Intro Into Macroeconomics Final Exam

Upon which of the following industries is a restrictive monetary policy likely to be most effective?

automobile

According to the Taylor rule, when the economy is at full employment and inflation is at its target rate of 2 percent, the Fed should

keep their targeted interest rate at 4 percent.

Government trade barriers

lessen or eliminate gains from specialization.

A maximum limit set on the amount of a specific good that may be imported into a country over a given period of time is called a

quota

The accompanying table gives data for Country X. Column 1 of the table is the price of a product. Column 2 is the quantity demanded domestically (Qdd, and Column 3 is the quantity supplied domestically (Qsd). If Country X opens up to international trade, how much will the country export if the world price is $3.00?

0 units

If Nations Q and T only produce aluminum or oil, the accompanying table shows the maximum output of each nation. Which one of the following terms of trade is most likely to produce mutually beneficial exchange between the two nations?

1 unit of oil for 0.4 unit of aluminum

Use the Taylor rule to determine what the targeted interest rate should be if the current inflation rate is 1 percent and the current unemployment rate is 1.5 percent. The target unemployment rate is 3.5 percent.

4.5 percent

If the effective federal funds rate is 5.14 percent, which of the following is most likely to be the Fed's target range for the federal funds rate?

5.00 to 5.25

Which of the following is a valid counterargument to the call for higher tariffs to save U.S. jobs?

All nations cannot simultaneously succeed in restricting imports while maintaining exports.

The equilibrium domestic price

All of the answers are correct.

Refer to the graphs, in which the numbers in parentheses near the AD, AD2, and AD labels indicate the level of investment spending associated with each curve. All figures are in billions. The economy is at point X on the investment demand curve. Given these conditions, what policy should the Fed pursue to achieve a noninflationary, full-employment level of real GDP?

Increase the money supply from $75 to $150 billion

The accompanying productivity table shows how many bushels of either wheat or rice can be produced in India and Canada with 1 unit of input. To achieve gains from specialization and trade,

India should export rice to Canada and import Canadian wheat.

Employing all its available resources, Nation Alpha can produce either 800 units of chemicals or 1,600 units of clothing. Nation Beta can - produce either 200 units of chemicals or 800 units of clothing.

Nation Alpha has a comparative advantage in producing chemicals.

Differences in production efficiencies among nations in producing a particular good result from

all of these

Assume that the price level is flexible both upward and downward and that the Fed's policy is to keep the price level from either rising or falling. If aggregate supply increases in the economy, the Fed

Will have to increase the money supply to keep the price level from falling.

If a nation agrees to set an upper limit on the total amount of a product that it exports to another nation, then this situation would be an example of

a voluntary export restriction.

Globalization of resource markets has resulted in the business practice of offshoring, which involves

both an outflow as well as an inflow of jobs in the United States.

Before the financial crisis of 2007-2009, if the Fed wanted to lower the federal funds rate, it

bought bonds from banks.

The Federal Reserve alters the amount of the nation's money supply by

changes in the administered rates.

Which of the following is an example of a capital-intensive good?

chemicals

Which of the following best describes the cause-effect chain of a restrictive monetary policy?

decrease in the money supply will raise the interest rate, decrease investment spending, decrease aggregate demand, and decrease inflation

Suppose the domestic price (no-international-trade price) of corn is $6.50 a bushel in the United States while the world price is $7.00 a bushel. Assuming no transportation costs, the United States will

export corn.

In recent years, the United States has

exported more services abroad than it has imported.

Assume that the MPC is 0.9 and that prices are fully flexible. If the Federal Reserve increases the money supply and investment spending increases by $8 billion, then aggregate demand is likely to

increase by $80 billion.

Which of the following actions by the Fed will most likely decrease nonbank financial firms lending?

increasing the overnight reverse repo rate

According to the Taylor rule, if the inflation rate is 5 percent and the unemployment rate is 4.3 percent, the

inflation gap is 3 percent.

Refer to the graphs, in which the numbers in parentheses near the AD, AD2, and AD labels indicate the level of investment spending associated with each curve. All figures are in billions. The economy is at point Y on the investment demand curve. Given these conditions, what policy should the Fed pursue to achieve a noninflationary, full-employment level of real GDP?

make no change in monetary policy

Before the financial crisis of 2007-2009, when the Federal Reserve Banks bought bonds from banks, the reserve balances of those banks would increase and cause them to lend

more in the federal funds market, decreasing the federal funds rate.

Which of the following is a tool of monetary policy?

open-market operations

In a two-nation world, comparative advantage in the production of a particular product means that one nation can produce

the product at a lower domestic opportunity cost than the other nation.