Econ 201 Exam 3

Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country's exports increase? A. Spain's B. Spain's and the U.S.'s C. the U.S.'s D. neither Spain's nor the U.S.'s

A. Spain's

Which of the following is correct? A. The amount of unemployment that a country typically experiences is a determinant of that country's standard of living, and some degree of unemployment is inevitable in a complex economy. B. The amount of unemployment that a country typically experiences is not a determinant of that country's standard of living, and some degree of unemployment is inevitable in a complex economy. C. The amount of unemployment that a country typically experiences is a determinant of that country's standard of living, and a complex economy can achieve zero unemployment. D. The amount of unemployment that a country typically experiences is not a determinant of that country's standard of living, and a complex economy can achieve zero unemployment.

A. The amount of unemployment that a country typically experiences is a determinant of that country's standard of living, and some degree of unemployment is inevitable in a complex economy.

Economists call an institution designed to oversee the banking system and regulate the quantity of money in the economy A. a central bank. B. a state bank. C. a charter bank. D. a national bank

A. a central bank.

Paying efficiency wages means that wages are A. above equilibrium, and profits are higher than otherwise. B. below equilibrium, and profits are lower than otherwise. C. above equilibrium, and profits are lower than otherwise. D. below equilibrium, and profits are higher than otherwise

A. above equilibrium, and profits are higher than otherwise.

In a system of 100-percent-reserve banking, A. banks do not make loans. B. deposits are banks' only assets. C. currency is the only form of money. D. All of the above are correct.

A. banks do not make loans.

Which of the following lists is included in what economists call "money"? A. cash B. cash and stocks and bonds C. cash and stocks and bonds and real estate D. cash and stocks and bonds and real estate and all other assets

A. cash

Which of the following can the Fed do to change the money supply? A. change reserves or change the reserve ratio B. neither change reserves nor change the reserve ratio C. change reserves but not change the reserve ratio D. change the reserve ratio but not change the reserve ratio

A. change reserves or change the reserve ratio

Suppose that a country imports $90 million worth of goods and services and exports $80 million worth of goods and services. What is the value of net exports? A. $170 million B. -$10 million C. $80 million D. $10 million

B. -$10 million

Which of the following institutions is a central bank? A. the Bank of Japan B. All of the above are correct. C. the Bank of England D. the Federal Reserve System

B. All of the above are correct.

Which of the following is not correct? A. Gross domestic product is both total income in an economy and total expenditures on the economy's output of goods and services. B. Purchases of capital goods are excluded from GDP. C. In a closed economy net exports are zero. D. National saving is the sum of private saving and public saving.

B. Purchases of capital goods are excluded from GDP.

In the open economy macroeconomic model, the amount of dollars demanded in the market for foreign-currency exchange at a given real exchange rate increases if A. either U.S. imports or exports increase. B. either U.S. imports decrease or U.S. exports increase. C. either U.S. imports or exports decrease. D. either U.S. imports increase or U.S. exports decrease.

B. either U.S. imports decrease or U.S. exports increase.

Purchasing-power parity describes the forces that determine A. prices in the short run. B. exchange rates in the long run. C. prices in the long run. D. exchange rates in the short run.

B. exchange rates in the long run.

Institutions that help to match one person's saving with another person's investment are collectively called the A. Federal Reserve system. B. financial system. C. banking system. D. monetary system.

B. financial system.

Shoeleather costs arise when higher inflation rates induce people to A. spend more time looking for bargains. B. hold less money. C. spend less time looking for bargains. D. hold more money.

B. hold less money.

Minimum wages create unemployment in markets where they create a A. shortage of labor. Unemployment of this type is called frictional. B. surplus of labor. Unemployment of this type is called structural. C. shortage of labor. Unemployment of this type is called structural. D. surplus of labor. Unemployment of this type is called frictional.

B. surplus of labor. Unemployment of this type is called structural

Economists use the term "money" to refer to A. all wealth. B. those types of wealth that are regularly accepted by sellers in exchange for goods and services. C. all assets, including real assets and financial assets. D. all financial assets, but not real assets.

B. those types of wealth that are regularly accepted by sellers in exchange for goods and services.

Table 26-3. The following table presents information about a closed economy whose market for loanable funds is in equilibrium. GDP $8.7 trillion Consumption Spending $6.1 trillion Taxes Net of Transfers $1.0 trillion Government Purchases $0.8 trillion Refer to Table 26-3. Determine the quantity of private saving. A. $0.2 trillion B. $2.6 trillion C. $1.6 trillion D. $1.8 trillion

C. $1.6 trillion

Based on the quantity equation, if Y = 3,000, P = 3, and V = 4, then M = A. $4,000. B. $250. C. $2,250. D. $36,000.

C. $2,250.

When a country imposes an import quota, its A. imports fall and its net exports rise. B. imports rise and its net exports are unchanged. C. imports fall and its net exports are unchanged. D. imports and exports are unchanged

C. imports fall and its net exports are unchanged.

The amount of unemployment that an economy normally experiences is called the A. average rate of unemployment. B. typical rate of unemployment. C. natural rate of unemployment. D. cyclical rate of unemployment

C. natural rate of unemployment.

According to purchasing power parity, the nominal exchange rate between the U.S. and another country should equal the price level of foreign goods divided by the price level of U.S. goods. a. TRUE b. FALSE

a. TRUE

A country with negative net exports has a trade surplus. a. TRUE b. FALSE

b. FALSE

Banks and mutual funds are examples of financial markets. a. TRUE b. FALSE

b. FALSE

An associate professor of physics gets a $200 a month raise. She figures that with her new monthly salary she can buy more goods and services than she could buy last year. A. Her real and nominal salary have risen. B. Her real salary has fallen and her nominal salary has risen. C. Her real and nominal salary have fallen. D. Her real salary has risen and her nominal salary has fallen.

A. Her real and nominal salary have risen.

Minimum-wage laws A. create unemployment. B. cause labor shortages, which further raise wages above equilibrium. C. do not apply in states with right-to-work laws. D. affect highly-educated workers more than high school dropouts.

A. create unemployment.

If a country had capital flight, then the real exchange rate would A. fall. To offset this fall the government could increase the budget deficit. B. rise. To offset this rise the government could decrease the budget deficit. C. fall. To offset this fall the government could decrease the budget deficit. D. rise. To offset this rise the government could increase the budget deficit.

A. fall. To offset this fall the government could increase the budget deficit.

The source of the supply of loanable funds A. is saving and the source of demand for loanable funds is investment. B. and the demand for loanable funds is investment. C. is investment and the source of demand for loanable funds is saving. D. and the demand for loanable funds is saving.

A. is saving and the source of demand for loanable funds is investment.

If a country's purchases of foreign assets exceeds foreign purchases of domestic assets, that country has A. positive net exports and positive net capital outflows. B. negative net exports and negative net capital outflows. C. positive net exports and negative net capital outflows. D. negative net exports and positive net capital outflows.

A. positive net exports and positive net capital outflows.

International trade A. raises the standard of living in all trading countries. B. raises the standard of living for importing countries and lowers it for exporting countries. C. lowers the standard of living in all trading countries. D. leaves the standard of living unchanged.

A. raises the standard of living in all trading countries.

Given that Monika's income exceeds her expenditures, Monika is best described as a A. saver or as a supplier of funds. B. borrower or as a demander of funds. C. saver or as a demander of funds. D. borrower or as a supplier of funds.

A. saver or as a supplier of funds.

When a large, well-known corporation wishes to borrow directly from the public, it can A. sell bonds. B. go to a bank for a loan. C. sell shares of stock. D. All of the above are correct.

A. sell bonds.

The primary economic function of the financial system is to A. keep interest rates low. B. match one person's saving with another person's investment. C. provide expert advice to savers and investors. D. match one person's consumption expenditures with another person's capital expenditures.

B. match one person's saving with another person's investment.

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from A. national saving B. net capital outflow C. domestic investment D. net exports

B. net capital outflow

An increase in the budget deficit A. raises net exports and domestic investment. B. reduces net exports and domestic investment. C. raises net exports and reduces domestic investment. D. reduces net exports and raises domestic investment.

B. reduces net exports and domestic investment.

At the broadest level, the financial system moves the economy's scarce resources from A. the rich to the poor. B. savers to borrowers. C. financial institutions to business firms and government. D. households to financial institutions

B. savers to borrowers.

If a county has 25 billion euros of imports, 15 billion euros of exports, and sells 20 billion euros of assets to foreigners, how many foreign assets do domestic residents purchase? A. 5 billion euros B. 30 billion euros C. 10 billion euros D. None of the above are correct.

C. 10 billion euros

When the Federal Reserve conducts open-market operations to increase the money supply, it A. redeems Federal Reserve notes. B. decreases its lending to member banks. C. buys government bonds from the public. D. raises the discount rate.

C. buys government bonds from the public.

If the exchange rate rises, which of the following falls in the open-economy macroeconomic model? A. desired net exports and desired net capital outflow B. desired net capital outflow but not desired net exports C. desired net exports but not desired net capital outflow D. neither desired net exports nor desired net capital outflow

C. desired net exports but not desired net capital outflow

If all workers and all jobs were the same such that all workers were equally well suited for all jobs, then there would be no A. cyclical unemployment. B. structural unemployment. C. frictional unemployment. D. natural rate of unemployment.

C. frictional unemployment.

The theory of efficiency wages explains why A. setting wages at the equilibrium level may increase unemployment. B. it is efficient for firms to set wages at the equilibrium level. C. it may be in the best interest of firms to offer wages that are above the equilibrium level. D. the most efficient way to pay workers is to pay them according to their skills.

C. it may be in the best interest of firms to offer wages that are above the equilibrium level.

The slope of the demand for loanable funds curve represents the A. positive relation between the real interest rate and investment. B. negative relation between the real interest rate and saving. C. negative relation between the real interest rate and investment. D. positive relation between the real interest rate and saving.

C. negative relation between the real interest rate and investment.

Inflation can be measured by the A. change in the consumer price index. B. change in the price of a specific commodity. C. percentage change in the consumer price index. D. percentage change in the price of a specific commodity.

C. percentage change in the consumer price index.

The slope of the supply of loanable funds curve represents the A. positive relation between the real interest rate and investment. B. negative relation between the real interest rate and saving. C. positive relation between the real interest rate and saving. D. negative relation between the real interest rate and investment.

C. positive relation between the real interest rate and saving.

To maintain their standard of living, most people rely on A. government assistance. B. their personal savings. C. their labor earnings. D. All of the above are correct

C. their labor earnings.

If the price level increased from 120 to 130, then what was the inflation rate? A. 1.1 percent. B. 10.0 percent. C. 7.7 percent. D. 8.3 percent.

D. 8.3 percent.

If national saving in a closed economy is greater than zero, which of the following must be true? A. Either public saving or private saving must be greater than zero. B. C. Investment is positive. D. All above are correct

D. All above are correct

Which of the following is not correct? A. Frictional unemployment results from the process of matching workers and jobs. B. When a minimum-wage law forces the wage to remain above the level that balances supply and demand, it raises the quantity of labor supplied and reduces the quantity of labor demanded compared to the equilibrium level. C. Structural unemployment results when the number of jobs is insufficient for the number of workers. D. Minimum wages are the predominant reason for unemployment in the U.S. economy.

D. Minimum wages are the predominant reason for unemployment in the U.S. economy.

Dave, a U.S. citizen buys a bicycle manufactured in China. Dave's purchase is A. both a U.S. and Chinese export. B. a U.S. export and a Chinese import. C. both a U.S. and Chinese import. D. a U.S. import and a Chinese export.

D. a U.S. import and a Chinese export.

Which type(s) of economies interact with other economies? A. only closed economies B. neither closed nor open economies C. only open economies D. closed economies and open economies

D. closed economies and open economies

When the price level falls, the number of dollars needed to buy a representative basket of goods A. increases, so the value of money rises. B. decreases, so the value of money falls. C. increases, so the value of money falls. D. decreases, so the value of money rises.

D. decreases, so the value of money rises.

Sectoral shifts in demand for output A. create structural unemployment. B. do not affect demand for labor. C. immediately reduce unemployment. D. increase unemployment due to job search.

D. increase unemployment due to job search.

Other things the same, when the interest rate rises, A. people would want to lend more, making the supply of loanable funds increase. B. people would want to lend less, making the quantity of loanable funds supplied decrease. C. people would want to lend less, making the supply of loanable funds decrease. D. people would want to lend more, making the quantity of loanable funds supplied increase.

D. people would want to lend more, making the quantity of loanable funds supplied increase.

In order to maintain stable prices, a central bank must A. maintain low interest rates. B. sell indexed bonds. C. keep unemployment low. D. tightly control the money supply.

D. tightly control the money supply.

If a country sells more goods and services abroad than it purchases abroad, it has positive net exports and a trade surplus. a. TRUE b. FALSE

a. TRUE

In an economy that relies on barter, trade requires a double-coincidence of wants. a. TRUE b. FALSE

a. TRUE

Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double-coincidence of wants. a. TRUE b. FALSE

a. TRUE

Some degree of unemployment is inevitable in a complex economy. a. TRUE b. FALSE

a. TRUE

The amount of unemployment that a country typically experiences is a determinant of its standard of living. a. TRUE b. FALSE

a. TRUE

The financial system coordinates investment and saving, which are important determinants of long-run real GDP. a. TRUE b. FALSE

a. TRUE

When a country keeps its workers as fully employed as possible, it achieves a higher level of GDP than if many of its workers were idle. a. TRUE b. FALSE

a. TRUE