ECON FINAL

Let's assume that the money supply in an economy is 500 billion and the velocity of money is 3, then the nominal gross domestic product in this economy, in billion of dollars is:

1500

Cotton sanctions on cotton-producing nations are relaxed, allowing the buying and selling of cotton to become an unregulated free market where countries can trade with one another. What is the new domestic price?

17

The below graph shows the domestic sugar market in Mexico (expressed in millions of tons). Based on the information given, how many tons of sugar does Mexico export in the presence of a tariff on the imports of sugar imposed by its trading partners?

173

At a world price of $120, Country A must export oranges. If Country B has a domestic quantity demanded of 250 crates of oranges and a domestic supply of 225 crates of oranges, then how many crates of oranges must Country A be exporting?

25

Using the basic quantity equation of money, calculate the money supply (M) if velocity (V) equals 5, the price level (P) equals 110, and real GDP (Q) equals 120.

2640

The below graph shows the domestic motor oil market in the U.S (in millions of barrels). Based on the information given, how many barrels of motor oil does the U.S. import given that there is no protectionism?

273

At a world price of $1000, Country B has a domestic quantity demanded of 10 computers while it has a domestic quantity supplied of only 6 computers. In a situation of free trade, how many computers will Country B be importing?

4

According to the graph below, what is the total amount of TVs the US will export with free trade?

750

One of these four answers best fits the definition of bank run. Which one?

A bank run is a situation in which depositors race to the bank to withdraw their deposits for fear that otherwise those deposits would be lost.

What is a lender of last resort?

A lender of last resort is an institution that provides short-term emergency loans in conditions of financial crisis.

During the last half-century, international trade was made easier because of a dramatic reduction in government-created barriers to trade, such as tariffs, import quotas, and nontariff barriers, as well as a number of technological developments, such as

All the other answers

Who among the following participate in the Federal Open Market Committee?

All the other answers

Why do higher interest rates reduce aggregate demand?​

All the other answers

What is an "excise tax"?

An excise tax is a tax on specific goods, usually gasoline, tobacco, and alcohol.

One of these four answers best defines the term bank capital. Which one?

Bank capital is a bank's net worth

Which of the following is not a result of raising the discount rate?

Banks extend more loans to individuals and firms.

Which of the following is the best definition of the term "countercyclical"?

Countercyclical means moving in the opposite direction of the business cycle of economic downturns and upswings.

One of these four answers best defines the term deposit insurance. Which one?

Deposit insurance is a system that makes sure depositors in a bank do not lose their money, even if the bank goes bankrupt.

_________________________ is vital to two industries of key importance in many low-income countries: tourism and agriculture

Environmental protection

All of the following reasons are why most economists consider a perpetual balanced budget unrealistic, except:

It is impossible to balance the budget as the government would never reduce spending.

Which of the following are effects of contractionary monetary policy?

It reduces the supply of money and the quantity of loanable funds which reduces business investment and aggregate demand.

One of these four answers is true of open market operations. Which one?

Open market operations involve the purchase and sale of government securities

One of these four answers is true about permanent tax cuts. Which one?

People have empirically not reacted much in response to permanent changes.

_____________________ reshuffles jobs from industries without import protections to industries that are protected from imports, but it does not create more jobs.

Protectionism

One of these four answers is not true of the U.S. Federal Reserve System. Which one?

The Fed is a part of the U.S. government.

_______________________ propose(s) giving an industry a short-term indirect subsidy to support it until such time that it matures and turns into a vibrant, healthy industry

The infant industry argument

________________________ is theoretically possible, even sensible: give an industry a short-term indirect subsidy through protection, and then reap the long-term economic benefits of having a vibrant healthy industry.

The infant industry argument

When the Federal Reserve purchases bonds from Bank XYZ, where does it get the money to do so?

The money is created by the Fed.

What do goods like gasoline, tobacco, and alcohol typically share in common?

They are all subject to government excise taxes.

In politics, whether the economy is expanding or contracting, what is difficult for politicians to accept?

They should increase taxes.

One of these four answers is an example of nontariff barriers. Which one?

a requirement for imported toys to pass a safety inspection before they can be sold in the U.S.

What is the definition of "inflation targeting"?

a rule that the central bank is required to focus primarily on keeping inflation low

asymmetric information

a situation in which one party to an economic transaction has less information than the other party

imperfect information

a situation where either the buyer or the seller, or both, are uncertain about the qualities of what is being bought and sold

During a recession, if a government uses an expansionary fiscal policy to increase GDP, the:

aggregate demand curve will shift to the right

Which of the following is true for this diagram?

all the other answers

Which of the following variables does the Federal Reserve Bank target when regulating commercial banks?

all theotheranswers

One of these four answers will benefit domestic customers of televisions. Which one?

an elimination of an import tariff on TVs from South Korea

Expansionary fiscal policy is achieved through:

an increase in government expenditures

If the government legislates policies that block imports of solar panels and gives domestic manufacturers a $5 billion dollar tax subsidy, the benefits to the U.S. solar panel manufacturing and distribution industry will be very visible. The bearers of the cost of the tax subsidy:

are more anonymous.

Government spending on unemployment benefits mechanically rises during a recession. Which of the following best illustrates that?

automatic stabilizer

When the reserve requirement is lowered, what happens?

banks have more money to lend out and the money supply increases

Proponents of a balanced budget amendment have argued that since households need to live on a balanced budget, the government should have one also. Why is this a flawed argument?

because the government has macroeconomic responsibilities

When a government uses ___________________, aggregate demand shifts inward (to the left).

contractionary fiscal policy

Expansionary fiscal policy can cause an increase in the interest rate, such as what occurs when expansionary fiscal policies are financed through borrowing, which reduces business investment and household consumption follows. Economist call this effect _________.

crowding out

In open market operations, the selling of bonds by the central bank __________.

decreases the amount of loans and money supply in an economy

Full _______________ have not only a common market, but also coordinate monetary and fiscal policies.

economic unions

In the United States, one of these four answers represents the largest component of state and local government spending. Which one?

education

In international trade, one the goals of The World Trade Organization is to __________.

enhance world trade by promoting a reduction in trade restrictions

Open market operations target which of the following interest rates?

federal funds rate

If a Central Bank decides it needs to decrease both the aggregate demand and the money supply, then it will:

follow tight monetary policy.

According to Keynesian economists, when the economy of a country is slowing down

government should spend more

Fiscal policy is the use of ____________________ and tax policy to influence the path of the economy over time.

government spending

Once the government passes a bill to respond to a recession, it takes some time to disperse the funds to the appropriate agencies to start the programs. Economists call this time to start the projects the _________________.

implementation lag

The below graph shows the domestic motor oil market in the U.S (in millions of barrels). Based on the information given, is the U.S. an importer or an exporter of motor oil? Note: Enter the word importer or exporter in the answer field.

importer

Anti-dumping laws block imports that are sold below the cost of production by ______________.

imposing tariffs that increase the price of these imports to reflect their cost of production

When the United States adopts a tariff in the market for tires, the price of tires in the United States will:

increase

Increasing a current tariff on grapes from France will:

increase American consumption of domestically produced grapes.

A new American import quota on imported steel would be likely to:

increase American production of steel

If a country's GDP increases, but its debt also increases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes.

increase or decrease

One of these four answers is an example of a contractionary fiscal policy. Which one?

increasing taxes

Which of the following statements is true for the scenario illustrated in the below diagram?

it can be caused by a tightening of the money supply, also known as contractionary monetary policy

When the Fed buys bonds on the open market __________.

it increases the money supply and lowers the federal funds rate

During expansionary fiscal policy, what happens to the aggregate demand?

it shifts outward to the right

During the 2008-2009 recession, what happened to the federal budget?

it went into a deep deficit

The Fed's preferred tool of monetary policy is _________.

open market operations

Discretionary fiscal policy is when the government __________________________________________.

passes a new law that explicitly changes tax or spending levels

Suppose the U.S. government levies a tax that requires all people to pay 5% of their income to be used for environmental preservation. What type of tax would this be?

proportional

Although the Fed had taken interest rates down to near-zero by December 2008, the economy was still deep in recession as measured by high unemployment rates. Open market operations could not make the interest rate turn negative in order to increase aggregate demand and reduce unemployment. Therefore, the Federal Reserve had to think "outside the box." An example of this "outside the box" thinking was __________.

quantitative easing

Profit-seeking multinational companies shift their production from countries with strong environmental standards to countries with weak standards, thus reducing their costs and increasing their profits. This phenomenon is called

race to the bottom

When California's state government announces a budget surplus in 2016, then the state government probably:

received more in taxes than it spent in that year.

If government tax policy requires Julianna to pay $20,000 in tax on annual income of $400,000 and Karla to pay $5,000 in tax on annual income of $50,000, then the tax policy is:

regressive

One of these four answers represents a tax in which people with higher incomes pay a smaller share of their income in tax. Which one?

regressive tax

An expansionary monetary policy will shift the Supply for Loanable Funds to the __________ which will ________ interest rates.

right; reduce

___________ government revenues come from many sources, the largest of which is the Sales tax.

state and local

Automatic stabilizer are programs that are already laws that ____________ aggregate demand in a recession and ___________ aggregate demand in a potentially inflationary boom.

stimulate, hold down

In general, high-income countries such as the United States, Canada, Japan, and the nations of the European Union have relatively _______ environmental standards whereas middle- and low-income countries like Brazil, Nigeria, India, and China have _______ environmental standards

strict; low

The World Trade Organization (WTO) superseded which organization?

the General Agreement on Tariffs and Trade (GATT

The common belief among economists is that it is better to embrace _____________, and then deal with the costs and trade offs with other policy tools, than it is to engage in _______________.

the gains from trade; protectionism

The federal debt can fluctuate from year to year based on the annual deficits and surpluses. Assume that a deficit is represented as a negative number whereas a surplus is represented as a positive number. How is the federal debt derived?

the sum of deficits and surpluses

One of these four answers is not a function of central banks. Which one?

to make loans to small businesses

The _________________________________ focuses on obstructing imported products that are harmful to consumers.

unsafe consumer products argument

If a commercial bank fails, the FDIC guarantees to reimburse depositors _________________.

up to $250,000 per insured bank, for each account ownership category.

Around the world, in many low-income countries, employees work under circumstances that ________________________________.

would be illegal for a worker in the United States