ECON 103- Quizzes
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
