Macro Econ Quiz

A stock index is

an average of a group of stock prices.

A bond is a

certificate of indebtedness.

As the reserve ratio decreases, the money multiplier

increases

A high demand for a company's stock is an indication that

people are optimistic about the company's future.

A country's NCO is $5,979 and its national savings are $11,025. What is its level of domestic investment?

11,025 = I + 5979 = 5046

Private saving is a closed economy is $1,447 and the government is running a deficit of $301. What is national saving?

1447-301=1146

In a closed economy, public savings are $350 and private savings are $800. What is GDP, if taxes are $196 and consumption is $536?

220+536+800=1556

If the number of Japanese yen a dollar buys falls, but neither country's price level changes, then the real exchange rate a. appreciates which causes U.S. net exports to increase. b. appreciates, which causes U.S. net exports to decrease. c. depreciates which causes U.S. net exports to decrease. d. depreciates which causes U.S. net exports to increase.

D

In France a loaf of bread costs 3 euros. In Great Britain a loaf of bread costs 4 pounds. If the exchange rate is .9 pounds per euro, what is the real exchange rate? a. 3.6/3 loaves of British bread per loaf of French bread b. 4/2.7 loaves of British bread per loaf of French bread c. 3/3.6 loaves of British bread per loaf of French bread d. 2.7/4 loaves of British bread per loaf of French bread

D

Given the following information, what are the values of M1 and M2? Small time deposits $1,800 billion Demand deposits and other checkable deposits $1,000 billion Savings deposits $1,400 billion Money market mutual funds $1,000 billion Traveler's checks $50 billion Large time deposits $600 billion Currency $300 billion Miscellaneous categories in M2 $50 billion

M1 = $1,350 billion, M2 = $5,600 billion.

A checking deposit functions as

a medium of exchange and as a store of value.

National saving in a closed economy is $448, GDP is $1,411, consumption is $532, and taxes are $142. Calculate government spending.

431

The level of bank deposits is $8,667 and the banks hold $1,018 in required reserves and $924 in excess reserves. If the Fed introduces $100 worth of new reserves in the economy, by how much will the money supply increase?

446.29

If the banking system has a reserves ratio of 12% and the Fed purchases $644 worth of government bonds from the public, what will be the increase in the money supply? Correct Answer: 5,366.67 ± 0.5

5,366.67

The nominal exchange rate between US and France is 0.87 Euros per Dollar. The price of a good in France is 77 Euros. How many US Dollars does one need to be able to purchase this good in France?

????

A depreciation of the U.S. real exchange rate induces U.S. consumers to buy a. more domestic goods and fewer foreign goods. b. fewer domestic goods and more foreign goods. c. fewer domestic goods and fewer foreign goods. d. more domestic goods and more foreign goods.

A

If you are vacationing in France and the dollar depreciates relative to the euro, then a. the dollar buys fewer euros. It will take more dollars to buy a good that costs 50 euros. b. the dollar buys more euros. It will take more dollars to buy a good that costs 50 euros. c. the dollar buys more euros. It will take fewer dollars to buy a good that costs 50 euros. d. the dollar buys fewer euros. It will take fewer dollars to buy a good that costs 50 euros.

A

If the U.S. real exchange rate appreciates, U.S. exports to Europe a. and European exports to the U.S. both rise. b. fall, and European exports to the U.S. rise. c. and European exports to the U.S. both fall. d. rise, and European exports to the U.S. fall.

B

A central bank's setting (or altering) of the money supply is known as a. interest rate policy. b. employment policy. c. monetary policy. d. open-market operation.

C

According to purchasing-power parity, inflation in the U.S. causes the dollar to a. depreciate relative to all other currencies. b. appreciate relative to all other countries. c. depreciate relative to currencies of countries that have lower inflation rates. d. appreciate relative to currencies of countries that have lower inflation rates.

C

Other things the same, an increase in the foreign price level a. increases the real exchange rate. This increase could be offset by an increase in the domestic price level. b. increases the real exchange rate. This increase could be offset by a decrease in the domestic price level. c. reduces the real exchange rate. This reduction could be offset by an increase in the domestic price level. d. reduces the real exchange rate. This reduction could be offset by a decrease in the domestic price level.

C

A bank has a 10 percent reserve requirement, $36,000 in loans, and has loaned out all it can given the reserve requirement. a. It has $3,600 in deposits. b. It has $32,400 in deposits. c. It has $39,600 in deposits. d. It has $40,000 in deposits.

D

If the Apple corporation sells a bond it is

borrowing directly from the public.

If you deposit $100 of currency into a demand deposit at a bank, this action by itself

does not change the money supply.

Financial intermediaries are

financial institutions through which savers can indirectly provide funds to borrowers.

A municipal bond is

issued by state and local governments.

A closed economy does not engage in international trade, therefore

net exports (NX) are zero.

The Fed has the power to increase or decrease the number of dollars in the economy through the decisions of

the FOMC

If a bank has a reserve ratio of 8 percent, then

the bank keeps 8 percent of its deposits as reserves and loans out the rest.

For an imaginary economy, when the real interest rate is 5 percent, the quantity of loanable funds demanded is $1,000 and the quantity of loanable funds supplied is $1,000. Currently, the nominal interest rate is 9 percent and the inflation rate is 2 percent. Currently,

the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will fall.

Index funds

typically have a higher rate of return and lower costs than managed mutual funds.

Suppose that in a closed economy GDP is 11,000, consumption is 7,500, and taxes are 500. What value of government purchases would make national savings equal to 2,000 and at that value would the government have a deficit or surplus?

1,500, deficit

In a closed economy, public savings are $350 and private savings are $800. What is GDP, if taxes are $206 and consumption is $545?

1,551

The same good sells for $10 in the US and for 73 Chinese Yuan in China. The real exchange rate between the US and China is 1.76. How many yuan does a dollar buy?

1.76(73/10)=12.85

National saving in a closed economy is $415, GDP is $1,479, consumption is $531, and taxes are $155. Calculate government spending.

1479-415-531=533

The level of bank deposits is $5,530 and the level of loans is $4,208. If banks hold no excess reserves, what is the reserves requirement? Express your answer in percentages, rounded to 2 decimals.

5530-4208/5530*100=23.91

The present value of $1,584 received 2 years into the future is $1,394. What is the interest rate? Express the answers in percentages.

6.60

A hypothetical economy has private savings of $6,977, domestic investments of $1,190, and its government runs a deficit of $5,034. Calculate NCO.

6977-1190-5034=753

You are the CEO of a U.S. firm considering building a factory in Chile. If the dollar appreciates relative to the Chilean peso, then other things the same a. it takes fewer dollars to build the factory. By itself building the factory increases U.S. net capital outflow. b. it takes more dollars to build the factory. By itself building the factory increases U.S. net capital outflow. c. it takes fewer dollars to build the factory. By itself building the factory decreases U.S. net capital outflow. d. it takes more dollars to build the factory. By itself building the factory decreases U.S. net capital outflow.

A

Demand deposits are included in a. M2 but not M1. b. M1 and M2. c. M1 but not M2. d. neither M1 nor M2.

B

According to purchasing-power parity, if the Federal Reserve increased the money supply a. U.S. prices would fall and the nominal exchange rate would rise. b. U.S. prices and the nominal exchange rate would fall. c. U.S. prices would rise and the nominal exchange rate would fall. d. U.S. prices would rise and the nominal exchange rate would rise.

C

Dollar bills, rare paintings, and emerald necklaces are all a. media of exchange. b. units of account. c. stores of value. d. All of the above are correct.

C

Fiat money a. may be used as a medium of exchange, but is not legal tender. b. refers to highly liquid assets that do not serve as a medium of exchange. c. has no intrinsic value. d. is worthless.

C

If purchasing-power parity holds, a dollar will buy a. one unit of each foreign currency. b. foreign currency equal to the U.S. price level divided by the foreign country's price level. c. enough foreign currency to buy as many goods as it does in the United States. d. None of the above is implied by purchasing-power parity.

C

A U.S. firm buys sardines from Morocco and pays for them with U.S. dollars. Other things the same, U.S. net exports a. increase, and U.S. net capital outflow increases. b. increase, and U.S. net capital outflow decreases. c. decrease, and U.S. net capital outflow increases. d. decrease, and U.S. net capital outflow decreases.

D

A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is a. 33.3 percent. b. 2.5 percent. c. 75 percent. d. 25 percent.

D

A depreciation of the U.S. real exchange rate induces U.S. consumers to buy a. more domestic goods and more foreign goods. b. fewer domestic goods and more foreign goods. c. fewer domestic goods and fewer foreign goods. d. more domestic goods and fewer foreign goods.

D

An important function of the U.S. Federal Reserve is to a. set the debt ceiling. b. fund Congressional spending. c. mint coins. d. control the supply of money.

D

Consider an identical basket of goods in both the U.S. and Taiwan. For a given nominal exchange rate, in which case is it certain that the U.S. real exchange rate with Taiwan falls? a. the price of the basket of goods rises in the U.S. and falls in Taiwan. b. the price of the basket of goods rises in the U.S. and Taiwan. c. the price of the basket of goods falls in both the U.S. and Taiwan. d. the price of the basket of goods falls in the U.S. and rises in Taiwan.

D