Final Exam

In the balance of payments of the United States, U.S. goods imports are recorded as a:

current account entry.

(Last Word) Classical macroeconomics was dealt severe blows by:

the Great Depression and Keynes's macroeconomic theory.

(Advanced analysis) Assume the equation for the total demand for money is L = 0.4Y + 80 - 4i, where L is the amount of money demanded, Y is gross domestic product, and i is the interest rate. If gross domestic product is $200 and the interest rate is 10 (percent), what amount of money will society want to hold?

$120.

Answer the question on the basis of the following information about the relationship between input quantities and real domestic output in a hypothetical economy: Refer to the table. If the price of each input is $5, the per-unit cost of production in the economy is:

$2.50.

Refer to the information. The value of the "near-monies" that are part of M2 is:

$350.

(Advanced analysis) Answer the question on the basis of the following information for a private closed economy where C is consumption, Y is the gross domestic product, Ig is gross investment, and i is the interest rate: Refer to the information. Given that the interest rate is 10 (percent), the amount that businesses will want to invest will be:

$40.

How many European nations belong to the European Union (EU)?

28

In the diagram, the economy's short-run AS curve is line ___ and its long-run AS curve is line ___.

2; 1

Approximately what percentage of the U.S. public debt is held by foreign individuals and institutions?

33 percent.

In the diagram, the economy's immediate-short-run AS curve is line ______, its short-run AS curve is _____, and its long-run AS curve is line ______.

3; 2; 1

Which of the following is a true statement?

A decline in aggregate demand will primarily affect real output and employment if prices are inflexible downward.?

Which of the following statements is correct?

Built-in stability only partially offsets fluctuations in economic activity.?

Which of the U.S. industries below has not seen major shutdowns and layoffs because of free foreign trade?

Financial services.

Which of the following is an example of a labor-intensive commodity?

Digital cameras.

If the equilibrium level of GDP in a private open economy is $1,000 billion and consumption is $700 billion at that level of GDP, then:

Ig + Xn must equal $300 billion.

Answer the question on the basis of the following list of assets: 1. Large-denominated ($100,000 and over) time deposits 2. Noncheckable savings deposits 3. Currency (coins and paper money) in circulation 4. Small-denominated (under $100,000) time deposits 5. Stock certificates 6. Checkable deposits 7. Money market deposit accounts 8. Money market mutual fund balances held by individuals 9. Money market mutual fund balances held by businesses 10. Currency held in bank vaults Refer to the given list. Which of the following are considered to be "near-monies?"

Items 2, 4, 7, and 8.

(Last Word) In The General Theory of Employment, Interest, and Money:

John Maynard Keynes attacked the classical economist's contention that recession or depression will automatically cure itself.

Refer to the diagram for a specific economy. The curve on this graph is known as a:

Phillips Curve.

Ownership of a single corporation is represented by what investment?

Stock.

Which of the following statements is correct?

There is a tendency for the public debt to grow during recessions.

If net exports are positive:

aggregate expenditures are greater at each level of GDP than when net exports are zero or negative.

If a corporation goes bankrupt:

bondholders get paid from the sale of company assets before stockholders do.

Refer to the table, in which investment is in billions. Suppose the Fed reduces the interest rate from 6 to 5 percent at a time when the investment demand declines from that shown by columns (1) and (2) to that shown by columns (1) and (3). As a result of these two occurrences, investment will:

decrease by $10 billion.

Other things equal, an excessive increase in the money supply will:

decrease the purchasing power of each dollar.

Refer to the diagram pertaining to two nations and a specific product. Point G is the:

domestic price for the nation represented by lines GB and GD.

(Last Word) The key policy target in the Taylor rule is the:

federal funds interest rate.

"Subprime mortgage loans" refer to:

high-interest-rate loans to home buyers with above-average credit risk.

A private closed economy includes:

households and businesses, but not government or international trade.

A nation's capital and financial account:

includes both inpayments and outpayments.

When the required reserve ratio is decreased, the excess reserves of member banks are:

increased and the multiple by which the commercial banking system can lend is increased.

Over recent years, economists holding monetarist views have replaced their call for a monetary rule with a call for:

inflation targeting.

When deriving the aggregate demand (AD) curve from the aggregate expenditures model, an increase in U.S. product prices would cause an increase in:

interest rates and lower investment expenditures.

Contractionary fiscal policy is so named because it:

is aimed at reducing aggregate demand and thus achieving price stability.

The Federal Reserve System:

is basically an independent agency.

Economists who criticize trade adjustment assistance argue that:

it only benefits a very small fraction of all unemployed workers.

Since 2002, the United States has had:

large federal budget deficits.

The current system of exchange rates can best be described as:

managed floating exchange rates.

Purchasing common stock by writing a check best exemplifies money serving as a:

medium of exchange.

Refer to the diagrams, in which AD1 and AS1 are the "before" curves and AD2 and AS2 are the "after" curves. Other things equal, a decline in investment spending caused by the interest-rate effect of a price-level increase is depicted by the:

move from point a to point b in panel (B).

The equilibrium level of GDP is associated with:

no unintended changes in inventories.

The velocity of money measures the:

number of times per year the average dollar is spent on final goods and services.

Inflation in the U.S. economy tends to be:

ongoing, as increases in aggregate demand generally exceed the increases in aggregate supply.

The political business cycle refers to the possibility that:

politicians will manipulate the economy to enhance their chances of being reelected.

Answer the question on the basis of the following production possibilities data for two countries, Alpha and Beta, which have populations of equal size. Refer to the given data. The domestic opportunity cost of:

producing a ton of chips in Beta is 6 tons of fish.

Refer to the diagram relating to short-run and long-run aggregate supply. The:

short-run aggregate supply curve is B.

The last few years of the 1990s in the United States were characterized by:

stagflation.

The Standard and Poor's 500 Index measures prices of the 500:

stocks of the largest companies in the United States.

The following table contains hypothetical data for the 2012 U.S. balance of payments. Answer the question on the basis of this information. All figures are in billions of dollars. Refer to the given data. The United States' balance of capital and financial account is a:

surplus of $5.

The public debt is the amount of money that:

the federal government owes to holders of U.S. securities.

The difference between M1 and M2 is that:

the latter includes small-denominated time deposits, noncheckable savings accounts, money market deposit accounts, and money market mutual fund balances.

Refer to the given market-for-money diagrams. Curve D1 represents the:

transactions demand for money.

Suppose the G8 nations decide that the dollar is too strong (high in value) relative to the yen. These nations might:

use official reserves of dollars to buy yen.

The World Trade Organization:

was established to resolve disputes arising under world trade rules.

A balance-of-payments deficit occurs:

when a nation must make an inpayment of official reserves to its capital and financial account.

The real-balances, interest-rate, and foreign purchases effects all help explain:

why the aggregate demand curve is downsloping.