ECON 103 Finals Practice Test

capital flight

-occurs when money/assets leave a country very rapidly -a big and sudden amount of net capital outflow

the government can increase the exchange rate by

reducing its budget deficit

If households choose to save more, this will shift the supply of loanable funds to the

right

When the quantity of money supplied is greater than the quantity demanded, the price level will

rise

interest rate effect

The tendency for increases in the price level to increase the demand for money, raise interest rates, and, as a result, reduce total spending and real output in the economy (and the reverse for price-level decreases).

Increased savings means _______ supply of loanable funds

a higher

Which of the following would both raise the US exchange rate? a. capital flight from other countries to the US occurs and the US moves from budget surplus to budget deficit b. capital flight from other countries to the US occurs and the US moves from budget deficit to budget surplus c. capital flight from the US to other countries occurs, the US moves from budget surplus to budget deficit d. capital flight from US to other countries occurs, the US moves from budget deficit to budget surplus

a. capital flight from other countries to the US occurs and the US moves from budget surplus to budget deficit

Gross domestic product measures a. income and expenditures. b. income but not expenditures. c. expenditures but not income. d. neither income nor expenditures.

a. income and expenditures.

Other things the same, when the price level falls, which of the following increases? a. lending and investment spending b. lending, but not investment spending c. investment spending, but not lending d. neither investment spending nor lending

a. lending and investment spending

Amy is working part-time. Tavaris is on temporary layoff. Who is included in the Bureau of Labor Statistics' "employed" category? a. only Amy b. only Tavaris c. both Amy and Tavaris d. neither Amy nor Tavaris

a. only Amy

Most economists use the aggregate demand and aggregate supply model primarily to analyze a. short-run fluctuations b. the effects of macroeconomic policy on the prices of individual goods c. the long-run effects of international trade policies d. productivity and economic growth

a. short-run fluctuations

Which of the following would cause the real exchange rate of the U.S. dollar to depreciate? a. the US government budget deficit decreases b. capital flight from foreign countries c. the US import quotas d. None of the above is correct

a. the US government budget deficit decreases

Which of the following would shift the long-run aggregate supply curve right? a. both an increase in the capital stock and an increase in the price level b. an increase in the capital stock, but not an increase in the price level c. an increase in the money supply, but not an increase in the capital stock d. neither an increase in the money supply nor an increase in the capital stock

b. an increase in the capital stock, but not an increase in the price level

In an economy where net exports are zero, if savings rises in some period, then in that period a. consumption and investment fall b. consumption falls and investment rises c. consumption rises and investment falls d. consumption rises and investment falls

b. consumption falls and investment rises

Suppose that college professors at public universities are unionized. If public university college professors change their minds and vote not to be unionized, the quantity of public university college professors demanded will a. rise. The supply of workers in other similar professions will also rise. b. rise. The supply of workers in other similar professions will fall. c. fall. The supply of workers in other similar professions will rise. d. fall. The supply of workers in other similar professions will also fall.

b. rise. The supply of workers in other similar professions will fall.

Suppose a tax cut affects aggregate demand and aggregate supply. Which of the shifts raise the price level? a. both the shift of aggregate demand and the shift of aggregate supply b. the shift of aggregate demand, but not the shift of aggregate supply c. the shift of aggregate supply, but not the shift of aggregate demand d. neither the shift of aggregate demand nor the shift of aggregate supply

b. the shift of aggregate demand, but not the shift of aggregate supply

Any policy change that reduced the natural rate of unemployment a. would shift the long-run Phillips Curve to the right b. would shift the long-run aggregate supply curve to the right c. would be a policy change that impeded the functioning of the labor market d. All of the above are correct

b. would shift the long-run aggregate supply curve to the right

Which of the following is not included in M1? a. a $5 bill in your wallet b. $100 in your checking account c. $500 in your savings account d. All of the above are included in M1.

c. $500 in your savings account

Other things the same, when an economy increases its saving rate a. consumption and production rise now. b. consumption rises now and production rises later c. consumption falls now and production rises later. d. consumption falls now and production falls later.

c. consumption falls now and production rises later.

A favorable supply shock causes the price level to a. rise. To counter this a central bank would increase the money supply. b. rise. To counter this a central bank would decrease the money supply. c. fall. To counter this a central bank would increase the money supply. c. fall. To counter this a central bank would decrease the money supply.

c. fall. To counter this a central bank would increase the money supply.

Suppose the demand for hard-wood flooring increases, while the demand for wall-to-wall carpeting decreases. Based on this change in consumer tastes, the demand for hard-woodflooring factory workers in North Carolina increases, while the demand for carpet factory workers in Georgia decreases. This is an example of a. frictional unemployment created by efficiency wages. b. structural unemployment created by efficiency wages. c. frictional unemployment created by sectoral shifts. d. structural unemployment created by sectoral shifts.

c. frictional unemployment created by sectoral shifts.

If there is a surplus of loanable funds, then a. the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. b. the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. c. the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. d. the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium

c. the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium.

Which of the following can be measured by the level of real GDP per person? a. productivity and the standard of living b. productivity but not the standard of living c. the standard of living but not productivity d. neither the standard of living nor productivity

c. the standard of living but not productivity

Which of the following would help explain why the aggregate demand curve slopes downward? a. An unexpectedly low price level raises the real wage, which causes firms to hire fewer workers and produce a smaller quantity of goods and services b. A lower price level causes domestic interest rates to rise and the real exchange rate to appreciate, which stimulates spending on net exports c. A higher price level increases real wealth, which stimulates spending on consumption d. A lower price level reduces the interest rate, which encourages greater spending on investment goods

d. A lower price level reduces the interest rate, which encourages greater spending on investment goods

In order to promote growth in living standards, policymakers must a. protect property rights. b. maintain political stability. c. encourage the accumulation of factors of production. d. All of the above

d. All of the above

The effect of budget deficits on interest rates a. increases private investment, so eventually the capital stock rises. b. increases private investment, so eventually the capital stock falls. c. decreases private investment, so eventually the capital stock rises. d. decreases private investment, so eventually the capital stock falls.

d. decreases private investment, so eventually the capital stock falls.

The model of aggregate demand and aggregate supply explains the relationship between a. the price and quantity of a particular good b. unemployment and output c. wages and unemployment d. real GDP and the price level

d. real GDP and the price level

Higher supply of loanable funds causes interest rates to...

decrease

An increase in the demand for loanable funds would originate from

households and firms who wish to borrow to make investments

a decrease in the government deficit will ______ savings

increase

an increase in the price level ______ the demand for money

increases

the US exchange rate would increase if there is

more capital flow to the country, i.e. more foreign investment

Net capital outflow and interest rates are ______ related

negatively related

capital stock

the total amount of physical capital available in a country

There are no workers unemployed ever if

you are at equilibrium in the labor market