Macro Exam

Suppose Canada can produce either 300 tons of paper or 200 HDTVs, and India can produce either 200 tons of paper or 100 HDTVs. The terms of trade between the two countries will lie between

1/2 and 2/3 of an HDTV per ton of paper

Using the rule of 72, determine how long it would take for real GDP to double if it grew at a constant growth rate of 4 percent

18 years

Goods and services sold to foreign buyers are

Exports

Which measurement is most useful for comparing the standard of living in different countries?

GDP per capita

A mechanism for fixing exchange rates is the

Gold standard

A rightward shift in aggregate demand will cause an increase in output and no change in the price level if aggregate supply is

Horizontal

The knowledge and skills possessed by the workforce is known as

Human Capital

The "pay or play" approach means that

If employers do not provide training activities, they must pay the government to do so.

Goods and services purchased from international sources are

Imports

The direct transfer of goods and services rather than cash is known as

In-kind transfers

Which of the following is true about income inequality?

Inequality tends to be greatest in the poorest countries

Generally speaking, a country whose currency depreciates will experience, as a result,

Inflationary pressure because the prices of imports rise

Economic growth

Is measured using real GDP

A country has a comparative advantage in a good if

It can produce a good at a lower opportunity cost relative to another country

Suppose the United States can produce 2,000 cars or 2,000 trucks. Japan can produce either 2,000 cars or 1,000 trucks. In terms of car production we can conclude that

Japan has a comparative advantage

A horizontal aggregate supply curve below the level of full employment is most consistent with which of the following views of the economy?

Keynesian

If trade is mutually beneficial, then increasing trade

Leads to increased output in export industries

Which of the following also occurs as the production possibilities curve shifts outward?

Long-run aggregate supply increases

An economy experiences economic growth whenever

Long-run real GDP rises

The natural rate of unemployment is the

Long-term rate determined by structural forces in labor and product markets

A progressive tax system

Means higher marginal tax rates at higher income levels

An aggregate supply curve that is always vertical is most consistent with which of the following views of the economy?

Monetarist

Which of the following groups believes that the velocity of money is constant in the long run?

Monetarists

The exchange rate is price of

One currency in terms of another

Which of the following is a monetary policy action?

Open market operations

Economists define economic growth in terms of changes in

Potential GDP

Supply-side tax cuts are designed to

Reduce marginal tax rates

Trade restrictions

Reduce the gains from trade for the country as a whole

Supply-side policy is designed to

Shift the production possibilities curve and shift the long-run aggregate supply curve to the right

When Americans buy Mercedes-Benz automobiles made in Germany, they are generating a

Supply of U.S. dollars and a demand for foreign currency

Monetarists believe that

The money supply should be expanded at a steady, predictable rate

Monetary policy tools include:

The reserve ratio and the discount rate

A country will not trade unless

The terms of trade are superior to domestic opportunities

A rightward shift in aggregate demand will cause an increase in output and price level if aggregate supply is

Upward-sloping to the right

A rightward shift in aggregate demand will cause an increase in the price level and no change in output if aggregate supply is

Vertical

Suppose a U.S. firm purchase some English china. The china costs 1,000 British pounds. At the exchange rate of $1.45 = 1 pound, the dollar price of the china is

$1,450

If one euro is equal to 0. 60 U.S. dollars, what would be the euro price of a car that cost $10,000

$16,667 euros

In a fixed exchange rate system

A country can eliminate a surplus of its currency by eliminating its protectionist barriers to trade

Structural unemployment is unemployment caused by

A mismatch between the skills of job seekers & requirements of available of jobs.

Over a given period of time, if imports are greater than exports, the result is

A trade deficit

Which of the following characterizes stagflation?

An increase in both unemployment and inflation

Suppose that today 1 British pound exchanges for $1.60. If next week 1 pound exchanges for $1.70, it is clear that

Both currencies have appreciated

Which of the following is an example of an automatic stabilizer?

Changes triggered by the economy & not by government decision makers.

Suppose China can produce 200 TVs or 200 DVD players. South Korea can produce either 100 TVS or 200 DVD players. In terms of TV production we can conclude that

China has a comparative advantage

Monetarists believe that an increase in the money supply shifts the aggregate

Demand curve to the right

When foreigners come to the United States as tourists, they are generating a

Demand for U.S. dollars and a supply of a foreign currency

Ceteris Paribus; if Canadians decide they want to eat more U.S.-grown soybeans, this causes the _____ U.S. currency to _______

Demand for; increase

Fiscal policy includes

Discretionary government spending

The number of years it takes for GDP to double is found by

Dividing 72 by the growth rate

A supply-side policy to cure a recession might include

Elimination of the minimum wage