ECON 103- Quizzes

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Suppose you put 500 into a bank account today. Interest is paid annually and the annual interest rate is 8 percent. The future value of the 500 after 2 years is

500(1+.08)^2= 583.20

Suppose you will receive 500 at some point in the future. If the annual interest rate is 7.5 percent, then the present value of the 500 is

500/(1+.075)^5= 348.28 if the 500 is to be received in 5 years and 500/(1+.075)^10= 242.60 if the 500 is to be received in 10 years

Suppose you are deciding whether to buy a particular bond. If you buy the bod and hold it for 4 years, then at the time you will receive a payment of 10,000. If the interest rate is 6 percent, you will buy the bond if its price of today is no greater than

7920.94

Imagine that someone offers you 100 today or 200 in ten years. You would prefer to take the 100 today if the interest rate is

8 percent

If 2004 is the base year, then the inflation rate for 2005 equals

CPI in 2005- CPI in 2004 ----------------------------------- x 100 CPI in 2004

Future value formula

FV=PV(1+r)^n

If you deposit 50 dollars in the bank and the reserves ratio, R=20%, then the maximum amount by which the money supply can increase by is

MS= C+D -50+250 =200

Present value formula

PV=FV/(1+r)^n

Which of the following equations is correct?

S=I+NCO

If US residents purchase 500 billion of foreign assets and foreigners purchase 1300 billion of US assets,

US net capital outflow if -800 billion; capital is flowing into the US

Which of the following is adverse selection?

a high risk person being more likely to apply for insurance

A country sells more to foreign countries than it buys from them. It has

a trade surplus and positive net exports

When the Fed decreases the discount rate, banks will

borrow more money from the Fed and lend more money to the public. The money supply increases

When the consumer price index falls, the typical family

can spend fewer dollars to maintain the same standard of living

A bond is a

certificate of indebtedness

A firm from China sells toys to a US department store chain. Other things the same, these sales

decrease US net exports and increase Chinese net exports

Suppose a stock market crash makes people fee poorer. This decrease in wealth would induce people to

decrease consumption, which shifts aggregate demand left

Macroeconomists study

economy-wide phenomena

Most economists believe that classical macroeconomic theory is a good description of the economy

in the long run, but not in the short run

Jackie, a Canadian citizen, works only in the United States. The value of the output she produces is

included in US GDP, but not included in US GNP

Which of the following is not a tool for the Fed in increasing the money supply?

increasing the government budget deficit

Income generated by a nation's domestic production

is equal to its domestic production

The consumer price index is used to

monitor changes in the cost of living over time

In a closed economy, what does (Y-C-G) represent?

national savings

Consider a small economy in which consumers buy only two goods: apples and pears. In order to compute the consumer price index for this economy, we assume that

neither the number of apples nor the number of pears bought by the typical consumer changes from year to year

Which type of economies interact with other economies?

only open economies

People who buy stock in a corporation such as General Electric become

part owners of General Electric, so the benefits of holding the stock depend on General Electric's profits

An increase in the real interest rate will make happier the

people who want to save

In a closed economy, what does (Y-T-C) represent?

private savings

In a closed economy, what does (T-G) represent?

public savings

The model of aggregate demand and aggregate supply explains the relationship between

real GDP and the price level

A relatively mild period of falling incomes and rising unemployment is called a

recession

Long term bonds are

riskier than short term bonds, and so interest rates on long term bonds are usually higher that interest rates on short term bonds

To decrease the money supply the Fed could

sell government bonds; increase the discount rate; increase the reserve requirement

One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. This problem is called

substation bias

GDP is equal to

the market value of all final goods and services produced within a country in a given period of time; Y; C+G+I+NX

Which of the following typically rises during a recession?

unemployment

GDP is defined as the

value of all final goods and services produced within a country in a given period of time

If the central bank in some country lowered the reserve requirement while everything else remains the same, then the money supply for that country

would increase


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