Econ 103 Midterm 2

A given short-run Phillips curve shows that an increase in the inflation rate will be accompanied by a lower unemployment rate in the short run. a. TRUE b. FALSE

A

According to the Phillips curve, policymakers would reduce inflation but raise unemployment if they A. decreased the money supply. B. increased government expenditures. C. decreased taxes. D. None of the above is correct.

A

According to the long-run Phillips curve, in the long run monetary policy influences A. the inflation rate but not the unemployment rate. B. neither the unemployment rate nor the inflation rate. C. both the inflation rate and the unemployment rate. D. the unemployment rate but not the inflation rate.

A

Country A and country B are the same except country A currently has more capital. Assuming diminishing returns, if both countries increase their capital by 100 units and other factors that determine output are unchanged, then A. output in country A increases by less than in country B. B. output in country A increases by the same amount as in country B. C. output in country A increases by more than in country B. D. None of the above is necessarily correct.

A

In 1968, economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that A. the Phillips curve did not apply in the long run. B. monetary policy was ineffective in combating inflation. C. Phillips had made errors in collecting his data. D. it seemed to work for wages but not for inflation.

A

In a certain economy, when income is $400, consumer spending is $325. The value of the multiplier for this economy is 3.33. It follows that, when income is $450, consumer spending is A. $360. For this economy, an initial increase of $50 in consumer spending translates into a $166.50 increase in aggregate demand. B. $341.67. For this economy, an initial increase of $50 in consumer spending translates into a $266.67 increase in aggregate demand. C. $341.67. For this economy, an initial increase of $50 in consumer spending translates into a $166.25 increase in aggregate demand. D. $360. For this economy, an initial increase of $50 in consumer spending translates into a $266.67 increase in aggregate demand.

A

Suppose the typical household spends $3,500 on goods and services during the month of January, and $4,300 on the same goods and services in February. Using January as the base period, what is the consumer price index for February? A. 122.9 B. 55.1 C. 81.4 D. 151.4

A

The agency responsible for regulating the money supply in the United States is A. the Federal Reserve. B. the U.S. Treasury. C. the U.S. Bank. D. the Comptroller of the Currency.

A

The discount rate is the interest rate that A. the Fed charges banks for loans. B. banks charge one another for loans. C. banks charge the Fed for loans. D. the Fed charges Congress for loans.

A

The level of real GDP person A. and the growth rate of real GDP per person vary widely across countries. B. and the growth rate of real GDP per person are similar across countries. C. is very similar across countries, but the growth rate of real GDP per person differs widely across countries. D. differs widely across countries, but the growth rate of real GDP per person is similar across countries.

A

The marginal propensity to consume (MPC) is defined as the fraction of A. extra income that a household consumes rather than saves. B. extra income that a household either consumes or saves. C. total income that a household consumes rather than saves. D. total income that a household either consumes or saves.

A

The one variable that stands out as the most significant explanation of large variations in living standards around the world is A. productivity. B. population. C. preferences. D. prices.

A

The short-run relationship between inflation and unemployment is often called A. the Phillips curve. B. Money Neutrality. C. the Classical Dichotomy. D. None of the above is correct.

A

Under a fractional-reserve banking system, banks A. generally lend out a majority of the funds deposited. B. hold more reserves than deposits. C. cause the money supply to fall by lending out reserves. D. All of the above are correct. Hide Feedback

A

Week 11 Quiz number 7

A

Week 11 Quiz number 8

A

What actions could be taken to stabilize output in response to a large decrease in U.S. net exports? A. decrease taxes or increase the money supply B. decrease taxes or decrease the money supply C. increase taxes or increase the money supply D. increase taxes or decrease the money supply

A

What is the fundamental basis for trade among nations? A. comparative advantage B. shortages or surpluses in nations that do not trade C. misguided economic policies D. absolute advantage

A

When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy, A. producer surplus increases and total surplus decreases in the market for that good. B. producer surplus decreases and total surplus decreases in the market for that good. C. producer surplus increases and total surplus increases in the market for that good. D. producer surplus decreases and total surplus increases in the market for that good.

A

An open-market purchase A. decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public. B. increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public. C. increases the number of dollars and the number of bonds in the hands of the public. D. decreases the number of dollars and the number of bonds in the hands of the public.

B

During recessions, taxes tend to A. rise and thereby decrease aggregate demand. B. fall and thereby increase aggregate demand. C. rise and thereby increase aggregate demand. D. fall and thereby decrease aggregate demand.

B

If a country allows free trade and its domestic price for a given good is lower than the world price, then it will import that good. a. TRUE b. FALSE

B

The CPI is a measure of the overall cost of A. the inputs purchased by a typical producer. B. the goods and services purchased by a typical consumer. C. the goods and services produced in the economy. D. the stocks on the New York Stock Exchange.

B

The consumer price index is used to monitor changes in an economy's production of goods and services over time. a. TRUE b. FALSE

B

When a country allows trade and becomes an exporter of a good, A. domestic producers gain and domestic consumers lose. B. domestic producers and domestic consumers both gain. C. domestic producers and domestic consumers both lose. D. domestic producers lose and domestic consumers gain.

B

When, in our analysis of the gains and losses from international trade, we assume that a country is small, we are in effect assuming that the country A. cannot have a significant comparative advantage over other countries. B. cannot affect world prices by trading with other countries. C. cannot experience significant gains or losses by trading with other countries. D. All of the above are correct.

B

Which list ranks assets from most to least liquid? A. fine art, currency, stocks B. currency, stocks, fine art C. currency, fine art, stocks D. fine art, stocks, currency Hide Feedback

B

Which of the following policies would Keynes's followers support when an increase in business optimism shifts the aggregate demand curve away from long-run equilibrium? A. increase government expenditures B. increase taxes C. increase the money supply D. All of the above are correct.

B

When there is inflation, the number of dollars needed to buy a representative basket of goods A. increases, and so the value of money rises. B. increases, and so the value of money falls. C. decreases, and so the value of money falls D. decreases, and so the value of money rises.

B.

If the MPC = 0.75, then the government purchases multiplier is about A. 7. B. 3. C. 4. D. 1.33.

C

Table 24-3 The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn. Year Price of Pork Price of Corn 2012 $20 per pound $12 per bushel 2013 $25 per pound $18 per bushel Refer to Table 24-3. If 2012 is the base year, then the CPI for 2012 was A. 132.8. B. 75.3. C. 100.0. D. 116.0.

C

The multiplier effect is exemplified by the multiplied impact on A. investment of a given increase in interest rates. B. tax revenues of a given increase in government purchases. C. aggregate demand of a given increase in government purchases. D. the money supply of a given increase in government purchases.

C

Which of the following can be measured by the level of real GDP per person? A. productivity but not the standard of living B. productivity and the standard of living C. the standard of living but not productivity D. neither the standard of living nor productivity

C

Which of the following would, by itself, reveal the most about a country's standard of living? A. the number of hours worked B. its availability of natural resources C. its productivity D. its level of capital

C

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. 75 percent. B. 33.3 percent. C. 2.5 percent. D. 25 percent.

D

A nation's standard of living is best measured by its A. nominal GDP. B. nominal GDP per person. C. real GDP. D. real GDP per person. Hide Feedback

D

A tax on an imported good is called a A. quota. B. supply tax. C. trade tax. D. tariff.

D

Babe Ruth, the famous baseball player, earned $80,000 in 1931. Today, the best baseball players can earn more than 400 times as much as Babe Ruth earned in 1931. However, prices have also risen since 1931. We can conclude that A. because prices have also risen, the standard of living of baseball stars hasn't changed since 1931. B. one cannot make judgments about changes in the standard of living based on changes in prices and changes in incomes. C. the best baseball players today are about 400 times better off than Babe Ruth was in 1931. D. one cannot determine whether baseball stars today enjoy a higher standard of living than Babe Ruth did in 1931 without additional information regarding increases in prices since 1931.

D

If there are diminishing returns to capital, then A. capital produces fewer goods as it ages. B. increases in the capital stock eventually decrease output. C. old ideas are not as useful as new ones. D. increases in the capital stock increase output by ever smaller amounts.

D

The goal of monetary policy and fiscal policy is to A. enhance the shifts in aggregate demand and thereby increase economic growth B. offset the shifts in aggregate demand and thereby eliminate unemployment. C. enhance the shifts in aggregate demand and thereby create fluctuations in output and employment. D. offset shifts in aggregate demand and thereby stabilize the economy.

D

When inflation rises, firms make A. less frequent price changes. This raises their menu costs. B. less frequent price changes. This reduces their menu costs. C. more frequent price changes. This reduces their menu costs. D. more frequent price changes. This raises their menu costs. Hide Feedback

D

Which of the following are residents of rich countries likely to have in greater quantities, or better quality, than residents of poor countries? A. healthcare B. life expectancy C. housing D. All of the above.

D