Macro Midterm 2
A decrease in U.S. interest rates leads to a. a depreciation of the dollar and greater net exports. b. a depreciation of the dollar and smaller net exports. c. an appreciation of the dollar and greater net exports. d. an appreciation of the dollar and smaller net exports.
a
In the long run, changes in the money supply affect a. prices. b. output. c. unemployment rates. d. All of the above.
a
In the open-economy macroeconomic model, if for some reason foreign citizens want to purchase more U.S. goods and services at each exchange rate, then a. the demand for dollars in the market for foreign-currency exchange shifts right. b. the demand for dollars in the market for foreign-currency exchange shifts left. c. the supply of dollars in the market for foreign-currency exchange shifts right. d. the supply of dollars in the market for foreign-currency exchange shifts left.
a
In the open-economy macroeconomic model, if investment demand increases, then a. the supply of dollars in the market for foreign-currency exchange shifts left. b. the supply of dollars in the market for foreign-currency exchange shifts right. c. the demand for dollars in the market for foreign-currency exchange shifts left. d. the demand for dollars in the market for foreign-currency exchange shifts right.
a
Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2,500, consumption equals 7,000, and government purchases equal 3,000. What are private saving and public saving? a. 1,500 and -500, respectively b. 1,500 and 500, respectively c. 1,000 and -500, respectively d. 1,000 and 500, respectively
a
The source of the supply of loanable funds a. is saving and the source of demand for loanable funds is investment. b. is investment and the source of demand for loanable funds is saving. c. and the demand for loanable funds is saving. d. and the demand for loanable funds is investment.
a
Which of the following is correct? a.Some bonds have terms as short as a few months. b.Because they are so risky, junk bonds pay a low rate of interest. c.Corporations buy bonds to raise funds. d.All of the above are correct.
a
Which of the following is included in the demand for dollars in the market for foreign-currency exchange in the open-economy macroeconomic model? a. A firm in Mexico wants to buy corn from a U.S. firm. b. A Japanese bank desires to purchase U.S. Treasury securities. c. An U.S. citizen wants to buy a bond issued by a Mexican corporation. d. All of the above are correct.
a
A relatively mild period of falling incomes and rising unemployment is called a a. depression. b. recession. c. expansion. d. business cycle.
b
Automatic stabilizers a. increase the problems that lags cause in using fiscal policy as a stabilization tool. b. are changes in taxes or government spending that increase aggregate demand without requiring policy makers to act when the economy goes into recession. c. are changes in taxes or government spending that policy makers quickly agree to when the economy goes into recession. d. All of the above are correct.
b
If purchasing-power parity holds, a dollar will buy a. more goods in foreign countries than in the United States. b. as many goods in foreign countries as it does in the United States. c. fewer goods in foreign countries than it does in the United States. d. None of the above is implied by purchasing-power parity.
b
If the government of a country with a zero trade balances increases its budget deficit, then interest rates a. rise and the trade balance moves to a surplus. b. rise and the trade balance moves to a deficit. c. fall and the trade balance moves to a surplus. d. fall and the trade balance moves to a deficit.
b
If the interest rate is 7.5 percent, then what is the present value of $4,000 to be received in 6 years? a. $2,420.68 b. $2,591.85 c. $2,996.33 d. $3,040.
b
In the open-economy macroeconomic model, if the supply of loanable funds increases, then the interest rate a. and the real exchange rate increase. b. and the real exchange rate decrease. c. increases and the real exchange rate decreases. d. decreases and the real exchange rate increases.
b
In the open-economy macroeconomic model, the amount of net capital outflow represents the quantity of dollars a. supplied for the purpose of selling assets domestically. b. supplied for the purpose of buying foreign assets. c. demanded for the purpose of buying U.S. net exports of goods and services. d. demanded for the purpose of importing foreign goods and services.
b
Suppose there were a large decline in net exports. If the Fed wanted to stabilize output, it could a. buy bonds to raise interest rates. b. buy bonds to lower interest rates. c. sell bonds to raise interest rates. d. sell bonds to lower interest rates.
b
When the interest rate increases, the opportunity cost of holding money a. increases, so the quantity of money demanded increases. b. increases, so the quantity of money demanded decreases. c. decreases, so the quantity of money demanded increases. d. decreases, so the quantity of money demanded decreases.
b
Which of the following is correct concerning recessions? a. They come at fairly regular and predictable intervals. b. They are associated with comparatively large declines in investment spending. c. They are any period when real GDP growth is less than average. d. They tend to be associated with falling unemployment rates
b
Which of the following is correct? a. An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left. b. An increase in stock prices reduces consumption spending so that aggregate demand shifts left. c. An increase in the price level causes the real exchange rate to rise so that aggregate demand shifts left. d. A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts left.
b
Which of the following leads to an increase in net exports in the long run? a. either a decrease in the budget deficit or imposing an import quota b. a decrease in the budget deficit but not imposing an import quota c. imposing an import quota but not a decrease in the budget deficit d. neither a decrease in the budget deficit nor imposing an import quota
b
hw 3: The shift of the short-run aggregate-supply curve from AS1 to AS2 a. could be caused by an outbreak of war in the Middle East. b. could be caused by an increase in the expected level of capital machinery. c. causes the economy to experience an increase in the unemployment rate. d. causes the economy to experience stagflation.
b
Other things the same, if the Swedish real interest rate were to decrease, Swedish net capital outflow a. would not change. b. would fall. c. would rise. d. Can't know without more information
c
Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience in the transition to the long-run a. a falling price level and a falling level of output. b. a falling price level and a rising level of output. c. a rising price level and a falling level of output. d. a rising price level and a rising level of output.
c
Which of the following is correct? a. A wave of optimism could move the economy from point a to point b. b. If aggregate demand moves from AD1 to AD2, the economy will stay at point b in both the short run and long run. c. It is possible that either fiscal or monetary policy might have caused the shift from AD1 to AD2. d. All of the above are correct.
c
Which of the following would increase output in the long run? a. an increase in stock prices makes people feel wealthier b. government spending increases c. firms chose to purchase more investment goods d. All of the above are correct.
c
Which part of real GDP fluctuates most over the course of the business cycle? a. consumption expenditures b. government expenditures c. investment expenditures d. net exports
c
Consider the expressions T - G and Y - T - C. Which of the following statements is correct? a. Each one of these is equal to national saving. b. Each one of these is equal to public saving. c. The first of these is private saving; the second one is public saving. d. The first of these is public saving; the second one is private saving.
d
If government policy encouraged households to save more at each interest rate, then a. the real exchange rate and net exports would rise. b. the real exchange rate and net exports would fall. c. the real exchange rate would rise and net exports would fall. d. the real exchange rate would fall and net exports would rise.
d
If the demand for dollars in the market for foreign-currency exchange shifts inward, then the real exchange rate a. rises and net exports rises. b. rises and net exports does not change. c. falls and net exports falls. d. falls and net exports does not change.
d
If the supply of loanable funds shifts left, then a. the real interest rate and the equilibrium quantity of loanable funds both fall. b. the real interest rate falls and the equilibrium quantity of loanable funds rises. c. the real interest rate and the equilibrium quantity of loanable funds both rise. d. the real interest rate rises and the equilibrium quantity of loanable funds falls.
d
Shifts in the aggregate-demand curve can cause fluctuations in a. neither the level of output nor the level of prices. b. the level of output, but not in the level of prices. c. the level of prices, but not in the level of output. d. the level of output and in the level of prices.
d
The economy is in long-run equilibrium. Suppose that automatic teller machines become cheaper and more convenient to use, and as a result the demand for money falls. Other things equal, we would expect that, in the short run, a. the price level and real GDP would rise, but in the long run they would both be unaffected. b. the price level and real GDP would rise, but in the long run the price level would rise and real GDP would be unaffected. c. the price level and real GDP would fall, but in the long run they would both be unaffected. d. the price level and real GDP would fall, but in the long run the price level would fall and real GDP would be unaffected.
d
When the money supply decreases a. interest rates fall and so aggregate demand shifts right. b. interest rates fall and so aggregate demand shifts left. c. interest rates rise and so aggregate demand shifts right. d. interest rates rise and so aggregate demand shifts left.
d
Which of the following policy actions shifts the aggregate-demand curve? a. an increase in the money supply b. an increase in taxes c. an increase in government spending d. All of the above are correct.
d
Which of the following would cause stagflation? a. aggregate demand shifts right b. aggregate demand shifts left c. long-run aggregate supply shifts right d. long-run aggregate supply shifts left
d
Dividends a. are the rates of return on mutual funds. b. are cash payments that companies make to shareholders. c. are the difference between the price and present value per share of a stock. d. are the rates of return on a company's capital stock.
B
If the efficient markets hypothesis is correct, then a. the number of shares of stock offered for sale exceeds the number of shares of stock that people want to buy. b. the stock market is informationally efficient. c. stock prices never follow a random walk. d. All of the above are correct.
B
Paper dollars a. are commodity money and gold coins are fiat money. b. are fiat money and gold coins are commodity money. c. and gold coins are both commodity monies. d. and gold coins are both fiat monies.
B
The theory of efficiency wages explains why a. setting wages at the equilibrium level may increase unemployment. b. it may be in the best interest of firms to offer wages that are above the equilibrium level. c. the most efficient way to pay workers is to pay them according to their skills. d. it is efficient for firms to set wages at the equilibrium level.
B
To increase the money supply, the Fed could a. sell government bonds. b. decrease the discount rate. c. increase the reserve requirement. d. None of the above is correct.
B
When inflation rises, people will desire to hold a. less money and will go to the bank less frequently. b. less money and will go to the bank more frequently. c. more money and will go to the bank less frequently. d. more money and will go to the bank more frequently.
B
When you rent a car, you might treat it with less care than you would if it were your own. This is an example of a. market risk. b. moral hazard. c. adverse selection. d. risk aversion.
B
Which list ranks assets from most to least liquid? a. currency, fine art, stocks b. currency, stocks, fine art c. fine art, currency, stocks d. fine art, stocks, currency
B
Frictional unemployment is inevitable because a. sectoral shifts are always happening. b. there is a federal minimum-wage law in the U.S. c. some people do not want to be employed. d. unions are very popular in the U.S.
A
If the demand for loanable funds shifts to the right, then the equilibrium interest rate a. and quantity of loanable funds rise. b. and quantity of loanable funds fall. c. rises and the quantity of loanable funds falls. d. falls and the quantity of loanable funds rises.
A
If the inflation rate is 2 percent and the real interest rate is 3 percent, then the nominal interest rate is a. 5 percent. b. 1 percent. c. 1.5 percent d. 0.67 percent.
A
Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate? a. store of value b. medium of exchange c. unit of account d. None of the above is correct.
A
The Federal Reserve a. is a central bank; it is responsible for conducting the nation's monetary policy; and it plays a role in regulating banks. b. is a central bank; it is responsible for conducing the nation's monetary policy; but it plays no role in regulating banks. c. is not a central bank; it is responsible for conducing the nation's monetary policy; and it plays a role in regulating banks. d. is a central bank; it plays a role in regulating banks; but it is not responsible for conducting the nation's monetary policy.
A
The inflation tax refers to a. the revenue a government creates by printing money. b. higher inflation which requires more frequent price changes. c. the idea that, other things the same, an increase in the tax rate raises the inflation rate. d. taxes being indexed for inflation.
A
8. When we want to measure and record economic value, we use money as the a. liquid asset. b. medium of exchange. c. unit of account. d. store of value.
C
If the reserve ratio for all banks is 20 percent, then $100 of new reserves can generate a. $60 of new money in the economy. b. $250 of new money in the economy. c. $500 of new money in the economy. d. $2,000 of new money in the economy.
C
Wealth is redistributed from creditors to debtors when inflation was expected to be a. high and it turns out to be high. b. low and it turns out to be low. c. low and it turns out to be high. d. high and it turns out to be low.
C
When the money supply curve shifts from MS1 to MS2, a. the demand for goods and services decreases. b. the economy's ability to produce goods and services increases. c. the equilibrium price level increases. d. the equilibrium value of money increases.
C
Which of the following is adverse selection? a. the risk associated with selecting stocks in only a few specific companies b. the risk that a person will become overconfident in his ability to select stocks c. a high-risk person being more likely to apply for insurance d. after obtaining insurance a person having less incentive to be careful
C
Collective bargaining refers to a. the process by which the government sets exemptions from the minimum wage law. b. setting the same wage for all employees to prevent conflict among workers. c. firms colluding to set the wages of employees in order to keep them below equilibrium. d. the process by which unions and firms agree on the terms of employment.
D
If velocity = 3.5, the quantity of money = 15,000, and the price level = 1.2, then the real value of output is a. 3,571.43. b. 4,285.71. c. 5,142.86. d. 43,750.00.
D
Imagine that someone offers you $100 today or $200 in 10 years. You would prefer to take the $100 today if the interest rate is a. 4 percent. b. 5 percent. c. 6 percent. d. None of the above are correct.
D
The natural rate of unemployment is the a. unemployment rate that would prevail with zero inflation. b. rate associated with the highest possible level of GDP. c. difference between the long-run and short-run unemployment rates. d. amount of unemployment that the economy normally experiences.
D
Zeeman is a college student who is not working or looking for a job. The Bureau of Labor Statistics counts Zeeman as a. unemployed and in the labor force. b. unemployed, but not in the labor force. c. in the labor force, but not unemployed. d. neither in the labor force nor unemployed.
D
