Macro Econ Final

Refer to the given table. The value of the dollar in year 3 is

$1.25

You deposit $5,000 in a 5-year bank CD that pays 3 percent interest per year. How much will you get from this deposit at maturity?

$5,796

The total amount of revenue collected from a $1-per-unit tariff on this product will be

$7

Refer to the accompanying table for a certain product's market in Econland. If the world price of the product were $6 and an import quota of 400 units were imposed on the product, then the equilibrium price in Econland would be

$7 and the total quantity available in Econland would be 2,000 units.

A promised amount $FV n years into the future is worth how much today, if the interest rate is i percent per year?

$FVn/(1 + i)n

The beta for the market portfolio's level of nondiversifiable risk is

1

The price of a bond having no expiration date is originally $8,000 and has a fixed annual interest payment of $800. A fall in the price of the bond by $3,000 will provide a new buyer of the bond an interest rate of

16%

The purchasing power of the dollar would fall by 20 percent if the price index rises by

25 percent.

Hermione is considering an investment that has a ¾ chance of paying a 10 percent rate of return and a ¼ chance of paying 2 percent. What is the average expected rate of return on the investment?

8 percent.

Refer to the diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. Sd + Q is the product supply curve after an import quota is imposed. A tariff of PcPt or an import quota of wy will have the same effect on

All of them

Suppose that the federal government suddenly declared that wheat was to be used as money. What is a possible outcome of that decision?

All of these are possible outcomes.

Refer to the graph, which shows the supply and demand for money, where Dm1, Dm2, and Dm3 represent different demands for money and Sm1, Sm2, and Sm3 represent different levels of the money supply. The initial equilibrium point is A. What will be the new equilibrium point following a decrease in the money supply?

B

Which of the following is a valid counterargument to a call for higher tariffs "to save U.S. jobs"?

Imports may eliminate some U.S. jobs, but they create others, so they may have little or no effect on employment.

The correct formula that relates present value (PV) to future value (FV), if interest rate is i percent per year over n years is

PV = FVn/(1 + i)n.

Refer to the diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. With a per-unit tariff in the amount PcPt, price and total quantity sold will be

Pt and y.

After the financial crisis of 2007-2009, why did the Federal Reserve effectively lose its ability to increase the money supply by manipulating the federal funds rate target?

The increase in excess reserves in the banking system virtually eliminated the need for banks to borrow in the federal funds market.

In which case would the quantity of money demanded by the public tend to increase by the greatest amount?

The interest rate decreases and nominal GDP increases.

Which one of the following is true about the U.S. Federal Reserve System?

There are 12 regional Federal Reserve Banks

Which is not a commonly heard argument for protectionism?

When other nations' economies grow, they typically import fewer goods and services

Other things equal, which of the following would increase the federal funds rate?

a decline in excess reserves in the banking system

Compared to fiscal policy, monetary policy has a much shorter

administrative lag.

The seven members of the Board of Governors of the Federal Reserve System are

appointed by the president with the confirmation of the Senate.

The Security Market Line depicts the relationship between thE

average expected rate of return and risk level of a financial asset.

Which is an example of a nontariff barrier (NTB)?

box-by-box inspection requirements for imported fruit

Other things equal, an excessive increase in the money supply will

decrease the purchasing power of each dollar.

Based on the given table, an increase in the money supply of $20 billion will cause the equilibrium interest rate to

fall by 2 percentage points.

Other things equal, economists would prefer

free trade to tariffs and tariffs to import quotas.

An asset with a beta of 0.5 has

half the nondiversifiable risk as a market portfolio.

The government bailout of large institutions creates the problem of moral hazard, which means that these large firms will

have an incentive to make highly risky investments.

The imposition of a tariff on a product is least likely to result in a(n)

increase in efficiency in the domestic industry producing the product.

The purchasing power of money and the price level vary

inversely.

As it relates to international trade, dumping

is the practice of selling goods in a foreign market at less than cost.

Refer to the graph. Suppose a particular financial asset's risk and return profile puts it at point E. The process of arbitrage will

not change the financial asset's position on the Security Market Line.

Last Word) During the financial crisis of 2007-2008, the Federal Reserve

served as a lender of last resort to both solvent and insolvent firms.

Diversifiable risk refers to risk

specific to a particular investment.

There is an asset demand for money primarily because of which function of money?

store of value

The equilibrium rate of interest in the market for money is determined by the intersection of the

supply-of-money curve and the total-demand-for-money curve

Money in the U.S. is essentially debt of

the Federal Reserve System and the banks.

Pavel is considering buying a $10,000 bond with no expiration date that generates yearly payments of $500. If the price of the bond were to fall to $9,000,

the bond's rate of return would rise from 5 percent to 5.6 percent.

The asset demand for money is downsloping because

the opportunity cost of holding money increases as the interest rate rises.