Econ Macro Final
Suppose Canada can produce either 300 tons of paper or 200 HDTVs, and India can produce either 200 tons of paper or 100 HDTVs. The terms of trade between the two countries will lie between
1/2 and 2/3 of an HDTV per ton of paper.
If the annual interest rate printed on the face of a bond is 12 percent, the face value of the bond is $1,000, and the current market price of the bond is $1,200, what is the current yield on the bond?
10.0 percent.
Refer to Table 17.2. Using the rule of 72, this economy will double in
11.52 years.
One In The News article is titled "The Misery Index." If the inflation rate is 5 percent and the unemployment rate is 7 percent, the misery index is
12 percent.
Assume an original balance sheet: On the basis of the information in Table 14.1, the required reserve ratio is
15.0 percent.
If one euro is equal to 0. 60 U.S. dollars, what would be the euro price of a car that costs $10,000?
16,667 euros.
Using the rule of 72, determine how long it would take for real GDP to double if it grew at a constant growth rate of 4 percent.
18 years.
If real GDP rises from $500 billion to $510 billion, the economic growth rate is
2 percent.
If a tax cut of 3 percent causes the output supplied to increase by 6 percent, the absolute value of the tax elasticity of supply is
2.0.
Using Figure 35.2, the opportunity cost of producing 1 pair of golf shoes in the United States is
3 baseballs.
If the growth rate of the labor force is 2 percent and the growth rate of productivity is 1.5 percent, the growth rate of total output is
3.5 percent.
An increase in the price of the U.S. dollar in terms of euros will cause, ceteris paribus,
European goods to be cheaper to residents of the United States.
Which of the following explains why small reductions in interest rates may not lead to an increase in investment spending?
Excess capacity gives businesses little incentive to expand production capacity.
Which of the following generates demand for foreign currencies?
Expenditures by Americans traveling abroad.
Which of the following represents the use of fiscal policy to achieve a fiscal stimulus?
Greater government expenditure or lower taxes.
Using the equation of exchange and assuming full employment and a constant velocity of money, a decrease in the required reserve ratio would result in a
Higher price level.
Increased opportunities for trade increase production by
Improving efficiency through specialization.
By raising and lowering the discount rate, the Fed changes the
Incentive for banks to borrow reserves.
An In The News article in the text is titled "The Misery Index." If an increase in government regulations causes the AS curve to shift to the left, the misery index will
Increase.
A marginal propensity to save (MPS) of 0.25 means a $50 million tax cut ultimately
Increases spending by $150 million.
The cost of servicing the debt may increase if
Interest rates rise.
The Phillips curve illustrates the
Inverse relationship between the unemployment rate and the inflation rate.
Suppose the United States can produce 2,000 cars or 2,000 trucks. Japan can produce either 2,000 cars or 1,000 trucks. In terms of car production we can conclude that
Japan has a comparative advantage.
By making infrastructure improvements, the government would change the Misery Index by:
Lowering the unemployment rate and lowering the inflation rate.
The Fed could sell bonds in the open market in an effort to keep interest rates constant when
Money demand decreases.
Refer to Figure 16.2. For the given Phillips curve, an increase in aggregate demand could cause a
Movement from point B to point A.
Which of the following would a Keynesian macro model include to describe the effect of a tax cut?
Multiplier spending responses.
From a consumer's viewpoint, which of the following policies would be least desirable?
No trade.
Refer to Figure 11.3. Assume aggregate demand is represented by AD1 and full-employment output is $5.6 trillion. If aggregate demand decreases by the amount of the GDP gap, equilibrium will occur at
Point c.
Many economic policies fail for all of the following reasons except
Politicians and economists work together in formulating policies.
Carolina holds $2,000 in her savings account in case of a medical emergency. This represents the
Precautionary demand for money.
If speculators with Swiss francs believed the yen was going to depreciate against the dollar, they would most likely: =
Purchase dollars.
An increase in the money supply will
Reduce interest rates and increase aggregate demand.
Which of the following would be the best supply-side policy to increase AS?
Reduce marginal tax rates.
A shift from AD1 to AD2 in Figure 11.2 will
Reduce, but not close, the GDP gap.
Which of the following supply-side efforts was embraced by the second Bush administration?
Reduction in marginal tax rates.
The choice to hold money in the form of cash
Results in forgone interest.
The depreciation of a country's currency causes the price of imports to
Rise and the prices of exports to fall.
Income taxes are an automatic stabilizer because when income rises, ceteris paribus, tax receipts
Rise because taxes are computed on the basis of income.
If the U.S. dollar depreciates, in the long run the United States should experience a
Smaller deficit in the U.S. trade balance.
Which of the following is an example of supply-side policy?
Tax incentives for business investment.
Theoretically, the net balance of payments is
The current account plus the capital account.
The money supply curve is determined by all of the following except
The demand for money.
If deficit spending does not contribute to public investment and crowds out private investment, then
The rate of economic growth will decline, ceteris paribus.
If the misery index is 12 and the inflation rate is 4 percent, we can conclude
The unemployment rate must be 8 percent.
Which of the following generates a demand for dollars in the foreign exchange market?
Travel by foreign visitors in the United States.
All of the following contribute to greater deficits when unemployment rises and reduce the deficit during an inflationary gap except for
U.S. exports.
The potential conflict of economic policy with political objectives can be used to explain
Why politicians stimulate the economy before an election and restrict it afterward.
Which of the following groups has an interest in encouraging free trade?
Workers in export industries.
Refer to Figure 11.1. Assume aggregate demand is represented by AD1 and full-employment output is $6.0 trillion. The economy confronts a real GDP gap of
$.2 trillion.
Refer to Figure 11.1. Assume aggregate demand is represented by AD1 and full-employment output is $6.0 trillion. The AD shortfall is equal to
$0.4 trillion.
Tony buys a bond in the amount of $500 with a promised interest rate of 15 percent. If the market interest rate decreases to 5 percent, Tony can sell his bond for up to
$1,500.
Assume an original balance sheet: The level of total reserves in Table 14.1 is
$150 billion.
If the multiplier equals 2 and the AD shortfall is $6 million, the desired fiscal stimulus is
$3 million.
If the real U.S. GDP was $10 trillion in 2000 and the U.S. population was 280 million, the per capita real GDP would have been closest to
$35,714 per person.
If the MPC for an economy is 0.90, a $4 billion increase in taxes will ultimately cause consumption to decrease by
$36 billion.
If the MPC is 0.80 and the government increases transfer payments by $45 billion, then the initial fiscal stimulus will equal
$36 billion.
Assume an original balance sheet: The total money supply (M1) in Table 14.2 is
$400 billion.
Suppose a bottle of wine produced in France sells for 35 euros. If the exchange rate between euros and dollars is €1 = $1.30, how much will an American pay for the bottle of wine in America?
$45.50.
Refer to Figure 11.1. Assume aggregate demand is represented by AD1 and full employment output is $6.0 trillion. The equilibrium level of income is
$5.8 trillion.
If the average worker's productivity is $12 per hour and the labor force is employed for 600 billion hours, GDP is equal to
$7.2 trillion.
If the MPC equals 0.75, a $100 billion transfer payment decrease will decrease consumption in the first round by
$75 billion.
Refer to Table 17.1. The growth rate of the economy from year 2 to year 3 was
4.3 percent.
Based on the information in Table 35.1, assume China and the United States have the same amount of resources with which to produce soybeans and computers and they produce no other goods. The opportunity cost of producing 1 ton of soybeans in the United States is
5 computers.
If the annual interest rate printed on the face of a bond is 16 percent, the face value of the bond is $1,000, and the current market price of the bond is $200, what is the current yield on the bond?
80.0 percent.
One In the News article is titled "Fed Cuts Deposit Reserve Requirements." All of the following are consistent with this headline except
A change in marginal tax rates.
Banks and customers are most likely to be reluctant to use the full lending capacity made available by the Federal Reserve when the economy experiences
A deep recession.
If the data collected by policy makers overstate inflation, this is an example of
A measurement problem.
Changing the reserve requirement is
A powerful tool that can cause abrupt changes in the money supply.
Which of the following is most likely to reduce a federal budget surplus?
A recession.
According to Figure 17.7, improved management would most likely result in
A shift in the long-run aggregate supply from LRAS1 to LRAS2.
Policies designed to pay off the national debt will result in:
A smaller level of aggregate demand
Suppose China can produce 200 TVs or 200 DVD players. South Korea can produce either 100 TVs or 200 DVD players. In terms of TV production we can conclude that
China has a comparative advantage.
At an exchange rate of $1 = €1 in Figure 36.1, there is
An excess demand for dollars.
Which of the following policy options would tend to offset each other?
An increase in the discount rate and a decrease in the tax rate.
Negative economic growth can be illustrated in Figure 17.1 by
An inward shift of the production possibilities curve.
During a severe recession, appropriate economic policy might include
An open market purchase by the Fed, a decrease in the discount rate, or a decrease in government regulation.
With greater deficit spending, ceteris paribus,
Any inflationary gap will become larger.
If the structural deficit is zero,
At full employment, the budget is balanced.
Tax incentives that encourage businesses to purchase more capital goods could result in a movement in Figure 17.4 from point
B to point C.
If the Federal Reserve buys government bonds from the public,
Banks will be able to make additional loans.
The success of Fed intervention depends on how well
Changes in long-term interest rates closely follow changes in short-term interest rates.
If the terms of trade between any two countries lie somewhere between their respective opportunity costs, then the effects of trade will include
Consumption outside the production possibilities curve for both countries.
A decrease in aggregate demand could be caused by
Contractionary monetary policy.
Which of the following would occur if the federal government decided to use a budget surplus to reduce the existing debt?
Crowding in and private sector output would increase.
In order to maintain a balanced budget every year, during a recession the government would have to
Decrease spending or increase taxes or both.
Supply-side economists try to increase the AS curve with all of the following policies except
Decreasing the supply of money.
When tariffs are imposed, the losers include
Domestic consumers and foreign producers.
A supply-side policy to cure a recession might include
Elimination of the minimum wage.
