Senior Macro-Economics Final

Which of the following is an example of foreign direct investment?

A United States automobile manufacturer building a steel plant in Russia

Which of the following changes will have the smallest expansionary effect on aggregate demand in the short run?

A decrease in taxes of $100

If maginal business tax rates are decreased, how will aggregate supply and employment change in the long run?

Aggregate Supply: Increase Employment: Increase

Suppose that the Federal Reserve buys $400 billion worth of government securities from the public. If the required reserve ratio is 20 percent, the maximum increase in the money supply is:

$2,000 billion

Based on the economic figures in the table above , what is the value of the GDP in billions of dollars?

$4,500

Assume that the required reserve ratio is 10 percent, banks keep no excess reserves, and borrowers deposit all loans made by banks. Suppose you have saved $100 in cash at home and decided to deposit it in your checking account. As a result of your deposit, the money supply can increase by a maximum of:

$900

The diagram below shows a linear production possibilities curve for a country. If the economy is currently producing 10 units of good A and 90 units of good B, the opportunity cost of increasing the production of good A from 10 units to 20 units is how many units of good B?

10

Suppose real GDP in Macroland was $400 billion in 2011 and $450 billion in 2012. Then the growth rate of real GDP between 2011 and 2012 was:

12.5%

At what real exchange ratio , also reffered to as the Terms of trade,between grain (G) and steel (S) would both Alpha and Beta find it mutually advantageous to specialize and trade?

1G = 1.5S

Which of the following best explains the increase in national income the results from equal increases in government spending and taxes?

Consumers do not reduce their spending by the full amount of the tax increase

Aggregate demand may be measured by adding:

Consumption, investment, government spending, and net exports

A country can have an increased surplus in its balance of trade as a result of

Decling imports and rising exports

A reduction in inflation can best be achieved by which of the following combinations of fiscal and monetary policy?

Fiscal Policy= increased taxes Monetary Policy= sell government bonds

If the govemrnet simultaneously engages in expansionary monetary and fiscal policies, whci of the following is the likely effect on interest rates and unemployment?

Interest rates are indeterminate Unemployment decreases

The Federal Reserve can cause an increase in interest rates in an attempt to:

Reduce inflation

An increase in which of the following would LEAST likely increase labor productivity?

The labor force

Which of the following is NOT a function of fiat money?

a source of intrinsic value

A barter economy is different from a money economy in that a bater economy

involves higher costs for each transaction

Long-run economic growth requires

political stability and respect for property rights

An industry historically used employees with specific skills. if the industry experiences technological advances the require new skills, there will most likely be :

structural unemployment

If labor costs rise in the automobile industry, what will happen to the car prices and the quantity sold?

the car prices will increase and the quantity sold will decrease

Suppose that real GDP grows at 2% per year, for real GDP to approximately double it will take?

35 years because the rule of 70 states that the number of years it takes for a variable to double is equal to 70 divided by the annual growth rate of the variable

Based on the information in the table above, what is the unemployment rate for Country X?

6.0%

The annual inflation rate is expected to be 5 percent over the next 3 years. Juan plans to take out a 3-year loan to purchase an automobile. If Juan decides not to take out the loan if the real interest rate exceeds 3 percent, the highest nominal interest rate he is willing to pay is:

8 percent

Which of the following would best explain an inward shift of the production possibilities curve?

A decrease in the quality of human capital

Which of the following is most likely to occur if the Federal Reserve engages in open market operation to reduce inflation?

A decrease in the reserves in the banking system

The required reserve ratio is 0.2 and the Federal Reserve sells $1 million in securities. If there are no leakages and banks do not hold excess reserves, then which of the following is the change in the money supply?

A decrease of $5 million

A commercial bank's ability to create money depends on which of the following?

A fractional reserve banking system

Which of the following individuals is classified as unemployed?

A recent college graduate who is looking for her first job

Which of the following statements is true?

An aggregate production function indicates how output per worker depends on the level of physical capital per worker, human capital per worker, and the state of the technology

In the graph above, AD denotes the aggregate demand curve, SRAS the short-run aggregate supply curve. If no policy action were taken, which of the following changes would move the economy to it's long run equilibrium?

An increase in wages

Which of the following would be included as a liability on a commercial bank's balance sheet?

Demand Deposits

According to the graph above, an increase in aggregate supply will most likely cause income and employment to change in which of the following ways?

Income and Employment both increase

An increase in which of the following would cause the aggregate demand curve to shift to the left?

Income taxes

An increase in which of the following is most likely to promote economic growth?

Investment tax credits

Gross Domestic Product has been criticized as a measure of well-being because it fails to take into account which of the following?

The distribution of Income

If economic agents perfectly anticipate policy changes and if all prices including wages are completely flexible, which of the following will be true in the long run?

There will be no trade-off between inflation and unemployment.

A high marginal propensity to consume implies which of the following?

a low marginal propensity to save

In the measurement of gross domestic product, investment includes spending by:

business on capital goods and changes in inventories

The Federal Reserve decreases the federal funds rate by:

buying government bonds on the open market

A short-run Phillips curve shows the inverse relationship between:

inflation and unemployment

A stimulative fiscal policy combined with a restrictive monetary policy will necessarily cause

interest rates to rise

If the real interest rate in the United States increases relative to that of the rest of the world, capital should flow:

into the United States and the dollar will appreciate

An advance in technology will cause the:

long run aggregate supply curve to shift to the right

On a short-run Phillips Curve, high rates of inflation coincide with:

low unemployment rates

If a country's economy is operating below the full-employment level of output at a very low inflation rate, the central bank of the country is most likely to:

lower the discount rate and buy bonds in the open market to generate an increase in output

In one year, spending on consumption, investment, and government purchases was equal to 103 percent of a country's gross domestic product. This would be possible only if:

net exports were negative

When the average price level increases by 10 percent in a given year, which of the following must increase by 10 percent for real output to remain constant?

nominal national income

The price of one's nations currency expressed in terms of another nation's currency is called:

the exchange rate

Crowding out refers to the decrease in:

Private investment due to increased borrowing by the government

Which of the following would cause the short-run aggregate supply curve to shift to the right?

A decrease in the expected price level.

Which of the following will most likely lead to a decrease in inflationary expectations?

A decrease in the money supply

Which of the following most undermines the ability of a nations currency to store value?

A decrease in the purchasing power of the currency

Which of the following household purchases will be counted as a part of gross private investment in a country's gross domestic product?

A newly constructed home

An increase in personal income taxes will most likely cause aggregate demand and aggregate supply to change in which of the following ways in the short run?

AD = decrease AS = no change

When firms restructure their operations to decrease production costs, the aggregate supply curve, the price level, and real output will change in which of the following ways?

Aggregate Supply Curve- shift to the right Price Level -Decrease Real output- Increase

Which of the following statements best describes the impact of a decrease in Japanese income on aggregate demand in the United States?

Aggregate demand will decrease because the demand for United States exports decreases

If the government increases expenditures on goods and services and increases taxation by the same amount, which of the following will occur?

Aggregate demand will increase

If country Alpha has been experiencing a higher inflation rate than Country Beta over the past decade, which of the following is true?

Alphas currency will have depreciated relative to Beta's currency

Which of the following changes would cause an economy's aggregate demand curve to shift to the right?

An increase in autonomous consumption spending

Which of the following will cause the United States dollar to depreciate relative to the Euro?

An increase in household income in the United States

Which of the following will most likely occur as a result of an increase in labor productivity in an economy?

An increase in output and a decrease in inflation

Which of the following is true when the velocity of money falls?

An increase in the money supply will have less effect on nominal gross national product

Assume that an economy is currently in long-run equilibrium, and the short-run aggregate supply curve is upward sloping. An adverse supply shock, such as a drought, will most likely cause which of the following in the economy in the short run?

An increase in the price level and a decrease in the real wage

A decrease in the prices of inputs will cause which of the following to occur in the short run?

An increase in the short-run aggregate supply and a decrease in the price level

If a worker's nominal wage rate increases from $10 to $12 per hour and at the same time the general price level increases by 10 percent, the worker's real wage has:

Approximately increased by 10%

According to the graph above, which of the following is true about the long-run equilibrium of the economy depicted?

As wages increase, the short-run aggregate supply curve will shift to the left to restore long-run equilibrium

To counteract a recession, the Federal Reserve should:

Buy securities on the open market and lower the discount rate

Expansionary monetary policy can affect the economy through which of the following chains of events?

Buying bonds increases the money supply, which lowers the interest rate

In a closed economy with only lump-sum taxation, if the marginal propensity to consume is equal to .75, a $70 billion increase in government spending could cause a maximum increase in output of :

$280 billion

Assume that Jane's marginal propensity to consume equals 0.8, and that in 2004 Jane spent $36,000 from her disposable income of $40,000. If her disposable income in 2005 increased to $50,000, her consumption spending increased by:

$8,000

Suppose that in an economy with lump-sum taxes and no international trade, autonomous investment spending increases by $2 million. if the marginal propensity to consume is .75, equilibrium gross domestic product will change by a maximum of:

$8.0 million

Suppose that all banks keep only the minimum reserves required by law and that there are no currency drains. The legal reserve requirement is 10 percent. If Maggie deposits the $100 bill she received as a graduation gift from her grandmother into her checking account, the maximum increase in the total money supply will be:

$900

Suppose that autonomous consumption is $400 and that the marginal propensity to consume is 0.8. If disposable income increases by $1,200 consumption spending will increase by:

$960

Based on the balance sheets above for thee different banks, which of the following is true, if the reserve requirement is 10 percent?

Bank B can increase its loans by $40

Before specialization and trade, the domestic opportunity cost of producing 1 ton of grain in Alpha and in Beta is which of the following?

1 ton of steel in Alpha AND 2 tons of steel in Beta

Assume that the nominal interest rate is 10 percent. if the expected inflation rate is 5 percent, the real interest rate is:

5%

In the short run, which of the following would occur to bond prices and interest rates if a central bank bought bonds through open-market operations?

Bond prices would INCREASE Interest rates would DECREASE

A decrease in business taxes would lead to an increase in national income by increasing which of the following?

Both aggregate demand and aggregate supply

Which of the following could be a current account transaction?

A United States firm sells $500 million of its products to a Chinese company.

The value of which of the following is counted in the United States gross domestic product?

A car produced in the United States and sold in Europe

An economy increases its level of physical capital per worker by increasing the level of investment spending. This can be achieved by:

Both having the domestic residents spend less of their income on consumption while increasing their domestic saving...and borrowing foreign savings from residents of other countries

If the Federal Reserve pursues a contractionary monetary policy, output and the price level will change in which of the following ways in the short run?

Both will decrease in the short run

If the velocity of money is stable, the quantity theory of money predicts that an increase in the money supply will lead to a proportional:

increase in the nominal output

AN increase in net investment leads to faster economic growth because capital per worker and output per worker will change in which of the of the following ways?

Capital per worker= Increase Output per worker= Increase

With an increaser in the real interest rate, consumption and real gross domestic product will most likely change in which of the following ways?

Consumption will decrease while Real Gross Domestic Product Decreases

The consumer price index (CPI) is designed to measure changes in:

Cost of a select market basket of goods and services

Using equal amounts of labor hours, Country X and Country Y can each produce the number of watches and radios shown in the production possibilities curves above. Based on the information, which of the following is true?

Countries X and Y can engage in mutually advantageous trade by exchanging 1 watch for 1 radio

The table below shows the production alternatives of Country A and Country B for producing computers and cars with equal amounts of resources that are fully and efficiently employed.

Country B has an absolute advantage and comparative advantage in the production of computers.

Which type of unemployment would increase if workers lost their jobs because of a recession?

Cyclical unmeployment

If a French firm buys computers from the United States, there would be an increase in which of the following in the foreign exchange market?

Demand for United States dollars and supply of euros

If the exchange rate between the US dollar ($) and the British Pound changed from 2 dollars per 1 pound to 3 dollars per 1 pound, and domestic prices in both countries stayed the same, then the United States dollar would:

Depreciate, making the United States imports from Britain more expensive

If two nations specialize according to the law of comparative advantage and then trade with each other, which of the following would be true?

Each nation would increase its consumption possibilities

Suppose that the federal reserve is committed to keeping the nominal interest rate fixed. To maintain the interest rate target in the face of an expansionary fiscal policy, the Federal reserve can do which of the following?

Engage in open-market purchases

Which of the following can be expected to cause an increase in gross domestic product in the short run?

Equal increases in both taxes and government expenditures

The economy of a country is currently in equilibrium at point A in the diagram above. If the government does nothing and wages are flexible, which of the following will most likely occur in the long run?

Falling wages will shift the aggregate supply curve to the right, producing full employment.

Which of the following will lead to an increase in the United States GDP?

Foreign companies build new assembly plants in the United States.

An appropriate fiscal policy to combat a recession would be to increase which of the following?

Government spending

A country's government runs a budget deficit when which of the following occurs in a given year?

Government spending exceeds tax revenues

The graph above shows the macroeconomic conditions of Wattsonia. Many economists estimate that the natural rate of unemployment is 6 percent. If this is true and the current rate of unemployment is 5.1 percent, in what rang of real gross domestic product is the economy currently producing?

Greater than Y2

Which of the following is most likely to cause an increase in the international value of the United States dollar?

Higher United States real interest rates

Which of the following statements about the simple circular flow model of a market economy is correct?

Households are on the demand side of the product market and supply side of the resource market

For an economy consisting of households and businesses only, which of the following is consistent which the circular flow of income and production?

Households are suppliers of resources and consumers of goods and services

The table above indicates labor-hours needed to produce a single unit of each of two commodities in each of two countries. If labor is the only factor used to produce the commodities, which of the following statements must be correct?

I. County A has an absolute advantage in the production of both commodities, but a comparative advantage in the production of wheat III. Mutually advantageous trade can occur between the two countries when 2.5 units of fish are exchanged for one unit of wheat (both I and III, or letterD)

Assuming fixed exchange rates, if country Z's rate of inflation increases relative to its trading partners, Country Z's imports and exports will most likely change in which of the following ways?

Imports: decrease........Exports: increase

Which of the following combinations of changes in government spending and taxes in necessarily expansionary?

Increase Government spending an Decrease Taxes

With an upward-sloping short-run aggregate supply curve, an increase in government expenditure will most likely

Increase real gross domestic product

Which of the following is an example of fiscal policy?

Increasing government expenditures to build highways

Which of the following policy choices represents a combination of fiscal and monetary policies designed to bring the economy out of a recession?

Increasing government spending and decreasing the Federal funds rate

Which of the following groups would most likely gain from unanticipated inflation?

Individuals who have borrowed money at fixed interest rates

Assue that the world operates under a flexible exchange rate system. if the central bank of Mexico increases it's money supply but other countries do not change theirs, Mexico's inflation rate and the international value of the Mexican peso will most likely change in which of the following ways?

Inflation rate: increase International Value of Peso: Depreciate

A simultaneous increase in inflation and unemployment could be explained by an increase in which of the following?

Inlflationary expectations

With a constant money supply, if the demand for money decreases, the equilibrium interest rate and quantity of money will change in which of the following ways?

Interest rate will decrease and Quantity of money will not change

If the Federal government reduces its budget deficit when the economy is close to full employment, which of the following will most likely result?

Interest rates will decrease

Which of the following will most likely occur when the Federal Reserve buys government bonds on the open market?

Interest rates will decrease

Which of the following would indicate that economic growth has occurred?

The long-run aggregate supply curve shifts to the right

Which of the following sequences of events would occur if the Federal Reserve implemented contractionary monetary policy?

Interest rates would increase; investment and consumption spending would decrease; aggregate demand decreases; and output prices decrease.

Which of the following is true about marginal propensity to consume?

It determines the size of the simple spending multiplier

Which of the following his true of the quantity of money demanded?

It falls when interest rates rise, because the opportunity cost of holding money increases

Which of the following statements is true of unanticipated inflation?

It increases the economic well-being of net debtors

Which of the following is true about the national debt of the United States?

It is the accumulation of past and current budget deficits and surpluses

Which of the following is true of the long-run phillips curve?

It is vertical at the natural rate of unemployment

Which of the following is true of a horizontal aggregate supply curve?

It suggests that increases in output can occur without increases in price levels.

An increase in which of the following would cause an increase in aggregate supply?

Labor productivity

Advocates of a monetary rule recommend increasing the money supply at a rate that is equal to the rate of increase in which of the following?

Long-run real Gross Domestic Product

The transaction demand for money is very closely associated with money's use as a:

Medium of exchange

Assume that the economy is at full employment. Policymakers which to maintain the price level but want to encourage greater investment. Which of the following combinations of monetary and fiscal policies would best achieve this goal?

Monetary Policy= expansionary Fiscal Policy= contractionary

Which of the following occurs as investment becomes more responsive to changes in the interest rate?

Monetary policy becomes more effective at changing real gross domestic product

Unlike a market economy, a command economy uses:

More centralized planning in economic decision making

Which of the following changes in the supply of and the demand for a good will definitely result in a decrease in both the equilibrium price and quantity of the good?

No change in supply; Decrease in the demand

Under rational expectations, an announced expansion in the money supply will change nominal and real gross domestic products (GDP) in which of the following ways?

Nominal GDP: increase Real GDP: No change

Assume that the economy is in equilibrium. If aggregate demand increases, nominal interest rates and bond prices will most likely change in which of the following ways?

Nominal interest rates: Increase Bond Prices: Decrease

When an economy is operating below the full employment level of output, an appropriate monetary policy would be to increase which of the following?

Open market purchases of government bonds

In a economy in which all prices, including wages are completely flexible, an increase in labor productivity will result in which of the following changes in output and real wages?

Output and Real Wages both increase

An economy is in a short-run equilibrium at a level of output that is less than full-employment output. If there were no fiscal or monetary policy interventions, which of the following changes in output and price level would occur in the long run?

Output- increase Price Level -decrease

Which of the following individuals is considered officially unemployed?

Pat, who recently left a job to look for a different job in another town

Which of the flowing will be counted as unemployed by the United States Bureau of Labor Statistics?

Persons who were fired from their previous job and are actively seeking applying for work

The diagram above shows the production possibilities curve for an economy that produces only consumption and capital goods. All of the following statements about this economy are true EXCEPT:

Point X represents the most efficient combination of the two goods that can be produced by this economy

IN the short run, an expansionary monetary policy would most likely result in which of the following changes in the price level and real gross domestic product (GDP)?

Price Level would increase and the Real GDP would increase

Which of the following will occur in a competitive market when the price of a good is less than the equilibrium price?

Price will increase to eliminate the surplus and restore equilibrium

If an affective price floor is removed from a market for a good, then the price and quantity of the good sold will change in which of the following ways?

Price: decrease Quantity: Increases

If an economy is operating with significant unemployment, an increase in which of the following will most likely cause employment to increase and the interest rate to decrease?

Purchases of government bonds by the central bank (expansionary monetary policy)

Which Federal Reserve action can shift the aggregate demand curve to the left?

Raising the discount rate

In the long run, if aggregate demand decreases, real gross domestic product (GDP) and the price level will change in which of the following ways?

Real GDP: no change Price Level: Decrease

Based on the diagram above, what effect will an increase in the world supply of oil have on real gross domestic product and the aggregate price level?

Real Gross Domestic Product: Increase Price Level: Decrease

Under a flexible exchange rate system, the Indian rupee will appreciate against the Japanese yen when:

Real interest rates in India increase relative to those in Japan

Suppose that a national government increased deficit spending on good and services, increasing its demand for loanable funds. in the long run, this policy would most likely result in which of the following changes in this country?

Real interest rates increase, while investment decreases

One explanation for the downward slope of the aggregate demand curve is that when the price level increases, which of the following will decrease?

Real value of assets

If a certain combination of goods or services lies outside the production possibilities curve of an economy, which of the following is true?

Resources are not available to achieve that combination of goods or services

Which of the following has been most important in driving long-run economic growth?

Rising labor productivity or output per worker

Which of the following government policies can reduce the rate of inflation in the short run?

Selling bonds on the open market

Which of the following would be the initial impact of an economy if wages were to increase more than worker productivity?

Short-run Aggregate supply curve would shift to the left, increasing the price level

An increase in which of the following would be most likely to increase long-run growth?

Subsidies to businesses for purchases of capital goods

Assume that Canadian consumers increase their demand for Mexican financial assets. How would the international supply of Canadian dollars, the value of the Mexican peso relative to the Canadian dollar, and Canadian net exports to Mexico change?

Supply of Canadian Dollars: increase Value of Peso: Increase Canadian Net Exports: Increase

Which of the following would most likely stimulate economic growth?

Technological progress

The shifting of a country's production possibilities curve to the right will most likely cause:

The long-run aggregate supply curve to shift to the right

An appreciation of the United States dollar on the foreign exchange market could be caused by a decrease in which of the following?

The United States consumer price index

Which of the following will most likely occur if a government adopts an annually balanced budget rule that requires the government to eliminate any deficits or surpluses?

The automatic stabilizing effect of fiscal policy will be eliminated

Assume that the inflation rate of Country X is very high relative to the inflation rates in all of its trading partners. Which of the following is likely to happen to Country X's currency on the foreign exchange market?

The demand curve for the currency will shift to the left and the currency will depreciate

If nominal gross domestic product fell while real gross domestic product rose, which of the following must be true?

The inflation rate was negative

If the nominal gross domestic product (GDP) of the nation of Hypothetica increased in 2007 relative to the previous year, it must be true that in Hypothetica in 2007:

The price level and/ or the real GDP has increased

If a reduction in aggregate demand, is followed by an increase in aggregate demand, which of the following will definitely occur?

The price level will increase

Suppose that the consumer prie index rises from 100 to 200. From this information we may conclude that:

The prices in an average consumers market are doubled

An increase in government budget deficit is most likely to increase which of the following?

The real interest rate

The purchase of bonds by the Federal reserve will have the greatest effect of real gross domestic product if which of the following situations exists in the economy?

The required reserve ratio is low, and the interest rate has a large effect on investment spending

If the Federal Reserve sells a significant amount of government securities in the open market, which of the following will occur?

The total amount of loans made by commercial banks will decrease

Which of the following best describes human capital?

The training and education of workers

An increase in which of the following would reduce the United States balance-of-trade deficit?

The value of foreign currency relative to the United States dollar

Which of the following is true about changes in tax rates, changes in the level of government expenditures, and changes in the money supply?

They have different lag times between implantation of a policy and its effects on aggregate demand

Policies intended to reduce demand-pull inflation are most likely to increase which of the following in the short run?

Unemployment

Which of the following are the most likely short-run effects of an increase in government expenditures?

Unemployment Rate= decrease Inflation Rate= increase Real Gross Domestic Product= increase

For which of the following sets of unemployment and inflation rates will a central bank be most reluctant to increase the rate of growth in the money supply?

Unemployment rate of 5% AND Inflation rate of 10%

an increase in the international value of the United States dollar will tend to cause:

United States exports to fall

Which of the following is lily to occur following the depreciation of the United States dollar?

United States exports will increase

In an open economy, an increase in government budget defect tends to cause the international value of a country's currency and its trade defect to change in which of the following ways?

Value of Currency: Appreciates Trade Deficit: Becomes larger

If the real interest rates in the United States rise relative to rates in other countries, what will happen to the international value of the United States dollar and United States net exports?

Value of Dollar: Appreciate Net Exports: Decrease

In an economy with lump-sum taxes and no international trade, if the marginal propensity to consume is 0.8, which of the following is true?

When investment increases by $1, INCOME increases by a maximum of $5 ( to differentiate between other choices, this is the only solution containing four words that start with the letter I)

Which of the following statements concerning economic growth is true?

With long-run economic growth, there is an increase in aggregate supply

Stagflation is caused by:

a decrease in aggregate supply

Stagflation is most likely caused by:

a decrease in aggregate supply

when an economy is at full employment, which of the following will most likely create demand-pull inflation in the short run?

a decrease in the real rate of interest

An increase in aggregate demand will cause which of the following?

a movement along a given short-run phillips curve (note: this is not a shift, just movement along the curve)

Economic Growth is best defined as:

a sustained increase in real gross domestic product per capita

According to the short-run Phillips curve, a decrease in unemployment is expected to be accompanied by:

an increase in inflation

Which of the following best illustrates an improvement in a country's standard of living?

an increase in real per capita gross domestic product

Suppose that the government decerase taxes and at the same time the central bank decrease the discount rate. The combined actions will result in :

an increase in the real gross domestic product and an indeterminate change in the interest rate

All of the following changes will shift the investment demand curve to the right EXCEPT:

an increase in the real interest rate

Which of the following will lead to a decrease in a nation's money supply?

an increase in the reserve requirements

Hyperinflation is typical caused by:

continuous expansion of the money supply to finance government budget deficits

The amount of money that the public wants to hold in cash will

decrease if the interest rates increase

If the economy was in a severe recession, the most expansionary fiscal policy would be to:

decrease personal income taxes and increase government spending by EQUAL amounts

If the reserve requirement is 25 percent and banks hold no excess reserves, an open market sale of $400,000 of government securities by the Federal Reserve will:

decrease the money supply by up to $1.6 million

The value of a country's currency will tend to appreciate if:

demand for the country's exports increase

Which of the following would cause the official unemployment rate to understate the problem of unemployment?

discouraged workers

The theory of comparative advantage implies that Alpha would find it advantageous to:

export grain and import steel

Tariffs are different from assigned import quotas in that tariffs will:

generate additional revenue for the domestic government

Crowding out occurs when

government borrowing to finance its spending decreases private sector investment

Suppose the amount of human capital per and the state of the technology are held constant, As physical capital per worker increases, each additional increase in physical capital per worker leads to:

greater increases in output per worker

According to the short-run Phillips cure, lower inflation rates are associated with:

higher unemployment rates

The official unemployment rate understates the unemployment level in the economy because the official unemployment rate:

ignores underemployed and discouraged workers

Productivity increases can be attributed to:

increases in physical capital or the amount of machinery and office space available to workers; increases in human capital or the level of a workers education; technological advances

Which of the following actions by the Federal Reserve reduces the ability of the banking system to create money?

increasing the reserve requirement

In the narrowest definition of money, M1, savings accounts are excluded because they are:

not a medium of exchange

A leftward shift of the long-run aggregate supply curve is most likely consistent with an improvement in a country's standard of living if:

population decreases

When the Federal Reserve increases the money supply to stimulate aggregate demand, workers believe that this action will cause inflation in the future and ask for higher wages to offset the expected increase in inflation. This is an example of:

rational expectations

A decrease in labor productivity wil shift the:

short run aggregate supply curve to the left

The concept of opportunity cost would no longer be relevant if:

the supply of all resources were unlimited

Comparative advantage implies that:

two countries should benefit from trade unless each have equal opportunity costs in every good