Macro Econ Final OSU

2012 2013 Nominal GDP $10,000 $12,000 Real GDP 9,500 10,500 Refer to Table 8-19. Given the information above, calculate the GDP deflator in 2013. A) 114 B) 105 C) 95 D) 87

A

An open economy is an economy that has A) interactions in trade or finance with other economies. B) its own stock market. C) governmental regulations regarding public information that is included in corporate finance reports. D) governmental regulations regarding the number of hours retail establishments must remain open on a daily basis.

A

As the tax wedge associated with a given economic activity gets smaller, we would expect A) more of that economic activity to occur. B) the distortions caused by taxes on that activity to be greater. C) people to engage in less of that particular activity. D) no change in the practice of that activity until the tax wedge ultimately disappears.

A

Economists refer to the series of additional increases in consumption spending that result from an initial increase in government expenditures as the ________ effect. A) multiplier B) expenditure C) consumption D) aggregate demand

A

If a country's currency is determined only by the demand and supply for that country's currency, the country is said to have a A) floating exchange rate. B) fixed exchange rate. C) gold standard. D) managed float.

A

If consumers decide to be more frugal (to be careful in how they use their money) and save more out of their income, then this will cause A) a shift in the supply curve for loanable funds to the right. B) a shift in the supply curve for loanable funds to the left. C) a movement to the right along the supply curve for loanable funds. D) a movement to the left along the supply curve for loanable funds.

A

If the Fed lowers its target for the federal funds rate, this indicates that A) the Fed is pursuing an expansionary monetary policy. B) the Fed is pursuing a contractionary monetary policy. C) the Fed is attempting to combat inflation. D) the Fed is concerned that the growth in aggregate demand will exceed potential GDP.

A

In the United States today, how much gold will the Federal Reserve give you in exchange for $1? A) none B) $1 worth of gold (based on the market price of an ounce of gold at the time you redeem the gold) C) 1 ounce of gold D) 1/35th of an ounce of gold

A

In the dynamic AD-AS model above, if the economy is at point A in year 1 and is expected to go to point B in year 2, and the Federal Reserve pursues no policy, then at point B A) firms are producing above capacity. B) there is pressure on wages and prices to fall. C) the unemployment rate is greater than the natural rate of unemployment. D) incomes and profits are falling.

A

In the dynamic aggregated demand and aggregate supply model, if AD shifts faster than AS, A) inflation occurs. B) deflation occurs. C) stagflation occurs. D) disinflation occurs.

A

In the figure above, if the economy is at point A, the appropriate monetary policy by the Federal Reserve would be to A) lower interest rates. B) raise interest rates. C) lower income taxes. D) raise income taxes.

A

Refer to the above figure. Suppose the economy is at point B in the figure above. Which of the following is true? A) The expected rate of inflation is 3%. B) The natural rate of unemployment is 3.8%. C) The current unemployment rate is 5%. D) The economy is producing at potential GDP. E) Expected inflation and actual inflation are the same.

A

The cost of Thanksgiving dinner for 10, according to the Farm Bureau A) Increased by 37 cents over last year B) Costs over $70 based on the basket of goods used C) Decreased by 52 cents from last year D) Is the highest it's ever been

A

Fiscal policy refers to changes in A) state and local taxes and purchases that are intended to achieve macroeconomic policy objectives. B) federal taxes and purchases that are intended to achieve macroeconomic policy objectives. C) federal taxes and purchases that are intended to fund the war on terrorism. D) the money supply and interest rates that are intended to achieve macroeconomic policy objectives.

B

For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries? A) Switzerland has the comparative advantage in chocolate. B) Switzerland has the comparative advantage in watches. C) Germany has the comparative advantage in watches and chocolate.

B

How does an increase in the budget deficit affect the demand for dollars on the foreign exchange market? A) The demand for dollars falls. B) The demand for dollars rises. C) The budget deficit has no impact on the foreign exchange market. D) There will be movement along the demand curve to a lower quantity demanded.

B

If Norwegian workers are more productive than Albanian workers, then trade between Norway and Albania A) cannot take place because Norwegian goods and services will be less expensive than Albanian goods and services. B) will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want. C) cannot take place until Albanian workers become more productive. D) can take place only if Albania has an absolute advantage in producing a good or service

B

If interest rates in the United States rise, A) the value of the dollar will fall as foreign investors sell their U.S. investments. B) the value of the dollar will rise as the foreign investors increase their holdings of U.S. investments. C) the value of the dollar will fall as foreign investors increase their holdings of U.S. investments. D) the value of the dollar will rise as foreign investors sell their U.S. investments.

B

If the Federal Open Market Committee wants to decrease the money supply through open market operations it will A) buy U.S. Treasury Securities. B) sell U.S. Treasury Securities. C) increase the discount rate. D) decrease the discount rate.

B

If the United States lifted the embargo on Cuban products, what would happen in the U.S. market for Cuban cigars? A) The supply curve would shift to the left. B) The supply curve would shift to the right. C) The demand curve would shift to the right. D) The demand curve would shift to the left.

B

If you want to earn a real interest rate of 3% on money you lend, and you expect that inflation will be 2%, what nominal rate of interest will you charge? A) 1% B) 5% C) 6% D) 9%

B

Monetary policy refers to the actions the A) President and Congress take to manage the money supply and interest rates to pursue their economic objectives. B) Federal Reserve takes to manage the money supply and interest rates to pursue its macroeconomic policy objectives. C) President and Congress take to manage government spending and taxes to pursue their economic objectives. D) Federal Reserve takes to manage government spending and taxes to pursue its economic objectives.

B

Suppose the economy is at point A. If the economy experiences a supply shock, where will the eventual short-run equilibrium be? A) A B) B C) C D) D

B

The CPI in 1990 was 131, and the CPI in 2010 was 218. If you earned a salary of $40,000 in 1990, what would be a salary with equivalent purchasing power in 2010? A) $45,977 B) $66,565 C) $87,200 D) $143,486

B

The curve showing the short-run relationship between the unemployment rate and the inflation rate is called A) the monetary policy curve. B) the Phillips curve. C) the Sargent curve. D) the unemployment curve.

B

The natural rate of unemployment is the amount of unemployment A) associated with the business cycle. B) equal to frictional plus structural unemployment. C) that exists when the economy goes into recession. D) that exists when the economy is in an expansion.

B

The terms of trade refers to A) the rules and regulations that countries must adhere to when trading. B) the ratio at which a country can trade its exports for imports from other countries. C) the role of the government in overseeing international trade. D) a legal document that specifies the trade quantities agreed to by two countries.

B

When Tesla, a U.S. company, purchases Italian-made Pirelli tires for its automobiles, the purchase is A) both a U.S. and an Italian import. B) a U.S. import and an Italian export. C) a U.S. export and an Italian import. D) neither an export nor an import for either country.

B

When the economy enters a recessionary phase of the business cycle, unemployment tends to A) decrease. B) increase. C) be unchanged. D) change in the same direction as the rate of inflation.

B

Which of the following best describes an assumption economists make about human behavior? A) They believe that individuals act rationally all the time in all circumstances. B) They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time. C) They assume that people take into account the question of fairness in all decisions they make. D) They assume that individuals act randomly.

B

Which of the following is considered a negative supply shock? A) increasing investment in the economy causes the capital stock to rise B) an unexpected increase in the price of natural gas C) a decline in wages D) an improvement in technology

B

Which of the following is counted in GDP? A) the value of goods and services produced in the underground economy B) the cost of a speed boat purchased by drug smugglers C) the value of do-it-yourself work D) the value of leisure

B

Which of the following will not shift the demand curve for a good? A) an increase in population B) an increase in the price of the good C) a decrease in the price of a substitute good D) an increase in consumer incomes

B

Which was the first company during the financial crisis that the government allowed to fail? A) AIG B) Lehman Brothers C) Bear Stearns D) Fannie Mae

B

7.Technological change is shown in the figure above by the movement from A) B to C. B) B to D. C) B to E. D) B to A.

C

An economic expansion tends to cause the federal budget deficit to ________ because tax revenues ________ and government spending on transfer payments ________. A) increase; rise; falls B) increase; fall; rises C) decrease; rise; falls D) decrease; fall; rises

C

Currency $1000 Checking Account Balances $2,000 Savings Account Balances Small-Denomination Time Deposits $6,000 Noninstitutional Money Market Fund Shares $7,000 Consider the information above for a simple economy. Assume there are no traveler's checks. M1 in this simple economy equals A) $1,000. B) $2,000. C) $3,000. D) $8,000.

C

Disposable personal income is defined as A) personal income less personal taxes plus indirect sales taxes. B) personal income less transfer payments plus personal taxes. C) personal income less personal taxes. D) personal income less depreciation.

C

If national saving decreases, A) the sum of domestic investment and net exports must increase. B) the sum of domestic investment and foreign investment must increase. C) the sum of domestic investment and foreign investment must decrease. D) foreign investment must increase to cover the loss.

C

2006 2013 Product Quantity Price Quantity Price Movies 20 $6.00 30 $7.00 Burgers 100 2.00 90 2.50 Bikes 3 1,000.00 6 1,100.00 A very simple economy produces three goods: movies, burgers, and bikes. The quantities produced and their corresponding prices for 2006 and 2013 are shown in the table above. Refer to Table 8-17. What is nominal GDP in 2013? A) $3,320 B) $3,690 C) $6,360 D) $7,035

D

According to the quantity theory of money, if the money supply grows at 6%, real GDP grows at 2%, and the velocity of money is constant, then the inflation rate will be A) 8%. B) 6%. C) 4%. D) 2%.

D

Consider the following data for a closed economy: Y = $12 trillion C = $8 trillion I= $2 trillion G = $2 trillion TR = $2 trillion T = $3 trillion Based on the information above, what is the level of public saving? A) $0 B) $1 trillion C) $2 trillion D) negative $1 trillion (a deficit of $1 trillion)

D

Consumption expenditures $800 Investment expenditures 200 Government purchases 300 Exports 100 Imports 200 Wages 800 Refer to Table 8-3. Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals A) $2,200. B) $1,600. C) $1,400. D) $1,200.

D

Developing countries with low saving rates and poor levels of health and education are likely to experience A) high levels of foreign direct investment. B) easy access to financial backing from banks. C) rapid growth in household incomes. D) low rates of growth in real GDP per capita.

D

If the Fed pursues an expansionary monetary policy, assuming no crowding out, investment in the United States will ________ and net exports will ________. A decrease; decrease B) decrease; increase C) increase; decrease D) increase; increase

D

If the Fed raises the interest rate, this will ________ inflation and ________ real GDP in the short run. A) reduce; raise B) increase; lower C) increase; raise D) reduce; lower

D

If the number of unemployed workers is 200 million, the number of employed workers is 300 million, and the working-age population is 800 million, what is the labor force participation rate? A) 12.5% B) 37.5% C) 40% D) 62.5%

D

If the quantity demanded for a product exceeds the quantity supplied, the market price will rise until A) the quantity demanded equals the quantity supplied. The product will then no longer be scarce. B) quantity demanded equals quantity supplied. The equilibrium price will then be greater than the market price. C) only wealthy consumers will be able to afford the product. D) quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.

D

In recent years the cost of producing wines in the U.S. has increased largely due to rising rents for vineyards. At the same time, more and more Americans prefer wine over beer. Which of the following best explains the effect of these events in the wine market? A) The supply curve has shifted to the left and the demand curve has shifted to the right. As a result there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price. B) Both the supply and demand curves have shifted to the right. As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity. C) Both the supply and demand curves have shifted to the right. As a result, there has been an increase in both the equilibrium price and the equilibrium quantity. D) The supply curve has shifted to the left and the demand curve has shifted to the right. As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

D

Purchasing power parity is the theory that, in the long run, exchange rates should be at a level such that equivalent amounts of any country's currency A) will equalize nominal interest rates across countries. B) are valued inversely relative to the size of its GDP. C) should earn the same real rate of return. D) allow one to buy the same amount of goods and services.

D

Refer to the above figure. Suppose the economy is at point A in the figure above. Which of the following is true? A) The short-run Phillips curve will shift to the right. B) The short-run Phillips curve will shift to the left. C) The long-run Phillips curve will shift to the left. D) Actual inflation and expected inflation are the same. E) The long-run Phillips curve will shift to the right.

D

Refer to the figure above. An increase in taxes would be depicted as a movement from ________, using the static AD-AS model in the figure above. A) E to B B) B to C C) A to B D) B to A E) C to D

D

Suppose Bill Gates deposits $20 million into his checking account at Wells Fargo Bank. If the required reserve ratio is 10 percent, what is the maximum change in money supply? A) -$200 million B) -$180 million C) $2 million D) $180 million E) $200 million

D

The balance of payments includes all of the following accounts except A) the current account. B) the financial account. C) the capital account. D) the national debt account.

D

The current Federal Reserve Chairperson is A) Henry Paulson B) Ben Bernanke C) Milton Friedman D) Janet Yellen

D

The tradeoff that the Federal Reserve and Department of the Treasury of the U.S. faced at the beginning of the financial crisis of 2008 was between A) Increasing interest rates and decreasing savings B) Moral hazard and externalities C) Depreciation and systemic risk D) Systemic risk and moral hazard

D

The two central government figures during the financial crisis(starting in 2008), the Fed chair and the Treasury secretary, were A) Janet Yellen and Joseph Biden B) Tim Geithner and Ben Bernanke C) Hank Paulson and Janet Yellen D) Ben Bernanke and Hank Paulson

D

Which of the following is a function that money serves? A) medium of exchange B) unit of account C) store of value D) All of the above are correct.

D

Which of the following is correct about the economic decisions consumers, firms, and the government have to make? A) Governments may face the problem of shortages but not scarcity in making economic decisions. B) Only individuals face scarcity; firms and the government do not. C) Firms and the government face scarcity, individuals only face shortages. D) Each faces the problem of scarcity which necessitates trade-offs in making economic decisions.

D

Which of the following models relies on emphasizing the importance of sticky wages and prices? A) the monetarist model B) the new classical model C) the real business cycle model D) the new Keynesian model

D

Year Real GDP (billions of 2000 dollars) 2010 $10,100 2011 10,950 2012 11,425 2013 11,300 Using the table above, what is the approximate growth rate of real GDP from 2011 to 2012? A) 1% B) 2% C) 3% D) 4%

D

The economic analysis of minimum wage involves both normative and positive analysis. Consider the following consequences of a minimum wage: a. The minimum wage law causes unemployment. b. Unemployment would be lower without a minimum wage law. c. Minimum wage laws benefit some workers and harm others. d. The minimum wage should be more than $7.25 per hour. Which of the consequences above are positive statements and which are normative statements? A) a, b, and c are positive statements and d is a normative statement. B) a and b are positive statements, c and d are normative statement. C) Only a is a positive statement, b, c and d are normative statements. D) a and c are positive statements, b and d are normative statements.

A

When the market value of the dollar rises relative to other currencies around the world, we say that A) the dollar has appreciated. B) the dollar has depreciated. C) the demand for dollars has increased. D) the supply of dollars has increased.

A

Which of the following explains the ability of the U.S. economy to avoid diminishing marginal returns and experience accelerating growth in the early to mid-20th century? A) continuing technological change B) immigration C) additions of a greater amount of capital of the same quality D) a decrease in the quality of labor

A

Which of the following explains why purchasing power parity does not completely explain long-run fluctuations in exchange rates? A) Some goods and services produced in any country are not traded internationally. B) Consumer preferences for goods and services across countries are very similar. C) Most countries do not impose barriers to trade. D) Most countries have free markets with little, if any, government regulation.

A

Which of the following policies would not help promote economic growth? A) a law requiring that the funds in an individual retirement account be taxed B) a law restricting elected officials from accepting expensive gifts and trips from private individuals C) a law that funds prenatal care for all expectant mothers D) a law that subsidizes research in nanotechnology

A

Which of the following would be most likely to induce Congress and the president to conduct expansionary fiscal policy? A significant A) decrease in investment spending. B) decrease in oil prices. C) increase in consumption spending. D) increase in net exports.

A

Year CPI (1982-1984 = 100) 2012 175 2013 180 Refer to Table 9-7. Suppose that the data in the table above reflect price levels in the economy. What is the inflation rate between 2012 and 2013? A) 2.9% B) 3.5% C) 4.6% D) 5% E) 7.5%

A

A critical function of the government in facilitating the operation of a market economy is A) producing goods and services for low income households. B) setting up and enforcing private property rights. C) ensuring an equal distribution of income to all citizens. D) controlling the market prices of food items.

B

Ceteris paribus (holding everything else constant), an increase in the expected future price level would be represented by a movement from A) SRAS1 to SRAS2. B) SRAS2 to SRAS1. C) point A to point B. D) point B to point A.

B

Deflation refers to A) a decrease in the rate of inflation. B) a falling price level. C) Both A and B are correct. D) None of the above is correct.

B

Examples of comparative advantage show how trade between two countries can make each better off. Compared to their pre-trade positions, trade makes both countries better off because in each country A) total employment is greater. B) total consumption of goods is greater. C) wages are higher. D) total welfare is greater.

B

If real GDP in the United States is growing at an annual rate of 3.2% per capita and Bolivia's real GDP per capita is growing at a rate of 1.3%, which of the following would we expect in the long run? Assume real GDP per capita in the United States begins at a level above that of real GDP per capita in Bolivia. A) Real GDP per capita in the United States will always be 1.9% higher than real GDP per capital in Bolivia. B) The difference between the level of real GDP per capita in the United States and real GDP per capita in Bolivia will shrink over time. C) The difference between the level of real GDP per capita in the United States and real GDP per capita in Bolivia will increase over time. D) The difference between the level of real GDP per capita in the United States and real GDP per capita in Bolivia will always be $1.9 trillion.

C

Increasing opportunity cost along a bowed out production possibilities frontier occurs because A) of inefficient production. B) of ineffective management by entrepreneurs. C) some factors of production are not equally suited to producing both goods or services. D) of the scarcity of factors of production.

C

Poorly timed discretionary policy can do more harm than good. Getting the timing right with fiscal policy is generally A) less difficult than with monetary policy. B) far less difficult than with monetary policy. C) more difficult than with monetary policy. D) about the same difficulty as with monetary policy.

C

The recession of 2007-2009 made many consumers pessimistic about their future incomes. How does this increased pessimism affect the aggregate demand curve? A) This will move the economy up along a stationary aggregate demand curve. B) This will move the economy down along a stationary aggregate demand curve. C) This will shift the aggregate demand curve to the left. D) This will shift the aggregate demand curve to the right.

C

The term "market" in economics refers to A) a place where money changes hands. B) a legal institution where exchange can take place. C) a group of buyers and sellers of a product and the arrangement by which they come together to trade. D) an organization which sells goods and services.

C

What two factors are the keys to determining labor productivity? A) the business cycle and the growth rate of real GDP B) the growth rate of real GDP and the interest rate C) technology and the quantity of capital per hour worked D) the average level of education of the workforce and the price level

C

When individuals use all available information about an economic variable to make a decision, expectations are A) underestimates of reality. B) accurate. C) rational. D) overestimates of reality.

C