ECO 204 PRACTICE EXAM> MASLOV

Other things being constant, when a firm sells new share of stock the

supply of the stock increases and the price decreases

price index was 128 in Year 2, and the inflation rate was 24 percent between Year 1 and Year 2. The price index in Year 2 was

103.2

Country A had a population of 1,000, of whom 600 worked an average of 8 hours a day and had a productivity of 2.5. Country B had a population of 800, of whom 560 worked 8 hours a day and had productivity of 3.0

Country B had the higher level of real GDP and real GDP per person

T/F: If, for an imaginary closed economy, investment amounts to $12,000 and the government is running a $2,000 deficit, then private saving must amount to $10,000.

False

T/F: If Congress instituted an investment tax credit, the demand for loanable funds would shift rightward

True

Japan

an advance economy, and over the past century its rate of economic growth has been higher than that of the United States

A newspaper article informs you that most businesses reduced production in the last quarter but also sold from their inventories during the last quarter. Based on this information GDP likely

decreased

Concerns about the bankruptcy of an appliance manufacturer diminish after a new CEO is appointed and some of the company's less productive factories as sold. What type of risk for bondholders falls? What happens to the interest rate on this company's bond?

default risk, the interest rate falls

T/F: Skeptics of government policy to reduce taxes on saving argue that it would primarily benefit the rich

true

Suppose the consumer price index was 184 in Year 1 and 198.17 in Year 1. The nominal interest rate during this period was steady at 5.8 percent. What was the real interest rate during this period?

-1.9 percent

A University of Iowa basketball standout is offered a choice of contracts by the New York Liberty. The first one gives her $100,000 one year from today and $100,000 two years from today. The second one gives her $132,000 one year from today and $66,000 two years from today. As her agent, you must compute the present value of each contract. Which of the following interest rates is the lowest one at which the present value of the second contract exceeds that of the first?

7 percent

Happy Trails, a bicycle rental company, is considering purchasing three additional bicycles. Each bicycle would cost them $249.66. At the end of the first year the increase to their revenues would be $140 per bicycle. At the end of the second year the increase to their revenues against would e $140 per bicycle. Thereafter, there are no increases to their revenues. At which of the following interest rates in the sum of the present values of the additional revenues closest to the price of a bicycle?

8 percent

What is a mutual fund

An institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds

When the government increases spending (holding taxes constant), the budget balance ______. This causes the interest rate in the market for loanable funds to _______ and investment to ______.

falls, increase, decrease

During a presidential campaign, the incumbent argues that he should be reelected because nominal GDP grew by 12 percent during his 4-year term in office. You know that population grew by 4 percent over the period and that the GDP deflator increased by 6 percent during the past 4 years. You should conclude that real GDP per person

grew, but by less than 12 percent

Mixster Concrete Company is considering buying a new cement truck. The owners and their accountants decide that this is the profitable thing to do. Before they can buy the truck, the interest rate and price of trucks change. In which case do these changes both make them less likely to buy a truck?

interest rates rise and truck prices rise

You hold bonds issued by the city of Sacramento, California. The interest you earn each year on these bonds

is not subject to federal income tax and so these bonds pay a lower interest rate than otherwise comparable bonds issued by the U.S. government

Recently, Venus's wealth increased by $500. If her wealth were to increase by another $500 in the near future, then her utility would increase, but not by as much as it increased with the recent increase to her wealth. Based on this information, and graphing wealth on each horizontal axis, Venus's utility function

is upward sloping and her marginal utility function is downward sloping

Suppose an economy experience an increase in its saving rate. The higher saving rate leads to a higher growth rate of productivity

more in the short run than in the long run

In a closed economy, what remains after paying for consumption and government purchases is

national saving

Adriana says that the present value of $700 to be received one year from today if the interest rate is 6 percent is less than the present value of $700 to be received two years from today if the interest rate is 3 percent. Cassie says that $700 saved for one year at 6 percent interest has a smaller future value than $700 saved for two years at 3 percent interest.

only Cassie is correct

Suppose that interest rates unexpectedly rise and the FineLine Corporation announces that revenues from last quarter were down but not as much as the public had anticipated they would be down. According to the efficient markets hypothesis, which of the following makes the price of FineLine Corporation Stock fall?

only the interest rate rising

Suppose that a new government is elected in Eurnesia. The new government takes steps toward improving the court system and reducing government corruption. The citizens of Eurnesia find these efforts credible and outsiders believe these changes will be effective and long lasting. These changes will probably raise

real GDP per person and productivity in Eurnesia

If over a short time there is an increase in the number of people retired and a decrease in the number of people working, then productivity

rises but real GDP per person falls

If the price index was 90 in Year 1, 100 in Year 2, and 95 in Year 3, then the economy experienced

11.1 percent inflation between Years 1 and 2, and 5 percent deflation between Years 2 and 3

Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2017. Suppose the price index was 17.6 in 1944 and 218.4 in the current year

141 percent

Suppose you win a small lottery and you are given the following choice: You can (1) receive an immediate payment of $100,000 or (2) three annual payments, each in the amount of $3,600, with the first payment coming one year from now, the second two years from now, and the third three years from now. You would choose to take the three annual payments if the interest rate is

3 percent, but not if the interest rate is 4 percent

Suppose your uncle offers you $100 today or $150 in 10 years. You would prefer to take the $100 today if the interest rate is

5 percent

A Texas household receive a Social Security check for $1500, which it uses to purchase a $40 pair of shoes made in Thailand by a Thai firm, a $1240 television made by a Korean firm in Korea, and $220 on groceries from a local store. As a result, U.S. GDP

increase by $220