EC 111

Which of the following would cause stagflation? A. aggregate demand shifts right B. aggregate demand shifts left C. aggregate supply shifts right D. aggregate supply shifts left

D

From 2001 to 2005 there was a dramatic rise in the value of houses. If this rise made homeowners feel wealthier, then it would have shifted aggregate A. demand right B. demand left C. supply right D. supply left

A

Imagine that in the current year the economy is in long-run equilibrium. Then the federal government reduces its purchases of goods by 50% Which curve shifts and in which direction? A. aggregate demand shifts left B. aggregate demand shifts right C. aggregate supply shifts left D. aggregate supply shifts right

A

In a certain economy, when income is $100, consumer spending is $60. The value of the multiplier for this economy is 4. It follows that when income is $101, consumer spending is A. $60.25 B. $60.75 C. $61.33 D. $64.00

A

In an open economy, national saving equals A. domestic investment plus net capital outflow B. domestic investment minus net capital outflow C. domestic investment D. net capital outflow

A

Other things the same, which of the following would cause the real exchange rate to rise? A. both an increase in the real interest rate and an increase in foreign demand for US goods and services B. an increase in the real interest rate, but not an increase in foreign demand for US goods and services C. an increase in foreign demand for US goods and services, but not an increase in the US real interest rate D. neither an increase in the US real interest rate nor an increase in the demand for US good and services

A

People had been expecting the price level to be 120 but it turns out to be 122. In response Robinson Tire Company increases the number of workers it employs. What could explain this? A. both sticky price theory and sticky wage theory B. sticky price theory but not sticky wage theory C. sticky wage theory but not sticky price theory D. neither sticky wage theory or sticky price theory

A

Refer to the figure: suppose the economy starts at Point R. If aggregate demand increases from AD2 to AD3 then in the short run the economy moves to A. Point O B. Point Q C. Point P D. Point S

A

Refer to the figure: there is an excess demand for money at an interest rate of A. 3.25% B. 4.25% C. 5.25% D. 6.25%

A

Suppose that foreigners had reduced confidence in US financial institutions and believed that privately issued US bonds were more likely to be defaulted on US net exports would A. rise which by itself would increase aggregate demand B. rise which by itself would decrease aggregate demand C. fall which by itself would increase aggregate demand D. fall which by itself would decrease aggregate demand

A

The economic boom of the early 1940's resulted mostly from A. increased government expenditures B. falling prices of oil and other natural resources C. an increase in the growth rate of the money supply D. rapid developments in transportation, electronics, and communication

A

Using the liquidity-preference model, when the Federal Reserve decreases the money supply A. the equilibrium interest rate increases B. the aggregate-demand curve shifts to the right C. the quantity of goods and services demanded is unchanged for a given price level D. the short-run aggregate-supply curve shifts to the left

A

Which of the following is NOT a determinant of the long-run level of real GDP? A. the price level B. the amount of capital used by firms C. available stock of human capital D. available technology

A

Which of the following is an example of crowding out? A. an increase in government spending increases interest rates, causing investment to fall B. a decrease in private savings increases rates, causing investment to fall C. a decrease in the money supply increases interest rates, causing investment to fall D. an increase in taxes increases interest rates, causing investment to fall

A

A country has domestic investment of $235 billion. Its citizens purchase $610 billion of foreign assets and foreign citizens purchase $300 billion of its assets. What is national saving? A. $310 billion B. $545 billion C. $235 billion D. $300 billion

B

A goal of monetary policy and fiscal policy is to A. offset the shifts in aggregate demand and thereby eliminate unemployment B. offset shifts in aggregate demand and thereby stabilize the economy C. enhance the shifts inn aggregate demand and thereby create fluctuations in output and employment D. enhance the shifts in aggregate demand and thereby increase economic growth

B

For the US economy, which of the following is the most important reason for the downward slope of the aggregate-demand curve? A. the wealth effect B. the interest-rate effect C. the exchange-rate effect D. the real-wage effect

B

If the real exchange rate for the dollar is above the equilibrium level, the quantity of dollars supplied in the market for foreign-currency exchange is A. greater than the quantity demanded and the dollar will appreciate B. greater than the quantity demanded and the dollar will depreciate C. less than the quantity demanded and the dollar will appreciate D. less than the quantity demanded and the dollar will depreciate

B

Other things the same, if technology increases, then in the long run A. both output and prices are higher B. output is higher and prices are lower C. output is lower and prices are higher D. both output and prices are lower

B

Refer to Figure: A shift of the money-demand curve from MD2 to MD1 is consistent with which of the following sets of events? A. the government cuts taxes, resulting in an increase in people's incomes. B. the government reduces government spending, resulting in a decrease in people's incomes C. the Federal Reserve increases the supply of money, which decreases the interest rate D. the Federal Reserve decreases the supply of money, which increases the interest rate

B

Refer to the figure: If the economy is in the long-run equilibrium, then an adverse shift in short-run aggregate supply would move the economy from A. O to P B. Q to R C. P to O D. R to Q

B

Refer to the figure: If the economy starts at O, a decrease in the money supply moves the economy A. to P in the long run B. to Q in the long run C. back to O in the long run D. to R in the long run

B

Refer to the figure: The shift of the short-run aggregate-supply curve from SRAS1 to SRAS2 A. could be caused by an outbreak of war in the Middle East B. could be caused by a decrease in the expected price level C. causes the economy to experience an increase in the unemployment rate D. causes the economy to experience stagflation

B

When Mexico suffered from capital flight in 1994, Mexico's net capital outflow A. and net exports decreased B. and net exports increased C. increased while net exports decreased D. decreased while net exports increased

B

A country has national saving of $60 billion, government expenditures of $40 billion, domestic investment of $10 billion, and net capital outflow of $45 billion. What is its supply of loanable funds? A. $40 billion B. $100 billion C. $60 billion D. $105 billion

C

According to liquidity preference theory, the money-supply curve is A. upward sloping B. downward sloping C. vertical D. horizontal

C

Assume the MPC is 0.80. Assume there is a multiplier effect and that the total crowding-out effect is $14 billion. An increase in government purchases of $90 billion will shift aggregate demand to the A. left by $380 billion B. left by $436 billion C. right by $436 billion D. right by $380 billion

C

If the Federal Reserve decided to raise interest rates, it could A. buy bonds to lower the money supply B. buy bonds to raise the money supply C. sell bonds to lower the money supply D. sell bonds to raise the money supply

C

If the United States raised its tariff on tires, then at the original exchange rate there would be a A. surplus in the market for foreign-currency exchange, so the real exchange rate would appreciate B. surplus in the market for foreign-currency exchange, so the real exchange rate would depreciate C. shortage in the market for foreign-currency exchange, so the real exchange rate would appreciate D. shortage in the market for foreign-currency exchange, so the real exchange rate would depreciate

C

If the stock market crashes, then A. aggregate demand decreases, which the Fed could offset by selling bonds B. aggregate supply decreases, which the Fed could offset by purchasing bonds C. aggregate demand decreases, which the Fed could offset by purchasing bonds D. aggregate supply decreases, which the Fed could offset by selling bonds

C

At the equilibrium real interest rate in the open-economy macroeconomic model, A. saving= domestic investment B. saving= net capital outflow C. net capital outflow= domestic investment D. net capital outflow + domestic investment = saving

D

Because a government budget deficit represents A. negative public saving, it increases national saving B. positive public saving, it increases national saving C. positive public saving, it decreases national saving D. negative public saving, it decreases national saving

D

If the quantity of loanable funds supplied is greater than the quantity demanded, then there is a A. shortage of loanable funds and the interest rate will fall B. shortage of loanable funds and the interest rate will rise C. surplus of loanable funds and the interest rate will rise D. surplus of loanable funds and the interest rate will fall

D

In 2008, the United States was in recession. Which of the following things would you NOT expect to have happened? A. increased layoffs and firings B. a higher rate of bankruptcy C. increased claims for unemployment insurance D. increased real GDP

D

In which of the following cases would the quantity of money demanded be smallest? A. r= 0.06, P= 1.2 B. r= 0.05, P= 1.0 C. r= 0.04, P= 1.2 D. r= 0.06, P= 1.0

D

Other things the same, a higher real interest rate A. decreases the quantity of loanable funds supplied B. raises domestic investment C. raises loanable funds demanded D. raises the quantity of loanable funds supplied

D

Refer to Figure: If the interest rate is 7%, there will be a A. shortage of $60 billion B. surplus of $80 billion C. shortage of $80 billion D. surplus of $60 billion

D

Refer to the figure: If the money-supply curve MS on the left-hand graph were to shift to the left, this would A. not represent an action taken by the Federal Reserve B. shift the AD curve to the right C. create, until the interest rate adjusted, an excess supply of money at the interest rate that equilibrated the money market before the shift D. shift the AD curve to the left

D

Refer to the figure: In the market for foreign-currency exchange, the effects of an increase in the budget surplus shown in graph (c) can be illustrated as a move from j to A. G B. H C. I D. K

D

Which of the following would not be directly included in aggregate demand? A. an increase in firms' inventories B. purchases of goods by households C. firms' purchases of newly produced machinery D. government's tax collections

D