ECON Practice Final Questions

u-rate

100 x # of unemployed/labor force

If a Bond from Dreamy Co. has a face value of $2000 and a price of 1900, what's the rate of return?

2000 - 1900 / 1900 = 100 / 1900 = 0.0526 x 100= 5.26%

What is the Fed Funds rate? A. A charge the Fed levies on US banks. B. A nominal interest rate for inter-bank loans C. A real interest rate for inter-bank loans. D. The rate that Federal T-Bills pay

B. A nominal interest rate for inter-bank loans

What happens to the AD curve in each of the following scenarios? And why?A. A ten-year-old investment tax credit expires. A. AD curve shifts right B. AD curve shifts left C. Movement along AD curve: AD decreases D.Movement along AD curve: AD increases E. No change in AD.

B. AD curve shifts left

Which of the following would imply an increase in A? (Pick none, or one, or more) A. A Federal highway bridge rebuilding project. B. Autonomous trucks and taxis (driverless) C. A shift to remote, asynchronous education D. Student loan subsidies. E. Increased use of computers in accounting.

B. Autonomous trucks and taxis (driverless) C. A shift to remote, asynchronous education E. Increased use of computers in accounting.

In each scenario, determine the effects on the CPI and the GDP deflator. 3. Armani raises the price of the Italian jeans it sells in the U.S. A. CPI and GDP deflator rise by the same amount. B. CPI rises, GDP deflator doesn't change. C. CPI doesn't change, GDP deflator rises. D. Neither CPI nor GDP deflator change.

B. CPI rises, GDP deflator doesn't change.

In each of the following cases, determine how much GDP and each of its components is affected (if at all). 1. Debbie spends $300 to buy her husband dinner at the finest restaurant in Boston. A. No change to GDP B. Consumption and GDP rise by $300 C. Investment and GDP rise by $300 D. Govt. spending and GDP rise by $300 E. Net exports and GDP rise by $300

B. Consumption and GDP rise by $300

Which of the following would be most likely to reduce frictional unemployment? A. The govt eliminates the minimum wage. B. The govt increases unemployment insurance benefits. C. A new law bans labor unions. D. More workers post their resumes at LinkedIn.com, and more employers use LinkedIn.com to find suitable workers to hire E. Sectoral shifts become more frequent.

D. More workers post their resumes at LinkedIn.com, and more employers use LinkedIn.com to find suitable workers to hire

One good: corn. The economy has enough labor, capital, and land to produce Y = 800 bushels of corn. V is constant. In 2020, MS = $2000, P = $5/bushel. For 2021, the Fed increases MS by 5%, to $2100. The 2021 values of nominal GDP and P are $4200 and 5.25, respectively. b. Compute the inflation rate for 2020-2021.

Inflation rate = $5.25 - 5.00/5.00 = 5%

3. Jane spends $800 on a computer to use in her editing business. She got last year's model on sale for a great price from a local second-hand store. A. Investment rises by $800, net exports fall by $800, and GDP doesn't change. B. Investment, net exports, and GDP rise by $800 C. Investment and GDP rise by $800. D. No change to GDP or any component. E. Investment rises by $800, consumption falls by $800, and GDP doesn't change.

D. No change to GDP or any component.

The US dollar is a: A. commodity money and a free money B. commodity money and a fiat money. C. pure money and a free money. D. pure money and a fiat money.

D. pure money and a fiat money.

One good: corn. The economy has enough labor, capital, and land to produce Y = 800 bushels of corn. V is constant. In 2020, MS = $2000, P = $5/bushel. For 2021, the Fed increases MS by 5%, to $2100. c. Suppose technological progress causes Y to increase to 824 in 2021. Now re-compute 2020-2021 inflation rate.

First, use Quantity Eq'n to compute P in 2021:P = M x VY = $4200824 = $5.10 Inflation rate = $5.10 - 5.00/5.00 = 2%

GDP per capita

GDP divided by population

If a country has Y < C + I + G, then it has NX = NCO a. negative net capital outflow and positive net exports. b. positive net capital outflow and positive net exports. c. positive net capital outflow and negative net exports. d. negative net capital outflow and negative net exports.

Notes: Y = C + I +G +NX. NX is negative d. negative net capital outflow and negative net exports.

In the late 1980s, a wide range of small banks, called Savings and Loans, failed. This caused a large decrease in total lending and banks and financial institutions slowed lending, which increased the overall reserve ratio. What tools might policymakers in the government and the central bank have tried to use to improve the economic situation in the short run?

The central bank: can increase the money supply. This will increase ΔM and shift AD right. Money supply increases do not suffer from crowding out. They could also cut taxes, raise taxes, or increase government spending.

The theory of the spending multiplier (aka the Keynesian multiplier) says what about the effect of an increase in spending on AD?

The effect of an increase in any of the spending components of GDP (C, I, G, and NX) is multiplied as the spending is passed along and spent by the sellers who received it, whose spending is passed along, etc. So, an increase in C, I, G, or NX has a multiplied effect on AD.

What formula explains the long-run real GDP growth of an economy with solid market institutions?

The growth of A x F(e,L,K). This is the Solow Production Function.

How does a recession affect consumption and investment?

They both decrease

The Dominican Republic is exposed to hurricanes. If there is a strong hurricane season that hits the D.R. with several hurricanes, what do think would be the effects on economic growth in the D.R.? What effects would you expect the hurricanes to have on inflation? Write your answer.

This is a classic negative real shock. Shift LRAS left to find the new equilibrium output growth and inflation for this year. Growth falls and inflation rises.

If you pay $909 for a 1-year bond with a face value of $1,000: rate of return will be

ROR = 1000 - 909/909 x 100 = 10%

What if the US government decides to subsidize college education, spending 5% of GDP on college tuition subsidies for the foreseeable future? Other things equal, how will this affect real GDP growth in the US over time? Why is this so?

Real GDP growth will be boosted at first, but the growth rate will slow down more and more over time. This is because growth in human capital yields decreasing returns to scale in the Solow Growth Model.

Name and describe two of the typical lags that affect fiscal policy. What implications do these lags have for the idea of using fiscal policy to fine-tune the growth and inflation level of the economy?

Recognition lag - The problem must be recognized. 2. Legislative lag: Congress must propose and pass a plan. The lags imply that it is hard or impossible to use fiscal policy to fine-tune the growth and inflation levels of the economy.

When the Federal Reserve wants to remove money from the US money supply, what does it normally do?

SELL bonds

What is the biggest single spending program in the US Federal budget?

Social Security

Given: Public saving = T - G = - 0.3 Find taxes.

T = G - 0.3 = 1.7

When the Federal Reserve goes to change interest rates, what interest rate does it target and directly impact?

The Federal Funds Rate

In an open economy, which of the following happens in the market for loanable funds when there is a decrease in foreign investment due to a rise in foreign interest rates? a. the demand curve shifts right. b. the supply curve shifts left. c. the demand curve shifts left. d. the supply curve shifts right.

b. the supply curve shifts left.

If the tax rate is 10% on income up to $30,000 and 15% on income up to 60,000, what is the average tax rate for someone earning $55,000? a. 12%. b. 12.27%. c. 12.5%.d. 11.78%

b: (10% x 30,000) + (15% x 25,000) = 6,750. 6750/55,000 x 100 = 12.27%.

If GDP in 1990 was $5,803 billion and GDP in 1991 was $5,995 billion, what was the growth rate of GDP? a. 1.92% b. 3.20% c. 3.31%

c - The growth rate was [(5995 - 5803) / 5803] x 100 = 3.31%

Assets Liabilities Reserves $15,000 Deposits $150,000 Loans $135,000 2. Refer to Table 26-3. The Bank of Granville's reserve ratio is a. 6 percent. b. 8 percent. c. 10 percent. d. 12 percent.

c. 10 percent

One benefit of stock markets is that they: a. Redistribute money to poor people. b. Are a source of capital for individuals. c. Are a source of capital for businesses.

c. Are a source of capital for businesses.

The government may be able to increase AD by: a. Increasing taxes and government spending. b. Decreasing taxes and government spending. c. Decreasing taxes and increasing government spending.

c. Decreasing taxes and increasing government spending.

In the USA a. Incomes taxes are regressive, and sales taxes are regressive. b. Income taxes are regressive, and sales taxes are progressive. c. Income taxes are progressive, and sales taxes are regressive. d. Income taxes are progressive, and sales taxes are progressive.

c. Income taxes are progressive, and sales taxes are regressive.

The costs associated with changing the prices of goods and services are called: a. Inflation costs. b. Inflationary expectations. c. Menu costs.

c. Menu costs.

With life satisfaction and GDP correlated, how do you expect economic freedom and life satisfaction to the correlated? a. Least free most satisfied to most free least satisfied. b. 2nd most free quartile most satisfied, most free second, and third and fourth last in satisfaction. c. Most free most satisfied to least free least satisfied. d. Other order.

c. Most free most satisfied to least free least satisfied.

If there is a negative real shock and the Federal Reserve increases the money supply in response, what does the Aggregate Supply and Aggregate Demand model predict? a. Real growth will increase and inflation may rise or fall. b. Real growth will decrease and inflation may rise or fall. c. Real growth may rise or fall and inflation will increase. d. Real growth may rise or fall and inflation will decrease.

c. Real growth may rise or fall and inflation will increase.

The annual difference between federal revenues and spending is called: a. The national debt. b. Government borrowing. c. The deficit.

c. The deficit.

Who bears most of the burden of the Medicare and Federal Insurance Contributions Act (FICA) taxes? a. Workers. b. Workers and employers. c. Workers and self-employed individuals. d. Employers and self-employed individuals.

c. Workers and self-employed individuals.

The Fed purchases $1000 worth of government bonds from the public. The reserve requirement is 5 percent, people hold no currency, and the banking system keeps no excess reserves. The U.S. money supply (including the original $1000) eventually increases by a. $2,500. b. between $2500 and $12,000. c. $16,000. d. $20,000.

d. $20,000.

Which of the following is an example of an increase in government purchases? a. The government builds new airports. b. The government hires new IRS agents. c. The air force expands the F-15 rebuild and rehab program. d. All of the above are examples of an increase in government purchases.

d. All of the above are examples of an increase in government purchases.

Because net capital outflow equals net exports, a. a surge of foreign investment into a county will tend to cause a trade deficit b. a country that seeks to maintain a trade surplus must also engage in foreign investment. c. an increase in the government budget surplus will tend to cause a trade surplus. d. All of the above are true.

d. All of the above are true.

In order win an election, where does a candidate in a democratic electoral system usually need to position himself or herself in terms of the key issue that voters care about? a. Closest to the liberal bloc's views. b. Closest to the conservative bloc's views. c. In the middle of the majority's views. d. Closest to the views of the median voter.

d. Closest to the views of the median voter.

GDP deflator =

Nominal GDP/Real GDP x 100

If inflation this year is 6% and your bank account where you keep your savings is paying 0.5%, your real interest rate is what?

0.5% - 6% = -5.5%.

labor force participation rate

= 100 x labor force/adult population

doubling time

70/growth rate

How does the Federal budget deficit or surplus relate to public saving, national saving, and investment?

A budget surplus increases all three, and a budget deficit decreases all three, other things equal.

What happens to the AD curve in each of the following scenarios? And why?B. The U.S. exchange rate falls. Exports become cheaper, imports become more expensive. A. AD curve shifts right B. AD curve shifts left C. Movement along AD curve: AD decreases D. Movement along AD curve: AD increases E. No change in AD.

A. AD curve shifts right

In each scenario, determine the effects on the CPI and the GDP deflator. 1. Starbucks raises the price of Frappuccinos. A. CPI and GDP deflator rise by the same amount. B. CPI rises, GDP deflator doesn't change. C. CPI doesn't change, GDP deflator rises. D. Neither CPI nor GDP deflator change.

A. CPI and GDP deflator rise by the same amount.

Which of the four countries' economic freedom ranking rose the most? A. Chile B. China C. USA D. Venezuela E. It was was a tie.

A. Chile rose 4.5 points out 10 from 1975 to 2010.

2. Sarah spends $1200 on a new laptop to use in her publishing business. The laptop was built in China. A. Investment rises by $1200, net exports fall by $1200, and GDP doesn't change. B. Investment, net exports, and GDP rise by $1200 C. Investment and Net Exports rise by $1200, and GDP rises by $2400. D. Consumption, net exports, and GDP rise by $1200. E. Net exports and GDP fall by $1200.

A. Investment rises by $1200, net exports fall by $1200, and GDP doesn't change.

Sam, the sole earner in his family of 5, just lost his $80,000 job as a research scientist. Immediately, he takes a part-time job at McDonald's until he can find another job in his field. A. Unemployment rate stays the same. B. Unemployment rate rises. C. Unemployment rate falls.

A. Unemployment rate stays the same.

If the financial system is working normally, what is most likely to happen if government spending rises or consumption rises? Will AD probably shift a lot or a little? Why?

AD will probably shift a little at most. Why? crowding out of investment and/or NX.

In Nigeria, real per-capita GDP is much lower than the US level as computed by PPP. For the last ten years, their real per-capita GDP growth has been much slower that of the US. Is this the normal growth pattern for a country with Nigeria's per-capita GDP level? What is probably causing Nigeria's growth to lag behind the US? Can monetary or fiscal policy improve Nigeria's growth rate in the long run?

According the Slow Growth Model, a country with lower per capita GDP should grow faster than a country with higher per capita GDP, because the return rate on capital (K) and human capital (e) decreases with scale. Also, technology ( A) transfer from rich to poor is much cheaper than trying to invent new technology (A). This is called catch-up growth, and Nigeria is not experiencing it.

4. General Motors builds $500 million worth of cars, but consumers only buy $470 million worth of them. A. Investment rises by $470 million, consumption rises by $30 million, and GDP doesn't change. B. Investment rises by $30 million, consumption rises by $470 million, and GDP rises by $500 million. C. Investment and GDP rise by $500 million. D. Consumption and GDP rise by $470 million. E. Investment falls by $30 million, consumption rises by $470 million, and GDP rises by $440 million.

B. Investment rises by $30 million, consumption rises by $470 million, and GDP rises by $500 million.

What is likely happening since March of 2022? A. Positive real shock B. Negative real shock C. No real shock.

B. Negative real shock

Use the loanable funds model to analyze the effects of a government budget deficit: Draw the diagram showing the initial equilibrium. Determine which curve shifts when the government runs a budget deficit. Draw the new curve on your diagram. What happens to the equilibrium values of the interest rate and investment? A. The Interest rate rises and investment rises. B. The interest rate rises and investment falls. C. The interest rate falls and investment rises. D. The interest rate falls and investment falls.

B. The interest rate rises and investment falls.

In each of the following, what happens to the u-rate? Does the u-rate give an accurate impression of what's happening in the labor market?1. Sue lost her job and begins looking for a new one. A. Unemployment rate stays the same. B. Unemployment rate rises. C. Unemployment rate falls.

B. Unemployment rate rises.

Suppose all economies have the same ratio of investment to GDP (ΔK/Y). Capital (K) has. . . A. diminishing returns, so that real GDP in rich countries would grow faster than in poor countries. B. diminishing returns, so that real GDP in rich countries would grow slower than in poor countries. C. increasing returns, so that real GDP in rich countries would grow faster than in poor countries. D. increasing returns, so that real GDP in rich countries would grow slower than in poor countries.

B. diminishing returns, so that real GDP in rich countries would grow slower than in poor countries.

In each scenario, determine the effects on the CPI and the GDP deflator. 2. Caterpillar raises the price of the industrial tractors it manufactures at its Illinois factory. A. CPI and GDP deflator rise by the same amount. B. CPI rises, GDP deflator doesn't change. C. CPI doesn't change, GDP deflator rises. D. Neither CPI nor GDP deflator change.

C. CPI doesn't change, GDP deflator rises.

Jon, a steelworker who has been out of work since his mill closed last year, has recently become discouraged and gives up looking for work. A. Unemployment rate stays the same. B. Unemployment rate rises. C. Unemployment rate falls.

C. Unemployment rate falls.

Given:Public saving = T - G = - 0.3 Taxes: T = G - 0.3 = 1.7 Find private saving.

Private saving = Y - T - C = 10 - 1.7 - 6.5 = 1.8

rate of return

FV - Price/ Price x 100

While cleaning your apartment, you look under the sofa cushion and find a $50 bill (and a half-eaten taco). You deposit the bill in your checking account. The Fed's reserve requirement is 20% of deposits.A. What is the maximum amount that the money supply could increase?

If banks hold no excess reserves, then money multiplier = 1/R = 1/0.2 = 5The maximum possible increase in deposits is 5 x $50 = $250But money supply also includes currency, which falls by $50. Hence, max increase in money supply = $200.

How are the classical dichotomy and monetary neutrality represented graphically by the AS/AD diagram?

LRAS curve

Compute the labor force and the unemployment rate using this data: Adult population of the U.S.by group, January 2022# of employed - 157 million # of unemployed - 6.5 million not in labor force 99.5 million

Labor force = employed + unemployed= 157 + 6.5= 163.5 million U-rate = 100 x (unemployed)/(labor force)= 100 x 6.5/163.5= 3.98% Population = labor force + not in labor force= 163.5 + 99.5= 263 LF partic. rate = 100 x (labor force)/(population)= 100 x 163.5/263= 62.2%

GDP deflator

Nominal GDP/Real GDP x 100

What is the difference between the long run and the short run in macroeconomics? How is the transition from the short run to the long run represented in the aggregate supply / aggregate demand model?

Money neutrality and the classical dichotomy between the nominal and the real hold in the long run, but not in the short run. The vertical LRAS represents the independence of the long run, Solow growth rate from nominal inflation. SRAS makes the transition from the short run to the long run by shifting up or down as expected inflation adjusts until it equals actual inflation.

One good: corn. The economy has enough labor, capital, and land to produce Y = 800 bushels of corn. V is constant. In 2020, MS = $2000, P = $5/bushel. For 2021, the Fed increases MS by 5%, to $2100. a. Compute the 2021 values of nominal GDP and P.

Nominal GDP = P x Y = M x V (Quantity Eq'n)P = P x YY= $4200/800 = $5.25= $2100 x 2 = $4200

The economy has enough labor, capital, and land to produce Yr = 800 bushels of corn. V is constant. In 2020, MS = $2000, P = $5/bushel. Compute nominal GDP and velocity in 2020.

Nominal GDP = P x Yr = $5 x 800 = $4000. V = P x Yr/ M = $4000/$2000 = 2

What kind of shocks shift both the short-run aggregate supply and the long-run aggregate supply right?

Positive real shocks such as unusually good weather, an increase in working population, a big improvement in useful education, an increase in the capital stock, an improvement in technology, or an efficiency-promoting regulation or tax reform.

What are the spending components of GDP? How do they affect the AD curve?

The spending components of GDP are C, I, G, and NX. AD is defined by ΔM + ΔV, the spending components change the growth rate of the velocity of money but not the growth rate of the money supply.

Given: Y = 10.0, C = 6.5, G = 2.0, G - T = 0.3 Public saving = T - G = - 0.3 Taxes: T = G - 0.3 = 1.7 Private saving = Y - T - C = 10 - 1.7 - 6.5 = 1.8 Find national saving. Plus: how much investment will there be?

Y = 10.0, C = 6.5, G = 2.0, G - T = 0.3 Public saving = T - G = - 0.3 Taxes: T = G - 0.3 = 1.7 Private saving = Y - T - C = 10 - 1.7 - 6.5 = 1.8 National saving = Y - C - G = 10 - 6.5 - 2 = 1.5 Investment = national saving = 1.5

Suppose GDP equals $10 trillion, consumption equals $6.5 trillion, the government spends $2 trillion and has a budget deficit of $300 billion. Calculate public saving.

Y = 10.0, C = 6.5, G = 2.0, G - T = 0.3Public saving = T - G = - 0.3

Slower growth in the money supply will: a. Decrease AD. b. Increase AD. c. Not affect AD.

a. Decrease AD

A Canadian investment firm buys bonds sold by BMW in Germany. BMW uses the funds to buy a new Canadian forging tool for BMW's German factories. Which of the following changes is correct? a. German net exports fall and German net capital outflow falls. b. German. net capital outflow falls but German. net exports rise. c. German net exports rise and German net capital outflow rises. d. Neither German. net exports nor German net capital outflow change.

a. German net exports fall and German net capital outflow falls.

A progressive tax means that people with higher incomes: a. Pay a higher tax rate. b. Pay a lower tax rate. c. Pay a lower rate, but higher dollar amount. d. Pay more and more as they age.

a. Pay a higher tax rate.

A negative real shock poses difficulties for monetary policy because: a. Policymakers can reduce inflation or unemployment but not both. b. Increasing the money supply is politically unpopular. c. Increasing the money supply is illegal. d. It is hard to keep the money supply steady then.

a. Policymakers can reduce inflation or unemployment but not both.

The largest amount of federal government spending goes to: a. Social security. b. Defense. c. Medicare.

a. Social security.

Which of the following connections is true? a. Unions increase long-term unemployment b. Minimum-wage laws increase short-term unemployment but not long-term unemployment c. It takes time for workers to search for the jobs that are best suited for them but that doesn't affect unemployment. d. The business cycle explains the natural rate of unemployment.

a. Unions increase long-term unemployment

A decrease in net exports initially and primarily shifts a. aggregate demand to the left. b. aggregate demand to the right. c. long run aggregate supply to the right d. long run aggregate supply to the left.

a. aggregate demand to the left.

In Enlightenment Now, Chapter nine, "Inequality," Steven Pinker argues that: a. measuring poverty in terms of consumption levels is better than the official poverty measure and shows that US poverty has declined to very low levels since the 1960s. b. measuring poverty in terms of consumption levels is worse than the official poverty measure and shows that US poverty has declined to very low levels since the 1960s. c. measuring poverty in terms of consumption levels is better than the official poverty measure and shows that the US poverty level has hardly improved since the 1980s.

a. measuring poverty in terms of consumption levels is better than the official poverty measure and shows that US poverty has declined to very low levels since the 1960s.

If people decide that some country is now a safer place to keep their saving, then at the original interest rate in that country there is a a. surplus of loanable funds, so the interest rate decreases. b. shortage of loanable funds, so the interest rate increases. c. surplus of loanable funds, so the interest rate increases. d. shortage of loanable funds, so the interest rate decreases.

a. surplus of loanable funds, so the interest rate decreases.

When the price level rises a. the nominal interest rate rises. b. people want to hold less money. c. real investment spending rises. d. All of the above are correct

a. the nominal interest rate rises

According to the rule of 70, a country whose real GDP per capita grew at 5% per year could expect GDP per capita to double in a. 5.6 years. b. 14 years. c. 20 years. d. 7 years.

b - the GDP/capita would double in 70 / 5 = 14 years.

Intertemporal substitution of effort: a. Amplifies only positive shocks. b. Amplifies positive and negative shocks. c. Dampens the effect of shocks. d. Amplifies only negative shocks. e. Dampens only positive shocks.

b. Amplifies positive and negative shocks.

Government borrowing causes a crowding out effect through: a. Decreased savings. b. Decreased consumption and investment. c. Decreased interest rates. d. Decreased government spending.

b. Decreased consumption and investment.

If a person in Japan buys a new car made in America by a Japanese firm, what spending components of Japanese GDP change, how do they change, and how is Japanese GDP affected? a. Japanese net exports decrease, Japanese consumption decreases, and Japanese GDP decreases. b. Japanese net exports decrease, Japanese consumption increases, and Japanese GDP is unaffected. c. Japanese net exports are unaffected, Japanese consumption is unaffected, and Japanese GDP is unaffected. d. Japanese net exports are unaffected, Japanese consumption increases, and Japanese GDP increases.

b. Japanese net exports decrease, Japanese consumption increases, and Japanese GDP is unaffected.

The Fed influences short-term rates through: a. Quantitative easing. b. Open market operations. c. The reserve ratio. d. Law 224 giving it power to set rates.

b. Open market operations.

Medicare and Federal Insurance Contributions Act (FICA) taxes are paid by: a. Workers. b. Workers and employers. c. Workers and self-employed individuals. d. Employers and self-employed individuals.

b. Workers and employers.

If businesses in general decide that they have overbuilt and so now have too much physical capital, their response to this would initially shift a. aggregate supply right. b. aggregate demand left. c. aggregate supply left. d. aggregate demand right.

b. aggregate demand left.

When there is deflation, a. debtors would gain at the expense of creditors, but under inflation creditors gain at the expense of debtors. b. creditors would gain at the expense of debtors, but under inflation debtors gain at the expense of creditors. c. both debtors and creditors would have increased real wealth. d. both debtors and creditors would have reduced real wealth.

b. creditors would gain at the expense of debtors, but under inflation debtors gain at the expense of creditors.

If inflation slows from 4% to 2% per year, this is called: a. Deflation. b. Disinflation. c. Recession. d. Depression.

b. disinflation

For any country, if the world price of copper is higher than the domestic price of copper without trade, that country should a. neither export nor import copper, since that country already produces copper at a low cost compared to other countries. b. export copper since that country has a comparative advantage in copper. c. import copper since that country has a comparative advantage in copper. d. neither export nor import copper since that country cannot gain from trade.

b. export copper since that country has a comparative advantage in copper.

If the supply of euros in the market for foreign-currency exchange shifts right, then the euro exchange rate a. falls and the quantity of euros exchanged falls. b. falls and the quantity of euros exchanged rises. c. falls and the quantity of euros exchanged does not change. d. does not change and the quantity of euros exchanged rises.

b. falls and the quantity of euros exchanged rises.

Mateo, a Mexican living in Mexico, builds a branch of his Taco restaurant chain in Albany. Relative to the U.S economy, Mateo's purchase is a. foreign direct investment. By itself it increases U.S. net capital outflow. b. foreign direct investment. By itself it decreases U.S. net capital outflow. c. foreign portfolio investment. By itself it decreases U.S. net capital outflow. d. foreign portfolio investment. By itself it increases U.S. net capital outflow.

b. foreign direct investment. By itself it decreases U.S. net capital outflow.

Other things the same, the more US inflation there is, the more US nominal interest rates a. rise, and the more the real value of a dollar rises. b. rise, and the more the real value of a dollar falls. c. fall, and the more the real value of a dollar rises. d. fall, and the more the real value of a dollar falls.

b. rise, and the more the real value of a dollar falls.

When is an increase in government spending likely to give a big boost to GDP growth? a. Any time because government spending always increases total spending in the economy a lot. b. During a financial crisis because government always increases total spending in the economy a lot. c. Any time because then government spending does not crowd out other GDP spending components. d. During a financial crisis because then government spending does not crowd out other GDP spending components.

d. During a financial crisis because then government spending does not crowd out other GDP spending components.

The US sugar quota is an example of a long-lasting anti-free-trade policy of the US government. What economic facts underlie the political power of domestic sugar farmers? a. Sugar is necessary for national security. b. The losses from free trade would be widely distributed, while gains would be concentrated on a few. c. Imported sugar doesn't count for US GDP. d. The losses from free trade would be concentrated on a few, while gains would be widely distributed.

d. The losses from free trade would be concentrated on a few, while gains would be widely distributed.

Which of the following results in higher inflation and lower unemployment in the short run? a. a more contractionary monetary policy b. a decrease in the minimum wage c. an adverse real shock such as an increase in the price of oil d. a more expansionary monetary policy

d. a more expansionary monetary policy

According to the aggregate demand and aggregate supply model, in the long run an increase in the money supply leads to a. an increase in real GDP and an increase in the price level. b. a decrease in the price level but does not change real GDP. c. decreases in both the price level and real GDP. d. an increase in the price level but does not change real GDP.

d. an increase in the price level but does not change real GDP.

Which of the following topics are most likely to be studied by a macroeconomist than a microeconomist? a. timber price changes and wage differences between job types b. the effect of sales taxes on the clothing sales, and the profitability of firms with few competitors c. how consumers maximize utility, and how prices are established in markets for agricultural products d. the reasons why per capita income is different in different countries, and changes in the average price level of an economy

d. the reasons why per capita income is different in different countries, and changes in the average price level of an economy

he Federal Government increased the deficit in 2018 compared with 2017. The Trump Administration said this would help boost US GDP growth up to a 3% per year rate. In 2018 the financial markets were functioning normally, and no banks had failed recently. How effective was the government's spending increase likely to have been in increasing growth? What would affect its impact considering the full effects of the deficit in the economy?

the rise in the federal deficit probably won't do much of anything.