ECON 252 Practice for final

If the exchange rate is 5 Egyptian pounds per U.S. dollar, a watch that costs $25 US dollars costs A. 125 Egyptian pounds B. 5 Egyptian pounds C. 50 Egyptian pounds D. None of the above is correct

A

The dollar is said to depreciate against the euro if A. the exchange rate falls. Other things the same, it will cost fewer euros to buy U.S. goods. B. the exchange rate rises. Other things the same, it will cost more euros to buy U.S. goods. C. the exchange rate falls. Other things the same, it will cost more euros to buy U.S. goods. D. the exchange rate rises. Other things the same, it will cost fewer euros to buy U.S. Goods

A

The interest rate effect A. Depends on the idea that decreases in interest rates increase the quantity of g/s demanded B. Is the least important reason, in the case of the US, for the downward slope of the aggregate demand curve C. Depends on the idea that decreases in interest rates, decrease the quantity of g/s demanded D. Is responsible for the downward slope of the money demand curve

A

To explain the long-run determinants of the price level and the inflation rate, most economists today rely on the A. quantity theory of money. B. disequilibrium theory of money and inflation. C. price-index theory of money. D. theory of hyperinflation

A

A country has GDP of $700 billion, consumption of $450 billion, government expenditures of $100 billion, and domestic investment of $200 billion. What is its supply of loanable funds? A. $350 billion B. $150 billion C. $250 billion D. $200 billion

B

Consider five individuals with different occupations. Which of the following pairs of individuals has a double coincidence of wants? A. Mary and Clark B. Polly and Paul C. Clark and Nathan D. Nathan and Polly

B

If a central bank reduced inflation by 2 percentage points for 2 years and the unemployment rate rise from 3% to 5% for 2 years, the sacrifice ratio is A. 1 B. 3 C. 2 D. None of the above are correct

B

If the exchange rate is .60 British pounds = $1, a bottle of ale that costs 3 pounds costs A. $1.80. B. $5. C. $4.80. D. None of the above is correct.

B

If the price level last year was 180 and this year it is 176, then A. there was inflation of 2.3 percent. B. there was deflation of 2.2 percent. C. there was inflation of 4.0 percent. D. there was deflation of 4.0 percent

B

In the open-economy macroeconomic model, the market for loanable funds equates national saving with A. domestic investment. B. the sum of domestic investment and net capital outflow. C. net capital outflow. D. the sum of national consumption and government spending

B

Refer to the figure above. A movement of the economy from point A to point B, and at the same time a movement from point C to point D, would be described as A. The outcome of a favorable supply shock B. Stagflation C. Falling inflation D. All of the above are correct

B

Refer to the figure above. In the market for foreign-currency exchange, the effects of an increase in the budget surplus can be illustrated as a move from j to A. g B. k C. h D. i

B

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

The short run relationship between inflation and unemployment is often called A. The classical Dichotomy B. The Phillips Curve C. Money Neutrality D. None of the above is correct

B

Which of the following is always correct in an open economy? A. S = I B. S = I + NCO C. S = NX + NCO D. S = NCO

B

The aggregate demand curve A. Has a slope that is explained in the same way as the slope of the demand curve for a particular product B. Shows an inverse relation between the price level and the quantity of all goods and services demanded C. Is vertical in the long run D. All of the above are correct

B.

A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to A. $8. B. $920. C. $80. D. $92

C

A reduction in the tax rate on income from saving would A. most directly benefit the poor in the short run B. decrease productivity over time C. increase real wages over time D. decrease the capital stock over time

C

According to the political business cycle theory, if the Fed wanted to see a President re-elected, prior to the election it might A. lower the discount rate and sell bonds B. Raise the discount rate and buy bonds C. lower the discount rate and buy bonds D. raise the discount rate and sell bonds

C

Consider the following traders who meet. Which, if any, pairs of traders has a double coincidence of wants? A. Bill with Mike B. Bill with Mike, and Tim with Amy C. Time with Amy D. Bill with Tim, and Mike with Amy

C

Eric, a resident of Sweden, purchases a book printed in the U.S. Which country's exports increase? A. Sweden's B. Sweden's and the U.S.'s C. the U.S.'s D. neither Sweden's nor the U.S.'s

C

If the real exchange rate between the U.S. and Argentina is 1, then A. purchasing-power parity holds, and 1 U.S. dollar buys 1 Argentinean bolivar. B. purchasing-power parity does not hold, but the amount of dollars needed to buy goods in the U.S. is the same as the amount needed to buy enough Argentinean bolivars to buy the same goods in Argentina. C. purchasing-power parity holds, and the amount of dollars needed to buy goods in the U.S. is the same as the amount needed to buy enough Argentinean bolivars to buy the same goods in Argentina. D. purchasing-power parity does not hold, but 1 U.S. dollar buys 1 Argentinean bolivar

C

In the long run, fiscal policy influences A. Saving, Investment, and growth; in the short run, fiscal policy primarily influences technology and the production function B. The aggregate demand for for g/s ; in the short run, fiscal policy primarily influences technology and the production function C. Saving, investment, and growth; in the short run, fiscal policy influences the aggregate demand for g/s D. Technology and the production function; in the short run, fiscal policy primarily influences saving, investment, and growth

C

In the short run, A. The price level alone adjusts to balance the supply and demand for money B. Increases in the money supply shift the aggregate supply curve causing output to rise C. Output responds to changes in the aggregate demand for g/s D. Changes in the money supply cause a proportional change in the price level

C

Paul, a Canadian citizen, purchases oranges grown in Florida. This purchase is an example of A. a U.S. import and a Canadian export B. an import for both Canada and the U.S. C. a U.S. export and a Canadian import D. an export for both the U.S. and Canada

C

Refer to figure above. An increase in taxes will A. Shift aggregate demand from AD1 to AD2 B. Have no effect on Aggregate Demand C. Shift aggregate demand from AD1 to AD3 D. Cause movement from point A to point B along AD1

C

Refer to the figure above. If the economy starts at A, a decrease in the money supply moves the economy A.to A in the long run B. To D in the long run C. To C in the long run D. Back to A in the long run

C

Take the following info as given for a small, imaginary economy: •when I come is $10,000, consumption spending is $6500 •when I come is $11,000, consumption spending is $7250 Refer to scenario34-1. The marginal propensity to consume for this economy is A. 0.650 B. 0.800 C. 0.750 D. 0.650 or 0.664, depending on whether income is $10,000 or $11,000

C

The law of one price states that A. a good must sell at the price fixed by law. B. nominal exchange rates will not vary. C. a good must sell at the same price at all locations. D. a good cannot sell for a price greater than the legal price ceiling

C

The multiplier for changes in gov't spending is calculated as A. 1/MPC B. (1-MPC)/MPC C. 1/(1-MPC) D. MPC/(1-MPC)

C

When Jamie, a U.S. citizen, purchases a wool jacket made in Ireland, the purchase is A. both a U.S. and Irish import. B. neither an export nor an import for either country. C. a U.S. import and an Irish export. D. a U.S. export and an Irish import

C

When the Federal Resrve conducts open-market operationsto increase the money supply, it A. Redeems fedral reserve notes B. Decreases its lending to memeber banks C. Buys gov't bonds from the public D. Raise the discount rate

C

When the U.S. real interest rate falls A. U.S. purchases of foreign assets and foreign purchases of U.S. assets rise B. U.S. purchases of foreign assets and foreign purchases of U.S. assets fall C. U.S. purchases of foreign assets rise and foreign purchases of U.S. assets fall D. U.S. purchases of foreign assets fall and foreign purchases of U.S. assets rise

C

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

C

You use US currency to pay the owner of a restaurant for a delicious meal. The currency A. Has no intrinsic value. The exchange is an example of a barter B. Has intrinsic value. The exhange is not an example of a barter C. Has no intrinsic value. The exchange is not an example of a barter D. Has intrinsic value. The exhange is not an example of a barter

C

The classical dichotomy and monetary neutrality are represented graphically by A. An upward sloping long run aggregate supply curve B. A downward sloping aggregate demand curve C. A vertical long run aggregate supply curve D. An upward sloping short run aggregate curve

C.

The price level rises in the short run if A. Aggregate demand or aggregate supply shifts right B. Aggregate demand or aggregate supply shifts right C. Aggregate demand shifts right or aggregate supply shifts left D. Aggregate demand shifts left or aggregate supply shifts right

C.

Which of the following is accurate? A. Monetary policy is neutral in both the short run and the long run. B. Monetary policy has profound effects on real variables in the long run, but is neutral in the short run. C. Though monetary policy is neutral in the long run, it may have effects on real variables in the short run. D. Monetary policy has profound effects on real variables in both the short run and the long run.

C...

6. 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 bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply? A. $50 B. $200 C. $100 D. $150

D

A country has I = $200 billion, S = $400 billion, and purchased $600 billion of foreign assets, how many of its assets did foreigners purchase? A. $0 B. $800 billion C. $200 billion D. $400 billion

D

A country has national saving of $100 billion, government expenditures of $30 billion, domestic investment of $80 billion, and net capital outflow of $20 billion. What is its demand for loanable funds? A. $60 billion B. $120 billion C. $70 billion D. $100 billion

D

Double taxation means that both A. Wage income and interest income are taxed, which is currently the case in the US B. the profits of corporations and the dividends shareholders receive are taxed, which is not currently the case in the US C. wage income and interest income are taxed, which is not currently the case in the US D. the profits of corporations and the dividends shareholders receive are taxed, which is currently the case in the US

D

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 15 percent receives a deposit of $600, it has a A. $600 increase in excess reserves and no increase in required reserves. B. $90 increase in excess reserves and a $510 increase in required reserves. C. $600 increase in required reserves and no increase in excess reserves. D. $510 increase in excess reserves and a $90 increase in required reserves.

D

If the U.S. has exports of $1.5 trillion and imports of $2.2 trillion, then the U.S. A. sells more overseas then it buys from overseas; it has a trade deficit. B. buys more from overseas then it sells overseas; it has a trade surplus. C. sells more overseas then it buys from overseas; it has a trade surplus. D. buys more from overseas then it sells overseas; it has a trade deficit

D

If the unemployment rate rises, which policies would both be appropriate to reduce it A. increase taxes, increase gov't spending B. decrease taxes, decrease gov't spending C. increase taxes, decrease gov't spending D. decrease taxes, increase gov't spending

D

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

In the long run, fiscal policy primarily affects A. Aggregate demand. In the short run it primarily affects aggregate supply B. Saving, investment, and growth. In the short run, it affects primarily aggregate supply C. Aggregate supply. In the short run, it affects primarily saving, investment, and growth D. Saving, investment, and growth. In the short run, it affects primarily aggregate demand

D

In the open-economy macroeconomic model, the market for loanable funds identity can be written as A. S = I B. S + I = NCO C. S = NCO D. S = I + NCO

D

Refer to Figure above. National saving is represented by the A. demand curve in panel a. B. supply curve in panel c. C. demand curve in panel c. D. supply curve in panel a.

D

Refer to figure 34-9. A significant increase in the world price of oil could explain A. The shift of the aggregate supply curve from AS1 to AS2, but it couldn't explain the shift of the Phillips curve from PC1 to PC2 B. Neither the shift of the aggregate supply curve from AS1 to AS2, nor the shift of the aggregate the shift of the Phillips from PC1 to PC2 C. The shift of the Phillips curve from PC1 to PC 2, but it could not explain the shift of the aggregate supply curve from AS1 to AS2 D. Both the shift of the aggregate supply curve from AS1 to AS2 and the shift of the Phillips curve from PC1 to PC2

D

Refer to figure above. The shift of the aggregate supply curve from AS1 to AS2 A. Results Ina more favorable trade-off between inflation and unemployment B. Represents a favorable shock to aggregate supply C. Results in a more labor able trade off between inflation and the growth rate of real GDP D. Represents an adverse shock to aggregate supply

D

Refer to the figure above. Faced with the shift of the Phillips curve from PC1 to PC2, policy makers will A. Ask whether the shift is temporary or permanent B. Face, as well, a decision as to whether to accommodate the shock C. Be concerned with how people adjust their expectations of inflation as a result of the shift D. All of the above are correct

D

Refer to the figure above. If the economy starts at A and there is a fall in aggregate demand, the economy moves A. Back to A in the in the long run B. To D in the long run C. To B in the long run D. To C in the long run

D

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits? A. $5,000 billion B. $4,995 billion C. $4,937.5 billion D. $5,062.5 billion

D

When Haley states that inflation by itself always reduces the real return on her saving, she A. has expressed the idea of the inflation tax. B. has expressed the idea behind shoeleather costs. C. has expressed the idea behind menu costs. D. has committed the inflation fallacy.

D

When inflation rises people will A. demand more money so the price level rises. B. demand less money so the price level falls. C. demand more money so the price level falls. D. demand less money so the price level rises

D

When the Fed conducts open-market purchases, A. banks buy Treasury securities from Fed, which increases the money supply. B. it buys Treasury securities, which decreases the money supply. C. banks buy Treasury securities from the Fed, which decreases the money supply. D. it buys Treasury securities, which increases the money supply.

D