
A) increases in the money supply that raise the domestic price level will lead to a depreciation of the domestic currency (dollar).
In a small open economy, when the government reduces national saving, the equilibrium real exchange rate: A) rises and net exports fall. B) rises and net exports rise. C) falls and net exports fall. D) falls and net exports rise.
A) rises and net exports fall.
According to the Keynesian-cross analysis, if the marginal propensity to consume (MPC) is 0.6, and government expenditures and autonomous taxes are both increases by 100, equilibrium income will rise by: A) 0 B) 100 C) 150 D) 250
B) 100
The quantity theory of inflation indicates that if the aggregate output is growing at 3% per year and the growth rate of money is 5%, then inflation is A) 8%. B) 2%. C) -2%. D) 1.6%.
B) 2%
If 5 Swiss Francs trade for $1, the U.S. price level equals $1 per good, and the Swiss price level equals 2 Francs per good, then the real exchange rate between Swiss goods and U.S. goods is ______ Swiss goods per U.S. good. A) 0.5 B) 2.5 C) 5 D) 10
B) 2.5
Assume that the adult population of the United States is 191.6 million, total employment is 117.6, and 9.4 million are unemployed. Then the unemployment rate, as normally computed, is approximately ________ percent. A) 4.9 B) 7.4 C) 7.9 D) 9.4
B) 7.4
You have just noticed that the dollar appreciated and you suspect that the American Policymakers were behind this change. Which would you choose as the most likely cause of this appreciation in the exchange rate? A) An increase in the money supply B) A decrease in the money supply C) A temporary increase in government purchases D) A temporary decrease in taxes
B) A decrease in the money supply
Which of the following decreases the nominal demand for money? A) An increase in the price level B) An increase in the interest rate C) An increase in the amount of consumption expenditures D) An increase in the transactions costs of exchanging bonds for money.
B) An increase in the interest rate
We observed that the unemployment rate in the U.S. dropped from 4.3 % in May 2017 to 4.1% in January 2018. You should conclude that A) The economy is definitely hiring a larger fraction of the labor force, so the labor market definitely improved B) Some caution with this number should be exercised, since discouraged workers leaving the labor market could be driving this decline in the unemployment rate. C) The labor force is growing, as the lower unemployment rate attracts more people into the labor market. D) The economy is definitely improving and the housing market has returned to levels observed in 2006.
B) Some caution with this number should be exercised, since discouraged workers leaving the labor market could be driving this decline in the unemployment rate.
You know that the current nominal interest rate is 4.3% per year, that the real interest rate is 2.2% per year, and that the inflation rate is 2.1% per year (this inflation rate is the result of a consistent increase in M1 of 1.98% per year). If you knew that the Fed was going to double the growth rate of M1, which will double the inflation in our economy, then according to the Fisher Effect: A) The real interest rate will increase to 4.3% per year but will not affect the nominal interest B) The nominal interest rate will increase to 6.4% per year but will not affect the real interest rate. C) Both interest rates will increase by similar proportions. D) Neither interest rate will be affected by the increase in the money growth rate.
B) The nominal interest rate will increase to 6.4% per year but will not affect the real interest rate.
Which of the following is the best example of structural unemployment? A) Tim is looking for a job with flexible hours, but has not been offered one yet. B) Vickie lost her job as a graphic artist at a movie studio because she did not have training in computer-generated animation. C) Kirby is seeking a job as an airline pilot, but the high union wages in the airline industry have limited the number of jobs available. D) Fatima lost her job at a packing plant, but has not looked intensively for a new job because she still has two months of unemployment insurance benefits left.
B) Vickie lost her job as a graphic artist at a movie studio because she did not have training in computer-generated animation.
The classical approach to macroeconomics assumes that A) Wages, but not prices, adjust quickly to balance quantities supplied and demanded in markets B) Wages, and prices adjust quickly to balance quantities supplied and demanded in markets C) Prices, but not wages, adjust quickly to balance quantities supplied and demanded in markets D) Neither wages nor prices adjust quickly to balance quantities supplied and demanded in markets
B) Wages, and prices adjust quickly to balance quantities supplied and demanded in markets
The recent move towards an easier flow of goods and services around the world has led to an increase in U.S exports to the rest of the world but a larger increase in our imports from the rest of the world. This has led to: A) an increase in our Net Exports B) a decline of our Net Exports C) an increase in our National Savings D) a decline in our National Savings
B) a decline of our Net Exports
The recent move towards an easier flow of goods and services around the world has led to an increase in U.S exports to the rest of the world but a larger increase in our imports from the rest of the world. This has led to: A) an increase in our Net Exports. B) a decline of our Net Exports C) an increase in our National Savings D) a decline in our National Savings
B) a decline of our Net Exports
Assume that a country experiences a reduction in productivity that shifts the labor demand curve downward and to the left. If the labor market were always in equilibrium, this would lead to: A) a lower real wage and a rise in unemployment. B) a lower real wage and no change in unemployment. C) a lower real wage and less unemployment. D) no change in real wage or in unemployment.
B) a lower real wage and no change in unemployment.
In a small open economy, if domestic saving equals $50 billion and domestic investment equals $50 billion, then there is _______and net capital outflow equals ________. A) a trade deficit; $100 billion B) balanced trade; $0 C) a trade surplus; $100 billion D) balanced trade; $100 billion
B) balanced trade; $0
If the productivity of farmers has risen substantially overtime because of technological progress, and workers can move freely between being farmers and barbers, the neoclassical theory of distribution predicts that the real wage(s) of: A) both barbers and farmers should have remained constant overtime. B) both barbers and farmers should have risen overtime. C) farmers should have risen while the real wage of barbers should have remained constant. D) barbers should have risen while the real wage of farmers should have remained constant.
B) both barbers and farmers should have risen overtime.
According to the Keynesian theory of liquidity preference, tightening the money supply will _______ nominal interest rates in the short-run, and according to the Fisher effect, tightening the money supply will _______nominal interest rates in the long-run. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase
B) increase; decrease
Crowding out occurs when an expansionary fiscal policy ___________ the interest rate and investment ____________. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decrease
B) increases; decreases
Trade protectionist policies implemented in a small open economy with a trade deficit, such as levying tariffs on imports, have the effect of _________the trade deficit and __________the quantity of imports and exports. A) decreasing; decreasing B) not changing; decreasing C) decreasing; not changing D) not changing; not changing
B) not changing; decreasing
According to the quantity equation, if M increases by 3 percent and V increases by 2 percent, then: A) real income increases by approximately 5 percent. B) the price level increases by approximately 5 percent. C) the nominal interest rate increases by approximately 5 percent. D) nominal income increases by approximately 5 percent.
B) the price level increases by approximately 5 percent.
If the real exchange rate between the United States and Japan remains unchanged, and the inflation rate in the United States is 6 percent and the inflation rate in Japan is 3 percent, the: A) dollar will appreciate by 3 percent against the yen. B) yen will appreciate by 3 percent against the dollar. C) yen will appreciate by 6 percent against the dollar. D) yen will appreciate by 9 percent against the dollar.
B) yen will appreciate by 3 percent against the dollar.
Given the information that you have about Consumption ($9,710 billion), Net Exports (-$708 billion), Investment ($2,130 billion), Government Spending ($2,675 billion), and Population (302 million) in the U.S., the GDP per capita for 2007 is: A) $52.6 thousand B) $36.2 thousand C) $45.7 thousand D) $42.6 thousand
C) $45.7 thousand
According to Paul Douglas's observation, the division of national income between labor and capital is relatively constant for the 19th century. Specifically, the income shares of labor and capital are respectively _______ A) 50% and 50% B) 30% and 70% C) 70% and 30% D) None of the above.
C) 70% and 30%
Suppose there's been a real depreciation of the dollar over the past month. In the long run, you would expect the quantity of A) American imports to fall and the quantity of American exports to fall. B) . American imports to rise and the quantity of American exports to rise. C) American imports to fall and the quantity of American exports to rise. D) American imports to rise and the quantity of American exports to fall.
C) American imports to fall and the quantity of American exports to rise.
If the steady-state rate of unemployment equals 0.10 and the fraction of employed workers who lose their jobs each month (the rate of job separation) is 0.02, then the fraction of unemployed workers who find jobs each month (the rate of job findings) must be: A) 0.02 B) 0.08 C) 0.10 D) 0.18
D) 0.18
If the implicit GDP deflator rose from 154.9 to 158.0 between 2015 and 2017, then what was the rate of inflation between these two years? A) 3.5% B) 3.6% C) 0.4% D) 2% E) None of the above.
D) 2%
If purchasing power parity held, if a Big Mac costs $2 in the United States, and if 10 Mexican pesos trade for $1 dollar, then a Big Mac in Cancun, Mexico, should cost: A) 2 pesos B) 5 pesos C) 10 pesos D) 20 pesos
D) 20 pesos
According to the neoclassical theory of distribution, if firms are competitive and subject to constant returns to scale, total income in the economy is distributed: A) only to labor used in production B) partly between labor and capital used in production, with the surplus going to owners of the firms as profits C) equally between the labor and capital used in production D) between the labor and capital used in production, according to their marginal productivities
D) between the labor and capital used in production, according to their marginal productivities
If a U.S. corporation purchases a product made in Europe and the European producer uses the proceeds to purchase a U.S. government bond, then U.S. net exports _________ and net capital outflows _________. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease
D) decrease; decrease
In the Keynesian cross, if the MPC is 0.75, then a $1 billion decrease in taxes _______ planned expenditures by _______ and _______ the equilibrium level of income by ________. A) increases; $1 billion; increases ; $1 billion B) decreases; $0.75 billion; decreases; less than $0.75 billion C) increases; $0.75 billion; increases; $0.75 billion D) increases; $0.75 billion; increases; more than $0.75 billion
D) increases; $0.75 billion; increases; more than $0.75 billion
Equilibrium levels of income and interest rates are _________ related in the goods and services market, and equilibrium levels of income and interest rates are _________ related in the market for real money balances. A) positively; positively B) positively; negatively C) negatively; negatively D) negatively; positively
D) negatively; positively
If earthquake destroys some of the economy's capital stock, the neoclassical theory of distribution predicts : A) the real wage will rise and real rental price of capital will fall. B) both the real wage and real rental price of capital will fall. C) both the real wage and the real rental price of capital will rise. D) the real wage will fall and real rental price of capital will rise.
D) the real wage will fall and real rental price of capital will rise.
If a dollar bought 1,000 Chilean pesos ten years ago and 1,500 pesos now, and inflation for that period was 25 percent in the United States and 100 percent in Chile, then: A) the purchasing power parity theory is correct B) traveling in Chile today costs about the same as it did years ago. C) traveling in Chile is cheaper now than it was ten years ago. D) traveling in Chile is more expensive now than it was ten years ago.
D) traveling in Chile is more expensive now than it was ten years ago.
