ECON 2020 Final Exam
A U.S. company uses U.K. pounds it already owned to purchase bonds issued by a company in the U.K. Which of these countries has an increase in net capital outflow? A) Neither the U.S. nor the U.K. B) The U.S. but not the U.K. C) The U.K. but not the U.S. D) The U.S. and the U.K.
A
In the late 1960s, Milton Friedman and Edmund Phelps argued that A) the trade-off between inflation and unemployment did not apply in the long run This claim is consistent with monetary neutrality in the long run. B) the trade-off between inflation and unemployment did not apply in the long run. This claim is inconsistent with monetary neutrality in the long run. C) the trade-off between inflation and unemployment applied in both the short run and the long run. This claim is consistent with monetary neutrality in the long run. D) the trade-off between inflation and unemployment applied in both the short run and the long run. This claim is inconsistent with monetary neutrality in the long run.
A
Which of the following economy-wide measures is GDP equal to? A) Total income B) Total income + total saving C) Total income - total government expenditures D) Total income - total imports.
A
What is frictional unemployment? A) Occurs when the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one B) Occurs when workers spend time searching for the jobs that are best suited to their skills and tastes
B
If a bank with a required reserve ratio of 15 percent receives a deposit of $600, it now has a... A) $90 increase in excess reserves and a $510 increase in required reserves. B) $600 increase in excess reserves and no increase in required reserves. C) $510 increase in excess reserves and a $90 increase in required reserves. D) $600 increase in required reserves and no increase in excess reserves.
C
Which of the following is an example of human capital? A) The comfortable chair in your dorm room where you read economics texts B) The amount you get paid each week to work at the library C) The things you have learned this semester D) Any capital goods that require a human to be present to operate
C
A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to... A) $92. B) $920. C) $8. D) $80.
D
The bank has $30,000 reserves, 170,000 loans, and $200,000 of deposits. If the bank is holding $4,000 in excess reserves, then the reserve requirement with which it must comply is A) 14 percent. B) 17 percent. C) 12 percent. D) 13 percent.
D
A worker received $5 for a daily wage in 1930, which has the equivalent value of $63.24 today. If the CPI was 17 in 1930 what is the value of the CPI today, rounded to the nearest whole number? A) 215 B) 134 D) 17 D) 1.3
A
According to the circular-flow diagram GDP... A) can be computed as the total income paid by firms or as expenditures on final goods and services B) can be computed as the total income paid by firms, but not as expenditures on final goods and services C) can be computed as expenditures on final goods and services, but not as the total income paid by firms D) cannot be computed as either total income paid by firms or expenditures on final goods and services.
A
According to the classical dichotomy, which of the following increases when the money supply increases? A) The nominal wage B) The real interest rate C) The real wage D) The real GDP
A
An economic expansion caused by a shift in aggregate demand causes prices to A) rise in the short run, and rise even more in the long run. B) rise in the short run, and fall back to their original level in the long run. C) fall in the short run, and fall even more in the long run. D) fall in the short run, and rise back to their original level in the long run.
A
Crowding out occurs when investment declines because a budget... A) deficit makes interest rates rise. B) deficit makes interest rates fall. C) surplus makes interest rates rise. D) surplus makes interest rates fall.
A
Every unit of good x that is produced in the United States is exported to other countries. An increase in the price of good x shows up in A) In the GDP Deflator, but not the consumer price index B) In the consumer price index, but not GDP deflator C) In both the GDP deflator and the consumer price index D) In neither the consumer price index, nor the GDP Deflator
A
If in the short run nominal wages are sticky, meaning they do not immediately adjust to short run changes in the economy, what will happen to output if the price level is unexpectedly lower than the equilibrium price level? A) Revenue will decrease, even as costs remain high, making production less profitable for firms and causing output to decrease. B) Revenue will increase, even as costs remain high, making production more profitable for firms and causing output to increase. C) Revenue will stay the same, as costs decrease but revenue increases, making pro-duction more profitable for firms no different than before. D) Revenue will increase, as costs decrease, making production more profitable for firms and causing output to increase.
A
If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, it could... A) buy $300,000 worth of bonds. B) sell $225,000 worth of bonds. C) buy $225,000 worth of bonds. D) sell $300,000 worth of bonds.
A
If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the inflation rate is... A) −2 percent. B) 0.4 percent. C) 2 percent. D) 12 percent.
A
If there is a shortage of loanable funds, then... A) neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. B) the supply for loanable funds shifts right and the demand shifts left. C) the supply for loanable funds shifts left and the demand shifts right. D) neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.
A
In the Philips Curve model, what does aggregate demand do to the Phillips Curve? A) causes movement from one point to another along the Phillips Curve B) shifts the Phillips Curve C) neither
A
Industrial machinery is an example of... A) a factor of production that in the past was an output from the production process. B) technological knowledge. C) a production function. D) an item which always has the property called constant returns to scale.
A
Kamila is not working but is available for work. Daniel was fired but has not looked for work during the last two months. Who does the Bureau of Labor Statistics count as "unemployed"? A) Kamila but not Daniel B) Daniel but not Kamila C) Both Daniel and Kamila D) Neither Daniel nor Kamila
A
Mixster Concrete Company is considering buying a new cement truck. The owners and their accountants decide that this is the profitable thing to do. Before they can buy the truck, the interest rate and price of trucks change. In which case do these changes both make them less likely to buy the truck? A) Interest rates rise and truck prices rise. B) Interest rates fall and truck prices rise. C) Interest rates rise and truck prices fall. D) Interest rates fall and truck prices fall.
A
Net capital outflow is defined as the purchase of A) foreign assets by domestic residents minus the purchase of domestic assets by foreign residents. B) foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents. C) domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents. D) domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.
A
Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. Holding all else constant, how would you expect this change in behavior to affect GDP? A) This change would increase GDP B) This change would not affect GDP C) This change would decrease GDP D) This change could increase, decrease, or have no effect on GDP.
A
Policies that reduce the time it takes unemployed workers to find new jobs... A) can reduce both frictional unemployment and the natural rate of unemployment. B) can reduce frictional unemployment, but they cannot reduce the natural rate of unemployment. C) cannot reduce frictional unemployment, but they can reduce the natural rate of unemployment. D) cannot reduce either frictional unemployment or the natural rate of unemployment.
A
Suppose New Zealand has an absolute advantage over other countries in producing vinegar, but other countries have a comparative advantage over New Zealand in producing vinegar. If trade in vinegar is allowed, New Zealand... A) will import vinegar B) will export vinegar
A
Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy stock in foreign corporations. Other things the same, these actions... A) raise both U.S. net exports and U.S. net capital outflows. B) lower U.S. net exports and raise U.S. net capital outflows. C) raise U.S. net exports and lower U.S. net capital outflows. D) lower both U.S. net exports and U.S. net capital outflows.
A
Suppose that the adult population in the country of Atlantis is 115 million. If 80 million people are employed and 5 million are unemployed, then A) 30 million are not in the labor force. B) 35 million are in the labor force. C) 75 million are in the labor force. D) 35 million are not in the labor force.
A
Suppose the economy is in long-run equilibrium. If the government increases its expenditures, eventually the increase in aggregate demand causes price expectations to... A) rise. This rise in price expectations shifts the short-run aggregate supply curve to the left. B) rise. This rise in price expectations shifts the short-run aggregate supply curve to the right. C) fall. This fall in price expectations shifts the short-run aggregate supply curve to the right. D) fall. This fall in price expectations shifts the short-run aggregate supply curve to the left.
A
Suppose the price of a quart of milk rises from $1.00 to $1.20 and the price of a T-shirt rises from $8.00 to $9.60. If the CPI rises from 150 to 195, then people likely will buy... A) more milk and more T-shirts. B) more milk and fewer T-shirts. C) less milk and more T-shirts. D) less milk and fewer T-shirts.
A
Suppose the world price of coffee is $2 per pound and Brazil's domestic price of coffee without trade is $3 per pound. If Brazil allows free trade, will Brazil be an importer of coffee, an exporter of coffee, or neither? A) Importer B) Exporter C) Neither
A
The aggregate quantity of goods and services demanded changes as the price level rises because... A) real wealth falls, interest rates rise, and the dollar appreciates B) real wealth falls, interest rates rise, and the dollar depreciates. C) real wealth rises, interest rates fall, and the dollar appreciates. D) real wealth rises, interest rates fall, and the dollar depreciates.
A
The money supply increases when the Fed A) lowers the discount rate. The increase will be larger the smaller the reserve ratio is. B) lowers the discount rate. The increase will be larger the larger the reserve ratio is. C) raises the discount rate. The increase will be larger the smaller the reserve ratio is D) raises the discount rate. The increase will be larger the larger the reserve ratio is.
A
The nominal interest rate is 6 percent and the real interest rate is 2.5 percent. What is the inflation rate? A) 3.5 percent B) 15 percent C) 2.4 percent D) 8.5 percent
A
What is structural unemployment? A) Occurs when the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one B) Occurs when workers spend time searching for the jobs that are best suited to their skills and tastes
A
When Mexico suffered from capital flight in 1994, Mexico's net capital outflow... A) and net exports increased. B) decreased while net exports increased. C) and net exports decreased. D) increased while net exports decreased.
A
Which of the following does purchasing-power parity imply? A) The purchasing power of the dollar is the same in the U.S. as in foreign countries. B) The price of domestic goods relative to foreign goods cannot change. C) The nominal exchange rate is the ratio of U.S. prices to foreign prices. D) All of the above are correct.
A
Which of the following is not a reason economies experience structural unemployment? A) job search B) unions C) minimum-wage laws D) efficiency wages
A
Which of the following would both raise the U.S. exchange rate? A) capital flight from other countries to the U.S. occurs and the U.S. moves from budget surplus to budget deficit B) capital flight from other countries to the U.S. occurs and the U.S. moves from budget deficit to budget surplus C) capital flight from the U.S. to other countries occurs, the U.S. moves from budget surplus to budget deficit D) capital flight from U.S. to other countries occurs, the U.S. moves from budget deficit to budget surplus
A
utilities company in the Netherlands buys wind generators made by a U.S. company. It pays for them with previously obtained dollars. By itself, this exchange A) increases both U.S. net exports and U.S. net capital outflow. B) decreases both U.S. net exports and U.S. net capital outflow. C) increases U.S. net exports and does not affect U.S. net capital outflow. D) None of the above is correct.
A
A Texas household receives a Social Security check for $1500, which it uses to purchase a $40 pair of shoes made in Thailand by a Thai firm, a $1240 television made by a Korean firm in Korea, and $220 on groceries from a local store. As a result, U.S. GDP... A) increases by $40. B) increases by $220. C) increases by $280. D) increases by $1500
B
A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement A) It has $25 in reserves and $4,975 in loans. B) It has $250 in reserves and $4,750 in loans. C) It has $1,000 in reserves and $4,000 in loans. D) None of the above is correct.
B
A depreciation of the U.S. real exchange rate induces U.S. consumers to buy A) fewer domestic goods and fewer foreign goods. B) more domestic goods and fewer foreign goods. C) fewer domestic goods and more foreign goods. D) more domestic goods and more foreign goods.
B
A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute... A) $150 to GDP. B) $250 to GDP. C) between $250 and $400 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle. D) $400 to GDP.
B
After the minimum wage is raised to $15 in Colorado, businesses can no longer afford to hire as many workers as they otherwise would. What kind of unemployment is this? A) Frictional Unemployment B) Structural Unemployment C) Cyclical Unemployment
B
China and Japan are significant trade partners. If Japan experiences an economic boom such that the Japanese yen appreciates in value relative to the Chinese yuan, what effect will this have on the business cycle in China? A) Aggregate demand in China will shift left as net exports decrease, decreasing output and price levels. Over time this will be followed by a shift right in short run aggregate supply to return to the natural rate of output, further decreasing price levels. B) Aggregate demand in China will shift right as net exports increase, increasing output and price levels. Over time this will be followed by a shift left in short run aggregate supply to return to the natural rate of output, further increasing price levels. C) Aggregate demand in China will shift right as net exports increase, increasing output and price levels. Over time this will be followed by a shift right in short run aggregate supply to increase output, decreasing price levels. D) Aggregate demand in China is not affected by what happens in other countries.
B
Crowding out occurs when A) a budget deficit makes interest rates fall B) a budget deficit makes interest rates rise C) a budget surplus makes interest rates fall D) a budget surplus makes interest rates rise
B
During a presidential campaign, the incumbent argues that he should be reelected because nominal GDP grew by 12 percent during his 4-year term in office. You know that population grew by 4 percent over the period and that the GDP deflator increased by 6 percent during the past 4 years. You should conclude that real GDP per person... A) grew by more than 12 percent. B) grew, but by less than 12 percent. C) was unchanged. D) decreased.
B
For a risk averse person,... A) the pleasure of winning $1,000 on a bet exceeds the pain of losing $1,000 on a bet. B) the pain of losing $1,000 on a bet exceeds the pleasure of winning $1,000 on a bet. C) the utility function exhibits the property of increasing marginal utility of wealth. D) the utility function exhibits the property of constant marginal utility of wealth.
B
If inflation is less than expected, then the unemployment rate is A) greater than the natural rate. In the long run the short-run Phillips curve will shift right. B) greater than the natural rate. In the long run the short-run Phillips curve will shift left. C) less than the natural rate. In the long run the short-run Phillips curve will shift right. D) less than the natural rate. In the long run the short-run Phillips curve will shift left.
B
In 2002, the United States placed higher tariffs on imports of steel. According to the open-economy macroeconomic model this policy reduced imports... A) into the United States and made the net supply of dollars in the foreign exchange market shift right. B) of steel into the United States, but reduced U.S. exports of other goods by an equal amount. C) of steel into the United States and increased U.S. exports of other goods by an equal amount. D) into the United States and made U.S. net exports rise.
B
In a closed economy, if Y and T remained the same, but G rose and C fell but by less than the rise in G, what would happen to private and national saving? A) Private and national saving would rise. B) Private saving would rise and national saving would fall. C) Private and national saving would fall. D) Private saving would fall and national saving would rise.
B
In the Philips Curve model, what does aggregate supply do to the Phillips Curve? A) causes movement from one point to another along the Phillips Curve B) shifts the Phillips Curve C) neither
B
In the circular-flow diagram, in the markets for... A) goods and services, households and firms are both sellers. B) goods and services, households are buyers and firms are sellers. C) the factors of production, households are buyers and firms are sellers. D) the factors of production, households and firms are both buyers.
B
Other things the same, a country could move from having a trade deficit to having a trade surplus if either... A) saving rose or domestic investment rose. B) saving rose or domestic investment fell. C) saving fell or domestic investment rose. D) saving fell or domestic investment fell.
B
Other things the same, a lower real interest rate decreases the quantity of A) loanable funds demanded. B) loanable funds supplied. C) domestic investment. D) net capital outflow.
B
Recessions in Canada and Mexico would cause A) the U.S. price level and real GDP to rise. B) the U.S. price level and real GDP to fall. C) the U.S. price level to rise and real GDP to fall. D) the U.S. price level to fall and real GDP to rise.
B
Suppose that price levels decrease. This means that A) Investment will not be affected by price level changes. B) Investment will increase because interest rates decrease. C) Investment will decrease because interest rates decrease. D) Investment will increase because interest rates increase.
B
Suppose that some country had an adult population of about 46 million, a labor-force participation rate of 75 percent, and an unemployment rate of 8 percent. How many people were employed? A) 2.76 million B) 31.74 million C) 34.5 million D) 42.32 million
B
Suppose that some country had an adult population of about 50 million, a labor-force participation rate of 60 percent, and an unemployment rate of 5 percent. How many people were unemployed? A) 1.425 million B) 1.5 million C) 5 million D) 2.5 million
B
Suppose that the real return from operating factories in Canada rises relative to the real rate of return in the United States. Other things the same, this will... A) only increase Canadian net capital outflow. B) increase U.S. net capital outflow and decrease Canadian net capital outflow. C) decrease U.S. net capital outflow and increase Canadian net capital outflow. D) only increase U.S. net capital outflow.
B
The country of Meditor, a small country with a closed economy, uses the merit as its currency. Recent national income statistics showed that it had GDP of $600 million merits, no government transfer payments, taxes of $150 million merits, a budget surplus of $40 million merits, and investment of $100 million merits. What were its consumption and government expenditures on goods and services? A) $460 million merits and $150 million merits B) $310 million merits and $190 million merits C) $350 million merits and $190 million merits D) $390 million merits and $110 million merits
B
The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% while firms were expecting it to rise by 2%, then some firms with high menu costs will have.. A) higher than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied. B) lower than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied. C) higher than desired prices, which leads to a decrease in the aggregate quantity of goods and services supplied. D) lower than desired prices, which leads to a decrease in the aggregate quantity of goods and services supplied.
B
When the price level falls the quantity of.. A) consumption goods demanded rises, while the quantity of net exports demanded falls. B) consumption goods demanded and the quantity of net exports demanded both rise. C) consumption goods demanded and the quantity of net exports demanded both fall. D) consumption goods demanded falls, while the quantity of net exports demand rises.
B
Which accurately describes the supply and demand market of US dollars? A) Demand for US dollars is equal to the amount of imports. B) The supply of dollars is equal to the Net capital outflows. C) If the market is functioning, there is a high interest rate. D) The supply of US dollars has no relationship to interest rates.
B
Which of the following is not a policy that would likely directly affect the market for loanable funds? A) The government hikes the sales tax on all common consumption to 20%. B) The president signs an executive order to put quotas on car imports. C) Congress passes a low that gives a 33% rebate to any company that updates it's machinery to modern equipment that passes the latest environmental standards. D) The government passes a tax break that significantly cuts the taxes of any firm that invests in the latest software tools for more efficiently running a business.
B
Which of the following might increase the equilibrium interest rate in the market for loanable funds while decreasing the equilibrium quantity? A) The federal government runs a budget surplus rather than a deficit. B) The government increases taxes on income from interest earned C) Profit expectations are less optimistic for business investments D) In response to tax reform, households are encouraged to save more than they previously saved
B
Which of the following shifts short-run aggregate supply right? A) an increase in the minimum wage B) an increase in immigration from abroad C) an increase in the price of oil D) an increase in the actual price level
B
According to Liquidity Preference Theory, which of the following events would shift money demand to the right? A) an increase in the interest rate or an increase in the price level B) an increase in the interest rate, but not an increase in the price level C) an increase in the price level, but not an increase in the interest rate D) neither an increase in the interest rate nor an increase in the price level
C
All else equal, which of the following would increase the unemployment rate? (i) an increase in the number of men who return to work after being stay-at-home dads (ii) a preference among older men to retire early (iii) an increase in the maximum number of weeks for which someone can receive government unemployment benefits (iv) an increase in the number of previously unemployed women who stop looking for work and become discouraged workers A) (i) and (ii) only B) (iii) only C) (ii) and (iii) only D) (ii), (iii), and (iv) only
C
If P = domestic prices, P* = foreign prices, and e is the nominal exchange rate, which of the following is implied by purchasing-power parity? A) P = e/P* B) 1 = e/P* C) e = P*/P
C
If the Federal Open Market Committee decides to increase the money supply, it... A) creates dollars and uses them to purchase various types of stocks and bonds from the public. B) sells government bonds from its portfolio to the public. C) creates dollars and uses them to purchase government bonds from the public. D) sells various types of stocks and bonds from its portfolio to the public.
C
If the economy unexpectedly went from deflation to inflation... A) both debtors and creditors would have reduced real wealth. B) both debtors and creditors would have increased real wealth. C) debtors would gain at the expense of creditors. D) creditors would gain at the expense of debtors.
C
If the nominal exchange rate is .60 British pounds = $1, a bottle of ale that costs 3 pounds costs A) $1.80 B) $4.80 C) $5.00 D) $6.50
C
If the reserve ratio increased from 10 percent to 20 percent, the money multiplier would A) rise from 10 to 20. B) rise from 5 to 10. C) fall from 10 to 5 D) not change.
C
If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $10, then this bank A) must increase its required reserves by $10. B) will initially see its total reserve increase by $10.50. C) will be able to make new loans up to a maximum of $9.50. D) All of the above are correct.
C
If the supply of loanable funds curve shifts right, then the equilibrium... A) interest rate and level of net capital outflows rise. B) interest rate rises and the equilibrium level of net capital outflow falls. C) interest rate falls and the equilibrium level of net capital outflow rises. D) interest rate and level of net capital outflows fall.
C
In a particular country in 2000, the average worker needed to work 40 hours to produce 55 units of output. In that same country in 2008, the average worker needed to work 30 hours to produce 45 units of output. In that country, the productivity of the average worker A) decreased by about 6 percent between 2000 and 2008. B) remained unchanged between 2000 and 2008. C) increased by about 9 percent between 2000 and 2008. D) increased by about 18 percent between 2000 and 2008.
C
In the Phillips Curve and aggregate demand curve, what would a right shift in the Phillips Curve and a left shift in aggregate demand equate to? A) Higher price level and output (Y) B) Higher price level and lower output (Y) C) Lower price level and output (Y) D) Lower price level and higher output (Y)
C
In the circular flow diagram,... A) Households purchase land, labor and capital from firms via the product market B) Firms obtain revenue from selling land labor and capital in the resource market C) Firms obtain revenue from selling goods and services in the product market D) Households purchase goods and services from firms via the resource market
C
Maria is looking for work as a electrical engineer. Her prospects are good but so far she has not taken a job. Julie is looking for work in a paper mill. Every time Julie shows up for an interview, there are more people looking for work than there are openings. She realizes that it has been that way for a long time. A) Maria and Julie are both frictionally unemployed. B) Maria and Julie are both structurally unemployed. C) Maria is frictionally unemployed, and Julie is structurally unemployed. D) Maria is structurally unemployed, and Julie is frictionally unemployed.
C
Suppose the price index was 105 in 2017, 126 in 2018, and the inflation rate was lower between 2018 and 2019 than it was between 2017 and 2018. This means that A) the price index in 2019 was lower than 126.0. B) the price index in 2019 was lower than 147.0. C) the price index in 2019 was lower than 151.2. D) the inflation rate between 2018 and 2019 must have been lower than 1.2 percent.
C
Suppose you put $350 into a bank account today. Interest is paid annually and the annual interest rate is 6 percent. The future value of the $350 after 4 years is... A) $414.09. B) $434.00. C) $441.87. D) $481.24.
C
The CPI is more commonly used as a gauge of inflation than the GDP deflator is because the... A) CPI is easier to measure. B) CPI includes more goods and services that the GDP deflator does. C) CPI better reflects the goods and services bought by consumers. D) GDP deflator cannot be used to gauge inflation.
C
The government of a particular country ends a previously lucrative tax break that allowed any individual to pay half their normal income tax rate on money they earned if they immediately put it in a long-term certificate of deposit. We would expect the quantity of loans to ..... and the interest rate on loanable funds to .... A) rise, rise B) rise, fall C) fall, rise D) fall, fall
C
The logic behind the catch-up effect is that A) workers in countries with low incomes will work more hours than workers in countries with high incomes. B) the capital stock in rich countries deteriorates at a higher rate because it already has a lot of capital. C) new capital adds more to production in a country that doesn't have much capital than in a country that already has much capital. D) None of the above is correct.
C
Unemployment that results because the number of jobs available in some labor markets may be insufficient to give a job to everyone who wants one is called A) the natural rate of unemployment. B) cyclical unemployment. C) structural unemployment. D) frictional unemployment.
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
What might cause the aggregate demand curve to shift out (increase)? A) Decreases in price levels B) Increases in real GDP (Y) C) Increased consumption of goods and services by households D) The aggregate demand curve does not shift.
C
When the Federal Reserve increases the Federal Funds target rate, it achieves this target by... A) purchasing government bonds. This action will reduce investment and shift aggregate demand to the right. B) purchasing government bonds. This action will increase investment and shift aggregate demand to the right. C) selling government bonds. This action will reduce investment and shift aggregate demand to the left. D) selling government bonds. This action will increase investment and shift aggregate demand to the left.
C
Which of the following Fed actions would both decrease the money supply? A) buy bonds and raise the reserve requirement B) buy bonds and lower the reserve requirement C) sell bonds and raise the reserve requirement D) sell bonds and lower the reserve requirement
C
Which of the following describes why a price level decrease will cause net exports to increase? A) Interest rates rise, increasing foreign investment in domestic bonds and therefore causing the exchange rate to appreciate. B) Lower price levels cause a large increase in immigrants, increasing production and therefore the number of goods a country exports. C) Interest rates fall, decreasing foreign investment in domestic bonds, decreasing demand for domestic currency and therefore depreciating the exchange rate. D) The government cuts back on government spending, leading firms to be less government dependent, more innovative, and increasing the demand for these newly innovate domestic products.
C
Which of the following is not an example of physical capital? A) a new factory building B) a delivery van C) the knowledge of workers D) the office chair in a lawyer's office
C
Why does real interest rate determine Net Capital Outflows (NCO)?A) Because a high interest rate means domestic investments are not paying a high return B) Because foreign investments are made more attractive when the real interest rate is high. C) Because a high interest makes foreign investments less attractive. D) Because when real interest rates are low, foreign investments are less attractive.
C
You bought some shares of stock and, over the next year, the price per share increased by 5 percent, as did the price level. Before taxes, you experienced... A) both a nominal gain and a real gain, and you paid taxes on the nominal gain. B) a nominal gain, but no real gain, and you paid no taxes on the transaction. C) a nominal gain, but no real gain, and you paid taxes on the nominal gain. D) both a nominal gain and a real gain, and you paid taxes only on the real gain.
C
f the amount of money in the economy doubles, but there is no change in production, what will happen to price levels? A) price levels will not change, you will just be able to consume twice as much B) price levels will increase by some amount, but not as much as the money supply increased C) price levels will increase by the same amount as the money supply increased D) price levels will increase by more than the amount of the increase in the money supply
C
A bank has a 10 percent reserve requirement, $36,000 in loans, and has loaned out all it can given the reserve requirement. A) It has $3,600 in deposits. B) It has $32,400 in deposits. C) It has $39,600 in deposits. D) It has $40,000 in deposits.
D
A bank has a 10 percent reserve requirement, $36,000 in loans, and has loaned out all it can given the reserve requirement. A) It has $3,600 in deposits. B) It has $39,600 in deposits. C) It has $32,400 in deposits. D) It has $40,000 in deposits.
D
A shift of the money-demand curve from a lower money demand to a higher money demand could be a result of A) a decrease in taxes. B) an increase in government spending. C) an increase in the price level. D) All of the above are correct.
D
All of the following are arguments against active stabilization policy except A) Economic forecasting is highly imprecise. B) Long lags may cause stabilization policies to in fact destabilize the economy. C) Monetary policy affects aggregate demand by changing interest rates. D) Fiscal policy must go through a long political process.
D
Anna recently moved to Boston in order for her husband Joe to begin a new job as an economics professor at Harvard. Anna is an experienced surgeon who is interviewing with several hospitals in Boston. Anna is... A) counted as employed, since she is likely to receive a job offer soon B) structurally unemployed C) cyclically unemployed D) frictionally unemployed
D
Due to a great economy, the government runs an unexpected surplus. What is the effect on the net capital outflows? A) Interest rates and NCO both decrease B) Interest rates and NCO both increase C) Interest rates increase but NCO decreases D) Interest rates decrease but NCO increases
D
Educated people may generate ideas that increase production. These ideas... A) never justify government subsides for education. B) are generally irrelevant for economic growth. C) are the source of personal benefits of education. D) produce a return to society from education that is greater than the return to the individual.
D
Human capital is... A) the same thing as technological knowledge. B) the same thing as labor. C) the tools and equipment operated by humans. D) knowledge and skills that workers have acquired.
D
If the US unexpectedly begins exporting more wheat: A) Net exports falls. B) The increase in net exports leads to a decrease in the supply of dollars. C) The supply of US dollars increases. D) The exchange rate for dollars increases.
D
If the economy unexpectedly went from inflation to deflation... A) both debtors and creditors would have reduced real wealth. B) both debtors and creditors would have increased real wealth. C) debtors would gain at the expense of creditors. D) creditors would gain at the expense of debtors.
D
If the reserve requirement is 10 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $500, it... A) must increase required reserves by $100. B) will be able to use this deposit to make new loans amounting to $500. C) will initially see reserves decrease by $500. D) must increase required reserves by $50.
D
If there is inflation, then a firm that has kept its price fixed for some time will have a... A) high relative price. Relative-price variability falls as the inflation rate rises. B) high relative price. Relative-price variability rises as the inflation rate rises. C) low relative price. Relative-price variability falls as the inflation rate rises. D) low relative price. Relative-price variability rises as the inflation rate rises.
D
In the market for foreign-currency exchange, capital flight shifts the... A) supply curve left. B) demand curve left. C) demand curve right. D) supply curve right.
D
In the open-economy macroeconomic model, the market for loanable funds equates national saving with... A) domestic investment. B) net capital outflow. C) national consumption minus domestic investment. D) none
D
Last year country A had a nominal GDP of $600 billion, a GDP deflator of 150 and a population of 40 million. Country B had a nominal GDP of $720 billion, a GDP deflator of 120 and a population of 50 million. From these numbers which country is likely to have had the higher standard of living? A) Country A because it had the higher nominal GDP per person B) Country B because it had the higher nominal GDP per person. C) Country A because it had the higher real GDP per person. D) Country B because it had the higher real GDP per person.
D
Last year country A had a nominal GDP of $600 billion, a GDP deflator of 150 and a population of 40 million. Country B had a nominal GDP of $720 billion, a GDP deflator of 120 and a population of 50 million. From these numbers which country is likely to have had the higher standard of living? A) Country A because it had the higher nominal GDP per person. B) Country B because it had the higher nominal GDP per person. C) Country A because it had the higher real GDP per person. D) Country B because it had the higher real GDP per person.
D
Last year real GDP in the imaginary nation of Oceania was 561.0 billion and the population was 2.2 million. The year before, real GDP was 500.0 billion and the population was 2.0 million. What was the growth rate of real GDP per person during the year? A) 12 percent B) 10 percent C) 4 percent D) 2 percent
D
Minimum wages create unemployment in markets where they create a... A) shortage of labor. Unemployment of this type is called frictional. B) shortage of labor. Unemployment of this type is called structural. C) surplus of labor. Unemployment of this type is called frictional D) surplus of labor. Unemployment of this type is called structural.
D
Other things the same, an increase in the price level induces people to hold... A) less money, so they lend less, and the interest rate rises. B) less money, so they lend more, and the interest rate falls. C) more money, so they lend more, and the interest rate falls. D) more money, so they lend less, and the interest rate rises.
D
Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things they consume have fallen by the same percentage. They may infer that the reward to working is temporarily... A) low and so supply a larger quantity of labor. B) high and so supply a larger quantity of labor. C) high and so supply a smaller quantity of labor. D) low and so supply a smaller quantity of labor.
D
The United States imposed restrictions on the importation of steel into the United States. The open-economy macroeconomic model shows that such a policy would A) lower the real exchange rate and increase net exports. B) lower the real exchange rate and have no effect on net exports. C) raise the real exchange rate and decrease net exports. D) raise the real exchange rate and have no effect on net exports.
D
The basket of goods used to calculate the CPI includes Italian shoes. If the price of Italian shoes imported into the United States increases, then... A) both the GDP deflator and the consumer price index will increase. B) neither the GDP deflator nor the consumer price index will increase. C) the GDP deflator will increase, but the consumer price index will not increase. D) the consumer price index will increase, but the GDP deflator will not increase.
D
The effect of an increase in the price level on the aggregate-demand curve is represented by a... A) shift to the right of the aggregate-demand curve. B) movement to the right along a given aggregate-demand curve. C) shift to the left of the aggregate-demand curve. D) movement to the left along a given aggregate-demand curve.
D
Wealth is redistributed from debtors to creditors 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.
D
When a country that imports a particular good imposes a tariff on that good,... A) consumer surplus increases and total surplus increases in the market for that good. B) consumer surplus increases and total surplus decreases in the market for that good. C) consumer surplus decreases and total surplus increases in the market for that good. D) consumer surplus decreases and total surplus decreases in the market for that good.
D
Which of the following would eventually lead to increased crowding out? A) The government passes a balanced budget amendment which causes the budget deficit to no longer be positive in ensuing years. B) The government links all government spending directly to tax revenues, meaning no government spending occurred that wasn't directly funded by a certain tax. C) The government pressures the federal reserve to lower interest rates. D) To support a stimulus meant to combat recession, the government begins running large and increasing positive budget deficits.
D
Which of the following would tend to shorten recessions associated with anti-inflation policies by central banks? A) People adjust their expectations of inflation rapidly. B) People believe policy announcements made by central bank officials. C) The short-run Phillips shifts rapidly. D) All of the above are correct.
D
