Macroeconomics Final

Other things equal, an increase in an economy's exports will A) increase its domestic aggregate expenditures and therefore increase its equilibrium GDP B) lower the marginal propensity to import C) decrease its domestic aggregate expenditures and therefore decrease its equilibrium GDP D) have no effect on domestic GDP because imports will change by an offsetting amount

A

Which of the following statements is false? A) China has the largest share of world exports B) In recent years, the US has had large annual trade deficits in goods and services C) The US imports some of the same categories of goods as it exports D) As a percentage of GDP, US exports are the highest among the industrially advanced nations

D

Expansionary fiscal policy is so named because it A) is designed to expand real GDP B) is aimed at achieving greater price stability C) involves an expansion of the nation's money supply D) necessarily expands the size of government

A

Graphically, demand-pull inflation is shown as a A) rightward shift of the AD curve along an upsloping AS curve B) rightward shift of the AD curve along an downsloping AS curve C) leftward shift of the AD curve along an downsloping AS curve D) leftward shift of the AD curve along an upsloping AS curve

A

If a $20 billion increase in government expenditures increases equilibrium GDP by $50 billion, then A) the MPC for this economy is 0.6 B) the multiplier is 2 C) the MPS for this economy is 0.6 D) inflation is occurring

A

If an unintended increase in business inventories occurs at some level of GDP, then GDP A) is too high for equilibrium B) entails a rate of aggregate expenditures in excess of the rate of aggregate production C) is too low for equilibrium D) may be either above or below the equilibrium output

A

If net exports decline from zero to some negative amount, the aggregate expenditures schedule would A) shift downward B) not move (net exports do not affect aggregate expenditures) C) become steeper D) shift upward

A

If the MPS in an economy is 0.1, government could shift the aggregate demand curve rightward by $40 billion by A) increasing government spending by $4 billion B) decreasing taxes by $4 billion C) increasing taxes by $4 billion D) increasing government spending by $40 billion

A

In a certain year, the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases. Full-employment GDP is $120 billion. To obtain price-level stability under these conditions, the government should A) increase tax rates and/or reduce government spending B) increase government expenditures C) discourage personal saving by reducing the interest rate on government bonds D) encourage private investment by reducing corporate income taxes

A

Lowering the discount rate has the effect of A) making it less expensive for commercial banks to borrow from central banks B) turning excess into required reserves C) forcing commercial banks to call in outstanding loans from their best customers D) turning required into excess reserves

A

Maximum checkable-deposit expansion in the banking system is equal to A)excess reserves times the monetary multiplier B) excess reserves divided by the monetary multiplier C) actual reserves minus required reserves D) assets plus net worth liabilities

A

If investment increases by $10 billion and the economy's MPC is 0.8, the aggregate demand curve will shift A) leftward by $50 billion at each price level B) rightward by $50 billion at each price level C) rightward by $10 billion at each price level D) leftward by $40 billion at each price level

B

If the Board of Governors of the Federal Reserve System increases the legal reserve ratio, this change will A) decrease the excess reserves of member banks and thus increase the money supply B) decrease the excess reserves of member banks and thus decrease the money supply C) increase the excess reserves of member banks and thus decrease the money supply D) increase the excess reserves of member banks and thus increase the money supply

B

If the dollar depreciates in value relative to foreign currencies, we would expect A) a country's exports and imports to both fall B) a country's net exports to fall C) the multiplier to decrease D) a country's net exports to rise

B

In a private closed economy, when aggregate expenditures equal GDP, A) Consumption equals investment B)planned investment equals saving C) disposable income equals consumption minus saving D) Consumption equals aggregate expenditures

B

Other things equal, an improvement in productivity will A) shift the aggregate supply curve to the left B) shift the aggregate supply cure to the right C) increase the price level D) shift the aggregate demand curve to the left

B

Which of the following represents the most expansionary fiscal policy? A) a $10 billion decrease in government spending B) a $10 billion increase in government spending C) a $10 billion tax cut D) A $10 billion tax increase

B

Suppose the price level is fixed, the MPC is 0.5, and the GDP gap is a negative $100 billion. To achieve full-employment output (exactly), government should A) reduce taxes by $50 billion B) increase government expenditures by $100 billion C) increase government expenditures by $50 billion D) reduce taxes by $200 billion

C

The major purpose of the Federal Reserve buying government securities in open market operations is to A) increase interest rates B) reduce the excess reserves of banks C) allow banks to increase their lending D) raise money for government spending

C

What do investment and government expenditures have in common? A) Both represent leakages from the circular flow B) Both represent a decline in indebtedness C) Both represent injections from the circular flow D) Neither is subject to the multiplier effect

C

An appropriate fiscal policy for a sever recession is A) appreciation of the dollar B) a decrease in government spending C) an increase in interest rates D) a decrease in tax rates

D

Employing all its available resources, Nation Alpha can produce either 800 units of chemicals or 1,600 units of clothing. Nation Beta can produce 200 units of chemicals or 800 units of clothing A) Nation Beta has a comparative advantage in producing chemicals B) Nation Beta is the high-cost producer of clothing C) Nation Alpha has a comparative advantage in producing clothing D) Nation Alpha has a comparative advantage in producing chemicals

D

Which of the following would most likely shift the aggregate demand curve to the right? A) a reduction in household borrowing because of tighter lending practices B) an increase in personal income tax rates C) increased fear that a recession will cause workers to lose their jobs D) an increase in stock prices that increases consumer wealth

D

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. The per-unit cost of production in economy described is A) $5 B) $0.50 C) $2 D) $1

C

Suppose that the level of GDP increased by $100 billion in a private closed economy where the marginal propensity to consume is 0.5. Aggregate expenditures must have increased by A)$500 billion B) $5 billion C) $50 billion D) $100 billion

C

The crowding-out effect suggests that A) high taxes reduce both consumption and saving B) increases in consumption are always at the expense of saving C) increases in government spending may reduce private investment D) increases in government spending will close a recessionary expenditure gap

C

A commerical bank has checkable-deposit liabilities of $500,000, reserves of $150,000, and a required reserve ratio of 20%. The amount by which a single commercial bank and the amount by which the banking system can increase loans are A) $100,000 and $500,000, respectively B) $50,000 and $500,000, respectively C) $30,000 and $150,000, respectively D) $30,000 and $250,000, respectively

D

An economist who favors smaller government would recommend A) tax cuts during recession and reductions in government spending during inflation B) tax cuts during recession and tax increases during inflation C) increases in government spending during recession and tax increases during inflation D) tax increases during recession and tax cuts during inflation

A

Checkable deposits are A) included in M1 B) considered to be a near money C) not included in either M1 or M2 D_ also called time deposits

A

Discretionary fiscal policy refers to A) intentional changes in taxes and government expenditures made by Congress to stabilize the economy B) any change in government spending or taxes that destabilizes the economy C) the changes in taxes and transfers that occur as GDP changes D) the authority that the president has to change personal income tax rates

A

The Federal Reserve System performs many functions, but its most important one is A) controlling the money supply B) providing for check clearing and collection C) acting as fiscal agent for the US government D) issuing currency

A

The benefits to trading nations based on comparative advantage accrue from A) specialization and trading B) specialization only C) trading only D) protection of domestic industries

A

Which of the following would increase GDP by the greatest amount? A) a $20 billion increase in government spending B) $20 billion increases in both government spending and taxes C) $20 billion decreases in both government spending and taxes D) a $20 billion reduction in taxes

A

A contractionary fiscal policy is shown as a A) rightward shift in the economy's aggregate supply curve B) leftward shift in the economy's aggregate demand curve C) movement along an existing aggregate demand curve D) rightward shift in the economy's aggregate demand curve

B

A decline in investment will shift the AD curve to the A) left by the same amount as the change in investment B) left by the multiple of the change in investment C) right by the same amount as the change in investment D) right by the multiple of the change in investment

B

An increase in personal income tax rates will cause a(n) A) increase (or shift right) in aggregate demand B) decrease (or shift left) in aggregate demand C) increase in the quantity of real output demanded (or movement down along AD) D) decrease in the quantity of real output demanded (or movement up along AD)

B

Assuming that the Federal Reserve Banks sell $40 million in government securities to commercial banks and the reserve ratio is 20%, then the effect will be to reduce A) the money supply by potentially $400 million B) excess reserves by $200 million C) excess reserves by $8 million D) the money supply by potentially $200 million

B

The amount by which government expenditures exceed revenues during a particular year is the A) public debt B) budget deficit C) GDP gap D) full employment

B

The money supply is backed A) by gold reserves representing fraction of the total value of dollars in circulation B) by the government's ability to control the supply of money and therefore to keep its value relatively stable C) dollar-for-dollar by gold and silver D) by government bond

B

A commerical bank has checkable-deposit liabilities of $50,000 and a required reserve ratio of 20%. What is the amount of required reserves? A) $1 million B) $250,000 C) $10,000 D) $50,000

C

A single commercial bank must meet a 25% reserve requirement. If it initially has no excess reserves and then $2,000 in cash is deposited in the bank, it can increase its loans by a maximum of A) $2,000 B) $1,750 C) $1,500 D) $1,250

C

Fractional reserve banking refers to a system where banks A) accept a portion of their deposits in checkable accounts B) grant loans to their borrowing customers C) hold only a fraction of their deposits in their reserves D) deposit a fraction of their reserves at the central bank

C

If the dollar depreciates in value relative to foreign currencies, then aggregate A) supply and aggregate demand increase B) supply and aggregate demand decrease C) demand increases D) demand decreases

C

If the price index rises from 100 to 130, then the purchasing power of the dollar will fall about A) 19% B) 15% C) 23% D) 30%

C

Raising the interest paid on reserves has the effect of making it A) more attractive for banks to lend out their excess reserves B) more costly for banks to hold excess reserves C) less costly for banks to hold excess reserves D) less attractive for banks to hold required reserves

C

The aggregate demand curve shows the A) direct relationship between the price level and the quantity of real GDP produced B) inverse relationship between interest rates and the quantity of real GDP produced C) inverse relationship between price level and the quantity of real GDP purchased D) direct relationship between real-balances and the quantity of real GDP purchased

C

Imports have the same effect on the current size of GDP as A) investment B) exports C) consumption D) saving

D

In a two-nation world, comparative advantage in the production of a particular product means that one nation can produce A)the product with fewer inputs than the other nation B) the product at lower average cost than the other nation C) more of the product than the other nation D) the product at a lower domestic opportunity cost than the other nation

D

The time that elapses from the beginning of a recession or an inflationary episode and the identification of the macroeconomic problem is referred to as a(n) A) operational lag B) administrative lag C) budget lag D) recognition lag

D

When a tariff or quota on a product is removed, this policy action A) hurts nations exporting the product B) benefits domestics producers of the product C) benefits the government D) benefits consumers of the product

D