Macro Midterm 3

What is one difference between stocks and bonds? A) Bonds are purchased at a bank, while stocks are purchased through the federal government. B) Stocks earn a higher rate of return than bonds. C) Stocks represent partial ownership in a firm, while bonds do not. D) Bonds earn a higher rate of return than stocks.

C) Stocks represent partial ownership in a firm, while bonds do not.

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 down along a stationary aggregate demand curve. B) This will move the economy up 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) This will shift the aggregate demand curve to the left.

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. export and an Italian import. C) a U.S. import and an Italian export. D) neither an export nor an import for either country.

C) a U.S. import and an Italian export.

25) Refer to Figure 18-3. Consider the market for U.S. dollars against the Japanese yen shown above. An event which could have caused the changes shown in the graph would be (exchange rate yen/$ on y axis, q of dollars on x axis, one demand, supply shifts to the left) A) speculators expect the dollar to depreciate in value in the near future. B) an increase in U.S. real income. C) a decrease in Japanese interest rates. D) an economic expansion in the United States.

C) a decrease in Japanese interest rates.

During the Chinese experience with pegging the yuan to the dollar, the yuan was ________. As a result, there was a ________ of dollars on the market, and the Chinese government had to purchase dollars to maintain the peg. A) overvalued; surplus B) overvalued; shortage C) undervalued; shortage D) undervalued; surplus

D) undervalued; surplus

Madison and Austin own Café Ole'. Table 7-2 lists the number of empanadas and tacos Madison and Austin can each make in one hour. M=30 E, M= 50 T A= 24 E, A= 32 T Refer to Table 7-2. Select the statement that accurately interprets the data in the table. A) Madison has an absolute advantage in making empanadas and tacos. B) Madison has an absolute advantage in making tacos and Austin has an absolute advantage in making empanadas. C) Austin has an absolute advantage in making empanadas and tacos. D) Madison has an absolute advantage in making empanadas and Austin has an absolute advantage in making tacos

A) Madison has an absolute advantage in making empanadas and tacos

If the dollar appreciates against the Mexican peso A) U.S. exports to Mexico become more expensive. B) Mexican imports to the U.S. become more expensive. C) U.S. exports to Mexico become less expensive. D) The value of Mexican imports to the United States does not change.

A) U.S. exports to Mexico become more expensive.

19) Which of the following is the best example of a tariff? A) a $150 fee imposed on all imported residential air conditioners B) a subsidy from the U.S. government to domestic manufacturers of residential air conditioners to enable them to compete more effectively with foreign producers C) a limit on the quantity of residential air conditioners that can be imported from a foreign country D) a tax placed on all residential air conditioners sold in the domestic market to help offset the impact of emissions on the environment

A) a $150 fee imposed on all imported residential air conditioners

An increase in the demand for loanable funds will occur if there is A) an increase in expected profits from firm investment projects. B) an increase in the nominal interest rate accompanied by an equal increase in inflation. C) an increase in the real interest rate. D) a decrease in the real interest rate.

A) an increase in expected profits from firm investment projects.

Over the past several decades there has been rapid growth in international trade. This growth has been due to all but one of the following factors. Which factor has not contributed to the growth of international trade? A) an increase in the tariffs charged on many goods B) a reduction in shipping costs C) favorable changes in government policies D) the spread of reliable communications

A) an increase in the tariffs charged on many goods

Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy. As a result A) the long-run aggregate supply curve will shift to the right. B) the economy will move up along the long-run aggregate supply curve. C) the economy will move down along the long-run aggregate supply curve. D) the long-run aggregate supply curve will shift to the left.

A) the long-run aggregate supply curve will shift to the right.

Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. Table 7-6 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade. Refer to Table 7-6. If the actual terms of trade are 1 belt for 1.5 swords and 50 belts are traded, how many swords will Morocco gain compared to the "without trade" numbers? A) 0 B) 15 C) 60 D) 75

B) 15

Refer to Figure 13-1 (price level on y axis, real gdp on x axis, AD1 to the left of Ad2, point A is higher on AD1 than point B, point a and b both on AD1). Ceteris paribus, a decrease in government spending would be represented by a movement from A) AD1 to AD2. B) AD2 to AD1. C) point A to point B. D) point B to point A.

B) AD2 to AD1.

How do lower taxes affect aggregate demand? A) They reduce disposable income, consumption, and aggregate demand. B) They increase disposable income, consumption, and aggregate demand. C) They increase corporate investment and aggregate demand. D) They increase aggregate supply and thus increase aggregate demand as well.

B) They increase disposable income, consumption, and aggregate demand.

Which of the following best describes the "wealth effect"? A) When the price level falls, the real value of household wealth falls. B) When the price level falls, the real value of household wealth rises. C) When the price level falls, the nominal value of household wealth rises. D) When the price level falls, the nominal value of household wealth falls

B) When the price level falls, the real value of household wealth rises.

Which of the following would not be considered a positive addition to household wealth? A) 1,000 shares of Microsoft stock B) a credit card balance C) the balance in your checking account D) the equity in one's home

B) a credit card balance

If the Chinese yuan was declining in value relative to other currencies, this would cause a ________ for the Chinese economy. A) movement to the right along the aggregate demand curve B) a shift to the right of the aggregate demand curve C) a shift to the left of the aggregate demand curve D) movement to the left along the aggregate demand curve

B) a shift to the right of the aggregate demand curve

If Ebenezer Scrooge spends rather than saves his vast wealth, he will A) promote economic growth because he is increasing the amount of funds available for investment. B) slow economic growth because he is reducing the amount of funds available for investment. C) slow economic growth because he is increasing the amount of funds available for investment. D) promote economic growth because he is decreasing the amount of funds available for investment.

B) slow economic growth because he is reducing the amount of funds available for investment.

If the exchange rate changes from $2.00 = £1 to $2.01 = £1 then ______ A) the British pound has depreciated. B) the dollar has depreciated. C) the dollar has appreciated. D) the British pound has stayed constant in value.

B) the dollar has depreciated.

In order to avoid the imposition of other types of trade barriers, foreign producers will sometimes agree to limit their exports to a country. What are these types of agreements called? A) involuntary export restraints B) voluntary export restraints C) sanctions D) implicit quotas

B) voluntary export restraints

You're traveling in Ireland and are thinking about buying a new digital camera. You've decided you'd be willing to pay $125 for a new camera, but cameras in Ireland are all priced in euros. If the camera you're looking at costs 115 euros, under which of the following exchange rates would you be willing to purchase the camera? (Assume no taxes or duties are associated with the purchase.) A) 0.56 euros per dollar B) 0.89 euros per dollar C) 0.92 euros per dollar D) You would purchase the new camera at any of the above exchange rates.

C) 0.92 euros per dollar

Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. Table 7-6 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade. Refer to Table 7-6. If the actual terms of trade are 1 belt for 1.5 swords and 50 belts are traded, how many swords will Estonia consume? A) 75 B) 100 C) 125 D) 200

C) 125

Madison and Austin own Café Ole'. Table 7-2 lists the number of empanadas and tacos Madison and Austin can each make in one hour. M=30 E, M= 50 T A= 24 E, A= 32 T Refer to Table 7-2. Select the statement that accurately interprets the data in the table. A) Austin has an absolute advantage in making tacos. B) Madison has a comparative advantage in making empanadas. C) Austin has a comparative advantage in making empanadas. D) Austin has a comparative advantage in making empanadas and making tacos.

C) Austin has a comparative advantage in making empanadas.

Which of the following is not an advantage to a country of choosing to fix its exchange rate against a major currency, rather than choosing a floating exchange rate? A) Pegging reduces the uncertainty caused by currency fluctuations and thereby simplifies business planning. B) Pegging insures that interest payments stemming from foreign loans do not fluctuate with the value of the currency. C) Pegging allows the country more flexibility in conducting monetary policy. D) Pegging helps avoid inflation in imported goods caused by currency depreciation for countries with significant levels of imports.

C) Pegging allows the country more flexibility in conducting monetary policy.

The Congressional Budget Office reported that federal budget deficits in the United States were likely to increase during the next decade, and due to these higher deficits, "the nation's capital stock ultimately would be smaller, and productivity and income would be lower than would be the case if the debt was smaller." This higher budget deficit would be represented graphically by A) a movement to the left along the supply curve for loanable funds. B) a movement to the right along the supply curve for loanable funds. C) a shift in the supply curve for loanable funds to the left. D) a shift in the supply curve for loanable funds to the right.

C) a shift in the supply curve for loanable funds to the left.

Changes in the price level A) decrease the level of aggregate supply in the long run. B) increase the level of aggregate supply in the long run only at very high levels of output C) do not affect the level of aggregate supply in the long run. D) increase the level of aggregate supply in the long run.

C) do not affect the level of aggregate supply in the long run.

The demand for loanable funds is downward sloping because the ________ the interest rate, the ________ the number of profitable investment projects a firm can undertake, and the ________ the quantity demanded of loanable funds. A) lower; smaller; greater B) greater; smaller; greater C) lower; greater; greater D) greater; greater; greater

C) lower; greater; greater

The current exchange rate system in the United States is best described as a A) silver standard. B) fixed exchange rate system. C) managed float exchange rate system. D) gold standard.

C) managed float exchange rate system.

Workers and firms both expect that prices will be 2.5% higher next year than they are this year. As a result A) aggregate demand will increase by 2.5%. B) workers will be willing to take lower wages next year, but not lower than a 2.5 percent decrease. C) the short-run aggregate supply curve will shift to the left as wages increase. D) the purchasing power of wages will rise if wages increase by 2.5%.

C) the short-run aggregate supply curve will shift to the left as wages increase.

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 welfare is greater. B) wages are higher. C) total consumption of goods is greater. D) total employment is greater.

C) total consumption of goods is greater.

Whenever a buyer and a seller agree to trade, both must believe they will be made better off A) unless the buyer resides in a different country than the seller. International trade may make the buyer or seller worse off. B) unless one party is richer than the other. C) whether the buyer and seller live in the same (or different) city or country. D) only if the buyer and seller live in countries with market economies.

C) whether the buyer and seller live in the same (or different) city or country.

Refer to Figure 10-5. "Crowding out" of firm investment as a result of a budget deficit is illustrated by the movement from ________ in the graph above. (graph has one demand, supply 1 shifting left to supply 2, A is (D,S1) B is (D,S2) and C is shift along S2 A) C to A B) B to A C) B to C D) A to B

D) A to B

Under which of the following circumstances would the government be running a deficit? A) G = $5 trillion T = $7 trillion TR = $1 trillion B) G = $7 trillion T = $7 trillion TR = $0 C) G = $7 trillion T = $10 trillion TR = $3 trillion D) G = $5 trillion T = $5 trillion TR = $1 trillion

D) G = $5 trillion T = $5 trillion TR = $1 trillion

Madison and Austin own Café Ole'. Table 7-2 lists the number of empanadas and tacos Madison and Austin can each make in one hour. M=30 E, M= 50 T A= 24 E, A= 32 T Refer to Table 7-2. Select the statement that accurately interprets the data in the table. A) Austin's opportunity cost for making tacos and making empanadas are both greater than Madison's. B) Madison has a greater opportunity cost than Austin for making tacos. C) Austin has a greater opportunity cost than Madison for making empanadas. D) Madison's opportunity cost for making tacos is less than Austin's.

D) Madison's opportunity cost for making tacos is less than Austin's.

In a closed economy, public saving is equal to which of the following? (Y = GDP, C = Consumption, G = Government purchases, T = Taxes, and TR = Transfers) A) Y - C - T + TR B) Y - C - T C) Y - G - T D) T - G - TR

D) T - G - TR

Financial securities that represent promises to repay a fixed amount of funds are known as A) insurance premiums. B) stocks. C) pension funds. D) bonds.

D) bonds.

f the value of the dollar declined in the second half of 2021, this would have resulted in ________ dollar prices for goods imported into the United States and ________ prices in foreign currencies for U.S. goods exported to other countries. A) higher; higher B) lower; lower C) lower; higher D) higher; lower

D) higher; lower

Under the gold standard, the government must have enough gold to back up any A) foreign currency deposits in its central bank. B) change in its currency's exchange rate. C) increase in money demand. D) increase in the money supply.

D) increase in the money supply.

In 2005, Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico. This subsequently drove up natural gas, gasoline, and heating oil prices. As a result, this should A) shift the short-run aggregate supply curve to the right. B) move the economy up along a stationary short-run aggregate supply curve. C) move the economy down along a stationary short-run aggregate supply curve. D) shift the short-run aggregate supply curve to the left.

D) shift the short-run aggregate supply curve to the left.

If the economy receives an influx of new workers from immigration, A) we will move up along the long-run aggregate supply curve. B) we will move down along the long-run aggregate supply curve. C) the long-run aggregate supply curve will shift to the left. D) the long-run aggregate supply curve will shift to the right.

D) the long-run aggregate supply curve will shift to the right.